Money and markets are not, nor have ever been, natural.
Why history supports the argument that co-operative, democratic control of the economy is possible.
Ah, money. The only thing on this planet that is a problem if you have too much or too little of it. Well, except maybe oxygen, water, or just about most things.
But you’d be hard pressed to find any other man-made construct that so fundamentally controls our life like money does. Yet, our basic understanding of it is actually quite rudimental. And tinged with an unhealthy amount of blind feath and devotion.
Why was money ever invented? Ask most economists and they’ll respond that it more easily facilitates exchange and lays the basis for it within more advanced societies.
Essentially, it evolved out of the need for more complex markets and methods of exchange. This enabled societies to move past the “barter stage” of their evolution.
But this theory relies on a theoretical shortcut that is actually baseless. In fact, free market theorists who have been propagating the “barter to markets” history of the world have been wrong all along and been peddling theories motivated chiefly by politics and gain. In short, money and markets did not evolve naturally from societies on their own; they were created by states to fund war, slavery, and expansion.
This demystification and refutation of the “naturalness” of markets and money are essential to redefining the dialogue surrounding political control of capital and the global economy. It also poses important questions that underpin the very structure of society. Namely, what creates value? How do we develop systems of exchange? History and anthropology provide the necessary elucidation on the genesis of money and markets. And there is something oddly optimistic to be found.
Let’s start at the beginning. Much of the inspiration for this article comes from David Graeber’s Debt: The first 5,000 Years. We’ll return to this. However, I’d like first to give a quick review of the literature that has defined our very ideas of the market, exchange, and value.
Markets vs. exchange: a small difference that reveals a lot of ideology.
A long, long time ago (around 1776, when The Wealth of Nations was published) there lived a man named Adam Smith. He neatly divided societies into by their forms of exchange: barter economies and market economies.
Say you’re a baker, but you’d like to eat some meat. You’d have to find someone with meat to spare. The only butcher in town hates bread, so “No exchange can, in this case, be made between them,” according to Smith. This is a highly undesirable situation for a complex society, one that goes beyond small communities living on sustenance farming. So this is how societies naturally came up with something called money, agreed to call it money, and that was that.
You see what a quantum leap that is.
This theory also wholly ignores the bulk of anthropological evidence that suggests that societies mostly practied gift giving and never placed a numerical value on commodities:
“The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships,” (Polanyi 1957: 46).
Over the last hundred years or so, anthropologists have argued that everyday “exchange” was actually a bit closer to writing an IOU. Again, let’s say you live in a relatively small village. You need some meat. Your friend, Jacob, the butcher doesn’t want anything you have. He gives you some meat. Later, he asks you to help him for a few hours with thatching a roof on his hut. Debt is settled. David Graber and other anthropologists call this a gift economy. And as you can see, it is an economy deeply rooted in social relationships and trust, a shared expectation that at some point, you’d be paid back. Money also works this way.
Larger empires and societies centralized this. In the Incan Empire, Gordon Francis McEwan writes, “Each citizen of the empire was issued the necessities of life out of the state storehouses, including food, tools, raw materials, and clothing, and needed to purchase nothing. With no shops or markets, there was no need for a standard currency or money, and there was nowhere to spend money or purchase or trade for necessities.”
Incas had no class of traders or merchants and only traded with outsiders. Here emerges a commonality across societies. Namely, that currency or money is only necessary where no established trust relation exists. Within the Inca Empire, citizens didn’t pay taxes in money. They paid in labor. In exchange for their labor, they were given the necessities of life, which the state centrally stored.
In ancient Mesopotamia, it worked similarly. The Sumerian economy was controlled and dominated by massive temple and palace complexes, run by thousands of administrators. Here’s where things get incredible. The basic monetary unit in Sumer was the “silver shekel.” The shekel’s weight in silver was equivalent to one bushel of barley. Each shekel was comprised of 60 minas, each one portion of barley. Temple administrators were given two rations of barely every day as payment. Thus, money “ïn this sense is in no way the product of commercial transactions. It was actually created by bureaucrats in order to keep track of resources and move things back and forth between departments.” (Graber, Debt.)
Astonishingly, these silver shekels didn’t circulate at all. Graber notes that they sat in the same, guarded chambers in temples for “literally thousands of years.” While even though debts, rent, fees, and so on were calculated in silver, they didn’t have to be paid in silver. “Peasants who owed money to the Temple or Palace, or to some Temple or Palace official, seem to have settled their debts mostly in barley…it was [also] perfectly acceptable to show up with goats, or furniture, or lapis lazuli.”
Marketplaces did exist in Sumeria, but due to the massive, industrial scale of the temples and palaces, most transactions happened in credit. Merchants would run tabs that could be settled later using Temple/Palace-established rates on other commodities or goods.
All of these developments lend support to Polyani’s argument that, “Previously to our time no economy has ever existed that, even in principle, was controlled by markets. . . . Gain and profit made on exchange never before played an important part in the human economy,” (Polanyi, 1957:43).
I hope you’ve been able to draw another conclusion from this. Chiefly, that value and worth in any economy is dictated socially. Exchange became possible at a complex, social level due to promises and trust. The Inca farmer’s currency was labor, labor he performed because he knew he would be paid with the necessities of life. The Sumerian tavern keeper ran tabs because he could exchange his payments at the Temple for whatever he needed to survive.
If we follow history to Rome, we see how universal coinage emerged. And here we will see that it was both a commodity an and IOU. Namely, it was a promise to accept the coins in the form of taxes that legitimized the currency, and the expanding Roman Empire that put it into wide circulation.
Rome paid its soldiers in coins, minted using a universally identifiable commodity like silver or gold as to hinder forgery. Rome, also proves that markets must, in fact be created by the state. They do not simply emerge on their own. By accepting taxes from soldiers in the coins it paid them, the coins themselves became valuable. It was a smart choice to use commodities like gold or silver as currency since they are naturally pretty and could be used to build beautiful temples for the gods.
But that’s not the point. What transformed the coins into money was the promise of its acceptance. Most coins that circulated were of questionable purity. Many a local tavern drunkards ran side gigs trimming the edges off of coins. The acceptance of the coin, combined with its existence as a commodity, give it value. The only criteria needed for a commodity is its general universal application of form and recognizability. And some degree of scarcity to prevent quick inflation or dissemination (like grain, dirt, stones, etc.).
Economists argued that when coinage dried up (think Medieval times), humanity largely reverted back to bartering. This never actually happened. Scandinavian societies continued using Roman currency to tabulate value centuries after the fall of the Roman Empire. The currency didn’t change hands. Goods and services did. What was different here is the embeddedness in a network of trust and reciprocity. During these periods, money didn’t change hands because there was no need to exchange it. Again, most transactions occurred locally, where a tally or ledger informed all involved parties of who owed whom what. The very concept of money became fluid and porous. Taxes were often collected as commodities, that could be converted into credit. Farmers would pay in what they could produce like barley or grain.
The fact that soldiers received their salary in coins or gold is important and supports the argument that bouillon or currency is state-created. Coinage dried up after the fall of the Roman Empire due to a complete lack of a centralized tax-collecting and reward system. Soldiers themselves would bring resources back to Rome, while simultaneously enforcing the value of Roman coinage in newly conquered lands. Once the Empire stopped expanding it was over. The flow of gold stopped and local tribes and groups (due to the drying up of gold and the more local nature of the economy) reverted to credit systems.
British economist Alfred Mitchell-Inness argued that coinage was so unimportant to the Medieval English that kings would not “hesitate to call it all in for re-minting and re-issue and commerce went on just the same.” The proof here remains that complex economies continued to function, largely on credit, without the everyday use of money.
What I’m illustrating here is that the concept of money is fluid. Money is nothing more than an IOU backed up by trust in a state. This has taken many forms over history, but the complete and total monetization of markets, goods, and services is an invention of capitalism.
Graber, in Debt, again adroitly recounts how this came to be, as he argues, that under capitalism, money is granted its own autonomy. Around this autonomy, political and military power are gradually reorganized to enforce its own logic. This was the breakthrough. Under the Roman Empire, money remained a political instrument to fund expansion. During Medieval Islam’s heyday, there was no centralized state to enforce profit-making ventures. Interest-bearing loans were impossible to collect, since there was no mechanism to enforce it. Competitive markets could not develop. Ironically, Medieval Islam was the closest to a free-market liberal ideal history has yet to see.
The real story of capitalism is how a previous economy of credit was turned into an economy of interest and capital. We’ve reached a point where money in and of itself is a commodity, with its own ruthless and relentless logic. With capitalism we first saw the cropping up of poor houses. Capital investment in trade ventures was partly (remembering that the Conquistadors themselves were still individual actors) to blame for the genocide of natives in the Americas.
Our current relationship with credit, debt, and money is so far removed from anything that has come before that it has distorted the very structure of society. This disembedding of money from trust relations created the environment for the Great Recession of 2007.
A new existential approach is needed.
If money itself is inherently worthless and it finds its value from a supporting state or community — well, you might see where I’m going — we as a society can define value. And we should, hell, must, jettison profit and exploitation if we are to survive.
The theory of commons and shared value finding
Where David Graber’s Debt: The First 5,000 Years falters, is its inability to scale up his findings on the nature of money to the modes of production. Marxists would argue that it is imperative to argue that embedded, social relations should dominate the economy. This relationship needs to be extended to the places of production, namely the fields, waters, and the factories. Graber, unfortunately, argues that any attempt to control these zones have necessarily failed. However, looking at Incan and Sumerian history, he would be wrong.
While Marx admitted that exchange may be vital to economic activity, he never forgot to stress that it was in fact the way that humans produced life’s necessities that laid the structure for society.
The Inca Empire, effectively, landed at a level of post-scarcity. And did so without democracy. The defining factor was a communal claim to the necessities of life. This very well could have been the first rendering of what contemporary theorists dub a commons (a commons being a resource overwhich a community has equal and shared rights).
Commons exist currently on smaller scales across the globe. The NHS in the UK for example, guarantees that if you pay your taxes you will receive health care. What we must push for is negotiated access to other areas of necessities. And define this access in a socially negotiated definition of value.
I’m hinting here at what Srnick and Williams describe cheekily as “Fully Automated Luxury Communism.” Here is the idea that self-replicating or cornucopia technologies would destroy the market for necessary goods and thus create a human economy based on the personal pursuit of meaning.
There are good arguments against the feasibility of any cornucopia technology. And one of the best arguments may be that any such technology may serve to simply reinforce existing class structures, rather than alleviate them. However, technology should not be ignored. In using technology to better grant access to commonly pooled resources, we could better insure their viability. Or create more fluid forms of access and democratic consensus.
But, it needn’t go that far. By renegotiating the very nature of property and how it functions on the market level, we would be able to ascend past capitalism. The model here may be a series of mutual aid structures. Apartment co-ops that define value in other services rendered: construction labor, medical services. By forming networks here, doctors and hospitals could (for example) accept value or “gifts” in the form of housing and return service in kind. A cooperative economy is already something leftists are theorizing. In fact, co-op organizations are emerging in developing economies like India, providing an alternative method of production that provides more for less to those in dire need, so argues Chris Wright the author of Worker Cooperatives and Revolution: History and Possibilities in the United States.
From an existentialist approach, Sartre would argue that this very definition of wealth is inherently ours to make. In fact, the very mutability of “human nature” shows that we largely define who we are by our choices. Our nature is thus not predetermined by biology or a set of genetic rules. As a society, we are capable of making collective choices.
We are, in essence, the sum of our choices. What if we were to decide that value shouldn’t include the existential minimum? That these items, their production, and their management were common property? We’d have a very different definition of value, indeed. We would have a definition that would produce exchange without deleterious markets or profiteering, one that cannot directly reduce the value of your life to a denomination.