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  • Owen Thomas Webb

What is Money?

Illustrations by Megan Le Brocq

We live in a material world. We live in a world where people, no matter who or where, need houses to live in and water to drink. We live in a world where conflicts are fought under material conditions, with tanks and ammunition. Our need for shelter, sustenance and comfort is a material need, but money, which determines access to these basic things for most people, is not. It is a social construct, an invention. So, what is money? And how should we be using it differently?

The last year in politics and media has demonstrated an unacceptable lack of awareness of the difference between finance and economics on the part of Atlanticist governments and supranational organizations like the European Union. We have heard a great deal about the ‘economic sanctions’ imposed on the Russian Federation by countries in the first world, but the efficacy of these seems to be more limited than Russia’s opponents were expecting. Why is this? It is a result of the extremely financial, monetary nature of the sanctions imposed, often targeting personal and private wealth, financial assets such as those held by the Russian central bank, CBR, and the exclusion of Russian banks from the global system of interbank transactions, SWIFT. This has provoked massive reforms on the part of the Russians, up to and including the assertion that European countries dealing with Russia must begin to use the ruble to fulfil payments for material Russian products, such as oil, gas and agrarian produce.

The Russian Federation is an export-driven economy with significant manufacturing, raw materials, and agrarian sectors. In contrast to this, the European Union is increasingly a collection of small, so-called ‘information economies’: highly financialized, import-driven economies by another name. Even after a year of the conflict in Ukraine, and a long series of sanctions on Russia, the European Union is incredibly still at a trade deficit with the Russian Federation, meaning that the value of Russian exports to the EU is still greater than what the European Union gets back from exporting to Russia. This says a great deal about the true nature of post-industrial economies such as those in the West. These economies are demonstrated by their relationship with industrial states like Russia to be strong on the charts and graphs used to measure financial wealth, but weak to the point of impotence when it comes to enforcing material restrictions on a state which they perceive is a threat. The logic of the sanctioning of Russian exports was that the lack of money that Russia would have coming in would cause its national economy to falter, but the European Union did not account for the fact that it would simply be replaced as a trade partner by other even larger economies, such as India. It should be obvious that a trade embargo to any extent cannot be enforced by the party that is dependent on trade for their material survival, but the economists in the European Union made the baffling mistake of thinking that Russia was more reliant on European money that Europe was on Russian material goods and resources.

The lack of self-sufficiency common in European economies should be a source of significant worry for everyone who lives within them. The United Kingdom, for example, imports a staggeringly high 46% of the food that it consumes, as of last year. On principle alone this is problematic because it means that the British agricultural sector has become woefully diminished, either as a cause or an effect of this startlingly high number. In practice, it is potentially catastrophic, with the material reality being that this country will starve if, for whatever reason, it cannot import from other countries. Even in the context of peacetime, self-sufficiency of something as straightforward as what the population eats should be a priority for the state in question. The reason this dependency on imports continues unquestioned is because the primacy of financial wealth goes unquestioned, and the conventional wisdom is that this country will always be able to buy from overseas because it has a lot of money. This is the same thinking as that which convinced import-dependent economies that they could sanction their most significant trade partner, and it is flawed.

Money is not a resource, nor is money itself economics. Money is finance, an incentive structure which formalizes exchange and through which the state can organize and command the actual economic process, for example the process of constructing a bridge or a railway or redistributing the workforce from one sector to another. Money does not feed, house, or warm the population— it is not real. Economics refers to the material conditions of a society, and how it achieves those conditions. Import and export are a key part of economics, particularly in a global economy such as the one we live in today. Money informs economics but it is a mistake to think that an economy that is not self-sufficient can rely on technocratic financial solutions, such as those applied to the problem of Russia, in lowering the cost of living in this country.

Without greater material self-sufficiency, the cost of the materials we need to live will never come down, and the problem of inflation will never go away. Only with a greater emphasis on agricultural and energy independence can the growing problem of expensive imports and integration into a flawed global economy be fixed, but throwing money at a material problem will get us nowhere.

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