FORUM: Desan’s Making Money/ Samuel Knafo, Revisiting the Origins of Modern Money

Samuel Knafo

Samuel Knafo is a Reader in International Relations at the University of Sussex. He has published The Making of Modern Finance: the Gold Standard and the Rise of Liberal Governance. He currently works on central banking and the early history of financialization.

Christine Desan’s book, Making Money, represents a landmark in the rapidly growing literature on the history of money. It offers a compelling account of the political measures and legal interventions in England that set the foundations for modern forms of money. Desan here demonstrates that money has always been a political affair. Taxation has indeed historically provided the key incentive for people to seek specific forms of money in order to pay taxes. But, more importantly, money itself cannot be stabilised as an institution without systematic political measures to establish and ensure its circulation.  

In developing this argument, Desan targets a pervasive myth that money is the product of market activity. Not only has the myth of the barter economy continued to inform much of the common sense about money, with money being portrayed as a convenient convention meant to simplify trade, but the literature largely continues to cast money as a product of financial (especially banking) activity. By contrast, Desan argues that the apparent seamless nature of money as an economic object is in fact the product of a political revolution in 17th century England; one that was so successful that we now largely fail to notice the role of political actors in the making of money.

The book is organised around a historical account, going back to medieval England, which powerfully conveys how much political efforts have historically been required to maintain a monetary circulation. At a time when means of payment were dependent on precious metal coins, their quality could rapidly deteriorate. There was wear and tear, but rulers and merchants also sought to take advantage of circulating coinage through debasements or coin clipping. These practices made it a challenge to maintain the integrity of circulating money, even when rulers were keen to do so. More often than not, they tried to pass the costs for this onto holders of coins, especially since rulers also relied on minting as a key strategy to raise funds for themselves. For this reason, Desan argues, money was clearly perceived to be a political matter driven by a constant trade-off between fiscal requirements and the need to secure the integrity of coinage.

Against this backdrop, the 17th century stands out, because the state took into its own hands the costs of ensuring the circulation of money instead of using it as a vehicle for funding. This represents the key moment when money became some sort of public good: “Rather than a resource defined by a public’s claim on its members, currency was supplied by the government as it recognised and rewarded individual orientation to profit.”[1] Particularly significant here was the decision by the state to cover the costs for minting coins and, more importantly, to realign public finance with a new institution, the Bank of England, which issued a new circulating medium of payment: banknotes. This alliance between investors and the state would provide the foundation for a new monetary infrastructure. Its success, Desan argues, would give the impression that money was a seamless economic object because it now appeared abundant and beyond state meddling.

Desan’s book represents a great achievement. It is an incredible synthesis on the subject that adds a novel legal perspective. Using key legal cases, along with a rich social history of money, Desan is able to peer into the reasoning that buttressed premodern and modern conceptions of money. The result is a book full of insights about the politics of money that achieves the rare feat of being just as significant for its historical content as it is for its conceptual clarity. Most notably, Desan offers a powerful response to the liberal mythology that places the onus for the use of money on people’s confidence rather than the exercise of power on the part of the state. These two aspects are too often opposed to justify leaving powerful agents (i.e. the state) out of the equation. Yet in reality, Desan shows, credibility often came on the back of state power, not the other way around. The state had to actively intervene to secure the circulation of money.

This being said, there are certain differences in the way we respectively approach this history and more generally the political economy of money, some of which Desan has herself outlined in her own discussion of my book.[2] These differences mirror a key debate in the history of money between those who emphasise the centrality of the state as a founder of money and those who focus on financial/commercial initiatives that are then reappropriated for policy matters. In considering this debate, it is easy to get lost in a circular rhetoric, some sort of chicken and egg debate over who is mainly responsible for the making of modern money. For, on the one hand, I fully agree with Desan that ultimately it is the state that anchors money. In that respect, Desan’s historical work makes a convincing case demonstrating the decisive role of state policies in the making of modern forms of money. The risk with such a presentation, however, is that it can convey, even if unwittingly, the false impression of an overly coherent and well-defined state project. Taking the other side of the story highlights instead the ways in which market/financial actors generated, as least initially, the monetary issues that confronted monetary authorities and often provided some of the instruments and the financial infrastructure that these authorities had to use in order to deal with their various concerns. More often than not, monetary authorities were reactive rather than proactive in these matters simply because they were trying to catch up to commercial/financial activities they often struggled to understand and control. So whereas Desan starts by showing the repeated failures of private entrepreneurs to kickstart new forms of money in the 17th century only for the state to intervene in a decisive way, I did the opposite in my book showing how medieval monetary authorities repeatedly encountered contradictions in their policies they could not overcome until banking innovations in the 17th century created new ways to address age-old problems of financial and monetary governance.[3]

In practice, it should be said, most scholars take on board, in one form or the other, the two sides of this equation. This is certainly the case with Desan’s book. But perhaps what is interesting here is how these perspectives frame differently what we take the making of ‘modern’ money to be about. For Desan, the key break relates to a new paradigm of monetary governance whereby the state committed to secure rather than exploit the creation of money. In this account, new instruments were important. For example, Desan highlights the role of banknotes as an additional source of means of payment and discusses how this helped make money abundant. Yet, Desan seems to treat coins and banknotes as similar objects of monetary policy in that both are subjected to the same new modern approach to money that is taking hold in Britain. In other words, the emphasis is on a more general approach to money that takes hold at that time.

While I agree with Desan about the broad contours of this monetary revolution in the 17th century, especially the importance of new monetary instruments (i.e. banknotes), I do not see a corresponding paradigmatic shift in the state’s approach to monetary governance. In other words, the new monetary instruments marked a radical break in the 17th century, but I would argue that the state did not fundamentally reconfigure its approach to money before the 19th century. Indeed, monetary governance remained predicated on the role of the mint and continued to focus on coins for more than a century after the financial revolution of the late 17th century. As a result, monetary governance remained plagued by similar problems to those that had long confronted English rulers.

This explains why key proponents of the supposed modern approach to money adopted in the late 17th century continued to propagate ideas about money that Desan rightly shows to have been problematic. Figures such as John Locke (in his writing) or Isaac Newton (in his monetary policies as Master of the Mint) promoted policies that had disastrous effects on the English monetary system. Both acted to defend the circulation of silver coins, insisting on the need for stable money (i.e. the liberal ideal), yet achieved precisely the opposite: they chased the silver coins they were keen to protect and unwittingly pushed Britain onto a gold standard. From this perspective, the securing of money that Desan implies is hard to see in practice. The 18th century also witnessed heightened problems of monetary scarcity that directly contributed to the systematic rise of country banking. With industrialists in dire need for means of payment, which the State failed to provide, they ended up creating more than 700 banks in the late 18th and early 19th century that issued their own banknotes to remedy a disastrous monetary situation.

What this suggest, I have argued in my book, is that the making of modern money was not simply a matter of creating a new instrument (i.e. banknotes), but more fundamentally one of reinventing monetary governance based on this new instrument. Wanting to secure the stability of money was not enough if monetary authorities did not have the means to do so. Unfortunately, it was nearly impossible at the time to reorganise the thinking about money accordingly. This would require a dramatic paradigmatic shift that took a long time. Only the early rise of central banking in the 19th century provided the grounds for monetary governance to finally shift its emphasis away from coinage in order to take banknotes and bank deposits as its main targets. This would close a key cycle in the emergence of modern money.

This process proved particularly difficult because it was not simply a technical issue (i.e. a matter of finding the right infrastructure for governance), but also involved a political struggle Given that the advent of banknotes provided great power and flexibility, these new monetary instrument raised the stakes of monetary governance. It made money a matter of greater political interest. For this reason, there is a risk in highlighting the alliance between state and investors, and more generally the coherence in the approach of the state during this time, that we lose sight of the key political intricacies that shaped the making of modern money. In that respect, the Glorious Revolution and the creation of the Bank of England did not depoliticise governance by entrenching a liberal commitment to sound monetary policy; one which would favour investors. There was no political “settlement.” As Bruce Carruthers has shown, banknotes provided a vital political tool that was systematically contested as different political forces vied for its control.[4] During that time, the position of the Bank of England and its banknotes was repeatedly challenged and its charters were only on short term basis until the 19th century. The creation of the Bank of England, often associated with the Whigs, was quickly followed by the establishment of a Land bank associated with the Tories. Most importantly, the 1710s witness the rise of the South Sea Company which led to the Bank losing its position of main financier of the state, albeit for a short period of time. All this suggests that the differences among investors, or more generally political forces, were key to the ways in which the politics played out and the specific forms of governance that emerged out of them.  

While these broader conceptual issues lead me to interpret Desan’s rich historical work in a slightly different way, this does not take anything away from the accomplishments of this book which bring much clarity to our understanding of the rise of modern money. Desan forensic analysis of the key formative events in this English history represents an authoritative account of these monetary transformations. This work is a must read especially given the growing interest in the aftermath of the global financial crisis for theories and histories of money. Of particular interest here is David McNally fascinating Blood and Money which develops similar themes but fleshes these out explicitly within the context of Britain colonial ventures.[5] At a time, when one may be tempted to conclude that we are observing a growing autonomisation of the financial sphere, Desan’s study serves as a powerful reminder of the deep entanglements of finance with the state. The explosion of shadow banking, in particular, speaks directly to the importance of the legal infrastructure for the creation of monetary claims, which this book highlights, and the recurrent reliance on quantitative easing well exemplifies the central argument of Desan’s book about the vital importance of the state for the smooth circulation of monetary claims.

[1] Christine Desan, Making Money: Coin, Currency and the Coming of Capitalism (Oxford: Oxford University Press, 2014), 11.

[2] Christine Desan, “Reading The Making Of Modern Finance As An Invitation To Critical Uses Of History” (2015) (

[3] Samuel Knafo, The Making of Modern Finance: Liberal Governance and the Gold Standard (London: Routledge, 2013).

[4] Bruce Carruthers, City of Capital: Politics and Markets in the English Financial Revolution (Princeton, Princeton University Press, 1996).

[5] David McNally, Blood and Money: War, Slavery, Finance and Empire (Chicago: Haymarket Books, 2020).