James C. Scott’s Against the Grain

During my long discursion on the history of money, the academic James C. Scott published an important book called Against the Grain: A Deep History of the First States.

Regular readers will know that this has been a longstanding area of research (or obsession) of mine. I’ve referred to Scott’s work before, particularly Seeing Like A State, which I think is indispensable in understanding many of the political divisions of today (and why left/right is no longer a useful distinction). We’re in an era where much of the “left” is supporting geoengineering and rockets to Mars, and the “right” (at least the alt-right) is criticizing housing projects and suburban sprawl.

It’s a shame that Scott’s book shared the same title as another one of my favorite books on that topic by journalist Richard Manning that came out a while ago: Against the Grain: How Agriculture Hijacked Civilization. Manning’s book is not only a historical account about how the rise of grain agriculture led to war, hierarchy, slavery and sickness, but a no-holds-barred examination of today’s grain-centric agribusiness model, where wheat, corn, soy and sugar are grown in mechanized monocultures and processed by the food industry into highly-addictive junk food implicated in everything from type two diabetes, to depression to Alzheimer’s disease (via inflammation):

Dealing with surplus is a difficult task. The problem begins with the fact that, just like the sex drive, the food drive got ramped up in evolution. If you have a deep, yearning need for food, you’re going to get along better than your neighbor, and over the years that gene is going to be passed on. So you get this creature that got fine-tuned to really need food, especially carbohydrates. Which brings us to the more fundamental question: can we ever deal with sugar? By making more concentrated forms of carbohydrates, we’re playing into something that’s quite addictive and powerful. It’s why we’re so blasted obese. We have access to all this sugar, and we simply cannot control our need for it—that’s genetic.

Now, can we gain the ability to overcome that? I’m not sure. You have to add to this the fact that there’s a lot of money to be made by people who know how to concentrate sugar. They have a real interest in seeing that we don’t overcome these kinds of addictions. In fact, that’s how you control societies—you exploit that basic drive for food. That’s how we train dogs—if you want to make a dog behave properly, you deprive him or give him food. Humans aren’t that much different. We just like to think we are. So as an element of political control, food and food imagery are enormously important.

The Scourge of Agriculture (The Atlantic)

Cancers linked to excess weight make up 40% of all US diagnoses, study finds (The Guardian)

Child and teen obesity spreading across the globe (BBC)

In that interview, Manning also makes this point which got so much attention in Yuval Noah Harari’s blockbuster, Sapiens (which came out years later):

…it’s not just human genes at work here. It’s wheat genes and corn genes—and how they have an influence on us. They took advantage of our ability to travel, our inventiveness, our ability to use tools, to live in a broad number of environments, and our huge need for carbohydrates. Because of our brains’ ability, we were able to spread not only our genes, but wheat’s genes as well. That’s why I make the argument that you have to look at this in terms of wheat domesticating us, too. That co-evolutionary process between humans and our primary food crops is what created the agriculture we see today.

As for the title, I guess Against the Grain is just too clever a title to pass up 🙂

I’m still waiting on the book from the library, but I have seen so many reviews by now that I’m not sure I’ll be able to add too much. What’s interesting to me is the degree to which the idea that civilization was a great leap backward from what we had before is starting to go mainstream.

The old, standard “Whig version” story of directional, inevitable progress is still pretty strong, though. Here’s one reviewer describing how it was articulated in the turn-of-the-century Encyclopedia Britannica:

The Encyclopaedia took its readers through a panorama of universal history, from “the lower status of savagery,” when hunter-gatherers first mastered fire; to the “middle status of barbarism,” when hunters learned to domesticate animals and became herders; to the invention of writing, when humanity “graduated out of barbarism” and entered history. Along the way, humans learned to cultivate grains, such as wheat and rice, which showed them “the value of a fixed abode,” since farmers had to stay near their crops to tend and harvest them. Once people settled down, “a natural consequence was the elaboration of political systems,” property, and a sense of national identity. From there it was a short hop—at least in Edwardian hindsight—to the industrial revolution and free trade.

Some unfortunate peoples, even entire continents such as aboriginal North America and Australia, might fall off the Progress train and have to be picked up by kindly colonists; but the train ran along only one track, and no one would willingly decline to board it…

What made prehistoric hunter-gatherers give up freedom for civilization? (The New Republic)

But,it turns out that the reality was quite different. In fact, hunter-gatherers resisted agriculture. Even where farmers and H-G’s lived side-by-side, the H-G’s (and herders) avoided farming as long as they could. When Europeans equipped “primitive” societies with seeds and hoes and taught them to farm, the natives threw away the implements and ran off into the woods. The dirt farmers of colonial America often ran away to go and live with the nomadic Indians, to the extent that strict laws had to be passed to prevent this (as documented in Sebastian Junger’s recent book Tribe).

At the ‘Man the Hunter’ symposium in Chicago in 1966, Marshall Sahlins drew on research from the likes of Richard B. Lee among the !Kung of the Kalahari to argue that hunter-gatherers enjoyed the ‘original affluent society’. Even in the most marginal environments, he said, hunter-gatherers weren’t engaged in a constant struggle for survival, but had a leisurely lifestyle. Sahlins and his sources may have pushed the argument a little too far, neglecting to consider, for instance, the time spent preparing food (lots of mongongo nuts to crack). But their case was strong enough to deal a severe blow to the idea that farming was salvation for hunter-gatherers: however you cut it, farming involves much higher workloads and incurs more physical ailments than relying on the wild. And the more we discover, as Scott points out, the better a hunter-gatherer diet, health and work-life balance look.

Why did we start farming? (London Review of Books)

So why did they do it? That is a question that nobody know the answer to, but it appears they stumbled into not because it was a better way of life, but due to some sort of pressures beyond their control. As Colin Tudge put it, “People did not invent agriculture and shout for joy; they drifted or were forced into it, protesting all the way.” Rather than taking up agriculture because it presented a better, more secure way of life as the Victorians thought (due to chauvinism and ignorance), it was actually much more unpleasant and much more work.

The shift to agriculture was in some respects…harmful. Osteological research suggests that domiciled Homo sapiens who depended on grains were smaller, less well-nourished and, in the case of women, more likely to be anaemic, than hunter-gatherers. They also found themselves vulnerable to disease and able to maintain their population only through unprecedentedly high birthrates. Scott also suggests that the move from hunting and foraging to agriculture resulted in ‘deskilling’, analogous to the move in the industrial revolution from the master tradesman’s workshop to the textile mill. State taxation compounded the drudgery of raising crops and livestock. Finally, the reliance on only a few crops and livestock made early states vulnerable to collapse, with the reversion to the ‘dark ages’ possibly resulting in an increase in human welfare.

Book Review: Against the Grain: A Deep History of the Earliest States by James C. Scott (London School of Economics)

Circumstances beyond their control must have played a role. Climate change is most commonly implicated. Overpopulation must have played a role, but this raises a chicken-and-egg problem: overpopulation is a problem created by agrarianism, so how could it have caused it?

One novel idea I explored earlier this year was Brian Hayden’s idea that the production of ever-increasing surpluses was part of a strategy by aggrandizing individuals in order to gain political power.

Periodic feasting events were ways to increase social cohesion and deal with uneven production in various climatic biomes–it was a survival strategy for peoples spread-out among a wide geographical area (mountains, plains, wetlands, riparian, etc.). If food was scarce in one area, resources could be pooled. Such feasting/resource pooling regimes were probably the earliest true “civilizations” (albeit before cities). It was also the major way to organize mass labor, which lasted well into the historical period (both Egyptian and Mesopotamian texts testify to celebratory work feasts).

At these events, certain individuals would loan out surplus food and other prestige items in order to lure people in debt to them. Cultural expectations meant that “gifts” would have to repaid and then some (i.e. with interest). These people would get their relatives and allies to work their fingers to the bone in order to produce big surpluses in societies where this was possible, such as horticultural and affluent forager ones. This would be used for feasting. They would then become “Big Men”–tribal leaders lacking “official” status.

Would-be Big-Men would then try and outdo one another by throwing larger, richer feasts than their rivals. Competitive feasting provided an opportunity for aggrandizers to try and outdo one another in a series of power games and status jockeying. But the net effect such power games had across the society was to ramp up food production to unsustainable levels. This, in turn, led to intensification.

At these feasts, highly prized foodstuffs would be used by aggrandizers to lure people into debt and other lopsided obligations, as well as get people to work for them. Manning notes above how food has been traditionally used to control people. And, Hayden speculates, the foods most commonly used were ones with pleasurable or mind-altering effects. One common one was almost certainly alcohol.

He speculates that grains were initially grown not for flavor or for carbohydrates, but for fermentation. It’s fairly certain that alcohol consumption played a major role in feasting events, and it’s notable that the earliest civilizations were all big beer drinkers (Egypt, Mesopotamia, China, Mesoamerica). Most agricultural village societies around the world have some sort of beer drinking/fermentation ritual, as Patrick E. McGovern has documented. The first “recipe” ever written down was for beer brewing. Hayden speculates that early monoliths like Göbekli Tepe and Stonehenge were built as places for such feasting events to take place, wedded to certain religious ideologies (all of them have astronomical orientations), and archaeology tends to confirm this. It’s notable that the earliest sites of domestication/agrarianism we know of are typically in the vicinity of these monoliths.

In other words, the root of this overproduction was human social instincts, and not just purely environmental or climatic factors. Is there some connection between plant/animal domestication and religious ideology? Is it any wonder that religious concepts in these societies transform to become very different from the animist ones of hunter-gatherers? Flannery and Marcus point out that the establishment of a hereditary priesthood that constructs temples and interprets the gods’ wishes (replacing the shaman) is always a marker of the transition from an egalitarian society to a hierarchical one with hereditary leadership. Even in the Bible, king and temple arise more or less simultaneously (e.g. Saul/David/Solomon).

Scott considers whether the Younger Dryas, a period of markedly colder and drier conditions between 12,900 and 11,700 years ago, forced hunter-gatherers into farming. But while the change in climate may have inspired more experimentation with cultivation and herding, the Younger Dryas is too early: communities committed to cereals and livestock didn’t arise until about ten thousand years ago. Scott overlooks another possible factor: religious belief. The discovery of the Neolithic hill-top sanctuary of Göbekli Tepe in southern Turkey in 1994 went against the grain of conventional archaeological understanding of the Neolithic. Here, around 11,000 years ago, hunter-gatherers had constructed a vast complex of massive decorated stone pillars in exactly the same place that domesticated strains of wheat had evolved.

The quantities of food needed to feed the workforce and those who gathered for rituals at Göbekli must have been huge: if the Neolithic gods could persuade people to invest so much effort in construction, and to suffer the physical injuries, ailments and deaths that came along with it, then perhaps expending those extra calories in the fields would have seemed quite trivial. Even then, Göbekli doesn’t help us explain why cereal farming and goat herding took such a hold elsewhere. Personally I find it difficult to resist the theory of unintended self-entrapment into the farming lifestyle, which was then legitimated by Neolithic ideology. We find evidence of burial rituals and skull cults throughout the Fertile Crescent.

Why did we start farming? (London Review of Books)

Scott’s book emphasizes the key role that grain cultivation played in the rise of the early states (even in the title). Cereals grown it river bottoms were easy to assess and tax, unlike other foodstuffs which would ripen at different times of the year, could be hidden, or grown in patches. They were storable and divisible. In some ways, grain may have been the earliest form of money:

Most early crops could not provide a source of taxation. Potatoes and tubers are easily hidden underground. Lentils produce annually and can be eaten as they’re picked. Grains, however, have determinate ripening times, making it easy for the tax collector to show up on time. They cannot be eaten raw. And because grains are so small, you can tax them down to the grain. Unlike squash or yams, grains are easy to transport. Spoilage time is nothing like that of vegetables. All these factors played into the first widespread form of currency.

Is the Collapse of Civilizations A Good Thing? (Big Think)

Grain is special, but for a different reason. It is easy to standardize—to plant in rows or paddies, and store and record in units such as bushels. This makes grain an ideal target for taxation. Unlike underground tubers or legumes, grain grows tall and needs harvesting all at once, so officials can easily estimate annual yields. And unlike fugitive wild foods, grain creates a relatively consistent surplus, allowing a ruling class to skim off peasant laborers’ production through a tax regime of manageable complexity. Grain, in Scott’s lexicon, is the kind of thing a state can see. On this account, the first cities were not so much a great leap forward for humanity as a new mode of exploitation that enabled the world’s first leisured ruling class to live on the sweat of the world’s first peasant-serfs.

What made prehistoric hunter-gatherers give up freedom for civilization? (The New Republic)

It’s worth noting that it wasn’t simply agriculture, but cereal production that relied on artificial irrigation that saw the rise of the first states. The need to coordinate all that labor, partition permanent plots of land, and resolve settlement disputes, must have led to the rise of an elite managerial class, as Ian Welsh points out:

Agriculture didn’t lead immediately to inequality, the original agricultural societies appear to have been quite equal, probably even more so than the late hunter-gatherer societies that preceded them. But increasing surpluses and the need for coordination which arose, especially in hydraulic civilizations (civilizations based around irrigation which is labor intensive and require specialists) led to the rise of inequality. The pharoahs created great monuments, but their subjects did not live nearly as well as hunter-gatherers.

The Right Stuff: What Prosperity Is and Isn’t (Ian Welsh)

Wealth inequality has been increasing for millennia (The Economist)

And sedentism, as I’ve noted, is not so much a product of agriculture as a cause. Likely sedentary societies needed to be around for some time in order to build up the kind of surpluses aggrandizing elites needed to gain power. These probably started as “redistributor chiefs” who justified their role through some combination of martial leadership and religious ideology:

Sedentism does not have its origins in plant and animal domestication. The first stratified states in the Tigris and Euphrates Valley appeared ‘only around 3,100 BCE, more than four millennia after the first crop domestications and sedentism’. Sedentism has its roots in ecologically rich, preagricultural settings, especially wetlands. Agriculture co-existed with mobile lifestyles in which people gathered to harvest crops. Domestication itself is part of a 400,000 year process beginning with the use of fire. Moreover, it is not a process (or simply a process) of humans gaining increasing control over the natural world. People find themselves caring for dogs, creating an ecological niche for mice, ticks, bedbugs and other uninvited guests, and spending their lives ‘strapped to the round of ploughing, planting, weeding, reaping, threshing, grinding, all on behalf of their favorite grains and tending to the daily needs of their livestock’.

This was also noted in the Richard Manning interview, above:

…we always think that agriculture allowed sedentism, which gave people time to create civilization and art. But the evidence that’s emerging from the archeological record suggests that sedentism came first, and then agriculture. This occurred near river mouths, where people depended on seafood, especially salmon. These were probably enormously abundant cultures that had an enormous amount of leisure time—they just had to wait for the salmon runs to occur. There are some good records of those communities, and from the skeleton remains we can see that they got up to 95 percent of their nutrients from salmon and ocean-derived sources. Along the way, they developed highly refined art—something we always associate with agriculture.

Of course, urban societies using irrigation and plow-based agriculture, with their palaces and temples, are very different from horticultural village societies practicing shifting cultivation (which Scott terms “late-Neolithic multispecies resettlement camps.”). This is likely why early agricultural societies were roughly about as egalitarian as their immediate predecessors, as Ian Welsh pointed out above. But once the plow allowed men to wrest control of food production away from the garden plots of women, the fortunes of females declined rapidly. Political control became exclusively centered in the households run by patriarchs, with women becoming little more than chattel. And because there was now property to be passed down, women’s sexual behavior became strictly regulated and monogomy enforced (for commoners but not for elites). Several thousand years of increasing surpluses and population led to the Neolithic “experiment” metastasizing into the first city-states and empires in various parts of the world. This was not a swift process, but instead took thousands of years to develop–longer than all of “recorded” history:

…why did it take so long – about four thousand years – for the city-states to appear? The reason is probably the disease, pestilence and economic fragility of those Neolithic villages. How did they survive and grow at all? Well, although farming would have significantly increased mortality rates in both infants and adults, sedentism would have increased fertility. Mobile hunter-gatherers were effectively limited by the demands of travel to having one child every four years. An increase in fertility that just about outpaced the increase in mortality would account for the slow, steady increase in population in the villages. By 3500 BCE the economic and demographic conditions were in place for a power-grab by would-be leaders.

Why did we start farming? (London Review of Books)

How agriculture grew on us (Leaving Babylon)

Once such societies were established, they were under an obligation to expand. This was due to the depletion of their agricultural resource base thanks to overgrazing, salinization, erosion, deforestation, and numerous other environmental problems caused by agriculture, along with rapid population growth. New farmers require new land, since their birthrates are higher. As such societies expanded, their neighbors had only three options: fight back by adopting similar measures, succumb and be assimilated, or run away. Many did run away, which is why so much of the the world’s inhabitants lived outside of state control until the 1600’s, as Scott points out (Scott calls them ‘Barbarians’; he uses it a term of respect rather than Victorian derision).

Scott also emphasizes the key role played by slavery in agrarian states. In Scott’s view, slavery was absolutely essential to the functioning of the state. Because sedentary, agricultural societies tended to have so much unpleasant “grunt” labor to be done, there was a strong incentive to acquire slaves to do the dirty work required to keep the society running. Three major ways labor was compelled in the ancient world were corvée labor, chattel slavery, and (we often forget) debt bondage. This only ended once we got “energy slaves” to do much of this grunt work for us. Yet even today, we use wage slavery compelled by poverty along with migrant labor to do the grunt work necessary for us. Non-mechanized agricultural labor is still completely dependent on migrant labor in the U.S. and Europe, as are many low-skill, non-automated professions (driver, nanny, gardener, etc.) Ancient slavery was less about skin color or point of origin, as it was in the Americas (where a racial hierarchy was instituted by Europeans). Instead it was simply more of a legal status, much like a temp or migrant worker in countries today (or the Chinese Hukou system):

In the world of states, hunter-gatherers and nomads, one commodity alone dominated all others: people, aka slaves. What agrarian states needed above all else was manpower to cultivate their fields, build their monuments, man their armies and bear and raise their children. With few exceptions, the epidemiological conditions in cities until very recently were so devastating that they could grow only by adding new populations from their hinterlands. They did this in two ways. They took captives in wars: most South-East Asian early state chronicles gauge the success of a war by the number of captives marched back to the capital and resettled there. The Athenians and Spartans might kill the men of a defeated city and burn its crops, but they virtually always brought back the women and children as slaves. And they bought slaves: a slave merchant caravan trailed every Roman war scooping up the slaves it inevitably produced.

The fact is that slaving was at the very centre of state-making. It is impossible to exaggerate the massive effects of this human commodity on stateless societies. Wars between states became a kind of booty capitalism, where the major prize was human traffic. The slave trade then completely transformed the non-state ‘tribal zone’. Some groups specialised in slave-raiding, mounting expeditions against weaker and more isolated groups and then selling them to intermediaries or directly at slave markets. The oldest members of highland groups in Laos, Thailand, Malaysia and Burma can recall their parents’ and grandparents’ memories of slave raids. The fortified, hilltop villages, with thorny, twisting and hidden approaches that early colonists found in parts of South-East Asia and Africa were largely a response to the slave trade.

Crops, Towns, Government (London Review of Books)

In describing the early city-states of Mesopotamia, Scott projects backwards from the historical records of the great slave societies of Greece and Rome. His account of the slaves and the way they were controlled seems strangely familiar. Much like migrant labourers and refugees in Europe today, they came from scattered locations and were separated from their families, demobilised and atomised and hence easier to control. Slaves, like today’s migrants, were used for tasks that were vital to the needs of the elites but were shunned by free men. And slaves, like refugee workers, were gradually integrated into the local population, which reduced the chance of insurrection and was necessary to keep a slave-taking society going. In some early states human domestication took a further step: written records from Uruk use the same age and sex categories to describe labourers and the state-controlled herds of animals. Female slaves were kept for breeding as much as for manual labour.

Why did we start farming? (London Review of Books)

How we Domesticated

I’ve often wondered if, when certain humans learned how to domesticate plants and animals, they used it as much on their fellow man as they did their flora and fauna. In this Aeon article, this passage really struck me:

When humans start treating animals as subordinates, it becomes easier to do the same thing to one another. The first city-states in Mesopotamia were built on this principle of transferring methods of control from creatures to human beings, according to the archaeologist Guillermo Algaze at the University of California in San Diego. Scribes used the same categories to describe captives and temple workers as they used for state-owned cattle.

How domestication changes species including the human (Aeon)

Indeed, the idea that humans domesticated themselves is another key concept in Harari’s Sapiens. But perhaps that domestication was much more “literal” than we have been led to believe. Perhaps human sacrifice was a way for early religious leaders to “cull” individuals who had undesirable traits from their standpoint: independence, aggression, a questioning attitude, etc. Indeed, hunter-gatherers still do not like obeying orders from a boss. I wonder to what extent this process is still going on, especially in modern-day America with its schools, prisons, corporate cubicles, police, military, etc.:

Anthropologists and historians have put forward the ‘social control hypothesis’ of human sacrifice. According to this theory, sacrificial rites served as a function for social elites. Human sacrifice is proposed to have been used by social elites to display their divinely sanctioned power, justify their status, and terrorise underclasses into obedience and subordination. Ultimately, human sacrifice could be used as a tool to help build and maintain systems of social inequality.

How human sacrifice helped to enforce social inequality (Aeon)

How humans (maybe) domesticated themselves (Science News)

And this is very relevent to our recent discussion of money: writing and mathematics were first used as methods of social control. As Janet Gleeson-White points out in this essay, accounting was our first writing technology. Money–and taxes–were an outgrowth of this new communications technology:

War, slavery, rule by élites—all were made easier by another new technology of control: writing. “It is virtually impossible to conceive of even the earliest states without a systematic technology of numerical record keeping,” Scott maintains. All the good things we associate with writing—its use for culture and entertainment and communication and collective memory—were some distance in the future. For half a thousand years after its invention, in Mesopotamia, writing was used exclusively for bookkeeping: “the massive effort through a system of notation to make a society, its manpower, and its production legible to its rulers and temple officials, and to extract grain and labor from it.”

Early tablets consist of “lists, lists and lists,” Scott says, and the subjects of that record-keeping are, in order of frequency, “barley (as rations and taxes), war captives, male and female slaves.” Walter Benjamin, the great German Jewish cultural critic, who committed suicide while trying to escape Nazi-controlled Europe, said that “there is no document of civilization which is not at the same time a document of barbarism.” He meant that every complicated and beautiful thing humanity ever made has, if you look at it long enough, a shadow, a history of oppression.

The Case Against Civilization (The New Yorker)

Collecting cereal grains directly as taxes would have been cumbersome for administrators, which no doubt led to the innovations we’ve been discussing recently: a unit of account and debt/credit records. The temples were the first institutions to create and store surpluses, making them arguably the ancestor to later corporations (and capitalism). They were the first to do economic planning and charge interest. Later, rulers would strongly desire to monetize the economy by issuing coins, because it was far easier to collect coins and record taxes using this method than collecting resources in kind. We’ve already seen how money, markets, and the state are intimately intertwined (and not separate as libertarians claim).

The connection between the earliest writing and domestication/subjugation is powerfully made by this article from the BBC documenting the world’s oldest writing:

In terms of written history, this is the very remote past. But there is also something very direct and almost intimate about it too. You can see fingernail marks in the clay. These neat little symbols and drawings are clearly the work of an intelligent mind.

These were among the first attempts by our human ancestors to try to make a permanent record of their surroundings. What we’re doing now – my writing and your reading – is a direct continuation. But there are glimpses of their lives to suggest that these were tough times. It wasn’t so much a land of milk and honey, but porridge and weak beer.

Even without knowing all the symbols, Dr Dahl says it’s possible to work out the context of many of the messages on these tablets. The numbering system is also understood, making it possible to see that much of this information is about accounts of the ownership and yields from land and people. They are about property and status, not poetry.

This was a simple agricultural society, with a ruling household. Below them was a tier of powerful middle-ranking figures and further below were the majority of workers, who were treated like “cattle with names”. Their rulers have titles or names which reflect this status – the equivalent of being called “Mr One Hundred”, he says – to show the number of people below him.

It’s possible to work out the rations given to these farm labourers. Dr Dahl says they had a diet of barley, which might have been crushed into a form of porridge, and they drank weak beer. The amount of food received by these farm workers hovered barely above the starvation level. However the higher status people might have enjoyed yoghurt, cheese and honey. They also kept goats, sheep and cattle.

For the “upper echelons, life expectancy for some might have been as long as now”, he says. For the poor, he says it might have been as low as in today’s poorest countries.

Breakthrough in world’s oldest undeciphered writing (BBC)

So the earliest writing tends to confirm Scott’s account. And not just Scott’s account, but that of anthropologist James Suzman, who has simultaneously come out with a book about the disappearing way of life of the the !Kung San Bushmen of the Kalahari. This is also reviewed in the New Yorker article, above. These hunter-gatherers are going through today exactly what those people in the Near East experienced roughly 6-8000 years ago, giving us a window into history:

The encounter with modernity has been disastrous for the Bushmen: Suzman’s portrait of the dispossessed, alienated, suffering Ju/’hoansi in their miserable resettlement camps makes that clear. The two books even confirm each other’s account of that sinister new technology called writing. Suzman’s Bushman mentor, !A/ae, “noted that whenever he started work at any new farm, his name would be entered into an employment ledger, documents that over the decades had assumed great mystical power among Ju/’hoansi on the farms. The secrets held by these ledgers evidently had the power to give or withhold pay, issue rations, and determine an individual’s right to stay on any particular farm.”

Writing turned the majority of people into serfs and enabled a sociopathic elite to live well and raise themselves and their offspring above everyone else.

And here we are at the cusp of a brand new “information revolution” where literally our every thought and move can be monitored and tracked by a tiny centralized elite and permanently stored. And yet we’re convinced that this will make all our lives infinitely better! Go back and reread the above. I’m not so sure. I already feel like “cattle with a name” in our brave new nudged, credit-scored, Neoliberal world.

We’re also experiencing another period of rapid climate change and resource depletion, just like that experienced at the outset of the original coming of the state. We’re now doing exactly what they did: intensification, and once again it’s empowering a small sociopathic elite at the cost of the rest of us. And yet Panglossians confidently tell us we’re headed for a peaceful techno-utopia where all new discoveries will be shared with all of us instead of hoarded, and we’ll all live like gods instead of being exterminated like rats because we’re no longer necessary to the powers that be. Doubtless the same con (“We’ll all be better off!!!”) was played on the inhabitants of early states, too. Given the human social instincts noted above, let’s just say I’m not optimistic. Please pass the protein blocks.

Welcome to 2030. I Own Nothing, Have No Privacy, and Life Has Never Been Better (Futurism)

Scott points out that the state is a very novel development, despite what we read in history books. We read about the history of states because states left written history, and we are their descendants. But that doesn’t mean most people lived under them. By Scott’s account, most humans (barbarians) lived outside of nation-states well into the 1500’s:

…Homo sapiens has been around for roughly 200,000 years and left Africa not much earlier than 50,000 years ago. The first fragmentary evidence for domesticated crops occurs roughly 11,000 years ago and the first grain statelets around 5000 years ago, though they were initially insignificant in a global population of perhaps eight million.

More than 97 per cent of human experience, in other words, lies outside the grain-based nation-states in which virtually all of us now live. ‘Until yesterday’, our diet had not been narrowed to the three major grains that today constitute 50 to 60 per cent of the world’s caloric intake: rice, wheat and maize. The circumstances we take for granted are, in fact, of even more recent vintage …Before, say, 1500, most populations had a sporting chance of remaining out of the clutches of states and empires, which were still relatively weak and, given low rates of urbanisation and forest clearance, still had access to foraged foods. On this account, our world of grains and states is a mere blink of the eye (0.25 per cent), in the historical adventure of our species.

Crops, Towns, Government (London Review of Books)

Why a leading political theorist thinks civilization is overrated (VOX)

Wither Collpase?

One of the more provocative ideas from Scott’s book is to question whether the withering away of state capacity–that is, a collapse–is really a bad thing at all!

We need to rethink, accordingly, what we mean when we talk about ancient “dark ages.” Scott’s question is trenchant: “ ‘dark’ for whom and in what respects”? The historical record shows that early cities and states were prone to sudden implosion.

“Over the roughly five millennia of sporadic sedentism before states (seven millennia if we include preagriculture sedentism in Japan and the Ukraine),” he writes, “archaeologists have recorded hundreds of locations that were settled, then abandoned, perhaps resettled, and then again abandoned.” These events are usually spoken of as “collapses,” but Scott invites us to scrutinize that term, too.

When states collapse, fancy buildings stop being built, the élites no longer run things, written records stop being kept, and the mass of the population goes to live somewhere else. Is that a collapse, in terms of living standards, for most people? Human beings mainly lived outside the purview of states until—by Scott’s reckoning—about the year 1600 A.D. Until that date, marking the last two-tenths of one per cent of humanity’s political life, “much of the world’s population might never have met that hallmark of the state: a tax collector.”

Book Review: Against the Grain: A Deep History of the Earliest States by James C. Scott (LSE)

Indeed, is collapse even a relevant concept when discussing history? What, really is collapsing? States can collapse, but cultures transform:

We also need to think about what we apply the term ‘collapse’ to – what exactly was it that collapsed? Very often, it’s suggested that civilisations collapse, but this isn’t quite right. It is more accurate to say that states collapse. States are tangible, identifiable ‘units’ whereas civilisation is a more slippery term referring broadly to sets of traditions. Many historians, including Arnold Toynbee, author of the 12-volume A Study of History (1934-61), have defined and tried to identify ‘civilisations’, but they often come up with different ideas and different numbers. But we have seen that while Mycenaean states collapsed, several strands of Mycenaean material and non-material culture survived – so it would seem wrong to say that their ‘civilisation’ collapsed. Likewise, if we think of Egyptian or Greek or Roman ‘civilisation’, none of these collapsed – they transformed as circumstances and values changed. We might think of each civilisation in a particular way, defined by a particular type of architecture or art or literature – pyramids, temples, amphitheatres, for example – but this reflects our own values and interests.

[…]

States collapsed, civilisations or cultures transformed; people lived through these times and employed their coping strategies – they selectively preserved aspects of their culture and rejected others. Archaeologists, historians and others have a duty to tell the stories of these people, even though the media might find them less satisfactory. And writers who appropriate history for moral purposes need to think carefully about what they are doing and what they are saying – they need to make an effort to get the history as right as possible, rather than dumbing it down to silver-bullet theories.

What the idea of civilisational collapse says about history (Aeon)

Scott looks at the fragility of states–and their propensity to revert to more simplified forms, as simply a necessary and inevitable part of the process of history. Rather than a catastrophe, a reduction in complexity often leads to an increase in personal freedom, social experimentation, autonomy, and even artistic development and cultural expression. The Middle Ages is often portrayed as a “dark age,” but that depiction was an invention of the Renaissance, and “dark” referred to the lack of written historical sources, not necessarily wail and woe. Note that the tools of the oppressor – written records, taxation, slavery, usury and money – all fade during this time period. This is not to dismiss the very real disappearance of technology, epidemic disease and warfare that accompanies a state collapse, but merely to suggest a more nuanced view. The Middle Ages was centered around the values of the Church, and society was reoriented along these lines.

Scott writes about the normalising effects of state collapse. Often it was the best thing possible for a people now emancipated from disease, taxes and labour. In the subsequent ‘dark ages’ – a propaganda term used by the elite – democracy and culture could flourish. Homer’s Iliad and Odyssey date from the dark age of Greece. This is in marked contrast to the consequences of state collapse today, now that there is no longer an external barbarian world to escape into. When Syria collapsed its refugees had no choice but cross the border to another state, whether Lebanon, Jordan or Turkey.

Why did we start farming? (London Review of Books)

While Scott’s topics are timely—tribalism, taxation, trade, warfare—one is particularly relevant: the collapse of civilizations. Shifting landscapes, battles, and resource depletion are all factors that forced newly sedentary societies to pack it up and move on once again. Scott does not see this as a necessary evil, but rather part of the natural order of things: “We should, I believe, aim to “normalize” collapse and see it rather as often inaugurating a periodic and possibly even salutary reformation of political order.”

Is the Collapse of Civilizations A Good Thing? (Big Think)

Scott argues that the loss of state capacity, rather than a tragedy, can often be seen as a liberating event. Yes, such periods mean more poverty, but without the yoke of the state, it can also paradoxically mean more freedom and happiness for the survivors of the collapse. And since relative poverty appears more harmful psychologically than absolute poverty, many societies tend to have greater well being after they’ve fallen apart. He writes:

When the apex disappears, one is particularly grateful for the increasingly large fraction of archaeologists whose attention was focused not on the apex but on the base and its constituent units. From their findings we are able not only to discern some of the probable causes of “collapse” but, more important, to interrogate just what collapse might mean in any particular case…much that passes as collapse as, rather, a disassembly of larger but more fragile political units into their smaller and often more stable components. While “collapse” represents a reduction in social complexity, it is these smaller nuclei of power—a compact small settlement on the alluvium, for example—that are likely to persist far longer than the brief miracles of statecraft that lash them together into a substantial kingdom or empire.

Over time an increasingly large proportion of nonstate peoples were not “pristine primitives” who stubbornly refused the domus, but ex–state subjects who had chosen, albeit often in desperate circumstances, to keep the state at arm’s length…The process of secondary primitivism, or what might be called “going over to the barbarians,” is far more common than any of the standard civilizational narratives allow for. It is particularly pronounced at times of state breakdown or interregna marked by war, epidemics, and environmental deterioration. In such circumstances, far from being seen as regrettable backsliding and privation, it may well have been experienced as a marked improvement in safety, nutrition, and social order. Becoming a barbarian was often a bid to improve one’s lot.

Thus, the leveling effects of “collapse” may be not as “disastrous” as we are led to believe.

Scott’s book gives us hope that the collapse of states, rather than being a universally bad thing, might lead to a flourishing of human freedom. In that, there is some hope. I’ll end with this thought from Scott’s review of Diamond:

Anthropology can show us radically different and satisfying forms of human affiliation and co-operation that do not depend on the nuclear family or inherited wealth. History can show that the social and political arrangements we take for granted are the contingent result of a unique historical conjuncture.

The Origin of Money – Key Takeaways

“We begin with the story of the greatest conqueror in history, a conqueror possessed of extreme tolerance and adaptability, thereby turning people into ardent disciples. This conqueror is money. People who do not believe in the same god or obey the same king are more than willing to use the same money. Osama Bin Laden, for all his hatred of American culture, American religion and American politics, was very fond of American dollars. How did money succeed where gods and kings failed?”
~ Yuval Noah Harari, “Sapiens: A Brief History of Humankind,” (2015)

So I’m done for now writing about the history of money, which is doubtless good news to any readers I still have left (if there are any). I went way too far down the rabbit hole on this one 😊.

But the way it started was actually very simple. When I started, I had two major questions. One was, where did the notion of a “national debt” come from??? I mean, you never hear about the national debt of ancient Greece and Rome do you? In fact, it’s hard to imagine any ancient empire, from Persia to China voicing concerns about the national debt. Yet now it seems to drive just about every decision any government makes. We’re constantly told that “we can’t afford” this or that because it would increase the national debt. But how can a nation-state go into debt merely by issuing its own money? And how can every country in the world be simultaneously in debt? Since every nation-state is the ultimate source of its own currency, how can they be in debt? To whom?

The other major question I had was how did we get this weird hybrid system where we have government money, but private banks and financiers seem to control it? After all, money is a public good. We all need it. It should theoretically be under democratic control. But actual control over it is exercised by a secretive cabal of bankers and financiers who are not accountable to any democratic institutions. As Michael Hudson says, “every economy is planned, it’s only a matter of who does the planning.” He argues that in our society it is the private financial interests who do the planning rather than government bureaucrats, and they do so primarily to benefit themselves, even to the detriment of society. As Frederick Soddy said:

“… every monetary system must at long last conform, if it is to fulfil its proper role as the distributive mechanism of society. To allow it to become a source of revenue to private issuers is to create, first, a secret and illicit arm of the government and, last, a rival power strong enough ultimately to overthrow all other forms of government.”(The Role Of Money[1932]).

Hopefully we learned some answers to those two questions. A thoroughgoing history of money, rather than just being of historical interest, does give us some crucial insights into current dilemmas and what we need to do going forward.

So, by way of conclusion, here are some of the major takeaways I got while writing this series of posts. If your eyes glazed over during the series or you just quit reading over the summer (and I don’t really blame you), I encourage you to come back and at least read this instead:

What is money and finance at its heart? It’s a way to get large numbers of people to cooperate on the same goal. As Yuval Noah Harari writes in Sapiens, because our “natural” group size is fairly small (only about 150 or so), we need to invent shared fictions to get people in order to cooperate at larger and larger scales.

For a long time, religion was the major one. Then came the nation-state. Now finance seems to be the major way of controlling people and getting them to cooperate. With enough money you can get people to do just about anything, including have sex with you or kill one another. Money is permission. But usually it’s used for more benign purposes, such as getting thousands of people from all over the world to cooperate in a shared goal such as building electric cars or making and selling fizzy drinks.

Homo sapiens have no natural instincts for cooperating with large numbers of strangers. Humans evolved for millions of years living in small bands. Consequently, there are no instincts for mass social cooperation. To make up for that, humans have to rely on all kinds of imagined realities that regulate cooperation on such a huge scale. The human empires are based on shared common beliefs, social and legal norms that sustain them. The stability of the complex societies is not based on natural instinct or on personal acquaintance, but on shared imagined realities. Coursera: A Brief History of Humankind by Dr. Yuval Noah Harari

Both the corporation and the nation-state are shared legal fictions invented to bind large numbers of people together with imaginary ties to some sort of common purpose. Since its invention in the 1600’s, the corporate form has gained more and more power relative to the nation-state which created it.

Money is transferable debt (or credit). This is the “credit theory of money.” In “primitive” societies, many items are used to signify debts and obligations between various individuals, groups, and families. But once these obligations can be transferred among unrelated people, it becomes a type of money, even if the “exchange” is just by oral agreement (as on the island of Yap). “Money” may not even have corporeal form, but if it does, then it is usually standardized in some way (stone disks, shells, beads, coins, paper, etc.).

Money, then, is credit and nothing but credit. A’s money is B’s debt to him, and when B pays his debt, A’s money disappears. This is the whole theory of money (Innes 1913, p.16)

…money is anything that denotes and extinguishes one’s debt/liability to another; it was not a product of market exchanges but rather a byproduct of social relations based on debt…the nature of money is a credit-debt relationship that can only be understood in institutional and social contexts…Therefore, money originated as a byproduct of social relations based on debt and realized its standard form through the need of the central authority, as opposed to private individuals, to establish a standard unit of account to measure debt obligations or production surplus.
Vincent Huang, On the Nature of Money, p. 6

In fact, there are numerous examples from history where the state has stopped issuing money or the banks have closed (such as Ireland in the 1960’s), and private credit circulated as money in the form of checks. Rather than barter, the establishment of new credit-clearing systems is the common response when currency systems seize up and go under at levels greater than a local village. Also, we see that throughout history the shrinking of the state has led to a curtailment of trade, not an expansion, suggesting that the markets, money and governments are symbiotic and not in opposition as we are led to believe.

Money emerges when one class is able to impose obligations on the rest of society. This is the contention of John F. Henry. This could be a redistributor chief, a warlord, a royal household or a divine priesthood. Henry contends that hydraulic engineers were the first such class to emerge in ancient Egypt. Carroll Quigley argues that ancient priests used their knowledge of reading the movements of the heavens to predict floods, and this allowed them to set themselves up as a ruling class. Others posit that the need to wage warfare led to warlords setting themselves up a ruling class. Religion probably played a key role; the root of the word hierarchy is “hiero-“ meaning sacred.

In every case, this class probably engaged in astronomy; managed collective labor in some way, whether in military or engineering endeavors; and collected goods for redistribution among the populace.

Money has no value in and of itself. It is not the thing that matters, but the ability of one section of the population to impose its standard on the majority, and the institutions through which that majority accepts the will of the minority. Money, then as a unit of account, represents the class relations that developed in Egypt (and elsewhere), and class relations are social relations.

To service the activities of this class, resources needed to be deployed to fund their efforts. To keep track of these resources, a unit of account was established by these authorities (priests and scribes).

As James C. Scott points out, writing was originally invented as a tool for social control of the masses by the ruling class, not as a form of cultural expression (which was oral). Written records first emerge to manage inputs and outputs. There is a fascinating argument that clay bullae envelopes were a form of double entry bookkeeping, with debits represented by tokens placed inside and credits represented by the markings on the outside.

Apart from its role in the invention of writing, accounting is significant for human civilization because it affects the way we see the world and shapes our beliefs. To take this early example, the invention of token accounting in Mesopotamia was important not only because it facilitated economic exchanges and generated writing, but, according to Mattessich, “because it encouraged people to see the world around them in terms of quantifiable outcomes. …
Jane Gleeson-White, Accounting: Our First Communications Technology

Along with writing, establishing common standards of measurement appears to have been a chief function of the ruling classes since their emergence. Ancient priests tracked cyclical movements of celestial bodies and divided the year into discrete units to determine the precise timing of the planting and harvest, as well as ritual gatherings and feasts. They encoded these heavenly movements and measurements into their monuments in order to depict a kind of cosmic order on earth–“as above so below.” The built calendrical monuments such as Gobeckli Tepe, Stonehenge and Nabta Playa. They began to measure distance in addition to time (to mark off plots of land) and weights and quantities (to measure offerings to the gods). This process happened independently in both the Old World and the New. Thus, the creation of a unit of measurement to establish equivalencies between disparate goods produced by households was a logical extension of the duties of the ruling class once people began to occupationally specialize.

…the rise of class society and inequality took place alongside the emergence of money, whereby money played a key role in establishing, maintaining and exacerbating inequality and class division in societies. To put it simply, as soon as one witnesses the emergence of money, one observes the rise of class society and economic inequalities. Money, class society, and inequality came into being simultaneously, so it seems, mutually reinforcing the development of one another. Semenova and Wray, The Rise of Money and Class Society: The Contributions of John F. Henry (PDF) p.2

Which leads to the following conclusion:

The “unit of account” role appears to have been the first function of money to emerge (and not the “means of exchange” or “store of value” functions). Thousands of years before the first coins were minted, tributes and donations to temples were denominated in a standard unit of account, such as the shekel in Babylonia and the deben in Egypt. Babylonian scribes established money-prices for internal administrative purposes to track the crops, wool, barley, and other raw materials distributed to their dependent workforce, as well as to calculate the rents, debts and interest owed to the temples and palaces. These prices were then fixed to a certain weight of silver, allowing it to be used as a standard measure of value and means of payment. Initially, grain (the principal product of the Mesopotamian economy) was used, but its value fluctuates too widely from year-to-year, so silver replaced it.

Thus, the authorities can determine, for example, that 1 horse = 2 cows = 5 pigs = 10 bushels of grain = 1 ounce of silver. This was used to calculate inputs and outputs for the redistribution economies of the Bronze Age. It was also used in assessing fines and punishments by legal and religious authorities. Such compensation payments for transgressions kept societies stable in the face of increasing numbers of strangers living shoulder-to-shoulder. There are clues in our language: the word for “debt” also means “sin” or “transgression” in many languages, and the verb “to pay” also means “to appease” or “to pacify.”

…money as a unit of account precedes its roles as a medium of exchange and store of value… It thus follows that the physical manifestation of money (the “money things”) is not necessary since money as a debt relation needs not be physically tangible. This has been demonstrated as early as in Mesopotamia (3100BC) where crops and silver were used as standard units of account but not as a general medium of exchange. Exchanges simply took the form of credit and debit entries in clay tablets, similar to our electronic payment system today. Vincent Huang, On the Nature of Money p.6

Money (a standard unit of account, used to denote debts or assess value) predates coins by [millennia], and coins only ever comprised a small fraction of the money in daily use. Most ancient money was in the form of marks on clay tablets or notes on pieces of papyrus, just as it is today (computers replacing clay or papyrus)…Coins were for spot transactions, untrusted persons and ceremonial gifts (donatives). The real cost of making money was and is in establishing and maintaining the trust needed to support it. https://rwer.wordpress.com/2014/02/03/the-real-costs-of-making-money-2-where-did-the-silver-used-to-buy-josef-come-from/

The unit of account was typically based on what was most appropriate for giving to the gods. This is a point David Graeber makes. We are all “in debt” from the moment we are born–to the gods, to our ancestors, to our parents, and to our society. This “primordial debt” is discharged by sacrificing to the gods or gifts to temples (mediated by the religious authorities). Hence, that “universal debt” becomes the cornerstone of taxation, and hence the first monetary systems. For example, the Bible demands a ten-percent gift of one’s income to the temple (a tithe).

Every tithe of the land, whether of the seed of the land or of the fruit of the trees, is the Lord’s; it is holy to the Lord. If a man wishes to redeem some of his tithe, he shall add a fifth to it. And every tithe of herds and flocks, every tenth animal of all that pass under the herdsman’s staff, shall be holy to the Lord. One shall not differentiate between good or bad, neither shall he make a substitute for it; and if he does substitute for it, then both it and the substitute shall be holy; it shall not be redeemed.” (LEV. 27:30–34)

So, for example, in ancient Mesopotamia, the fact that silver is “captured sunlight,” gives it a divine quality which makes it highly desirable for gifts to the temple. Thus, the unit of account becomes equivalent to a certain weight of silver.

Silver was sort of a “goldilocks commodity” – there was enough of it for coinage, but no so much that it would be too easy for anyone to procure. It only comes from a single place–a mine down deep in the earth, most of which were owned by the authorizes. Things like apples and hides could not be useful, for example, because they were widely distributed. You had to use something whose issuance could be controlled by the state. By stamping the ruler’s mark on the coins, it gained value in exchange over and above its precious metal value. That is, they were tokens:

Coinage arose at approximately the end of the seventh century BCE in Lydia (in what is now western Turkey), where there was an abundant supply of electrum, a natural alloy of gold and silver. But coinage was first used in everyday life in the Greek city-states on the coast of Lydia. One plausible theory is that it arose out of the best possible way for the Lydian monarchy to use its abundant electrum to pay Greek mercenaries. Each piece of electrum had a different and undeterminable proportion of gold and silver (and so a different metallic value), but numerous pieces each with exactly the same value could be created by stamping them with a mark meaning ‘this is worth x’. And so from the very beginning of coinage its conventional value was different from (generally greater than) its metallic value. Radical Anthropology, Richard Seaford interview (PDF)

In ancient Greece, cattle were ranked and sacrificed to the gods. Thus, the value of things such as ships and armor were measured against cattle, even though no one ever used cattle to buy or sell anything. In ancient Ireland, slave girls (kumals) were the most valuable commodity, so items were evaluated against them. Eventually, the kumal became just an abstract unit of account for trading purposes, divorced from its original context.

Religiously significant metals became important as temple offerings and temples began accumulate large reserves. Followers of the religion would look to acquire the metal, to enable them to make an offering to the gods, and so the metal became the commodity in the most demand. The Ancient Egyptians, who had easy access to gold, used Cypriot copper for their religious offerings while the Cypriots used Egyptian gold. In Mesopotamia, the metal of choice was silver…Later, we read in Homer that the Greeks priced goods in terms of oxen, the animal that was reserved for sacrifices to the gods, ..When ‘Currency Cranks’ or ‘Bullionists’ argue that the economy would be improved by reverting to a Gold Standard because gold has an ‘inherent value’ they need to explain where is the value in gold, apart from its inherent symbolic, representative, value. Lady Credit (Magic, Maths and Money)

The Unit of Account and the Means of Exchange need not be the same. In fact, for most of history they weren’t! In the Middle Ages, prices were denominated and taxes assessed in a common unit of account (e.g. livres tournois), but hundreds of different coins churned out by dozens of mints were used to pay them (such as the Piece of Eight or Louis d’Or).

In many places, there was often no coin equivalent to the unit of account. Coins were exclusively minted by authorities. The coins didn’t have a fixed value, rather their exchange value fluctuated and was dictated by government fiat. However, their bullion value fluctuated according to supply and demand in the marketplace. Imbalances between bullion and exchange values led to surfeits and shortages of precious metals, with corresponding price swings (e.g. the “Price Revolution”). This led to efforts by authorities to restrict the movements of precious metals (bullionism).

Similarly, bills of exchange were denominated in an abstract unit of account (écu de marc), which did not correspond to any particular sovereign currency in circulation. The arbitrage between this abstract unit of account and the currencies of the time is how bankers made their money when usury was still illegal.

An interesting example of this was seen in Brazil in the 1990’s. The government created a totally new unit of account, the “Unit of Real Value” (URV) which would hold its value relative to the currency (the cruzeiro), which was subject to hyperinflation. Prices, taxes and wages would be denominated in the URV, which would remain constant, while the amount of cruzeiros needed to equal 1 URV would vary. Eventually, once prices stabilized, the country would introduce a totally new currency equivalent to the URV (the real).: How Fake Money Saved Brazil (NPR)

Items that can be accepted in payment as fines or taxes to authorities acquire value in private transactions. As MMT economists point out, the dollar is given value by the ability to pay ones taxes with it, that is, one is able to discharge one’s personal obligations to the state with dollars (and only dollars). Thus, prices are typically denominated in dollars as well, and producers accept dollars in exchange for goods and services.

While private money can be created and issued, the ability to pay one’s taxes with dollars means there is always a demand for them. Also, since money is transferable credit, the government’s credit is typically much more reliable than that of private individuals. This is often referred to as the “state theory of money,” of “chartalism”:

[While] private individuals may have different units of accounts (cattle, watermelon, etc.)…It is unlikely that any individual could have sufficient power to induce others to hold its liabilities as a standard unit of account…By choosing a unit of account as the only means for individuals to extinguish his/her liabilities to themselves, the central authorities “write the dictionary”. Hence, the power of the central authority (state, temple, tribe, etc.) to impose a debt liability (fines, fees, taxes, etc.) on its population gives the former the unique right to choose a particular unit of account as the only means of payment to the central authority.

Money’s value comes from faith in the issuing government’s credit. The loss of faith in the currency had much more to do with the stability of the issuing government rather than the amount of precious metal contained in the coin. Numismatists can find no solid correlation between prices and the precious metal content of coins over millennia. Nor can they find a consistent standard of how much specie a coin “should” have.

In the case of paper money, the paper itself is not valuable; it is the enforceable claim written on it that’s valuable. Originally this promised to pay the bearer in coin. Then it evolved into banknotes–sort of a “paper coin”–a signifier of government debt which did not pay interest.

The above leads to the following conclusion:

Money led to markets, not vice-versa. Once the concepts of money and prices are firmly established by central authorities, only then can decentralized exchanges can take place in markets. That these standards were initially set by authorities makes far more sense (and is historically better supported), than the idea that money emerged spontaneously by private individuals to reduce search costs without recourse to any centralized authority through innumerable acts of barter.

Once the state has created the unit of account and named what can be delivered to fulfill obligations to the state, it has generated the necessary pre-conditions for development of markets. The evidence suggests that early authorities set prices for each of the most important products and services. Once prices in money were established, it was a short technical leap to creation of markets. This stands orthodoxy on its head by reversing the order: first money and prices, then markets and money-things (rather than barter-based markets and relative prices, and then numeraire money and nominal prices). The Credit Money and State Money Approaches by L. Randall Wray, p.9

Religion played a key role in the establishment of money and markets from the very beginning. This makes sense, since religion was the primary unifying and coordinating “story” for ancient societies. The source of the word religion literally means “to bind together.” We saw above the Biblical instructions on tithing.

Temples appear to have been the first banks and the first treasuries. Sumerian temples stored precious metals, made loans, rented land, coordinated labor, established prices for key goods, and determined fees and fines. The obolos, the lowest denomination Greek coin, derived its name from the iron spits (obelos) through which sacrificial roast meat was evenly distributed to the members of the tribe. The drachma derives its name from obeliskon drachmai, a ‘handful’ of spits. This communal ritual is thought to have influenced Greek ideas of decentralized exchange and universal value, in contrast to the centrally-administered economies of the Near East. The iron spits acquired value in interpersonal exchange. Later, Greek temples distributed stndardized lumps of metal, stamped with the city’s emblem, to all adult male members of the polis which allowed for the unique social order to be maintained.

In contrast to most ancient near-eastern societies, the Greek polis had retained sacrificial ritual that embodied the principle of communal egalitarian distribution. The fact that the Greek word for this distribution (moira) came to mean ‘fate’ indicates the importance of the distributional imperative. Citizenship was marked by participation in communal sacrifice, which also provided a model for the egalitarian distribution of metallic wealth in standardised pieces.Some of the vocabulary of early coinage comes from animal sacrifice. For instance, the word ‘obol’, used of a coin, comes from the word for a spit. In the communal egalitarian distribution meat was distributed on iron spits, which were of standard size as well as being portable and durable, i.e. they could be used as money (in a limited way). With the use of more precious metal in exchange, ‘obol’ was transferred to a piece that was of roughly equal value and so of much smaller size (and so even more convenient). Radical Anthropology, Richard Seaford interview (PDF)

Markets also appear to have emerged around religious buildings. Many ancient exchanges were near temples. The great fairs of Europe in places like Champagne and Lyon took place near churches and cathedrals under the watchful eye of the all-seeing God. Since so much of trade relies on trust and belief (credit comes from credere = “to believe”), it is logical that religion would play a central role:

We tend nowadays to think of religion as the non-material activity of mankind. Did not Jesus expel the moneychangers from the Temple? Does not Islam forbid the charging of interest on loans? Did not a similar Christian prohibition of usury hold back mediaeval Europe’s economic development for centuries? Yet when Jesus took his action against the money-changers he must have been reversing the tradition of several millennia. The temples were the source of commercial law and practice. They had developed writing for the keeping of their accounts. They imposed the moral code which made promises inviolable. In Mesopotamia temples employed the poor, the widows and the orphans in factories which produced textiles to be traded abroad for the commodities the region lacked, including silver, copper, tin and lead. They were, it seems, the major business centres. (Innes p. 136)

Some theorists posit that as exchanges became more common and societies became more affluent, they invented “big gods” that could see everything and demanded that we behave a certain way (honest, truthful, etc.). These “Big gods” could transcend the limits of the old tribal gods that were based on shared ancestry and culture. All you had to do was profess belief! Wealth may have driven the rise of today’s religions (Science)

Trade Credit (not gold or silver) was the primordial form of commercial money. Rather than barter or coins, credit lines were probably what was used for exchanges in the days before currency became commonplace. In “primitive” cultures, reciprocity performs this role, where one’s gifts to others circulate back to the giver in time without a formal accounting of who owes what to whom. This helps maintain social relationships in small, close-knit societies.

As societies scale up, reciprocity is replaced with more formal agreements, often denominated in the standard unit of account. Even in modern times, credit is what is used to purchase inputs upfront, rather than just repeated spot transactions (as any businessperson or farmer can tell you).

The word credit is derived, very appropriately, from the Latin word for ‘to trust’. …the division of labour, from the very first moment it was applied, required the creation of a credit system of some kind. It was absolutely necessary to be able to trust one’s fellow workers’ promises to reward one appropriately at some future moment for one’s own products or services. It would have helped to have an enforcing authority, and that makes it all the more likely that trade was conducted in a regulated way, not by free individual option…it is obvious that a completely free market economy has rarely, if indeed ever, existed. We all rely on the existence of an enforcement system. We rely on the rule of law.

Trade credit (bills of exchange) formed much of the “money” of the Middle Ages and facilitated the commercial expansion in the absence of adequate gold and silver supplies. Huge amounts were transferred using double-entry bookkeeping (the “Venetian Method”) without any cash changing hands. Bankers would settle accounts at the conto which concluded the fairs. In fact, this may have been the original purpose of the fairs, with retail trade being subsidiary. Eventually, as commerce became more and more important after 1600, these economic activities were located in permanent banks and bourses established by the major port cities in order to facilitate the activities of merchants and the expansion of long-distance trade.

Trade credit is the essential foundation of the whole economic system, and the essential financial problem of economic development is to monetise trade credit, to turn it into an instrument for transferring value, for measuring value and for storing value. Wray. 121

Tally sticks, which keep track of debts and credits, may be the earliest form of money to emerge, even before coins or clay tablets. They were made of organic materials such as wood and bone. Because metal coins are what survive, tally sticks are sadly omitted in standard accounts of money: What tally sticks tell us about how money works (BBC)

Debt servitude appears to be the earliest form of mass slavery. While slaves were often captured prisoners of war in primitive cultures, their numbers were necessarily limited because having too many hostile foreigners living among your society and doing its essential chores would be dangerous (if not outright suicidal). That’s why in the ancient Near East, they were mainly women and children employed in domestic labor (cooking, cleaning, weaving, child care, etc.). Rather than slave labor, their massive walls and monuments were built by voluntary, mainly corvée labor, which served as a sort of social glue and proxy form of taxation in the absence of money.

But once debt becomes commonplace, large numbers of one’s own people could be compelled to labor for others in order to service their debts. This, as David Graeber points out, would be seen as just and fair, and thus the debtors would be less inclined to rebel. In fact, this may have been how the very first classes formed in ancient societies–debtors and creditors–rather than through military conquest or political decisions. Debt and chattel slavery existed side-by-side in most ancient societies. Even in colonial America, there were more indentured servants than African slaves.

Early rulers realized they needed to occasionally release the people from their debt obligations to public institutions (temples and palaces), otherwise they would lose the support of the people. They also needed enough free men to staff the armed forces, as debt-serfs could not afford to train or equip themselves. Debt serfs could also run away. Some argue that the debt serfs of ancient Mesopotamia, the Habiru, are the ancestors of the Jews (Hebrews).

And ye shall hallow the fiftieth year, and proclaim liberty throughout the land unto all the inhabitants thereof; it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.
— Leviticus 25:10

Later, when professional soldiers replaced citizen armies, debt forgiveness was abolished and debts were held sacrosanct. This gave rise to a large class of hereditary debt serfs.

Only later on do prisoners of war become the major source of slaves in the Classical world. Some of the first markets to emerge were slave markets where prisoners of war were bought and sold. The Roman war machine brought in tens of thousands of slaves, diving their costs down and displacing free labor in agriculture. This allowed wealth to concentrate to a degree that undermined social cohesion. This may have been an underlying cause of Rome’s decline and fall.

All the major innovations in money and finance seem to have been created either to manage long-distance trade or to fund wars. The need to raise funds for war has seemingly driven all financial innovations since Medieval times. The “national debt” began when Venice needed to fund a war with Byzantium, and so they borrowed from their wealthy merchant classes. This borrowing eventually became done on a permanent basis. All the creditors’ obligations were eventually consolidated in one lump sum, revenue streams were dedicated to them, and payments were managed by a state-run bank. Thus the “national debt” was born. Borrowing was done by various municipalities in Northern Europe, but none of these were national debts. The Dutch seem to be the first country to leverage those techniques effectively on a national scale to fight for their independence from Spain.

Going even farther back, it appears that coinage was first invented to pay troops. Coins were distributed to soldiers as payment. Then a tax was then imposed on the conquered populations. The way to pay the tax was to acquire signifiers of the state’s debt in the form of coins by selling goods and services to the occupiers, thus redeeming signifiers of the state’s debt. There is another clue in the language here: the word soldier comes from the soldius, a gold coin used to pay troops in the late Roman Empire.

There is firm evidence to support money being a state creation. Money appears in Europe at the time the Greek city states became reliant on mercenary armies. Cities paid soldiers in gold to conquer some community, the soldiers then spent the gold in the colonised lands and the state recovered the gold by taxing the colonised merchants and innkeepers using the tokens that the soldiers had paid for food and lodgings. Greek and Roman citizens never paid tax, only the conquered paid for the privilege and were bound to the conqueror by having to exchange their resources for the Imperial currency. The model would survive and drive colonialism in the modern age, in the 1920s the British taxed Kenya at a rate of about 75% of wages, forcing the colonised to grow cash-crops to be consumed by the colonisers. Lady Credit (Magic, Maths and Money)

Financial innovations spread through the need to wage wars. If a system gave one nation a competitive advantage, it had to be adopted by other nations in order to compete. It was a sort of a Darwinian arms race: if a financial innovation allows a country to be more effective in trade or warfare, it will dominate countries that are unable to deploy their resources as effectively. The others will either adapt the innovation on their own or be subsumed into the empire (and thus gain the innovation that way).This is probably why financial techniques spread so rapidly in Western Europe as compared with China and the Middle East, who relied upon conscription and command-and-control systems rather than mercenaries & borrowing to fight wars.

In “patrimonial states”, where the state was an extension of the ruling family’s household, loans were essentially personal loans to the monarch that could be refuted at any time. Only when parliamentary systems come into play does state borrowing become a reliable means for governments to raise money. Thus merchant republics led the way, first in Italy, and then in Holland.

John Law’s financial innovations were an attempt to consolidate and manage the massive debts Louis 14th had run up with his wars and extravagances. Similarly, the debts generated by King William’s Glorious Revolution and subsequent wars led to the creation of the Bank of England, a joint-stock company designed to loan to the government and manage the state’s debt. This is the ancestor of today’s central banks.

Borrowing marks a time when citizens become not only debtors of the state, but creditors as well, profoundly altering the social relations between the state and its citizens. There effects were distributional–from the public sector at-large to the wealthy citizens and institutions who held the bonds. Over time, this group became more and more influential. Borrowing allows nations to bring resources forward in time. It also allows borrowing from a wider range of people and institutions than just banks.

Warfare has also been the reason for abandoning precious metal standards. The need to issue adequate money to fight wars has led to the suspension of convertibility of money and the rise of fiat currencies. Every time any sort of fixed standard has been tried, warfare undermines it.

Trading Empires are the major source for financial innovations. It’s no coincidence that major financial innovations occur in thassalocracies reliant upon long-distance trade. First the Italian city-states such as Venice and Genoa, then the Spanish and Portuguese empires, then the United Provinces (Dutch Republics), and finally the English Whig merchants who invented the modern monetary system.

Why were trading empires such a fertile source for innovations such as insurance and limited-liability corporations? Because trading voyages require enormous sums of investment upfront and the outcome is highly uncertain.

Consider the enormous length of time it took these wind-powered trading voyages. It took 12-18 months to make it to the Indies, and then you had to procure the cargo. That meant it could be 3-4 years before a profit is was realized. That meant that trading voyages required a very high level of capitalization; investors did not get an immediate return on their funding. They also required large amounts of infrastructure: ships were expensive, trading forts were expensive, soldiers were expensive, and so large amounts of resources had to be brought together. This was beyond the capacity of any single entity, so resources needed to be pooled. In addition, unlike one-off trading voyages, trade with the Indies required a permanent infrastructure rather than resources to fund a single voyage. You needed a trade with long-term continuity to realize a profit; single-purpose funding would not do.

It is these requirements that led to financial innovations, from medieval Italian commenda (a temporary limited partnership) to the limited-liability joint-stock corporation, where ownership is negotiable and is wholly separated from direct management.

Money played a huge role in the evolution of Western philosophy and mathematics. European mathematics achieved a high degree of sophistication due to the need to deal with multiple currencies at the same time as the Church’s prohibition on usury. The earliest mathematical treatises were all concerned with practical matters in trade and jurisprudence, not abstract science. Rather than sophisticated mathematics being developed to explain physical phenomena, it was first developed to manage trade risks and calculate transaction costs. Later on, these math techniques began to be applied to the natural world. Often, early scientists began their mathematical training in commerce. Newton and Copernicus both wrote treatises on Money. After 1600 the commercial and scientific revolutions both gained steam.

European science did not start in the Renaissance, it existed in the High Middle Ages. The ‘renaissance’ of the ‘long twelfth century’ resulted in what the historian Joel Kaye describes as, “the transformation of the conceptual model of the natural world…[which] was strongly influenced by the rapid monetisation of European society taking place [between 1260-1380].” and played a pivotal role in the development of European science. Thirteenth century scholars, “[were] more intent on examining how the system of exchange actually functioned than how it ought to function…” It seems that Fibonacci did not just influence medieval merchants, those scholars keeping an eye on merchant’s dubious dealings, also, became obsessed with mathematics… Who was the first quant? (Magic, Maths and Money)

Going even further back in time, many of the distinctive features of ancient Greek society (and hence Western civilization) such as science, philosophy and democracy, may have their origins in the use of money and trade in the Greek world:

The first ever pervasive monetisation in history (of the Greek polis) made possible for the first time various features of Greek culture that have in asense persisted throughout monetised society up to the present. I confine myself here to two examples. One is the idea that the abstract is more real than the concrete, which was a basis of much ancient philosophy. Another is the absolute isolation of the individual: this is especially manifest in Greek tragedy, where, for instance, Oedipus is entirely alienated from the gods and from his closest kin. Both these features are familiar to us, but do not occur in pre-monetary society. Radical Anthropology, Richard Seaford interview (PDF)

Loans create deposits, not vice-versa. This is called the “endogenous theory of money.” It claims that the amount of money is constrained only by the number of willing borrowers in the economy, and not the amount of reserves held by the central bank.

In short, the endogenous money approach reverses two causalities proposed by orthodoxy: 1) reserve creates deposits; and 2) deposits create loan. On the contrary, the endogenous money holds that loans create deposits that then create the need for the central bank to accommodate with reserve. In other words, banks first make loans, and then seek reserves to meet central bank regulations…

…Suppose Henry decides to hire Joshua to build a condo. In theory, Henry could issue his own money/IOU to Joshua in exchange for Joshua’s labor time. The problem is, Joshua would probably not accept Henry’s own liability (Henry dollar) because Henry cannot sufficiently indebt the rest of the population to create a demand for his own IOU. Instead, Joshua agrees to exchange his labor only for the liability of the state (U.S. dollars). Therefore, Henry needs somehow to convert his own IOU to the state IOU in order to get Joshua’s labor. Now Henry walks into a bank and asks for a loan, the loan officer does not check the bank’s reserves at the central bank and comes back to tell Henry, “sorry, we are out of money!” If the bank thinks Henry’s project is good, it creates a Henry loan simply by crediting the Henry’s deposit account. To meet the reserve requirement, the bank then borrows reserves from other banks that have excess reserves or directly from the central bank. What distinguishes the bank’s IOUs and Henry’s IOUs is that the former is directly convertible to the central bank/state IOUs while the latter is not. Vincent Huang, On the Nature of Money

The government is not revenue constrained. The above leads to the conclusion that in order to collect taxes, the government must first issue the money-thing it wishes to collect. This leads to the conclusion that rather than taxes funding spending, spending funds taxes! If the government (public sector) collects more in taxes than it spends, it reduces the money supply and causes the private sector to go into deficit in the equivalent amount (the “sectoral balances” approach).

A sovereign issuer of currency can never “run out” of money, nor can it go “bankrupt.” It can, however, be short of key resources, productive capacity, willing borrowers, or faith in the governing institutions. In such cases, excess money in the economy could lead to inflation, which is the real constraint on issuing money. Taxation serves as a way of “un-printing” money to bring inflation under control.

Although the finer points of MMT can get quite involved, the most basic takeaway is very simple. For societies with currency-issuing governments:

If something can be done, it is “affordable”.

If we have access to the raw materials, the labor power, the skills, the equipment and the facilities needed to produce something, then we can afford to produce it. The cost of doing so is not financial. The cost is a real cost: the exertion of human effort and know-how, the wear and tear on facilities and equipment, and the depletion of natural resources.

On one level, it is bizarre that this basic takeaway of MMT is not already mainstream. If the idea is heterodox, it is only because we are currently living in a very topsy-turvy world, in which up is presented to us as down, black as white, with everything reversed. In reality, it should be much harder to believe the opposite: that what we are capable of is impossible. If it’s Doable, it’s Affordable (hetereconomist)

What constitutes “money” is not so simple. Many things can be used as money. Stocks can be thought of a kind of money (since they are an IOU). Equity can be used as money. Items with intrinsic value (or perceived intrinsic value) can be used as money. Gift cards are a type of money. So are airline points. No doubt John Law’s theories derived in part from his observations at the gambling tables of Europe. There he observed that all sorts of things could serve as money in a pinch: coins, stocks, bonds, jewelry, certificates of deposit, deeds to land, checks, even hastily scribbled IOU notes. Anything that is accepted in payment, whether gold, stocks, bonds, cash, or IOUs, can be used as money, he concluded.

As MMT theorists say, anyone can create money, the challenge is getting it accepted. As we saw, private monies circulated alongside state money and borrowing before the two were combined in England, where bills of exchange became enforceable by contract law outside of merchant courts. Because the state’s liabilities and credit are generally the most reliable (except in cases of state failure), its money generally becomes the ‘money thing’ at the top of the pyramid—the ultimate means of settlement for various debts.

Recall that money represents a promise/IOU and that these promises can be created by anyone. The ‘secret’ to turning these promises into money is getting other individuals or institutions to accept them. Therefore, the ‘hierarchy of money’ can be thought of as a multi-tiered pyramid where the tiers represent promises with differing degrees of acceptability. At the apex is the most acceptable or ‘ultimate’ promise…The ‘simplified hierarchy’ can be envisioned as a four-tiered pyramid, with the debts of households, firms, banks and the state each representing a single tier…All money in the hierarchy represents an existing relationship between a creditor and a debtor, but the more generally acceptable debts will be situated higher within the hierarchy…as the decisive money of the system, both the state’s promises and banks’ promises rank high among the monies of the hierarchy. Although bank money is part of the ‘decisive’ money of the system, its acceptance at state pay-offices really requires its conversion into state money (i.e., bank reserves). That is, bank money is converted to bank reserves so that (ultimately) the state actually accepts only its own liabilities in payment to itself. The debt of the state, which is required in payment of taxes and is backed by its power to make and enforce laws, is the most acceptable money in the pyramid and, therefore, occupies the first tier. Stephanie Bell, The role of the state and the hierarchy of money, p. 10-12

The test of ‘moneyness’ depends on the satisfaction of both of two conditions. First, the claim or credit is denominated in an abstract money of account. Monetary space is a sovereign space in which economic transactions (debts and prices) are denominated in a money of account. Second, the degree of moneyness is determined by the position of the claim or credit in the hierarchy of acceptability. Money is that which constitutes the means of final payment throughout the entire space defined by the money of account. Geoffrey Ingham, The Emergence of Capitalist Credit Money p. 214

In our society, money has multiple uses: means of exchange, store of value, unit of account, and settlement of debts. That these things are all embodied in a single item we call “money” is not a natural phenomenon but a feature of capitalist credit money which allows this system to function as it does. That invention took a long time and it’s probably not over yet.