Money, Resources, and the Myth of the Gold Standard

Markets do not exist in a vacuum — they are a product of rules and social order. Markets function only because governments have created a system of institutions and rules that allow them to work. The free market works optimally only within the framework of rules created by government. Government created property titles, courts, police, money, and taxation — all of which are necessary in order for markets to function optimally. Without this governmental backdrop, markets could not exist, much less function efficiently.

The Origins of Money

The classical economic narrative of the origin of money, found in works such as Adam Smith's Wealth of Nations and Carl Menger’sOn the Origins of Money, assumes that people originally traded directly through barter and gradually adopted precious metals as a medium of exchange for the sake of convenience. Gold eventually became the universal medium of exchange because it had an inherent value. Eventually, banks developed as warehouses for people to store gold in and "dollar bills" were issued as warehouse receipts for the gold on store at the bank. Indeed, the term dollar originally designated a specific amount of gold. Over time, people began trading the warehouse receipts themselves in place of the gold. And this was the origin of paper money. While this narrative is quite elegant and seems to be a logically satisfying explanation of the origin of money, archeological evidence and anthropological research have thoroughly disproven this theory. In reality, the earliest forms of money were government-issued and credit-based currencies, not commodity-based mediums of exchange emerging spontaneously from market consensus. While the term dollar did originally designate a certain amount of gold, the “dollar bill” was not actually a warehouse receipt. In reality, the “dollar bill” was just a promissory note representing a credit valued at the amount of a dollar of gold. It was never actually backed by gold.

Passing the Torch

The baby-boom generation is ending its lap in the human race, and the Fridays-for-future generation is beginning its run. Generational shifts of power are symbolized by the image of passing the torch, but now what the older has to pass on to the younger seems not a torch but a time bomb, a legacy of crises. Industrial production without responsibility has placed the environment in a situation where entire species are experiencing extinction. The economic system increasingly sees a growing gap in wealth and income between the poor to the rich.

To find a way out of the disaster, we need to look at how we got into it, the historical context. The economic and social system of capitalism shapes our times and shapes us. It is a system based on power, the ability of one group to dominate another – the owner of industry dominate workers, the owners of land dominate the renters, the rich countries dominate poor countries. The political system, even with the window-dressing of parliamentary democracy, is designed to keep participation to a minimum and to protect this system of dominance from change. To understand the effects of this, let’s review a bit of history.

From Elimination to Herd Immunity?

The experience of last year [1, 2, 3] suggested quite strongly in favour of elimination as a strategy for SARS-Cov-2, rather than a suppression strategy. After the experiences of the original and alpha strains of SARS-Cov-2, it should be quite clear by the numbers that "go hard, go fast" is a successful approach. It means restricting movement and interaction between people (the virus doesn't move, people do), putting up strong fences to demarcate an area and block the potential entry of the infected.

The results speak for themselves; from Australian states like Victoria, which remarkably reached elimination from high numbers, Western Australia, and Tasmania, to countries like New Zealand, Taiwan, and China. The strategy of trying to achieve zero cases was a proven success, with the three aforementioned countries having the lowest case numbers per capita in the developed world. As a grim irony to those who recommended that a policy of suppression in fear of the economic damage that an elimination strategy would cause, the numbers do not lie; those countries and regions that adopted an elimination strategy were able to recover quickly and more completely and there suffered less economic damage than those which did not [4].

The First Mistake

Establishment journalists and politicians are despairingly asking: Why did we fail in our well-meaning efforts to help the Afghan people? What were our mistakes? But they ignore their first mistake: creating the Taliban.

The USA’s attempts to dominate Afghanistan and its resources began 40 years ago when Jimmy Carter in one of his last acts as president approved a CIA plan to overthrow the Afghan government. That government was no more dictatorial than others in the region, and it was implementing most of the humanitarian programs the USA later claimed it wanted to do: Women had equal rights and access to education, the country had freedom of religion and a well-functioning healthcare system. The rural infrastructure was being improved, and the standard of living was increasing. But the government was communist, and that meant it had to go, no matter how many people had to die.

Incompetence and Malice from the NSW Tories

Image by Eric Lobbecke. This has been said: Gladys Berejiklian is a danger to the people of New South Wales, the rest of Australia, and even New Zealand. Every single case of coronavirus, the highly infectious Delta and Delta Plus variants, originates from New South Wales substantially aided by the policies lead by that state government. New Zealand previously had less than ten cases a day since April last year, using a 7-day rolling average; then, a case crossed the ditch [1] from New South Wales, and now they have 66 a day, and the total number of active infections has grown from 36 at the beginning of August to 651. Victoria, too, had a 5-cases a day at the beginning of August (again using the rolling average of the previous week), now it's up to 81, again with origins from New South Wales [2]. Whilst they have been largely spared, due to successful and rapid implementation of strong movement restrictions (popularly, but somewhat incorrectly, described as "lockdowns"), the few cases in South Australia and Queensland also owe their origins to New South Wales.

Public health policy has public health results. The outbreak in Victoria resulted from a policy that allowed some cross-border movement, and the same applied in New Zealand. Pity, however, New South Wales which is an absolute train-wreck and getting much worse. With a weekly rolling average of 24 cases at the end of June, a lackadaisical approach to suppressing the outbreak has led the state to experience a rolling average of over a thousand cases a day, with the worst yet to come. Extraordinarily, even as the state recorded the worst-case figures [3] for an Australian state since the pandemic began, the Premier announced "We are going to show the way in Australia as to how you can live with COVID", a remark that will leave a bitter taste for the friends and family of the six patients who died in the same daily reporting period. "Living with COVID" is, of course, a euphemism to mean "dying with COVID" as words have their opposite meaning when political marketing pitches are made against reality. A few days later, as NSW recorded another 1164 cases, the Premier said she didn't understand why some states and territories were unhappy with the national plan to end lockdowns once 80% of the eligible population had been vaccinated, referring to reaching the "magic 70 percent and 80 percent [4].

The Rise and Return of the Taliban

The sudden fall of Afghanistan into the hands of the Taliban may have shocked establishment experts [1], but are certainly no surprise to those expert critics who for decades have criticised the corruption, the lack of strength in civil institutions, and the disparity between what Western governments told us and what reality was like on the ground [2]. That reality is approximately 175,000 dead, mainly Afghan national military and police, Taliban and other opposition fighters, and civilians. One could add an additional 67,000 for the Pakistani side of The Durand Line [3], a British imperialist invention that divides the indigenous Pashtuns and is treated with complete contempt by those on both sides of the border; all quite a remarkable achievement by the US after spending 2.261 trillion dollars on consolidating a military presence in a country of less the 40 million. Certainly, a windfall for those capitalists who invested in the war machine; returns on the top five defense contractors from 2001 to now have a return 50% greater than the general stock market [4].

The fall of Afghanistan has occurred under Biden, as the United States had agreed under Trump to withdraw its troops whilst the Taliban agreed not to allow al-Qaeda or other terrorist groups to operate under their areas [5]. Hand-waving their behaviour in the past, their gross violations of human rights and especially those against women, establishment experts tried to tell the world then, and continue to do so now, that the Taliban of 2020 are fundamentally different [6] from the Taliban of the 1990s. This is not entirely true; they are certainly more pragmatic in their international relations, and certainly more mercurial in public relations, but their ideology is the same, and their behaviour is the same. At the time of writing, the Taliban are going door-to-door searching for people who either worked for NATO or the Republic [7]. Whilst one would be happy to be wrong, we can certainly expect that horrific facts of the new Taliban rule will come out soon.

Coronavirus-19 and The Unfolding Disaster in Southern Asia

A few days ago, the SARS-CoV-19 virus reached two hundred million cases, with over four million dead. We know these numbers are almost certainly under-estimations based on data collection limits and comparisons of death rates from previous years. It is with the benefit of hindsight that we now realise that the entire year of 2020 was, in fact, "the first wave" of increasing infections which did not peak until early January 2021 at close to 840,000 new cases a day, and its nadir in mid-February at a mere 400,000. Since then we have witnessed the rise of the new and more contagious and deadly Delta variant which peaked at the end of April with 875,000 new cases as it overwhelmed India. That peak declined to a low of around 300,000 new daily cases in mid-June, only to rise again as the variant spread to densely populated regions in South-East Asia; at the time of writing the daily new case numbers are at 688,000 and are on an upwards trajectory.

On Engagement in Politics

Tony Benn blackboardMany people dislike involvement in politics because what they witness is the shameless acquisition of power, of nepotism and corruption, and partisanship. For far too many, this results in a great number of truly talented people stepping away from engagement in public life. Not only does our society miss out by having the involvement of such great minds, but also we collectively run the risk of being ruled by those who are pathological and narcissistic, who actually enjoy the aforementioned negative characteristics. Unfortunately, many well-meaning political activists take an erroneous attitude to this situation, ending up in two groups going in very different directions. Both those engaged and disengaged from the practical affairs of political life remark, "that's just how politics is", with the engaged group gritting their teeth and carrying on and becoming increasingly part of the system's approach, and the disengaged either forming anemic, if well-meaning, social networks or slipping into the selfish lifestyle of "individual anarchism".

These responses are not helpful. The existence of politics is inevitable because it determines our rights, freedoms, and obligations and the just distribution of shared and produced resources. There is no escaping from it. Every square centimetre of soil, air, and water on this planet is subject to some politics, even bizarre edge-cases considered (e.g., Bir Tawil) on earth or beyond it (the Outer Space Treaty of 1967). Simply put. wherever there are two people or more there will be politics, as they must have a means of governing their polis. But whilst politics is inescapable, the means of governance can be altered. Just as interpersonal relationships can be arranged differently to be more or less inclusive and equitable, so too the political system is not something set in stone and can be changed to reduce the influence of the worst, of the most pathological. The following are a few suggestions that can be applied for making society less of a kakistocracy, the rule of the worst, least qualified, and most unscrupulous citizens.

Trading Places: Australia-China Relations

It is certainly a special combination of insensitivity and expediency that led Peter Dutton, Australia's Minister of Defence, to suggest that a military conflict with China over Taiwan should not be discounted. The comments were coupled with Home Affairs Department Secretary Mike Pezzullo remarked that we could hear the beating drums of war in the region. This all comes on the back with a continuing trade war between Australia and China.

The comments are insensitive, not only because they contradict to the long-standing policy of Australia to China, which recognises that Taiwan is part of China. For what it's worth, this is also in the constitution of Taiwan; both the governments of Beijing and Taipei consider themselves the legitimate government of China, and that the other side is rebellious. But the insensitivity is not just in the field of international relations, but also the fact that the comments were made during the ANZAC Day holiday, held in commemoration of Australians (and New Zealanders) who served and died in war.

Libertarian Distributism?

The Overlapping Consensus

Socialists and libertarians both integrated key Burkean conservative insights into their philosophies around the turn of the 19th Century. The revolutionary idea of tearing the system down to build something completely new from scratch fell into disfavor. Libertarians started to shy away from anarchism and socialists started to shy away from revolutionary ideologies. The new libertarianism was “neo-liberal” — embracing the ideas of liberal democracy and seeking to move in a more “liberal” direction within the context of republican systems of government while rejecting market fundamentalism. Socialists embraced the idea of democratic socialism (or social democracy) and the notion that gradual reform through the democratic system was the best route to a better society. Both the libertarians and the socialists ended up becoming staunch proponents of the philosophy of republicanism.

Furthermore, the “neo-liberalism” of libertarians like F. A. Hayek and Milton Friedman entailed a recognition that markets are not perfect and that sometimes you do need the government to step in for the purpose of welfare provision. The social democrats too started to move away from the idea of nationalizing industry and centrally planning the economy and towards the idea of promoting a universalist welfare system within the context of a mixed economy. In fact, the liberal-socialist economist James Meade and the libertarian economist Milton Friedman both supported the same minimum income guarantee proposal — the Negative Income Tax scheme of Juliet Rhys-Williams. Eduard Bernstein, Anthony Crosland, and James Meade started popularizing the idea that a widespread distribution of private ownership might be an acceptable alternative to nationalization, at least in many cases. This idea of widespread distribution of private ownership (distributism or property-owning democracy) had actually originated on the right in the early 20th Century and was later adopted by center-left political liberals and social democrats like John Rawls and James Meade. The “neo-liberal” libertarians and the social democrats agreed in rejecting the doctrine of laissez-faire and recognizing that the government needs to take action in order to make markets work beneficially.

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