Money

by Felix Martin

  It is just the same with money. As we have seen, the great temptation has always been to think that coins and other currency, being tangible and durable, are money—on top of which the magical, incorporeal apparatus of credit and debt is constructed. The reality is exactly the opposite. It is the social technology of transferable credit that is the fundamental force—the primitive monetary reality. The stone fei of Yap, the willow tally sticks of medieval England, the banknotes, cheques, scrip money, and private IOUs of countless episodes of monetary disorder throughout history, and the billions of bits of electronic data that the banking systems of today’s advanced economies use: they are all simply tokens to keep track of the underlying and ever-fluctuating balances of millions upon millions of credit and debt relationships.

  The consequences of this change of perspective on money for our understanding of our economic reality are every bit as dramatic, in their sphere, as the consequences of the shift from the Newtonian to the quantum theoretic perspective have been for our understanding of our physical reality. The next chapter will begin to explain what they are.

  2 Getting Money’s Measure

  THE BIOGRAPHY OF MONEY: A STORY OF IDEAS

  In June 2012 a splendid new gallery devoted to the history of money was opened at the British Museum in London. The museum’s management had concluded that the previous Money Gallery had lost the public’s interest. Visitors just weren’t that engaged by row upon row of old coins and scholarly explanations of where they came from: a new approach was needed. The result is a triumph of design. Alongside a more limited but more fascinating collection of coins are all kinds of exotic objects that have been used as currency: cowrie shells from Arabia and Africa, seeds from the Solomon Islands, a fourteenth-century Chinese banknote—even a fei from Yap. But there are now also a host of other intriguing objects that bring money’s central role in human history to life, from a sixteenth-century maiolica donation box with which the pious citizens of Siena used to expiate God with Mammon, to a 1982 silkscreen homage to the U.S. dollar by Andy Warhol. There is, however, something strange about this magnificent new gallery. Its creation was generously sponsored by a bank; in fact, by what was then the largest bank in the world, the U.S. conglomerate Citibank. Banks are a pretty important part of the story of money, one would have thought. Yet there is no bank exhibited in the Money Gallery.

  This is not because of some nefarious conspiracy to conceal the real workings of the financial system. It is because the gallery’s designers were well aware that nothing very informative would result from putting a bank inside a museum. A bank is just an office building, pretty much indistinguishable from any other office building—and it would tell you little about money to look at that. The problem is that money is not really a thing at all but a social technology: a set of ideas and practices which organise what we produce and consume, and the way we live together. When it comes to money itself—rather than the tokens that represent it, the account books where people record it, or the buildings such as banks in which people administer it—there is nothing physical to look at.

  This has an important implication for us if we want to investigate money’s origins, nature, and influence on history and our own lives. The archaeological approach taken by the new Money Gallery at the British Museum is an important and interesting one in its own right. But if we really want to understand money, we need to embark on a different kind of archaeological expedition. Ours will be a mission to recover and analyse not bullion, coins, or the charred remains of tally sticks—or indeed any thing at all—but ideas, practices, and institutions; and, above all, the idea of abstract economic value, the practice of accounting, and the institution of decentralised transferability.

  As with any excavation, the first question is where to dig. We have seen that if money is indeed the operating system on which we run our societies and economies, the challenge of getting an objective view is an imposing one. Locating a case in which the official monetary system took a holiday, as it did during the Irish bank strike, might have been easy enough; and through it we learned something about the extent to which money really depends upon the state. If we wish to delve more deeply, however, we need to achieve an altogether more radical triangulation: we need to explore a time and a place where money never existed. That may sound like a tall order—but as it happens, we are in luck. Not only do we possess a vivid and detailed description of the age immediately before the invention of money, but that description happens to be contained in two of the greatest poems ever composed.

  THE WRATH OF ACHILLES:

  THE WORLD BEFORE MONEY

  The Iliad and the Odyssey—the two epic poems that represent the earliest surviving products of Greek culture—are celebrated as the fountainheads of all subsequent European literature. But it is not for their literary merits alone that the Homeric epics are valued. The Iliad and the Odyssey also comprise a unique historical record of Greek society and culture during a period of which we otherwise know remarkably little. The great palace civilisations of Knossos and Mycenae that flourished in the second millennium BC left a wealth of archaeological evidence. To understand the city states of classical Greece that emerged from the mid-eighth century BC onwards, we can turn not only to their art and architecture but to their literature and philosophy. But in between these two periods is an era for which almost no evidence of any sort exists: the so-called Greek Dark Ages. When Mycenaean society suddenly collapsed in around 1200 BC—probably as a result of assaults by invading enemies—virtually every vestige of the great civilisation disappeared within a single generation. The monumental palaces with their large populations, wealthy hinterlands, and cosmopolitan connections vanished. The Greek world reverted to a dispersed collection of isolated tribal communities: small, rustic, and illiterate. For the next four centuries almost our sole source for understanding the culture and society of the Greek Aegean is the tradition of oral poetry that culminated in the Homeric epics.

  Fortunately, the canvas of these poems is vast. The Iliad is most famous for its evocative accounts of the carnage of war and the manly excesses of its heroes. A single account of an attack by a lone chieftain can run to over a thousand verses, most of them dedicated to vivid description of the gruesome ways in which he dispatches his enemies.1 But the variety of life depicted in the poems is much broader than the heroic existence alone. In a famous passage of the Iliad describing the shield that the blacksmith-god Hephaestus fashions for Achilles, for example, we learn of Dark Age practice in fields ranging from agriculture to animal husbandry, and from marriage ritual to criminal litigation.2 The subject matter of the Odyssey is more wide-ranging still. The hero Odysseus, returning from Troy, criss-crosses the known world. He is seduced by witches and imprisoned by one-eyed giants. He consorts with shepherds whilst disguised as a vagrant and dines with kings at the grandest palaces of the age. After exhausting all possibilities on earth, he even descends to the Underworld where he encounters his erstwhile brothers-in-arms and commiserates with them on their dreary fate. Yet in all this astonishingly rich panorama of Dark Age society there is something that is conspicuously missing. There is no money.

  To those of us who live in a world where markets and money are the dominant tools for the organisation of social life, this begs an obvious question. If the tribal societies of Dark Age Greece had none of these things, how did they organise themselves? The shock at encountering a society that functions according to completely different rules from one’s own is well captured by the question which the British economist Paul Seabright was asked by the director of bread production in the Russian city of St. Petersburg shortly after the collapse of the Soviet Union. “Please understand that we are keen to move towards a market system,” the former Red Director explained, “but we need to understand how such a system works. Tell me, for example, who is in charge of the supply of bread to the population of London?”3 The answer, of course, is that nobody is in charge—the decentralised system of money and markets i
s what keeps Londoners supplied with everything from Warburtons sandwich to artisan spelt. But just as the Soviet mind was astonished by the notion that the economy could operate without a plan and a planner to co-ordinate it, our minds are apt to be amazed by the opposite: the idea that society could function without any markets or money at all. What did the job before money and markets existed? The Iliad and Odyssey provide a rich and detailed answer.

  The political apparatus is simple but rigid. It is an aristocratic world of chieftains, clerics, and common soldiers. But the hierarchy is flat: a chieftain amongst his followers seems more like a first among equals than a modern monarch, and Agamemnon, the Greek commander-in-chief at Troy, appears to stand in the same relation to the other chieftains. The relatively modest social distinctions are, however, rigidly observed. When a rancorous foot soldier accuses Agamemnon of arrogance in front of the assembled troops, the chieftain Odysseus responds to the breach of protocol in swift and brutal fashion, beating him with his staff and threatening to strip him and thrash him around the camp. This exercise of naked power, unmediated by any more civilised social institutions, might appal the modern reader. To the Dark Age Greek, nothing could have been more natural and appropriate. “Odysseus has done many thousands of great things for the Greeks before now both in government and in battle,” the poet reports the troops as saying to one another approvingly, “but making this scurrilous chatterbox shut up is really the best of all of them: never again, I’ll wager, will [he] dare to rebuke chieftains in this shameless manner.”4

  So much for the art of politics. How else did Dark Age Greek society organise itself in the absence of money? For the provision of the most basic needs—food, water, and clothing—the answer was simple, since it was essentially an economy of self-sufficient households in which the individual tribesman subsisted on the produce of his own estate. But the poems also emphasise three social institutions that played important roles in organising the community. The Iliad is concerned with the state of war. Here, it is the sharing out of booty following the sacking of a city or the defeat of enemies that is the most important mechanism. As a system for the distribution of income, it was evidently far from perfect. The rules appear to be subject to frequent dispute. Indeed, the plot of the poem turns on the dispute between the Greeks’ best warrior, Achilles, and their commander-in-chief, Agamemnon, over their respective rights to captured booty.

  By the time of the Odyssey, the world is at peace again. The poem follows Odysseus as he wends his way home from Troy, and his son Telemachus as he travels the Aegean in search of his father. A different institution now dominates the scene: the practice of exchanging gifts between chieftains. It was the custom, on receiving or parting from fellow aristocrats, to present gifts—gifts that would be reciprocated on one’s own next visit. The purpose of this primitive form of economic exchange was to express in visible and tangible form the bond between social equals and to retouch the cement of the social infrastructure for the future. Like booty distribution, its rules were sometimes contested: the Trojan War itself was the result of a breach of protocol by Paris, who stole Menelaus’ bride, the beautiful Helen. But outside times of war, it was the most important system of economic interaction in the Dark Age Greek world; one, indeed, so central to its worldview that when another poet writing two centuries or so after Homer’s time wished to capture the essence of the good life in a single verse, he wrote: “Happy the man who has his sons, his hounds, his horses—and a friend from foreign parts.”5

  The raw principle of “might is right” alone, albeit moderated by booty distribution and reciprocal gift-exchange, seems a somewhat threadbare fabric out of which to fashion even a simple society. And indeed the poems describe a third crucial institution that was altogether more profound: the sacrifice of oxen to the gods and the distribution of the roast meat in equal parts to the congregation of the tribe. Through this solemn ritual perhaps the most basic of all principles of Greek political organisation was expressed in visible—indeed, in edible—form: the fact that every male member of the tribe was of equal social worth, and, by the same token, owed an equal obligation to the community as a whole.6

  These three simple mechanisms for organising society in the absence of money—the interlocking institutions of booty distribution, reciprocal gift-exchange, and the distribution of the sacrifice—are far from unique to Dark Age Greece. Rather, modern research in anthropology and comparative history has shown them to be typical of the practices of small-scale, tribal societies.7 Of course, such pre-monetary social institutions have assumed many forms, reflecting the peculiar circumstances and beliefs of the peoples in question. But the anthropologists Maurice Bloch and Jonathan Parry have identified a widespread twofold classification. Comparative studies of societies from Madagascar to the Andes reveal “a similar pattern of two related but separate transactional orders: on the one hand transactions concerned with the reproduction of the long-term social or cosmic order; on the other, a ‘sphere’ of short-term transactions concerned with the arena of individual competition.”8 The pre-monetary institutions of the Homeric world conform to the scheme. On the one hand, there was the primeval institution of the sacrifice and the egalitarian distribution and communal consumption of its roast meat—a ritual expression of tribal solidarity before deity probably inherited from the most distant Indo-European past.9 This was the institution that governed the “long-term transactional order.” On the other, there were the conventions of reciprocal gift-exchange and of booty distribution. These were the rules that governed the “short-term transactional order,” concerned not with cosmic order and harmony between the classes but with the more mundane matter of ensuring that the everyday business of primitive society—drinking and hunting when at peace; rape and pillage when at war—did not dissolve into chaos.

  ANCIENT MESOPOTAMIA: THE UR-BUREAUCRACY

  Yet the primordial social practices described in the Homeric epics and attested in the Aegean archaeological evidence were far from the only known means of organising society in the era of the Greek Dark Ages. A mere thousand miles to the east were civilisations much older, much larger, and much more sophisticated. These were the ancient riparian societies of Mesopotamia. In stark contrast to the rocky, mountainous, seaboard geography of most of the Greek world, Mesopotamia was a landscape of tremendous fertility, encompassing the rolling hills of the Fertile Crescent in the north and the rich alluvial plain of the Tigris and Euphrates rivers in the south. No doubt it is on account of these basic environmental conditions that Mesopotamia can claim to be the birthplace of so many of the basic aspects of human civilisation. It is close to the northern reaches of the Euphrates, in modern-day Turkey, that agriculture seems to have been invented and the very earliest evidence of sedentary human settlement has been found.10 It was in the delta of the two great Mesopotamian rivers, in modern-day Iraq, that the technique of irrigation appears to have been first developed.

  These fundamental scientific discoveries permitted what were, by the standards of the era, vast concentrations of people—and as a result, the development of Mesopotamia’s greatest and most influential social innovation: the city. By the early third millennium bc, the city of Uruk was thriving on the banks of the Euphrates in the far south, covering five and a half square kilometres and housing thousands of inhabitants.11 But Uruk was only the pioneer of a number of great city states that flourished throughout Mesopotamia, and which a thousand years later would be unified by the world’s first regional state, headquartered in the great metropolis of Ur.12 By the beginning of the second millennium bc, more than sixty thousand people lived within the city itself. In its hinterland, meanwhile, thousands of hectares of land were under cultivation for dates, sesame, and cereals, and hundreds more were devoted to dairy farming and sheep herding. There were fish farms and reed factories in the marshes of the south, and numerous artisans’ operations in the city itself making pottery, reedwork, and prestige goods for use in religious ritual. The scale and divers
ity of these activities, and their concentration in a single centre of population, were unimaginable in Dark Age Greece.

  Unsurprisingly, the social system that developed was also radically different from the primitive tribalism of the Dark Age Greek world. Ultimate power in Ur was shared between the palace—the seat of a semi-divine king who combined the roles of military leader and chief justice—and the temples—home both to the deities who were believed to regulate the universe, and to an extensive clerical bureaucracy whose job it was to do the same for the economy of the city on earth. Monumental temple architecture dominated the centre of the city—the great ziggurat dedicated to the god Nanna which still stands today; the temple of his heavenly spouse Ningal; and the Ganunmah, a vast storehouse which also served as the headquarters of the clerical administration.13 These officials choreographed virtually every aspect of Ur’s economy: “[t]he fields, the herds, and the marshes were owned mainly by the temples, who used citizens to take care of the daily work. The temple administrators were always, however, the ultimate authority.”14 The contrast with Greece could not be more stark. In Mesopotamia, geography and climate led to scale and complexity, which in turn led to the world’s first bureaucratic society—and its first command economy.15