Many are now convinced that a new economic system is needed to replace capitalism. All too often, however, the new economy movements mistakenly assume that money is still a necessity. From the degrowth/decroissance movement, to local currency initiatives, monetary reformists, market socialists, left libertarians, Transition Towns, “new economy” organisations and most recently, the cryptocurrency-powered FairCoop: they share the basic idea that money in itself is fine, and that only “capitalist” money is evil. Opinions differ slightly as to what it is that makes capitalist money evil while the fabled “new money” is perfectly fine. Many people brashly appropriate Silvio Gesell’s pet theory that interest-bearing loans are the devil incarnate and that so long as money can “rust” like metal, everything will be roses and sunshine. Others simply slap the blame onto “capitalists” or “bankers”, the so-called 1%, arguing that “greed” or the profit motive are the real killers.
Money itself is assumed to be beyond questioning. So let’s question that assumption. It will quickly become clear that money is neither necessary nor useful, that there is no such thing as money without capitalism, and that every system of exchange, regardless of how it works, will be exploitative and destructive - just capitalism with a mask on. And no, abolishing money does not mean we have to be hunter-gatherers or nomads or live in hippy communes (unless we want to!). There is in fact nothing that a monetary system can do that a non-monetary system can’t do better. You’ll want some justification for my bold claims, so read on.
So if money is not necessary, what are the alternatives? Here are three.
Commons-based peer production.
This means people working together for a common goal, sharing the resources required for production and governing them as a commons (that means, safeguarding them so that they will always be available for the people who need them). This paradigm is already being used successfully by the open source, open content and open hardware movements.
This means that a community - one that has a geographical basis - collectivises a service or a resource and organises it on the basis of need within the community. Decisions are made participatively, meaning everyone who is affected can contribute. This economic paradigm was extremely common in pre-capitalist societies, and is much less common now.
Which basically means, “do it yourself”. In pre-capitalist societies this meant subsistence farming; it meant building your own house and tending your own sheep. In post-capitalism it includes 3D printing and fab labs, local energy generation, allotment gardening and the information commons (blogging, social media, user-generated content).
While capitalism’s basic agents are capitalists, workers and consumers, a society based on peer production is instead focused on users and contributors and would be made up of lots of peer projects with their own goals. A communalist society, meanwhile, would give control to citizens and would be made up of confederated communes. A society could also have both of these alternative paradigms at the same time.
Self-provisioning may be able to give us some of our food, information and entertainment provision, but not all of it. One or both of the other two systems is needed, where communalism is probably better suited to territorial public services such as water and electricity; while peer production is better suited for industry, luxuries, information and science. In the case of education and healthcare, there’s no obvious “best fit”.
In these systems, money is not needed and is irrelevant. Exchange and capital have been abolished and replaced by institutions of the commons - that is, by people managing resources collectively for their mutual benefit. New economy movements frequently recognise the importance of the commons, but often fail to see that commons-based systems make exchange systems redundant.
People often believe in the myth that pre-capitalist societies used barter prior to money. This is anthropologically inaccurate and also nonsensical. Barter is just the inferior and more cumbersome kind of exchange, useless except for the most insignificant of transactions. Before money, people used a variety of systems, including gift economies, self-provisioning, communalism and others. If pre-capitalist societies had the commons, why would they need to exchange?
In fact, many pre-capitalist societies were extremely violent and exploitative. I’m not saying that non-exchange economies are inherently fair and wonderful. The truth is, abolishing exchange is necessary, but not sufficient, for a fair and emancipatory society.
In the Middle Ages, money had a minor role for the emerging merchant class, but was still useless for the majority of the population. Money only became an all-encompassing economic system with the development of capitalism, when the commons was expropriated from the people and made into private property. Then, people no longer had access to the means of life and were forced to pay for everything that had been taken from them.
The problems with money are all interconnected, with many feedback loops. These problems apply to every kind of exchange system, whether it is based on local currencies, negative interest, cryptocurrencies, non-profit co-operatives, fiat currency or non-fiat currency. Money itself is the problem.
In any exchange system, those with more money are more powerful than those with less money, which creates ubiquitous hierarchies of domination and subservience. In particular, dependants and those who have dependants will always lose out, their dependence exploited. In practice this means that women systematically lose out the most: a cause, but also a symptom, of patriarchy.
As we saw, the existence of an exchange system presupposes that there is no commons. If you have to exchange for something, then it must be the private property of someone else. When production itself requires an investment of money, this implies that the means of production are privately and not publicly owned. Private ownership is one of the defining features of capitalism. Another is wage labour. Again, even if you’re self-employed or work for a co-operative, working in order to obtain exchange value (i.e. money) is wage labour. Therefore every exchange system is based on private property and wage labour - the hallmarks of capitalism.
So what about the profit-making aspect of capitalism? Capital, after all, is money making more money. While not all money is capital, an exchange system depends on capital accumulation to invest in the production system and hence ensure its survival. Economic growth is the only way to ensure a constant circulation of money in a cycle of consumption and production, given that any amount of shrinkage is potentially catastrophic, causing a downward spiral of shrinking wages, shrinking demand, shrinking output and so on in a feedback loop.
It all comes down to survival anxiety. Any loss of money can lead to the closure of a business or the ruination of an individual, yet there is no upper limit on the amount of money that will make you “safe”. 1000 units might be enough, but having 1500 would give greater security, protecting you from the uncertainty of the future, and 2000 would be better still. In an exchange system, everyone wants their money to grow into more money. Somewhere along the line, this necessitates capital accumulation.
Even if every single business is a green and happy workers’ co-operative which retains no profit at all, profit still needs to be made to invest in the business and secure its future survival. This is true even in the unlikely event that market competition is eliminated by having every co-operative owned by the same super-coop. (Think of the growth imperative in the Soviet Union, a state capitalist system.) If competition is not eliminated, the need to grow becomes all the more pertinent.
This growth dynamic will persist even with an interest-free or negative-interest currency. It will persist with cryptocurrencies and local currencies. In short, capitalism is written into the nature of exchange itself - so if you want to abolish capitalism, you have to say goodbye to exchange.
The imperative of growth encourages and necessitates rampant exploitation of natural resources, which is the reason why our world has countless ecological problems. An economy with a permanent growth imperative is also unsustainable. It is therefore incorrect to claim that a “reformed” money system would be compatible with ecological health. Building an ecological economy requires the abolition of exchange.
The accepted wisdom of neoclassical economics is that the market is a rational response to the “scarcity” of resources in the world. As explained in The Zeitgeist Movement Defined, scarcity is in fact specifically designed into an exchange economy: “While extreme scarcity is, indeed, destabilizing… the most optimized state within which the market system can exist is in a sort of balanced scarcity pressure, hence the assurance of sales-producing demand. Again, the life requirements of humans are not recognized in this equation.”
The book goes on to point out a number of consequences of the scarcity pressure in a market economy. Firstly, it leads to the problems of competitive and planned obsolescence: businesses have an interest in making sure that their products do not last forever or that they go out of fashion at some point, because this will ensure that they can generate future sales. Secondly, it leads to a preference for “ownership” over “access”: instead of encouraging people to share products like cars, entertainment media or infrequently used tools, it encourages and in some cases even requires them by law (e.g. copyright) to own them individually, since this creates additional sales demand. Thirdly, it discourages collaboration and encourages competition and secrecy, locking away innovations with onerous patents and proprietary software, which leads to an enormous amount of duplicated effort. As the book argues, a non-exchange economy has the potential to be vastly more efficient - from a technical standpoint - by encouraging collaboration, access over ownership, and by avoiding duplicated effort and unnecessary product obsolescence.
Businesses don’t have to be ‘evil’ for this sort of logic to sink in: any business that doesn’t think about keeping up a continual stream of revenue is quite simply doomed. That goes for non-profits, co-operatives, charities and even individuals just as much as it goes for profit-making multinationals.
People will often say that surely our society is “too complex” to function without a monetary system. Charles Eisenstein, for example, bizarrely juxtaposes his thorough and devastating critique of money (and the rest of industrial civilisation) with the claim that “In any economy with a specialization of labor beyond the family level, human beings need to perform exchanges in order to survive” and goes on to propose a negative-interest currency. Similarly, the Center for the Advancement of the Steady State Economy advocates the use of markets because they are supposed to provide “efficient allocation”. In truth, exchange isn’t saving us from complexity, it creates the complexity. Money isn’t some neutral toolset that “helps” us to organise an economy - it hinders us.
Think about what an efficient allocation of products and services looks like. If a product or service has been made, but the people who want it are unable to access it, then the economy has not efficiently allocated its output. The same goes when somebody has access to a product or service but doesn’t need it. If a needed product or service has not been produced at all, then resources have not been properly allocated.
In an exchange economy, everybody has a different amount of money, yet everybody also has a different set of needs and desires. Whilst a rich person and their bank account both sit in idle extravagance, a poorer person is having to choose between a thicker duvet and a bigger meal, because their money this month won’t quite cover both. Be a socialist if you want, and introduce some sort of wealth redistribution mechanism, but then you are just responding to complexity with more complexity, accepting an inefficient allocation of money and then clumsily attempting to redistribute it, like making a dozen shirts that are all the wrong size and then fixing it by snipping off bits of material and patching them elsewhere. Why not just do it right the first time?
Note that giving everybody exactly the same amount of money is also not a solution: for some people it will be more than they need, for others it will be less.
If you’re trying to allocate economic output efficiently, you produce what is necessary and then distribute it to where it is needed. This process is a given in any economic system. If that system is an exchange system, it will involve several additional steps and an entire “exchange ritual” for every allocation: you can’t just give what is needed, you have to also charge the fee, and if that process fails for whatever reason, then the allocation fails. You can’t just produce something that is needed, you have to “raise the money” first; if you fail, the allocation fails. And you can’t just improve an existing process, you have to “invest” the required amount of money as well; if this fails, the allocation fails. Therefore a system with money is inevitably less efficient than a system without money, regardless of how many times you say the word “fair” when you perform the money-exchanging ritual.
The purpose of money is not to “facilitate exchange”. As we saw above, it complicates economic allocation by putting up a barrier between every need and its satisfaction. From a purely economic standpoint, therefore, money is a bad solution to a non-problem, since it only seems to create inefficiency which wouldn’t have existed otherwise. When you realise that money is not neutral, it becomes clear that this inefficiency does serve a purpose: money exists to keep people out. It is not designed to be efficient, it is designed for social control, to ensure that people are subservient to owners of property.
You might be thinking, am I seriously suggesting that a society without money could produce space probes and particle accelerators and PET scanners and tablet computers, all without destroying the planet? Yes, that’s exactly what I’m suggesting.
For the peer production and communalist paradigms, the challenge is how to divide up the necessary labour. Since certain kinds of labour are not very pleasant, the first tasks of a moneyless society are:
Eliminate any unnecessary and undesirable labour (banking, retail, insurance…)
Use (existing) technology to automate all the unpleasant labour that can be automated.
Make the remaining unpleasant tasks as pleasant as possible (by improving safety and working conditions).
Then, the remaining labour needs to be shared among the participants. This can be done using a combination of stigmergic self-selection (basically a very fancy way of saying voluntarism) and contribution schemes. Stigmergic self-selection on its own is already used successfully in existing peer projects. Participants leave behind “hints” about tasks that need to be done (think of the red links on Wikipedia), and people select available tasks according to their personal wishes and aptitude. Existing project members must decide which contributions to accept or reject.
Where self-selection isn’t enough, there are other kinds of labour distribution mechanisms available to us. A scheme can be adopted either at the level of the local community, or at the level of a producer federation. Possible schemes include:
An iterative process of offers and counter-offers, until everyone who wishes to contribute is contributing and all the necessary tasks have been claimed
A regular labour contribution requirement, with suitable exemptions, periodically revised
Contributing labour in proportion to your consumption, with suitable exemptions.
See my article, Which Production System? for a more detailed inventory.
Making those big, scary contraptions like PET scanners and particle accelerators is actually not a huge problem, because these economic paradigms and labour systems that I’ve mentioned are scalable. Peer production combined with stigmergic self-selection would easily attract contributors to all the exciting roles. The dirty work - i.e. mining and smelting and transporting all the needed resources - might need to be communalised. In that case, communities who want to benefit from these projects would each contribute a proportional share of the labour, and their share would be divided up amongst them using their normal labour sharing system. A bottom-up federation of communities could veto the entire thing, however, by declaring these natural resources out of bounds for exploitation.
Money would not only be unnecessary, but would actually cripple the production system if people were foolish enough to reintroduce it. I’m not saying that nothing has to be quantified in a moneyless economic system. Far from it: making those PET scanners takes some seriously precise quantification, but it’s physical quantities we’re talking about, in terms of metres and kilograms and Joules, not pennies and dollars. How can you put a monetary value on a PET scanner anyway, which will go on to save hundreds of lives?
If you’re desperate to put a trendy label on the system that I’ve just described, let me suggest the term “natural economy”. It is similar to the terms used by the Zeitgeist Movement: Natural Law Based Economy (NLBE) and Resource-Based Economy (RBE), but these terms have connotations of hypertechnological super-automation where human labour is practically eliminated. As you can see, the system I’ve described is based on a rational distribution of human labour with a natural tendency to reduce unpleasant labour to the absolute minimum - one day, perhaps, it will be reduced to zero, but I don’t think we should count on it.
In an exchange economy, products and services are commodities: they are only valuable because of their quantitative, exchange value. In a natural economy, by contrast, what matters is their qualitative use value. The important thing in an exchange economy is just to exchange, never mind what you are exchanging. To keep the cycle going, the mere fact of consumption is more important than what is consumed, production is more important than what is being produced, and the mere fact of having a job is more important than what the job produces. It’s not concerned with satisfying anybody’s needs except coincidentally.
A natural economy is based on natural laws, the laws of physics and ecology. In particular, the laws of thermodynamics are very important: energy has to come from somewhere, it has to go somewhere afterwards, and no process is 100% efficient. Production requires energy, resources and labour, and it affects the natural world. A natural economy’s purpose, therefore, is to use labour and resources to sustainably satisfy human needs and desires in the most technically efficient way. (Technically efficient means labour, energy and resource usage are minimised.) The purpose of labour then is to produce things that people need.
Money has no place in a natural, ecological economy. Saying goodbye to capitalism means saying goodbye to money - and when we realise how much it has enslaved us, that goodbye becomes good riddance.
This article on FairCoop was part of the impetus for the present text. The opening paragraphs assume without any coherent argument at all that “we need money”. Their sarcastic examples of the “gift economy” are not about a gift economy at all and are actually about barter, which is a type of exchange. Barter, like money, is unnecessary. The gift economy is also unnecessary: peer production or communalism are sufficient for a new moneyless economy. ↩
It is also worth considering the gift economy as an alternative paradigm. There is also the approval economy talked about in Heather Marsh’s Binding Chaos. These are worthy of a separate discussion which I did not want to get into here. ↩
This is the argument of David Graeber’s Debt: The First 5000 Years. ↩
See Elinor Ostrom’s groundbreaking work on the commons (1990) for concrete examples. ↩
In the interest of transparency I should point out that there is one type of “money system” that I think does actually manage to avoid these problems, and that’s the voucher-based rationing system which was found in many rural communes during the Spanish Revolution. A similar but independently developed system is proposed in technocracy. These kinds of money are still unnecessary and flawed. See my other article, Which Production System? for the lowdown on this point. ↩
Arguably it would be even worse with a demurrage currency because it causes money to circulate faster. ↩
This may sound like an exchange but it is merely a way of making sure that the needed work gets done. The labour contribution does not “circulate”. See Christian Siefkes (2007), From Exchange to Contributions for a thorough elaboration of this system. Link ↩