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Money Talk

“Loan”? “Borrow”? “Growth”? “Seed money”? Michael Philips finds such talk hard to credit.

Philosophy encourages us to question our linguistic habits. Our ordinary ways of talking about the world may conceal and obscure as well as reveal and clarify. A good example of linguistic obfuscation is the way we talk about money.

The language of money so misrepresents reality in favor of bankers and brokers that it’s hard to imagine how a public relations firm in their employ could have done better. Consider the use of the term ‘loan’ in the sentence “Banks loan money.” If I loan you my car, I expect you to return it in the condition you received it. I don’t demand that you pay me for its use. If I demand payment, I do not loan it to you, I rent it to you. Hertz or Avis do not loan us cars. We do not borrow houses and apartments from our landlords. If ‘loan’ means the same thing in relation to cars, houses and horses as it does in relation to money, banks don’t loan us money. We rent it from them.

Nor do banks save our money for us. The money in our savings accounts is not safely stashed in a vault or strong box. It is not kept in the bank at all. It is rented out. The sorry fact is that we rent our money to the bank at a ridiculously low rate (savings account interest) and the bank rents the money to others at whatever price the market will bear. It is clearly in their interest to keep the nature of these transactions in soft focus.

The use of the terms ‘loan’, ‘borrow’ and ‘save’ does this quite well. It assimilates business transactions, calculated risks with the expectation of profit, to transactions between neighbors and friends. Loans are generous acts, extensions of trust. The loaner temporarily forgoes the use of some thing because she wants to be helpful. She incurs the risk that it will be damaged or not returned at all in the same spirit. No price is exacted. The borrower is expected to repay only with gratitude and a willingness to reciprocate. The bonds of human solidarity are strengthened by all this. Bankers want the transactions they describe as loans to be seen in this warm light. “We’re glad we could help you out,” the friendly loan officer says, as if the bank were doing us a favor. But the bank is not doing us a favor. They expect to profit from the transaction and would not agree to it if they didn’t.

One could describe the banker’s use of ‘loan’ as a straightforward abuse of language. Or one could argue that the banker’s way of talking is so well established in our language that there are two senses of the word ‘loan’. First, there is the sense that applies to houses, cars, appliances, books, furniture, horses, boats, kites, ornamental shrubs and everything else but money. Here loaning is one thing, renting is another. Second, there is the special sense reserved exclusively for money. Here there is no distinction at all between loaning and renting. I leave it to the semantic theorists to select the more accurate description. If we accept the second, my point is that ‘loan’ is ambiguous and that the banking community exploits this ambiguity. Banks make loans in the second sense, but they want us to think of these transactions as loans in the first sense.

Misrepresentation in the investment world takes a different form. Here what were once metaphors that attribute strange powers to money have come to assume literal meanings without altogether losing their metaphorical associations. Money, invested in the right place, grows. Investments produce yields. When we invest our money, we put it to work for us. If the investment is a good one, our money earns interest or dividends. ‘Grow’ and ‘yield’ have biological associations (a theme developed further by expressions like ‘seed money’). It is as if money, planted in the right place, behaves like a tomato plant or a field of wheat. ‘Work’ and ‘earn’ have wage labor associations. It is as if money performs a job and deserves payment for it.

Of course, we all know what it means to say things like “This bond yields 10%,” or “This stock earns a 5% dividend.” Still, the metaphoric associations that cling to this way of talking about money suppresses doubts some might otherwise have about the justice of investment income (investors included). The familiar left wing complaint is that investors, qua investors, don’t work for their income. Others produce the value that investors appropriate (not just laborers, but all salaried employees). This appropriation of the value of other people’s labor is what Marxists call exploitation. The metaphors in question mask this phenomenon by obscuring the role of these producers. We investors do not live off the work of others. Our money just grows like zucchini, and produces yields like wheat or corn. When we put it to work for us, it earns interest and dividends. Our income is not based on the labor of others; we live off of the activities of our money.

I’m not arguing here that investment income is unjust or that we should do away with capitalism. I think these are very complicated questions. I am claiming only that the way we talk about money (in the relation to investments) obscures the basis of one important left wing challenge to the justice of investment income. If we think we are literally living off the activity of our money, the question of exploitation will not arise. No further justification of investment income will be called for.

I don’t know what money is. The standard popular definitions are inadequate. The Encyclopedia Britannica, for example, defines it as “a commodity accepted by general consent as a medium of exchange.” It’s clear from how their account continues that by ‘commodity’ they have in mind some tradable physical object. In some Polynesian cultures, that commodity was a certain class of sea shells; among some Native Americans, it was a certain class of beads; today, it is generally properly minted currency (coins and bills). But this is a better definition of ‘cash’ than of ‘money’ and cash transactions are becoming increasingly rare. Someday they may be replaced entirely by electronic transactions. Still, we will have money. So money can not be identified with sets of exchangeable physical objects and, this being the case, it’s unclear exactly how money functions as a ‘medium of exchange’. In electronic transactions, what gets exchanged are numbers in bank accounts. But what exactly do these numbers represent? A sophisticated account of ‘money’ must explain the complex web of social relationships that constitute our current system of exchange. We need such an account to explain what really happens when we ‘put our money to work for us’ and it ‘grows’.

Michael Philips is a professor of philosophy at Portland State University in Portland, Oregon. In his spare time he is a photographer and performance artist.