Money versus Value

I have been reading Capital by Karl Marx, lately (well, listening - thanks Librivox!) which has my mind on Economics - NOT a subject I normally spend a great deal of time on. Perhaps wrongly so - economics seems boring, but it is also, particularly for the last few hundred years, the force that drives history.

I'm not an expert on Economics - I really know next to nothing - but it strikes me that the world economy in it's current form is unsustainable - either we all will degenerate into a sort of global feudalism where rich countries use poor countries as serfs, and military force is used to keep the rich country's economic needs fulfilled (we're kind of already there it seems, in many ways), or we'll have to transform. I'm kind of hoping for the second one.

Capitalism is complex, I know, and I won't pretend I understand it, but the central tenet of capitalism itself seems to be doomed in our current world: that a free market encourages competition, thereby bringing out the best possible products, the best possible profits, and the best possible world to humanity at large. Think about that for a minute. Think of what competition has chosen as the best products - think about furniture, for instance, where being not-rich means buying fiberboard junk that falls apart in a few years. Now, even assuming that these products ARE the best possible products - is the system that creates them really giving the greatest possible good to humanity? Is the greatest good a good that determines your relative well-being by which country you happen to be born in, how much melanin you have in your skin,  or whether you have a penis? If that's the best we can do as a race, I'm not sure we have much to brag about, really. The thing is that competition doesn't breed better products, it breeds better competitors. I work for Pearson, the largest educational publisher in the world now. Did they get there by being the best at what they did? No. Heck, Pearson started out building bridges, and really only got in education in the last quarter century. Pearson is great because it was clever, it knew how to buy up the right companies at the right time. Does that produce a measurable benefit to us as a race? No. On the contrary, consolidation is an extremely effective way to fight competition, but a terrible way to produce a vibrant, innovative community - Dilbert, after all, doesn't work in a small company, because if he did, they'd be out of business. Only the Fortune 500 can afford to bankroll incompetence.

[Side note - I don't mean to say that you CAN'T innovate in a multi-billion dollar corporation, anymore than you CAN'T hand out social justice from the seat of a dictatorship. It just happens to be far too easy to do the wrong thing and get away with it]

The thing is, this model doesn't just stifle innovation in large companies - it kills it off in small companies too. The dotcom bubble of the last decade was an excellent example of this. In the beginning of the internet (and to be fair, in a strong central culture throughout the internet's history) there was a central culture of innovators - some entrepeneurs, many simply people who loved technology and believed in what it could do. These people innovated, and created something truly transformational in our culture - to be frank, I've wondered over the last few years if, without the growth of computing and the internet, if the US as a worldwide imperial power would even still exist (but that's something to talk about another day). The dotcom bubble was the classical reaction to revolution - the string of people trying to riff of other people's good ideas. This can be good of course. Not EVERY company of the dotcom era was a bust. However, the business model in the dotcom era speaks of an essential weakness: many dotcommers tried to grow as explosively as they could on venture capital and limited revenues, so that they looked lucrative enough to get snatched up and bought by a bigger company. That's why they paid people with stock options, so that they would hang around and work to get the company sold, since they could sell their 'free' stock high and cash out. This pattern continues today even. The problem with it is that it confuses money with value - a successful business is one that can be sold off for money, not one that can create sustainable value. This is the problem that surrounds the Facebook and iPhone application market right now (do you REALLY think that Mafia Wars is the kind of business that will last 20 years? Really? How about PullMyFinger, one of the most popular apps on the iPhone? Are these innovation?).

The confusion between money and value is really gets to the root of the problem with Capitalism - like Utilitarianism in the 19th century, it is easy to measure, but impossible to measure accurately. A bank in this system can make billions of dollars annually, for moving stuff around from one pot of money to another. Seriously - the finance industry makes NO sense to me. Think of it this way: the most profitable company on earth is Exxon Mobil. In 2007, they made almost $41 billion in profit. Not in revenues - in profits. That's how much more we, as a world, paid Exxon than it needs to run. So, all of the world's profits serve three basic social purposes - to reward and encourage innovation, to allow for growth, and to provide a cushion for unforeseen problems. So, how much benefit have we, as a world, gotten for our $41 billion dollars? What innovation are we rewarding? Is that hte most valuable innovation on earth? Do we really WANT the oil industry to grow? Considering the inevitable future don't we want the exact OPPOSITE of that? And as for disasters, well sure, Exxon needs something, okay. But you know, I don't know how often Exxon really has a problem with a year in the red. If they're so worried about disasters, maybe they'd work harder to make sure they don't have oil spills without being browbeaten into it by the government and an angry public. Furthermore - has our energy dollar spending encouraged the best possible product? If you consider oil the best energy source on earth, sure. But it isn't - it can't be in the long term, because we ain't even gonna HAVE it forever. But that's jsut the thing - Capitalism produces the highest possible profits - NOT the highest possible VALUE. Money is a short term measure of success, because it is immediate and palpable. In the long term? Money is both meaningless and unpredictable. Having money may enable us to do good things, but in and of itself, it is not success, and to be perfectly frank, most human beings don't REALLY think that it is. It's fun. It feels good. It's easy. But it's not important.

Because, the thing is, money isn't a product. Money isn't a thing people can use. It's just a token, somethign that sits in your hand so that you can get what you want to use. Money is just a convenience, because converting the price of 20 gallons of gas into ducks or computer-repairman-work-hours is too complicated. We make a standard way to exchange the output of our labors, that's money.

But the thing is, Exxon has nothing that it needs to exchange $41 billion for. There is nothing exxon needs that costs that much. So what does it do with it? It hoards it, in which case the money becomes meaningless, or it jsut buys more of itself, and grows, an equally unprofitable activity in a world that frankyl doesn't NEED more Exxon. Or more Pearson. Or more WalMart. Or more McDonalds. Or more Microsoft. What the world needs is more of the things it DOESN'T have - but capitalism demands that we give our money only to the things we've already got - or we invest it, in which case we put it into companies that we feel will get us more money - not more value, just more money. Noone is investing in, say, Proctor and Gamble because they're holding out for the bottle of Crest that will change the world and fix our problems. They're investing in it, because they know everybody will keep having to buy toothpaste, Proctor and Gamble will end up with billions of dollars and nothing it needs, it will tehrefore buy more Proctor and Gamble for itself, and the cycle will perpetuate itself.

Unfortunately, this is more than just an annoyance. This doesn't mean only that we don't grow. IT means that slowly, very slowly, we're eating away at the value we have left. If all money eventually funnels out into mindless growth cows, and money is our measure of value, then all of the value produced by the world must slowly be sucked in by the exponentially growing corporate vampire companies that we feed. What this means is that the companies ending up gobbling each other up in an endless cycle of merger and acquisition, that must be fed by producing more products and extorting more profits - because a growth vampire no longer knows how to sustain itself except by the value it takes from others (Exxon, again, being a good example). Where does all this value come from? Someone must make it, someone must put some input into the system - well, there are only two forms of value in the world: human activity and natural resources. People must owrk more to make more sellable materials, and more must be pulled up from the earth to sell. Because that's the blood, that's what the vampires drink.

Where do we go from here? IS there anywhere to go from here? I don't know. I know I don't have a lot of readers here, but if you have any thoughts, I'd be thrilled to hear them.


Emily said...

It's funny that I came home to read this after just hanging out with one of my partner and my closest friends, who just happens to be a documentary filmmaker and alternative-currency activist working with the mayor's office here in Portland to establish an open platform for alternative currencies. He hopes that people can escape the debt loop and value-suck that is national/fiat money, by using forms of exchange that don't depend on keeping some folks in debt - thereby encouraging meaningless hoarding, like you were saying - in order to function. I don't pretend to know enough about this issue to have an opinion about whether he's right or not, but it's an interesting approach.

Jason Gignac said...

*grin* I really am not that knowledgeable either. If I was talking to a well read person of the opposite viewpoint, I'm sure they'd talk me out of things, just because I don't know enough to defend my convictions. But, it's something that I think normal people need to think about, because it DOES affect so much. Thanks for coming by and commenting, I'll have to look at the documentary you link to.