An overwhelming majority of people have not
understood the idea of money and its origin. Money is only worth what someone
is willing to pay you for it. It’s not the coin that matters, rather the value
behind it. If it took me 1 hour to produce a packet of bread, I can say that,
it cost 1 penny or 10 penny or 100 penny, it doesn’t matter really. What
matters is if one hour work should worth 1 penny, 2 hours should worth 2 and so
on. Money is a medium of exchange. If I want to exchange the bread with sugar,
how do I do it ? I can see how long it will take for the sugar producer to
produce a kilo of sugar. If he produces 3 kilo of sugar in one hour, it is
logical to exchange 1 packet of bread for 3 kilo of sugar. Here we used time as
a determining factor of price. In a real world, it can be the efficiency,
producing costs, time and many other factors that determine price. Also there
will be a wide range of goods and services which makes the world bit
complicated. How much should a gas cylinder worth if I should pay it with kg of
sugar? Or maybe the gas seller doesn’t want any sugar. To avoid such
complicated barter trading, money was created, whose aim is to make the
exchange simpler. Hence, the increase of the supply of money does not make the
society richer, it only increases the price of goods and services.
The discovery of money can be traced back to the
time since humans started trading, or exchanging things. Before that, the hunters
and gatherers didn’t need any money because they didn’t trade. They looked for
foods, consumed that right away and moved further so they didn’t need to store
value, hence no money was required. After that, when humans lived in a society,
involved in agriculture and collected other goods, they also traded, so in some
form, the idea of money was born, though barter system existed widely
throughout human history. It is believed that the first bronze coin was
introduced in China around 220 BC by the emperor Qin Sihnuangdi. Even after
that, money only existed in the form of coins. Paper money, which is in wide
circulation today, only came into existence in the last 2 century.
Again, money is not the piece of paper (which we
call a bill) or a coin rather a trust inside it. I don’t trust Zimbabwean
Dollar so even if someone is ready to give me a trillion Zimbabwe dollars, I won’t
give anything but I trust the US dollar and am sure that with US dollar bill, I
can buy other goods later. So, if someone is ready to pay me half a million
dollar, I will give my Villa for it because I can buy other goods, like another
Villa in Davos, Switzerland. But the value is same as long as the US central bank
called the Federal Reserve does not print irresponsibly. If it does so, the value
of US dollar will go down, which is termed as Inflation in economics. A
currency that will potentially be inflated will lose value, so people holding
this currency rush to exchange it with others. So, people trusting the US
dollar today do not have trust on God (as it says ' In God we Trust ' on dollar
bill), rather the Chairman of the Federal Reserve is the person whom we
actually trust. The term 'Credit' in English which originated from the word '
Credo ' in Latin means ' I believe ' or ' I trust '.
Because money is a very liquid asset, its
importance has always been immense. Those who had it the most always had more
power. Kings and Emperors raised war for wealth and initially to raise wars,
they needed merchants and people who possessed wealth. Those who didn’t have
money, also didn’t have any rights. For example, in England in some time of
history, only those with more than a certain amount of money were allowed to
vote. Those with money were close to the rulers who then used their wealth to
monopolize power. The expulsion of Jews from many places in Europe was related
to money and banking. Jews were merchants who settled in so called ' Ghettos '
throughout Europe. The Emperors went to Ghettos to borrow money to raise wars (also
because lending with interest was forbidden between Christians and also between
Jews but not with the other). So, when the war was won by the other side, Jews
were subjected to expulsion as they were the financiers of war. On the other
hand, Jews also used their wealth to lobby the ruling elites to get a
favourable environment for them. They could also play between both sides, by
betting who will win the war by placing wealth on their side to gain favour.
On the other hand, those with money could open lending
offices. They could lend more than they had because the process of lending is
mostly a value written on the Balance Sheet, not necessarily the actual flow of
money. So, the lenders could lend more than they actually have and make higher
profits through interest. By this way, they had a huge influence on the society
and in many cases, they also exploited the borrowers. Why I tell this story is
because this was the beginning of the story that means, those with wealth are
considered tyrants, cheaters, greedy who just use the society for their greed.
They are told to be the ones responsible for wide inequality and poverty in the
society. In the aftermath of Industrialization, Karl Marx's Communist Manifesto
also called for the redistribution of wealth and in other parts of the world,
the wealth from the rich was strapped and given to the poor. This sounds good
in words but what the illusion of money is that the industrialization itself,
which took our life-standard high, would not have been possible without the
concentration of wealth in the hand of few. Economists widely agree that it is
only if wealth is concentrated; there will be investment in factors of
production which leads to technological advancement and helps the society as a
whole to grow. Once it grows to a certain level, then again inequality tends to
drop. Once again, in the process of economic development, first there should be
wealth concentration so that one can invest in factors of production like
Machines, then it creates jobs, makes the owners of factors or production rich,
and as they hire other people to work in production lines, their economic
situation also increases hence inequality will fall making everybody better off
than before the investment in factors of production. This was also the story of
what actually happened during Industrialization.
Without those with wealth, there would be no
Industrialization. Without pooling wealth, no investment could be made to
repair machines, to build new machines, to finance infrastructures etc. So, in
the second stage, pooling of money, or in a new word, the establishment of
banking institutions played an important role in economic development. The
Business Cycle worked this way: 1) The Company built machines and hired
workers. 2) The workers got salary, consumed a part of it and saved the
remaining in a bank. 3) The company borrowed from the bank to invest in
additional machinery and created further jobs. This cycle caused the society to
progress.
So, the ones with wealth or money have played an
important role to make the modern world. Today in many countries, Banks,
Financial Institutions and those with wealth are regarded as people who have
caused the wide gap. But the fact is, especially the poor countries are poor
not because of financial institutions but due to the lack of it. There is no
place to borrow money to the poor, noone gives them a loan fearing default as
they have no securities. As a result, the poor are forced to borrow from a
person or village chiefs mostly with very high interest, more than it is
legally allowed ( as there are no such regulation for private lending ) and end
of paying far more than they would require had they borrowed with a bank. The
huge amount they should pay back cause them to be pushed to poverty trap. So,
policy makers should concentrate on how to lend to those who have no
securities. This would have a positive effect on growth and increase
employment. In the developed world, there are other problems. Banks were blamed
for Economic Crisis, which are also true in some cases. But this has nothing to
do with the very reason of banks, which is, to collect funds from some and to
lend it to others with charging some fee which is called profit and make the
society go. The problem however lied on the management of rules and regulation.
The deregulation of financial system motivated them to involve in risky
activities as they knew that if they win, they can keep the profit, if not, the
society will step in to rescue them. So, the crisis was caused because of the
tendency of not playing by the rule. However, after the crisis, financial
industry was regulated further and today, it is the sector with most
regulations as they are sensitive to the running of our society.
So in general, Banks are crucial part of society,
not the problems. So are the private corporations with enormous wealth.
Corporations give jobs to millions, train people and help them gain valuable
skills. Moreover, they pay taxes to the government which can be used to build
infrastructures or to pay for our education. On the other hand, it is also due
to corporations and private business that we have gazettes like Ipad, Iphone,
laptop computers as well as other machineries like Washing Machines, Water
Cooker, Grinder, and Cars etc. It was made after the private corporations
invested in research and technology to gain profit and to make money. But while
making money, they also made our life easier and at last, we are all better
off. More than 80% of research came from private corporations whom we blame to
have caused inequality and poverty and may be environmental degradation. We say
this by using Facebook through our laptop computers which was also the product
of same corporations. So, yes, inventions were driven by the thirst of profit,
thirst of money but by doing so, we have got valuable devices that made our
life simpler, easier, worthier and enjoyable. So, money is the main driver
behind the running of a society. So, don’t say that people who are money minded
are bad people. One should be money minded, one should think on profits, only
the thing one should not forget is that they also have the responsibility to
give back to the society, as Bill Gates, Warren Buffet and others are doing.
This is not only true for big corporations but
also for small people like us who might have a shop on the main street. The
famous example of the Bakery Shop owner makes the story clearer. The Baker
wakes up at 1 o clock in the morning, gets the flour, bakes doughnuts, bread
etc so that when you wake up at 6 in the morning, you can buy at his place. He
does not wake earlier because he wants to make you happy by serving fresh bread
but because he wants to earn money by selling you the bread. But it also helped
you because you could have bread in the money. So, both of you are better off.
This is exactly what makes the society running. It is greed, it is the profit,
it is the money. Hence, concluding everything, the aim of this article was to
make it clear that those with wealth and money are not bad people per see.
Concentration of wealth has helped to create a materialistic society in the
past that has caused growth and raised our life standard and it still plays an
important rule today to make the daily life to move on. Only if it is poorly
managed, for example deregulating financial industry, letting the financial institutions
to take risks, they will be problems. If all the stakeholders of the society
play by the rule, the importance of money is immense.
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