Introduction Bread, cash, dosh, dough, loot, lucre, moolah, readies, the where withal: call it what you like, money matters. To Christians, the love of it is the root of all evil. To generals, it is the sinews of war; to revolutionaries, the shackles of labour. But what exactly is money? Is it a mountain of silver, as the Spanish conquistadors thought? Or will mere clay tablets and printed paper suffice?
How did we come to live in a world where most money is invisible, little more than numbers on a computer screen? Where did money come from? And where did it all go?
Last year (2007) the income of the average American (just under $34,000) went up by at most 5 per cent.
1 But the cost of living rose by 4. 1 per cent. So in real terms M r Average actually became just 0.
9 per cent better off. Allowing for inflation, the income of the median household in the United States has in fact scarcely changed since 1990 , increasing by just 7 per cent in eighteen years.
2 Now compare M r Average’s situation with that of Lloyd Blankfein, chief executive officer at Goldman Sachs, the investment bank. In 2007 he received $68.
5 million in salary, bonus and stock awards, an increase of 25 per cent on the previous year, and roughly two thousand times more than Joe Public earned. That same year, Goldman Sachs’s net revenues of $46 billion exceeded the entire gross domestic product (GDP) of more than a hundred countries, including Croatia, Serbia and Slovenia; Bolivia, Ecuador and Guatemala; Angola, Syria and Tunisia. The bank’s total assets for the first time passed the $ i trillion mark.
3 Yet Lloyd Blankfein is far from being the financial world’s highest earner. The veteran hedge fund manager George Soros made $2. 9 billion. Ken Griffin of Citadel, like the founders of two other leading hedge funds, took home more than $ 2 billion. Meanwhile nearly a billion people around the world struggle to get by on just $ 1 a
4 Angry that the world is so unfair? Infuriated by fat-cat capitalists and billion-bonus bankers? Baffled by the yawning chasm between the Haves, the Have-nots – and the Have-yachts? You are not alone. Throughout the history of Western civilization, there has been a recurrent hostility to finance and financiers, rooted in the idea that those who make their living from lending money are somehow parasitical on the ‘real’ economic activities of agriculture and manufacturing. This hostility has three causes.
It is partly because debtors have tended to outnumber creditors and the former have seldom felt very well disposed towards the latter. It is partly because financial crises and scandals occur frequently enough to make finance appear to be a cause of poverty rather than prosperity, volatility rather than stability. And it is partly because, for centuries, financial services in countries all over the world were disproportionately provided by members of ethnic or religious minorities, who had been excluded from land ownership or public office but enjoyed success in finance because of their own tight-knit networks of kinship and trust.
Despite our deeply rooted prejudices against ‘filthy lucre’, however, money is the root of most progress. To adapt a phrase from Jacob Bronowski (whose marvellous television history of scientific progress I watched avidly as a schoolboy), the ascent of money has been essential to the ascent of man.