In the conventional narrative about money’s origins and development, inconvenient barter evolved into monetary exchange, an organic byproduct of an ever-expanding “market.” People trading things converged toward a metal medium because it was durable and relatively scarce; over time gold and silver coins progressed into fiat currencies, which eventually yielded to credit systems. Yet as the late David Graeber, drawing on anthropologist Caroline Humphrey, highlighted in his provocative Debt: The First 5,000 Years, there is no evidence that money emerged from barter, “and an enormous amount of evidence suggesting that it did not.”[1] Not only that, but the myth was backwards, for at its inception money was immaterial—a shared language, not a physical object. John Maynard Keynes observed long ago that “modern” money first appeared in ancient Babylonia, where temple bureaucrats named the money of account, set the prices of local goods, and levied dues on the population.[2] Moneys of account came first, followed by monetary instruments, the different modalities of making money rooted in historical circumstances and political configurations. Markets didn’t make money, societies did.
Christine Desan further complicates the barter myth in Making Money: Coin, Currency, and the Coming of Capitalism, where she beautifully illustrates the central role that politics and the law played in animating Anglo-Saxon monetary practice from the seventh century on. One of the book’s major accomplishments—demonstrating that the English legal position consistently favored nominalism (payment by tale) over metallism (payment by weight)—culminates in an examination of a 1605 decision by the Privy Council, The Case of Mixed Money, which affirmed that creditors had to accept the sovereign’s coin as payment for debts contracted in the official money of account, regardless of changes to its silver content. The road to the landmark ruling was not without bumps. As Desan points out, appeals to metallism occasionally surfaced during periods of “rampant clipping” and when “public recalibrations” created heavy losses for particular social groups.[3] Citing legislation and treatises going back centuries, the council ultimately confirmed the sovereign’s exclusive right to make and to remake money. Coming a few years after Elizabeth I debased the coinage paid to troops in Ireland, the decision was “a celebration of the executive prerogative over money” as well as an assertion of money’s purpose as a shared measure of value, “an entity with the potential to introduce order across the chaos of human relations…Money was a domestic political matter, as its genesis in sovereign authority and its public purpose indicated.”[4] English money may have traveled through precious metal, but its value came from its political identity. Money was contrived, not found.
The Fiscal Basis of Money
Making Money is as much a theoretical work as it is a historical one. To begin with, Desan defines money as a medium made by communities (states or other collectives) to measure and distribute resources. Recognizing that states did not organize every collective endeavor or act of governance throughout history, she uses the term “stakeholder” to describe the leaders or bodies that bound communities and that used their positions to specify and entail value in a way that individual members could not do.[5] Stakeholders made money when, acting for the group, they drafted goods and labor from individuals in return for “uniform receipts” documenting the in-kind contributions, promising to take back the receipts in the future in lieu of the next contribution. “The initiative requires only one more twist to make money fully operational,” Desan explains: “if the stakeholder recognizes the receipt and takes it from anyone’s hand as an item that exonerates the person holding it from making a contribution otherwise due, the receipt can travel from hand-to-hand and maintain its worth as an item that pays off the center. The result is a token that fixes or entails value in a way that both the stakeholder and individuals can use.”[6]
Making Money resonates with the state and credit theories of money of Abba P. Lerner, Hyman Minsky, L. Randall Wray, and other post-Keynesian economists currently in fashion. Building on the insights of Keynes and Georg Knapp (and, to an extent, Alfred Mitchell-Innes and sociologist Georg Simmel), the post-Keynesians appropriately emphasized the role tax redemption mechanisms play in anchoring modern monetary regimes.[7] More significantly, Desan’s counter-theory of how money works engages the “asset-pricing” approach of economic historians to illustrate the fiscal basis of money throughout history. According to this approach, proffered by Thomas J. Sargent and others, money may be conceptualized as the claim to an asset that holds value according to its future expected value in paying a tax. Following Sargent, several economic historians have modeled money in ways that confirm what Desan calls its “fiscal value.” Farley Grubb, for instance, modeled the paper money of early America as a “zero-coupon bond” that held value based on its future redemption. This structural feature imparted what Grubb styles as a “time-discounting dimension” to money, whereby people may have discounted its present value according to how much time remained until it could be redeemed in payment of taxes. The discount could be negated, however, if the money also carried a “cash premium” or “liquidity premium,” that is, “if people recognized as valuable its services as cash in the interim.” Prominent eighteenth-century figures such as Benjamin Franklin and Adam Smith observed the same phenomenon.[8]
The asset-pricing approach applies equally well to early England. An Anglo-Saxon chief created money when he mobilized the goods and labor of families for the construction of defensive fortifications in return for tokens redeemable in payment of future tributes. The strategy provided an effective means to marshal resources because the tokens entailed real value. Each token represented actual contributions to the chief, a material referent, and those contributions established the token’s fiscal value. “Entailing value in a token,” Desan elaborates, “enables a stakeholder to command resources with great effect. The stakeholder can ‘buy’ what it needs when it needs them, paying in receipts that it takes back later. In effect, the stakeholder gains the capacity to spend and tax in money as it makes money…Money, it will turn out, is an enormously effective mode of governing.”[9] Separate and apart from their fiscal value, the tokens carried a cash premium because they offered a transferable means of payment. The early English families could hold on to their tokens to pay tribute later, or they could pass them on to another community member in exchange for goods or services. Because anyone—not just the people whose contributions they documented—could use the tokens to pay tribute, everyone acknowledged them as a standard of value and a mode of payment for all transactions in the community.[10]
As demand for cash outstripped its fiscal base, English societies designed innovative ways to supplement the amount of money created by spending and taxing. Indeed, the cash services money provided meant that people were willing to purchase money directly from the stakeholder. In medieval England, this took the form of minting on demand, or “free minting,” whereby sovereigns sold silver pennies to individuals in exchange for bullion, distributing money making costs to the population. Even though the authorities took a cut of the bullion brought in, the system was a good deal “as long as coin had so much value because of its cash value that, even given the charge of minting, it was worth more than silver bullion.”[11] Another way to increase the money supply—and to facilitate the collection of taxes—was for the English state to issue “public credit currencies” on the basis of incoming revenues. The earliest example of these was the medieval “tally,” a notched wooden stick representing a certain amount of money, the thickness of the cut reflecting the size of the denomination. Tallies served originally as receipts of payment into the Exchequer, before taking on the additional function of “the assignment,” an instrument that drafted revenue that was still being collected. The crown issued tallies of assignment to royal creditors and sent the claimants directly to tax collectors in the field, who redeemed the tallies for cash. As the custom developed, those with tallies held onto them to pay taxes later. By the mid-fifteenth century, they regularly comprised half or more of the revenue that passed through the Exchequer.[12] Pointing to evidence from Exchequer rolls (the sticks have long since burned), Desan reasons that tallies passed from hand to hand with the tacit approval of tax collectors and Exchequer officials, who did not demand proof that the person cashing them was the original creditor. Some medieval statutes prohibited certain types of transactions in tallies, legitimating the larger practice.[13] In addition to defining the money of account and setting the terms of money’s value, medieval and early modern monarchs claimed “seigniorage,” or the profits that arise from creating new money, including fees for minting licenses. As Desan puts it, money was “a matter owed to the sovereign.”[14]
In the late seventeenth century, however, the rejection of the divine right of kings, the rise of commercial banking, and the expansion of warfare produced a dramatic transformation in how money was designed. While the crown retained the prerogative to mint coins and, crucially, to define the money of account, the English state stopped charging individuals for coin from the mint and instead began minting coin free of charge. Simultaneously, the state started borrowing money from wealthy investors in the form of bank notes through the new Bank of England. The investors multiplied money further by lending to individuals on the basis of the coin and public debt the bank held. Contrary to the then still-emerging liberal illusion of money emerging through the market, the English “financial revolution” was intensely political. The state’s promises to repay the Bank of England were grounded in the political economy of taxation, with Parliament earmarking specific revenue streams to finance interest payments and the Treasury taking bank bills and notes in payment of taxes at face value. The new system “ensured that paper issues would have purchasing power,” Desan argues, invoking the asset-pricing approach, “because it made predictable the outflow and withdrawal of that currency…Financing its war with both short-term (“unfunded”) and perpetual (funded) borrowing, the English imposed taxes to service its debt. Those taxes were sufficiently heavy, relative to the money supply, to ensure demand for all modes of payment receivable by the government.” This structure of debt-based war finance married private gain and public good, wedding the pursuit of profit to the common interest, and established the foundations of modern capitalist finance.[15]
The Colonial Connection
As Desan has explored elsewhere, the old ways of making money soon cropped up across the Atlantic—but with a new twist. While in Britain, the establishment of the Bank of England and John Locke’s “Great Recoinage” appeared to place money outside of politics, simultaneously dispersing its production to private bankers and redefining it as “trader’s silver,” in early America, colonial assemblies made and managed money, crafting it for local circulation and tying it to provincial taxes.[16] Ironically, at the very moment the English monarchy lost its exclusive claim on seigniorage profits as part of the grand settlement between King William III and Parliament resulting in the Bank of England’s establishment and the crown’s reliance on commercial debt, early American assemblies began issuing paper currencies known as “bills of credit” to command resources for campaigns against Indigenous peoples and wars with European rivals. In Making Money, Desan invites comparisons between colonial paper money and medieval English tallies. First, both forms of money were denominated in the official money of account and were acceptable in payment of taxes in lieu of specie, supplementing the coined money supply.[17] Moreover, neither tallies (until 1660) nor bills of credit (with a few exceptions) carried interest, meaning that public creditors who accepted them at face value made an interest-free loan to their fellow taxpayers, the waived interest comparable to a seigniorage fee. Finally, both tallies and bills of credit were liable to circulate at a discount, reflecting doubts about their redeemability.[18]
The comparisons build on Desan’s previous work on early American money, where she locates colonial monetary design in the larger political drama of the rise of the assemblies and the coming of American independence. Bills of credit were fashioned by political representatives acting on behalf of colonial settlers, “constructing patterns of provincial authority and justifications that strengthened the orientation toward domestic governance and strained imperial structures.”[19] The first bills of credit were used to pay outstanding war debts, but they were soon being wielded to finance direct government spending, extending legislative authority to the appropriation of public funds and reducing royal-appointed governors’ influence over colonial finance to a mere formality. Assemblies assumed control over whether and when to issue paper money, how much to issue, and how to levy the taxes that supported its value. Configured as contractual promises, bills of credit depended on the assembly’s commitment to receive the money for taxes, the community’s readiness to pay the taxes that were imposed, and, occasionally, the public’s evaluation of the likelihood that the crown or Parliament would revoke the assembly’s privilege to issue money.[20] As in medieval and early modern England, monetary change fueled debates over nominalism and the nature of the contract money represented, with some colonies eventually adopting statutes that required judges to adjust for currency depreciation debts owed on running contracts, recalibrating the tradeoff between public rights and private gain (in the process breaking with the English legal position).[21] The early American corollary to English “free minting,” meanwhile, was the colonial “loan office” system. Rather than restrict the money stock to what was needed for public expenses, assemblies supplemented the money supply by lending bills of credit at interest to individuals pledging real estate as collateral. Whether by accepting interest-free bills of credit from the government or by paying interest to borrow them, colonial settlers contributed in common to the money they carried, a marked contrast to the new British model of state-sponsored commercial finance.[22]
While mostly situated in the Anglo-American world, Desan’s approach to money as a legal institution lends itself to new studies concerning the relationship of monetary regimes to capitalist empires and of national currencies to international inequalities. Recent works by emerging historians on topics such as cross-cultural trade and contracting in the Indian Ocean World, money and the First Nations in Canada, and the CFA Franc in Africa shed light on the imbrication of global commercial circuits with local financial principles, the use of money as a technology of settler colonialism, and the role of monetary management in the reproduction of imperial structures using new names.[23] In turn, transnational and global histories of money encourage scholars to engage more deeply with the fraught relationship between monetary sovereignty and political sovereignty in a globalized and unequal world.
Conclusion
I first met Chris five years ago at the Massachusetts Historical Society in Boston, where we were both conducting research on early American money—me as a short-term fellow and Chris as that year’s NEH fellow. I was thrilled when she attended my brown bag talk on my dissertation topic, “Money and Value in Colonial America,” and more thrilled when she wanted to continue the conversation afterward. After that, Chris served on my dissertation committee, an indispensable resource on all things money-related (“What is the difference between transferability and negotiability?” “What is a floating exchange rate?”) and, besides that, a warm and generous mentor. Her scholarship and our conversations not only helped me understand the more technical aspects of money but gave me a better appreciation of the value of interdisciplinary engagement, even, or especially, when the disciplines appear to be talking past each other.
Chris’s pathbreaking scholarship provides a template for future studies of how societies throughout history not only made but also spent money, and how money, in turn, shaped markets. In both England and the colonies, revolutions in making money were rooted in the financial demands of war, slavery, and empire, but the contexts and consequences radically differed. If England’s debt-based war finance established the foundations of modern capitalism, then the colonies’ currency finance played a central role in the formation of colonial spaces and systems of power. An enduring lesson from Chris’s work is the necessity of historicizing the ideologies that explained how economic systems should be structured and that, in the process, wrenched money from history itself, starting with the myth of barter. For only by reckoning with how money and its myths constructed our modern world can we begin to imagine a more just future.
[1] David Graeber, Debt: The First 5,000 Years (Brooklyn: Melville House, 2011), 28; Caroline Humphrey, “Barter and Economic Disintegration,” Man, 20, No. 1 (1985): 48–72.
[2] John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money (London: Macmillan, 1930), 4–5.
[3] Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford: Oxford University Press, 2014), 94, 149.
[4] Desan, Making Money, 269, 271–72.
[5] Desan, Making Money, 6–7, 41.
[6] Desan, Making Money, 43 (emphasis mine).
[7] Georg Friedrich Knapp, The State Theory of Money, abridged edition, trans. H.M. Lucas and J. Bonar (London: Macmillan and Co., 1924); Alfred Mitchell Innes, “The Credit Theory of Money” (1914) Credit and State Theories of Money: The Contributions of A. Mitchell Innes, ed. L. Randall Wray (Cheltenham, UK: Edward Elgar, 2004), 50–78; Georg Simmel, The Philosophy of Money, third enlarged edition, trans. Tom Bottomore and David Frisby (London: Routledge, 2004); Abba Lerner, “Money as a Creature of the State,” The American Economic Review,37, No. 2 (1947): 312-317, 313; Hyman Minsky, Stabilizing an Unstable Economy (New Haven: Yale University Press, 1986), 258, FN 10; L. Randall Wray, “Modern Money,” What is Money?, ed. John Smithin (London: Routledge, 2002), 58–59.
[8] Thomas J. Sargent, “The Ends of Four Big Inflations,” in Inflation: Causes and Effects, ed. Robert E. Hall (Chicago: University of Chicago Press, 1982), 45-46; Bruce D. Smith, “American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence of an Alternative View,” Canadian Journal of Economic, 18, No. 3 (1985): 531-565; Farley Grubb, “Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775,” NBER Working Paper 17997 (Cambridge: National Bureau of Economic Research, April 2012); Charles W. Calomiris, “Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental,” Journal of Economic History, 48, No. 1 (1988); Desan, Making Money, 48.
[9] Desan, Making Money, 44–45.
[10] Desan, Making Money, 46.
[11] Desan, Making Money, 47, 61–62, 64 (quotation).
[12] Desan, Making Money, 171–76.
[13] Desan, Making Money, 179–86.
[14] Desan, Making Money, 273–74.
[15] Desan, Making Money, 316 (quotation), 328–29. See also Graeber, Debt, 339; Geoffrey Ingham, The Nature of Money (Cambridge, UK: Polity Press, 2004), 127–31; David McNally, Blood and Money: War, Slavery, Finance, and Empire (Chicago: Haymarket Books, 2020), 128–38.
[16] Christine Desan, “The Constitutional Approach to Money: Monetary Design and the Production of the Modern World,” in Money Talks: Explaining How Money Really Works, eds. Nina Bandelj, Frederick F. Wherry, and Viviana A. Zelizer(Princeton: Princeton University Press, 2017), 109–30.
[17] Desan, Making Money, 179.
[18] Desan, Making Money, 186, 189. See also Christine Desan, “From Blood to Profit: Making Money in the Practice and Imagery of Early America,” Journal of Policy History 20 (2008): 26-46, 29; Grubb, “Is Paper Money Just Paper Money?” supra note 7.
[19] Christine Desan, “The Market as a Matter of Money: Denaturalizing Economic Currency in American Constitutional History,” Law & Social Inquiry, 30, No. 1 (2005): 1-60, 9.
[20] Desan, “The Market as a Matter of Money,” 43–48.
[21] Desan, “The Market as a Matter of Money,” 50; Claire Priest, “Currency Policies and Legal Development in Colonial New England,” The Yale Law Journal,110, No. 8 (2001), 1380–91.
[22] Desan, “The Market as a Matter of Money,” 51–52; Desan, “From Blood to Profit,” 29; Desan, “The Constitutional Approach to Money,” 120–21.
[23] Fahad Bishara and Hollian Wint, “Into the Bazaar: Indian Ocean Vernaculars in the Age of Global Capitalism,” Journal of Global History, 16, No. 1 (2021): 44-64; Brian Gettler, Colonialism’s Currency: Money, State, and First Nations in Canada, 1820-1950 (Montreal: McGill-Queen’s University Press, 2020); Fanny Pigeaud and Ndongo Samba Sylla, Africa’s Last Colonial Currency: The CFA Franc Story (London: Pluto Press, 2021).