Welcome to the second post in our #7CheapThings blog series! Raj Patel & Jason W. Moore’s A History of the World in Seven Cheap Things focuses on seven areas that are the foundation of modern commerce: nature, money, work, care, food, energy, and lives. How has the cheapening of these things made the world safe for capitalism? Follow along to find out.

If we want to understand the idea of cheap money, we have to first go beyond money and zoom out to take a look at the larger picture. At the core of capitalism is a cycle that expands beyond just money and encompasses commodities as well. Money flows into commodities which then flow back into money. It is here that the authors note:

A peculiar and very modern magic lies here. States wanted the loot of war, but needed money to pay the military. Without war, they couldn’t acquire riches which they needed, in part, to pay for the previous war. War, money, war. Bankers needed governments to repay them, and governments needed bankers to fund them. What’s new about capitalism and its ecology isn’t the pursuit of profit, but the relations between the pursuit, its financing, and governments. The planet was to be remade through these relations, and they are the subject of this chapter.

This cycle is fueled by the cheap money in question, specifically “a secure denomination of exchange that can be relied upon to facilitate commerce, controlled in a way that meets the needs of the ruling bloc at the same time.” Said cheapness includes two major characteristics: the appropriation of a primary commodity such as gold or oil and its regulation that allows interest to remain low and control over the wider cash economy which only states can provide.

In the end, however:

Cheap money means one thing above all – low interest. Even in today’s world of fast-moving container ships and high frequency stock trades, credit is the lifeblood of capitalism. If cheap work, food, energy, and raw materials are the necessary conditions for capitalist booms, cheap credit makes it all possible. Historically, there’s been a virtuous circle of cheap money and new frontiers. When opportunities for profit making contracted in established regions of production and extraction, capitalists took their profits and put it into money-dealing. That’s one reason why, after each great boom in world capitalism – the Dutch in the mid-seventeenth century, the British in the mid-nineteenth century, and the American postwar golden age – there’s been a curious process that scholars call financialization. We’re living in such a time at the moment, and history doesn’t reassure – such cycles of accumulation usually end in war, with the rise of new financial powers, as we’ll see below.

Two movements make financialization attractive and even useful for capitalism. One is that, as we’ve seen, when the world’s economic pie stops growing, leading powers tend to go to war, or at a minimum build up their warmaking capacity. As we will see modern states rarely self-finance their wars. They have to borrow money just like anyone else. The other thing that happens is that capital in the heartlands of the system begin to flow towards the frontiers. In the late nineteenth century, for example, gigantic sums of British capital, in the form of loans, flowed out of London and towards the rest of world, especially to build railroads. Thus the significance of financialization – relatively cheap British capital flowed out to make possible a global railway network, which in turn was central to the next century’s extraordinary food and resource extraction. This worked so long as there were bountiful frontiers, where humans and other natures could be put to work – or otherwise extracted – for cheap. When the boom made possible – in part – by the global railway network went bust, in the 1970s, a new era of financialization began. And though the neoliberal era owed it existence to precisely the inverse of cheap money – the 1979 Volcker Shock – a long era of cheap money followed. As Anwar Shaikh explains, the neoliberal “boom” — such as it was – that began in the 1980s was “spurred by a sharp drop in interest rates… Falling interest rates also lubricated the spread of capital across the globe, promoted a huge rise in consumer debt, and fuelled international bubbles in finance and real estate.” What’s different today is that, where once finance was a bridge to a renewed era of profitability, because of how finance, science, and empire cooperated to make new frontiers of cheap nature, there are no such frontiers today. In the twenty-first, money masks the underlying problems of socio-ecological crisis, magnifying the contradictions in the process.

Raj Patel is an award-winning writer, activist and academic. He is a Research Professor in the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin and a Senior Research Associate at the Unit for the Humanities at Rhodes University. He is the author of Stuffed and Starved: The Hidden Battle for the World Food System and The Value of Nothing.