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OP-ED: Money - A great equalizer, and more

  • Published at 11:05 pm September 6th, 2021
Money currencies

There are different theories behind the story in between illegitimate extraction and hard work

Money is a tool in physical form or in electronic form used as a medium of transactions.

In addition, it is said to be used as a unit of accounts and store of value. In hunter gatherer society, people would need to arrange all their demands.

This is the same as wild animals do in the jungles.

Later barter system was introduced to meet the needs. But the system is embedded with problems of matching demand and supply.

Despite this, something is better than nothing since it is not possible to do all kinds of work for each person.

Later division of work evolved in response to necessity.

This very division is well articulated in the magnum opus of Adam Smith ‘Wealth of Nations."

A pin factory was exemplified to show the process of work division. Under the division of work, a person working in a factory cannot claim to be a producer of the particular product.

Even part of the product cannot be claimed as salary.

Division of work makes people specialized for a particular work. Behind division of work, medium of exchange plays a significant role.

Money as a medium of exchange, among others, makes people to be jacks of all trades.

People specialized in computer software development can enjoy foods and other amenities without producers of the same by way of money they earn from sales of software.

The income is used to maintain their livelihoods and remain in monetary form as a store of value.

Other side of money is that without manufacturing or service outputs, people may acquire purchasing power though possessing money otherwise.

This helps them to live without work. What a nice way money helps to be rich! 

Ancient way of earning money is theft.

Really it is old in ages but still available. In the age of digitization, a virtual way of theft is found.

A situation is like old wine in a new bottle. In the official world, approval practices lead people to have access to opportunities for extra monetary benefits.

There is a win-win situation in the approval world, givers get privileges.

Level playing fields are destroyed, leading many to have extra money without producing real outputs.

Academic measurement

There is an academic measurement regarding money supply which is exercised by central banks.

This denotes that money supply is equal to national output. It is a flow statement, but stock of money supply accumulated over years is not considered.

There are many countries having loans of around 300 percent over national output, denoting a part of the stock variable.

Purchasing power by way of money through earned income can lead people to run life smoothly. But this can meet current experiences leaving an insignificant part as savings.

Current income can hardly be able to purchase durable goods and fixed assets, unearned income is needed to meet such expenses.

People within the bracket of inabilities for access to unearned income lead life without a privileged position.

As such, there is an earmarked line between people with earned income and unearned income.

Earned income is fine but in many cases, the people under this group may be in poverty line; leading life in a subsistent way - ‘hand to mouth’.

Frequently it is heard of ‘financial inclusion’, ‘inclusive growth’ and many more.

This is populist type talk told by financially included people having substantial pie from growth.

There are numerous types of professions in an economy. In a broad sense, they are categorized as self-employed or employers and employees.

Employers may be natural persons or legal persons. In later cases, they are government or corporate bodies.

Whatever the categories are, all people are not equal in status. Work is also classified in many ways such as physical work, mental work, and direct work with production or service outputs, indirect supervisory work.

Everyone employed is found working for a specified time period. However, the benefit structure is different depending on the hierarchy of work portfolios.

The amount earned monthly is basically used for current expenses.

A portion of which is used as savings as said earlier but an emergent situation leads employees to take informal loans from nearby ones and formal loans from banks in the name of consumer credits.

If it were the situation for all people, the disparity from person to person would be very insignificant. But reality is different. 

In economic texts, 1% people are enjoying more than ninety percent wealth is frequently discussed.

There are different theories behind the story in between illegitimate extraction and hard work.

Whatever the theories say, money is the factor to move from have-nots to haves.

Without producing outputs, possessing money in an unearned way makes people wealthy and creates inequality in the society.

A genuine medium

Money, as said, earlier is a medium of transactions, a replacement tool of goods to goods transactions.

Without goods and services, money can buy goods and services. In an ideal sense, people will get money by selling goods and services.

The money received will be paid to purchase different types of goods and services.

But what is to happen in case of money received without exchange of goods and services is a question.

The simple answer is that this money may be out of nothing but can bring something.

This is unearned money which creates inequality between people who have this money and those who do not have this money.

Let us leave illegitimate possession of money.

There is a legitimate process through which unearned money can be received.

Again, holders of money can be broadly categorized as natural persons and corporate persons.

Corporate persons are business entities doing business with money as capital but capital is not enough to run the operations requiring more money.

This is loans from financial systems. Such loan proceeds are unearned money meaning that corporates capitalize their future income at present time.

On the other hand, people working for corporations earn money regularly against their service rendered.

This is earned income which is used for meeting day to day needs. But unearned income is needed to purchase wealth like home, vehicles and other durable goods.

Natural people can receive unearned income by capitalizing their future income.

Those who can receive such money can take them to the upper stage from their present level.

But what about those who do not get the opportunities is really the bottleneck of the monetary system.

People without opportunities face a higher degree of inequality compared to their earlier fellows.

Money in this situation is leading to increased inequality.

On the other hand, it will increase equality when the have-nots will get the opportunities to capitalize their future income.

Inequality of opportunities

It is true that inequality of opportunities leads to inequality of income to inequality of wealth.

So, the stair of opportunity comes first. After that regular income does not enlarge inequality among the players but inequality starts enlarging with influx of autonomous money – unearned income.

Money as a medium of transactions plays as a double-edged sword.

It can increase inequality and equality on the opposite edge.

No inequality is possible if ‘goods to goods’ work as a medium of transactions.

Money system brings ease in life since ‘goods to goods’ as a medium of exchange cannot work well, it is like an economic theory of demand and supply which never becomes equilibrium other than in graphs.

No mathematics is workable in real life.

As such, money is a way-out to solve the problem of mismatch between demand and supply of goods and services.

But the embedded problem of money is inequality of capitalization of future income in discriminate ways.

But what should be the best option for the future of money, private money like cryptocurrency or legal tender like central bank digital currency?

These are not the solutions unless and otherwise unearned money is distributed in a way through which people in all classes are financially included truly.


The author works in the development sector and can be reached at [email protected]