Why are we discussing about the evolution of the concept of money in a study of evolution of ethics and its concepts? Because money corrupts and its corrupting influence is maximum at the lowest and the highest levels of availability.
Historically money has had the highest influence on ethical behavior throughout the history of human civilization. It is important to understand how and why. What is Money - Money is a medium of exchange of goods. It is also the medium of evaluation of worth of anything. Money is a means of protecting value earned or accumulated over time. It represents the economic power or the power to grow. It is something which is generally accepted in exchange for other things and which can discharge all obligations, past and present. For money general acceptability is essential. Thus currency notes are money, but not Cheque. Coins and currency notes, duly sanctified by government authority is money. Cheques and promissory notes are not money as they just represent the commitments of individuals or organisations, which may or may not be met.
Why Money
Money is necessary because it removes all the difficulties of the barter economy – it eases up economical operations and speeds up commercial transactions.
It renders the “double coincidence of wants” unnecessary. In the barter economy, two people have to have wants, reciprocally, each want coinciding with the surplus of the other. Money eliminates this difficulty to fulfill need and becomes the intermediary. It thus facilitates exchange and satisfaction of wants.
It also provides a common measure of value and gives a precise idea about the relative values of commodities. Thus one can judge what product, commodity or service is of a greater value to the consumer and which one of a lesser value. It enables classification of one’s wealth into a large spectrum of widely varying different values.
The greatest gift of the concept of money is the ability to assign value in a single dimension for any kind of product, service or transaction – the dimension of currency measured in units of that currency. This is just like all distances being measured in terms of a unit of length. It hardly matters whether the unit of currency is US dollars, British Pounds, Indian Rupee or Japanese Yen, just as it does not matter whether the length is in meters, centimetres or feet.
It is capable of subdivision as well as multiplication – one can move from micro- to macro-levels without changing the units, and without losing value perspective. As such it helps in the completion of very minute transactions to very large transactions millions of times larger in value, which is a great gain to society.
Money also serves as a convenient store of value.
Money spurs all economic activities. It was originally conceived only as a medium of exchange, which saves us from the difficulties of barter. Due to its central position with regard to all activities, as all activities tend to have an economic connotation, money has tended to become the object of all activities and is the objective of everybody.
Money is thus the central point of all economic life today. The modern economic system with its division of labor and large-scale production would have been impossible without the use of money. Money represents general purchasing power. It gives its possessor a claim on goods, which he can purchase, in a form and at a time most convenient to him.
Money is beneficial to society in general since on small basis of cash, a vast superstructure of credit can be built up. Optimum distribution of community’s resources would have been impossible without the use of money. Thus all types of waste are minimized and welfare of the community is maximized.
Functions of Money
Money performs both specific and general functions, which have evolved over a long period of time as the economy evolved. As national and global economies grew, newer and newer functions were added to money.
Specific Functions (Mostly Micro Economic)
1. Unit of account (abstract)
2. Common measure of value (abstract)
3. Medium of exchange (concrete)
4. Means of payment (concrete)
5. Standard for deferred payments (abstract)
6. Store of value (concrete)
General Functions (Mostly Macro Economic & Abstract)
7. Liquid asset
8. Framework of the market allocation system (prices)
9. A causative factor (of activities) in the economy
10. Controller of the economy
“Money is utilized very largely towards non-economic causes: from tribute as well as from trade, from blood-money and bride-money as well as from barter, from ceremonial and religious rites as well as from commerce, from ostentatious ornamentation as well as from acting as the common drudge between economic men.”
– The utilization of money towards non-economic causes has a large ethical content (or the lack of it) in the dealings.
Many societies had laws requiring compensation in some form for crimes of violence, instead of the Old Testament approach of “an eye for an eye”. The word to “pay” is derived from the Latin “pacare” meaning originally to pacify, appease, or make peace with - through the appropriate unit of value customarily acceptable to both sides. A similarly widespread custom was payment for brides in order to compensate the head of the family for the loss of a daughter’s services. Rulers have since very ancient times imposed taxes on or extracted tributes from their subjects. Religious obligations might also entail payment of tribute or sacrifices of some kind. Thus in many societies there was a requirement for a means of payment for blood money, bride-money, tax or tribute and this gave a great impetus to the spread of money. The use of money evolved out of deeply rooted customs; the clumsiness of barter provided an economic impulse but that may not have been the primary factor.
Multiple uses of Money
In the earlier section we have discussed a large number of different uses of money. Let us try and understand certain psychological aspects of money rather than the economic aspects.
1. Money is used as an indicator of position of an individual in a society.
2. Money is an ego satisfier and bloats up the ego of its possessors. Money people tend to believe themselves to be larger than life. A human being less than 1.5 meters tall imagines being equal to a thousand million in size.
3. Money can buy enormous goodwill and co-operation. This factor is used to buy prestige and position in society and enables man to continue unethical and immoral activities for detriment of society. Money has been used to subjugate and destroy ethnic groups throughout the world and throughout the history of human civilization. It is used to destroy civilizations and cultures.
4. Today we see the sad spectacle of many rich languages disappearing because of their low economic values. English has come to represent the credibility of man’s intellectual capabilities, skills and competence.
5. Money has been used in the recent past to build nations as well as destroy nations - As it has happened in Japan immediately after the Second World War with the use of the Marshal Plan and in China and the South East Asian countries (like Singapore, Thailand, Malaysia, Indonesia etc.) now. The flight of money almost led to the collapse of South East Asia a few years ago.
Forms of Money – Changing Faces of Money
Once upon a time, money had a different look. When barter became obsolete, crude currency took its place. This came in the form of anything quaint - from the glass bead to the brass gong. Cowry shells, of off-white, glossy hue, weren’t just popular as charms and ornaments. They were the earliest form of currency. Glass or stone beads valued between 50 sen and 100 ringgit from China, Africa and Arabia eventually took over as money. Magical or religious jars, brass kettle, and miniature brass cannons were also regarded as currency once. The mini- cannons were popular in Borneo and were greatly valued by the natives who used them for bartering, as wedding gifts and status symbols. With the introduction of money in Borneo, cannons fell into disuse and many were melted down during World War II. Slowly hard currency is being replaced by e-currency through Credit Cards, Debit Cards, PayTM etc.
Changing Value of Money
For economic purposes, value is the rate at which a given commodity gets exchanged for other commodities. We tend to measure many values in terms of money.
However money itself changes its value from time to time based on the following -
1. Concepts of depreciation due to inflation or due to one country’s economy doing poor compared to others.
2. Appreciation
3. Devaluation and revaluation in comparison with other currencies The purpose of a student of ethics examining these aspects is more from the point of view of understanding the tactics adopted and the psychological pressure exerted by the interested parties for maximising sectoral gains.
Depreciation brings down the value of money which means that its purchasing power goes down in a fast growing economy due to the problem of printing of paper money by the government (which may not be in proportion to the value addition taking place in the economy) inflation occurs. That is, the same commodity will cost more and more over a period of time, which in turn means that the value of the currency depreciates constantly with time. Depreciation of one country’s currency with respect to another can also occur.
This is decided by the international trading pattern and the balance between imports and exports of the countries involved. If there is more imports and less exports its currency depreciates. If there are more exports the currency becomes stronger. In order to force depreciation, strong parties to international commerce could force the prices of an exporting country down.
Appreciation of money is the opposite of depreciation where the purchasing power of goods and services from abroad goes up. At the same time internally the prices may go up, as it happened in Japan for a long period – the Japanese Yen constantly appreciating while prices inside Japan constantly going up. If value addition in an economy goes up without corresponding increase of money in circulation there will be appreciation. Similarly in case of favorable international trade (more exports and less imports) the currency value goes up.
From an ethical perspective, currency depreciation may not be a natural phenomenon. It may have been thrust upon a nation by certain groups for their own gains. In order to artificially promote exports and control imports, countries tend to devalue their currencies so that imports become costlier and exports become cheaper. Such devaluation is not created by the forces of economy but by artificial government intervention. Generally taxation on imports were used but with more and more pressure from international trade organizations like the WTO, countries resort to exchange rate manipulation.
Overvaluation of currency takes place when the currency is artificially valued very high. This is normally created by foreign exchange manipulators from outside the country and also many countries who control international trade joining together to ensure that the particular country does not become too strong in international trade. Constant revaluation of the Japanese Yen over the last few decades is a powerful example in this regard.
All these changes in value of money have serious economic, ethical and social implications when currency flies out of the country making the economy and value of local currency collapse. Thousands of people become jobless and economic activity slows down fast. This leads to innumerable difficulties for the local population and living conditions are affected. The situation in countries like Thailand in the last few years of the last century is an important pointer to how interested parties can create major structural disturbances in a country’s economy.
There are a lot of ethical issues involved in the international currency manipulation, which does not affect individuals but entire societies and countries.
Evolving Nature of Business Transactions – Moving Away from the Concept of Hard Money
As money changes its physical form, its role and functions expand. The nature and process of business transactions are also changing. Today when man earns money he does not earn hard cash. One does not have to en-cash all his work into money. Today only being informed is enough. The value for your work is just a piece of information entered into your bank account. The value can be utilized for comfort, purchase or transacting any business without using hard cash. As economy evolves a time would come when business transactions would take place without the involvement of money and with just a “value indicator” that is only a number (at present called dollars or rupees or whatever). When the global economy becomes fully globalized, there will be one name as a value indicator. It may be called “dollar”, but in reality no dollar would exchange hands. Small transactions may still need money but most transactions would take place without money through credit card or the banking system.
Thus the future business scenario would include a huge number of transactions, meaning a lot of work and value-adding activity with no real monetary transactions, nominal values being debited or accrued in banks for them. This is an interesting scenario indeed where human activity and value addition will take place in a virtual money environment.
Money from an Ethical Platform
There is a general perception in modern society that money is everything. People run after money. Money represents an end, not concerned with ways and means by which it is acquired. In a society where people are evaluated not based on human values but based on physical and monetary strength, money becomes everything. It’s an end in itself. It has acquired a value higher than man himself. There is a Tamil idiom mocking the normal social values, which says, “Close the door to a person without money even if he is God Himself.” Thus we see men who are rich but will not be remembered in few decades after passing away being projected in society as the greatest. It is good fortune of society that large numbers of them are operating under the legal and constitutional framework of countries.
Some of them, however, are taking on the roles of crusaders creating upheavals in various parts of the world through money. Their facades may be legal. They often give the appearance of serene and tranquil operations, but within they may be propagating most hideous and dangerous activities such as smuggling, drug dealings, religious fanaticism, etc. Any human activity should be ethical and human value based.
However, with expansion of money power, many immoral and unethical activities are becoming strong and gaining acceptance among a large number of people through what may be called sheer money power. Most of them apparently operate within the legal framework of the local countries. The power of money behind these activities provides them an ethical facade not in proportion to the ethical values determined.
Impact of E-Money on Business Ethics
Replacement of hard money with e-money, and the expanding use of credit cards open up vastly enhanced new ways of carrying out transactions. It has become far more easy now for illegal and sly operations to be carried out because it is more and more difficult to trace the sources and bring them to the book. Large volumes of money can be transferred instantaneously and the illegal and unethical operators involved can get away scotch-free. Social thinkers must find innovative powerful ways of dealing with this newly evolving and potentially explosive ethical problem.
K.S. Madhavan - The author is a management expert specializing in TEI (Total Employee Involvement) with expertise in turning around sick companies. - selected ‘Man of the Millennium’ by Economic Times in 2000.
Source : AVB
___________________________________
0 facebook:
Post a Comment