Weighing up Libra

by Guy Brandon

Facebook’s plans to launch its own digital currency should intrigue, excite and terrify you. But how will ZuckBucks measure up to the biblical gold standard?

‘…a homer of barley seed shall be valued at fifty shekels of silver’ – Leviticus 27:16

In announcing Libra, Facebook’s digital currency, CEO Mark Zuckerberg has put the cat among the monetary and regulatory pigeons. US lawmakers have reacted with dismay, scrambling to find out all they can about the new technologies proposed for use and trying to figure out exactly what the implications of the move might be.

Concerns about the digital currency being used to facilitate money laundering, drug purchases and terrorist financing are high on the list. At the time of writing, it looks like objections might prevent Congress from ever approving Libra. But there’s more to it than that. What’s at stake is more than facilitating organised crime (the US dollar has, in any case, been the global vehicle of choice for that for decades). This is about who gets the keys to the printing press. It’s about the soul of money.

Biblical money

A quick recap here is in order, though since this was covered in the recent the Brexit-related Engage article, Worth its weight in what?, and more extensively in Crumbling Foundations, we’ll keep it brief:

  • Biblical money, at different times and in different circumstances, took the form of gold and cattle, and more commonly silver and barley
  • Its creation and management was independent of the state, or any other centralised power
  • The Levites played a key role in maintaining honest weights and the integrity of the money supply
  • Money was a form of social ‘glue’, intended to strengthen relationships
  • Interest was banned as inherently abusive, since it entrenched poverty and increased inequality

Going against the grain

Measured against the Bible’s ideals, our central and commercial banks have not acquitted themselves well. Biblical silver proved an excellent store of value; for everyday transactions, barley was popularly used (or both, as in Hosea 3:2). Barley, while not quite growing on trees, was accessible to all with the growing space, also being scarce enough and useful enough to be valuable. By contrast, our debt-backed money has proven a terrible long-term store of value and is controlled by a handful of elite gatekeepers, whose collective failures contributed directly to the Global Financial Crisis.

Unfortunately, they’re not keen on giving up the keys to the magic money tree. Way back in 1984, the Austrian economist and author of The Denationalization of Money Friedrich Hayek commented, ‘I don’t believe that we can ever have good money again before we take the thing out of the hands of government. And since we can’t take it violently out of the hands of government, all we can do is by some sly, roundabout way introduce something they can’t stop.’

Facebook may have just tried to take the thing out of the hands of government; their error was not being sneaky enough. They may yet succeed by dint of judiciously ignoring US regulators – and if they don’t, someone else will. Unfortunately, though, Libra is far from a panacea.

The pros and cons of ZuckBucks

There are a number of reasons to be encouraged by Libra – and equally, a few that should be deeply worrying. The centralisation of the monetary system has resulted in injustices, as it almost inevitably must. In biblical terms, unnecessary centralisation is always considered a bad thing, resulting in the concentration of power and therefore the irresistible opportunity to misuse it. Deuteronomy 17 contains plenty of such warnings for Israel’s king (the monarchy in any case being a concession, see 1 Samuel 8).

So greater monetary choice – a plurality of options and competition between currencies, much like in biblical times – is a good thing. There’s the democratising potential of Libra, too: the ability to bank a proportion of the world’s 1.7 billion unbanked people, two-thirds of whom own a mobile phone, offering access to financial services in a way our current banking system finds uneconomical.

Quid custodet ipsos custodes?

But on the flipside of the Libra, you have the following problem. Companies are not answerable to citizens, like governments are (and, in a roundabout way, central banks). They’re answerable to shareholders. A democratically-elected government can also be voted out. There are checks and balances around the government and its handling of the economy. Quite apart from anything else, a state has a moral purpose, even if it doesn’t always do a brilliant job of executing it.

That’s hardly the case with a corporation. Its ultimate purpose is to make money for shareholders, and it’s far less accountable than government is.

So here we have Facebook: a supra-national entity, with 10 times more monthly active users than the US has voters, a shady past on protecting its users’ rights and keeping their data safe, potentially becoming the unaccountable and profit-driven central bank of its own global currency.

What could possibly go wrong?

Not small change?

This marks the point at which everything changes for money. Whether or not Libra succeeds, someone else – social media platform Telegram, retail giant Walmart, digital currency exchange Binance or any one of a dozen other multi-billion-dollar corporations – certainly will. One way or another, this is when – in a ‘sly, roundabout way’ or by means rather less subtle – money moves progressively out of the hands of government. In theory, that could be a good thing, resulting in decreased centralisation and abuse of the system we all use.

But we need to be careful we don’t swap an imperfect system for an even more flawed one. The history of money is one of progressive centralisation. The history of technology is much the same. Giving unaccountable, global and arguably amoral tech giants the ability to issue our currency may nudge us in a direction that makes us reminisce about our days in the monetary frying pan from our new vantage point in the fire.

This blog was first published in the October 2019 edition of our Engage News Magazine.

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Category: Reports and Articles

October, 2019

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