of money. In this way, economists link the existence and nature of money to functions of money.
The theoretical understanding of money in modern capitalist economies is centered around the “intrinsic” commodity nature of money; that is, money as representing only exchange ratios, as a neutral veil, and as only a medium of exchange. In the mainstream (neoclassical) economic view, money is essentially either a natural commodity or a symbol of a natural commodity: a commodity that can be traded for all other commodities. Whether this commodity is gold, cigarette, or paper is not really the issue; whatever it is, it merely symbolizes the underlying exchange ratios between tradable commodities. It is a veil over the “real” economy, having no economic force sui generis. Eminent economist and Nobel laureate Paul Samuelson writes: “even in the most advanced industrial economies, if we strip exchange down to its barest essentials and peel off the obscuring layer of money, we find that trade between individuals or nations largely boils down to barter.”17
The economists’ definition of money views money as serving as universal measure of values (in its unit-of-account function) by which all qualitative differences are converted into quantitative difference, thus desiccating all social ties. Classical social thinkers like Karl Marx, Max Weber, and Georg Simmel in different ways interpreted money as “the very essence of our rationalizing modern civilization” and “a tool of rational cost-profit calculations.” It is a rational instrument without much “cultural significance” (that is, without much qualitative differentiation, earmarking, personalizing, and non-homogenization), focused only on “arithmetic problems.”18 The general idea is that money and monetization, the twin battering rams of capitalism, have been very successful in transforming “products, relationships, and sometimes even emotions into an abstract and objective numerical equivalent” all over the world.19 Though Marx argued that the objective relations between commodities are the phantasmagoric forms of social relations between people, he still viewed money, a “god among commodities,” as the radical, frightful leveler that desiccates all social ties and spaces.20
Against this extraordinarily narrow concept of homogenous money, some sociologists, namely Viviana Zelizer, have attempted to formulate a more substantial institutional and cultural account of money. They have vigorously put forward the notion of the diverse nature of money, asserting that monetary exchanges are thickly social, cultural, and relational. Sociologists have argued that all monetary phenomena are socially contingent. They posit that money is not a neutral, nonsocial substance and that it is influenced everywhere by culture. They have countered the mainstream neoclassical economic perspective that regards money as a given and as nothing more than a lubricant between “real” goods in order to reveal the meaningful social relations among persons or groups in monetary transactions.
For instance, Zelizer documents how people earmark money, place restrictions on its use to mark social boundaries, create separate spheres of exchange and regulate allocations to create differentiation of homogenous money, affirm cultural distinctions, and elaborate the social meaningfulness of money. In this way, she mounted a vigorous assault against the widespread economistic view of money as absolutely fungible, qualitatively neutral, and devoid of any use value. Her research has shown that money is “neither culturally neutral nor socially anonymous. It may well ‘corrupt’ values and convert social ties into numbers, but values and social relations reciprocally transmute money by investing it with meaning and social patterns.”21 In directing attention to monetary exchanges as thickly social, cultural, and relational, Zelizer argues that social ties and economic (monetary) transactions repeatedly mingle. In this vein she rejects the idea of “hostile world”22 and that of “economics-or-nothing reductionism” in economic-sociological analyses.23
Overall, in the sociological investigation of money three key properties of money have emerged to frame the discourse on money. These are unit of account, monetary media, and interpersonal transactions. Unit of account or money of account is the abstract numeraire, the official currency. In the United States the money of account is the dollar. Monetary media relate to the medium, the objects that are used as money. The money of account can be embodied in various material forms like metal coins, paper, or credit cards. The dollar, the money of account, is embodied in a range of objects: gold and silver coins, greenbacks, credit cards, various kinds of e-money, etc. The third property (interpersonal transactions) refers to money’s ability to mediate interactions between people, to “the connections among persons and groups involved in monetary transactions,” and to the way they use money to differentiate one relationship from another.24 Later in this book, I will argue that money is not only a socially contingent phenomenon, but also social relations as constitutive of money itself. The argument is that social relations are by no means secondary, but rather constitutive of money. Money is a social relation.25 In chapters 4 and 10, we will further explore this notion of money as a social relation.
For now, let us take a moment to examine what kind of relationship our monetary system has with the environment, which is an integral part of the web of relationships that make life and human flourishing possible.
Theology in Motion 1: Money and Environmental Pollution
The foundation of the monetary system in the United States is debt. In order to create money, “high-power money,” to put money into circulation the Federal Reserve Board has to buy government securities from the commercial banks, except it wants to literally print money. If the Federal Reserve Board wants to pump $20 billion into the United States economy, it has to buy that amount of government securities from the banks (creating new bank reserves for them) and pay appropriate interest to the commercial banks or their investors. The Fed cannot just create money as the Treasury Department does with its issuance of metal coins, which is debt-and-interest free. The reader who is not familiar with modern monetary economics may rightly ask: Where do the government securities come from in the first place? The Treasury Department of the United States government sells bonds to borrow from the public in order to supplement tax revenues. The banks buy the debt instruments for their use or for their clients and the government pays periodic interest to the investors. From this you can see that the foundation of the money supply in the United States is on debt, not commodity standard. Running an efficient system for generating market-clearing interest rates and payments of interest due on debts is key for the functioning of the whole monetary system.
The interest-based monetary system is one of the contributing factors to ecological non-sustainability of economic growth. It is often rare to find theologians who recognize the crucial link between the damage to the environment and the interest rate. In the market economy, every producer who intends to stay in business has to cover, at the minimum, his or her cost of capital. Let us say that the risk-free, before-tax interest rate on bonds (only a part of the weighted average cost of capital as cost of equity is ignored in this example) is only 4 percent; it means the profit rate has to be higher than this level for private production to go on. This also means at the minimum the economy has to grow at 4 percent to yield this kind of profit irrespective of concern for the environment. Now this is where the argument hits home. If the economy of the United States is growing at 4 percent per year, it will double approximately every eighteen years. (This 4 percent rate does not include allowance for return on equity, a margin for national population growth rate, and the compounding of interest, which is boundless. And if it does, the years will be dramatically less.) Now imagine the huge impact on the environment if Europe and Japan are also growing at the same rate—yet we know the average cost of capital in these societies is more than 4 percent per annum. The monetary system and the
