Brett Scott has a one of the best pieces on war on cash written so far. He sums up the issues nicely.
He first starts with his experience when one of the payment machines refused his card. Based on this, he writes how there are two kinds of cash. One is the physical fiat cash which we hold in hands and other is digital cash which we hold in our bank accounts. The latter one is used to make payments from one bank to another. Banks naturally hate the physical cash as they have to run ATMs etc to dispense the cash. They would love the digital world where money remains in hands of banks and they can keep playing with it.
However, there are two more players which are interested in war on cash:
The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge.
The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money. It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.
The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option. Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off.
The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control. The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analysed, good or bad. Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen. This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending.
Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion! The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment. The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.
In all this is the role of elite economists:
Supporting this core alliance are auxiliary corps of establishment academics, economists and futurists, living life in leafy suburbs, flying business class to speak at technology conferences, attended to by a wall of sycophantic media pundits and innovation journalists preaching the gospel of cashlessness. The Curse of Cash (2016) by Kenneth Rogoff, economics professor at Harvard, was longlisted for the Financial Times and McKinsey Business Book of the Year award, undoubtedly accompanied by invitations to financial industry-sponsored conference parties in five-star hotel lobbies.
The real problem is not love of holding physical cash. But how this will ruin the privacy:
My main defence of cash will be simple and intuitive. As unsexy and analogue as cash is, it is resilient. It is easy to use. It requires little fancy infrastructure. It is not subject to arbitrary algorithmic glitches from incompetent programmers. And, yes, it leaves no data trail that will be used to project the aspirations and neuroses of faceless technocrats and business analysts into my daily existence. It comes with criminals, but hey, it’s good old friendly normal capitalism rather than predictive Minority Report surveillance-capitalism. And ask yourself this: do you really want to live in the latter society without the ability to buy drugs? Believe me, you’ll need something to dull the existential pain.
How few people are seeing the dangers of this increased digital world. Just because a government which is highly popular is in power you just don’t sign up to whatever the government says. These things are permanent and we will only know their dangers when a not so benign leader takes over and creates havoc..