The Future of Money (Part 1): with Brett Scott

Today I’m talking with Brett Scott, author and specialist in the money system. Here’s his excellent YouTube channel, and I’ll add links to other things we talk about as well.

This is part of a series of interviews that will accompany a book I’m writing about building a new kind of economy, that will be published by Chelsea Green – an employee-owned company, and part of the new economy that the book is describing, built around a mutual credit core. [Here’s more on the book deal and here’s some introductory information about mutual credit.]

Hi Brett. So you came from South Africa to London, to work in the city, to find out about how the financial sector operates. Is that right?

Yes. It was in 2008. I came from SA, got a job as the financial sector was imploding during the financial crash. I got a job at a derivatives brokerage house. Just before that, I was interviewed by Lehman Brothers just before they went bust. So I joined the finance sector just as the big crisis was hitting. It was an exciting adventure to break into something that had been against my values. To explore it with an open mind was what I did for two years, which was enough time.

So you didn’t go in there to try to bring it down – you wanted to understand it more?

It’ll take more than one person to bring down the finance sector.

What sort of things did you discover?

On the one hand you learn technical things, but also, the most interesting thing is the social and cultural dynamics – who people were, how they ended up there, how they saw what they were doing. And I ended up writing a book about that process.

And were you more enlightened or horrified?

I think I came out of it with a more nuanced view of the finance sector. Before that I’d been ‘activisty’ in the way I’d spoken about it. By default, if you go into a system and exploring its nuances, you’re going to come out with a slightly different perspective on how it works. So if you’re a peace activist and you go and spend time in the military, you’re going to understand people more, get their back story. So I came out with a richer perspective on finance. From there I tried to apply a lot of that knowledge to alternative forms of finance. But I wasn’t horrified. Systems are often quite banal. In huge, bureaucratic, corporate systems, people often don’t know what they’re doing in the wider context. Everyday life of the finance sector, of ‘casino capitalism’ isn’t like the Wolf of Wall Street.

So you left. What drives you now?

I have a spirit of exploration, which is often driven by a desire to reconnect people to otherwise very alienating systems. My desire to enter the finance sector was to explore a large, mysterious alienating system. I wanted to make it more human for myself, and help people understand it. I still have that impulse – I like to enter communities, for example the Bitcoin community. I have some big ideological problems with it, but I will enter into the space and try to understand what’s going on in people’s minds – why they believe what they believe. It’s quite anthropological. The end goal is to help people reconnect to economic systems that otherwise seem too big to understand.

What ideological problems do you have with the Bitcoin community?

In a nutshell, the Bitcoin community has an extremely old-school, conventional, conservative perspective on money, although framed in a supposedly disruptive way – largely because the technology layer of it is innovative. But that doesn’t mean the money system implemented by Bitcoin is innovate, which it’s not. It’s a very crude pseudo-money system implemented in a highly technological layer. There are people in the Bitcoin community who are politically progressive, who don’t necessarily understand the dynamics of the thing they’re supporting. I know lots of US liberals who think that Bitcoin is a progressive system, because there’s been a certain rhetoric around it. But when you strip away what people are imagining, it’s a very conservative community.

Why do you say that?

Because they see money as a constrained commodity that will be held tight in few hands. The strange thing about Bitcoin is that it has this rhetoric around democratising money and yet the whole system is designed to be highly constrictive. The early adopters are concentrated in areas of the world that already have high levels of wealth. The subsequent fragmentation of the tokens, which trickle to more peripheral areas of the globe, doesn’t make it progressive. It means that people in the peripheries are being pulled in to push up the price for the early adopters. So it’s a regressive, rigid, old-school, crude system. But it’s technologically innovative. So it has a sense that it was somehow more advanced than other forms of money. I don’t actually see Bitcoin as money.

You don’t?

No. I’d describe Bitcoins as blank tokens. That’s my terminology. The idea is that it’s a digital object – and that’s pretty much the only thing you can say about the tokens themselves, although they have a bunch of ancillary features. You can move the object, break it into pieces, there are things you can say about the ability to move and to hold the object. But the object / token itself is featureless, but it has features around it that people imagine imbue the token with features in itself. A metaphor is a train system. First the trains are built, along with infrastructure. Secondarily, a system for issuing tickets is formed. Then thirdly I might set up a system for transferring tickets between each other – but the first two things are more important. So there’s a real economy of things. Then there’s a ticket layer, then there’s a transfer system for the tickets. With Bitcoin they’ve built an issuing system and a movement system, but the things being issued are like blank tickets. There’s nothing about the ticket that says anything about what it’s redeemability is. And the idea in the crypto community is that if you can build this highly advanced ticket issuance and movement system it will somehow reverse engineer the presence of a real economy.

Bitcoin isn’t used much for exchange anyway are they? They’re more for speculation.

No. I’ve spoken at Bitcoin conferences, and the talk is always about how can we move these things around more effectively and securely. All the discussion is about moving coins, not about what is the thing we’re moving. How is it anchored into the real economy? There’s no discussion of that. But the dark secret of Bitcoin is that it isn’t money, it’s a cyber-collectible that you use money to buy, and you can re-sell it for money. That’s basically it, although there’s a whole narrative around it that people buy into.

Here’s a biggie. What’s wrong with the money system?

It depends on how deep you want me to go. There are smaller problems and then bigger problems. But let’s give it a go. The first thing I’d say is that the way I think about things doesn’t tend to be binary. I often see contradictions, that I hold at the same time. With large-scale state money systems, what I’d often see is systems that have enabled extremely large economies to form. Having these big issuers who push money out and draw it back in – has created very large economic networks, called capitalism. But it’s all underpinned by these enormous monetary systems. So on the one hand, people’s livelihoods do depend on these systems, including small businesses. Everyone is locked in. And in the current way that society is structured, we all depend on these systems, because they provide lifelines to us. But they simultaneously create a lot of alienation (if I use old-school Marxist terminology). People can’t really see what’s happening because they’re stuck in these huge networks. They can’t see who has the power, and don’t understand how the systems really work. They don’t feel connected. They just see this world of free-floating objects, and they have to find a job, feeling scared and confused.

A lot of alternative economic projects are trying to create localisation. They’re trying to bring those networks to a smaller scale, so that people can feel more like they know what’s happening. They feel more in control. But simultaneously it will reduce the amount of things they can get. With super-large systems, there’s lots of stuff. So this is the trade-off when it comes to monetary design. De facto reality is that the banking sector and the state dominate the money system right now. We can try to build small-scale alternatives – like what you’re trying to do with mutual credit – or we can try to make interventions via the political system, for example trying to make sure that the central bank is under democratic control, or that the banks are acting in the public interest. These are large-scale political interventions.

Problems associated with these large systems are social inequality, environmental destruction, confusion about what people are doing in the economy. For example, I sometimes teach university students, and you see the confusion in their eyes. They’re being told that they have to get a job in this huge invisible network that I can’t see. I hope someone’s going to offer me a job, but I have no idea where I’m going to find this thing that I’m supposed to find. So the way people think about these systems is that they’re a tiny little person trying to understand invisible forces. What I’m trying to do is to reveal what those invisible forces are, so that people can understand more about what’s happening around them.

So are you saying that the scale of the money system is way beyond any natural human scale that it works against human happiness?

Yes, again, in reality, how we are as human beings today is based on modern monetary systems. We don’t know what it’s like to be in a non-monetary society. We have no experience of what that means. You have to go back to pre-capitalist anthropology for that. Yes, a lot of modern issues that we have are down to the scale of our systems, and then humans end up not being in control of their own world. Forces start to emerge that are not under the control of anybody. Adam Smith called it the invisible hand – but he had a positive take on that. It was supposed to create order. But actually, for most people, the lack of understanding masks exploitation, and accumulation of wealth in very specific parts of the economy.

Do you think there could actually be a political solution to this, because states are subject to these same forces?

The system is underpinned by the state and the banking sector – they can’t be extricated from the system. In libertarian circles – if you hang out with crypto people, they always believe there’s a separation between states and markets. They have this fantasty, but there is no such thing as large scale markets without the state.

Yes. The left often believe that the state is going to solve the problems, but the state is a part of it.

The thing with left / right politics is that the left might try to wrestle the state to a position that it supports the more peripheral parts of the system – the ordinary workers rather than large-scale capitalists. But often when I’m in (right) libertarian circles, I get accused of having statist tendencies, and I say ‘you know what’s also statist? Statist is believing that your workers can get to work without being attacked, statist is believing that you’re allowed to go bankrupt. Statism is all these things that most modern capitalists take for granted. In pre-capitalist societies, if you go into debt and you don’t pay it back, you get killed. Now business owners expect to be protected by the state. You only find modern capitalism in the context of states.’

When I talk to people on the left, they see the state as a counter-balance to corporate power, and actually, so do people on the right, although they have different views on that.

Yeah. All political positions now assume the state, unless you’re in proper anarchist circles. And you do find anarchist tendencies in localist circles, and mutual credit circles. What they’re saying is that we want a true form of decentralisation, in that we want to devolve power back down to the human scale. Sometimes localist movements romanticise this, because if you actually do anthropology of small-scale societies, they’re not always peace-loving.

I forgot to mention that you’re an anthropologist, aren’t you?

Yes. Anthropologists know that pre-capitalist societies didn’t operate anything like market exchange. There were all these other systems going on – feud-based systems etc. – a lot of dynamics in it, but there were trade-offs. You’re a lot more connected to your community, but you have much less trust in outsiders. But in modern, large-scale money systems, you don’t know your neighbour, but you’re happy to do business with Amazon, and people you’ve never met.

Now we have the internet and the technology to federate local, trusted groups, you know the people you’re trading with are also in a trusted, local group, so you can trust them.

Yeah, it’s very exciting, some of the modern, hybrid attempts to do local / global things. It’s very interesting.

Do you think that more people understand where money comes from now? Positive Money have done a lot of work on it. But they also did a survey, and found that only 10% of politicians knew where money comes from.

In elite circles – media, influencers, startups, the intelligentsia – the kind of people who hang out in innovation salons in cities. In this group it would be a faux pas if you reveal that you don’t know some basic things about monetary systems. But I still think that if you look at the school system, it’s not taught at all. It’s still taught as if it’s a commodity. A friend recently showed me a book that her kid was given at school, and it’s all about money being barter, then it was various other things etc.

I’ve talked to people who work in the banking industry who think that banks are an intermediary that lend out the money that people save with them.

Yes, lots of people think that there’s just one kind of money – banknotes that go into banks, and then they lend it out, and this one form is going around. The idea that there are different layers – a state layer, and a layer where banks are creating their own credit, which forms the majority of the money supply. That’s still not generally well understood. Even amongst bankers.

Part 2 next week, when we’ll be talking about new monetary ideas. Find it here.

Highlights

1. Bitcoin has this rhetoric around democratising money and yet the early adopters are concentrated in areas of the world that already have high levels of wealth. The subsequent fragmentation of the tokens, which trickle to more peripheral areas of the globe, means that people in the peripheries are being pulled in to push up the price for the early adopters.
2. People can’t really see what’s happening because they’re stuck in these huge networks. They can’t see who has the power, and don’t understand how the systems really work. They don’t feel connected. They just see this world of free-floating objects, and they have to find a job, feeling scared and confused.
3. But actually, for most people, the lack of understanding masks exploitation, and accumulation of wealth in very specific parts of the economy.