The Phenomenon of Money (Routledge Revivals)

Thomas Crump

• Publisher: Routledge
• Year: 2011
• ISBN:
  9781136823626
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1981, this book concerns itself with the different ways in which money is used, the relationships which then arise, and the institutions concerned in maintaining its various functions. Thomas Crump examines the emergence of institutions with familiar and distinctive monetary roles: the state, the market and the banking system. However, other uses of money - such as for gambling or the payment of fines - are also taken into account, in an exhaustive, encyclopedic treatment of the subject, which extends far beyond the range of conventional treatises on money.

1
The phenomenology of money

Underlying a rich diversity of form, money is a single phenomenon. But its nature is not easy to understand, for money gives no information about itself, except that it is money. In revealing itself as money, it is nothing more than a cultural tautology.

Money fails to reveal its true nature for two reasons. The first is that, at the deepest level, it is independent of any transactions in which it is used. The second reason, which is complementary to the first, is that money, as soon as it is used for any purpose, generates its own distinctive institutions.

Both reasons need to be further elucidated. The first is best illustrated by an example. The information that X has £1000 standing to his credit at the Y bank tells nothing about how he acquired that sum, nor about how he will spend it, unless certain extraneous assumptions are made about the organization of the socioeconomic system which comprises both X and the Y bank and uses the pound sterling. Even then, the information is insufficient: it needs to be supplemented by X’s own record of past, and his plans for future, transactions. His full bank statement would give some information about the size (if not the nature) of past transactions, but it would still tell nothing about the future.

As for the second reason, the possible uses of money, and the different functions which money must have to support them, are never random. However wide the range of different uses, the form must always be institutionalized. At the present stage it is sufficient to note that money—because of its extreme generality and consistency as a phenomenon—can be functional only if its use in any case is highly specific. To use an analogy, because the potential of the letters of the alphabet to transmit and record language is so utterly general, their usefulness for this purpose—in the case of any one language—depends on maintaining extremely precise specifications in regard to spelling (such as are made manifest in any dictionary).

The fact that in any culture the phenomenon of money is only and always manifest in transactions and institutions has meant that in practice thinking about money is determined by the character of these manifestations, although this is seldom made explicit. This is the basis of what is commonly called ‘monetary theory’, which forms the dominant view of the phenomenon of money.

This approach, which is first to be found in Aristotle’s views about money, presented in the fifth century BC, has allowed for only an extremely impoverished axiomatic basis for the development of monetary theory.¹ Because of this, the scientific potential of monetary theory is extremely restricted. The reasons for its success are political, just like that of pre-Copernican astronomy (whose cultural assumptions were equally narrow). It is significant, here, that Marxist monetary theory takes the Aristotelian basis in its most rigid form. By taking the institutions for granted, the monetary theorist is seduced into accepting, as axiomatic, a number of statements about money, which are at most true only in a limited range of monetary systems.

The approach, then, of the present study is that money is essentially a uniform phenomenon, which can become manifest only when it occurs within the confines of an established institution. Although it is the institutions which give money meaning or purpose, its true nature—though not necessarily the forms in which it becomes manifest—is independent of any of them. This being so, the institutions have to be presented in all their diversity, so as to establish, convincingly, that not one institutional configuration can be definitive. A good deal of attention must be paid, therefore, to what is never more than implicit in conventional thinking about money. To use a metaphor from physics, one must look inside the atom, recognizing at the same time that the nature of the investigation, and the results which it may lead to, will depend—at least in part—on the elements chosen for research.

If, therefore, monetary theory normally takes for granted not only money as an observable phenomenon, but also certain functions of money (together with the institutions which support them) and a good deal of what people think about money (which can best be called ‘the culture on money’), it is precisely these aspects of money which provide the starting point for the present book. Money, as an observable phenomenon, apt to be described in objective terms, is essentially the subject matter of a ritual, which is described in this chapter under the sub-heading, ‘The ritual of money’. The ritual, as soon as a purpose or function is ascribed to it, becomes an incident in a continuing institutionalized pattern of monetary activity, described under the heading ‘Money as an institution’. Then, because the circulation of money represents a system of social, political or economic interaction, the phenomenon of money must be considered under a third sub-heading, ‘Money as a symbolic system’. Finally, to ensure that the present study is not totally divorced from what others (largely professional economists) say about money, there is a final section, entitled ‘Different types of monetary theory’.

The four parts of this first chapter provide the basis for the whole of the rest of the book, but the emphasis will almost always be on the interaction between the matters dealt with in the first three of them. The scheme for the book is therefore presented at the end of this chapter, to give the reader a synoptic view of the different themes which then call for separate, and more detailed consideration.

The ritual of money

The phenomenon of money is manifest in a particular kind of event, called ‘payment’. Payment is the transfer, from one person (the ‘payer’) to another person (‘the payee’) of an interest which is always expressed as a multiple of a recognized unit with its own name, or ‘denomination’. Money is the means which represents this interest, and enables payments to be made. The ostensible result of a payment, so far as the money used to make it is concerned, is to put the payee in what, before the payment, was the position of the payer. Whatever functions money may have, the payee, in place of the payer, is, by virtue of the payment, put in a position to perform them, and—this is the key point—he can do so only by making a further payment. It is of the nature of money, therefore, to be used for an indefinite succession of payments, that is, to circulate, without being subject to any sort of loss of function.

At the same time, the reason for any particular payment is always extrinsic to it. It is this which establishes money as no more than ‘an extreme and specialized type of ritual’ (Douglas, 1969, p. 69). This follows directly from the fact that payment, as an observable phenomenon, discloses next to nothing about the use, functions or purpose of money. The questions which now arise are: What form does the ritual take? and What sort of structures are generated and maintained by performing it?

The elementary answer is that money is constituted out of some recognizable substance, which must then, ideally, have certain attributes, such as divisibility, portability, uniformity, durability and relative inelasticity of supply (Chick, 1978, p. 41; Parsons, 1967, p. 368; Polanyi, 1966, p. 177 and Simiand, 1934, p. 22). In this way there come into existence a number of objects which are recognizably money, in the sense that they are to be used to the exclusion of all other assets² for the purpose of making payments, which are then effected by handing over one or more of these objects.

Although the attributes of the money-stuff, introduced in the previous paragraph, would appear greatly to restrict the choice of what may be used as money, the range of things attributed with some of the functions of money, in both primitive and modern societies, is extremely wide. A great deal of confused thinking, particularly about elementary monetary systems, follows from uncritically acknowledging as money a wide variety of objects used for purposes such as exchange.

It is essential to decide, therefore, at this early stage on the sort of restrictions to be imposed on the definition of money. Two such restrictions prove to be essential for a consistent treatment of the phenomenology of money. The first is that a true money must of its nature be capable of circulating indefinitely among those who use it, and the second is that a true money has a distinctive identity as such, so that it has no significant use for non-monetary purposes.³ These restrictions avoid, in particular, the confusion between primary commodities which are a recognized trade good in a given area (and may therefore readily be exchanged for other interests) and money. In much of the Third World, a primary commodity such as coffee is often a surrogate for money in local transactions (Ortiz, 1973, pp. 162f.), in the first place because almost every household is engaged in its production, and in the second because it can always be sold, that is converted into money, in an open market. In the areas where coffee is produced no one thinks of it as money, and this is chiefly because it is a cash-crop which is always converted into money in the end.

The position remains essentially the same even where no such conversion is possible. The Baruya of New Guinea are subsistence cultivators with an external exchange economy entirely dependent upon the export of salt to neighbouring tribes (Godelier, 1973, pp. 275f.). The Baruya have an effective monopoly of salt production: their export trade in salt is essential for providing them with goods which they cannot produce themselves. Since salt is their only export, it follows that every import must have an exchange value expressed in terms of it. That is, as far as the Baruya are concerned, every form of merchandise (seeing that they have no significant internal exchange economy) must have a ‘price’ in terms of salt. This line of reasoning, which would ‘monetize’ any exclusive export commodity, does not establish, however, where it would then circulate as money.⁴ Paradoxically, in the case of the Baruya, there does appear to be some internal circulation of salt, on the basis of gift (Godelier, 1973, p. 293), and this factor is far more important in establishing it as money. This is not, however, the argument adopted by those theorists who look for the origins of money in cases of this kind.⁵ The most that can be said is that some moneys may have originated as trade-goods. In particular, early systems of deposit certainly seem to have been organized on the basis of a unit of account related to the staple crop.⁶ More generally, the origin of money may well be related to a change in the function of objects already used for other purposes.

The important point, in any case, is how few objects in general use have the attributes of a satisfactory money-stuff. It is, moreover, an advantage for the user—at least in the long run—for there to be no possibility of confusion as to whether or not a given object is money. These factors explain the pre-eminence of specie, that is objects used as money and for no other purpose. In practice, the establishment of money in the form of specie has required either the adoption of some object found in nature with all the necessary attributes, and with no obvious alternative use, or the mass production of a similar object by means of a manufacturing process. Historically, the only suitable natural object has been the cowrie (Quiggin, 1949, ch. 4, pt i), and the only suitable manufactured object, the coin. The diffusion of the cowrie (Jeffreys, 1948, p. 52 and Simmel, 1978, p. 150) and of coinage (Hopkins, 1978, p. 39) over very wide areas of the world, and the decline of alternative currencies, give a practical demonstration of the advantages of these forms of specie.

The character of different forms of specie depends on the balance of the attributes proper to them: that specie is durable not only allows it to link ‘the present to the future’ (p. 11 below), so that money can circulate indefinitely, but also distinguishes it from the consumer goods which comprise a substantial part of the basic needs of any population. The uniformity of specie (which is essential to making it recognizable as such) is in no sense problematic in the case of the cowrie (where the natural process of production ensures it) but does raise certain difficulties when it comes to the manufacture of coins, or of other more modern forms of specie, such as banknotes.⁷ A coin is more than a piece of metal of recognized weight, size and form: its identity is established by a design impressed upon it in the process of manufacture.⁸ But then the control of the manufacturing process becomes critical—an extremely important historical factor (which is discussed in chapter 5) in relation to the supply of money. The problem can be solved in part by choosing as the raw material for coins precious metals in such short supply that the existing money-stock (that is, the total money held by all transactors) is maintained at a more or less constant level, with only a marginal supply of new coinage. This is what is meant by ‘relative inelasticity of supply’. At the same time, the coins can be made small and light in weight, which contributes to the ease of using them in transactions.

If, at an elementary level, money tends to be conceived of in the form of specie, there is an alternative form which is no less important. Suppose that, at any given time, the amount of money held by any transactor was as recorded, numerically, in a recognized form of document. The ritual of payment could then be performed by an appropriate alteration in the records. All that would be necessary would be to increase, by the amount of the payment, the number recorded against the name of the payee, at the same time reducing, by the same amount, that recorded against the name of the payer. This alternative system, of ‘scriptural’ money, is generally regarded as secondary or derivative. It is, for one thing, historically dependent on the invention and use of writing—a skill not found among the many primitive peoples who have developed their own money. The system would also seem to be unwieldy. But the earliest known writing, that of Sumeria, which can be traced back to the fourth millenium BC, ‘is almost certainly represented by texts of business and administrative character’ (Encyclopaedia Britannica: Macropaedia, 1973, 15th edn., vol. 17, p. 797), and there is abundant evidence of payments recorded in cuneiform on clay tablets (Lambert, 1963, p. 84) by civilizations which knew nothing of the use of specie. Scriptural money, particularly where it is supported by a numerical system well suited for arithmetical calculation, has great advantages over specie when it comes to dealing with relatively large sums of money, particularly over long distances. From the time of ancient Sumeria to that of...