While Denmark goes cashless, whistle-blowers fear excesses

Article published on Aug. 29, 2016
Article published on Aug. 29, 2016

This article has not been vetted by an editor at Paris HQ

Denmark, along with its Northern neighbors, is slowly drifting towards something utterly new in the industrialized world: a cashless economy. Softly driven by governments and the banking industry, and peacefully accepted by the population, the shift is nonetheless a dangerous move, as increasing numbers of whistleblowers are pointing out.

Editor at Wolf Street Don Quijones recently wrote that “First they came for the Pennies… in the war on cash”, talking about Denmark and Sweden as the “World’s biggest cashless laboratory”. 

And banks like the idea, to tell the truth. Managing e-money is simply a lot easier than it easy to manage cash. Although little time is usually spent thinking about cash, there are significant logistics behind the money we carry around every day. It must be designed, printed, secured, stored, transferred, checked and replaced. All things which induce rather significant expenses, with little return. So if all transactions could be carried out and authorized by a simple click or, even better, an automatic server, costs would be reduced.

Another argument in favor of kicking cash out is security: no more theft, no more counterfeiting or fraud. This argument, however, is only very partially valid: while it would simply delete the relevance and existence of forged banknotes, electronic money has its own share of fraud. The amount of such fraud has even been on the rise in recent years.

Governments, including the Danish government of course, share roughly the same burdens as banks. Their central banks are in charge of designing, producing and distributing the currency. Once the cash is distributed, then it is no longer the state’s responsibility, and yet its problems aren’t over. It must then deal with the replacement of damaged or lost currency, and deal with cash-related crimes such as drug trafficking and gun-smuggling.

The last party involved are the people themselves, and the Danish society seems to like the idea of killing off cash. In Nordic countries, cash has a bad image. It is associated with crime, to the extent that some customers paying for regular purchases have been reported to the police for their possession of large amounts of cash. Nowadays, cash has almost completely disappeared, even for the smallest items, with a residual 6% of the population resorting to cash for its payments.

So one could ask, where’s the problem, if everyone agrees? The problem isn’t here because the problem isn’t now: it will occur soon.

Increasing numbers of whistleblowers have been raising flags about the grave democratic risk of no longer having any possibility to conduct transactions without a third party (bank or state) being aware of it. Whatever is bought, in a cashless society, can be checked, monitored, controlled, etc. Not only will the nature of the product or service be disclosed, but also the whereabouts, financial links, etc. Which means, in the end, absolute state control over our lives. That’s a problem Kenneth Schortgen raises: “A cashless society will give banks and the government absolute control over what you can do with your money, and give these and other entities the power to track your every move through your purchases”

The Anonymous activist group even published an article last year, to raise awareness on the trend, quoting “The Danish government said as of next year, businesses such as clothing retailers, petrol stations and restaurants should no longer be legally-bound to accept cash.”

“The proposal is part of a pre-election package of economic growth measures aimed at reducing costs and increasing productivity for businesses. It would need to be approved by parliament, although the timing of a vote is as yet unknown”, says the Telegraph. A very small share of the Danish population seems to be going against this trend, for democratic reasons, and reverting back to cash, but the great majority of the population is going along with it nicely.

Major stakeholders such as secured cash transfer companies, for their part, are naturally opposed to this trend. Jarl Dahlfors, the outgoing chief executive of cash handling firm Loomis in Sweden, says the cashless trend may have gone too far for “unbanked people” such as many elderly people. “Do we really want everything we buy to be registered?”, he adds.

Critics are even found within governments. Carl-Ludwig Thiele, the German central banker, is opposed to this new form of absolute control, and has regularly made it known to the public. He stated :"Abolishing cash would hurt consumer sovereignty - the free choice of citizens about their payment instruments […] Government agencies do not have the right to tell citizens how they should pay […] Each person chooses the instrument that best meets the requirements in their eyes”. To support his views, he regularly quotes Dostoevsky, who is known as one of the historical defenders of individual liberty, namely by reminding that “money is coined liberty”. The message behind the aphorism is that when a customer pays for his purchases with cash, no one will be aware of it, and he has no one to answer to for it, unless a crime has been committed.

The suppression of cash raises several concerns, beyond the main democratic risk described above. It is probably, in part, based on miscalculated observations. Because cash is used more often for small purchases than for large ones, it’s often considered as a residual, or even negligible, part of the economy. But in fact, its “market” share is considerable. In Germany, for instance, over half of the money exchanged is through cash. And when the ratio is based upon number of transactions, and not financial volume, the figure jumps to over 80%. So, suppressing it would be quite a drastic move.

Additionally, it might miss its target because of the general belief that electronic payments are safer, which is intrinsically untrue. Just as Apple’s Macs used to be deemed safe from malware because they held too small a market share for hackers to be interested until Apple’s market share exploded, the rise in the number of electronic payments will lead thieves to transfer their illicit activities to the electronic realm. So the Danes – and others – may kill their cash, and their individual freedom along with it, to secure their money, and end up losing both. “Cash Banned, Freedom Gone”, says Thorsten Polleit from the Mises Institute.

So, think twice about it the next time you hold a banknote in your hands: the war on cash is not a question of evolution, but a question of democracy facing sprawling economic interests. Let’s have a look at what happens just right now in Nigeria. Editor Don Quijones reports that “the government launched a Mastercard-branded biometric national ID card, which also doubles up as a payment card. The “service” provides Mastercard with direct access to over 170 million potential customers, not to mention all their personal and biometric data. The company also recently won a government contract to design the Huduma Card, which will be used for paying State services. For Mastercard these partnerships with government are essential for achieving its lofty vision of creating a world beyond cash.”

Where do we go, from here?