An Economy of Hot Air

Henry Ford

Henry Ford, who was nobody’s idea of a flaming communist, purportedly said: “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” This is, in fact, a paraphrase; the actual quote, from his 1922 memoir, is much wordier and more difficult to parse. But it accurately reflects his belief, that most people don’t realize money doesn’t objectively exist.

Money, Ford acknowledged, isn’t the currency in your pockets. That’s a government-approved substitute which makes money circulate. Money is, functionally, a philosophical abstract, not a thing at all. Money comes into existence when banks loan it, and when the economy contracts—as we’re seeing now, surrounding COVID-19—the missing money simply ceases to exist. Money is the ultimate placebo, functioning entirely because we believe it does.

I remembered this lesson from one of America’s greatest capitalists yesterday, when reading the newest Robert Reich op-ed. Reich, who famously quit the Clinton Administration because he considered it too accommodationist, excoriates rich people’s behavior during this crisis. Some already-rich people, like Jeff Bezos, are hiring new workers to meet the demand placed upon their businesses. But they aren’t offering these new hires basic perks, like sick days, during a pandemic.

Let me flout Leftist orthodoxy and say: Jeff Bezos possibly deserves to be rich. He controls material resources and distribution networks which ordinary workers don’t want and lack skills to maintain. But he also relies upon workers, both his own (warehouse order pickers) and others’ (road maintenance crews) to conduct his business. Therefore, he maybe deserves to be rich, but does he deserve to be, at this writing, $125 billion rich?

Possibly more important, is he really $125 billion rich?

If money doesn’t really exist, as über-capitalist Henry Ford said, what wealth does Bezos really have? Once your accumulated wealth exceeds quantities necessary to pay your bills and we’re dealing with literal fiction. Bezos moves bank data around a fiduciary Shangri-La and, by possessing this fictional resource, changes the value of money possessed by everybody else. Like a supernova, he bends time, space, and the value of a buck.

Jeff Bezos

Unless he converts this money into something which has substance, though, like gold or land or new factory resources, that money remains fictional. Perhaps that’s why, just before COVID-19, Bezos bought the most expensive house in California, a state known for exorbitant real estate values. Only when his fictional money becomes something material, does he actually have wealth. Bezos, who hoards houses, banks on their value tracking forever upward.

That’s why, when Robert Reich suggests taxing Bezos’ wealth at levels consistent with his ability to manipulate the economy, I wonder what he intends to tax. Unoccupied houses? Idle resources, like land, economic futures, and… I’ve literally run out of ideas. Because we cannot confuse “wealth,” something actually taxable, with “money,” which is fictional. When individuals accumulate Bezos-level monetary wealth, it becomes functionally immune to taxes, because it’s like taxing air.

By this I don’t mean Bezos could move money overseas, though he certainly could. Rather, I mean that money at this level serves primarily as a mix of incentive, bargaining chip, and threat. When Amazon offered to expand resources in Staten Island, the entire effort centered on dumping money into a regional economy, and when critics like Alexandria Ocasio-Cortez balked, Amazon took the money away. But the money was never there, so it never really left.

Instead, the money simply loomed, like the statue of Christ overlooking Rio de Janeiro. Like Christ, that money had power over people’s lives to exactly the degree they invested faith in it. The money was never really present, just as Christ’s presence (or absence) isn’t dependent on artwork. You can’t tax the population’s general faith in money, because it doesn’t exist in material form. It’s a big, shapeless nothing which nevertheless dominates because we expect it to.

COVID-19 gives us new perspective on this reality. Watching the government basically pull money from thin air, it’s tempting to rhetorically question where wealth comes from. It isn’t from the value of labor, not while work is disappearing. But such rhetorical questions are hot air, because we know the answer. Like Henry Ford wrote nearly a century ago, money is fictional. Like a novelist, the government simply tempts us to believe its story.

Maybe the revolution is upon us. Not a violent revolution, just the realization that we’ve been lied to.