The monopolists' war on cash
Welcome to The Counterbalance, the newsletter of the Balanced Economy Project.
Today's edition carries a wide-ranging interview with Brett Scott, an ex-banker and author of the nonfiction Penguin book Cloudmoney, on the seemingly unstoppable rush towards a cashless society. This is a big one, involving a potentially terrifyingly fusion between Big Tech and Big Finance. Digital money versus cash, Scott says, is like Uber versus bicycles. We need both: if we get rid of bicycles and leave only Uber, we face a monopoly trap.
We've also got lively endnotes, and news of a big change at the Balanced Economy Project.
The monopoly perils of a cashless society
Brett Scott, author of the book Cloudmoney, was visibly uncomfortable, even awkward, as we met in the pale pink-and-yellow fronted Geschwister Nothaft café in southwest Berlin.
The style was bohemian, progressive, middle class: beside a large wooden chessboard a young woman was tapping away at a laptop; at a bright window a woman with dyed hair was talking intensely with a friend, their heads close together.
To me, this was unobjectionable - but not to Scott. I felt a tinge of his discomfort when the barman refused cash for my chai latté and chocolate banana bread. Cards only, he said, pointing to a green sign: nur Kartenzahlung. He did accept a cash tip.
The barman's rejection unsettled me: welcome to my world, Scott said. A friend of his called him an "economic empath:" he viscerally feels economic relations embedded in his surroundings: something that must have taken a toll during his previous career in finance.
"You find this kind of café anywhere in the world, with the same aesthetic: a classic global, middle class, progressive café," Scott said. "In my work, where this vibe goes, the anti-cash thing follows."
"I've been in plenty of old-man working class pubs where it's 'fuck yeah,' there is no problem paying cash. But if you try in a place like this, you will likely feel shame: as in, 'I am an aspirational dude and I don't want to associate myself with it." It was emblematic, he said, that I paid by card and tipped in cash: cards (and data) for the owner, and cash for the workers.
As the interview unspooled, the café became a metaphor for modernity. Unlike Big Oil, which is associated with conservative culture, the Silicon Valley crowd had cloaked themselves in a liberal cultural aesthetic, fusing it with monopoly power, and fusing that with ideas of technological progress and advancement.
In this (con)fusion, millions of people who might once have considered themselves of the political left or working classes are now disorientated: they love Amazon's services, they flock to edgy progressive Google-sponsored events - but they also have a queasy feeling about these firms' power.
This disorientation plays havoc with the potential for political resistance, leaving a vacuum that far right forces and conspiracy theorists have rushed to fill, exploiting "our destabilized present rife with doubles and confusion," as the author Naomi Klein puts it, "where far right movements playact solidarity with the working class."
Addressing this lies in confronting the heart of the matter: monopoly power.
Why cash matters
Bicycles versus Uber; roads versus bike lanes; emergency stairs versus lifts: we need both. Similarly, we need cash -- alongside our fantastically useful digital money systems.
A first advantage of cash is privacy: you can spend it when and where you like, avoiding the digital surveillance that undermines our democracies and threatens our freedoms. Cash also can't be hacked, or used to facilitate digital fraud or identity theft.
Going cashless hurts those on lower incomes the most. A census by the UK's Royal Society for the Arts (RSA) in 2022 found that 10 million people - almost 20 percent of the adult population - would struggle to cope in a cashless society; nearly half of those wouldn't cope at all. They cited fears of falling into debt (as with cash you only spend what you have), fears of fraud, and mistrust of corporate payment systems, but also a loss of community as human interactions wither: something that is especially important for the elderly, for many of whom a chat with the cashier at the supermarket can be the highlight of their day.
Cash also keeps economies running in the event of a catastrophe: for example if electricity infrastructure collapses due to an earthquake, or because of corruption and mismanagement.
At another level, bigger dangers lurk. Cloudmoney begins like this:
"This book is about a merger and an acquisition. The merger is between the forces of Big Finance and Big Tech. The acquisition is of power: once the merger is complete, Big Finance and Big Tech will have power over us on a scale never before seen in human history."
Big Tech and Big Finance are interconnected with everything now, weaving us increasingly into fast-growing international webs of dependency: "two hemispheres of a global mind," as Scott wrote. In digital money, they increasingly intersect.
So what is digital money?
Casino chip money
All money is a social construct: pieces of metal or paper, or data on a server visible through the window of your computer screen. We accept it as payment only because we know others will. It's not a con trick because it contains a powerful anchor: government, which will take your money when you pay your taxes or pay for public services: a sovereign guarantee of acceptability. (Crypto has no such anchor, which is one reason why it is ultimately pretty useless as money.)
Scott talks about layers of money: with public money - cash and digital - at the base, propping up the rest. Private digital money - what you can see in your bank account via your banking app - is a secondary layer: it has the same name ("money") as public money, and it is interchangeable with public money, but it is not the same thing.
Digital private money he says, is more like the plastic chips that casinos issue. You hand over €1,000 in (public) cash, say, and the casino issues you with €1,000 worth of plastic chips. In banking terms those chips are your assets, and the casino's liabilities: it must pay cash to you or whoever hands those chips back.
Those digital chips require the casino to exist (or those round pieces of plastic would be worthless) and the casino also needs that cash in reserve, to pay people back when they 'cash in' their chips.
Similarly, digital money requires intermediaries: a banking system that validates your digital money, and a digital payments infrastructure that enables you to pay your tax return on your phone while waiting for a dental appointment.
Without wishing to get too technical, the private banking system like the casino also requires a system of central bank reserves, public money to anchor the system and people's trust in it. They are what the European Central Bank calls "a safe asset its core. . . . what keeps the value of private money stable." These reserves mostly aren't cash, but they are public money.
Currently, only banks can access those reserves, but now there are proposals to allow the public to access them directly through so-called Central Bank Digital Currencies or CBDCs, potentially bypassing private banks. Of course, the gatekeepers are now lobbying to be the intermediaries for this so they remain the gatekeepers, in what the Bank for International Settlements says could create “a vicious circle of entrenched market power and data concentration.” (CBDCs are a topic for another day.)
The gatekeepers
Cash requires no intermediaries: it is the "itch they cannot scratch," as Scott put it. Behind digital money, by contrast, lies a large infrastructure of interconnected intermediaries: the whizzy interfaces from Big Tech, and the banking licences, cross-border agreements and and financial infrastructures from the banking system.
Intermediaries need to be paid - and when you inject monopoly power into this equation, these intermediaries become like autocratic tollkeepers, with power to extract fees from the passing traffic, like private tax systems.
With the cashless society, the passing traffic is money itself.
Payments platforms tip towards monopoly if not carefully regulated. Take credit and debit card fees, for instance. In many countries these are capped, but in the less regulated United States they average around two percent of each transction: these fees added up to $161 billion in 2022, two and half times what it was 10 years earlier -- rising much faster than associated sales volumes. Similarly, credit card interest rates nearly doubled to 23 percent over that period, even as inflation fell: interest charges added up to $105 billion in 2022, meaning that this sector is making over a quarter of a trillion dollars annually, just in the United States. "My fastest growing operating expense is credit card swipe fees," said small businessman Gratz Peters. "It’s the only cost I am powerless to negotiate, beholden to whatever Visa and Mastercard set as the fees." The racket is all about monopoly power.
Fast-rising fee percentages matches our recent Taken, Not Earned report, which showed how the world's biggest companies are taking ever more income through leveraging market power to levy excess "markups" - or price-gouging.
The more the alternative of cash and public money shrinks, the more we must rely on these intermediaries: the more political and economic power they will amass, and the more our payments will cost. The cashless society has powerful cheerleaders.
"The banking system has long had interests in your using digital casino chips rather than cash, and gaining oligopoly power," Scott said. "It is part of this broader shift towards automation and concentration. Amazon and all these firms love automation, they hate human interaction, they hate physicality, they hate offline activities because they can’t operate there.”
Anti-cash ‘propaganda’ and feedback loops
The green sign on the counter at the Geschwister Nothaft Café says, under CARD PAYMENTS ONLY, "To create a safer work environment we only accept credit & debit cards." My emphasis added: some want us to think that cash is ‘unsafe.’
We can knock that on the head: the Robert Koch Institute for infectious diseases disagrees: as this article entitled “Banknotes carry no particular Coronavirus risk" explains. So does the Bundesbank, with its “Cash poses no particular risk of infection for the public.”
But that doesn’t stop the anti-cash propaganda, as Scott calls it. Endless encouragements to go cashless are often couched in the language of 'financial inclusion' to bring the 'unbanked' into the modern age.
Another common confusion also plays a powerful role. A few years ago I interviewed Dave Miller, Director of research at the Iowa Farm Bureau, which has promoted monopolisation in U.S. agriculture. He kept referring to a tapestry behind his desk showing a bucolic farm scene: a cow, a pig, chickens, sheep, and a tiny tractor harvesting on a lazy summer's day. "They want to take us back to that" he said of the growing critics of corporate concentration in agriculture. "Setting out on an open-station tractor bouncing across the field on a hard steel seat? Now I'm in air conditioned comfort."
This is the trick and the obstacle: blurring the difference between the business model of monopoly, and the technological advances. Just as small farmers are perfectly capable of using high-tech farm equipment, we don't need monopoly power to make brilliant digital payments systems. Quite the opposite, in fact.
The dash for cashless, more pervasive in the UK or Sweden than in Germany, contains powerful feedback loops pushing the process forwards. As physical bank branches or ATM machines close, especially in smaller towns and remote areas, market traders and smaller businesses can no longer easily deposit their cash takings, so they are almost forced to go cashless. As this happens, demand for physical bank branches and ATM machines - and cash transactions - falls.
It's a strange contrast, though: even as cash transactions decline sharply, physical cash holdings are rising: people still very much want to save or hoard it.
Note that the trend here increased during the pandemic: a signal that for many people cash is a refuge, a safety blanket in uncertain times. People want cash.
Reclaiming the language of political resistance.
Most people in the Nothaft café would likely consider themselves left wing, Scott said. "But if I tell them that in accepting a cashless world they are succumbing to corporate power, they would become awkward, uncertain, maybe ashamed."
Big tech’s deliberate fusion of a liberal, progressive aesthetic with its monopoly business model, and the blurring of the distinction between monopoly power and technological advances, has profound cultural impacts.
"I have noticed that [these] people back away from working on cash issues: it is associated with conspiracy theorists, the far right, it is anti-progress."
It is true that especially here — anything to do with the nature of money — you will find conspiracy theorists, like aphids on a rose bud. You know, people who obsess about things like this:
Most people feel they are being lied to, manipulated, discriminated against - and they are right.
This disorienting fusion of big tech monopoly power with liberal political culture and notions of progress has undercut old traditions of class politics and resistance, edging it aside with identity politics, fanned by social media firms that encourage profitable "engagement" and controversy.
“I can see how the Steve Bannons of this world strategise to use this [cashless] place" Scott, said, looking around. "This café clearly excludes people: it is signaling that we refuse to accept anyone not linked up to the banking sector and tech. It is a political statement."
"They [the far right] have made hay with the idea that progressive culture welcomes corporate domination, and that social conservatism is aligned with an anti-corporate position."
The far right’s recent successes tap into deep human feelings of powerlessness in the face of vast, impersonal global forces. Elites, versus the people. The problem is real: we just disagree on who the liars are, who are the manipulators, the elites.
"The cash thing could be framed in several ways, Scott said, “but the frame that I find most useful is to frame it as rebalancing power."
Anti-monopoly is, we'd argue, the most promising avenue that progressive forces can take to prise large political territory out from the grip of far right. Because its central focus goes to the heart of the matter: economic and political power.
You can follow Brett Scott’s work on his blog, Altered States of Monetary Consciousness.
Endnotes
Changes at the Balanced Economy Project
We are delighted to have announced the appointment of Claire Godfrey to be Executive Director at the Balanced Economy Project. Claire succeeds our co-founder, Michelle Meagher, who is moving on to develop her ideas and research on anti-monopoly, at close allies at SOMO.
Rebalancing Europe: A new economic agenda for tackling monopoly power
Join us, our allies, and leading policymakers and thinkers for a half-day conference in Brussels on April 15th to debate how the next European Commission can put tackling monopoly power at the heart of its economic agenda.
Amazon lobbyists banned from European Parliament - civil society
A civil society and union campaign bore fruit, only the second time a company’s lobbyists (after Monsanto in 2017) have been banned. We co-signed the letter, here.
The EU's DMA: time to get serious about enforcement - civil society
We urged the European Commission “to take resolute action” to enforce the Digital Markets Act, after big tech firms said they will only comply to a limited extent.
The Harms from Concentrated Industries: a Primer - Denise Hearn.
An important new report about the harms from concentrated industries, or monopoly power. Most work done in this area has focused on the United States: this brings a wider international perspective.
Monopoly Money - Greenpeace podcast
Nicholas Shaxson of the Balanced Economy Project, and author of this Counterbalance, talks tax havens, international finance — and monopoly power.
Crash Course Economics - SOMO
An exciting series of talks on rentier and monopoly capitalism by experts. So far we’ve heard from Angela Wigger (Monopoly power and EU Competition Policy); Nick Dearden (Rentierism and Big Pharma); Brett Christophers (Asset Managers and Rentier Capitalism); and Cory Doctorow (Entshittification and the rise and fall of Big Tech.) Click on the links to hear the talks: more to come.
Balancecraft - a dive into fascism and industrial concentration in pre-war Germany.
“Germany’s banks, industries, and government had become tightly woven together into a war-mongering singularity . . . The path to hyper-concentration pre-dated, and arguably greased the way for, Hitler’s rise to power.”
Barons - Money, power and the corruption of America’s Food Industry
Austin Frerick takes us on a “riveting tour through a hidden world of big-money powerhouses that control our food system.” As profits of giant agricultural firms have soared, America’s farm country is “now defined by its reactionary political landscape and decaying towns.” As our recent Taken, Not Earned report also shows, profits and penury have become two sides of the same extractive coin.