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The Archdruid Report

The cultures that clawed their way back up from the bitter dark ages that followed the fall of Rome knew only one form of real wealth, agricultural land - a habit of thought that still survives in the phrasing that calls land, and only land, "real property." The warrior aristocracies that threw back the last barbarian invasions from Europe and imposed a tenuous peace on their battered societies defined themselves by their landholdings; possession of a "knight's fee" - enough land to support a single armored horseman - was the one requirement of noble status in those days. Money existed in the form of coinage, but most people went from one year to the next without ever seeing any; nearly all goods and services moved through customary patterns of exchange in which market forces had no place.

The waning of the Middle Ages saw the gradual replacement of these customary economies with a new economics of precious-metal currency. Feudal tenure, by which farmers held the right to their land in exchange for specific duties defined by tradition, gave way to cash rents, and a significant part of the population moved away from the land to proto-industrial wage labor in the newly expanding cities. This was a step toward abstraction; gold and silver coins replaced fields of grain as the basic definition of wealth, and made way for concentrations of economic power far more extreme than anything the Middle Ages had seen.

Further abstractions followed. By the 17th century, banks began to issue paper receipts for gold and silver in their vaults, and these receipts could be exchanged like the coinage that backed them. The invention of the banknote was followed promptly by the practice of printing more banknotes than a bank's gold and silver reserves would cover, on the assumption that most of the notes would never be cashed in for metal; when word of this practice spread, the first bank runs followed. In the same way, companies found they could bring in capital by selling shares of their future earnings; the purchasers of these shares then found that their prices could be bid up or down, and stock speculation was born.

Fast forward a few more centuries, and we arrive at today's global economy, which consists primarily of the buying and selling of abstractions. The concept of wealth, which was once limited to the immediate means of production, and then shifted to mean the precious metal markers used to denominate the value of production, has now mutated into arbitrary numbers that can be wished into existence by a few keystrokes. When the US government announced a few days ago that it was investing $250 billion in the nation's banks, for example, that money did not have to be pulled out of some imaginary bank account in the national treasury, much less extracted from the dwindling productive capacities of America's remaining factories and farms; it was conjured into being by government fiat, in order to replace some even vaster sum of abstract wealth that more or less dissolved into twinkle dust over the preceding weeks.

What makes this pursuit of the abstract so dangerous, of course, is that abstract value is not the same thing as the concrete realities it once represented: green fields and grain in storehouses; strong muscles and the work they accomplish; or for that matter, factories, the resources that keep them running, and the products that come from them. These are real wealth; the layers of economic abstraction piled atop them are simply complex social games that determine who gets access to how much of this real wealth - and those games can become so complex., and so dysfunctional, that they get in the way of the production of real wealth. The flight into abstraction can proceed so far, in other words, that the abstractions interfere with the concrete realities underlying them.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Sun Oct 19th, 2008 at 05:17:25 PM EST
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