The Significance and Importance of Money

“And when men live by trade — with reason, not force, as their final arbiter — it is the best product that wins, the best performance, the man of best judgment and highest ability—and the degree of a man’s productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money”. (Ayn Rand, Atlas Shrugged, p.411)

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In Ayn Rand’s fantastic novel, Atlas Shrugged, published in 1957, James Taggert, the liberal (that is, socialist) president of Taggart Transcontinental, the largest rairoad in the country (the United States), is celebrating his wedding.  But he decides to criticize the socio-economic class to which he himself belongs (sometihing far from unusual even today). He tells his guests:

“We are at the dawn of a new age. We are breaking up the vicious tyranny of economic power. We will set men free of the rule of the dollar. We will release our spiritual aims from dependence on the owners of material means. We will liberate our culture from the stranglehold of the profit-chasers. We will build a society dedicated to higher ideals, and we will replace the aristocracy of money by—”

Someone’s strong voice breaks in. It is Francisco d’Anconia’s, the copper tycoon, one of the richest men in the world, if not the richest – and a former student of Hugh Akston, in whose honor this blog is named. Francisco completes the phrase for James Taggart: “—the aristocracy of pull” (p.404).

Money versus pull (favor, influence).

In order to live our lives and achieve our life projects, we need a number of things. To survive, we need food, clothing, shelter, tools to defends ourselves from the elements, animals and other men. To implement our desires and achieve our life projects, we need still much more.

We can, of course, produce, ourselves, what we need. But that is not practical except in very simple societies. In more complex societies, such as the one in which we life, very few are capable of producing everything they need and want to live their lives and reach their goals. That’s why we have the division of labor. Each one especializes in producing a few things – and produces more than he needs in order to trade the surplus with people produce things he needs or wants but is incapable or unwilling to produce.

Sooner or later, however, we don’t find people who who want to trade with us, because they are not interested in what we produce, or with whom we are not interested to trade, because they do not produce what we need or want.

That’s when money comes in. Money allows the seller to protract the buying part of the trade: it allows him to postpone consumption until he finds products (goods or services) that he needs or wants. Money entitles you, as producer, who trades his products, to consume only later that which he needs or wants.

If a broad definition of money is required, we can say it is anything that is generally accepted as payment for goods and services,  as repayment of debts, or as a store of value. The main use of money is as a means of trade, a medium of exchange.

Because of this, “money is [a] means of survival”, says Francisco d’Anconia in his “money speech”. “So long as men live together on earth and need means to deal with one another—their only substitute, if they abandon money, is the muzzle of a gun” (p.412).

To be more precise, if we live together in a society complex enough to require trade, money is essential. The only alternative to it is begging or theft.

But money is a means, or a tool. Francisco d’Anconia continues: ““But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires.” (p.411).

Aristotle (384 BC – 322 BC), the greatest single influence upon Ayn Rand, reflected philosophically upon money. He investigated the problem of commensurability – or how to compare the relative value of things that are different and may have different values. To do this we need a common instrument of measurement – and he found that in money. Money makes it possible to equate what is unequal and apparently non-comparable. Money, as a common measure, makes things commensurable and makes it possible to equalize them. According to Aristotle, everything can be expressed in the universal equivalent of money.

To do what is required of it, money must have four characteristics. It must be durable, portable, divisible and intrinsically valuable. Additionally, the value of money should be independent of any other object and contained in the money itself. [These considerations were literally borrowed from John Lee, CFA, in his article “Aristotle and the Definition of Money”, which can be found in the site The Market Oracle, in http://www.marketoracle.co.uk/Article10370.html.]

But another important consideration, before we go back to Aristotle’s disciple, Ayn Rand, is that people who are criticized for “loving money”, do not really love money, but love the things that money can allow them to obtain and secure.

Money is not a sufficient condition for happiness – but it is a necessary condition, except for the person who is capable to produce everything he needs or wants, or for the person who has no needs or wants. As Francisco d’Anconia said, in a passage already quoted, money can help you achieve what you desire, but it will not give you desires.

Let us go back to Ayn Rand – that is, to Francisco d’Anconia’s memorable speech on the significance and importance of money. And let us do exactly on the issue we werre discussing: “Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he’s evaded the knowledge of what to value, and it will not provide him with a purpose, if he’s evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent” (p.411).

In James Taggart’s wedding, Francisco d’Anconia makes his speech to respond to James Taggart’s initial remark, quoted at the beginning of this article and to Betram Scudder’s contention that “money is the root of all evil”.

Francisco d’Anconia retorts (the emphases are added):

“So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?”

“When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor—your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?”  (p. 410).

As I mentioned before, the only alternative to the use of money in trade is begging or theft. Moochers beg, using their tears to move others; looters loot, using their guns to force you to handle them your money or your goods.

But liberals (or socialists, which in the United States are the same) argue that money is obtained by exploitation of the weak by the strong. Francisco d’Anconia replies (and once more, emphases are added):

“You say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made—before it can be looted or mooched—made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced” (pp.410-411).

The liberal / socialist – and very rich – James Taggart claimed that they – he and his friends in industry and in government – were “breaking up the vicious tyranny of economic power”, were “set[ting] men free of the rule of the dollar”, were “liberat[ing] our culture from the stranglehold of the profit-chasers”.

That is what the socialists of today claim that they are doing – and they claim that they are doing it in the name of higher values and through motives that are superior to “profit chasing”: material equality. But they don’t say it open that they want material equality: they speak of “equality of opportunity”. That is why the Equalization of Opportunity Bill, mentioned in the previous article, was so important to them. That is why they spoke, in Atlas Shrugged, of prohibiting good writers from selling more than ten thousand copies of their books – so that bad writers could have a chance… But this is not equalization of opportunity: this is downright theft from the capable so that the uncapable can, perhaps, sell their books…

The liberals / socialists do not consider what they do theft. They call it redistribution of wealth – the fulfillment of Karl Marx’s wish: “from each according to his ability, to each according to their need” (Critique of the Gotha Program, 1875).

But most of todays liberals / socialists have basically given up Marx’s idea that this “communism” would be reached through class warfare and violent revolution. They found a more effective way: following Antonio Gramsci, they have taken control not only of the state (which supposedly has a monopoly on the use of violence, and most of the time does not need in fact to use force, but only to have the power to used it…) but of all the cultural dimensions of society. Taking control of government and society, liberals / socialists use the media to convince the population that it is just – socially just — to take from producers and give to moochers and (non-violent) looters, through taxation (what they call “progressive taxation).

Let me leave no doubt as to the following: wealth is only created by those who produce goods or services and then trade them to those freely willing to buy them. Everybody else lives parasitically on the wealth generated by those who produce. Including those in government. Government only justifies itself to the extent that it performs a service that is perceived by the citizens as sufficiently valuable to justify payment by them. And payment should be in the form retribution for services renderedd, not in the form of general taxes for discretionary use by the government. “Money permits no deals except those to mutual benefit by the unforced judgment of the traders”, says Francisco D’Anconia (p. 411).

But this is not what happens…

Here in Brazil we are tired of knowing this.

I will finish with a long, but fantastic, quotation from Francisco d’Anconia’s speech (emphases added):

“Then you will see the rise of the men of the double standard — the men who live by force, yet count on those who live by trade to create the value of their looted money — the men who are the hitchhikers of virtue. [Most high government officials belong to this category].

In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of disarmed victims—then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. [This explains corruption].

Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue.

When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.”  (p.413).

In São Paulo, on the 15th of September of 2013.