The Cashless Society
Having looking at our movement towards a cashless society in Part 1, I thought we should turn our attention to the consequences of a truly cashless society. Could it be a force for good? Or could it lead to banks and governments abusing the power that comes along with it?
The phasing out of cash in the economy would make implementation of certain fiscal policies, such as negative interest rates, far easier and more effective. Kenneth Rogoff, author of “The Curse of Cash”, cites negative interest rates as an important tool for central banks to restore macroeconomic stability; the incentive to borrow and spend help stimulate the economy. By holding all currency in regulated accounts the government can tax savings in the name of monetary policy.
One of the more widely used arguments in favour of a cashless economy is that of security. France’s finance minister has recently stated that he plans to “fight against the use of cash and anonymity in the French economy” in order to help fight terrorism and other threats. With the ability to track every transaction that takes place, intelligence services could cut down on crime by monitoring purchases and money transfers. However, Rogoff acknowledges the limitations of this policy, in that the removal of paper money will only be effective “provided the government is vigilant about playing whac-a-mole as alternative transaction media come into being“. Although, it is naïve to think that crime could be quashed so easily. If interest rates fall too far below zero, it is quite possible that citizens would find an alternative to cash (drug traffickers certainly would). Money has been reinvented time and again throughout history, as shells, cigarettes and cryptographic code. Going cashless has also been touted as being more secure from theft, with Apple and Google claiming their payment system is more secure than regular banking, as well as being more convenient than cash.
Yet there are a number of concerns that have been raised about the transition to digital money. Advances in tech have allowed credit and debit card purchases to be tracked and evaluated to gauge the validity of a purchase. This has so far been used to prevent fraud and theft, to protect consumers. However, there is a risk of abuse here, for example in 2010 Visa and Mastercard gave in to government pressure, not even physical legislation, and barred all online-betting payments from their systems. They made it virtually impossible for these gambling sites to operate regardless of their jurisdiction or legality. Scott A. Shay, chairman of Signature Bank, suggested in an article on CNBC that “the day might come when the health records of an overweight individual would lead to a situation in which they find that any sugary drink purchase they make through a credit or debit card is declined”. Although this may seem like a stretch, a government with access to this sort of power could quite easily control individual spending.
A cashless society would also increase the difficulties for homeless people to re-integrate into society. Having no fixed address already makes holding a bank account incredibly difficult, a cash free society simply increases the societal barriers that those on the fringes of society have to navigate. There is also the psychological issue, that electronic payment encourages frivolous spending. A student interviewed at the University of Gothenberg commented that she was much more likely to think twice about spending a 500 krona note compared to with a debit or credit card.
The other side of the coin (pardon the pun), is that this power could be used for good, for example placing restrictions on recovering alcoholics from purchasing alcohol. The route which this technology will take is, as is often the case, determined by the government and societal attitude to the situation. There is room for abuse in the technology, more than most, but the benefits are well documented and used sensibly could help prevent terrorism and crime, reduce tax evasion, and help to curb unhealthy spending habits. Ultimately, a cashless society will be what we make of it.
By Josh Hamilton