top
US
US
Indybay
Indybay
Indybay
Regions
Indybay Regions North Coast Central Valley North Bay East Bay South Bay San Francisco Peninsula Santa Cruz IMC - Independent Media Center for the Monterey Bay Area North Coast Central Valley North Bay East Bay South Bay San Francisco Peninsula Santa Cruz IMC - Independent Media Center for the Monterey Bay Area California United States International Americas Haiti Iraq Palestine Afghanistan
Topics
Newswire
Features
From the Open-Publishing Calendar
From the Open-Publishing Newswire
Indybay Feature

Dr Jay L. Zagorsky: "In a cashless economy, the poor tend to suffer"

by Kim McGrath
As the push towards the abolition of cash grows stronger, Doctor Jay Zagorsky, Professor and researcher at Ohio State University and Boston University, reminds policy-makers that the poorer segments of the population are also the ones who tend to rely the most on cash, and hints at the threat they are under, as banks push for cash to be eliminated.
Doctor Jagorsky is an economist - one of those behind-the-scenes experts who crunch and analyze data to measure if the last policy hit its target, and how to increase the chances of success of the next decision. For the past 13 years, he has “held the position of Research Scientist at The Ohio State University, where [he] collects data as part of the National Longitudinal Surveys on income, wealth, and life experiences of thousands of Americans”, and he has been teaching senior executives at the Boston University Questrom School of Business since 1987. One of his areas of study is the ongoing trend in which cash is being less and less resorted to, as consumers favor new technologies to make purchases. Moreover, he examines in detail the hidden consequences, with which the poorer populations could be hit, if the trend were pushed any further.

The push against cash is not merely the result of consumer whim. While the new generations do indeed spontaneously try out virtual payments - and appreciate them - it is a stretch to consider this fact as a popular desire to eliminate cash. That desire, is clearly one of banks. With interest rates at a record low, banks fear that customers may be tempted to withdraw their savings to place them elsewhere, in a more profitable investment. In the worst days of the interest crunch, there were even some reported cases where savings were hit with negative interest rates, effectively decreasing the savings. In these conditions, the risk of massive withdrawal dangles over the head of each and every bank - since their interest rates are common to all. The only way to withdraw currency out of the entire banking system is under the form of cash. This phenomenon, otherwise known as a bank run, is deadly to banks, which therefore pressure policy-makers to destroy hard currency altogether, arguing that the dwindling use of cash makes the entire medium obsolete.

But Doctor Jagorsky, like many other whistleblowers, is fearful that such a policy would be implemented by central banks, disregarding the interests and economic safety of an often-overlooked part of the population: the poor. It is no secret that financial markets have more influence on policy makers than poor communities, and a cashless revolution would serve the interests of the former as much as it would harm the latter.

A large proportion of the population in the world is simply unbanked. Actually, it is traditionally the under-privileged who tend to resort exclusively to cash. If bills were simply suppressed, it would amount to a forcible transfer towards the electronic banking system and the virtual world, which they have neither chosen nor mastered. “In a cashless economy, the poor tend to suffer. People who can’t afford debit and credit cards, they will be marginalized in a cashless economy”, he says. Financial specialist Dominic Frisby adds that, with 2 billion unbanked people in the world, “If you begin to insist on cashlessness, it does put pressure on you to be banked and signed up to financial system, and many of the poorest are likely to remain outside of that system. So, there is this real danger of exclusion.”

The second objection made by Dr Zagorsky is the jeopardy under which our privacy would be placed, if financial companies and corporations had every knowledge of our contacts, purchases and whereabouts, at any given time. This concern is shared by many civil rights activists across the world, who are worried about the level of power which large corporations would then have upon the population - even greater than it already is today. Dr Zagorsky says: “We lose privacy. If some high-tech company is tracking my every purchase, they know exactly what I buy.” When any online purchase is made, several intermediaries are notified of the details of the sale and register the information. They are then free to use it, sell it, or bundle it in any way they choose. Dr Domagoj Sajter confirms : “It is argued that anonymity in the ‘classic’ payment processes, carried through paper
cash and metal coins, is vital to certain civil rights and liberties, and that the vast possibilities
of tracking identity of the participants in the cashless society pose large risks”, hinting at online purchasing which creates hundreds of terabytes of private information every month, for corporations.

Finally, Dr Zagorsky issues a warning about how dangerous a cashless society would be. Without cash as a backup solution, the entire financial world would depend upon reliable power sources, and a functioning network. “A cashless society really depends on a network of computers that run and communicate all the time. If we lose power, if our computers are hacked, if communication lines go down, telephones don’t work — a cashless society doesn’t work”, he says, pointing at the risk of infrastructure failure and cyber-attacks. The former risk has already accidentally occurred in a Swedish cashless festival, and the latter is growing bigger as countries develop their cyber-warfare capacities. Russia, for instance, has now achieved lethal levels of cyber-attack capabilities, as Cyber warfare specialist David Kennedy confirms: “Russia is being extremely aggressive on a lot of different areas right now, and this is just one of them, and especially on the cyber-front.”

The Boston economist sees three main reasons to think twice before embracing the cashless world. Other risks are being highlighted as he speaks, such as the dereliction of elderly people to a world they often don’t understand, the opportunity for massive-scale State surveillance, and the suppression of the symbol of national unity, the bill.
We are 100% volunteer and depend on your participation to sustain our efforts!

Donate

$110.00 donated
in the past month

Get Involved

If you'd like to help with maintaining or developing the website, contact us.

Publish

Publish your stories and upcoming events on Indybay.

IMC Network