In the wake of the 2008 financial collapse, there have been a number of studies concerning the nature and history of money and its relationship to social life. Christine Desan's new book on making money in England from the seventh through eighteenth centuries is much, much more than a voguish response to recent events. However, given the continuing turmoil in global markets, and the attrition of civil society and political extremism emerging out of the politics of austerity, the appearance of Making Money provides an opportunity to ask why historians have waited so long before getting to this topic? The best explanation, it seems, is self-induced myopia dating back to the late nineteenth-century and a controversy within German Historicism from which economics emerged as a more or less distinct and separate field of inquiry. It was this now rarely reflected upon controversy that produced the "Austrian School"--originally a pejorative title intended to emphasize the provinciality of historicism's critics--which with others pursued abstract and mathematical approaches to economics in which money featured as an otherwise neutral medium of exchange and mere facilitator of trade. By the late twentieth century assorted economists, bankers, European politicians, and business leaders were sufficiently confident in their (mis)understanding of the apolitical character and limited function of money to launch a series of monetary experiments culminating with the single European currency. [1] How they (and we) must now wish that they had read Desan's study before plumping for the ill-fated currency union. Money, it turns out, is not a thing and very far from neutral in the creation and maintenance of markets and exchange. Money is a practice and process which is managed by groups and governments to achieve the very thing that the economists' abstractions obscure (hence our myopia): money is "a way to mark value, maintain it evenly as a means of payment across real time and place, and pass it among participants." Thus making money is, in essence, a governance project charged with producing practices and entities that are at once intimate and impersonal, material and artificial, and which are profoundly sensitive to and influential over the contexts within which they are produced and which, not surprisingly, change over time.
The book opens with a review of the tenacious mythologies concerning money's origins. First up is the myth of money as an exchange commodity that appears more or less spontaneously in the market in response to the inconveniences of barter exchange. This story is usually traced to Adam Smith's tale, in The Wealth of Nations (1776), of the difficulties experienced by apocryphal butchers, bakers, and brewers, but it can be found across the centuries as far back as Aristotle. Intent on tackling classical political economy on its own terms, Marx accepted its conception of commodity money and focused on its role in reifying and thereby expropriating labour's surplus value. Thus whether welcomed or condemned money was cast in instrumentalist terms as little more than a provider of liquidity. By the early nineteenth-century earlier debates concerning the relationship between intrinsic/silver and extrinsic/official value of coin were supplanted by the growth of paper money sustained by social convention--individuals valuing money because they expected others to do likewise. These mythologies of spontaneous creation and normative acceptance obscured money's artificiality and the power structures that create it, and naturalized the development of market economies in which individuals freed from social contexts pursued their interests and accumulate wealth as money. There is no shortage of studies of the processes that underpinned this disembedding of economic practices and the creation of homo economicus across the medieval and early modern eras. Desan's singular achievement has been to not only synthesize a vast literature but to also produce a richly detailed, compelling, and original account of how the development of market commerce and capitalism was largely dependent upon the transformation of the ways in which people thought about and made their money.
The story begins with the sixth-century reconstruction of political power in Anglo-Saxon lands and resort to tokens distributed by chiefs to acknowledge contributions to defense and the common good. When these tokens circulated back into the hands of the issuer and exonerated holders for contributions otherwise due, money was effectively reintroduced following a long absence dating back four centuries or so to the collapse of the Roman empire. The next four chapters take us through the medieval period beginning in the late twelfth century and the minting and sale of coin to meet private requirements and public demand. English coins, particularly the "just penny," were carefully made and regulated, creating a currency that provided effective purchasing power and so circulated easily. The development of the common law writ of debt bolstered the status and value of coins by treating them as distinct from bullion and providing for the recovery of public/face rather than intrinsic values. The penetration of coin encouraged the rise of thirteenth-century fairs and market towns, as farmers were drawn into exchange to secure the coin needed to pay rents and taxes. Shortages encouraged clippers and forgers and the use of tokens from abroad, complicating disputes concerning the relationship between face and intrinsic value. Desan conducts the reader through detailed and occasionally dense discussions of the controversies thrown up by having to reconcile coins' compound value and its count and the related problems of crying values up and down and the routine need for recalibration, devaluation, and legal and constitutional engineering. In general, England's determination to avoid debasement fostered a chronic shortage of small change--mints not being keen to strike smaller value coins because of the expense--leading to more clipping and counterfeiting. In the fourteenth century a dearth of silver prompted the unintended expansion of the money supply when the crown used tallies to spend future revenues and holders passed their tallies from hand-to-hand creating a medium out of public debt. Despite this innovation the standard medieval complaint remained the lack of sufficient money to go round. The currency was too valuable to meet the need for small sums in everyday trade. More productively, a strong currency and effective money management provided for an alliance between the sovereign and a landed elite that was replicated, with some variation, across Europe.
The major transformation at the center of the book is the shift from the commodity money which predominated until the late seventeenth century to the invention of bank money which displaced it and became the major form down to our own time. When the James I came to the English throne in 1603 the money supply looked much the same as it had since the Middle Ages; by the time of the collapse of the Stuart dynasty at the end of the century new forms of currency were beginning to prevail, in particular coins minted free of charge, bank notes, and interest-bearing instruments derived from personal and public debt. The back story relates to the decline of government revenue as a portion of national income beginning in the 1550s. This left Tudor and early Stuart monarchs with less fiscal capacity than their fourteenth-century peers. In response they pursued various and unpopular debasement schemes that disturbed and ultimately sundered the longstanding alliances between crown and leading lords and financiers. The seventeenth-century Civil Wars effectively destroyed the royal prerogative as a source of income and left control of taxation with Parliament. Beginning in the middle decades various monetary innovations aimed at solving the age old problem of insufficiency, ranging from the assigning of personal paper obligation, to the creation of interest-bearing government bonds, and the use of paper bills of credit. Following the 1688 Glorious Revolution, when the newly-installed William and Mary needed funds to fight the French, they and their supporters drew upon these decades of experimentation and established the Bank of England (1694), setting the nation on a new course in the ways in which talked about and made money.
Whereas previously monarchs had charged to turn bullion into coin, and traded away attributes of their money making prerogative, now they handed over their sovereign right to private hands which created coin for free (subsidized by tax revenues) and introduced additional sources of money, in particular interest-bearing and negotiable bank notes. This cheaper and more liquid credit-based paper currency provided for the rapid circulation of debt obligations promoting and intensifying market transactions and transforming their relationship to the state. Money was free to users and governments borrowed funds at interest from banks which managed credit and distributed profits in the form of interest to shareholders. By 1720s the British state was collecting ten times the tax revenues it had in 1640 and this financial muscle, along with its ability to borrow at home and abroad, underpinned the inexorable growth of domestic and imperial commerce. By the time of the Napoleonic Wars the state was collecting thirty-six times the revenue of the mid seventeenth century. Desan takes issue with Douglas North and Barry Weingast's argument concerning the salutary effects of a limited monarchy and new institutions guaranteeing debt payments and property rights in encouraging the growth of a market economy. In this telling the constitutional turn of the new regime was less to exit the market than to make money and so the market in a different way.
Needless to say this brief review in no way does justice to the narrative reconstruction, eye-watering detail, and historiographical engagement which will surely make Desan's text the definitive account for some time to come. One more brief observation, relating to the age old problem of the slippage between money's intrinsic and nominal value brings us up to the modern day. For centuries money politics had revolved around the difference between intrinsic value of metal/commodity coin and the nominal or face value set by the sovereign. The creation of bank money was unsurprisingly by extensive debate on this and other themes which continue to today. In particular credit theorists saw huge potential for increasing the circulating medium of exchange using paper currencies backed by the promise of expanded commerce and future tax returns. Critics feared the inflationary and destabilizing effects of such emissions, especially on those already holding wealth and assets. In the 1690s this was the essence of the debate concerning the recall and reissue of England's badly clipped and adulterated coin. One side argued for lowering of silver content and increase in coin with higher nominal values to meet demand, effectively counselling the Bank to behave in much the same way as a medieval monarch. Their opponents, and in particular John Locke, argued that coin should be equivalent to traders' silver exchanged across international borders, thereby arguing for the preeminence of intrinsic over nominal value effectively naturalizing the value of money favoring weight over count. With others Desan identifies Locke's reasoning with a desire to free money and contracts from the arbitrary influence of governments, leaving it to the consensus of strangers acting freely according to the elemental logic of the "market." Although this move from count to weight was soon eclipsed, by the predominance of paper bank notes and coins of little or no intrinsic value, its logic lived in the debates regarding hard v soft money, the gold standard and others forms of backing down to the collapse of the Euro and the fate of debtor states. Rather than emerging spontaneously from trade, as Smith would later argue, money was created and designed to enable markets and trade. There was no invisible hand at work in the dawn of market societies. Then as now, the fingerprints of public authorities and their business allies were all over the money they made and which, in circulating, made capitalism.
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Notes:
1. The controversy, methodenstreit, is discussed in Geoffrey Ingham, "On the Underdevelopment of the 'Sociology of Money'," Acta Sociologica 41 (1998): 3-18 and his The Nature of Money (Cambridge: Polity, 2004). The story of Europe's post-war monetary history culminating with the Euro and its collapse is well told by Yanis Varoufakis, And the Weak Suffer What They Must?: Europe's Crisis and America's Economic Future (New York: Nation Books, 2016).
2. Douglass C. North and Barry R. Weingast, "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History 49, no. 4 (1989): 803-832.