Money and the economy we’ve built around it are useful abstractions. Early societies were able to exchange goods and services through barter but this was a crude and unwieldy system. The development of coins and a cash economy allowed more nuanced economic interactions than trading a cow for ten chickens or a field for a lump of gold, and it was on this that nations, governments and businesses were built.

But the past few hundred years, and particularly the past century, have seen that abstraction spinning out of control. Economic activities, all of them set up to benefit society, are becoming completely detached from that social value.

Have we turned a useful tool into an act of social self-harm?

Lives for sale

Michael Sandel looks at this issue in his book What Money Can’t Buy. One of the most disquieting cases Sandel looks at is life insurance.

Life insurance started out as a way to protect families from hardship if the breadwinner unexpectedly died. They were a way of providing security to dependents and protecting them from destitution. As such, when they were first introduced in the 19th century there were strict limits on who could hold them.

But free market values have eroded those limits, detaching life insurance from its original purpose. Not only can companies now insure their CEOs, protecting the business from the disruptive effects of a power vacuum, but they can insure employees all the way down the chain, often without telling them. While an organization like Walmart is not likely to endanger employees just because their deaths are more economically valuable than their lives, it does remove an incentive on the company to protect them. And it means life insurance no longer serves the people it was created for – the families of the bereaved. In this context it has changed from a social safety net to a corporate gamble.

More extreme is the viatical investment industry, in which life insurance schemes are sold to unrelated third parties. Suddenly people can directly benefit from the death of someone they have never met – where is the social good in that?

Betting on failure

If the past decade has taught us anything it should be to beware hedge funds, the investment organizations that try to achieve high returns by taking high risks. Yet one of their most insidious practices is becoming increasingly common rather than deterred.

Most people have heard the phrase ‘short sell’ by now, but how many understand that it is a financier seeking to gain from someone else’s failure? That the investor can only profit from a short sell if the company they have invested in suffers and sees a decline? That their payday comes at the expense of jobs lost and potentially productive businesses ruined?

True, short sells don’t directly destroy companies. But they can create doubts about a company’s future, and in a world of high-speed trades and twitchy traders this can do a company real harm.

Investment in companies, meant to create work and jobs, can now be used to undermine them.

Reasserting value

There are no easy answers to these problems. But unless we look them in the eye, unless we acknowledge that economic value can equate with social harm, we will find no solutions at all.

Thoughts?