Surplus Money. A Note

August 28th, 2008 Posted in Money, Surplus Value

We all encounter money directly. It takes the form of a flow away from us and towards us. We buy what we need and what gives us pleasure and we sell our skill and energy as workers (our services) and we sell the goods we produce that we do not use for ourselves. We also sell the values we have accumulated that we either no longer need or that we can no longer afford.

Socially there is a constant exchange that can take a very stable form–a repeat of the same pattern through each daily cycle with an exact match for each of us and for the entire exchange system. Everything is bought without residue. Our needs are satisfied; our simple pleasures attained; and our money in hand remains the same as the day before. The division of labor is exactly balanced.

This is the model of the egalitarian society. It probably can never actually exist. Our efforts, energies, talents, and training and our contributions are not equivalent. Children, the very old, the disabled are non-contributing dependents. Criminals, non-conformists, malcontents, the psychologically challenged require special consideration. No social order, even a commune made up of the pure and saintly, is perfect.

More usually the amount of money available is greater than needed for the price of the goods and services offered. We buy everything presented on the market and still have folding money remaining in our pockets or in our usual caches. This is one way to visualize surplus money–as an unspent excess of potential demand. (With less money than posted prices we have another story.)

A very famous Japanese film of 1954 called “Shichinin No Samurai” (Seven Samurai) (directed by Akira Kurosawa) introduces this concept very graphically. A band of thieves periodically visits a rural village and confiscates crops and stock. The villagers are reduced to poverty and their survival is threatened. They confer and decide to seek the military help of unemployed samurai warriors in the formation of a defense and an ability to fight back–a strategy that works but only after the test of a very strenuous battle. (An American presentation of this theme in a 1960 movie called “The Magnificent Seven” (directed by John Sturges) repeats the same story, now in the setting of a Mexican farm village persistently robbed by local bandits. The rescue is provided by six itinerant American cowboy gunmen and a Mexican youth.

The thieves take the excess material goods of the villagers over and above that needed for communal survival. Extinction of the farmers is very possible. This is the classic meaning of surplus–the taking of all sustenance above the level of survival and reproduction. The means used here is extortion and force. Loot and the surplus are the same.

Other ways of one group taking surplus from another have more legitimacy but, for some, still appear to be an injustice. In the world of Charles Dickens’ novels we see the operation of the early factory system where the maximum profit of the owners and managers depends upon the starvation wages of the workers. The Marxists consider this margin of profit as the same kind of surplus the bandits stole from the peasants. The workers of Dickens were pushed to the edge of survival. There were other abuses during this same era–child labor (at even lower wages), dangerous and unhealthy working spaces and conditions, company stores and housing that kept the workers tied to the employer by debt.

The taking of surplus is direct and up front in these situations. In our current world this model flourishes in run-away plants seeking the cheapest intelligent disciplined and motivated workers and the most cooperative and least intrusive governmental authority. But more likely in our time the surplus is gathered as money. The means are indirect and less visible and onerous. There have been reforms.

Our experience of surplus varies. We think of it as savings and security against the rainy day when we have no earnings. Or we are urged on by untapped energy and newly discovered needs to use it immediately–it burns a hole in our pockets. Or we search out the longed for extras–move toward the pleasure-dome. Or we are indifferent and inattentive and carry on the same old way without noticing.

I am not arguing here against the existence of the surplus, but I will admit that all money looks the same so we might conclude that the notion of surplus in our post-modern era is an illusion. We bring our available money to the market and we determine price by competitive bidding and competitive offering. Any surplus disappears into the adjusting price.

But we can counter argue with a proposed metric. Take the concept of poverty line for income–the tipping amount of money a household requires to be socially defined as not in poverty. Over this line we are into surplus, under it we are into hard times. Multiply this measure by the total number in our society and you get a rough idea of the amount of money we as a national group (all of us) need to physically survive. All the money income and available wealth above this summary line could be considered surplus. So the majority of us under this model share in the surplus if even only modestly. The glass is at least half-full.

But this surplus as it accumulates seems to liberate money from its daily material anchor. Surplus money, even though lacking as a useful object, becomes a value in itself. We trade it with hardly a reference to any underlying good or service.

Totally freed money is play money and in practice meaningless. In the practical world even the most abstract money traces back to actual goods and services. The abstract money can be brought to bear quickly on the everyday markets. The surplus can take an active and even dominant part in the goods and services exchange. In the current sub-prime mortgage and the anticipated credit card crises I suspect the process of collecting and investing the surplus is the powerful antecedent.

The surplus now is taken up as money. When I consider it I visualize a pea soup fog, amorphous, non-specific yet definitely there. It has a blob-from-outer-space quality. Ominous. Perhaps not totally deserved.

The questions are obvious: How is it extracted? By whom and from whom? How is it distributed? And finely how is it used?

May I offer a hint? The government, the decisions and actions of the acting sovereign, has a significant part.