Although the myriad of benefits that is entailed through a choice of monies (unemployment, trade, credit market and so on) has often been exposited, there is less discussion about the possibility for a choice of multiple monies to alleviate inequality which has proven to be a cause for ever-greater concern ever since 2008 (where QE across the developed world, amongst other things, has served to increase both wealth and income inequality by artificially inflating asset prices).
Indeed, a choice of multiple monies would, conceptually, entail multiple exchange rates, interest rates, and a choice of instruments of expectations-management. Of course, if people could trade and pay taxes in the monies of their choice then the first benefit this would bring to people on lower incomes is the ability to offer their labour at the price they choose and accept payment in the medium of exchange that they choose. Indeed, by freeing them from a coercively imposed monetary monopoly, exporters and workers more generally could become more competitive both intra-nationally and internationally; thereby improving their own incomes and national incomes.
Of course, a counter-argument to this would be that these individuals and entities would suffer a loss of (relative) purchasing power since they would likely congregate toward monies with lower exchange rates whereas those with higher incomes and would tend towards money with higher exchange rates. Indeed, on this view, inequality could actually be exacerbated. There are two potential counter-arguments to this.
Firstly, although the money they may choose could well have a lower (stable) exchange rate, they are likely to sell more goods and optimise their preferences according to the various elasticities (price, income, cross- and so on) which would, thereby, increase the quantity of goods sold and their incomes overall. This would mean that, even if they did earn, trade in and pay taxes in monies with lower exchange rates, they would still benefit from a higher overall income.
Secondly, although coercive, state-led redistribution is (in principle) undesirable, it is unlikely to disappear in the near-future. Therefore, when we consider the fact that people with lower incomes, less wealth and so on may flock to lower exchange rate monies, this would mean that redistribution towards these individuals and entities would actually be more cost-effective and a greater variety of services could be paid for by the government, ceteris paribus.
In this way, and in many others, granting individuals and entities more broadly the power to transact in and pay taxes in multiple monies (thereby allowing monies to compete on a more even ground with national, government monies – although, it must be conceded that the first-mover advantage of central bank money may take quite a while to diminish, notwithstanding exogenous shocks) could not only improve trade, promote prosperity and (potentially) bring a myriad of credit market benefits but it could also help alleviate inequality; thereby meeting the multiple objectives of individuals, traders, debtors, creditors, governments, and industry. Free(r) Banking systems in the sense of enabling a choice between multiple monies within a wider framework of truly free markets and genuine free trade can and does satisfy and pragmatically reconcile diverse stakeholder preferences in the policymaking process.
Vishal Wilde is a finalist studying for a BSc (Hons) in Philosophy, Politics & Economics (Economics major) at the University of Warwick. He wishes to spend his life fighting for and defending freedom. He proudly serves Her Majesty in the Royal Naval Reserve, is a Freelance Journalist, he writes Poetry, Science-Fiction and Fantasy and conducts independent academic research in Economics, Political Science and Philosophy. He is also a Research Consultant for Fantain Sports, Pvt Ltd. (a tech startup based in India).
