Money has always inspired obsession, both in those who amass it and in those who think about it. “Man will never be able to know what money is any more than he will be able to know what God is,” wrote the French financier Marcel Labordère to his friend John Maynard Keynes. The analogy is apt. Money, like God, injects infinity into human desires. To love it is to embark on a journey without end.
Three new books testify to money's enduring power to fascinate and horrify. The most scholarly of them, The Invention of Market Freedom by political theorist Eric MacGilvray, traces the emergence of the distinctively modern or “market” conception of freedom out of its “republican” predecessor. The general story is somewhat familiar, but MacGilvray complicates it by showing that market freedom did not vanquish its republican competitor in open combat but subverted it from within, like a parasite devouring its host.
The republican tradition was diverse and labile, but its core, argues MacGilvray, lay in two beliefs: that freedom means control of arbitrary power and that a virtuous citizen body is required to exercise such control. Hence, republicans pressed for extensions of the franchise only to those deemed fit to wield it; universal freedom was not one of their ideals. Some republicans valued private liberty—doing as one pleases in one's own backyard—though they generally sought to secure it through citizenly vigilance rather than formal guarantees. And all ancient republicans despised commerce as insecure, distracting, and corrosive of the public spirit. Working for wages or profits was regarded not as an innocuous voluntary activity but as a form of compulsion tantamount to slavery. The modern ideal of the market as a “system of natural liberty” was nowhere in sight. How did we get from there to here?
MacGilvray distinguishes three stages in the decline of the republican conception of freedom. The first was the development of a distinctively modern brand of “commercial republicanism” in the work of Montesquieu, Hume, and Adam Smith. These thinkers retained the ancient idea of freedom as control of arbitrary power, but added that under modern conditions such control requires the encouragement rather than the restraint of commerce. Commerce, on this view, lays the foundations of national wealth and hence independence. It also, by replacing fixed with mobile capital, forces the sovereign to act in the interests of the people, or at least that part of the people that owns mobile capital. Virtue still holds a place in this scheme, but a subordinate one. It is reinterpreted in a narrowly utilitarian sense, as that set of qualities favorable to civil peace and prosperity: industry, thrift, honesty, and respect for the law.
The next step was to re-envisage commerce not just as a precondition but as the supreme expression of freedom. Crucial here was the old “juristic” conception of freedom as the right to do as one pleases in a certain sphere. The market—the sum total of consensual economic exchanges—could easily be presented as the realization of freedom in this sense, and restrictions on it as infringements of freedom. Thus was forged a “synthesis of the commercial republican claim that rights to property and exchange should be respected as a matter of social utility and the juristic claim that they should be respected as a matter of justice” (pp. 140–141). This synthesis came to fruition in Smith's Wealth of Nations, the foundational text of the new market ideology.
The nineteenth century saw the unraveling of Smith's synthesis. Industrial capitalism and mass democracy created a world in which republicanism, even in its qualified commercial form, could only appear to be “an atavistic appeal to an idealized past” (p. 150). Hume and Smith had envisaged a population of small freeholders playing the part of the landed citizenry of ancient Athens and Rome. But by the mid-nineteenth century it was clear that wage laborers would dominate the new industrial state. Were such laborers genuinely free? And were they fit to uphold a free polity? Marxists and conservatives answered both questions with a resounding “no.” Defenders of capitalism were accordingly forced back on a purely negative conception of freedom as the right to dispose of one's goods and labor as one sees fit. And that remains the dominant conception to this day. In popular discussion, freedom is tacitly identified with market freedom; restrictions on the market must be justified by appeal to some other value—equality, usually, or economic security. The old republican idea of freedom has disappeared from sight.
The Invention of Market Freedom is a learned and densely argued book. Its laudable aim is to undermine the self-evidence of “market freedom” and so create space for its republican rival. I have only two reservations. The first concerns terminology. MacGilvray's opposition of republican and market freedom is misleading in the same way that an opposition of “Western” and “Indian” values would be misleading: it presents non-contradictories as contradictory. The contradictory of republican freedom is not just market freedom but freedom of thought, association, and religious practice—everything that Benjamin Constant designated as “modern liberty.” True, market freedom is often presented as the modern freedom par excellence, but one only has to read Goethe, Humboldt, or John Stuart Mill to realize that this is nonsense. Freedom of thought and conscience is just as integral to the modern liberal tradition, and just as alien to older republican conceptions.
Once “modern liberty” is allowed to include these other, noneconomic freedoms, it appears rather more appealing relative to its “ancient” counterpart. But we can still ask how closely the economic and noneconomic aspects of modern liberty hang together. Not very closely, I suspect. Right-wingers like to point out that private property is essential to personal freedom, including freedom of thought, but they neglect to mention that to play this role it need not take its distinctively modern, marketable form. Was Montaigne any less free in spirit for not being able to sell his tower and buy a yacht? Indeed, insofar as marketable property tends to flow into the hands of a few, it is positively inimical to the freedom of the many, who are forced into dependence on the labor market. This quintessentially republican insight has been all but lost in the modern world, where (as MacGilvray points out) property is understood as marketable by definition. Perhaps what we need is a synthesis of the ancient republican view of property as the foundation of personal independence with a modern liberal awareness of what that “independence” might encompass.
I have one other quibble. Freedom, however conceived, is not the only or even the most potent value to set against market imperialism. For example, teachers of philosophy, history, and other humanistic disciplines are now required to justify their activities on the grounds they “add value” to students by equipping them with “transferable skills.” This looks like an unwelcome intrusion of market language into the nonmarket sphere. But it is hard to make out that anyone's freedom is at stake, except perhaps in a very indirect or general sense. The damage, rather, is to the integrity of a particular human practice, embodied in a particular institution. Similar points could be made in connection with science, medicine, law, and art.
Here, Michael Sandel's recent bestseller, What Money Can't Buy, steps into the breach. Sandel's target, like MacGilvray's, is market imperialism. Drawing on many examples, he shows how over the last three decades market norms have seeped into spheres of life previously regarded as lying outside their remit. Sandel's chief concern, however, is not freedom or equality, but corruption. His prime example is friendship. I cannot, as a matter of logic, pay someone to be my friend, though I can pay him to act as if he were my friend. True friendship implies a motive—willing your friend's good for his sake, not your own—incompatible with the receipt of payment. The point can be generalized. Subordinating the internal end of a practice to an external one (typically money) transforms it into an essentially different and inferior kind of practice. It corrupts the practice, and by extension those engaged in it.
Sandel's protest against market imperialism has won him a devoted following in left-liberal circles. His argument from corruption has not been so popular, however. For one thing, it smacks of paternalism. If a man agrees to be paid to “be my friend”—willingly, and in full knowledge of the facts—who are we to condemn him? And talk of the inherent “end” or “nature” of human practices raises the hackles of liberal secularists. Surely it is up to us to decide what we are aiming at in what we do. As Glen Newey puts it in his review of What Money Can't Buy, a doctor accused of prostituting his talents for pay might simply retort that he is in the business not of doctoring but schmoctoring, “which is just like doctoring, except that its internal goal is to earn money for the schmoctor.”Footnote 1
Newey's example is unfortunately chosen. Clearly, a doctor who strives to maximize his income by any means possible, including by giving patients whatever drugs they ask for, regardless of whether they need them, is not engaged in some alternative practice of schmoctoring; he is, simply, a bad doctor. Doctors and other professionals are not free to redefine the internal goal of their practices by fiat, any more than individual speakers of English are free to redefine the meaning of “cheese” or “potato.”
But there is a more serious point here. Even if individuals cannot consciously change the meaning of the practices they engage in, those practices do nonetheless change, so that what looks like corruption to one generation may seem quite innocent to the next. Sandel himself provides an example. For centuries, the life insurance market was tightly regulated by law and custom. “A human life cannot be the object of commerce,” wrote an eighteenth-century French jurist, “and it is disgraceful that death should become a source of commercial speculation” (p. 144). Today, these inhibitions have vanished. The market in “death bonds”—life insurance policies packaged into bonds and sold to investors—is valued in the billions. No one seems too troubled by this, though Sandel has qualms.
The sphere of commerce does not always expand, of course; it also contracts. Many things we now regard as sacred were once bought and sold freely: public offices, for instance, or brides. In a previous book, Justice, Sandel discusses the policy, implemented by the Union government during the American Civil War, of allowing draftees to hire substitutes to fight in their place (p. 76). Examples like these serve to correct the sentimental error, tacitly encouraged by What Money Can't Buy, that ours is a uniquely venal age.
Given this variety, what could it mean to say that practices have an “internal end,” and that deviation from this end counts as “corruption”? Two options are open to Sandel. He could either base his case purely on contemporary intuitions about the meaning of practices, like a linguist pronouncing a certain usage “incorrect” today knowing that it will probably be “correct” fifty years hence. Or else, more ambitiously, he could appeal to the basic purposes of human life. Both options face difficulties. The relativizing option leaves us with nothing to say during transitional periods, when one set of cultural meanings yields to another. And the absolutist option confronts the hard task of spelling out the basic purposes of human life. What Money Can't Buy is a popular work and wisely steers clear of these metaphysical deep waters. But a more thorough discussion would be bound to encounter them sooner or later.
The last and liveliest book in this trio, Felix Martin's Money: The Unauthorised Biography, attempts what Labordère declared impossible: to tell us what money is. Martin brings to his task an unusual combination of qualities. A trained economist with a doctorate from Oxford, he is also widely read in history and literature, has an insider's knowledge of the money market (he is currently a fund manager in the City of London), and writes fluent, witty prose. In brief, Martin has mastered economics and remained human—a rare feat, and one that equips him to deal the conventional economic theory of money a blow that its exponents may have to reckon with.
That theory rests upon an old story, relayed by Martin in the first chapter of his book. According to this story, human beings once bartered commodities directly against one another. Finding this inconvenient, they eventually settled upon a single commodity—in practice, usually a rare metal, though theoretically anything might have done—to serve as a general “medium of exchange.” This commodity became known as money. Credit and its various refinements were a later, secondary development. Versions of the myth can be found in Aristotle, Locke, and Adam Smith, as well as in the introductory sections of most economic textbooks.
There is only one problem with this elegant and plausible story, writes Martin: it is entirely false. The “age of barter” is a purely speculative construction with no basis in historical or anthropological fact. Indeed, what evidence we have strongly suggests that no such age has ever existed. In all nonmonetary societies known to us, goods are not bartered freely but exchanged as gifts between individuals bound by ties of kinship and reciprocity. The image of Stone-Age man trucking and trading just like us, only without the benefit of money, is an anachronistic fantasy.
Moreover, money, when it does appear, is often not a commodity, or if it is, this is not crucial to its functioning as money. Gold and silver coins have always traded at above their metal value, and some currencies, such as the vast stone wheels of the island of Yap, are altogether useless. Indeed, claims Martin, money is not essentially a thing at all, but an abstract system of social relations. At the heart of this system lies transferable debt. If I write you an IOU in lieu of payment and you sell it on to a third party, that IOU is, in effect, money. What sustains this system of transferable debt is trust—trust both that the original issuer is creditworthy and that his debt will be generally accepted as payment. Credit is not a ghostly superstructure erected upon the solid foundation of commodity money; rather, commodity money is the “ephemeral and cosmetic” record of the “underlying system of credit accounts and clearing” that is money's essence (p. 26).
This reinterpretation of the nature of money has two striking implications, which Martin draws out over the course of his book. The first is cultural and psychological. Conventional economic theory presents money as a mere means for the satisfaction of nonmonetary wants. Theoretically, money is eliminable—an assumption reflected in the standard economic practice of modeling complex money economies in “real” (that is, nonmoney) terms. But if Martin is right, this procedure is nonsensical. Money is not just a device for satisfying preexisting desires more efficiently. It changes the whole face of the social world, commuting concrete tithes and dues into abstract debt and liberating the acquisitive passion from the fixed bounds of custom and religion.
The secret of money's power, argues Martin, lies in its unique capacity to be exchanged with anything. Money thus brings into being a new, universal form of value—economic value, as we call it. Such a notion was foreign to pre-monetary man. In the world of the Homeric epics, each thing has a value peculiar to itself, reflecting its particular use and provenance. Objects are sometimes exchanged for one another, but such exchanges have only the personal significance of pledges of friendship or loyalty. There is no general principle of exchangeability. The Homeric world is one of qualitatively unique substances, which is the secret of its archaic charm.
With money, all this changes. Now everything has a price, making it exchangeable, in principle if not in fact, with everything else. Money is a sort of universal acid, reducing all other forms of value to its own. This power of money to impose “an artificial monotony” upon the variety of life and nature is memorably symbolized by the legend of King Midas, who is granted the power to turn all he touches into gold (p. 154). But of course, Midas' real-life counterpart, homo economicus, does not need to turn things literally into gold, for in his disenchanted eyes everything is already potentially gold, in other words, it has a money equivalent. This is the “blasé attitude” that sociologist Georg Simmel saw as the distinctive mark of monetary civilization and that playwright Eugene O'Neill embodied in the figure of his Marco Polo: “He has memorized everything and learned nothing. He has looked at everything and seen nothing. He has lusted for everything and loved nothing.”Footnote 2
Martin's reinterpretation of money has another, more practical implication. The traditional commodity theory served an ideological purpose: to wrest control of the monetary standard from the sovereign. This was the import of John Locke's influential essay of 1695, in which he argued (against William Lowndes' plan to reduce the silver content of the coinage while retaining its nominal value) that a pound sterling just is a certain weight of silver. Locke's argument won the day, with disastrous consequences for the Exchequer. But its real purpose was more political than economic: by identifying money with silver, Locke hoped to secure it forever against the depredations of sovereign power. “Largely as a result of Locke's influence,” Martin quotes the historian of currency Sir Albert Feavearyear as saying, “£3 17s 10½d an ounce came to be regarded as a magic price for gold from which we ought never to stray and to which, if we did, we must always return” (p. 133).
The idea that money just is silver or gold is no longer taken seriously by economists. However, the fundamental error of the commodity theory remains intact. Though no longer thought of as literally part of nature, money is endowed, insofar as is possible, with the independence and fixity of a natural object. Its control is delegated to central bankers with a mandate to maintain “stable price expectations.” This is a kind of bad faith, argues Martin. Money is a social technology, whose standard is inherently political. To renounce control over it is to shirk a responsibility implicit in monetary sovereignty.
The specific problem is debt. Left to itself, it tends to accumulate to unsustainable levels, bringing the whole monetary system into disrepute. The state must therefore “always be vigilant to ensure that the architecture of financial obligations reflects what society believes to be fair” (p. 187). In the past, this meant periodic clean slates or “jubilees.” Today, it must mean a deliberate recalibration of the monetary standard in favor of debtors—in a word, inflation—and also, looking ahead, a withdrawal or restriction of the sovereign support that has allowed banks to gamble so recklessly with other people's money.
Money is a brilliant, quirky, imaginative work. Yet I put it down with a certain sense of bathos. Money's original sin, according to Martin, was to dissolve the concrete values of life into an abstract, homogenous economic value. Reforms of the banking sector do not seem apt to deal with a catastrophe on this scale. Martin is not the first to grapple with this problem, of course. Communist regimes also sought to abolish the tyranny of money, by restricting the number of things it could buy. But the upshot of their efforts was a despotism of cadres and engineers far more oppressive than the alternative despotism of finance. The point is that civilizational problems do not admit of administrative solutions. Reification, alienation—whatever one wants to call it—is a condition of the modern world. It will take more than “narrow banking” to do away with it.
The problem of mismatch also confronts MacGilvray and Sandel. Neither thinker has any clear remedy for the evils he sets forth so eloquently. MacGilvray calls for a revival of the republican conception of freedom, yet he himself is well aware why that conception fell into disuse in the first place: it was ill-adapted to the realities of capitalism and mass democracy. Sandel repeatedly calls for “democratic debate” over the scope of the market. Yet without a shared conception of the internal goal of our practices, it is unclear how such a debate could be anything more than a shouting match, with victory going to the stronger party.
These three excellent books point to the emergence of a new ideological formation—or perhaps one should say the reemergence of a very old one. Their broadly anti-market stance places them superficially on the left, yet their real anxiety is a conservative one about immorality and corruption. Aristotle and ancient Greece loom large in all three. This backward-looking stance explains their authors' inability to envisage any alternative to the current order that is both radical and realistic. The genius of Marxism was to tether the old ethical indictment of commerce to a theory of historical change and a program of political action. That theory and that program have now collapsed, leaving only the indictment. And what force can a mere indictment have in a world whose inner structure is shaped by money?
