The Story of Money

New Internationalist, October 1998 | Go to article overview

The Story of Money


1 A cunning invention

Money is ingenious. Less cumbersome than barter, basically it is any medium of exchange a group of people agree to call money. The earliest known record of its use is around 2400 BC in Mesopotamia and Egypt. There are records of money in China and in the Aegean in the 7th century BC, and in 4th century BC India. It has usually emerged when a community has wanted to expand trade with others. But it has also proved useful for paying fines, taxes and levies - and, of course, rewarding labour.

2 A head for money

All sorts of things are used as money. Perhaps the most varied repertoire has been found in Micronesia and Melanesia, where feathers, cloth, teeth and stone, as well as the common cowry shell, feature. Sumatrans of the 15th century used human skulls, while Mexicans of that period favoured cocoa beans. Shells were widely used in India, North America and Africa, while up until the 19th century the Lele people of central Africa favoured cloth. The first people to start making coins from precious metals appear to have been the 7th century BC Lydians, who lived on the Asian coast of the Aegean. Gold, silver, copper and brass became the commonest currency, used by the Chinese, Greeks, Romans, Arabs and Indians. But paper money was already being used in China as early as the Song Dynasty of 960-1279.

3 Immoral income

Ethical qualms have probably always surrounded money. Aristotle despised and distrusted it. Both Jesus of Nazareth and the Prophet Mohammed were acutely aware of the social and moral damage that love of money and the hunger for accumulating it could do. Earning interest by lending money was prohibited in both religions, with some effect until the late Middle Ages. But such qualms ultimately gave way to pecuniary interest and international trade and banking flourished.

4 Spawning capitalism

The Spanish conquistadors could hardly believe the abundance of gold and silver they saw when they first arrived in the Americas in the late 15th century. First they got their hands on it by looting and kidnapping: King Atahualpa of the Incas was held to ransom by Francisco Pizarro in exchange for a room-full of gold. Then they moved on to exploiting the continent's gold and silver deposits, mined by mainly indigenous slave labour under appalling conditions. The massive inflow of precious metals sent Europe into an inflationary spiral, with wages lagging behind prices.

Enterpreneurs could make easy money, the poor became poorer, and capitalism was born.

5 John Law: banker, gambler, murderer

Banking flourished during the European Renaissance in port cities such as Antwerp, Amsterdam, Venice and Genoa. Modern banking, however, began with a Scots gambler named John Law, fleeing a murder charge in England to try his luck in France. He got the go-ahead from the French Regent, Philip Duc d'Orleans, to issue bank-notes in the form of loans against the security of the land of the country. The notes soon gained more credibility than hard coin, fortunes were made overnight and the word 'millionaire' entered the vocabulary. But too many were issued and Law fled France in 1720 leaving broken fortunes, falling prices, depressed business and an enduring suspicion of banking.

6 Making a mint in the colonies

Trade and colonialism had a profound effect on indigenous money systems in Africa, Asia and the Americas. With Portuguese, Dutch, French and British traders and settlers came Western-style money. …

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