The cash machine stops

The coronavirus crisis has resulted in people being strongly encouraged to use contactless payments wherever possible to minimise the need for physical contact associated with using notes and coins. This has led to warnings that it is likely to accelerate the widely foretold death of cash, which may have largely vanished by the summer as people never return to using it. While obviously many people value the convenience of making payments by card, the elimination of cash raises serious issues for both the general functioning of society and for individual freedom, which I touched on a couple of years ago.

It is estimated that there are 1.6 million unbanked workers in the UK, and there must be many other non-workers who have no access to banking facilities. While there may be technological solutions that can address this issue, their interests cannot simply be breezily dismissed. Added to this, there are many people, not by any means entirely elderly, who have a strong preference for using cash and are uneasy about card payments, even though they may theoretically be available to them. Is it reasonable to ride roughshod over their wishes in the name of progress?

Over the past couple of years, there has been a growing trickle of pubs and bars deciding to go entirely cashless and stop accepting cash payments. This may be understandable if, as has happened in a few cases, the establishment has been the victim of multiple robberies. However, in most cases it is simply signalling that they want to be perceived as modern and forward-looking. It is essentially profoundly snobbish. It is in effect saying that they are not interested in the business, not only of people who have no access to card payments, but of those whose preference is to avoid them. They are putting up a sign that the poor, the old and the conservatively-minded are not welcome. Our friend Cooking Lager made a good point when he said:

I like cashless but not accepting cash is like advertising the gaff as a wankers' bar.

— Cooking Lager👁️ The #PubFromHomeMan (@CarpeZytha) October 16, 2018

One obvious issue is that going cashless creates a disconnect between people and money. It makes it harder for children to grasp the concept of money, if it is just numbers on a screen rather than something tangible in their hand. It also makes budgeting more difficult for adults, both in terms of limiting your spending on a night out, and also in a more general sense of managing your expenditure through the month. It’s hardly surprising that so many people seem to get into unmanageable debt when they hardly ever see the stuff.

When this concept was first mooted more than twenty years ago, what was proposed was “digital wallets” which could be topped up in the same way as a pay-as-you-go mobile phone. This would have helped to make it more manageable, but instead what has happened is that people end up using debit cards and having a multiplicity of transactions taken directly from their current accounts. I was always brought up to keep a separate record of banking transactions and reconcile this to the statement at the end of each month, but if there are dozens of cups of coffee and rounds of drinks on it, this becomes completely impractical.

I always used to find it useful to draw a distinction between significant items of expenditure that justified recording individually, and routine everyday spending that didn’t need to be identified in detail, and thus were appropriate to be paid for in cash. I knew that in a typical week I would spend £XXX or thereabouts, so that was what I would withdraw from the cash machine. Fortunately, a couple of years ago the practice of imposing credit card surcharges was outlawed, so from my point of view the most workable solution is to allocate one particular credit card to everyday contactless transactions, which I can then view the balance of online and pay it off in a single sum at the end of the month. But not everyone has the luxury of having a credit card.

Charities have reported a fall-off in donations, such as those received by bar-top collection boxes in pubs, due to the reduction in cash usage. Yes, of course you can make donations by card, but it’s a much more considered process and not remotely as spontaneous. Last year, I even saw a street beggar with a card reader, which just seems wrong. The absence of cash will also inhibit small, casual gifts and loans between friends and relatives. It will make such everyday activities as sharing out a restaurant bill, and carrying out a collection for a departing work colleague, much more formal and remove any element of anonymity. And it’s not hard to visualise people in situations such as abusive relationships wanting to build up a cash reserve that is hidden from scrutiny.

There are extensive areas of what might be called the black and grey economies that currently run on cash. Requiring all of this to operate by bank payments will obviously bring it out into the light and subject it to the scrutiny of the tax authorities. Some may see this as a good thing, but it may cause many informal or ad hoc economic activities to cease to happen entirely. And, if cash is unavailable, some form of alternative barter economy or unofficial currency may evolve to replace it.

A cashless society is dependent on connections to power and communications for every single transaction. However, the foundations of our modern technological society are more fragile than many imagine. While coronavirus has driven many to adopt cashless payments, it has also exposed our vulnerability to shocks of this kind. Many of us remember being subjected to power cuts in the 1970s, and in recent years the failure of successive governments to support the construction of new capacity has left our power generation system teetering on a knife-edge. Organised hacking attacks have sometimes brought large swathes of the Internet to a standstill, while some banks’ IT infrastructure has fallen over for days on end. In 1909, in his oddly prescient short story The Machine Stops, E. M. Forster described how a universal, interconnected, technological society could slowly but surely be brought to its knees if things stopped working.

There are also wider implications for civil liberties, which have been highlighted from both sides of the political spectrum. For example, this article in the Guardian says:

Engineering public consent for cashlessness is a subtle process. People may indeed enjoy a new payments app or contactless card, but financial institutions then use that to justify the gradual removal of the cash infrastructure – such as ATMS – in order to deliberately make cash harder to use. This feeds back, making digital seem relatively more convenient, “inspiring” more people to choose it.

While the free-market Mises Institute says:

Cash has been the target of the banking and financial elites for years. Now, the coronavirus pandemic is being used to frighten the masses into accepting a cashless society. That would mean the death of what’s left of our free society...

...Being bound to computers for transactions kicks the door wide open to hardcore surveillance of personal activity and location data. Being eternally on the grid means relentless taxation and negative interest rates, which the Federal Reserve is already gearing up for.

These concerns fall into two main areas. One is that people will be subject to constant surveillance of exactly where they have been and what they have spent their money on. It’s all too easy to say that the innocent have nothing to fear, but who can honestly say that they have never done anything that they would prefer not to be exposed to the light of day? And it isn’t difficult to imagine a range of scenarios where this information could be used to target or stigmatise people in various ways.

If all transactions are on the record, it also opens up many possibilities for being able to control people. For example, certain types of transactions could be blocked if they were felt to be undesirable, either for the individual or society as a whole. Businesses that were felt to be acting against the public interest could be prevented from accepting payments. And the entirety of your financial life would be potentially laid open to the grasping hand of the State, either through negative interest rates or outright confiscation.

Of course, these concerns may be dismissed by some as examples of the tinfoil hat mentality. But any student of history will know that the benevolence of those in authority is not something that can be guaranteed. And, if you lived today in Russia or China, would you be happy for the State to have such detailed oversight of your everyday activities? It’s ironic that some of those who, before Christmas, were ludicrously accusing Boris Johnson of wanting to erect some form of totalitarian state, are now amongst those who are the cheerleaders of a trend that contains such potential for making that outcome a reality.

Ultimately, the continued existence of cash represents a bulwark of freedom against both governments and corporations. Yes, many people may find contactless payments for everyday transactions convenient, but if we as a society allow cash to entirely disappear, we will have also said goodbye to a large measure of our liberties.