Why are computers so cheap and money so expensive?

How would you like a machine like that? I would but it would take up too much space, you may reply. I’ve got news for you: you have one sitting on your desktop; you may even be walking around with one in your pocket. Here are two of my favourite snippets of information regarding information technology:

On February 10, 1927, a trans-Atlantic phone call between London and New York cost around £150. That same day, the firm F.L. Mercer & Co was offering for sale in the London Times a residence on the borders of Norfolk and Suffolk: three reception rooms, billiard room, eight or nine bedrooms, offices, etc, with tennis lawn, a home farm and two cottages for £3,500.

And from the 18 April ’92 issue of the New Scientist: “IN THE 1950s, an electronic circuit that could store a single ‘bit’ of information cost more than £1. Today, a penny will buy 5,000 of them.”

This second fact will be apparent from what I said about CDs and the old floppy disks, but to put that first fact into some perspective, where £150 would buy a half hour phone call in 1926, it would today buy you 15 ten hour sessions in my local Internet café.

Although property prices vary widely throughout the UK, I am currently looking at one being offered by a local estate agent: 2 bedrooms, bathroom, 2 reception rooms, outside space, double glazing, approximately 854 square feet, a fair sized garden – £379,950.

Doing the math, that splendid 1926 property and grounds would buy you around 12 hours on the telephone, and the 2012 home just down the road in Forest Hill would buy you 43 years in the local Internet café surfing round the clock!

Admittedly, computers and computing have been exceptional, but there have been increased efficiencies in farming, mass production, and many other fields. Some industries, or more specifically some professions have remained and will remain labour intensive, but with the cost of computerisation, automation, intensive farming...all dropping, the question should be asked, why is money so expensive?

In approximately 85 years we have seen the price of a half hour trans-Atlantic phone call drop from about 4% of the value of a magnificent country estate to less than the price of a pint of milk. How did this come about?

The obvious answer is by new developments in technology, but how did these new developments come about? The answer to this is investment. Most people believe investing involves saving, which necessitates refraining from consumption. This is true, but it is this money that goes into investment, this means more research, in medicine this can involve lengthy trials involving hundreds of people or a great many more. In the hard sciences, it involves building laboratories, paying scientists, paying people to learn, to train, and so on. The results in the fields of telecommunications, computing and related disciplines have been staggering. When Lawrence Wright and Jack Hylton spoke to each other across the Atlantic Ocean in February 1926, they could not in their wildest dreams have imagined that less than 90 years later, people would be walking around with telephones in their pockets and not only speaking regularly to people on the other side of one Ocean or other but that they would do so face to face.

Although progress has been fast in one respect, developing these technologies has been slow and painstaking in another; many people have devoted their lives to it. And their reward is that we take the Internet, international phone calls and ultra-cheap CDs for granted. Now what about money?

In February, the Bank of England created £50 billion with the stroke of a pen, or more accurately with the press of a button. This new money was then given to the banks – on the pretext of exchanging it for corporate bonds – and their vague promise of lending it (at interest) to companies and others who actually work in the economy.

This process has been going on not just in Britain but in the United States through the Federal Reserve, and also in Japan (where this modern version of Quantitative Easing originated). Yet money is still scarce – though only for us little people. It is also expensive – although not for the banksters who get it for nothing, nor for the speculators, who like the banks are awash with cheap money. How can this be possible?

The reason is that the banks have a monopoly of credit. In practice, the only way a monopoly can be enforced is by law. A private arrangement, even a secret cartel, will always collapse, as Murray Rothbard explained in 1984.

It is simply ludicrous that private corporations should be permitted to issue money at their whim, to inflate and deflate the currency, playing games with people’s livelihoods and the economies of entire nations. If this power were removed from the banks we could end world poverty if not overnight then certainly within the next decade or two, and improve the standards of living of everyone, not to mention develop the technologies that we require for a world without oil. Until such time as the men in charge of our governments have both the understanding and the will to do what needs to be done, computers and everything associated with them will continue to fall in price, and the grip of finance will continue to crush us all as taxes rise and people lose their livelihoods in the name of paying down a deficit (in David Cameron’s words) that has been conjured up out of thin air, with the real wealth of the people.

[The above op-ed was first published April 12, 2012. One thing I would add, do not buy memory sticks from either ebay or Amazon. Now I buy mine from Argus; they are slightly more expensive, but as the saying goes: buy cheap, pay twice.]

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