Why We Can't Live Without Money?

Money - Uganda ahillings
Money - Uganda ahillings

Is money evil?

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It is a popular saying that money is the root of all evil. It is here that many stem their argument that perhaps the world would be a safer place without money. I however completely disagree. The complex human mind is the true source of all evil and money is simply a medium used to propagate evil. Vices such as corruption and theft would still be present even in the absence of the object of money. Although wealth is quantified with money, ancient societies valued wealth in terms of possessions such as oxen and donkeys. The natural desire to have more still compelled the faint hearted to steal or to use dishonest scales as they shared.

Why it is not possible to live without money

While it is theoretically possible to have a world completely free of money, the practical aspect is questionable. Money is certainly not one of the basic needs that sustain life, but is the only effective means of quantifying the value of basic needs such as food, clothing and shelter and the only sure way of acquiring them for their true worth. One would argue that value attached to an object is a thing of the mind. But value is in fact far from a mere illusion. It is a principle of life. For example a cow will naturally be considered worth more than a goat, even without the concept of money. This is simply because a cow can feed three times the number of people that can feed on a goat. A cow is thus of more value compared to a goat. Money simply quantifies this value and simplifies exchange. A world without money would be in complete chaos and disarray. And this is why;

Money as we know it is any object that is generally accepted as payment for goods and services. Society has evolved from the use of commodity money such as gold, silver, to the use of what economists refer to as ‘fiat money’. Fiat money has value only by government order and does not derive its value from intrinsic value such as Gold (commodity money). It is thus true that the object of money as used today may itself have no significant value on its own. In other wards it derives its value from mutual agreement by members of society.

There is no doubt that trade is responsible for the global economic evolution we enjoy today. Eliminating money from the picture means that we would need an alternative medium of trade in order to have continuous development. The easiest alternative would be a system of batter trade. But would this be effective? Certainly not. An effective system should be able to provide a fair, comprehensive medium of exchange of goods and services in relation to their worth, as well as act as a store for value that can be saved for future use and be predictably used as medium of exchange when retrieved. This can only be achieved with the use of money.

It would be difficult to compute exchange rates for organic products against factory goods
It would be difficult to compute exchange rates for organic products against factory goods

A possible computation of exchange rates for different items in a batter trade system

 
Rice(1kg)
Milk(1ltr)
Cooking Oil(1ltr)
Beans(1kg)
Rice(1kg)
1
3
2
2
Milk(1ltr)
0.33
1
0.5
3
Oil(1ltr)
0.5
2
1
7
Beans(1kg)
0.5
0.33
0.14
1
. The table represents an exchange rate for items as would be found in the market under a batter trade system. One liter of milk would be exchanged for 0.5 liters of cooking oil, while one kilo of beans would be exchanged for 0.5 kg of rice

What would the world be like without Money?

The biggest challenge to a world without money comes from the fact that human wants and needs are never constant. They vary from time to time and from one individual to another. They are thus inconsistent and unpredictable. The other challenge is that it is difficult to have an environment that provides in abundance every item one requires to live a comfortable life. This is where the idea of sharing fails. If I want tomatoes but you have oranges, then sharing with me your oranges does not satisfy my want. It means I need to look for a stranger who has tomatoes from whom I will either be required to beg or trade what I have for the tomatoes. The option of begging or asking is tricky because it does not guarantee that I will get as many tomatoes as I need. Or that this person will have enough tomatoes to share with me to my satisfaction, and still have enough for him to adequately use in the days to come. Therefore trade and competition become inevitable.

The absence of money would mean that if you needed to get tomatoes, oil, beans and potatoes, you would have to walk into a market with some items for exchange. The probability of finding a person who needs the exact items you have brought for exchange is so unpredictable. One economist suggests that a batter system would require a complex matrix of exchange rate for every pair of products for example; if you had rice, you would have to know how many kilograms of it you need to exchange for every product you want. See the table below.

Imagine how costly it would be to compute this matrix for 1000 items. This is why money is a necessity.

The other problem would be inability to save. Many times you don’t want to simply exchange a product for another. You just want a promise to exchange for the product at a future time. Money can be kept and will stay for long periods of time, unlike physical products. For example the milk you got for beans may not stay intact for such a long time and you can therefore not exchange it for another product 7 months later. In other wards you cannot reliably store value in goods because they easily get spoilt. There would also be difficulty comparing value for organic items against factory products. For example how many clusters of bananas would I need to have to exchange for a tin of margarine from a local store? Sustaining production would also be complex. The amount of resources needed to produce a smart phone is what gives it its market value. How would we advance in technology without putting all this in perspective?

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