In last week’s post, I referred to what I call the Dogma of Money as one of the three main drivers of modern Western civilisation and its reign of quantity (as Rene Guenon termed it). It’s worth expanding on this idea somewhat because many of the enormous problems facing society at the moment revolve around it. The neoliberal agenda elevated the Dogma of Money to the central role it now plays in governing our lives and those chickens are coming home to roost as we speak.
If the modern economy could be summarised in a single rule, it would be this: monetise everything. That’s why we have the obsession with GDP, which is a measurement of monetisation. Frederic Bastiat pointed out the limitations of this approach 150 years ago. When you focus entirely on quantitative results to the exclusion of lived reality, you end up where we are now with all kinds of obviously toxic things going on and a governing class that couldn’t care less because they see their job as solely about making the numbers go higher (which is also what happens when you elect managers instead of leaders).
Like so much of our world these days, this focus on quantitative measurement began in earnest during the world wars. The use of GDP and similar metrics made sense in that scenario because the whole economy had been turned towards the war effort. You didn’t need to qualitatively investigate what was being produced because you already knew it was the food, uniforms, and weapons needed by the troops. The vast bureaucratic apparatus that we now take for granted was created in that environment, and, it has to be said, bureaucracies do a good job when you give them a repetitive task to do over and again. They are organisational machines.
The use of quantitative methods was not only justified because the whole economy was on a war footing; it was valid because the wars were a contest to see whose economy could produce more stuff. If memory serves me correctly, it was Ernst Jünger who said that WW1 could be divided into two parts. The first half was relatively tame and civilised. The second half became a battle of volume. As war production hit its stride, both sides began launching enormous quantities of bombs against each other. In the end, Germany’s loss was mostly economic in nature. It couldn’t outproduce the Allies once the United States joined the fray.
The same dynamic held in WW2, and it was once again the United States which tilted the scales by ramping up its economic production and distributing the goods not just to Britain but, perhaps more importantly, to the USSR. In any case, it was once quantity which won the wars and that’s why quantitative metrics like GDP were perfectly valid.
It’s fitting that GDP only measures monetised production because war is always facilitated by money. Professional soldiers have always needed to be paid. But even modern conscript armies need money. Napoleon’s conscripts were given a wage, as were the soldiers in the world wars. In addition, modern warfare also requires vast payments to the companies producing the things needed to prosecute the war. Therefore, because the entire economies of the combatant nations were turned to the war effort, the two world wars represented an unprecedented monetisation of society in general.
Because we live in the aftermath of that, it’s hard for us to imagine that for most of history “the economy” revolved around non-monetary transactions, including all the economic activity that takes place in the household. At least here in Australia, prior to the wars, anybody that had access to land would use it to grow vegetables. If there was enough space, you’d have backyard chickens. There’d invariably be a lemon tree in the corner of the yard too. People expected to make and mend some of their own clothing, cook their own meals, and generally produce things for themselves. This kind of home production is non-monetary in nature.
It was this informal economy that was elbowed aside during the wars as every last resource was siphoned into the war effort, all of which was facilitated by monetary transactions. Because Australia was far away from the actual fighting, one of the side effects of this was to create a mini-boom in wages, which led to things like a spike in public drunkenness as people splurged their newfound wealth. Some politicians here complained that the public were not saving enough of their earnings and thereby reinvesting into the war effort.
In any case, we can see that the paradigm for the post-war economy was created during the worlds wars. The original purpose of growing the monetised economy had been to defeat the enemy. But what would be its purpose once the enemy was defeated? What happened was that “the economy”, which now referred exclusively to monetised transactions, became an end in itself. The purpose of growth was more growth. The GDP went from being a fairly useful measure of wartime production to a quasi-religious indicator of economic virtue.
While the Cold War was ongoing, this fixation on the economy still had some element of higher purpose in the fight against communism. But the collapse of the USSR put an end to that. With nobody left to fight, we elevated the economy to the rank of demigod through the neoliberal agenda. The last vestiges of the notion that the economy should serve some higher purpose were dismissed. It would now be society which was subordinate to the economy.
Of course, the financialisation process had begun well before then. The neoliberal agenda simply elevated it to the official state religion; well, the globalist religion. The result is a system that runs on the very simple rule that we mentioned at the beginning of this post: monetise everything. Finance has now been allowed to intervene in every aspect of life. Nothing happens anymore without money changing hands.
Perhaps the easiest way to see that is to look at all the activities that would once have belonged inextricably to the non-monetary economy of the household. Nobody even has the idea of growing their own food anymore. Making or mending clothes is a forgotten skill. The raising of children has been outsourced to schools and childcare centres. Even the preparation and cooking of food has been handed over to the market, if the prevalence of food delivery drivers on scooters is any indication. The household is now a place of consumption, not production. It, too, has been monetised.
So complete has the financialisation process been in the last few decades that, at this point, you’d have to say that we are running out of things to monetise. Perhaps the next step will be to start charging people for the privilege of existing. How about a fixed rate of $1.95 for every hour you’re alive. We’ll call it the Life Tax. Or maybe $0.01 per breath taken: the Oxygen Tax. Wim Hof could adapt his deep breathing technique to help lower the amount of tax us useless breathers need to pay to the bankers and bureaucrats.
Jokes aside, it really does seem that we have now entered a period where there is nothing left to monetise and the financial system is metabolising society instead. We need to get back to the idea that the economy should serve us, not the other way around. In order to get there, however, we’ll have to figure out some value system other than the Dogma of Money.
Hi Simon,
It’s worth noting that bond yields are increasing, even as interest rates are falling. Bond yields of course reflecting a combination of the amount paid for the debt sold off and the expected regular return on the same. Also, non financial err, things, such as gold and property are rising rapidly in value if converted into cash. What this suggests to me is that we are reaching the point of diminishing returns for further financialisation acts. Although, by no means will that policy stop, until the bitter end.
The government could always attempt to balance its budget and stop expanding the money supply at the rate it is doing so. But can you imagine the consequences from that act?
How it will all play out, is simply beyond my understanding, but I’d suggest that we might yet get to find out.
I’d have not gone down this dark road, but nobody asked for my thoughts, and with 10% unemployment I was hustling to keep a roof over my head and food upon the table. Being one unexpected car repair away from not being able to pay the rent, forces a person to learn how to fix the car themselves. The policy makers faced all that story back in the early 1990’s, and chose the neoliberalism option. It’s been an interesting ride ever since, but there were plenty of other options to have chosen from.
The awful thing about victory gardens is that the houses ate the land. Truly. Houses being constructed nowadays have very little land around them, and who thinks to leave open space aside to convert to producing food at a future date?
One alternative to monetary transactions are social transactions. The system works tolerably well, on a very small scale.
Cheers
Chris
Chris – what could have been done with the enormous post-war surplus was to cut back financialisation via reducing paid work. In fact, that’s actually what happened for a few decades and the belief in some quarters was that work would eventually be almost entirely phased out. Instead, we opted for the “more stuff” option, which implied more monetisation because the only way to get the goodies was to have money to buy them. It was fun while it lasted, but the price of getting the goodies has been steadily increasing, not just in monetary terms but more importantly in political ones. Apparently, the deal now is that we have to sacrifice national sovereignty and personal agency just to get access to the cookie jar.
I already pay $0.01/min in property tax for the ‘privilege’ of occupying a house I own outright. And the same again for the not-quite-compulsory insurance on the property.
In regards leaders, one of the notable facts about peoples’ reactions to Trump is that he is cast from the leader mould which is an almost singularly unique thing in modern western politicians. The gut-felt hatred so many have is in a large part a reaction to this, they simply cannot comprehend someone who isn’t a manager. The previous western leader to be recognised as such in common memory was Churchill, co-incidentally WWII again. I suspect the same reaction underlies the horror directed at Putin, however the great irony there is that while Putin is a somewhat effective leader, the reason so many Russians support him is that he is an _excellent_ manager. Go figure.
Daniel – good point. The post-war years really have seen the takeover by the technocrats and back room men at the expense of leaders. This gives our politics a paranoid aspect because we never see these people or know what they want. The job of politicians is to create a friendly facade that hides the real interests and agendas. What the “end of history” really meant was the arrival of technocratic utopia. What’s incredible is how fast they have driven their own system into the ground. It’s crumbling before our very eyes.
To expand a little on why Putin (and similarly Xi Jinping) are primarily managers is that whilst Putin has done an impressive job of leading the rebuilding of Russia, the playbook followed was neither new nor uncharted – manage corruption and promote growth, a typical technocratic method. Even the war currently being fought is large scale industrial warfare, an understood phenomenon that excels under good management (albeit with different weapons). WRT to China, Jinping inherited a system doing it the other way around (growth, then maybe corruption), but still, like Putin this isn’t breaking new ground so to speak, just managing at a phenomenal scale.
Trump (and any effective western leader that follows) has a very different path. Now that energy extraction is peaking across the board there’ll be no more growth, so the fall back and grow again playbook won’t work (isn’t working, hence the monetising of everything). Instead the task is controlled contraction for which there is no understood management methodology and thus the managers are completely stymied.
Maybe it can’t be done at all, but only an actual leader who is willing to do the unexpected has any chance whatsoever. Also, even in failure you want a leader to jump in and clean up the mess, not a manager to sweep it under the rug. Thus the madness of Trump.
As an aside, the breaking ground metaphor obviously falls apart here, because what is effectively required is a retreat over already broken ground. Ditto for exploring uncharted territory. Even the management cliches don’t work.
Daniel – China is a technocrat’s dream. No pesky legal system or democracy to deal with. Just a blank slate to impose your will on. That’s why Western elites look to China with envy, hence our copying of the Chinese lockdown during covid.
It’s worth bearing in mind that, now that the consequences of neoliberalism are becoming clear and the establishment is being forced to explicitly defend it for the first time, the upcoming generation are already starting to realise that there is nothing on offer for them. They’ll have every incentive to support whatever demagogue comes along and promises to do something. In short, conditions are going to be ready for leaders again. Who knows, this might give birth to a new paradigm. It might be bad, but it might also be something positive.
As you say, monetizing everything has nearly been squeezed to the last drop, and I think the push to make everything “data” is how they’re attempting to monetize existence — they can assign value to every heartbeat, calorie, REM cycle, you name it. And gods have mercy should you fail to fall within the “normal” range: penalties and fines and increases in premiums shall rain down upon your head.
AM – Auden has a great poem on that subject. Written in 1939, too, which goes to show that this has been building for a long time – https://poets.org/poem/unknown-citizen
We shouldn’t forget that somebody gets paid for the databases and IT infrastructure that store all that information, and companies also paid large sums for it. Data is now money.
The real predicament is that debt needs growth to be repaid. By turning a vast proportion of the population into debt slaves the imperative for growth is locked in for all those people. The non-indebted would never countenance debt forgiveness, as it represents “moral hazard”.
When monetisation/financialisation can’t stave off the next recession/depression debt will be unrepayable.
Growth will inevitably be sought as the solution, not identified as the problem.
Jamie
Jamie – pretty sure that’s exactly what Trump said recently – “we’re going to grow our way out of it”. Actually, they’re going to try to inflate their way out of it, and have been for quite a long time. I think we’re approaching the point where that strategy can no longer work. Well, we’re approaching the point where it can no longer be hidden from the average person. What happens next is anybody’s guess.
Simon,
A tax on air? We in Israel are way ahead of you, it’s called national insurance. But I’m sure it’ll make it to Australia, as you know from covid, one of our chief exports nowadays is terrible ideas.
Bakbook – so, national insurance is payable whether or not you are employed?
Simon,
As long as you are alive. And due to demographic trends I doubt I’d ever get any benefits, even when I’m old enough.
Interesting. Is the amount you pay proportional to income or fixed?
It is proportional to income, but your employer would pay a significant part of the difference. It actually makes owning your own buisness hard, because not only would you pay more for your employees (and have a disinsentive to raise their wages), but also you would have to pay for yourself. Most small buisness owners I know told me it’s one of the reasons being independent in Israel is asking for trouble.
Well, the system is not set up for independence. Although, I suppose another way to look at it is that the system promises a kind of independence, but only if you get enough money together. For everybody else, there is only dependence.
In a way, getting rich would arguably make you way more dependent – the very rich pay people to wipe their butt because they are so dependent on paying people to do what us regular people consider everyday stuff. You would also need a battery to lawyers, accountants and other glorified beaurocrats to manage, keep track and defend said assets.
David Greaber put it very elequently, I think he said something to the effect of “having to work to pay for your children’s daycare which you need because you are working instead of taking care of your own children”.
Well, yes, if you can’t resist the temptation to flaunt your wealth, then you become dependent. I’m thinking something more like this – https://www.youtube.com/shorts/QAvEvs1whjE
Hi Simon. Another interesting read and this monetisation is certainly that I have also noticed. Long ago the media stopped referring to us as citizens and we became consumers. On a side note, the measure ‘household income’ went from being 1 persons wage to 2 peoples wages. As someone who grows some of their own food, I am also used to other people thinking that I could only do this because I am poor. No one considers that I could do it for other reasons, like hobby or quality. I know another lady in our area who grows almost all of her own food and has had a similar experience. Chris and I have received many recommendations from kindly concerned folks over the years on how we could make more money – garden tours, selling produce at markets, renting out our spare rooms / land, providing gardening services etc). People also often give us their waste items – we must give off a vibe!!! Somewhere quality of life has been left behind in the quest for money, never ending traffic, long work hours and mass produced housing.
Sandra – it’s interesting that one of the main gripes of second wave feminism was that women did “unpaid work”, which is to say, un-monetised work. Now, paid work is no longer optional for women, which makes perfect sense because, if you double the supply of labour, you halve the price, and that has to be paid either in falling nominal wages or inflation.
It’s weird that people still think growing your own food is something that poor people do. That attitude is about 100 hundred years old now and the “poor people” back then did actually have their own land to grow something on. Modern poor people do not!