(This essay is the tenth installment of the series HOW JOBS DESTROYED WORK)
When it comes to the topic of how money can destroy work, we encounter a problem. Such a topic really calls for an investigation into what money actually is, along with the history of empire building, trade, banking and finance and the various actions, both well-meaning and exploitative in intent, which caused money to evolve into the form it now takes. Such an undertaking calls for a book in and of itself, and as such we cannot do full justice to the role of money in destroying work here. Rather than attempt a comprehensive account, I want to focus on a few things: The commodification of debt, market efficiency, and extrinsic versus intrinsic value.
In explaining the commodification of debt, one might select as a starting point the 17th century. The reason for choosing that century over another has to do with that being the period in time in which the ideas that underpin capitalism were put down in writing.
If one belief can be said to be of prime importance to capitalism, it would have to be the concept of private property. The problem is, the Earth and its resources do not actually belong to anyone. Such a problem was resolved in the past by asserting that divine power had set up rigid caste systems, with everybody assigned their place from birth. But such assertions were not persuasive enough for more rational minds. Another justification was needed.
In 1689, in chapter five of his Second Treatise of Government, John Locke attempted such a justification. Locke’s line of reasoning was that commodities hardly ever come in a form where they can be obtained without effort. Tin must be mined, crops must be sown, land that is to be built on must be made fit for such a purpose. So why not say that whoever performs such labour may lay claim to the end product?
“The labour of his body and the work of his hands, we may say, are strictly his. So when he takes something from the state of nature has provided and left it in, he mixes his labour with it, thus joining to it something that is his own; in that way, he makes it his property”.
Such an argument fits nicely with my definition of work, because it entails a person undertaking mental and physical effort that leads to reward. Locke argued that the individual was entitled to work to obtain all the reward he or she could make good use of:
“Anyone can, through his labour, come to own as much as he can use in a beneficial way before it spoils; anything beyond this is more than his share and belongs to others”.
Again, all reasonable-sounding points: Work to acquire all that you can use, but use all that you acquire. Do not over-hoard, for in doing so you are taking resources that others may have more use for.
However, in the very same book, Locke made another statement that undermines his argument concerning labour and property. He wrote:
“The one thing that blocks this is the invention of money, and men’s tacit agreement to put a value on it; this made it possible, with men’s consent, to have larger possessions and to have a right to them”.
We have already seen how market logic commodifies labour and self-interest adjusts negotiating positions such that the owner classes may impose conditions that maximise their benefits while minimising the reward due to the working classes. The power that money has to commodify labour brings the statement ‘anyone can, through his labour, come to own as much as he can use’ into doubt. After all, if I have money, and I pay other people to build me a house, whose labour is it that is being mixed with the resources used up in such a property? Not mine. I have not lifted a finger, other than to write a cheque.
Now, at the time when John Locke was writing, just about everybody was something of a producer. That being the case one could claim that whoever had money must have mixed their labour with it (although you would have to ignore the reality of inheritance connected to earlier empiric conquests, feudalism, or state monopolies of mercantilism to believe it is true in all cases). This kind of reasoning may sound acceptable to people, most of whom are used to striving to obtain even modest amounts of income. But capitalism’s drive to commodify everything and lower costs would further undermine such belief.
If you ask somebody to visualise money, chances are that they will picture a physical object, like a dollar bill or an English penny. There is a popular belief that before money existed, people relied on systems of barter. Such systems would have fallen foul of the ‘double coincidence of wants’: For a barter transaction to take place, I must want what you have, and you must want what I have. Some commodities were more likely to be accepted, and people began using these as intermediaries. The word ‘salary’ is derived from ‘salt’, so presumably people were once content to be paid in salt because they could be reasonably sure of it being exchanged for something more useful. Over time, we converged on a commodity that was used pretty much exclusively as a medium of exchange; something like coins. Money was born. 
This story, by the way, is fictional. Anthropologists have been searching for the fabled land of barter, a land in which people act just like today only with money removed, and found no evidence that it ever actually existed. That is not to say that nobody ever bartered. Rather, the evidence points to no actual commonly-used system of the form ‘I will swap my four eggs for your beef steak”. If you read economic textbooks, you may note how they all use imaginary examples of a barter-based economy. True, they may be based on real-world communities (‘imagine a tribal village…’, ‘imagine a small-town community…’) but they are never examples drawn from historical fact. 
Quite simply, this tale that goes ‘in the beginning there was barter, and it was darned inconvenient so money was invented’ is capitalism’s creation myth. Most economists retell it, and it is a lie. Why perpetuate such a fantasy? David Graeber has argued that it is necessary to believe this is how money came into being, because it justifies arguing that economics is “itself a field of human inquiry with its own principles and laws- that is, as distinct from, say, ethics or politics”. Once you accept that, it follows that property, money, and markets existed prior political institutions and that there ought to be a separation between the State and the economy, with the former limited to protecting private property rights and guaranteeing the soundness of the currency (some go further and say the government should be limited to protecting property rights only). In actual fact the emergence of markets and money has always depended on the existence of the State (whether markets and money will continue to depend on the state, regardless of technological development, is another matter.)
A full justification of the accusation that the most commonly-told story of money’s creation is a myth is beyond the scope of this essay (those who wish to consider the evidence should read ‘Debt: The First 5000 Years’ by David Graeber). Whatever the real evolution of money was, we undoubtedly did arrive at a situation in which coins (usually gold or silver) became the ubiquitous medium of exchange. But the drive to reduce costs was not content with money remaining as a physical commodity. If something else, some non-physical thing, could be accepted as ‘money’, that would enable a marvellous ability for whoever gained control of such ‘money’: It would be possible to created any amount of the stuff out of nothing.
What could possibly be accepted as a non-physical form of money? In a word: Debt. We are still lead to believe that money is a physical commodity. Documentaries and news reports invariably depict money in the form of paper notes and coins, but money of this kind actually represents a tiny percentage of currency in use today. The vast majority of money, 95% or more, is created out of nothing by the banking system. More precisely, it’s created out of the promise to pay. Whenever anybody takes out a loan, the bank does not lend out money it already has. Instead, the digits are simply entered into the borrower’s account, and hey presto, the money is there.
Explaining in detail the mechanisms by which money is created out of debt, and how the banking system is able to get away with something like ‘printing money’ which is fraud if done by anyone else, is sadly beyond the scope of this essay. Those who are interested to know more might want to read books like ‘The Creature From Jekyll Island: A Second Look At The Federal Reserve by G. Edward Griffin or ‘Modernising Money: Why Our Monetary System Is Broken And How It Can Be Fixed’ by Andrew Jackson and Ben Dyson. Here, though, I want to focus on an aspect of the system that is surrounded by a lot of misunderstanding: The application of interest.
Whenever money is borrowed, it typically has to be paid back plus accrued interest. For example, if I borrow £10,000, at 9% interest I must pay back £10,900. Now, the banking system only creates enough money to pay back the principle (ie the original £10,000) not the interest. Therefore, the total amount of money in existence is insufficient to repay all loans plus interest.
This has lead some to conclude that our-debt-based, interest-bearing currencies must lead inevitably to growing debt. There simply is no way for all the money plus interest to be repaid, other than to borrow the extra amount. But that extra also has interest charged. Therefore, the more we borrow, the more we have to borrow, in a never-ending spiral of growing debt.
There is, however, a way to pay back more money than actually exists. To see how, we can turn to a simplified example. Imagine that Alice and Bob live alone on an island. Bob is in possession of a pound coin, the only money on the whole island. Alice asks to borrow the pound, and after interest is added she must pay back £5. How can she do that? She can submit to paid labour. She paints Bob’s fence, and earns £1 salary. She hands that £1 over and pays of a part of her debt. Next day she prunes Bob’s roses, and receives the same £1 she was paid as wages yesterday. Again, she hands it back as payment for part of her interest-bearing debt. This revolving-door process of money handed back and forth as wages and repayment can continue until the debt is paid off entirely. 
The same principle can apply in the real world. Say a bank loans £10,000 at £900 per month and that £80 represents interest. That interest is spendable money in the account of the bank. The bank decides to hire a cleaner, and the result is not all that different from the simplified case. Nor do you have to literally seek employment at the very branch of bank which you borrowed money from. So long as there is no requirement to repay everything at once, so long as the money needed to pay interest is spent into the economy, and so long as there are wage-paying jobs, it is possible to repay debt plus interest even though the total amount of money is never enough to cover all the money owed.
Another popular idea, in marked contrast to the previous belief of absolute shortage, is the idea that since banks spend interest charges as operating expenses, interest to depositors and shareholder dividends, there is in fact enough money released back into the community to make all payments. But this is an oversimplification that rests on the assumption that interest-bearing money is always spent into the economy, never lent at interest or invested for gain. In reality, there are a significant proportion of non-bank lenders, and if they manage to capture some of the money needed to retire the loan that created that money, the original loan cannot be retired. Beyond that there is a cultural expectation that money should generate more money- not through productive effort but through mere investment for personal gain.
The theory that there is always enough money spent into the productive economy to pay off interest has to be true 100% of the time. But that cannot be the case when the money needed by borrowers in everyday productive economics is instead moved ‘upstairs’ to play in a casino world where players essentially gamble on how money moves through financial systems. For example, the volume of trade on the world’s foreign exchange markets in just one week exceeds the total volume of trade in real goods and services during an entire year. This money is in continuous play by speculators hoping to make windfall profits on currency fluctuations; it is money circulated for no reason and no productive outcome, other than to make more money. Nowhere in our system is there any restriction on re-lending money or investing it for personal gain in the casino economy that is, arguably, completely auxiliary to the real, productive economy. It stands to reason that every time interest is added to money that already bears an interest charge (as happens when secondary lenders capture such money) and every time money is taken out of circulation in the real, productive economy, that increases the pressure on the system to repay the debt.
Producers may respond by increasing sales or raising prices. Consumers may meet the demand by taking on an additional job or paying off debts over a longer period of time. Governments may respond by raising taxes. But each tactic comes with possible negative consequences. For producers, competition for sales usually entails lowering prices, a move that necessitates even more sales and possible overproduction and saturation of the market. Increasing taxes drains money from the productive economy, thereby reducing the collective ability to pay taxes, which then necessitates deficit spending and additional interest charges. Competition for jobs lowers wages, lower wages means less consumer spending, and paying interest over longer periods adds enormously to the amount of interest owed.
The truth, regarding the affect that interest has on our lives, lies somewhere between those opposing extremes in which the money supply is believed to be in absolute shortage on one hand, and always available on the other. In principle, the money could be made available provided it were always spent into the real, productive economy, but it isn’t. And the result- fuelled in part by the commodification of debt and what some call the ‘money sequence of value’ (meaning systems that do nothing except turn money into more money)- is increasing debt, and people finding the struggle to keep themselves afloat becoming harder as the system plays out.
So who benefits from a crazy system like this which causes debt to grow and grow? Those who control the money, that’s who. Remember: banks profit primarily from interest-bearing debt. As G. Edward Griffin put it:
“No matter where you earn the money, its origin was a bank and its ultimate destination is a bank…this total of human effort is ultimately for the benefit of those who create fiat money. It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility”.
I have defined work as physical or mental effort that is intrinsically meaningful and directly connected to a reward. I would argue that any work that is directly connected to a reward will necessarily be intrinsically meaningful. A beaver does not construct a lodge for no good reason. Work done for the purpose of rewarding yourself is a great thing, but how many of us can honestly be said to be ‘working for ourselves’? The so-called ‘self-employed’ cannot be said to truly work for themselves if what they are mostly doing is paying off debt. They and anyone else in that situation are working for the banks or the state (whoever you think controls fiat money). They have jobs, but they don’t have work. They are, indeed, indentured servants to a ruling class of financial nobility.
If money is created out of debt, one may ask if money is destroyed as debt is repaid. The answer is yes. In 1864 King Henry II borrowed £1, 200, 000 from a consortium of bankers. In return for the loan the consortium was given a monopoly on the issuance of banknotes, which basically meant they could ‘monetize’ the debt and advance IOUs for a portion of the money owed by the king. The bankers were able to charge the king 8% annual interest for the original loan and also charge interest on the same money to the clients who borrowed it. So long as the original debt remained outstanding this system could continue and, in fact, it remains unretired. It cannot be fully paid off because if it were Great Britain’s entire monetary system would cease to exist.
Mariner Eccles, one-time Chair of the Federal Reserve, agreed that money is destroyed as debt is paid off in a debt-based system:
“If there were no debts in our monetary system, there wouldn’t be any money”.
Coming up in part eleven, market versus technological efficiency.

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