The Coercive Power of Money

The Webster’s New Collegiate dictionary defines ‘to coerce‘ as ‘to compel to an act or choice’, or ‘to restrain or dominate by nullifying individual will’. We all have some kind of idea of what it means to coerce someone: to force someone into doing something they don’t necessarily want. When I hold a shotgun to your head, and tell you that you should give me your iPhone, that could very well be interpreted as an act of coercion. But there are also more subtle acts of coercion. If you told me a secret, and we would get into a fight, I could force you into doing something by threatening to make pubic your secret. But there are even more subtle acts of coercion. Acts that all of us experience on a daily basis. And the leading actor in this play is omnipotent and all-known: it is Mister Money himself.

Where does voluntary engaging in a deal stop and coercion start? When you offer me 300 dollars for me to repair your car, I could voluntarily decide whether or not to accept your offer. I might feel forced to do so, since I am short on money, but I am still able to compare the pro’s and con’s of your offer and come to a rather autonomous decision. It becomes a different story when I am an employee of a car repairing firm where you turn to for getting your car fixed. In that case I have no vote in deciding whether to accept your offer. That’s the boss’ decision: I just have to do as he says. But you could still claim that I voluntarily decided to go work for the company, so in that sense my ‘forced decision’ to repair your car would still be voluntary. Note that you could doubt these two examples of ‘voluntary’ action by claiming that, although in theory I might have decided whether to take the job or not, in practice I was more or less obliged to do so. I might have needed the money in order to stay alive, which could have forced me into accepting the job. But Iet’s not focus on that.

Because I want to provide you with a different case, and that is the following: imagine that a big construction company decides to build an apartment block next to where you live. Now I ask you: how much of a choice do you have in accepting this deal? Not much, right? Even though you aren’t offered any money, or anything for that matter, you are still supposed to accept the company’s plans. You have no authority at all. Your ‘individual will is nullified’ by the domination of the construction company. Thus it seems that money can force you into accepting an offer. That is, when parties engage in a deal, even though this deal might be executed voluntarily by the offering and accepting party, the will of other parties is rendered irrelevant. It’s nullified. And although this might not be a big issue if the deal is relatively small (like your neighbor buying a new car), the consequences can be much more severe when the parties involved are big and powerful (like the construction company and the government).

So it seems that money truly is power: coercive power.

But what do you think?

Written by Rob Graumans

8 thoughts on “The Coercive Power of Money

  1. Hello Rob,

    Interesting post! Overall I agree that money does have the potential to be used as a means of coercion. However, I don’t fully agree with the example in your final paragraph…

    If I understand you correctly, you argue that the power of coercion in money comes from the fact that a third (or several) uninvolved parties of a commercial exchange (goods or services against money) are not being involved in the decision process. To that I would simply say that this is also true for a non-commercial exchange: the typical example I think of is the “criss-cross murder” I remember from the movie http://en.wikipedia.org/wiki/Strangers_on_a_Train_(film) . The idea being that two people agree to murder someone the other one wants to have killed. No money is exchanged (if both are faithful to the contract), but clearly the two people being killed don’t have a say. So, I don’t think that money is the coercive element.

    In my opinion, the coercive power of money comes from two facts: people simply believe (more or less universally) that money has value and life without money is (practically) impossible. This means that everybody needs money (like air, water, or other resources), and given that money can be traded for most other resources it becomes the one resource to try to obtain in lieu of others. The second fact is the highly skewed distribution of wealth. As a rich man (let’s say I’m a billionaire), I can go out on the street and offer a stranger 10,000 Euros (or Dollars) if he or she does something I assume is against their will or normally occurring intention. Maybe for 10,000 there are still lots of people who could resist, but for 100,000 or even a million? In addition to that I don’t see any utility (other than satisfying some questionable desire of seeing someone humiliated maybe) for society in this exchange.

    Still, I would argue, that the principles of a free market (i.e. money being used as a tool for communicating and creating the best possible allocation of resources) require a form of “transaction” with a virtual good (money; it doesn’t have real value, only imagined/believed-in value). However, I don’t think that money as it exists today is the perfect virtual good, given its multiple functions (one of them being communication/resource allocation, another being coercion).

    • Hello Jochen,

      Thank you for your comment. I see you’ve thoroughly thought about money and its possible coercive effects. I want to respond to a few things you said, and I want to add some points myself.

      I believe you’re absolutely right in saying that coercion towards third parties (parties not directly involved in a trade) can also occur by means of the exchange of goods/service, without intermediation of money. So indeed; money is not required in order for two (or more) parties to be able to coerce other parties. However – as you explained well – since money is such an important tool in our society (more important than, let’s say, the exchange of promises to kill someone the other wants to have killed) it might be the prime “good” being responsible for this form of coercion. Again: that is not to say that it’s the only good – since coercion (read: not being involved as a third party in the decision process leading up to a trade) is an intrinsic part of every economical transaction. Nonetheless, in our society, money seems to be the most important good, leading up to the biggest coercive power.

      If I’m right – and please correct me if I’m wrong – you say that the coercive power of money comes from the fact that (1) everybody needs money (because it’s such a universal good that can be exchanged for pretty much every other good/service around) and therefore the importance people attach to it is high. In other words: people are prepared to go a long way for money because money is the most multi-exchangeable good (in comparison to other goods/services) and therefore of a higher intrinsic value than “other” goods/services. And (2) the fact that the distribution of money is highly skewed, so therefore the financially less fortuned people might be forced into doing something they find embarrassing/degrading/in conflict with their primary goals.

      Point (1) I find true: money is simply the most multi-applicable medium for the exchange of value; you can trade it for any good/service you like. So therefore it has an intrinsically “higher value” than a financially equivalent (piece of) good/service. Although this is true, I don’t think it’s the reason explaining why “third parties” are forced into complying with economic transactions between other parties. I believe that’s a result of the free-market system we live in; a result that would just as well be attained if money was absent.

      (2) I find more applicable (from this perspective), since parties having relatively much money are in a better position to engage in economic transactions – that other parties just have to accept – than parties that don’t have the money. But I believe it’s not so much an issue that third parties aren’t necessarily benefiting from the exchange; it’s the inherent powerlessness of these parties to influence the course of actions that I find most peculiar.

      I agree with you on your analysis of money as a tool necessary for benefiting from the advantages the free market system has to offer, but also having some negative consequences. But – as you might have experienced for yourself – it’s not that easy to come up with a good substitute for money. I’ve been thinking for myself for quite some time: is there even an alternative to money? Or better: is there a viable alternative to money? And if so, what would this look like? I’m very curious if you’ve got any thoughts about this?

      A good day to you,

      Rob

      • Hey Rob,

        On your first comment, as long as coercion is mainly defined as the consequences suffered (or generally experienced) by an unrelated party of an agreed exchange, then money clearly is the main driver. However, I think of coercion also *between* the parties agreeing on the exchange, and would argue that these effects are the ones that, if removed, would make money simply a completely different tool altogether.

        For instance, if I think of human trafficking (which contains both aspects: the exchange of money against people and the consequences suffered by those people who do not participate in the “benefit” of the exchange but just suffer from it). If money as we know it would lose its function of power (which is the underlying reason it can be used in direct coercion), eventually I believe that trafficking (for the parties agreeing on the exchange) would lose most if not all of its “benefit” (value).

        As for your last question. There are already several ideas, I believe. The most prominent one I remember is digital money, which would work like this:

        1. For everything you produce (including services you provide, once again including writing this blog, helping neighbors, in short everything you consider to be of value!) you would “request” (from a worldwide operating and democratically supervised server) virtual currency (money equivalent), which can then be only spent by you and only spent once.

        2. Whatever you spent the money for will then “count” towards that kind of product (i.e. the information value of money to work as a decentralized means of letting “the market” know which products are sought after most). And if you happen to be a more “industrial” (not amateur) producer of a good, you would then need to undergo an equally democratically supervised system that would simply “balance sheet” all purchases to determine the allocation of resources (incl. workforce, etc.).

        As far as I can tell, money has at least these two main (desirable) functions: unsupervised creation of efficient resource allocation (in the absence of biases, corruption, etc.) while at the same time distributing value across those who produce it in relative quantities according to the valuation of their contribution.

        The biggest problem is that money, at the moment, is not administered democratically but technocratically (in the hands of some few select and somewhat obscure and unsupervised people). Their control over the system provides them with opportunity to skew certain processes into directions that are not necessarily leading to efficient resource allocation (for the common benefit at least). I emphasize that it creates *opportunity*. Whether or not the people who administer money abuse their power is in their control (and unfortunately poorly monitored, given the complexity of the topic and mechanisms involved).

        Psychologically, my intuition is that people simply have too much faith in what they “think they know” and too little faith in what they “believe they can endure”. If people were less impressed by the scarecrow of inflation and more willing to endure it, a lot of the current economic problems wouldn’t be as pressing. But the fact that yield expectations for “profitable investments” have increased (in fact, a few decades ago, a financial investor really carried the risk of losses, whereas now the expectation for certain types of investments is almost to get a guaranteed yield) and the fact that the skew in the wealth distribution is becoming ever higher means that those people who *actually* produce the value and utility for humanity (workers, service providers, teachers, nurses, doctors, etc.) have to accept smaller and smaller contributions from their work because more and more of the overall “output” of the system goes to “passive consumers” (who invest their money and “let it work” for them).

        The system as it is (with the idea that a significant amount of people could derive income from simply investing their prior accumulated wealth) just isn’t feasible, and I think that even more and more rich people understand this, which is why they donate large sums of their money to charitable causes (however then exerting a LOT of power in deciding who gets what, which once again is undemocratic and possibly non-efficient!).

        So, overall, my suggestion would be to create a currency that is based on democratic oversight and is created whenever REAL value is created. This would then also remove the potential of simply creating money out of thin air :)

        • Hello Jochen,

          Okay, I see what you mean. And indeed: if money would lose its “function of power”, it would become a rather worthless “good”. Money exists (“has value”) because of the inability of people to resist its power; it’s a means by which people can make other people do “things” for them, things these people otherwise would (likely) not do. So, there seems to be an inherent coercive feature in money; an aspect that is – indeed – required for money to have any power at all. The real question – I believe – is: how free are parties in accepting/rejecting monetary offers? Do people even have a choice? And if they don’t, doesn’t that money is – just like physical coercion – a true means of coercion? These are interesting issues that – especially for people working for companies and not having the authority to accept/reject offers; the people who are truly forced to do the job – seem to culminate in an omnipresent power-domination of the “wealthy” people.

          I see what you mean by saying that only a few (wealthy) people have the possibility to invest their money/decide what value can and will be created. That’s an inherent feature of capitalism – a feature that makes (as you explained) the rich richer and keeps the poor poor. On the other hand – a proponent of capitalism might say – the wealthy investors have an incentive to spend their money wisely (to “create value for society”) because that would make their investments (more) profitable. So, by means of that process, new value is created – even though the biggest part of it goes to the already wealthy investor.

          But I agree with you that the ones “truly” creating value (by means of doing work; instead of investing money and letting others do the work) are rewarded disproportionally little money. And I hope better possibilities arise/will be benefited from to overcome this “problem”. The question is: are we prepared to undergo such a big change in our economic system/way of thinking :)?

          • Hmmm, I still think that even if money didn’t have the “power” component/function, but merely the function of communication (and allowing the system to determine the most desirable “mix” of resource spending given the demand), it would not be useless. It just couldn’t be used as means of coercion any more.

            As to your last question: I don’t think we will be “asked” of have a “choice”. Either we will adapt or not (and species who cannot adapt in the face of huge problems, such as environmental changes, which in my opinion all have to do with incorrect allocation of externalities), are “superseded” by evolution. We will simply disappear as a species if we don’t find way to cooperatively (instead of competitively) make use of the ONE resource we share: our planet…

          • Hello Jochen,

            Do you really think that it will get that far; that we might become superseded by evolution? I agree with you in saying that the current economic system is primarily based on competition instead of cooperation. And most certainly: our economic system has disastrous effects on our planet. And as long as it remains our main concern to make profits, this is very likely to continue. So – in my opinion – there are two ways in which you could try to “solve” this problem, thereby avoiding the dramatic effects on our environment and (thus) killing ourselves in the long run:

            (1) We turn to a radically different economic system; an economic system based on – as you explained – cooperation, in which money is absent/doesn’t play such a pivotal role as it does today.

            (2) We keep going on in the capitalistic sphere and we’ll rely on the fact that we’ll become more socially responsibly (including more responsible towards our environment/planet) as our technology progresses and the profit margins on “green” products increases/costs per unit decreases.

            Given the system we live in, option (2) seems to be the more plausible option. However, the question is: will this stage ever occur; a stage in which our technology/knowledge makes environmentally responsible goods less expensive than polluting goods? If not, we might be on a dead ended road; quite literally.

            Option (1) can be implemented in different “degrees”: we can turn full-fledged communistic or – as you explained – we can try to adopt a different “monetary” system. But don’t you think that, if we’d choose the latter option (the different “monetary” system), we keep on having to deal with the negative consequences of a monetary system? That the rich will keep on dominating the poor – although slightly less obvious than before?

  2. This may post as a new reply (may the nesting levels have reached their maximum, ~smiles~).

    As much as I would want to believe that humans are as “conscientious” and “aware” of the consequences (as some other of your posts suggested to me, like consumers making “good” choices for themselves), I also believe that for humans to engage in socially beneficial thinking and action, they have to feel that their needs are taken care of. And as long as our economy fosters the idea that, indeed, each and every one has to take care of their own needs (which of course is ridiculous; I could never procure my own electricity, machines, etc. by myself, but I always need others), we have very little intrinsic motivation/incentive to truly care about others needs (above and beyond the monetary reward we get for doing so).

    Unfortunately, as you said, in any exchange there are “unconcerned” parties that are not being asked, but that very well may suffer the consequences of an exchange. And in our current economy, I believe the planet (as a whole ecosystem) is suffering from our neglect and ignorance of the negative consequences. And as long as we are trapped in a mindset of only caring about our own benefit for any given transaction, there will always be the risk of someone or something suffering additional negative consequences.

    My favorite is thus alternative (1). I agree that given our extremely long tradition of money and the way we have grown accustomed to it seems to make it very, very difficult to overcome the way we engage in commercial exchange and organize large-scale projects (I often ask myself: would it be possible at all to organize, say, space travel without money?) Then again, before the advent of the internet, people would have had a hard time to imagine the ease with which you and I are now engaging in this discussion without ever having to stay up at the same time. I believe that to the degree that global communication is becoming less and less costly, the free-market function of money to find the best resource allocation *could* be replaced by a different mechanism which would remove the more detrimental effects. However, those people who currently hold “concentrated power” would have to give up on that power, not a very desirable prospect. So, the first step, I think, has to be to ensure that also rich people feel that giving up money in its current form would be in *their* interest (because they would seem to be among the biggest “losers”)…

    • We could also decide to start small; to take relatively little areas in – let’s say – the USA or Europe, and “design” a unique economic system for each of them. Then we can gather some extra clarity or quantitative data regarding the positive/negative effects of each of the systems we came up with.

      Also, when people see that the new system is working (even though it might be on a small scale) they are likely to be more inclined to accept the new system for their own living-area as well.

      In other words: radically altering the worlds/USA’s/Europe’s economic system as a whole at once is likely to encounter too much resistance – because everyone (no matter how little) has – as you explained – interests in the old system; however, starting small might be a good first step in this altering process :).

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