The Power of Cash to Support Economic Prosperity, Resilience and Safety
Mar 15, 2024
As many analogue technologies enjoy a renaissance—with younger generations discovering the pleasures of books, vinyl and acoustic instruments—is the world also ready to revisit the joys of cash? Economics professor Jay L. Zagorsky says the benefits of physical money are too critical to wait and see, and now is the time to ‘use it or lose it.’
Writing for The Conversation, Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law at Boston University, says he ‘was amazed by the mixed signals [he] saw in many storefronts’ in Seattle, with shops displaying signs saying they are ‘welcoming and inclusive’ right next to a sign saying ‘no cash accepted’. The message seems to be that individuals without bank accounts or cashless means of payment are not, in fact, welcome.
Zagorsky observes around six million U.S. households are unbanked—roughly equal to the population of Wisconsin—with the figure standing at over one billion unbanked worldwide. In the U.S., reasons for this are myriad, with some people, such as unhoused individuals, unable to meet the requirements to open an account, those on very low incomes finding the fees prohibitive, some being too sceptical of the banking industry, and others seeking to preserve their financial privacy.
When businesses refuse cash, these unbanked people either cannot access them, or are forced to use other payment methods such as prepaid debit cards, which can be costly. He cites an example of Walmart’s reloadable basic debit card, which costs $1 to buy and charges $6 per month in fees, plus $3 every time it’s loaded with cash at a register.
The next time you see a sign in a shop or restaurant window stating “No cash accepted,” you’re really looking at a business excluding many unbanked and underbanked people. Insisting that all businesses accept cash is a simple way to ensure everyone is financially included in the modern economy.
In a summary for his forthcoming book, The Power of Cash: Why paper money is good for you and society, Zagorsky emphasises that economic exclusion is just one major downside of reducing access to and acceptance of cash, with far reaching impacts extending from personal privacy right through to national security.
Eliminating cash can harm us in many ways. It causes us to spend more, reducing our privacy and boosting prices we pay. It hits the poor especially hard by making them pay for bank services they cannot afford. It weakens our national defense by making us vulnerable to cyberattacks and natural disasters. It increases crime since criminals can target us from anywhere in the world.
As a business school professor, he says, he teaches students how to thrive in a capitalist economy, and notes that the companies driving cashless technologies are ‘not evil, but it is not in their interest to point out the downsides of abandoning cash.’ His motivation to write the book is ‘because society needs someone to stand up and show why supporting the use of cash is crucial to the world’s continued economic prosperity, resilience and safety.’
The world is seeing a resurgence of old-fashioned technologies... Will cash also enjoy a resurgence? We can’t wait to see the answer because once paper money, ATMs, cash registers and the other tools needed to make cash transactions are gone it will cost billions to restore them.
Zagorsky’s call to action is for people to use cash in conjunction with electronic payments, because ‘using it preserves [it] for the long run, making us all better off.’