In A Treatise on Money (1930) Keynes asserts, against the origin myth
that has money evolving from the barter of commodities by savages, that states
invented money. He distinguishes the way in which debts, prices or purchasing
power are expressed (”money-of-account”) from what is actually
discharged or held (”money-proper”). Money had an
insubstantial form, as money of account, and a substantial form, as money
proper. It was thus always both an idea and an object; we might say, virtual
and real. Money as a convenient means of exchange on the spot, stressed by
precursors such as Smith and Marx, seemed to Keynes less important than the
emergence of a money standard named by law. Moreover, for almost as long as
money proper has existed, it has been recognized that private debts can just
as well be used in the settlement of transactions expressed through the money
of account; and he calls these acknowledgements of debt “bank money”.
The essence of modern state money is that currency of little or no worth
is offered to a people by the government in payment for real goods and services,
as the sole legal means of exchange within the territory and with the obligation
to pay taxes on all transactions using it. Central banks jealously guard the
national monopoly, policing the banks who actually issue most of the money.
During the last two centuries, state money has oscillated between being based
on a commodity (such as gold) and being worthless (’fiat’ or paper money).
In practice most currencies are a hybrid between commodity- and fiat-money.
Keynes named this hybrid “managed money”, when a government seeks
to maintain a relationship of its currency to an objective standard, while
its value is intrinsically artificial.
From the beginning, states and markets were symbiotic. States needed the
revenues from taxation of trade and some commodities as symbols of power;
merchants needed the protection of law and the establishment of a public standard.
Each rested on an individualized concept of society: the state was society
centralized as a single agency and the market rested on private property in
commodities and money. Society conceived of as people belonging to specific
communities and associations was excluded from each of these versions.Heads or tails?
Take a look at any coin. It has two sides. One side contains a symbol of
political authority, most commonly the head of a ruler, hence heads.
The other side tells us what it is worth, its quantitative value in exchange
for other commodities. Rather less obviously, this is called tails.
The two sides are related to each other as top to bottom. One carries the
virtual authority of the state; it is a token of society, the money
of account. The other says that money proper is itself a commodity,
lending precision to trade; it is a real thing.
There is an obvious tension between the two sides of the coin which goes
far deeper than appearances may suggest. For Victorian civilization based
its market economy on money as a commodity, gold. In our century, very much
under Keynesâs influence, political management of money became for a time
normal and then again anathema. Now there is talk once more of “the markets”
reigning supreme and of states losing control over national currencies in
a process of globalization. Yet the evidence of our coinage is that states
and markets are or were each indispensable to money. What states and
markets share is a commitment to founding the economy on impersonal money.
If you drop the coin and someone else picks it up, they can do exactly the
same as you with it. This absence of personal information from the money proper
is what recommends cash to people who prefer their transactions to be illegal.
But a more effective route to economic democracy lies through people participating
in exchange as themselves, not just as the anonymous bearers of cash.
Keynes tried to explain that there were not just two types of money, one
based on a market for precious objects and the other paper notes made out
of thin air, but rather that modern money must be the managed outcome
of the interplay between states and markets. But what if money came from the
people instead? The German romantic, Adam MŸller, in 1816 came up with a new
theory that money expressed the accumulated customs of a nation
or people (Volk); while others, such as Bagehot and Simmel, have
conceived of money as an expression of trust within civil society, locating
value in the management of credit and debt. In the age of electronic money,
other possibilities than heads and tails present themselves. For money is
principally a way of keeping track of what people do with each other. It is
above all information, a measure of transactions. Money should not be left
to the death struggle of the disembodied twins, states and markets. In short,
money might become more meaningful than it has been of late.

The meaning of money
The word money comes from Juno Moneta, whose temple in Rome was where
coins were struck, making it an early mint. Most European languages
retain “money” for coinage (French monnaie, Dutch munt
etc.), using another word for money in general, such as silver, cattle
or payment. Moneta was the goddess of memory and mother of the Muses. Her
name was derived from the Latin verb moneo whose first meaning is “to
remind, bring to oneâs recollection” (other meanings include “to
warn, teach, inform, announce, predict”). For the Romans, money was an
instrument of collective memory which needed divine protection, like the arts.
As such, it was both a memento of the past and a sign of the future.
A lot more circulates by means of money than the goods and services it buys.
Money conveys meanings and these tell us a lot about the way human beings
make communities. Money expresses both individual desires and the way we belong
to each other. We need to understand better how we build the infrastructures
of collective existence. How do meanings come to be shared and memory to transcend
the minutiae of personal experience? Memory played an important part in John
Lockeâs philosophy of money. His theory of property rested on the idea of
a person who, by performing labour on the things given by nature to
us in common, made them his own. But, in order to sustain a claim on his property
through time, that person has to remain the same. Property must endure in
order to be property and that depends on memory. So, money expands the capacity
of individuals to stabilize their own personal identity by holding something
durable that embodies the desires and wealth of all members of society.
I would go further. Communities exist by virtue of their membersâ ability
to exchange meanings that are substantially shared between them. The people
form communities to the extent that they understand each other for practical
purposes. And that is why communities operate through culture (meanings held
in common). Money is an important vehicle for this collective sharing.
Communities operate through implicit rules (customs) rather than state-made
laws. They may be large or small. If they regulate their members, they usually
do so informally, relying on the sanction of exclusion rather than punishment.
In the nineteenth century, few believed that the state, an archaic institution
of agrarian civilization, could govern the restless energies of urban commercial
society. Accordingly, ãprimitive” communities were studied to throw light
on the task of building modern societies according to democratic principles.
The first world war put an end to that. Since then the modern state has often
seemed inevitable and small-scale alternatives were hardly relevant. But now
centralized states are in disarray, even though their bureaucracies remain
powerful. The word is out for devolution to less rigidly organized “communities”
or regions. The networks of market economy, amplified by the internet and
fast transport, offer more direct access to the world at large. Cheap information
allows relations at distance to be made more personal. Now we have to think
again about how societies can be organized for their own development.
The meaning of money is that each of us makes it, separately and together.
It is a symbol of our individual relationship to the community. This
relationship may be conceived of much as the state would have it — as a durable
ground on which to stand, anchoring identity in a collective memory whose
concrete symbol is money. Or it may be viewed as a more creative process in
which we each generate the personal credit linking us to society in the form
of multiple communities. The latter, however, requires us to accept that society
rests on nothing more solid than the transient exchanges we participate in.
And that is a step few people are prepared to take at present.

People’s money
Future generations may well conclude that we are passing
through a cumulative tax revolt of proportions not seen since the end of the
Roman empire. The bureaucratic power of states rests on coercion. Revenue
collection, both public and private, depends on the authorities being able
to force people to pay through the threat of punishment; and territorial monopoly
is indispensable to both. This, for all their conflicts of interest, underlies
the continuing alliance between large corporations and national governments.
The issue is whether borderless trade at the speed of light will permit governments
and corporations still to compel payment of their dues.
Nation-states are too big for the small things and too
small for the big things. Central powers will be devolved to regional or local
government bodies, since people are more likely to fund public projects nearer
to home. At the same time, they will seek out more inclusive institutions
(federations, international networks and single-issue pressure groups) better
suited to addressing global problems. The territorial dimension of society
will therefore devolve to more local units. These will retain a modified ability
to coerce revenues from their members, at a level limited by the sanction
of personal mobility. To some extent, support for bodies and projects beyond
the local level will be voluntary because of the scope for evading unwanted
taxes. The US government is, for similar reasons, now seeking to persuade
other public authorities to keep their hands off the internet.
How might public economies be organized without effective
means of coercing payment? The Swiss government has recently released its
stock exchange from state supervision, because it could not make good its
threat to punish offenders. It has encouraged the exchange to draw up its
own rules with the principal sanction of excluding transgressors. This example
is likely to become much more widespread with the erosion of territorial power.
People will then have to turn to their own forms of association and to more
informal means of regulation. We could participate, on our own terms, in many
forms of money and in the circuits of exchange corresponding to them.
Modern bureaucracy, as embodied in law, markets and science,
has undermined the meaningful attachment of persons to the social order of
which they are a part. It follows that, when bureaucracy fails, the means
of personal connection will have to be reinvented. There are many antecedents
for building communities on the basis of individual members’ moral and
religious commitment. The growth of NGOs financed by charitable donations
could likewise be enrolled in expanding this point. Marcel Mauss was far-sighted
when he sought to trace the foundations of the modern economy to its origin
in the gift, rather than in barter as the conventional myth holds.
Mauss’s emphasis is consistent with the idea of money
as personal credit, linked less to the history of state coinage than to the
acknowledgement of private debt. I have suggested that the meaning of money
lies in the myriad acts of remembering that link individuals to their communities.
The need to keep track of proliferating connections with others is mediated
by money as a means of collective memory. People will voluntarily enter circuits
of exchange based on special currencies. At the other extreme, we will be
able to participate as individuals in global markets of infinite scope, using
international moneys of account (such as the euro), electronic payment systems
of various sorts or even direct barter via the internet. In many ways, it
will be a world whose plurality of association, even fragmentation, will resemble
feudalism more than the Roman empire.
In such a world, one currency cannot possibly meet all
the needs of a diversified region’s inhabitants. The shift to ever more insubstantial
versions of money proper — from metals to paper to bits — has exposed the
limitations of central bank monopolies, reduced now to maintaining a single
money of account that cannot equally accommodate the economic interests of
its parts. In response, people have already started generating their own money,
not just as isolated alternatives, but in multiple forms, offering individuals
a variety of community currencies linked by increasingly sophisticated electronic
payment systems.

The euro
The technical form of money is becoming ever more insubstantial — from precious
metals to paper notes to ledger entries to electronic digits. In the process
money is revealed as pure information and its function as an accounting device
(money of account) takes precedence over its form as circulating objects (currency
or money proper). The euro began life, for two years, in a wholly virtual
form, as money of account, without an objective existence as currency. During
this time, it lost over 20% of its value against the dollar, reflecting global
financial markets driven by exchange of instruments derived in all sorts of
imagined ways from assets with a monetary value, including money itself. This
gave the arrival of the notes and coins last January a tangible objectivity
in a world of runaway intangibles. The banks of course will still create over
90% of all euros in the form of loans, but the actual currency seemed above
all to be a symbol of a new political era. Some people were reported to have
used their starter kits to make a display on the living room table. Almost
all suppliers took advantage of the switch to round prices upwards. Apart
from this, given that the participating national currencies had been linked
together within EMU for a decade or more, the euro seems to have made little
difference to people’s experience of money either as an idea or as an object.
What about heads or tails? Has the euro altered the balance between states
and markets on which so much of twentieth century economic history hinged?
The euro may not be a national currency, but it does aim to be federal, like
the dollar, and the twelve participating countries represent in effect a league
of states. Joining a larger currency bloc is a way of trying to cope with
“the markets” — the global tide of virtual money which threatens
to swamp the independence of national economies. But the euro is still a form
of state money and its management is likely to be even less democratically
accountable to the public than its national precursors. The euro is in principle
a throwback to the Bretton Woods era of fixed parity exchange rates, at least
for the participating countries, and it does not take much imagination to
figure out that some parts of the European economy will suffer from its rigidity.
At least the euro coins have generally dispensed with the heads of rulers.
The economic destiny of 300 million Europeans is
now tied to the fortunes of a single currency whose management cannot possibly
meet their varied needs and interests. If government of modern societies from
a fixed central point has always been anomalous, this is even more likely
to be true of Europe in the near future. Its constituent states will come
under pressure from their own people for more flexible instruments of economic
management. The euro cannot do the job all by itself. National monopolies
of money have in any case only been around since the 1850s. Now would be a
good time to recognize the need for a variety of monetary instruments, for
as many in fact as our communities.
An editorial in the French newspaper, Libération, of 1^st
January 2002 celebrated the euro as a revival of the spirit of the Roman empire
under the heading ‘Rubicon’:

Moneta returns to claim her cultural legacy and a left-wing newspaper temporarily
abandons its republicanism to invoke the idea of empire. If money is memory,
then the euro provokes very long memories indeed, as well as a degree of amnesia.
Whatever we may think of Rome’s political system, the promise of overcoming
the fragmentation of European sovereignty inherited from feudalism is indeed
the huge symbolic prize conferred by monetary union. The European Union is
a community, not a state; and its founding principle of subsidiarity ensures
that there is room for many levels of community underneath. Ironically, by
suppressing their own national currencies, some EU countries may encourage
the formation of parallel exchange circuits, employing virtual deutschmarks
or francs as community currencies. There is a good deal to be said for European
unity in the face of the world economy today; but there is bound to be scope
for less inclusive monetary instruments to complement the euro, just as French
or Parisian identity is hardly erased by a currency that crosses borders in
Europe.
Is the euro a step towards money that genuinely reflects the interests of
people in general? The technical forms of currency are relatively insignificant
– notes, coins, cheques, ledgers, plastic, digits — and the euro embraces
them all. The most important forms concern the money of account and, after
several thousand years of state money linked to scarce commodities, it will
take some effort to embrace another form, people’s money. Territorial states
are an anachronism today. Digitalization encourages a growing separation between
society and landed power. The euro involves only a limited break with the
territorial principle. Its logic is still that of a central bank monopoly
within an expanded territory. The best that can be said for it is that the
national governments of Euroland are likely to be more constrained in their
ability to raise taxes beyond the norm for the region. And of course, travelers
throughout Europe will be less subject than before to usurious exchange rates.
But against this, the management of the European economy from a single fixed
point will impose costs on regions ill-suited by the common monetary policy.
And it is still the case that people will finance governments and the banks
through the imposition of a monopoly currency as sole legal tender.
There are other democratic possibilities. We can make our own money rather
than pay for the privilege of receiving it from our rulers. Already social
experiments involving community currencies are breaking new ground, thanks
to the possibilities inherent in the new information technologies. The European
Commission is at this time studying the scope of community currencies as one
answer to the problem of electronic micro-payments. The next chapter of monetary
history will be written by new approaches addressing the parts that the euro
alone cannot reach. But the euro itself will probably be with us, well, for
as long as European people think of themselves as a community for some purposes.References
W. Bagehot 1999 (1873) Lombard Street: a Description of the
Money Market. New York: Wiley.
G. Caffentzis 1989 Clipped Coins, Abused Words and Civil Government
in John Locke’s Philosophy of Money. New York: Autonomedia.
J.M. Keynes 1930 A Treatise on Money (two volumes). London:
Macmillan.
M. Mauss 1990 (1925) The Gift: the Form and Reason for Exchange
in Archaic Societies. London: Routledge.
A. Müller 1931 (1816) Elemente der Staatskunst: Theorie des
Geldes. Leipzig: A.Kröne.
G. Simmel 1978 (1900) The Philosophy of Money. London:
Routledge & Kegan Paul.