Might a more conceptually important question be as to what effect Covid-19 will have on the future of economics and politics in general?
Consider that our current international structure is built toward supporting a Cold War that ended thirty years ago and yet still consumes a significant fraction of global wealth. The military industrial complex tried using Arab Terrorists as a replacement for the Soviet Union, but it has proven far too complex for their somewhat rigid mindset, so now it’s back to pointing the finger at the Russians. Irrespective of the fact the US has had a joint space program with them, since the fall of the Soviet Union. Imagine for just a moment having a joint space program with the Soviets, if you want a real dose of cognitive dissonance.
Might that money have been better spent, over the last thirty years, towards building up a more robust civil structure? What does economics have to say to that? Will this pandemic prove to be a watershed moment, where the field of economics actually addresses the entire situation and not just the very narrow mathematical models they currently think are most important?
Are there any other issues which have been ignored, or overlooked? I would argue the very nature of money is seriously misunderstand.
Econ 101 says money is both medium of exchange and store of value, yet a medium is dynamic, while a store is static. Blood is a medium, fat is a store. Roads are a medium, parking lots are a store. The hallway is a medium, the hall closet is a store. The average five year old has likely been taught the difference, so why do economists lack that level of insight?
As a glorified voucher system, money is functionally a contract between the individual and the community. Even gold backed currencies are an IOU for some set value. As such, the asset is backed by a debt.
Markets need these notes to circulate, thus the medium part, but as linear, goal seeking creatures, we treat it as the signal to extract from the noise of society and the economy, so save and store. Requiring ever more to be added and since storing it is no longer burying coins, ever more socially and economically corrosive ways to store what has been extracted.
For one thing, it creates a centripetal effect, as positive feedback draws the asset to the center of the community, while negative feedback pushes the debt to the edges. Since the financial system serves as the value distribution mechanism, this is analogous to the heart telling the hands and feet they don’t need so much blood and should work harder for what they do get. The younger generations currently being drowned in debt are not going to be able to continue to support this system, at least willingly.
Another significant fact is that government is debtor of last resort. It doesn’t take much knowledge to realize the financial markets could not function, without the government siphoning up trillions in apparently surplus capital. Where would it go otherwise? Derivatives? Apple stock? Not that there is much discussion of this, in economics debates. The secret sauce of capitalism is that public debt backs private wealth.
Then considering how much gets poured into the aforementioned military industrial complex, could it be their real function is to spend the money, in order that more can be borrowed? So we blow up other countries to sustain the apparent value of this money.
The obvious problem is that this is a poor investment. There simply isn’t sufficient investment potential to save the amount of notational wealth we feel we need, but we all save for many of the same reasons, such as raising children, housing, healthcare, retirement, as well as all the infrastructure of a functioning society.
What if these could be invested in directly, as community assets and networks, rather than everyone trying to save for them individually? Might we have stronger societies and healthier environments, if these could be considered stores of value and not just assets to be mined?
The functionality of money is in its fungibility. We own it like we own the section of road we are using, or the fluids passing through our bodies. It is an economic lubricant, not a fuel. As such, it is a public utility, like roads and has to be treated as such. Like taking the punch bowl away, when the party gets going, not just pour more vodka in, when it runs low.
Those who love money, but hate government, are like the fish that loves the worm, but hates the hook. If you don’t like the government, don’t use their currrency. The more society can rely on more organic, grass roots networks of reciprocity, the more resilient it will be.
To be really radical, what if the government was to threaten to tax out what it currently borrows? Certainly many people would scream about, “their money!,” but whose picture is on it and who holds the copyrights? Maybe we could invest in the communities, rather than just pouring it in a speculative bubble and hoping we get ours out, before it pops.
This pandemic is certainly offering a very clear example of the importance of government, relative to the private sector, so will we learn from it? Or go back to the old ways, as soon as it’s past? What will the field of economics do?
As the executive and regulatory function of society, government is analogous to the central nervous system, as money and banking are to blood and the circulation system. There was a time when government was private, but when monarchs lost sight of the fact they served a function to society, in order to be served by it, they were usurped. It’s a two way street.
Now we have this government as semi-functional public utility.
Banking seems to be having its, “Let them eat cake.” moment.
Not that banking could be a direct function of government. Politicians live and die on the hope they inspire and we experience money as quantified hope, so printing excess money is a cheap high. Like the head and heart, they are different organs, serving different functions.
