I recently found myself facing a vending machine in a quiet corridor at the Delft University of Technology in the Netherlands. I was due to speak at a conference called ‘Reinvent Money’ but, suffering from jetlag and exhaustion, I was on a search for Coca-Cola. The vending machine had a small digital interface built by a Dutch company called Payter. Printed on it was a sentence: ‘Contactless payment only.’ I touched down my bank card, but rather than dispensing Coke, it beeped a message: ‘Card invalid.’ Not all cards are created equal, even if you can get one – and not everyone can.
In the economist’s imagining of an idealised free market, rational individuals enter into monetary-exchange contracts with each other for their mutual benefit. One party – called the ‘buyer’ – passes money tokens to another party – called the ‘seller’ – who in turn gives real goods or services. So here I am, the tired individual rationally seeking sugar. The market is before me, fizzy drinks stacked on a shelf, presided over by a vending machine acting on behalf of the cola seller. It’s an obedient mechanical apparatus that is supposed to abide by a simple market contract: If you give money to my owner, I will give you a Coke. So why won’t this goddamn machine enter into this contract with me? This is market failure.
To understand this failure, we must first understand that we live with two modes of money. ‘Cash’ is the name given to our system of physical tokens that are manually passed on to complete transactions. This first mode of money is public. We might call it ‘state money’. Indeed, we experience cash like a public utility that is ‘just there’. Like other public utilities, it might feel grungy and unsexy – with inefficiencies and avenues for corruption – but it is in principle open-access. It can be passed directly by the richest of society to the poorest of society, or vice versa.
Alongside this, we have a separate system of digital fiat money, in which our money tokens take the form of ‘data objects’ recorded on a database by an authority – a bank – granted power to ‘keep score’ of them for us. We refer to this as our bank account and, rather than physically transporting this money, we ‘move’ it by sending messages to our banks – for example, via mobile phones or the internet – asking them to edit the data. Money ‘moves’ to your landlord if your two respective banks can agree to edit your accounts, reducing your score and increasing your landlord’s score.
This second mode of money is essentially private, running off an infrastructure collectively controlled by profit-seeking commercial banks and a host of private payment intermediaries – like Visa and Mastercard – that work with them. The data inscriptions in your bank account are not state money. Rather, your bank account records private promises issued to you by your bank, promising you access to state money should you wish. Having ‘£500’ in your Barclays account actually means ‘Barclays PLC promises you access to £500’. The ATM network is the main way by which you convert these private bank promises – ‘deposits’ – into the state cash that has been promised to you. The digital payments system, on the other hand, is a way to transfer – or reassign – those bank promises between ourselves.
This dual system allows us the option to use private digital bank money when buying pizza at a restaurant, but we can always resort to public state money drawn out of an ATM if the proprietor’s debit card system crashes. This choice seems fair. At different times, we might find either form more or less useful. As you read this, though, architects of a ‘cashless society’ are working to remove the option of resorting to state cash. They wish to completely privatise the movement of money tokens, pushing banks and private-payments intermediaries between all interactions of buyers and sellers.
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The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge.
The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.
The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off.
The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen. This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending.
Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.
Signs say ‘Card only’. Who is Card? Card is a glamorous socialite, welcomed into stores. Card is superior
Supporting this core alliance are auxiliary corps of establishment academics, economists and futurists, living life in leafy suburbs, flying business class to speak at technology conferences, attended to by a wall of sycophantic media pundits and innovation journalists preaching the gospel of cashlessness. The Curse of Cash (2016) by Kenneth Rogoff, economics professor at Harvard, was longlisted for the Financial Times and McKinsey Business Book of the Year award, undoubtedly accompanied by invitations to financial industry-sponsored conference parties in five-star hotel lobbies.
The psychological assault is working. The Netherlands – where I face my vending machine – has become one key front in the war on cash. Here cash is becoming viewed like an illegal alien on the run, increasingly excluded from the formal economy, drawing dirty looks from shop assistants. Signs say ‘Card only’. Who is Card? Card is a glamorous socialite, welcomed into stores. Card is superior. Look at the bank adverts showcasing their accessories for Card. Nobody is building accessories for Cash.
The frontlines, though, are now creeping to poorer countries. India’s recent so-called ‘demonetisation’ was a brutal overnight retraction of rupee notes by the prime minister Narendra Modi to bring discipline to the ‘black economy’. It was an exercise that necessitated choking the poorest Indians, who depend on cash and who often lack access to bank accounts. Originally cast in popular terms as an attempt to stem corruption, the message was later ironically altered to cast cashlessness as a way to create economic progress for India’s poor.
This message is given humanitarian credentials by the UN-based Better Than Cash Alliance, which promotes ‘the shift from cash to digital payments to reduce poverty and drive inclusive growth’, and which counts Visa, Mastercard and Citi Foundation as key partners. The Modi action was also preceded by the initiation of the Cashless Catalyst programme, ‘an alliance between the Government of India and USAID, to expand digital payments in India’, backed by a panoply of digital payments companies. These official alliances of states, corporations and public academics are impressive. In India, well-heeled urban elites who applauded Modi’s actions from the sidelines can safely point to Rogoff’s Financial Times-nominated book of the year to justify it.
Rogoff, though, has appeared spooked, writing articles stating that he was advocating removing cash only from advanced economies with advanced banking systems. Oh damn. Highly influential and politically powerful Harvard economist releases a global anti-cash book and is concerned when poorer nations take him seriously?
The attempt to present the cashless bank-payments society as a benefit to marginalised people is tenuous at best. If you’re a vulnerable denizen of the informal economy, an off-the-grid hustler, or a low-income precarious worker, banks and payments intermediaries have little interest in prioritising you. The bank-payments society will not process the activity that takes place in the peripheral cracks that form the basis of your livelihood. Indeed, it is intended to shut down those spaces. That might be characterised as ‘progress’, but equally we might say you’re being firewalled out of the economy in an act of economic cleansing. Under the guise of destroying the ‘shadow economy’, the underclass, the unwatched, the eccentric and the untamed will be coercively corralled into the hands of the state-corporate mainstream.
I have no special love of cash. I don’t really care for nostalgic reveries on the beautiful aesthetics of the banknote, or its texture and cultural importance within a market system, though I understand this is important to many. I also don’t really care about the pedantic history of cash, whether it was the Tang or Song dynasty in China who first issued notes. What I care about is the unaccountable callousness of this vending machine, the one that has just blocked me from engaging in free trade.
Old vending machines didn’t do this. They had a little slot for coins, one that allowed even a ragged beggar to convert his tiny income into sustenance. Look closely at the machine. It’s actually two machines. The Payter device fused into its body does not work for the cola seller. It works for payments corporations. You see, the cola seller has one bank account, but there are many people with many accounts at different banks approaching the vending machine. Those banks need to identify which of their account holders wishes to transfer how much money to which account at which other bank. The device is there to deliver my card information into the transmission lines of the card payments networks, where it will be – in theory – routed to facilitate the transfer of money tokens from my account into the seller’s account, for a small fee.
This is no longer a deal between me and the seller. I am now dealing with a complex of unknown third parties, profit-seeking money-passers who stand between us to act as facilitators of the money flow, but also as potential gatekeepers. If a gatekeeper doesn’t want to do business with me, I can’t do business with the seller. They have the ability to jam, monitor or place conditions upon that glorious core ritual of capitalism – the transfer of money for the transfer of goods. This innocuous device exudes mechanical indifference, reporting only to invisible bosses far away, running invisible algorithms in invisible black boxes that don’t like me.
If we are going to refer to bank payments as ‘cashless’, we should then refer to cash payments as ‘bankless’. Because that’s what cash is, and right now it is the only thing standing between us and a completely privatised money system.
As in the case of previous privatisations, we’ll hear suited TV pundits arguing that if the digital payments companies don’t work for people they will be outcompeted by better private systems. Yeah right. When did you last see a credible competitor to the likes of Mastercard and Visa? They preside over huge network systems, subject to intense network effects. It’s in no shopkeeper’s interest to use a competitor to Visa when it’s so utterly dominant already.
The most we can hope for, then, is a benign oligopoly of payments corporations, heavily exposed to the geopolitical aspirations of the states they reside within. The Chinese state encouraged the creation of China UnionPay precisely because they don’t want US payment megacorps installing themselves as gatekeepers into transactions made by Chinese citizens.
The new bank-payments society doesn’t actually solve the old problems – crime just goes digital, your account gets hacked rather than your wallet stolen
When mounting a defence, there are always two options. You either block an incoming attack, or you launch a strategic counterstrike, sometimes summed up as ‘offence is the best defence’.
In the former strategy, you focus on pointing out that the arguments against cash are either exaggerated, inaccurate or incomplete. Exaggeration and inaccuracy are both present in anti-cash tirades, but incompleteness is crucial. For example, let’s say we agree that criminals prefer cash. Does that translate into ‘We should ban cash’? Banning everything that criminals favoured would almost certainly lead to a constrained, suffocating existence for everyone. Congratulations, we ended crime, but only at the expense of ending privacy and free creative space too. The end of crime comes accompanied by an overbearing surveillance state, always standing next to you, reaching into your most private moments, treating you like a small child that cannot be trusted. Enjoy your life.
The second mode of defence-as-offence involves attacking the proposed alternative. We point out that the new bank-payments society, firstly, does not actually solve the old problems – crime just goes digital, and your account gets hacked rather than your wallet stolen – and, even worse, causes a whole range of new problems that were not explicitly mentioned in Mastercard’s marketing material. Let me reveal the fine-print written in invisible ink: Did we mention that in removing the ability to transact with cash we can now see everything you do and can also censor you? Cheer up, if you have nothing to hide, you have nothing to fear!
Oh yes, I can use scare tactics too. I can point out that removing cash takes us one step closer to potentially realising the most powerful and automated state-corporate financial control complex the world has ever seen. Very few people either seem to understand this, or care. Like a slow-boiled frog, we don’t seem to notice the process of locking ourselves into daily dependence on an alienating, unaccountable infrastructure that makes us increasingly subservient to bureaucratic processes we cannot see.
Maybe I need to turn up the shock-and-awe. Maybe I can drum up an argument about how, in a cashless society, terrorists could target the electrical grid to bring entire regional economies to a halt.
No. My main defence of cash will be simple and intuitive. As unsexy and analogue as cash is, it is resilient. It is easy to use. It requires little fancy infrastructure. It is not subject to arbitrary algorithmic glitches from incompetent programmers. And, yes, it leaves no data trail that will be used to project the aspirations and neuroses of faceless technocrats and business analysts into my daily existence. It comes with criminals, but hey, it’s good old friendly normal capitalism rather than predictive Minority Report surveillance-capitalism. And ask yourself this: do you really want to live in the latter society without the ability to buy drugs? Believe me, you’ll need something to dull the existential pain.