12. In contrast, England already had a national bankruptcy law in 1571. An attempt to create a U.S. federal bankruptcy law in 1800 foundered; there was one briefly in place between 1867 and 1878, aimed to relieve indebted Civil War veterans, but it was eventually abolished on moral grounds (see Mann 2002 for a good recent history). Bankruptcy reform in America is more likely to make the terms harsher than the other way around, as with the 2005 reforms, which Congress passed, on industry urgings, just before the great credit crash.
13. The mortgage relief fund set up after the bailout, for example, has only provided aid to a tiny percentage of claimants, and there has been no movement toward liberalization of bankruptcy laws that had, in fact, been made far harsher, under financial industry pressure, in 2005, just two years before the meltdown.
14. “In Jail for Being in Debt,” Chris Serres & Glenin Howatt, Minneapolis-St. Paul Star Tribune, June 9, 2010, www.startribune.com/local/95692619.html.
15. “IMF warns second bailout would ‘threaten democracy.’ ” Angela Jameson and Elizabeth Judge, business.timesonline.co.uk/tol/business/economics/
article6928147.ece#cid=OTC-RSS&attr=1185799, accessed November 25, 2009
Chapter Two
1. Case, Fair, Gärtner, & Heather 1996:564. Emphasis in the original.
2. op cit.
3. Begg, Fischer, and Dornbuch (2005:384); Maunder, Myers, Wall, and Miller (1991:310); Parkin & King (1995:65).
4. Stiglitz and Driffill 2000:521. Emphasis again in the original.
5. Aristotle Politics I.9.1257
6. Neither is it clear we are really speaking of barter here. Aristotle used the term métadosis, which in his day normally meant “sharing” or “sharing out.” Since Smith, this has usually been translated “barter,” but as Karl Polanyi (1957a:93) has long since emphasized, this is probably inaccurate, unless Aristotle was introducing an entirely new meaning for the term. Theorists of the origin of Greek money from Laum (1924) to Seaford (2004) have emphasized that customs of apportioning goods (e.g., war booty, sacrificial meat), probably did play a key role in the development of Greek currency. (For a critique of the Aristotelian tradition, which does assume Aristotle is talking about barter, see Fahazmanesh 2006.)
7. See Jean-Michel Servet (1994, 2001) for this literature. He also notes that in the eighteenth century, these accounts suddenly vanished, to be replaced by endless sightings of “primitive barter” in accounts of Oceania, Africa, and the Americas.
8. Wealth of Nations I.2.1–2. As we’ll see, the line seems to be taken from much older sources.
9. “If we should enquire into the principle of human mind on which this disposition of trucking is founded, it is clearly the natural inclination every one has to persuade. The offering of a shilling, which to us appears to have so plain and simple meaning, is in reality offering an argument to persuade one to do so and so as it is for his interest” (Lectures on Jurisprudence, 56) It’s fascinating to note that the assumption that the notion that exchange is the basis of our mental functions, and manifests itself both in language (as the exchange of words) and economics (as the exchange of material goods) goes back to Smith. Most anthropologists attribute it to Claude Levi-Strauss (1963:296).
10. The reference to shepherds implies he may be referring to another part of the world, but elsewhere his examples, for instance of trading deer for beaver, make it clear he’s thinking of the Northeast woodlands of North America.
11. Wealth of Nations I.4.2.
12. Wealth of Nations I.4.3.
13. Wealth of Nations I.4.7.
14. The idea of an historical sequence from barter to money to credit actually seems to appear first in the lectures of an Italian banker named Bernardo Davanzati (1529–1606; so Waswo 1996); it was developed as an explicit theory by German economic historians: Bruno Hildebrand (1864), who posited a prehistoric stage of barter, an ancient stage of coinage, and then, after some reversion to barter in the Middle Ages, a modern stage of credit economy. It took canonical form in the work of his student, Karl Bücher (1907). The sequence has now become universally accepted common sense, and it reappears in at least tacit form in Marx, and explicitly in Simmel—again, despite the fact that almost all subsequent historical research has proved it wrong.
15. Though they did make an impression on many others. Morgan’s work in particular (1851, 1877, 1881), which emphasized both collective property rights and the extraordinary importance of women, with women’s councils largely in control of economic life, so impressed many radical thinkers—included Marx and Engels—that they became the basis of a kind of counter-myth, of primitive communism and primitive matriarchy.
16. Anne Chapman (1980) goes if anything further, noting that if pure barter is to be defined as concerned only with swapping objects, and not with rearranging relations between people, it’s not clear that it has ever existed. See also Heady 2005.
17. Levi-Strauss 1943; the translation is from Servet 1982:33.
18. One must imagine the temptation for a sexual variety must be fairly strong, for young men and women accustomed to spending almost all of their time with maybe a dozen other people the same age.
19. Berndt 1951:161, cf. Gudeman 2001: 124–25, who provides an analysis quite similar to my own.
20. Berndt 1951:162.
21. Though as we will note later, it’s not exactly as if international business deals now never involve music, dancing, food, drugs, high-priced hookers, or the possibility of violence. For a random example underlining the last two, see Perkins 2005.
22. Lindholm 1982:116.
23. Servet 2001:20-21 compiles an enormous number of such terms.
24. The point is so obvious that it’s amazing it hasn’t been made more often. The only classical economist I’m aware of who appears to have considered the possibility that deferred payments might have made barter unnecessary is Ralph Hawtrey (1928:2, cited in Einzig 1949:375). All others simply assume, for no reason, that all exchanges even between neighbors must have necessarily been what economists like to call “spot trades.”
25. Bohannan 1955, Barth 1969. cf. Munn 1986, Akin & Robbins 1998. A good summary of the concept can be found in Gregory 1982:48–49. Gregory gives one example of a highland Papua New Guinea system with six ranks of valuables, with live pigs and cassowary birds on the top rank, “pearl-shell pendants, pork sides, stone axes, cassowary-plume headdresses, and cowrie-shell headbands” on the second, and so on. Ordinarily items of items of consumption are confined to the last two, which consist of luxury foods and staple vegetable foods, respectively.
26. See Servet 1998, Humphries 1985.
27. The classic essay here is Radford 1945.
28. In the 1600s, at least, actually called the old Carolingian denominations “imaginary money”—everyone persisting in using pounds, shillings, and pence (or livres, deniers, and sous) for the intervening 800 years, despite the fact that for most of that period, actual coins were entirely different, or simply didn’t exist (Einaudi 1936).
29. Other examples of barter coexisting with money: Orlove 1986; Barnes & Barnes 1989.
30. One of the disadvantages of having your book becomes a classic is that often, people will actually check out such examples. (One of the advantages is that even if they discover you were mistaken, people will continue to cite you as an authority anyway.)
31. Innes 1913:378. He goes on to observe: “A moment’s reflection shows that a staple commodity could not be used as money, because ex hypothesi, the medium of exchange is equally receivable by all members of the community. Thus if the fishers paid for their supplies in cod, the traders would equally have to pay for their cod in cod, an obvious absurdity.”
32. The temples appear to have come first; the palaces, which became increasingly important over time, took over their system of administration.
33. Smith was not dreaming about these: the current technical term for such ingots is “hacksilber” (e.g., Balmuth 2001).
34. Compare Grie
rson 1977:17 for Egyptian parallels.
35. e.g., Hudson 2002:25, 2004:114
36. Innes 1913:381
37. Peter Spufford’s monumental Money and Its Use in Medieval Europe (1988), which devotes hundreds of pages to gold and silver mining, mints, and debasement of coinage, makes only two or three mentions of various sorts of lead or leather token money or minor credit arrangements by which ordinary people appear to have conducted the overwhelming majority of their daily transactions. About these, he says, “we can know next to nothing” (1988:336). An even more dramatic example is the tally-stick, of which we will hear a good deal: the use of tallies instead of cash was widespread in the Middle Ages, but there has been almost no systematic research on the subject, especially outside England.
Chapter Three
1. Heinsohn & Steiger (1989) even suggest the main reason their fellow economists haven’t abandoned the story is that anthropologists have not yet provided an equally compelling alternative. Still, almost all histories of money continue to begin with fanciful accounts of barter. Another expedient is to fall back on pure circular definitions: if “barter” is an economic transaction that does not employ currency, then any economic transaction that doesn’t involve currency, whatever its form or content, must be barter. Glyn Davies (1996:11–13) thus describes even Kwakiutl potlatches as “barter.”
2. We often forget that there was a strong religious element in all this. Newton himself was in no sense an atheist—in fact, he tried to use his mathematical abilities to confirm that the world really had been created, as Bishop Ussher had earlier argued, sometime around October 23, 4004 bc.
3. Smith first uses the phrase “invisible hand” in his Astronomy (III.2), but in Theory of Moral Sentiments IV.1.10, he is explicit that the invisible hand of the market is that of “Providence.” On Smith’s theology in general see Nicholls 2003:35–43; on its possible connection to Medieval Islam, see chapter 10 below.
4. Samuelson 1948:49. See Heinsohn and Steiger 1989 for a critique of this position; also Ingham 2004.
5. Pigou 1949. Boianovsky 1993 provides a history of the term.
6. “We do not know of any economy in which systematic barter takes place without the presence of money” (Fayazmanesh 2006:87)—by which he means, in the sense of money of account.
7. On the government role of fostering the “self-regulating market” in general, see Polanyi 1949. The standard economic orthodoxy, that if the government just gets out of the way, a market will naturally emerge, without any need to create appropriate legal, police, and political institutions first, was dramatically disproved when free-market ideologues tried to impose this model in the former Soviet Union in the 1990s.
8. Innes as usual puts it nicely: “The eye has never seen, nor the hand touched a dollar. All that we can touch or see is a promise to pay or satisfy a debt due for an amount called a dollar.” In the same way, he notes, “All our measures are the same. No one has ever seen on ounce or a foot or an hour. A foot is the distance between two fixed points, but neither the distance nor the points have a corporeal existence” (1914:155).
9. Note that this does assume some means of calculating such values—that is, that money of account of some sort already exists. This might seem obvious, but remarkable numbers of anthropologists seem to have missed it.
10. To give some sense of scale, even the relatively circumscribed commercial city-state of Hong Kong currently has roughly $23.3 billion in circulation. At roughly 7 million people, that’s more than three thousand Hong Kong dollars per inhabitant.
11. “State theory may be traced to the early nineteenth century and to [Adam] Muller’s New Theory of Money, which attempted to explain money value as an expression of communal trust and national will, and culminated in [G.F.] Knapp’s State Theory of Money, first published in German in 1905. Knapp considered it absurd to attempt to understand money ‘without the idea of the state.’ Money is not a medium that emerges from exchange. It is rather a means for accounting for and settling debts, the most important of which are tax debts” (Ingham 2004:47.) Ingham’s book is an admirable statement of the Chartalist position, and much of my argument here can be found in much greater detail in it. However, as will later become apparent, I also part company with him in certain respects.
12. In French: livres, sous, and deniers.
13. Einaudi 1936. Cipolla (1967) calls it “ghost money.”
14. On tallies: Jenkinson 1911, 1924; Innes 1913; Grandell 1977; Baxter 1989; Stone 2005.
15. Snell (1919:240) notes that kings while touring their domains would sometimes seize cattle or other goods by right of “preemption” and then pay in tallies, but it was very difficult to get their representatives to later pay up: “Subjects were compelled to sell; and the worst of it was that the King’s purveyors were in the habit of paying not in cash down, but by means of an exchequer tally, or a beating … In practice it was found no easy matter to recover under this system, which lent itself to the worst exactions, and is the subject of numerous complaints in our early popular poetry.”
16. It is also interesting to note, in this regard, that the Bank of England still kept their own internal accounts using tally sticks in Adam Smith’s time, and only abandoned the practice in 1826.
17. See Engels (1978) for a classic study of this sort of problem.
18. Appealing particularly to debtors, who were understandably drawn to the idea that debt is simply a social arrangement that was in no sense immutable but created by government policies that could just as easily be reshuffled—not to mention, who would benefit from inflationary policies.
19. On the tax, Jacob 1987; for the Betsimisaraka village study, Althabe 1968; for analogous Malagasy case studies, Fremigacci 1976, Rainibe 1982, Schlemmer 1983, Feeley-Harnik 1991. For colonial tax policy in Africa more generally, Forstater 2005, 2006.
20. So, for instance, Heinsohn & Steiger 1989:188–189.
21. Silver was mined in the Midwest itself, and adopting bi-metallism, with both gold and silver as potential backing for currency, was seen as a move in the direction of free credit money, and to allow for the creation of money by local banks. The late nineteenth century saw the first creation of modern corporate capitalism in the United States and it was fervently resisted, with the centralization of the banking system being a major field of struggle, and mutualism—popular democratic (not profit oriented) banking and insurance arrangements—one of the main forms of resistance. The bi-metallists were the more moderate successors of the Greenbackers, who called for a currency detached from money altogether, such as Lincoln briefly imposed in wartime (Dighe (2002) provides a good summary of the historical background.)
22. They only became ruby slippers in the movie.
23. Some have even suggested that Dorothy herself represents Teddy Roosevelt, since syllabically, “dor-o-thee” is the same as “thee-o-dor”, only backwards.
24. See Littlefield 1963 and Rockoff 1990 for a detailed argument about The Wizard of Oz as “monetary allegory.” Baum never admitted that the book had a political subtext, but even those who doubt he put one in intentionally (e.g., Parker 1994; cf. Taylor 2005) admit that such a meaning was quickly attributed to it—there were already explicit political references in the stage version of 1902, only two years after the book’s original publication.
25. Reagan could as easily be argued to be a practitioner of extreme military Keynesianism, using the Pentagon’s budget to create jobs and drive economic growth; anyway, monetary orthodoxy was abandoned very quickly even rhetorically among those actually managing the system.
26. See Ingham 2000.
27. Keynes 1930: 4–5
28. The argument is referred to as the paradox of banking. To provide an extremely simplified version: say there was only one bank. Even if that bank were to make you a loan of a trillion dollars based on no assets of its own of any kind whatever, you would ultimately end up putting the money back into the bank again, which would mean that the bank would n
ow have one trillion in debt, and one trillion in working assets, perfectly balancing each other out. If the bank was charging you more for the loan than it was giving you in interest (which banks always do), it would also make a profit. The same would be true if you spent the trillion—whoever ended up with the money would still have to put it into the bank again. Keynes pointed out the existence of multiple banks didn’t really change anything, provided bankers coordinated their efforts, which, in fact, they always do.
29. I might note that this assumption echoes the logic of neoclassical economic theory, which assumes that all basic institutional arrangements that define the context of economic activity were agreed to by all parties at some imaginary point in the past, and that since then, everything has and will always continue to exist in equilibrium. Interestingly, Keynes explicitly rejected this assumption in his theory of money (Davidson 2006). Contemporary social contract theorists incidentally make a similar argument, that there’s no need to assume that this actually happened; it’s enough to say it could have and act as if it did.
30. Aglietta is a Marxist, and one of the founders of the “Regulation School,” Orléans, an adherent of the “economics of convention” favored by Thevenot and Boltanski. Primordial debt theory has been mainly developed by a group of researchers surrounding economists Michel Aglietta and André Orléans, first in La Violence de la Monnaie (1992), which employed a psychoanalytic, Giradian framework, and then in a volume called Sovereignty, Legitimacy and Money (1995) and a collection called Sovereign Money (Aglietta, Andreau, etc. 1998), co-edited by eleven different scholars. The latter two volumes abandon the Girardian framework for a Dumontian one. In recent years the main exponent of this position has been another Regulationist, Bruno Théret (1992, 1995, 2007, 2008). Unfortunately almost none of this material has ever been translated into English, though a summary of many of Aglietta’s contributions can be found in Grahl (2000).
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