Commercial breaks on television these days last much longer than the average time it takes to make a cup of tea.
Chances are you’ve recently seen this PayPal commercial advocating ‘new money’.
New money is progress, it tells us. ‘What do you mean you still pay with cash? Boring! Go back to the past!’
It’s a perfect ad for this age. It doesn’t really tell you anything but it’s flashy and everything’s written in capital letters so that’s enough to make it look convincing.
Governments appear to be going with the hype as high-denomination banknotes are taken out of circulation left and right.
The ECB is phasing out the 500 euro note. I guess that’s a move we can still accept since it’s barely used in day-to-day transactions.
But then India took it several steps further and banned 86 per cent of its paper currency overnight.
And now Australia is openly debating the possibility of scrapping its 100 dollar note.
It looks like governments are pushing for a cashless society, but does it help overcome any real issues people are facing?
Would a world without cash benefit society as a whole?
A flawed theory
Economists and professors seem to be convincing politicians of the brilliance of the theories they’ve thought up.
A cashless society will help fight crime, tackle tax evasion and shut down the black economy, they say. It could also make it easier to stimulate consumption and discourage saving, which is good for the economy too.
What’s not to like?
The problem is that none of these arguments are completely convincing and they might create more problems than they solve.
Besides cash, criminals also use precious metals, art, bitcoin, and other techniques to evade detection. So it’s not really clear how effective the measure would be against crime.
What is clear is that citizens would have to surrender a great deal of control to financial corporations. People could suffer negative interest rates and even see their money confiscated to rescue banks in so-called ‘bail-ins’.
The same goes for governments which would be able to monitor just about every transaction taking place.
Apart from the ethical question it raises of whether we want to live in an Orwellian surveillance state, complete dependence on digital money is dangerous for other reasons.
Banking systems like SWIFT are regularly getting hacked. Hackers could wipe out the wealth of entire nations, let alone individuals. And if these systems fail, for whatever reason, entire economies would grind to a halt.
Regarding tax evasion, it’s true that cash may facilitate this but at the same time an estimated $7.6 trillion in private wealth – more than the combined GDP of Britain and Germany – is held offshore.
If governments fail to crack down on tax havens than banning cash is pointless.
There are quite a few flaws in the cashless society theory that could make its practical implementation problematic for a great number of people.
More to the point, it deeply concerns me that this policy doesn’t seem to take into account how it’ll impact society’s most vulnerable groups.
Not everyone qualifies for a bank account, for example. In 2013-2014 as many as 1.7 million adults in Britain didn’t have a bank account and that number is on the rise.
In a cashless society these people could face financial exclusion or become even more dependent on the state.
In India, where 98 per cent of transactions are in cash, a crusade on the black economy was the pretext for banning most of the country’s cash in a matter of days.
In reality it’s done little to tackle illicit activities and the collateral damage of less fortunate people left in the cold with no access to the new money was never justified.
Even if such measures are introduced in a less radical way ordinary people seem to be put at a disadvantage.
Worse still, their assets could be used to bail out banks if there’s no way to get their money out of failing institutions.
Banning cash is presented to people as a solution to problems it may not even solve – and is a smokescreen for other policies that could create new ones.