Sunday, July 16, 2006

The meaning of money

There is something about money I do not get. I understand bartering. Two people exchange things that have roughly equal value. But modern money as a concept makes little sense. Milton Friedman, in Money Mischief, writes that money, as we know it, has no intrinsic value and what gives it value is that it is used for exchange. He goes on to say that the value is what we attribute to it, and all money is ‘credit’ money, a contractual IOU for an incomplete exchange. As Aristotle said, the value of money is “derived not from nature, but from law”.

So money is made by the meaning we give it yet, at the same time, it apparently makes the world go around. If you do not have it, your life can be miserable. Nevertheless, money or, to be precise, currency, which is the physical embodiment of the idea of money, cannot buy happiness – only a new iPod or a fridge. But the more money one is talking about the less concrete the notion gets. Bill Gates, for example, is apparently worth $27-billion, but he does not have $27-billion dollars in the same way a person has 1 000 cattle.

He is a rich man with jets and houses but, mainly, he has more IOUs than the rest of us. His bank does not have a vault with $27- billion crisp $100 bills in it, ready for Bill to dive into whenever the urge takes him.

Governments have enormous amounts of unseen money. At a government level, finance is based on promises and IOUs. It is about shuffling budgets of virtual money and meeting obligations. These obligations boil down to where they want to commit make- believe dosh. These choices can have tragic and visible consequences.

Money means different things to different people. I recall working with a community group in South Africa and discussing a grant to support people around the truth commission. One community member commented: “We have been thinking that we don’t want to use the money for that – rather, we want to share the grant out between us.” The group would have preferred an instant R500 each rather than a long-term, less tangible benefit. Money as a thing, or at least the objects R500 could buy when you are poor, was more important. The man had a point, but the donor would have seen it differently. Donor and grantee had conflicting desired outcomes. But what determines these outcomes? Who controls these fantasy purse strings? A recent report in the UK claimed that lack of resources in the security services led to the London bombings last year. But at the same time the country spends £3-billion a year on the occupation of Iraq. The US government finds $100-billion a year for its Iraq folly. When the amounts of money get this astronomical, the meaning of the money becomes even more ephemeral. The only way to make sense of it is to break figures down into numbers we think we can compute. My calculations go like this: the UK and US governments are spending roughly $110-billion a year in Iraq. This is five times the gross domestic product (GDP) of Mozambique and is the equivalent of about 20% of the annual GDP of South Africa.

But even more staggering is that the money invested in making this war is more than the Iraqi GDP, estimated at $97-billion in 2005. Does this incredible statistic make sense to anyone? I once met a businessperson who told me he owed his bank half a million pounds, or R5-million. I remember thinking he was the only person I knew who was rich enough to be half a million pounds in debt. Does that make sense to anyone? Answers on a postcard, please.

Brandon Hamber writes the column "Look South": an analysis of trends in global political, social and cultural life and its relevance to South Africa on Polity. Copyright Brandon Hamber, May 2006. "Look South" Column published on Polity on 26 May 2006.