A society (a world) without money would be, perhaps, healthier? The question does not imply harsh anticapitalism, nor nostalgia for a return to nature and to a “barter economy.” For at least a decade now (including in our regions) there has been a campaign against cash. And in favor of electronic payments. The arguments used for something that represents a serious change in social habits and relationships often border on absurdity. For example, when Greek legislation forced employers to pay wages through banks, the argument was “the fight against undeclared labor!”… As is well known, “undeclared work” disappeared thereafter…
Where is the “demonetization” campaign of money in its known form (banknotes, coins) coming from and why, and why is the parallel operation of “physical” and “digital” payment systems not desirable?
Initially, it is easy to identify the role (and interests) of banks as “intermediaries of money movement.” This became clear in our parts (as well as elsewhere, e.g., in Cyprus) when they imposed a maximum daily withdrawal limit of 60 euros from their customers (depositors…) in the summer of 2015. But all bank failures that preceded the collapse of Lehman Brothers in September 2008 followed the same pattern: depositors concerned about the bank’s financial condition withdrew their deposits en masse – which is “physical” money. No bank, not even the most “healthy” one, ever has available more than a fraction of the amounts entrusted to it by depositors. If depositors demand their money collectively, any bank is unable to provide it; and it defaults. Much more easily if it already has problems.
Consequently, the “physical” form of money, which allows it to be stored in private spaces (homes, offices) outside the banking system, has been, and remains, a huge headache for the existence and operation of these institutions. If money could take a form such that it would be impossible to store anywhere other than banks, then they would solve this strategic knot. And this form already exists: digital numbers. You cannot withdraw the digital number/amount from the bank, put it in your wallet and take it home! The only thing you can do is move it from bank to bank (either as a payment or for any other reason); but always within the banking system!
In an initial phase, therefore, the campaign in favor of “electronic money” was a campaign in favor of banks and their interests. All the arguments used to present “electronic money” as an advantage for citizens were questionable, ranging from debatable to completely false. For example, the argument that “electronic money” cannot be stolen by an ordinary “wallet”… It was quickly proven that either the theft of the plastic card, or the “copying” of the PIN, or other technical methods provided digital wallets with a much larger and safer turnover! On the other hand, the development of private international trade and international tourism gave a truly practical value to the ability to make payments through electronic means.
Things started to get more complicated (and more aggressive) when other interested defenders of “digital money” were added alongside the banks. We are not only referring to (state) tax authorities that, through the movement of money in the banking circuit, have better control over them. “Electronic payment” inevitably leaves traces; it creates data. The data of retail payments (the amounts, the items, the time, the place, the identity of the buyer…) began to become a valuable raw material for advertising (from the moment they could make personalized advertising promotions on citizens’ mobiles…) but also for the security complex.
These are known. What perhaps has been given less significance is that appetite comes while eating. Although in the first world a number of citizens make a part of their payments electronically (because indeed something like this serves them) this “part” from which data emerge is little both for administrators and data merchants, as well as for anyone else who would like to monitor, for whatever reason, the daily life of ordinary people. The existence of “physical” money and the insistence on using it began to become an obstacle.
The obstacle becomes clearer if one moves away from the first capitalist world. If even in the US over 7.5% of citizens DO NOT have a bank account, while another 18% do have one but use it as little as possible; and if especially the “poor” in the US (with less than $15,000 in their pockets per year) are 25% outside the banking system (though they still use money in its “physical form”), one can understand what a large part of the societies of the so-called “third world” constitutes escaping raw material (personal data) and not only for banks. Not having a bank account probably means that someone doesn’t have a police ID either (or has a fake one). Consequently, the form and use of money can easily be linked to public order. Ultimately, the challenge of “eliminating physical money” is an attractive global project – for controlling the economic life, related activities (and not only) of 7.5 billion passengers on the planet!
Of course, it would be easy to consider maniacs those who have set as their goal the filing of the entire planet! However, starting the filing from where it is possible (always in large quantities) is something more realistic. Especially if the states – which are the typical “money creators”, through their central banks – discovered that they have their own interests in this filing. An example is the Indian state, with a population of 1.35 billion. More than half of them do not have a bank account; and about 300 million do not even have an identity. In the vast (and poor) rural areas of India, the “villagers” know each other, the small shops are paid in cash, while they can keep “account books” with small debts of their customers that are paid collectively periodically: verese… It is understood that all this “economic life” moves outside the radar of the Indian tax authorities.
On November 8, 2016, the Indian state triggered an artificial liquidity crisis that specifically targeted the “poor” by announcing the immediate ban on all 500 and 1000 rupee banknotes – equivalent to 5.8 and 11.7 euros respectively… Those who had them in their hands were required to exchange them by the end of that year for new 500 and 2000 rupee notes. Since this exchange had to be done through banks (and since banks are not exactly common in rural areas), that decree caused not only mass panic, demonstrations, street fights, etc., but also an artificial shortage of “physical” cash, as many had to wait days and weeks to make the exchange.
The digitization of payments among the poor was perhaps the real target of that blackmail by the Indian state. It succeeded, but only to a certain extent. Mainly, payments via mobile applications increased; however, when by mid-2017 basic normality in the use of banknotes had been restored, they fell again. But by April 2018, the volume of digital payments had doubled compared to those before the “authoritarian action” (as it was characterized by the renowned Indian economist Amartya Sen) on November 8, 20161. Since then, no significant change has been observed.
Blockchain and digital currencies
The emergence of blockchain technology and “cryptocurrencies” starting with bitcoin (early 2009) was a revolution in the field of both “electronic money” and “electronic payments.” The intention of bitcoin’s creators and users (and those that followed) was to bypass central banks both in terms of issuing and managing/circulating currencies as means of exchange. The idea and its implementation were interesting and bold from a technical perspective; however, from an economic/monetary standpoint, it showed great ignorance of elementary functions of (capitalist) economy from the beginning—or unless this ignorance was intentional.
By design, bitcoin was the first purely digital currency/means of transaction that had no relation to banks. Indeed, both bitcoin and subsequent cryptocurrencies “moved” uncontrollably by any banking structure throughout the planet. But their exchange rate was a gamble; worthy of attention only by formal gamblers of international finance. Although it was denounced as being used mainly by mafias (to avoid control of their money movements), organized crime circuits are not at all indifferent to the stability of the currency’s price they use! The fluctuations in bitcoin’s “exchange rates” with other, conventional currencies (mainly the dollar) were so numerous and drastic that practically it could only be used as a relatively reliable means of exchange within narrow time frames.
The result (of “free” cryptocurrencies) may not have been great. The technology, however, blockchain, remained2. A number of states (and some companies) are preparing reliable digital currencies. State versions have an advantage: the price of the digital currency (and its exchange rates) will be supported by the respective central banks. Beijing and the digital yuan are ready from a technological standpoint, and the first official digital currency is set to be implemented in China this autumn, gradually extending to international transactions of Chinese capitalism3. Chinese electronic giants Alibaba, Tencent, and Baidu, with their massive customer bases across Asia, are actively participating from the beginning in this story.
Everyone agrees that when a digital currency is established and its use becomes widespread, there will be no economic transaction, transfer, or payment that is not controlled by the system’s administrator; that is, the central bank; that is, the tax and other mechanisms of the respective state, advertising agencies, and whoever else can process and exploit the relevant big data4.
Although a few more advantages are mentioned (e.g., lower operational costs in managing payments, zero cost for creating “physical” currencies), the fundamental and unprecedented one is this: the generalized control of citizens’ economic behavior and the technical ease of creating a highly accurate “consumer profile” for each individual, valid for life5.
The dream of such a universal control is not exclusively Chinese. Almost all capitalist states have it. That’s why, quite suddenly, the (alleged) illness of coins and banknotes was also attributed to covid-19!!! Yet another attempt, another encouragement, another pressure for voluntary acceptance of algorithmic imprisonment…
Ziggy Stardust
- It is understood that industrialists and bankers supported the “despotism” of the Indian state… ↩︎
- More specifically Cyborg 14, February 2019, blockchain: the protocol of the gods. ↩︎
- The digital yuan will be based on a dual system. Its “issuance” and circulation to commercial banks and other related financial institutions will be done without blockchain. This technology will be used in the distribution of the currency, from banks to their customers. ↩︎
- Electronic payments are quite widespread in China, mainly through companies such as Alipay (of Alibaba) and WeChat Pay. There is also the yuan in the familiar “physical” form, coins and banknotes. ↩︎
- The first major capitalism that will establish the use of exclusively digital payments will decisively impose the technical and operational standards that will be followed by others on the planet. The fact that here the initiative belongs to Beijing also has a strong geopolitical dimension, especially with the US and the steadily declining “omnipotence” of the dollar in international transactions… ↩︎