Private Minting in Bhopal and 19th Century Britain

There is a very cool article in HT this week about a shop in Bhopal that is producing Rs. 5 coins due to a shortage in that denomination. A liquor shop acts as a bank that produces, issues, and redeems several of the coins for larger rupee denominations. From what I read in the article, these coins have become currency in that vicinity.

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Image from Hindustan Times “Bhopal market has a ‘currency’ of its own” Ashutosh Shukla May 07, 2013[/caption]

This is a nice example of private enterprise producing coin, which is often thought to be something that only government can or must do.

This occurrence in Bhopal reminds me of a book I’m eager to read by free banking scholar George Selgin, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821. The book outlines how private initiative in minting small denomination coins played a vital role in facilitating the Industrial Revolution in Britain.

The Independent Institute blurb on the book says the following:

In Good Money, George Selgin tells the fascinating story of the important yet almost unknown episode in the history of money — British manufacturers’ challenge to the Crown’s monopoly on coinage.

In the 1780s, when the Industrial Revolution was gathering momentum, the Royal Mint failed to produce enough small-denomination coinage for factory owners to pay their workers. As the currency shortage threatened to derail industrial progress, manufacturers began to mint custom-made coins, called “tradesman’s tokens.” Rapidly gaining wide acceptance, these tokens served as the nation’s most popular currency for wages and retail sales until 1821, when the Crown outlawed all moneys except its own.

Good Money not only examines the crucial role of private coinage in fuelling Great Britain’s Industrial Revolution, but it also challenges beliefs upon which all modern government-currency monopolies rest. It thereby sheds light on contemporary private-sector alternatives to government-issued money, such as digital monies, cash cards, electronic funds transfer, and (outside of the United States) spontaneous “dollarization.”

It turns out people are people are people everywhere and that, not only are the principles of economic theory true everywhere, but economic events show such beautiful parallels over time and space.