Once we understand the true purpose of money, we can identify the most ethical and desirable financial systems that serve this purpose. My book, The Philosophical Method, shows how money, at its core, is a tool to facilitate will. Not all our desires are mutually realisable. For instance, I cannot simultaneously holiday in both the US and Australia. I have only one body and this constrains what I can do at any one time. Furthermore, there are many tasks we cannot simultaneously perform for others. We cannot cook and drive a taxi at the same time, for example.
These are extreme cases. Other times, we can do either A or B well, or both badly. When we speak of resources, we speak of the limits to the will. When we speak of allocating resources, we speak of allocating the degree that different wills can be realised. The limitation of not being able to travel is a hard and fast one, but most things can be mutually realised by getting someone else to do them. I can simultaneously have a nice meal cooked for me, redecorate the house, have my children babysat, have my company’s clients’ weddings arranged, and even go travelling (and swim while I travel, if the cruise ship has a swimming pool!) so long as I pay other people to perform all these tasks for me at the same time.
So, at a fundamental philosophical level, finance is not complicated. It is simply the relative importance that the economic system places on different people’s wills. The complications of finance can, in many ways, be regarded as jargon to hide the injustice of the far greater weighting that the system gives to the will of some people compared to others.
The underlying question of financial reform is a simple one: When should the will of one person outweigh the will of another?
In the Philosophical Method I provide two answers:
- To reward people for devoting time and effort to facilitate the will of another by placing a greater importance on the facilitator’s will at a later date.
- To give influence, to those with good judgement, to better organise resources to facilitate the will of the general public.
These two principles can be embodied in two, fairly simple policies:
- The Universal Dividend
- The Consumption Quota
Then remove all other costs that relate to operating and running a business (corporation tax, income tax, VAT), etc., etc., but limit the private consumption of everyone (including businessmen) to the consumption quota.
The universal dividend is the minimum that people have available, automatically issued by the state into their bank accounts, to spend on personal consumption in order to facilitate their various personal whims.
If they want more, they can get a job, as they can now, but while they can save as much as they like, they are limited to spending the consumption quota. Those with savings, or a successful business, can invest as much money as they want in their various business undertakings, as the business, in general, facilitates the will of customers. The extent to which the universal dividend is set differently to the consumption quota is then simply the differential that is empirically required to get enough people out of bed and into the workplace to ensure the economy flourishes.
A digital currency could facilitate this fairly easily. Everyone could be issued with a debit card; the universal dividend is added to their account every week and the consumption quota is their spending limit. Since personal consumption determines price inflation, price inflation could be directly and easily regulated through adjusting both the universal dividend and the consumption quota.
The role of banks would be to give people and businesses access to funds during periods where they have greater than normal needs. However, the core question is: should private banks have a role in the financial system, or should private banks be the financial system?
Should private, unelected bankers with no democratic mandate be the key institutions that determine the relative importance of the wills of different human beings compared to each other?
If the answer is no, then we need financial reform. The system described here is just one example of what such a reform might look like. Generally though, if you don’t want the banks to decide your level of importance, then you need to participate in movements, such as Positive Money, that campaign to reform the financial system, to ensure that you, and not the bankers, have a say in how important you are.
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