by Felix Martin
It is here, in the ascendancy of Locke’s understanding of money, that the curious inability of orthodox economic thought to engage with the social and political roots of the instability of monetary society has its roots. The highest hidden cost of Locke’s mission to make money safe for democracy was what it implied not for the topics that remained within the province of economics, but for those which it left out. It was the licence that his concepts of money and economic value provided to the economists—indeed, the imperative it urged on them—to treat respect for the unimpeded action of the market as the moral duty of every rational person that was in the end its most baleful consequence.
The immediate aftermath of the great recoinage itself served ominous notice of the human tragedies that this self-inflicted ethical blind spot could result in. Yet it was a mere shadow of catastrophes to come. The more widespread that belief in the economists’ story of monetary society’s miraculous ability to regulate itself became, the greater became the capacity for moral disaster when policy-makers succumbed to the simplistic charms of its Looking-Glass world. The story of one of the most shameful episodes in the history of economic policy-making testifies to quite how bad things could get.
THE INVISIBLE HAND IN ACTION
In 1845, Ireland had been a full constituent nation of the United Kingdom for more than four decades, and an accessory of the British economy and polity, if often by force, for several centuries before that. Yet in its religion, politics, and language, Ireland retained a quite distinct culture from its neighbour: economically and socially speaking, it was almost of another era. By the early nineteenth century, Britain was the greatest manufacturing economy in the world, while Ireland was one of the most backward in Europe. The most telling evidence of its poverty was the near-total reliance of the rural economy and population on a single crop: the potato. So when the first reports of a disastrous failure of the Irish potato crop began to emerge in September 1845, they were brought at once to the attention of the government in Westminster.
The government’s initial response was quick. A scientific factfinding mission was dispatched, the gravity of the situation was ascertained, and a Relief Commission established. At its head was Sir Randolph Routh, who had been the senior logistics officer at Waterloo. Meanwhile, the mastermind of government policy was to be the young Assistant Secretary at the Treasury, Charles Edward Trevelyan. Trevelyan was a prodigy—one of the most brilliant of the new breed of modernising progressives then beginning to dominate the British civil service. With a team combining such unimpeachably noble principles and such long practical experience in charge, Ireland was surely in the safest possible hands.
Those praying for a merciful policy from Trevelyan’s Treasury should, however, have been forewarned by the very first sentence of an editorial shot across his bows from The Economist magazine in late November 1845. It opened with a chilling warning: “[c]harity is the national error of Englishmen.”9 There was no question that the impending Irish famine was an economic disaster and a human tragedy. But simply sending aid was absolutely the wrong way to help. It would violate two central principles of economic theory. The first was the need to avoid moral hazard. Send aid, and one might alleviate the immediate problem—but at the cost of reducing the Irish to a state of permanent dependency. The second was the hallowed principle of non-intervention in the operation of the market. Adam Smith had proved that it was allowing private self-interest to operate as freely as possible that most efficiently achieves the social good. For the government to interfere with the operation of the market in solving the crisis would therefore be a foolish error.
A second editorial in The Economist, published in March 1846, captured the consensus which dominated the views of the British Establishment. Proactive intervention by the government, the editors warned, would be futile: “To feed the Irish, to attempt which it is now practically driven, … is for the legislature physically impossible.”10 To attempt it therefore risked jeopardising the authority of government: it would “only damage the interfering, unthinking lawmaker … arms against him all the unsatisfied desires of the people, and must in the end destroy his power.”11 Ultimately, it would do more harm than good: “The legislature therefore cannot effectively help Ireland … [I]t can no more relieve the wants of the Irish, than a man can cure delirium tremens by swallowing daily increasing quantities of ardent spirits.”12 Above all, to deny these self-evident truths was proof not of an alternative political or moral disposition—but of wilful ignorance of objective, scientific fact. Appealing to the British people to send assistance to Ireland, the editors of The Economist wrote, “appears like calling on us to unlearn the first rules of arithmetic, and do our sums by the assertion that two and two make five.”13 Within seventy years of its publication, Adam Smith’s theory of monetary society had attained the status of scientific—indeed, mathematical—truth.
Since virtually every official and politician dealing with Ireland was a devoted acolyte of these doctrines, they dictated British policy. Sir Robert Peel managed to have Parliament authorise a lone consignment of £100,000-worth of American maize before his government collapsed and with it any further hope of significant relief. The consequences of this inaction were catastrophic. Throughout the winter of 1845 and the spring of 1846 there was famine on a scale unprecedented in Ireland’s history. By the summer of 1846 large bands of the poor were to be found roaming the countryside, living off weeds and nettles. The country was close to a breakdown of civil order: military rule was installed in all but name. Yet worse was to come. In August, to universal horror, the potato crop failed for a second year. None of this was secret; all of it was widely and vividly reported—on 2 September, a leader-writer in The Times of London described the situation simply but clearly as “total annihilation.”14
Incredibly, the policy debate in London continued at the level of abstract principles. Smith and his followers had proved that interference with the natural operation of monetary society can only be bad: it was essential not to heed the siren song of those calling for government intervention. “We have no knowledge of any theoretical or scientific deduction whatever, so amply confirmed as this of Smith,” thundered the editors of The Economist on 2 January 1847. Morality had nothing to do with it: it would be a travesty of reason itself if the government were to “turn back to the old discredited principles of interference, and adopt practices the most unscientific and the most decried.”15 This editorial was published less than a fortnight after the following account of conditions in the district of Skibbereen had been submitted in desperation by Nicholas Cummins, a magistrate of Cork, to the Duke of Wellington, and published in The Times:
My Lord Duke, Without apology or preface, I presume so far to trespass on your Grace as to state to you, and by the use of your illustrious name, to present to the British public the following statement of what I have myself seen within the last three days … I was surprised to find the wretched hamlet apparently deserted. I entered some of the hovels to ascertain the cause, and the scenes which presented themselves were such as no tongue or pen can convey the slightest idea of. In the first, six famished and ghastly skeletons, to all appearances dead, were huddled in a corner on some filthy straw. I approached with horror, and found by a low moaning that they were still alive—they were in fever, four children, a woman, and what had once been a man. It is impossible to go through the detail … The same morning the police opened a house on the adjoining lands, which was observed shut for many days, and two frozen corpses were found, lying on the mud floor, half devoured by rats … A mother, herself in a fever, was seen the same day to drag out the corpse of her child, a girl about twelve, perfectly naked, and leave it half covered with stones. In another house, within 500 yards of the cavalry station at Skibbereen, the dispensary doctor found seven wretches lying unable to move, under the same cloak. One had been dead many hours, but the others were unable to move either themselves or the corpse.16
There could be no more seari
ng indictment of a mistaken policy and of the terrible intellectual error that had led sensible and humane people to persevere with it unquestioningly. And unlikely as it may at first seem, it is from Locke’s revolution in monetary thinking that the awful failings of economic thought that were on display in this shameful episode originated. It was only once money had gone, with Locke’s assistance, through the Looking-Glass, that the traditional ethical dilemmas over monetary society had magically disappeared. Foremost amongst these was the question of the extent to which money should really be the co-ordinating mechanism for social life. This question was rendered obsolete by the new view of money as a thing—a harmless fact of nature. The new discipline of economics boldly claimed to reduce what had once seemed vital questions of moral and political justice to the mechanical application of objective scientific truths. The complicity of this new worldview in ethical disaster was not lost on all contemporary observers. It was Nassau Senior—the Drummond Professor of Political Economy at Oxford and one of the government’s chief advisers on Irish economic policy—whom Benjamin Jowett, the great Master of Balliol College, Oxford, had in mind when he said years later: “I have always felt a certain horror of political economists since I heard one of them say that he feared the famine of 1848 in Ireland would not kill more than a million people, and that would scarcely be enough to do much good.”17
Fortunately, the conventional view of money is not the only one. There is, as we saw earlier, another tradition in monetary thought that never stepped through the looking-glass—a tradition that never flinched from interrogating the ethical consequences of the concept of universal economic value and the political and economic realities implied by the choice of the monetary standard. And it is a tradition that started right back when money was first invented, with the Greeks.
10 Strategies of the Sceptics
THE ANCIENT ORIGINS OF MODERN MISGIVINGS ABOUT MONEY
The brilliantly counter-intuitive notion that the pursuit of money for its own sake could actually be good was an idea alien to the Greeks. For them, money was still new and strange. They understood it quite accurately as a competing ideology of social organisation, and subjected it to critical evaluation. Their attention focused on exactly that aspect which the advent of the conventional understanding of money some two thousand years later was to brush under the carpet: money’s central idea, the revolutionary notion of universal economic value. Their experience of this concept as a novel idea for the organisation of social life allowed them to discriminate its good and bad effects with a clarity not available to the jaded eyes of thinkers who have lived with monetary society for centuries. Their misgivings were brilliantly summarised in one of the Greeks’ most enduring and popular stories: the myth of Midas.
Midas was the king of Phrygia, and the proprietor, it was said, of a beautiful garden in which, without cultivation, “roses grew of themselves, each bearing sixty blossoms and of surpassing fragrance.”1 One day, Midas found the satyr Silenus, who had become detached from the retinue of the god Dionysus, gambolling amongst these lovely roses.2 Midas captured the nature deity, and forced him to reveal his ancient wisdom. What, he asked, is the best that man can attain to? The satyr at once recognised him for what he was—a shallow and greedy despot. So as satyrs are wont to do, he poked fun at Midas’ ephemeral outlook and responded with the disappointingly philosophical answer that the best thing for a man is never to have been born; and the second best, to die as soon as possible. This was hardly what Midas had in mind, of course, and he made no secret of it. “Well, then,” replied Silenus, “have it your own way. If you let me go, I shall grant you one wish—and if you are so wise, you can choose whatever it is that you think is the best thing of all!” Believing, naturally, that wealth is the best thing a man can have, Midas chose that everything he touched should turn to gold.
The mischievous god granted his wish, and at first Midas was delighted. He broke off a twig, and it turned to gold! He picked up a clod: it turned to gold too! He picked an apple—and all at once it became as golden as the famous apples of the Hesperides! So intoxicated was the avaricious old king with his amazing new power that “his mind could scarcely grasp its own hopes, dreaming of all things turned to gold.”3 He ordered up a splendid banquet to celebrate his good fortune. But here, things started to go wrong. He grasped a crust of bread to eat—but it turned to solid gold. He mixed wine to drink—but as it passed his lips, it turned to molten gold. In later versions of the myth, Midas even made the fatal mistake of kissing his dear daughter—and turning her to cold and inert gold. Cursing his foolish error, “rich and yet wretched, he sought to flee his wealth, and hated what he but now had prayed for.”4 He begged the gods to take back their terrible gift—and, luckily for him, Dionysus took pity on him. He instructed Midas to go to the source of the River Pactolus in Lydia, and plunge his head and body into the water to wash away his powers. This Midas did, and so lost his now-detested gift. In doing so he transferred it to the river itself, which thereby became the source of the gold and silver alloy from which the earliest coins were made—the source, in other words, of the questionable invention of coined money for the rest of mankind.
The central theme of this myth is money’s intrinsic tendency to reduce everything to a single dimension by weighing it in the balance of universal economic value. Like the money he craves, Midas’ touch reduces the enormous variety of life and nature—the twig, the apple, his bread, his wine, even his fellow human beings and his family—to a single, lifeless substance. Where in nature there is variety of substance—and in traditional society, many dimensions of social worth—monetary society imposes an artificial monotony. The inexorable logic of money, the Greeks realised, was to put a price on everything, and to make everyone think of everything first and foremost in terms of a single dimension. By itself, a universally applicable concept of economic value was in one sense exhilarating, just as it is today. A single metric that can serve as the criterion for any decision does wonders for the organisation of a complex economy. But for the Greeks it was also a source of unease. Could it really be right for money to solve not only the humdrum problem of how many chickens to bring to market, but also the social dilemma of whom one’s daughter should marry—let alone the cosmic question of whether one was living in accordance with the divine order of the universe? Aristophanes tried the traditional method of disarming discomfort with comedy when he had the old hand Heracles explain to Dionysus that these days crossing the River Styx to enter Hades required payment up front, in cash.5 Even in the Underworld, money had become the organising power.
The myth of Midas is less ambiguous, however. The universal application of the new concept of economic value brings with it a major problem: the lack of any intrinsic limit to consumption, accumulation, and the quest for status. Midas did not just want some gold. He wanted everything he touched to turn to gold, because only then could he be sure that come what might he would be richer than anyone else: the best that a man can attain in life. Traditional society had intrinsic limits—limits defined by the immutable social obligations owed by peasants to chieftains, chieftains to priests, and so on. Monetary society, the Greeks feared, had none. There is no intrinsic limit to the accumulation of wealth; and since status in monetary society is by its nature relative, not absolute, monetary society constantly risks degenerating into an unending one-upmanship. “No one ever gets their fill of you,” says Aristophanes’ hero Chremylus to the god Wealth: “There can be too much of everything else”—from an abstract virtue like manliness to something as earthily concrete as humble lentil soup—“but no one ever gets his fill of you. If someone gets his hands on thirteen talents, he hankers all the more to get sixteen; and if he achieves that, he wants forty, or else he says life isn’t worth living.”6 And what is even worse, the Greeks feared, the lack of a limit to the imperative to get money may lead to a lack of limits to what people will do to get it. In this respect, Midas was a special case—opportunity fell into his l
ap. But in the real world, where passing satyrs do not grant wishes, the incentives to try anything to get unlimited wealth would surely, the Greeks feared, be unlimited as well.
The impact of excessive accumulation, consumption, and competition for status remains a widespread concern today. Contemporary thinkers identify a number of potential culprits. “Today, the logic of buying and selling no longer applies to material goods alone but increasingly governs the whole of life,” laments the American philosopher Michael Sandel in his meditation on What Money Can’t Buy: “[i]t is time to ask whether we want to live this way.”7 Markets, in other words, are the problem—and we must consciously decide the parts they should and should not reach. How Much Is Enough? ask the British thinkers Robert and Edward Skidelsky in the title of their recent book, before arguing that only a substantive ethical conception of what a good life consists of can answer that eternal question; hoping that the market mechanism will impose limits on itself is a pipe dream.8 What we need is to be specific about what we think is good and bad, and then have the moral fibre to stick to our judgement. Neuroscientists, and the economists who follow their research, explain that both Sandel’s and the Skidelskys’ questions are futile. Markets and ethics are froth. Competition for status is hard-wired into the human brain—a physical trait evolved to give us an edge in a world where the best mates and the most food mean the survival of one’s genes. Evolution is the problem—and there is hardly much point in worrying about that.9