Ethicsandinternationalaffairs.org-The Touch of Midas Money Markets and Morality

7/27/2019 Ethicsandinternationalaffairs.org-The Touch of Midas Money Markets and Morality

http://slidepdf.com/reader/full/ethicsandinternationalaffairsorg-the-touch-of-midas-money-markets-and-morality 1/6

ethicsandinternationalaffairs.org

http://www.ethicsandinternationalaffairs.org/2014/the-touch-o f-midas- mo ney-markets-and-mo rality-full-text/

Photo cred it: Flickr /Kevin Dooley

Edward Skidelsky

The Touch of Midas: Money, Markets, and Morality

The

Invention

of Market

Freedom,

Eric

MacGilvray (Cambridge: Cambridge University Press, 2011), 216 pp., $94 cloth, $26.99 paper.

What Money Can’t Buy: The Moral Limits of Markets, Michael Sandel (New York: Farrar, Strauss and

Giroux, 2012), 256 pp., $27 cloth, $15 paper.

Money: The Unauthorised Biography , Felix Martin (London: Bodley Head, 2013), 336 pp., £20 cloth, £9.99

paper.

Money has always inspired obsession, both in those who amass it and in those who think about it. “Man will

never be able to know what money is any more t han he will be able to know what God is,” wrote the French

f inancier Marcel Labordère to his f riend John Maynard Keynes. The analogy is apt. Money, like God, injects

infinity into human desires. To love it is to embark on a journey without end. Three new books testify to

money’s enduring power to f ascinate and horrify. The most scholarly of them, The Invention of Market

Freedom by political theorist Eric MacGilvray, traces the emergence of the distinctively modern or “market”

conception of f reedom out o f its “republican” predecessor. The general sto ry is so mewhat f amiliar, but

MacGilvray complicates it by showing that market f reedom did not vanquish its republican competito r in

open combat but subverted it from within, like a parasite devouring its host.

http://www.ethicsandinternationalaffairs.org/

http://www.flickr.com/photos/pagedooley/

http://www.flickr.com/

http://www.ethicsandinternationalaffairs.org/2014/the-touch-of-midas-money-markets-and-morality-full-text/

http://www.ethicsandinternationalaffairs.org/



The republican tradition was diverse and labile, but its core, argues MacGilvray, lay in two belief s: that

f reedom means contro l of arbitrary power and that a virtuous citizen body is required to exercise such

contro l. Hence, republicans pressed f or extensions of the f ranchise only to those deemed f it to wield it;

universal f reedom was not one o f their ideals. Some republicans valued private liberty—doing as one

pleases in one’s own backyard—though they generally sought to secure it t hrough citizenly vigilance rather

than f ormal guarantees. And all ancient republicans despised commerce as insecure, distracting, and

corros ive of the public spirit. Working fo r wages or prof its was regarded not as an innocuous voluntary

activity but as a f orm of compulsion t antamount to slavery. The modern ideal of the market as a “system of

natural liberty” was nowhere in sight. How did we get f rom there to here?

MacGilvray distinguishes three stages in the decline of the republican conception of freedom. The first was

the development of a distinctively modern brand of “commercial republicanism” in the work of Mont esquieu,

Hume, and Adam Smith. These thinkers retained the ancient idea of f reedom as contro l of arbitrary power,

but added that under modern conditions such control requires the encouragement rather than the restraint

of commerce. Commerce, on this view, lays the f oundat ions of national wealth and hence independence. It

also, by replacing f ixed with mobile capital, forces the sovereign to act in the interests of the people, or at

least that part o f the people that owns mobile capital. Virtue still holds a place in this scheme, but a

subordinate one. It is reinterpreted in a narrowly utilitarian sense, as that set of qualities favorable to civil

peace and prosperity: industry, thrif t, honesty, and respect f or the law.

The next s tep was to re-envisage commerce not just as a precondition but as the supreme expression o f

f reedom. Crucial here was the o ld “jurist ic” conception of f reedom as the right to do as one pleases in a

certain sphere. The market—the sum total of consensual economic exchanges—could easily be presented

as the realization o f f reedom in this sense, and restrictions o n it as infringements o f f reedom. Thus was

f orged a “synthesis o f the commercial republican claim that rights to property and exchange should be

respected as a matter of social utility and the juristic claim that they should be respected as a matter of

ust ice” (pp. 140–141). This synthesis came to f ruition in Smith’s Wealth of Nations, the foundational text of

the new market ideology.

The nineteenth century saw the unraveling of Smith’s synthesis. Industrial capitalism and mass democracycreated a world in which republicanism, even in its qualif ied commercial f orm, could only appear to be “an

atavist ic appeal to an idealized past ” (p. 150). Hume and Smith had envisaged a population o f small

f reeholders playing the part o f the landed citizenry of ancient Athens and Rome. But by the mid-nineteenth

century it was clear that wage laborers would dominate the new industrial stat e. Were such laborers

genuinely free? And were they fit to uphold a free polity? Marxists and conservatives answered both

quest ions with a reso unding “no.” Defenders of capitalism were accordingly forced back on a purely

negative conception of f reedom as the right to dispose of one’s goods and labor as one sees f it. And that

remains the dominant conception to this day. In popular discussion, f reedom is tacitly identif ied with market

f reedom; restrictions on the market must be just if ied by appeal to some other value— equality, usually, or

economic security. The old republican idea of f reedom has disappeared f rom sight.

The Invention of Market Freedom is a learned and densely argued boo k. Its laudable aim is t o undermine the

self-evidence of “market freedom” and so create space for its republican rival. I have only two reservations.

The f irst concerns terminology. MacGilvray’s oppos ition o f republican and market f reedom is misleading in

the same way that an opposition of “Western” and “Indian” values would be misleading: it presents non-

contradicto ries as contradictory. The contradicto ry of republican f reedom is not just market f reedom but

freedom of thought, association, and religious practice—everything that Benjamin Constant designated as

“modern liberty.” True, market f reedom is of ten presented as the modern f reedom par excellence, but one

only has to read Goethe, Humboldt, or John Stuart Mill to realize that t his is nonsense. Freedom of thought

and conscience is just as integral to the modern liberal tradition, and just as alien to older republican

conceptions.



Once “modern liberty” is allowed to include these other, nonecono mic f reedoms, it appears rather more

appealing relative to its “ancient” counterpart. But we can st ill ask how closely the economic and

noneconomic aspects of modern liberty hang together. Not very closely, I suspect. Right- wingers like to

point out that private property is essent ial to personal f reedom, including f reedom of thought, but t hey

neglect to mention that to play this ro le it need not take its distinctively modern, marketable f orm. Was

Montaigne any less free in spirit for not being able to sell his tower and buy a yacht? Indeed, insofar as

marketable property tends t o f low into the hands of a f ew, it is positively inimical to t he f reedom of the

many, who are f orced into dependence on the labor market. This quintessentially republican insight has

been all but los t in the modern world, where (as MacGilvray points out) property is understood as

marketable by def inition. Perhaps what we need is a synthesis o f the ancient republican view of property as

the foundation of personal independence with a modern liberal awareness of what that “independence”

might encompass.

I have one ot her quibble. Freedom, however conceived, is not the only or even the mos t po tent value to set

against market imperialism. For example, teachers of philosophy, histo ry, and o ther humanistic disciplines

are now required to justify their activities on the grounds they “add value” to students by equipping them

with “transf erable skills.” This looks like an unwelcome intrusion of market language into the nonmarket

sphere. But it is hard to make out t hat anyone’s f reedom is at st ake, except perhaps in a very indirect or

general sense. The damage, rather, is to the integrity of a particular human practice, embodied in aparticular institution. Similar points could be made in connection with science, medicine, law, and art.

Here, Michael Sandel’s recent bestseller, What Money Can’t Buy , steps into the breach. Sandel’s target, like

MacGilvray’s, is market imperialism. Drawing on many examples, he shows how over the last three decades

market norms have seeped into spheres of life previous ly regarded as lying outs ide their remit. Sandel’s

chief concern, however, is not f reedom or equality, but corrupt ion. His prime example is f riendship. I cannot,

as a matter o f logic, pay someone to be my f riend, though I can pay him to act as if he were my f riend. True

f riendship implies a mot ive—willing your f riend’s good f or his sake, not your own—incompatible with the

receipt o f payment. The point can be generalized. Subordinating the internal end of a practice to an external

one (t ypically money) transf orms it into an essentially diff erent and inferior kind of practice. It corrupts t he

practice, and by extension those engaged in it.

Sandel’s pro test against market imperialism has won him a devot ed f ollowing in lef t- liberal circles. His

argument f rom corrupt ion has no t been so popular, however. For one thing, it smacks o f paternalism. If a

man agrees to be paid to “be my f riend”—willingly, and in full knowledge of the f acts—who are we to

condemn him? And talk of the inherent “end” or “nature” of human practices raises the hackles o f liberal

secularists. Surely it is up t o us to decide what we are aiming at in what we do. As Glen Newey puts it in his

review of What Money Can’t Buy , a doctor accused of prost ituting his talents f or pay might s imply retort

that he is in the business not of doctoring but schmoctoring , “which is just like doctoring, except that its

internal goal is to earn money for the schmoctor.”1

Newey’s example is unf ort unately chosen. Clearly, a doctor who s trives to maximize his income by any

means poss ible, including by giving patients whatever drugs they ask f or, regardless of whether they need

them, is no t engaged in some alternative practice of schmoctoring; he is, simply, a bad docto r. Docto rs and

ot her prof essionals are not f ree to redef ine the internal goal of their practices by fiat, any more than

individual speakers o f English are f ree to redefine the meaning of “cheese” or “potato.”

But there is a more serious point here. Even if individuals cannot consciously change the meaning of the

practices they engage in, those practices do nonetheless change, so that what looks like corruption t o one

generation may seem quite innocent to the next . Sandel himself provides an example. For centuries, the life

insurance market was t ightly regulated by law and custom. “A human life cannot be the o bject of commerce,”

wrote an eighteenth-century French jurist, “and it is disgraceful that death should become a source of

commercial speculation” (p. 144). Today, these inhibitions have vanished. The market in “death bonds”— lif e

insurance policies packaged into bonds and sold to investors—is valued in the billions. No one seems too

tro ubled by this, though Sandel has qualms.

http://www.ethicsandinternationalaffairs.org/2014/the-touch-of-midas-money-markets-and-morality-full-text/#fn-6740-1



The sphere of commerce does not always expand, of course; it also contracts. Many things we now regard

as sacred were once bought and sold freely: public offices, for instance, or brides. In a previous book,

Justice, Sandel discusses the policy, implemented by the Union government during the American Civil War, of

allowing draftees to hire substitutes to fight in their place (p. 76). Examples like these serve to correct the

sent imental erro r, tacitly encouraged by What Money Can’t Buy , that ours is a uniquely venal age.

Given this variety, what could it mean to say that pract ices have an “internal end,” and that deviation f rom

this end counts as “corruption”? Two opt ions are open to Sandel. He could either base his case purely on

contemporary intuitions about the meaning of practices, like a linguist prono uncing a certain usage“incorrect” today knowing that it will probably be “correct” f if ty years hence. Or else, more ambitiously, he

could appeal to t he basic purposes of human lif e. Both options f ace dif f iculties. The relativizing option

leaves us with nothing to say during transitional periods, when one set of cultural meanings yields to

another. And the absolutist o ption conf ronts the hard task of spelling out the basic purposes o f human life.

What Money Can’t Buy is a popular work and wisely steers clear of these metaphysical deep waters . But a

more thorough discussion would be bound to encounter them sooner or later.

The last and liveliest book in this trio , Felix Martin’s Money: The Unauthorised Biography , attempts what

Labordère declared impossible: to tell us what money is. Martin brings to his task an unusual combination o f

qualities. A trained economist with a doctorate f rom Oxfo rd, he is also widely read in history and literature,

has an insider’s knowledge of the money market (he is currently a f und manager in the City of London), and

writes f luent, witty prose. In brief , Martin has mastered economics and remained human—a rare feat, and

one that equips him to deal the conventional economic theory of money a blow that its exponents may

have to reckon with.

That theory rests upon an old st ory, relayed by Martin in the f irst chapter of his book. According to this

story, human beings once bartered commodities directly against one anot her. Finding this inconvenient, they

eventually sett led upon a single commodity—in practice, usually a rare metal, though theoretically anything

might have done—to serve as a general “medium of exchange.” This commodity became known as money.

Credit and its various ref inements were a later, secondary development. Versions o f the myth can be found

in Aristotle, Locke, and Adam Smith, as well as in the introductory sections of most economic textboo ks.

There is only one problem with this elegant and plausible story, writes Martin: it is ent irely false. The “age of

barter” is a purely speculative const ruction with no bas is in historical or anthro pological fact. Indeed, what

evidence we have stro ngly suggests that no such age has ever existed. In all nonmonetary so cieties known

to us, goods are not bartered f reely but exchanged as gif ts between individuals bound by ties of kinship

and reciprocity. The image of Stone-Age man trucking and trading just like us, only without the benef it of

money, is an anachronistic f antasy.

Moreover, money, when it does appear, is of ten not a commodity, or if it is, this is no t crucial to its

f unctioning as money. Gold and s ilver coins have always t raded at above their metal value, and some

currencies, such as the vast sto ne wheels of the island of Yap, are altogether useless . Indeed, claims

Martin, money is no t essent ially a thing at all, but an abstract system of social relations. At the heart of this

syst em lies transf erable debt. If I write you an IOU in lieu of payment and you sell it o n to a third party, that

IOU is, in eff ect, money. What sustains this system of transf erable debt is t rust—trust both that t he

original issuer is creditworthy and that his debt will be generally accepted as payment. Credit is no t a

ghostly superstructure erected upon the solid foundation of commodity money; rather, commodity money is

the “ephemeral and cosmetic” record of the “underlying system of credit account s and clearing” that is

money’s essence (p. 26).



This reinterpretation o f the nature o f money has t wo s triking implications, which Martin draws out over the

course o f his book. The f irst is cultural and psychological. Conventional economic theory presents money

as a mere means f or the sat isf action o f nonmonetary wants . Theoret ically, money is eliminable—an

assumption ref lected in the standard economic practice of modeling complex money economies in “real”

(that is, nonmoney) terms. But if Martin is right, this procedure is nonsensical. Money is no t just a device

for satisfying preexisting desires more efficiently. It changes the whole face of the social world, commuting

concrete t ithes and dues into abst ract debt and liberating the acquisitive passion f rom the f ixed bounds o f

custo m and religion.

The secret o f money’s power, argues Martin, lies in its unique capacity to be exchanged with anything.

Money thus brings into being a new, universal f orm of value—economic value, as we call it. Such a not ion

was f oreign to pre- monetary man. In the world of the Homeric epics, each thing has a value peculiar to

itself , ref lecting its particular use and provenance. Objects are sometimes exchanged for o ne another, but

such exchanges have only the personal significance of pledges of friendship or loyalty. There is no general

principle of exchangeability. The Homeric world is one of qualitat ively unique subs tances, which is t he

secret of its archaic charm.

With money, all this changes. Now everything has a price, making it exchangeable, in principle if not in f act,

with everything else. Money is a so rt o f universal acid, reducing all other f orms o f value to its o wn. This

power of money to impose “an artificial monotony” upon t he variety of lif e and nature is memorably

symbolized by the legend of King Midas, who is granted the power to t urn all he touches into go ld (p. 154).

But of course, Midas’ real-lif e counterpart, homo economicus, does not need to turn things literally into

gold, f or in his disenchanted eyes everything is already pot entially gold, in other words, it has a money

equivalent. This is the “blasé at titude” that sociologist Georg Simmel saw as the distinctive mark of

monetary civilization and that playwright Eugene O’Neill embodied in the f igure of his Marco Polo: “He has

memorized everything and learned not hing. He has loo ked at everything and seen nothing. He has lusted

for everything and loved nothing.”2

Martin’s reinterpretat ion of money has another, more practical implication. The tradit ional commodity theory

served an ideological purpose: to wrest contro l of the monetary standard f rom the sovereign. This was t he

import of John Locke’s inf luential essay of 1695, in which he argued (against William Lowndes’ plan to

reduce the silver content o f the coinage while retaining its nominal value) that a pound st erling just is a

certain weight o f silver. Locke’s argument won the day, with disast rous consequences f or the Exchequer.

But its real purpose was more po litical than econo mic: by identifying money with s ilver, Locke hoped to

secure it forever against the depredations of sovereign power. “Largely as a result of Locke’s influence,”

Martin quotes the hist orian of currency Sir Albert Feavearyear as saying, “£3 17s 10 ½d an ounce came to

be regarded as a magic price for gold f rom which we ought never to st ray and to which, if we did, we must

always return” (p. 133).

The idea that money just is silver or gold is no longer taken seriously by economists. However, thef undamental error of the commodity theory remains intact. Though no longer thought o f as literally part o f

nature, money is endowed, insof ar as is poss ible, with the independence and f ixity of a natural object. Its

cont rol is delegated to central bankers with a mandate to maintain “stable price expectat ions.” This is a kind

of bad f aith, argues Martin. Money is a social technology, whose s tandard is inherently political. To

renounce cont rol over it is to shirk a responsibility implicit in monetary sovereignty.

The specific problem is debt. Left to itself, it tends to accumulate to unsustainable levels, bringing the

whole monetary system into disrepute. The state must therefo re “always be vigilant to ensure that the

architecture of financial obligations reflects what society believes to be fair” (p. 187). In the past, this

meant periodic clean slates or “jubilees.” Today, it must mean a deliberate recalibration o f the monetary

standard in favor of debtors—in a word, inf lation—and also, looking ahead, a withdrawal or rest riction o f

the sovereign support that has allowed banks to gamble so recklessly with other people’s money.

http://www.ethicsandinternationalaffairs.org/2014/the-touch-of-midas-money-markets-and-morality-full-text/#fn-6740-2



Money is a brilliant, quirky, imaginative work. Yet I put it down with a certain sense o f bathos. Money’s

original sin, according to Martin, was to dissolve the concrete values o f lif e into an abstract, homogenous

economic value. Refo rms o f the banking sector do not seem apt to deal with a catastrophe on this scale.

Martin is not the f irst to grapple with this problem, of course. Communist regimes also sought to abolish

the tyranny of money, by restricting the number of things it could buy. But the upshot of their eff ort s was a

despot ism of cadres and engineers f ar more o ppressive than the alternative despot ism of f inance. The

point is that civilizational problems do not admit of administrative solutions. Reification, alienation—

whatever one wants to call it—is a condition of the modern world. It will take more than “narrow banking” to

do away with it .

The problem of mismatch also conf ront s MacGilvray and Sandel. Neither thinker has any clear remedy for

the evils he sets forth so eloquently. MacGilvray calls for a revival of the republican conception of freedom,

yet he himself is well aware why that conception f ell into disuse in the f irst place: it was ill-adapted to the

realities of capitalism and mass democracy. Sandel repeatedly calls f or “democrat ic debate” over the scope

of the market. Yet without a shared conception o f the internal goal of our practices, it is unclear how such

a debate could be anything more than a shouting match, with victory going to t he stronger party.

These three excellent boo ks point t o the emergence of a new ideological formation—or perhaps one

should say the reemergence of a very old one. Their broadly anti-market stance places them superf icially

on the lef t, yet their real anxiety is a conservative one about immorality and corrupt ion. Aristot le and ancient

Greece loom large in all three. This backward- looking stance explains their authors’ inability to envisage any

alternative to the current order that is both radical and realistic. The genius of Marxism was to tether the

old ethical indictment of commerce to a theory of historical change and a program of political action. That

theo ry and that program have now collapsed, leaving only the indictment. And what f orce can a mere

indictment have in a world whose inner structure is shaped by money?

1. Glen Newey, “You have £2000, I have a kidney,” London Review of Books 34, no. 12 (June 2012), p. 10.

↩

2. Quoted in Thomas King Whipple, Spokesmen (Berkeley, Calif .: University of California Press, 1963),

p. 250. ↩

http://www.ethicsandinternationalaffairs.org/2014/the-touch-of-midas-money-markets-and-morality-full-text/#fnref-6740-2

http://www.ethicsandinternationalaffairs.org/2014/the-touch-of-midas-money-markets-and-morality-full-text/#fnref-6740-1

Documents

Ethicsandinternationalaffairs.org-The Touch of Midas Money Markets and Morality