Money will owe its position of importance, under a producers' society, to the need for a medium of exchange, and until men discover a means more effective than money for the facilitating of exchange, money will continue to play an economic rôle.
The inhabitant of a modern industrial community buys many things each day. For the newspaper he spends a penny or two; for the street-car ride, five or ten cents; for fruit, groceries, and other food products, a number of small sums. These transactions, in a country of fifty millions of people, aggregate tens of millions for each day.
There are three possible ways in which such transactions may be carried on: (1) each party may give the other some commodity or service—a bunch of carrots for a street-car ride, a sack of flour for a hat, (2) Money may be employed. (3) A system of book-keeping may be devised, and each purchaser may use a credit card, or some similar device. Barter is impossible. Money is the usual means of facilitating exchange. Bookkeeping, on a scale requisite for all petty transactions would be an immensely intricate mechanism.
The chances are that at the outset, a producers' society will be compelled to follow the practices of present-day economic life, and to distinguish between the two chief uses of money: money as a means of making change and money as a basis for credit.
This distinction has been pretty well established in all parts of the world. The business man buys his morning paper and his lunch with the change that he carries in his pocket. He buys his automobile or his factory building with a check (credit). Money as a means of making change will continue under a producers' society until some more satisfactory means of handling minor transactions is discovered. Money as a basis for credit will be superseded by a system of social book-keeping.
The money used at the present time is based on an amount of some commodity, such as gold. A producers' society will undoubtedly substitute for this commodity base some unit of productive effort—an hour's labor or a day's labor in a given industry. Such an idealized labor production period could be used as a basis for all value computations.
There are a number of requirements for such a value measure:—(1) It must be reasonably stable; (2) it must be generally recognized and accepted; (3) it must be the medium in which all values in all parts of the economic world are calculated.
With a standardized labor unit of value once determined, there would be several methods of procedure. One would be to issue a certificate for each unit of labor performed. The pay-check would then serve as money. Another method would be for the world parliament to issue metal and paper money, using the labor unit instead of gold as the basis of value. In the former case, there would be a labor check, or piece of money in the community for each unit of labor performed. In the latter case, only so much money would be issued as was required for the ordinary purposes of making change. The latter method is the one now in use. The former would represent a distinct step in advance, in that there would be a certificate of purchasing power in the community for each unit of goods and services that was produced. There would be still a third method of handling the problem, by having the world producers' federation issue paper currency stamped with the statement "this is a mark" or "this is a franc," and making it receivable for all legal and public obligations. If the amount of this "fiat" money were carefully regulated, it would probably serve all of the purposes for which money is needed. Whatever its character, it is essential that all money and credit should be publicly issued and under public control.
The first problem confronting the exchange and credit board would be to establish some such generally acceptable standard of value. The chaos now existing in exchange rates is but a foretaste of the difficulties that confront a world which is attempting to carry on economic transactions with scores of different moneys and of differing financial systems.
The exchange and credit board would have three other important fields of activity: