Do You Agree With Jesus & Keynes?
By Andrew White
Last Tuesday night the St Paul’s Institute held the second in a series of set piece debates on the theme of “The City and the Common Good: What kind of City do we want?”. The keynote speaker was Robert Skidelsky, the ennobled economic historian and biographer of John Maynard Keynes who set out the broad thesis that money, and the pursuit of money, is often detrimental to human welfare.
The diminutive Skidelsky, voice echoing around the insides of the massive gold encrusted dome of St Paul’s Cathedral, set out the plausible argument that money and its pursuit can often reach extremes where its economic uses are lost under its collection and display for its own sake. There are many reasons why people pursue money but perhaps the most encompassing is that people have a rough idea of their wants and rather than desiring all things individually they desire the means with which to purchase them as a whole. He cites Schopenhauer; “Money is human happiness in the abstract”.
The morality of the banking industry comes in for attack from a whole load of angles. Keynes’ argument for interest rates to be a reflection of the opportunity cost of money is at the theoretical economics end of the spectrum, and strikes me as a pretty good argument for the active control of interest rates to regulate demand a fair few decades before it became economic orthodoxy.
More par for the course in the banker bashing is blaming the greed of bankers for the global depression. Much play was made of the gold standard and the period of banking regulation up to 1971 and the stability that supposedly ensued (periodic depressions, economic crises and devaluations aside of cause). There was certain amount of confusion between currencies being pegged to gold and the consequent restrictions on banks to create money via their fractional reserve ratios and the prudential regulation of banks (a point largely uncorrected by the deputy governor of the band new Prudential Regulation Authority on the panel).
Lastly there was the more theological discussion around usury; the idea that the mere ownership of money should not enable the breeding of money. Jesus, it seems, was against this, alongside many Muslim’s conceptions of God, leading to one of the stranger questions heard in a debate about economics: “Do you agree with Jesus and Keynes?”. I’d agree that Wonga.com isn’t the greatest product of modern civilisation but their specific persecution by god seems a step too far.
Ultimately the problem with most of these arguments is that money is nothing more than a reflection of what we already are. To ascribe a special status to the peculiarities of money is to fundamentally misunderstand this essential fact. Pay day loans reflect the greed of those willing to exploit others and of many who are unwilling to defer their own short-lived gratification. They also reflect, however, the fact that some people in our society are so excluded from the ordinary circling of money (and the consumptions, self respect, and general fulfilment that often goes with it) that they are forced to lengths to which few others would willing go.
The distribution of money, and what people do to get it, is something that we should worry about. This is especially true in politics where the rules of the game are decided. It is not for us to judge why it might be that people are so willing to pursue happiness in the abstract. Ambition for status, desire for approval, the fleeting thrill of purchasing one’s way to fulfilment, seeking a quite life of security, are just as valid as having a fully worked out list of what we want to buy with the money as they all constitute an essential part of what it is to be free.
What we must decide is whether everyone has an equal chance to achieve their own goals, whether the benefits that accrue to some are fair or proportionate to the efforts they put it and the outputs they achieve, and whether the society that ensues is actually one in which we want to live.
I firmly believe that none of these problems are insurmountable. I do not think we should ever fool ourselves into using the monetary system as a proxy for the problems of which it is a symptom. There is not a single social problem which would be solved by a return to the days of the gold standard where inflation and interest rates were decided by the vagaries of when gold was found (see the California gold rush and economic expansion of the 1850s followed by the 20 year depression beginning in 1871). Neither would we be able to solve the housing crisis by returning to fixed exchange rates where there were limits on how much money you were allowed to take on holiday in case it destabilised the pound. And we certainly wouldn’t solve the problem of unemployment if fractional reserve banking and lending money for profit were abolished.
The end of Schopenhauer’s quotation is that since “Money is happiness in the abstract; he, then, who is no longer able to enjoy happiness in the concrete devotes himself utterly to money”. As far as I’m concerned that’s fine, just so long as everyone has a decent chance of pursuing happiness in the first place.