We are in danger of sleepwalking into a cashless society. More and more purchases are made by electronic means , through standing orders, direct debits, debit cards or credit cards. Debit and credit card purchases already account for over a third of UK GDP and more than three quarters of retail purchases (up from 46% in 2003), while card and computer purchases have just overtaken UK cash sales.
The next logical step towards a cashless society is to have laws which allow private businesses and any public body which charges for its services to refuse cash payment. Denmark is seemingly taking the first tentative steps along that road. The Danish Government has proposed legislation which if passed will remove the obligation to take cash from retail outlets such as petrol stations, clothes shops and restaurants next year.
With the combination of more and more people using methods of payment other than cash and the willingness of technologists to feed the trend with ever more sophisticated and comprehensive systems of cashless payments, there is no reason to think that this trend towards making cash dysfunctional will stop unless governments take a hand and prevent cash from becoming defunct by law. This development is alarming because the abolition of physical money would carry tremendous dangers in terms of the opportunities for state authoritarianism and simple practicality.
The dangers from state authoritarianism are:
1. There would be no money which could be held which was not potentially known to the state, because with only electronic money available it would have to be stored electronically and be accessible via the Internet if it was to be useable.
2. A cashless system would allow the state to have all electronic money stored in a central government controlled place. This would leave the individual at the mercy of the state which could deny electronic money to anyone within their jurisdiction by cancelling or blocking their means of payment.
3. The state could more readily control the money supply if all bank accounts were under the control of the state and physical cash did not exist. The state would be able to manipulate public economic behaviour by imposing a negative interest rate when increased spending is deemed desirable – people save less because it costs them money – and a transaction tax every time a purchase is made – people spend less if because it will cost them to make a purchase – if it is thought an economy is over heating.
4. The state could remove money from your account at will.
5. The opportunities for general surveillance of the individual both by the state and by private corporations or individuals would be greatly increased.
But what about using virtual currencies such as Bitcoin? Apart from the dangers of such a means of exchange – the great volatility in value, the frauds which are occurring where Bitcoin is stolen, the lack of a lender of last resort and a restricted range of goods and services which can be bought – Bitcoin still needs to be stored electronically and hence is potentially identifiable and accessible to governments. There would also be an audit trail from an individual’s source of electronic money to the purchase point of a virtual currency like Bitcoin. The only exception would be if someone sold something or did paid work for someone and was paid in a virtual currency like Bitcoin.
If Britain went cashless and others did not the likelihood is that a black market in foreign cash such as dollars would arise in Britain. There would also be the possibility of exchanges made by barter or a product such as cigarettes becoming a de fact currency.
The problems of practicality are:
1.The idea assumes that everyone can afford a computer of some sort, whether that be a mobile phone, tablet or desktop, and can afford to replace their means of getting access to the Internet every few years at best. The reality is that millions of people are too poor to be able to meet such costs. The taxpayer would have pay for access to electronic money for those too poor to buy their own.
2. Many people cannot use the digital technology. Huge numbers of people are still not using this technology. The latest figures from the Office for National Statistics (ONS) estimates that 11% of the UK population (approximately 6 million) has never used the Internet. Moreover, the ONS did not ask for frequency of use merely whether someone had used the Internet. When asked whether they had used the Internet in the last 3 months, only 86% answered yes. Thus 14% of the population had either not used the Internet for more than three months or had never used it and, importantly, only 68% of disabled people had used the Internet in the previous 3 months. Clearly there will be large numbers of people, including the most vulnerable in society, who will seriously struggle to use digital technology for the foreseeable future. If cash becomes illegal many of these people will literally not be able to live if they cannot understand the technology or have no one to operate it for them.
3.The computer systems which support a cashless society will inevitably be subject to regular disruption, whether from hacking or simple failure because, as we all know, digital technology frequently goes wrong and the system downtime can be considerable. Imagine being unable to access the only means you have of paying for something. It would probably be necessary to have more than one electronic payment device because of this, although that would not help if the fault was not with your payment device but with that of those from whom you wished to make a purchase.
4. Many people will have their means of accessing electronic money stolen or lose it themselves. They would then need to replace their equipment which allowed them to access their electronic money. Many would not be able to afford to do so and those most likely to lose or have their electronic money access equipment stolen would be the old and the disabled.
A cashless society would have considerable attractions for a government. It would greatly extend the power of the state over the individual. Crime generally might be reduced without physical cash to oil the felonious wheels, although cybercrime would become more tempting in the absence of banks to rob and people to mug. Tax evasion would become very difficult for most people (the rich would simply move their money to other jurisdictions) . There would also be the saving on the abolition of the need to maintain a physical money supply. Banks and other financial institutions would also welcome the abolition of cash as it would remove the considerable cost of physically handling cash and maintaining a branch network.
The danger is that cash will become defunct by default, because the Government shows no interest in protecting cash and arguably is surreptitiously encouraging its demise by making it either impossible or very difficult to access public services in any way other than through the Internet. We could reach a point where, say, 90% of the population use electronic money and a government simply says it is time to go cashless ignoring the fact that millions of people who cannot use electronic money will be left in the soup. Politicians need to be lobbied now to ensure that the maintenance of cash remains a legal requirement.
But it is not just a case of ensuring that cash remains a legal requirement. Even a widespread refusal to accept cash by businesses and other corporate bodies which charge for their services would be seriously socially disruptive. That idea also needs to be knocked on the head by making it illegal to refuse cash in payment for anything.
Get writing to your MP.