‘From Bronze to Bitcoin’: Ponderings pertaining to the “pocket”

Very few of us have a “hole in the heart” issue, but most of us have the “hole in the pocket” issue. The proposed tax increases will make it more acute for many Lankans. I read a book with a difference with much interest, which highlights the memories of money in tracing its origins. Interestingly, it was a gift I received on Teachers’ Day 2022, from one of my most competent MBA learning partners who is now a visiting faculty of PIM. Today’s column is on the contents of the book titled “Money” by Jacob Goldstein in relation to Sri Lankan context. 

Overview 

What is money can be answered in many ways. It is a medium of exchange that allows individuals as well as institutions to obtain what they need to survive and thrive. Bartering was one way that people exchanged goods for other goods before money was created. Similar to gold and other precious metals, money has worth because for most people it represents something valuable and exchangeable. As in most of the cases, fiat money is government-issued currency that is not backed by a physical commodity but by the stability of the issuing government. In essence, money is a unit of account and a socially accepted standard unit with which things are priced. 

Jacob Goldstein, an American Journalist, and the co-host of the popular podcast Planet Money provides a well-researched and reflective look at how money is a made-up thing that has evolved over time to suit humanity’s changing needs. As he elaborates, money only works because we all agree to believe in it. In Money, Jacob Goldstein shows how money is a useful fiction that has shaped societies for thousands of years, from the rise of coins in ancient Greece to the first stock market in Amsterdam to the emergence of shadow banking in the 21st century.

Book in a nutshell 

At the heart of the story are the fringe thinkers and world leaders who reimagined money. Kublai Khan, the Mongol emperor, created paper money backed by nothing, centuries before it appeared in the west. John Law, a professional gambler and convicted murderer, brought modern money to France (and destroyed the country’s economy). The cypherpunks, a group of radical libertarian computer programmers, paved the way for bitcoin.

One thing they all realised: what counts as money (and what doesn’t) is the result of choices we make, and those choices have a profound effect on who gets more stuff and who gets less, who gets to take risks when times are good, and who gets screwed when things go bad. Lively, accessible, and full of interesting details (like the 43-pound copper coins that 17th-century Swedes carried strapped to their backs), Money is the story of the choices that gave us money as we know it today.

Planet Money 

It is an interesting podcast where Jacob Goldstein, our author is a co-host. Imagine you could call up a friend and say, “Meet me at the bar and tell me what’s going on with the economy.” Now imagine that’s actually a fun evening. “That’s what we’re going for at Planet Money”, says Jacob. 

Since Planet Money launched in 2008 during the financial crisis, it has won many awards including a Peabody and an Edward R. Murrow Award for our investigation into Wells Fargo’s retaliation against whistle-blowers. “By the time I got to Planet Money, the acute phase of the financial collapse was over, and we started looking at less urgent but more fundamental subjects”, observes Jacob. “In 2011, we went on the radio show This American Life to ask the question I’d been wrestling with: “What is money?”

“Money feels cold and mathematical and outside the realm of fuzzy human relationships”, opines Jacob. “It isn’t. Money is a made-up thing, a shared fiction. Money is fundamentally, unalterably social. The social part of money—the “shared” in “shared fiction”—is exactly what makes it money. Otherwise, it’s just a chunk of metal, or a piece of paper, or, in the case of most money today, just a number stored on a bank’s computers.”

“Like fiction, money has changed profoundly over time, and not in a steady or gentle way. When you look back, you see long periods of relative stability, and then suddenly, in some corner of the world, money goes bananas. Some wild genius has a new idea, or the world changes in some fundamental way that demands a new kind of money, or a financial collapse causes the monetary version of an existential crisis. The outcome is a profound change in the basic idea of money—what it is, who gets to create it, what it’s supposed to do.”

“What counts as money (and what doesn’t) is the result of choices we make, and those choices have a profound effect on who gets more stuff and who gets less, who gets to take risks when times are good, and who gets screwed when things go bad. Our choices about money gave us the world we live in now: the world where, when a pandemic hit in the spring of 2020, central banks could create trillions of dollars and euros and yen out of thin air in an effort to fight an economic collapse. In the future we’ll make different choices, and money will change again.”

Origins of money

Jacob Goldstein narrates the origins of money in an interesting manner. Adam Smith had said the same thing a hundred years earlier, and Aristotle had said something similar a few thousand years before that. “This theory, that money emerged from barter, is elegant and powerful and intuitive, but it suffers from one key weakness: there’s no evidence that it’s true. “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money,” the anthropologist Caroline Humphrey wrote in 1985, summarizing what anthropologists and historians had been pointing out for decades.”

“The barter story reduces money to something cold and simple and objective: a tool for impersonal exchange. In fact, money is something much deeper and more complex”, observes Jacob. “People in pre-money societies were largely self-sufficient. They killed or grew or found their food, and they made their own stuff. There was some trade, but often it was part of formal rituals with strict norms of giving and getting. Money arose from these formal rituals at least as much as it did from barter.”

According to Jacob, “money is not just some accounting device that makes exchange and saving more convenient”. “It’s a deep part of the social fabric, bound up with blood and lust. No wonder we get so worked up over it.”

Money changes the mighty

In the annals of history, Greek towns started constructing public buildings and shared waterworks. The book illustrates the use of money therein. It was the classic setting for an economy that revolved around a system of tribute and redistribution, controlled by a king or priest, which was still common in the civilisations to the east. But instead of creating top-down mini-kingdoms, the Greeks created something new. They called it the “polis,” a word whose standard translation, “city-state,” is so boring and generic that you could almost overlook the fact that the polis is the origin of much of political and economic life in the West. Not coincidentally, it was also the place where the first thing we would recognise today as money really took off.

“Around 600 BC, Greece’s neighbour Lydia, a kingdom in present-day Turkey, was mining a lot of a gold-silver alloy called electrum”, narrates Jacob. This presented a kind of ancient first-world problem for the Lydians because they had to assess the ratio of gold and silver in each piece to figure out its value. Somebody in Lydia came up with a clever solution: they started taking lumps of electrum with a consistent ratio of gold to silver, breaking them into standard sizes, and stamping the image of a lion onto each lump. So, every lump of a given size had the same value as every other lump of that size. The Lydians had invented coins. Soon, they took the next step: they started minting coins of pure silver and pure gold.”

“Standardized lumps of metal were exactly what the city-states needed to build their new kind of society—a society too big to run on familial reciprocity but too egalitarian to run on tribute—and soon there were a hundred different mints spread across Greece making silver coins. Within a few more decades, the money-ish things the Greeks had been using to measure value and exchange goods (iron cooking spits, lumps of silver) weren’t money-ish anymore. Money was coins, and coins were money.” “Coins transformed daily life in Greece. Each Greek city-state had a public space called the agora where citizens gathered to hear speeches and talk about the news and in some cases have formal meetings of the citizens. Around the time coins arrived, people started showing up at the agora with stuff to sell. Soon the agora became the market—this new kind of place where ordinary people went to buy and sell cloth and figs and pots and everything else. The agora also continued to be a place for public discussion, but in the long run shopping won out over public discourse. In modern Greek, the word agora is a noun that means market, and a verb that means to buy.”

As the story continues, people flowed into the new wage-based economy. Women sold ribbons and picked grapes, though it was considered a sign of desperation when a citizen’s wife had to work for money. When the Athenians built a new temple on the Acropolis in the fifth century, slaves did a lot of the work, but wage labourers did some of the detail finishes, like carving the fluting into the columns at the front of the temple. Because a random accounting tablet happened to survive, we know that the slaves worked almost every day, but the wage labourers worked less than two-thirds of the time. Were the labourers choosing to take time off because they preferred to do something else? Or were they denied work that they needed to survive? As the scholar David Schaps asked, was it “the blessing of leisure or the curse of unemployment”?

“The spread of coins—the rise of money—made people freer and gave them more opportunities to leave the life they’d been born into. It also made people more isolated and vulnerable,” opines the author. 

Way forward  

“One of the big lessons of the book for me is that money has changed again and again” reflects Jacob. “So, we’re not done. Money is going to continue to change, and I think it was hard for me to really feel that lesson. I think there’s such a strong tendency to innately feel like the way the world works is the default setting. But in fact, there are lots of different ways to do money, have banks or not have banks, and the way we do money will almost certainly continue to change. And I think I am much more aware of that and much humbler about trying to predict what’s going to happen, or even what would be good or bad.”

At a time, we are pressed for money, reading a book titled “Money” may offer fresh insights not only to earn but also to save in being cost-conscious. “When I was young, I thought that money was the most important thing in life; now that I am old, I know that it is”, so said Oscar Wilde in highlighting the necessity of it. We Sri Lankans should learn how to be earn legitimately, how to pay the dues honourably and how to demand the Government to be accountable in using the collected taxes wisely and transparently. 

(The writer is the immediate past Director of the Postgraduate Institute of Management, and can be reached through [email protected], [email protected] or www.ajanthadharmasiri.info.)