Money – it’s what’s wrong with the world. It corrupts. It stains. It burdens. It’s a leading cause for suicide. Relationships fall apart on its behalf. Nations go to war over wealth. People cheat, steal, fight, and die because of it. There’s a reason why my mom always told me to wash my hands after handling money. It’s an ever-present filth that we just can’t rid ourselves of. Like a worn out bearing poorly supporting the mount of the axle of our society to the wheels of progress, money is an outdated tool compromising our forward progress and risking the safety of humanity.
Or so the world’s sentiment goes. The propaganda engulfing the everyday man of the western world is that money is evil and dangerous, and anybody with more money than they judge necessary exhibits the same traits. Those closer to the reigns of this bandwagon issue more technical concepts, condemning private ownership of the means of production as exploitive of labor. In other words, the message is that if one derives wealth through business ownership, he is by definition oppressing others. In fact, the existence of any unequal possession of material goods is a sign of oppression, destabilizing society. And so, money, if not distributed equally, is an evil bearing evil.
There is a lot to unpack there. Perhaps, overtime, I’ll be given a chance to dissect the multiple issues. This time, however, I’d simply like to address a very basic idea, and, of course, judge it. That idea being money.
As in most disagreements, many of those involving economics manifest a misunderstanding of definitions and concepts that are sort of important to understand before arguing for one position or another. It seems like the basic idea of money is misunderstood in some way, and then entire economic structures are built on this pile of sand. Like Sisyphus forever toying with his boulder, economic structures based on faulty ideas keep collapsing, but people keep trying.
When arguments live in some kind of one-dimensional abstractions or hypotheticals, things become complicated because they’re being treated too simplistically. For example, government officials justify regulating wages by approaching the concept of value from only one direction – that which the laborer adds to the product. And if the business owner can sell the product for more money than he paid the laborer to assemble it, then he undermined the worker. Thus Marx. To the gulags!
But the product that I bought at the store was not created ex nihilo by the worker in the factory. The business owner didn’t hire a laborer, lock him in an empty room, and voila! Out comes an iPhone. “Keep the change, you filthy animal.” Says the business owner as he throws crumbs into the room. That’s the way the picture is painted. Yes, the laborer is an essential part of the ingredients, but so is the equipment, the machinery, the raw materials, the tools, the delivery, the systems, the management, and everything else that a customer cares about. All of this needs to be paid for and paid for before being able to sell the potential, future product. Meaning, somebody has to be willing to take on the risk of paying for the production of a product without making any sales.
That’s the role of the business owner. He pays for all of the ingredients, and he does so when it’s risky to do it. He might lose everything. Why would anybody want to do that? Because, while there is a potential loss, there is also a potential reward in profit. The business owner weighs his options and decides to invest into the means of production in order to benefit from the means of production. The laborer gets paid for what he brings to the table. As does the owner. Take away the potential for profit and you take away any reason for anybody to risk. Thus, business closers. Unemployment. Economic stagnation.
Now, this is all procedural economics. Interesting, yes. But I said I wanted to address the idea of money. Well, the application of money into the economic process is a necessary setup for the question. So, here comes the money talk, because, money does talk. Keeping abstract notions out of it, what is money? Money is nothing more than an agreed method of exchanging the value my work creates for the value yours does. Money = productive labor. Or, better yet, productive labor = money.
When a carpenter goes to the grocery store to buy a gallon of milk, he can try to bring the table he just made to exchange for the milk. But perhaps the store owner doesn’t want a table. Perhaps the store owner needs a light bulb. Blast. The carpenter doesn’t make light bulbs. No milk for him. No bulbs for the store owner. Nobody gets what they want. Unless, of course, there is a trading unit that the carpenter, the store owner, and the electrician can all agree upon. In comes currency. (This is an ancient concept. Not my idea.) The carpenter can trade the table he made with somebody who wants it in return for a unit measuring the value of his work – money. He can then use some of that money to trade with the store owner for some milk, who in turn trades the money with the electrician for a light bulb. Money in the form of currency is simply an agreed method of exchanging labor for labor. It’s the middleman in an economy beyond the complexity of 2 people.
Money is productive labor quantified. Work first. Money later. So, the complaint that a wage earner is doing all the work and the business owner is reaping the monetary reward is only viable if we don’t understand what money is. How did the business owner pay for the equipment, tools, materials, systems, and everything else it takes to make a product? With money of course. Money that was acquired by means of productive work quantified by those who saw value in it. The wage earner works and gets paid. The business owner works and gets paid. In order to have money, work has to be done.
So, when politicians speak vain slogans about regulating wages or prices, they are speaking in abstractions beyond reality. And as we see happening around us, anytime we walk out on the limbs beyond reality, we are in danger of getting what’s coming. Money is not a problem. The problems lingering around it come about when people hold money in the wrong category and make advances at it in the wrong way. But those are moral judgements.
There is a lot to talk about when it comes to economics, business management, and wealth creation. But before we complicate matters, the first thing to remember is this: money isn’t God, but it is good. Because money is a measure of work. That’s the premise.
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