Money has fascinated as well as bewitched mankind for centuries. How was it born? How did it become popular? Many books have been written on the history of money. Here is another book with an interesting hypothesis about how money came into being and what constitutes money.
My review of the book was carried by Business Standard today (http://goo.gl/k6QZ8l):
Mankind felt a compelling need to give it physical shape, even though it resides mostly in the head. It’s universally coveted, yet it is willingly and freely exchanged. Meet this unique commodity called “money”, which is probably mankind’s most remarkable – and paradoxical – innovation to date. Stripped of its basic functions and viewed from different vantage points, it has provided grist for every philosopher’s mill – explanations for the entire spectrum of human frailties. Money, in short, is intriguing yet simple, notional yet real.
No wonder, then, that it has inspired numerous writers across generations. Here’s an easy exercise: go to amazon.com and type in “money” in the search bar. You will see the number of books that pop up, including some in the fiction genre (sample Money: A Suicide Note by Martin Amis, a part of the London Trilogy). Some of the books written about the history of money have remained outstanding works on the subject. John Kenneth Galbraith’s Money: Whence it Came, Where it Went was less known than some of his other books, but it was as much a pleasure to read. A more recent book is Niall Ferguson’s The Ascent of Money, which has won some acclaim but has also generated heated debate, especially since the book’s unabashed and ill-timed hymn to capitalism was rudely overtaken by the global financial crisis.
Along comes another book that purports to tell the truth about the origins of money and the peculiar mechanics that make it tick. It also goes boldly where no book has gone before; it claims that the popular belief that societies have used a system of barter is built upon an elaborate myth. Different societies, at different times, have used several versions of what they considered money – sea shells, large circular stones, leather tablets, pebbles, coins and, with the advent of the printing press, paper money. But the author’s contention is that money is not just a medium of exchange or solely a repository of value. At its heart, it’s a system of credit and debit that allows people to trade and deal with each other. Money, it seems, is the best credit rating for any economic agent. Money also helped ancient societies unhook themselves from the hierarchical yoke of social burdens.
The author buttresses his hypothesis by citing Ireland’s example. In the 1970s, all banks in that country had to be closed for seven months owing to a labour dispute. This forced everyday commerce and trade to depend on cheques (which couldn’t be banked) and IOUs, which rapidly assumed the form of an alternative currency. Trust and a personal assessment of risk lubricated dealings in this new arrangement. The author contends that this is nothing but money, because even though the centralised monetary system had broken down, housewives still bought milk and bread, publicans continued plying regulars with their pints, and the small businessman managed to buy his raw materials. At work was the credit and debit that each person maintained against another in the economy, which was tradeable and hence eligible to be called money.
Therefore, apart from facilitating commerce, money also organises society and creates some sort of social order and cohesion. This, then, debunks another important and prevailing concept about money: only sovereigns can issue money. So, if we stay on with the Irish example, the author contends that even though the banks – the main purveyors of currency in any economy – were shut for seven months, the economy didn’t come to a standstill. An alternative system sprung up all the same. He concludes that money is nothing but a “social technology”.
The author, a scholar of classics and economics, has managed to provide a grand sweep of history and sociology to present his views on money. This book is, therefore, less of a biography and more of a well-strung and interesting necklace of ideas, hypotheses and theories. And we wish he had not walked into the same trap as some of his predecessors (including Galbraith): they often ended their books with a homily or a home-grown theory about the future, especially about the conduct of monetary policy. His contention is that the system of tradeable credits – since it is just one step away from speculation – is bound to lead to a succession of financial crises. His prescriptions for greater state support and narrower banking practices are inherently impractical and unlikely to find popular support.
Bodley Head (a Random House imprint)
327 pages; £14