Cooking the Books 1 – Digital pound, what’s that?
‘New deputy governor will oversee project to mint digital pound’, was how the Times (2 August) reported the appointment of Sarah Breeden as a deputy governor of the Bank of England. Here’s the Bank’s description of what is envisaged:
‘The digital pound would be a new type of money issued by the Bank of England for everyone to use for day-to-day spending. You would be able to use it in-store or online to make payments. This type of money is known as a central bank digital currency (CBDC). […] The digital pound would be denominated in sterling and its value would be stable, just like banknotes. £10 in digital pounds would always have the same value as a £10 banknote. […] The digital pound would be like an electronic version of the banknotes issued by the Bank of England. […] The way that you would access digital pounds would be through a digital wallet that would be provided by a private company’ (www.bankofengland.co.uk/the-digital-pound ).
The press statement issued by the Treasury and the Bank in February announcing a consultation on the subject explained that the Bank would provide the infrastructure in the form of a ‘core ledger’; the private companies would offer people digital wallets through smartphones or smart cards (tinyurl.com/4nkjxvpt).
Money, as Marx pointed out in section 4 of chapter 1 of Capital on ‘The Fetishism of Commodities’, is not a physical thing but the expression of a social relation. He wrote of ‘a definite social relation between men that assumes… the fantastic form of a relation between things’. The relation between people he had in mind was between producers of different articles for sale who could only be brought into relation with each other via the market, which required a means of exchange. Today this includes the relation between buyers and sellers of labour power.
The physical thing in which this social relation is expressed can, and has, varied. In pre-capitalist times it had been, among other things, cows and cowrie shells but historically the most important form that money has taken has been the precious metals gold and silver. However, even these haven’t expressed money for many years now, having been replaced by intrinsically valueless paper notes and cheap metal coins issued by the state. We are currently in a period where these are being increasingly replaced by a computer code. The coming of central bank digital money would complete this change in the form (though not the substance) of money.
You can see the logic, from a capitalist point of view, of doing something like this. Payments these days are increasingly made electronically anyway, by transfers to and between banks. However, the ‘libertarian’ right are up in arms about it. Soon after the government’s announcement Nigel Farage tweeted on 7 February: ‘Central Bank Digital Currencies will give the state total control over our lives. This must be resisted’. In the recent by-elections, the Reform Party, the successor to the Brexit Party, promised to ‘oppose a cashless society and central bank digital currency’ while Piers Corbyn shouted ‘KEEP CASH!’ Yet another conspiracy theory.
The government is saying that the new form of money would not replace cash but that notes and coins would continue to be issued. What it would replace is bank transfers. Which would make it even clearer that banks only circulate money. They don’t create it. Only a central bank like the Bank of England can do that.
The socialist retort to Piers Corbyn might be ‘Smash Cash’, or, rather, change the social relation of which money is an expression by making productive resources commonly owned and democratically controlled. Money would then vanish into thin air.