Competing currencies would better discipline and encourage innovation than central bank monopolies.
As such, money and payment systems matter. And the payments consultant and author David Birch notes people can deal with multiple currencies. And where existing money and payment systems don’t serve, mutually consenting adults are resourceful finding ways to transact, notwithstanding government restrictions.
Birch's new book, "Before Babylon, Beyond Bitcoin," details the evolution of money and its enabling technologies, and supports the argument that currency competition can spur broader payments innovation.
With bitcoin’s breaking $4,000, and Apple Pay, Android Pay and the Chinese mobile payments phenoms Alipay and WeChat Pay capturing headlines, Birch’s optimistic oeuvre is topical.
Electronic delivery platforms amplify money’s social and commercial utility. Money is a means of exchange, store of value and unit of account, and critically a network relying on technology, trust and generally government sanction. A dollar is a dollar, however, whatever technology’s employed to store and spend it, whether it’s a paper note, four quarters or electronic bits in a DDA, PayPal, a prepaid account or receivable.
But people are reluctant to abandon the tried and true. Innovation is all well and good, but new money or systems for managing payments must be compellingly better than what they attempt to displace.
Birch rails against cash and is frustrated with people’s innate conservatism in payments, declaring, “Money is a field in which conservatism — preserving the status quo is very definitely a bad thing. Caution is not the best course of action.”
Birch's argument would help progress in the 21st century, in which governments enjoy money monopolies, reap seigniorage and debase the currency. Permitting competition in money as in every other realm would improve performance and innovation.
In the 21st century, successful new payment systems such as PayPal, Alipay, WeChat Pay and M-Pesa had paths to critical mass. PayPal solved the payment challenge on eBay. In the shadow of monopoly card network China Unionpay, Alipay built critical mass on marketplace Alibaba. WeChat Pay catapulted to the point of becoming formidable on Tencent’s gaming and chat platforms. And in deep emerging markets like Kenya and Tanzania, M-Pesa succeeded competing with insecure and inconvenient cash.
Birch laments the failure of electronic purses such as Mondex, Danmont and Proton, and banks’ strategies introducing them in the '90s. With cards, cash and checks, neither consumers nor merchants had an obvious payments problem at the physical point of sale. But online, Digicash, CyberCash, First Virtual, Beenz and Flooz also failed. Traditional card systems were good enough and had network critical mass.
Advances in the technology of money have been spurred by competition, spearheaded by private-sector actors, and adopted most rapidly in markets where cash reigned supreme and traditional retail-card payment networks and banks were weak.
Birch is purposefully provocative in his argument for innovation-driven decentralized money, speculating, “Selfie money should have little trouble getting popular acceptance." Why not? Digital dollars might carry the bearer’s picture and/or fingerprint replaced on payment by the new bearer’s.
He allows that the government should control money. But he does cite former Bank of England Gov. Mervyn King’s speculation that central banks could become extinct, and also channels the Cato Institute’s George Selgin in observing, “The production of money does not have the properties of a natural monopoly.”