The value of a dollar

Image from the Australian ABC
After my North Korea trip, it was pretty easy to realise that there are some problems with the current form of capitalism, and it's worth trying to identify and borrow good parts of non-capitalist systems; unfortunately, I'm not really experienced in that area (by that I mean, I know effectively nothing), so trying to improve that by reading a few recommendations on the Marxist/Leninist side of things - Das Kapital and The State and Revolution (I know, Amazon links, oh the irony).

In any case, I'm only part way through the first and making slow progress, but all the talk of commodities and the gold standard made me think about how we define currencies today. You see, way back when, coins were used to represent actual metal value - i.e. the british pound used to be the Anglo Saxon pound which was one pound weight of silver in value. This was nice in that it fixes the price of silver (i.e. a pound buys you a pound) but means that the cost of everything else varies as the metal price changes - this is essentially the idea behind the gold standard (and why I chose the picture up the top).

Stock photo interjection
The problem is, noone uses the gold standard any more. Instead, we have fiat money - essentially, it is just used for transferring value, and has no relation to anything physical. Yet there's still this concept of $1 (or whatever currency you like) which is defined over time, but seems to bear no resemblance to anything - you cannot define it by anything really that is not circular, or time dependant (e.g. $1 isn't X grams of gold, except at a given time), so really the only thing I can come up with is: "$1 used to be a certain amount of gold. Now, it's value is very close to what it was yesterday, but probably slightly less".

So this led me to: Is there something else that fulfills this property (of small variations which mean that people don't have to change prices a lot all the time) that would actually be more useful than this completely abstract amount? My first thought was along the lines of what Marx has covered a lot, and that is labour. If I denote the new currency as H, then define 1H as the wage you need (per hour) to get by ok - the closest I could approximate this to would be the poverty line. i.e. if your wage is 1H per hour, then you're right on the 'adequate income' level.

What is nice about this? A few things:
  • It (hopefully) fits the criteria of being stable enough on a day-to-day basis to use as currency.
  • Comparing the minimum wage to the poverty line is trivial. If the wage falls below 1H/hr, you have a problem.
  • Exchange rates are a measure of comparative cost of living (I'm not sure what they are now, maybe this is more useful?)
  • Relating the cost of items to work that goes into them is much more salient - i.e. if I buy something that's 8H, that's one day's work for someone on the poverty line - maybe we can go all british and non-metric and have 8H = 1D, 40H = 5D = 1W, 50W = 1Y = 2000H, nicely. So if I buy something online that costs 1000H.cn, that's equivalent to half a year's wage for someone just getting by in china.
Just a thought. I'm sure there are downsides to having 1 currency unit actually correspond to something. After all, the gold standard was dropped - plus, this is something that is non-trivial to calculate. But maybe there are upsides too. It is quite possible that it is also not something that can actually be done, or is theoreticallay possible but in reality not (or vice-versa).

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