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A Liberal Defence of Money

by William Davies

Friedrich Hayek described it as “one of the greatest instruments of freedom ever invented by men”. The sociologist Georg Simmel noted that it “means more to us than any other object of possession because it obeys us without reservation”. Yet if some marketing gurus are to be believed, its pre-eminent position in the psychology of consumers is on the wane. The object in question is money.

It is not just the lending of money that is in crisis. A variety of business models are emerging which look set to challenge the previously unquestioned role of monetary prices in the relationship between retailers and consumers. Where products are intangible or experiential in nature, it is these models that look set to survive the current bout of creative destruction sweeping the high street.

The eyeballs of London commuters are now fought over by the distributors of free newspapers, London Lite and Thelondonpaper. Radiohead released their highly acclaimed album In Rainbows, on a pay-what-you-want basis via their website. Michael O’Leary of Ryanair has said that his goal is to offer all flights for free in the future. Google terrifies various publishing and software industries by making free what was previously sold, probing the limits of copyright. Examples such as these have led Chris Anderson, business guru and editor of Wired magazine, to declare that “$0.00 is the future of business”.

‘Free’ products have existed for some time, thanks to various forms of cross-subsidy, either through certain consumers being subsidised by others or certain products being subsidised by others. The Ryanair proposal, for example, would only work through significant increases in additional charges (such as the rumoured toilet fee) and tie-ins with other products.

What is more exciting to the prophets of ‘free’ is the prospect of a commercial product that is experienced as a gift. Wherever the marginal cost of production is close to zero – as with software or music recordings – there is the option to give the product away in order to gain as much attention as possible. Once this attention has been won, it can be used in order to sell advertising – the Google example – or simply build reputation (the Radiohead example). Even where the marginal cost of production isn’t zero, if it’s sufficiently low the model can still work (the free newspaper example).

Marketing specialists are now seeking to extend this model in all directions. When Anderson’s book on the topic comes out later in the year, expect a surge in idealistic declarations that post-recession businesses will be virtually philanthropic in their generosity to customers. If we are not paying for this blizzard of gifts out of our pockets, what are the costs? The problem is that they may not be economic at all.

Richard Stallman, founder of the free software movement, coined an oft-cited distinction between ‘free as in beer’ and ‘free as in speech’. Stallman was struggling to remind people that ‘free software’, as he meant it, was software that couldn’t be restricted in use, not software that had no monetary price. It was ‘free as in speech’ not ‘free as in beer’. If someone wanted to adapt and sell it, they were free to do so.

But when marketing gurus use the word ‘free’, they mean it ‘as in beer’. This then raises an urgent political question: does a business model such as Google’s offer us more free stuff, in exchange for less freedom? Is there perhaps a trade-off between ‘free as in beer’ and ‘free as in speech’? In political terms, the twentieth century offered two dominant responses to this question.

The social democratic response is that there isn’t a trade-off. This is why commitment to a National Health Service ‘free at the point of use’ is such an important point of political honour for the British Labour Party. Because prices exclude certain individuals from goods, political citizenship and free public goods are conditions of one another. If we want to safeguard ‘free as in speech’ then we must also provide ‘free as in beer’.

The neo-liberal response is adamant that there is a trade-off. According to the critique outlined by Hayek and Milton Friedman, societies that pursue socialist economic goals gradually lose political freedoms. If we want to safeguard ‘free as in speech’, we must abandon the pursuit of ‘free as in beer’. Of course prices prohibit those who can’t afford them, but the price system is guaranteed to preserve some element of choice, even for the poor.

The political fear, if “$0.00 is the future of business”, is that the neo-liberals are right on this occasion, just as their credibility is on the wane elsewhere. There are various respects in which corporate gifts are paid for through microcosmic restraints on freedoms and privacy rights.

A number of contemporary controversies centre around exactly this trade-off. It emerged last year that certain British internet service providers were partnering with a company called Phorm to analyse their customer’s online behaviour and help personalise advertising without the user’s consent. The fact that the web contains primarily free content would not prevent its gatekeepers extracting commercial value in other ways. The scheme was potentially in breach of European law, until various privacy safeguards were introduced.

This sort of example, together with the brewing fear of how Google will remain accountable in the future, is the archetypal dilemma of the post-money economy. Orthodox regulatory tools such as competition policy are weak in this area, given that their purpose is to defend consumer welfare in an economic sense. It’s hard to claim that £0.00 is a rip-off.

Yet this scarcely conforms to Hayek’s fears of the society that abolishes prices and freedom in one fell swoop. It may be more helpful to come at this from a different perspective altogether and ask – what sort of cultural device is money and why may we want to preserve it?

It is an enigma of all technologies that we only come to understand their latent cultural function once they are no longer necessary. With the dawn of television, we came to recognise that cinema was not just about moving pictures, but an opportunity to have a night out in public. With the dawn of email, we now see that letter-writing is not just about conveying information, but a way of demonstrating greater affection or respect for the recipient.

So it is with money. If a zero price really is “the future of business”, then now might be the time to appreciate what is culturally and ethically important about money. This is more than a little ironic, at a time when Hayek, Friedman and their valorisation of homo economicus are roundly dismissed as having led us to the brink of financial ruin. And yet the liberal defence of money needn’t be the neo-liberal one, which seeks to implant calculation to the heart of all social and political relations. What’s needed is a culturally attuned understanding of the precise areas where money needs to be conserved.

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