While the banking crisis alerted many to the damaging effects our financial structure can have on social wellbeing, how many of us go to the deeper cause of the malaise, namely money itself? For, as Di Muzio and Robbins put it in this groundbreaking new book, ‘different kinds of money or monetary systems produce very different effects in society and serve to illustrate how we can’t take money for granted’ (6). As its name implies, this book is very different to the largely technical treatments of the subject by financiers and economists, which in the opinion of its authors never do justice to the many ways in which ‘money manipulates us and is manipulated by us’ (1). Thus they see it as being far more than a ‘neutral veil’ over the economy but rather as a fundamental shaper of society and of power relations. As they write: ‘We cannot emphasize the point enough that our present monetary order is a historical creation born in a period of income and wealth hierarchy, a fossil fuel revolution, colonialism and a limited democracy for the propertied’ (77). The authors use two main approaches to demystify money: historical and anthropological. They offer a brief history of the many different monetary systems that have existed throughout human history and a useful periodization of world history according to the monetary systems that dominated: money as an accounting system without transferrable tokens (Mesopotamia, third millennium BC); precious metal coinage systems (Asia Minor, c700BC to early 20th century); dual systems of precious metal coinage and credit money (15th to early 20th centuries) and today’s ‘pure capitalist credit-money system’ (mid-20th century onwards) (56). This helps make the point that ‘how money is created, defined, distributed, used and controlled makes a huge difference in our society’ (33). It is the anthropological approach that richly illustrates the deep social and cultural effects of changing monetary systems. Di Muzio and Robbins’s examination of the impact of the introduction of European monetary systems on the Tiv people of Nigeria and the Kwakiutl of British Columbia are among the most fascinating and insightful sections of the book as they illustrate how the imposition of European money and tax systems ‘has profoundly affected many traditional societies by changing the way people compete for status and redistributing power’, benefiting some more than others (10). Of course, this was not all negative as subaltern groups in highly stratified societies found means to challenge traditional elites, but it also introduced new inequalities and hierarchies based now on access to money. As the authors repeat in a number of places, the possession of money gives people a claim over others, over natural resources and over society itself. Thus they consider ‘one of the most significant consequences of a monetary system that uses money as a unit of value is the continual commodification of nature, power and social relations’ (28). Money can buy almost anything people want but the problem is that people tend to want only what money can buy. In these ways, the authors skillfully describe the deep consequences of the monetization of our social systems. In its examination of modern money systems, the book is equally insightful. It points to the deep tensions for society that arise from different understandings of money. So, if we understand money as a means of exchange, then it becomes a measure of economic activity and the more of it in circulation the better. However, if we see money as a store of value, those who have a lot of it want to ensure it is scarce so that it increases its value. Therefore people’s interests are invested in different understandings of money: those with lower incomes or the unemployed want more money in circulation to improve their lives but the wealthy want money to be scarce to hold its value. This is sometimes reduced to the tension between combating unemployment and keeping inflation low. And these different understandings are then translated by politicians into mandates for central banks – the US Fed has a dual mandate to keep inflation and unemployment low whereas the European Central Bank is mandated only to keep inflation low. Perhaps the core argument of the book is that modern money is the creation of private interests, namely commercial banks who make interest-bearing loans. Basically, the authors argue, banks create new money out of nothing. For example, in the US notes and coins make up only about 11% of the money supply while the remainder exists as digital entries in companies. They conclude: ‘Our entire money supply is effectively on loan from the banks. Interest must be paid on most of the money in the economy. This interest transfers wealth and income from the bottom to the top’ (82). We are therefore moving away from a money system based on commodity money (coins, or notes whose value is tied to a commodity like silver or gold) which has been dominant for centuries, to a credit system. Among the consequences is the need for perpetual growth to pay back debt, growing inequality in wealth distribution, intense consumption of energy and natural resources, and liberalized capital controls to facilitate the expansion of global extraction and production. The authors conclude that ‘the present monetary system is undemocratic, unfair and unstable’ so that ‘alternatives must be sought’ (42). The final chapter outlines some of these alternatives such as the Austrian town of Wörgl which issued free money notes whose value decreased the longer they were held, thus stimulating economic activity. It examines various forms of local currencies, and a public banking system which lends out no more than can be covered by their reserves and operating in the public interest. While they outline the operation of bitcoin, they appear skeptical about its durability. But they do urge that we change our current system of privately issued, interest-bearing credit money before we hit rock bottom again. © Oxford University Press and Community Development Journal. 2018 All rights reserved. For permissions, please email: firstname.lastname@example.org
Community Development Journal – Oxford University Press
Published: Feb 14, 2018
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