Humanity has experienced a perturbation in its long evolution of social development. This is not the result of one man, army, wealth or idea, but the interaction and exchange of many communities - once isolated and introspective, suddenly opened and expanded. It is a society based on exchange.
Money - the medium of exchange - is the social fabric of this new age. The medium itself is a consensus of many players, expanding through time and across generations, and in day-to-day interaction, to the point where now it is almost regarded as scientific, a natural component of our solar system or inherent to humankind. But it is inherent to society, and by understanding what we mean by money, we may gain some understanding of the modern age.
Because money is also endowed with values far removed from the simple facilitation of exchange, our discussion will address multiple dimensions of our topic. We will begin with a brief historical placement of money, tracing its evolving nature through the accumulated knowledge of man., and then draw political, social and psychological implications, followed by more whimsical speculation.
Evolving by the invention of hominids, and their ability to conceive and formulate, money represents an exchange medium common to all forms of human aggregation and organization throughout time and location. The conception of "what it is" has varied, but "that it is" has continued from neolithic times.
Money could be anything of agreed-value: a residual in the consumption of goods or services which remains liquid - i.e., that which can be passed on. In a barter of two goods - say, corn for pork, or pork for work - any inequality of exchange could be matched by a token of agreed significance, as, perhaps, an IOU for later redemption. Depending on the level of social organization, the token may remain liquid-- i.e., perpetuated through subsequent trades, between two or many others.
Money could be represented by shells, stones, or commodities. The common characteristic is some socially recognized value. As social organizations evolved and inter-exchanged, a common medium - e.g., metal specie (like gold) - was invested with an understood value for exchange. The commonality of this medium enabled the expansion and sophistication of social exchange, thus extending the spatial dimensions of trade and social interactions. To regulate this value and deter counterfeiting, power to inscribe value to the exchange medium was assumed by a central authority. This power, in turn, reinforced the political institutions of the day. Through inscription, money could be valued above the specie content owing to the value of the symbols inscribed.
Seigniorage (the difference between the exchange value of money and the cost of producing and maintaining it) and the debasement of currency represented a profit to the issuing authority. From this profit, the central government could exchange for its own purposes: such as cathedrals; luxury for rulers; or military expenditures. Paul Einzig writes that Cleopatra devalued the drachma by seventy-five percent to finance her life of luxury, for example, and Charles the Bad debased his country's coinage by one-third in 1383, with the object of securing funds to celebrate the release of the hier to the throne from French captivity. (Bretton, 1980)
Money can also be a democratizing force, depending upon its distribution. In a strict one man-one vote democracy, no man assumes greater power than any other, but in an inequitable distribution of money, those possessing greater amounts effectively possess more votes in market development, as well as political decisions. Norman Angell stresses that the Greeks, "to whom more than to any other people, the western world owes democracy, were the first fully to democratize money (or, perhaps, be democratized by it); to make its use common with the ordinary man, and to impose upon it public control for the public benefit." Angell also stressed the political significance of inscription.
Money was clearly politicized by the eighth-century, B.C. Money, tied to political systems, ebbed with the same. There was relatively little in way of an aggregate system after the Roman era, until the arrival of the Spanish and Portuguese looting expeditions of central America. It is interesting how the influx of specie could effect social and economic institutions. Keynes linked the flowering of the European renaissance and the establishment of the modern monetary system with the arrival of Drake's booty. Similarly, Stadnichenko, a leading Soviet economist, links the dissolution of feudalism with the issuance of paper money in Europe - also coinciding with Drake's arrival. (Bretton, 1980)
In spite of these social transformations and the saturation of monetary exchange, the economic and social systems were still not comparable to those of the present day. Coinciding with the period of new world colonialisation., there was an apparent confusion concerning wealth and exchange. Known as "Mercantilism", the economic belief of the time was that each nation should hoard as much of the precious specie as possible, in a. scramble to obtain a dominant position within the world political arena. International trade was seen as a leakage of the precious medium, and so was held to a minimum. The result-- though increasing the value of national currency-- was internal depression.
This time represents an extreme depiction of the politicalization of monetarized wealth. It also depicts the case where, rather than facilitating exchange, the medium became held as superior to exchange. This is an important quality for our understanding of money-- it assumes a value as something above that of medium. Our economic conception becomes transformed.
We find the limits to avarice emerging as early as 1660 in a report of the H.M. Council of Trade in London. The principle point is that the export or import of bullion depends upon the balance of trade. Prohibitions cannot prevent the export but may, in effect, hinder the import. Sir William Petty, at about the same period, also observed that the prohibition of exports was futile. Both goods and money flow according to their relative prices at each location. But even Petty reverts to Mercantilism.
By the end of the seventeenth century, economic analysis began taking a modern form. It was David Hume, in 1741, who combined the thought into a rational series of essays. Behind his thought was the accumulated knowledge assembled in Britain: the quantity theory of money; the recognition that excess trade balances tend to produce specie flows; the doctrine that the world's supply of specie is distributed more or less automatically; the doctrine of the effect of exchange rate movements upon prices-- Hume merely drove the point home. Money is "none of the wheels of trade". Money is only " a method of enumeration, a set of counters". In foreign trade it becomes a disadvantage, since an increase will simply raise prices of products and production, including labor. It is only in the interim between the increased quantity of gold and silver and the resulting increase in prices that social production is actually benefited. "Things resume their previous relationships, except that more counters are used." (Angell, 1926)
It was Adam Smith, who was historically recognized for the overthrow of Mercantilism, although he, himself, attributes his thought to Hume. Smith, on the one hand, attributes flexibility of prices to the relative abundance of goods. On the other hand, he suggests value being determined by relative labor costs. His central contribution lay in his demonstration of the reciprocal advantages arising from the international division of labor, yet even this contribution was derived from an earlier discussion by Hume. Ultimately, we may assert that the demise of Mercantilism lay in the realization that the kinetic-- or flow - value of money was greater than the potential - or hoarded - value.
If we adjust the word "medium" to mean "message", we may study our subject with the help of information theory. In information theory, there is talk of "positive-feedback" and "negative-feedback" - the former relating to "self-amplifying, or self destroying organizations or situations", the latter to internal stability. The difference between the two is a multiplication factor, which,in the case of positive-feedback, has some value sufficiently different from unity (i.e., 1.0) to have an accumulative effect, and,in the case of negative-feedback, has some value approximating unity, so that the system tends to equilibrium (for static systems ) or steady-state (for dynamic systems). In a feedback sense, money is idealized as a feedback signal relating to the productive forces of society (i.e., money flows to socially productive behaviors), guiding the system through some stable growth path. But, because of other qualities inherent in our medium, the signal becomes distorted.
We may think of the present monetary investment in status goods, national armaments, real estate and other speculative holdings - e.g., gold - as examples of unproductive objects of present concern. Each has the obvious "opportunity costs". National armaments - although rationalized in terms of employment, technological innovation and protection of its citizenry from the other warlord - ultimately divert investment from possibly more lasting and socially benefiting production and, if ever employed, would surely disrupt international markets and national concerns. Real estate and gold are competitive (though less fluid) exchange mediums which, when speculated against national currency, typically devalue monetary holdings. These investments also divert investment in capital formation and social welfare. That these alternative mediums devalue currency may be an error-signal in its own right. Monetary value is largely a value of confidence. Where confidence is lacking -- as in an inflationary economy -- there is an increased turnover - or, "velocity" - of currency in favor of these alternate holdings. This results in an amplification process characteristic of positive- feedback, known to us as runaway inflation.
AN ECONOMIC ANALYSIS OF KINETIC ABSTRACTION
To better understand this kinetic-- or "medium"-- value of money, let us consider the point where value is introduced beyond the embodied commodity-value. This value remains "liquid"-- principally intangible and social. We will begin our analysis with a barter exchange of two commodities, and then introduce a monetary fluidity.
Let us envision a Farmer Dale and an Old MacDonald. Farmer Dale has a bumper crop of corn; Old Mac's sow had a litter of pigs. Old Mac would like to feed sweet corn to his pigs and proposes to Farmer Dale that he will give one of the pigs when fattened if he could have some of Farmer Dale's corn. Now, farmers are not typically fast talkers and you always know where to find them, so Farmer Dale figures he can trust Old Mac.
How much corn is a pig worth? Here it is an isolated negotiation. Farmer Dale values his corn based on his surplus that year. Old Mac reckons how much he needs to feed his pigs. How many pigs is corn worth? Old Mac figures he can only spare one in exchange for feeding the rest. Farmer Dale would like to have another for his surplus corn, but Old Mac doesn't want anymore corn than what's necessary to feed them. So, although they both have an interest in making a trade in the beginning, they reach some point at which a trade is no longer attractive. So they bargain an amount of corn equal to one fat pig, here denoted as a token or document - like an IOU - which can be exchanged for the pig when it has grown. The IOU is an expression of money - albeit, a limited one - based upon the now obsolete pig standard.
Now envision a community of family farms. Families come in all shapes and sizes - some large, some small. Each works over a certain parcel of land - originally determined only by how much each can work given their relative size - the larger the family, the larger the parcel of land - but eventually constrained by the expansions of other farms in the area. Over several generations, each parcel is divided among the children - having the reverse effect, the more children available to work the land, the smaller each parcel. Eventually, various rules of inheritance were devised to keep such parcels from dwindling to zero - as in the first male or female child inheriting the lot, with the others having to work for their elder sibling.
Farming is a vulnerable occupation - seasonal, but also varies year to year depending on unpredictable natural forces, like rainfall. Some families - due to their relative size and performance - have a greater bumper - a storage from prior harvests; others are precariously perched at the edge of subsistence. The weaker families approach the more powerful ones for loans in exchange for future harvests. Again a form of money is exchanged - a symbol of future harvests in exchange for past ones. Still, however, the negotiation is local and personal.
The revolutionary value of tokens for exchange - the IOUs as opposed to the actual product - is that they are portable and impersonal. They can be easily transported from one community of farms to another, allowing trade between regions. Thereby, the family that accumulates them may exchange with other communities in the region, favoring their relative position locally and consummating their position as "lord." Eventually, such tokens lose all reference to a particular harvest or pig, but became values solely on the basis of exchange. As tokens evolved and their use expanded - as between regions and finally nations - they also affect the nature of trade itself.
This money which makes up the balance of trade, can be seen to represent a claim against its issuer's future product. Under a bullion standard it could be exchanged for specie. A currency's value was determined by the volume in circulation relative to its bullion reserve. Assuming a degree of confidence in that reserve, exchange for specie is actually seldom done-- it being much easier to hold and exchange currency. The difficulty arises, however, that the value of a currency also fluctuates according to its relative abundance abroad. Hence, a secondary market arose: the speculation of currencies.
In a laissez-faire market system, competitive markets arise where each currency is exchanged for every other currency until a single price obtains between every possible combination of currencies. These prices will be stabilized not only within each market, but also between them. If the price of British sterling per dollar were lower in New York than in London, for example, all buyers of sterling would buy in New York, thus bidding up the prices, and all sellers would sell in London, thus reducing the prices, until prices in both areas equalized.
Although the laissez-faire system would establish uniform and orderly exchange rates throughout the world, the relative prices would not necessarily remain stable. This is seen in the case of a deficit balance of trade where either specie or currency is spent abroad to balance the trade. This would result in raising the relative prices of the other currencies against the one, or depreciating the one against the others.
One thing the bullion standard did was to offer a common denominator to monetary exchange. Since its abandonment, the value of a currency is a function of exchange rates and arbitrage. Aside from speculation, its value is also a function of confidence-- i.e., that it can be converted into a commodity. Ungrounded, money returns to abstraction: a set of counters used to quantify "productive possibilities". The possession of money thus implies a claim against these possibilities. Its value is determined chiefly by the number of counters relative to the wealth it quantifies. But, as Hume acknowledged, at least for the interim period, social production is befitted by the influx of more counters. Wealth itself, then, is a fluid and intangible process.
If wealth is an abstraction - a value added by the production process, not pre-existing in latent form - then its stock can be expanded. If it exists as given - as in fixed and nonrenewable global resources - then it can only be transferred and we must assume the ordinary opportunity costs. Thus, following an expansion of currency, there is a point of saturation where the further issuance only raises prices. But by pacing the release of more currency, we may further raise our productive possibilities over time. The national monetary board has the duty of regulating the currency so as to enable a steady-growth path. That it can be expanded indefinitely assumes the ideal character of wealth (wealth as process). If we cannot expand it indefinitely, then we are only changing its form. Depreciating in the usual way, a resource stock devalues over its productive life. Production may, at once, exert a positive and a negative effect on wealth. If there is a net gain, it is the value of human work.
THE SOCIAL ENVIRONMENT
Exchange occurs within a social setting. It involves the product of labor which is more than a variable in a production function. The value added is an organized application of intelligent life. Where the exchange medium becomes fluid, political and abstract, it is sure to have social consequences. By its commonality and non-perishable properties, the individual is given new freedoms in the choice of social and economic ties. This has led to the ego-centering of economic processes.
During the Middle Ages, it was culture or tradition - not the market - which regulated economic activity. Both peasant and lord accepted the customs because they served the purposes of each. The lord could count on them reinforcing his rule and income. The peasant could appeal to them for justice within the social setting. Rent in the sense of payment in money or in-kind for the use of land was a small part of the tenurial relations between lord and his peasants and the payments were not unidirectional. The lord's wealth was as much determined by the number of his men as by the amount of land he controlled. The peasants could expect in turn the provision of goods and services, a share of the wealth in boon periods, and stability of political form. The lord was more a leader than a landlord. The concept of land "ownership" was not present in Medieval society. In medieval law, land was held by one member in the hierarchy for a superior member. If we go back to the 12th century, the "dominant concepts were not ownership and incomes, rents and profits, but lordship, tenure and service. "(Cohen, et al 1975)
Social customs were also enforced by the peasant culture. Work groups were often formed on the basis of kinship and neighborhood. Social integration was served by the distribution system. May Diaz informs us that the dyadic contract-- fictive kin, friend or neighborhood ties-- "is established and reinforced with gift-giving and the exchange of favors and services, thus increasing the flow and magnitude of the local economy just as Christmas gift-giving spurs on distribution in the United States." (Potter, et al, 1967) This encourages the employment of resources toward the social good, in what Diaz terms a "give now, to draw later... elementary, low-risk savings system." (Ibid)
What led to the shift in relations was the enclosure of land into private possession. What led to enclosure was a new exchange mechanism - money. Rents need no longer be paid in surplus produce, but can be paid by taxing profits. Service to the lord was no longer customary obligation but could be settled with wages. All units of production could be assigned monetary value, exchanged, :and devoted to profit-maximizing activities. The landlord came more and more to view land as a source of income, and men as potential wage-earners. The lords expelled peasants from their traditional holdings and claimed the agricultural surplus. According to Marx, this surplus served as the primary source of primitive capital accumulation and formed the basis for the capitalist mode of production In the Marxian framework, the expelled peasantry became the wage-labor work force, which gave rise to the industrial proletariat.(Cohen, et al 1975)
Illich tells us that the "abhorrence of wage-labor still fits the outlook which might be shared by today's world majority" (Illich, 1980)
Illich provides historical examples of this awkward transition. Until the mid-eighteenth century, "French poor houses were run on the medieval Christian assumption that forced labor was a punishment for sin or crime." In other areas, chiefly Protestant Europe, workhouses were organized and equipped to cure laziness and develop the will for work. The main population, however, resisted such attempts for "improvement".
Not everything could be monetarized, obviously. Those unquantified aspects of the modern system Illich terms "shadow-work", composed principally by the "domestic enclosure of women". This was to become a "necessary complement to the production of goods and services." By making working men into the wardens of their domestic women, and this guardianship a burdensome duty, the enclosure of women made wage-work a "necessary adjunct of life." The shadow-economy includes more than housewives, however. Much of it represents various barter transactions or "barn-raising" activities. In the United States, this economy was valued at approximately $700 billion in 1980 - more than a quarter of the GNP value were it monetarized.(Wall Street Journal, 1980) When the monetary economy does poorly, as it did then, the shadow-economy becomes stronger. We were informed that "all around the world, ten thousands of movements try to unplug their communities from both wage and shadow-work through the choice of alternative use-value oriented lifestyles,... Sweden might now be leading the world in the attempt to employ disciplined shadow-workers (volunteers) in its social services .... This is a plan to make shadow-work in the social sector increase much faster than wage- labour. " (Illich, 1980)
We should expect a reluctance on the part of our national and economic interests to dispense with wage-labor. The 'L' in the economic production function represents labor, which can be priced according to its marginal contribution to production. Its surplus income becomes savings which then can be reinvested in capital formation. By the reduction of man into these mathematical operations, our social organization again becomes stable and predictable. Further, it becomes profitable. Profit remains a national concern. With taxable income, governments may finance their defense and public goods. Defense and public goods are necessary to instill confidence in social institutions, which is necessary to maintain the positions of power and social order.
We are thus led to the dialectic of the individual and society. In Marxist thought "man by his activity, creates an order of external relations which appear to his descendants as destiny; but in reality a situation is never definitive, it is always being remade both by the gaze which contemplates it and by the will which transcends it."(Aron, 1929) National wealth - comprised of enclosed properties, capital accumulation, and accumulated knowledge - stand external to the person. The traditions and the family farm is replaced by the university and the urban economy of specialized functions. Commonwealth becomes privatized and exclusive. Its processes become remote and elaborate.
The Marxists postulate a "privileged state" which would render meaning to all of history. This privileged state was described in terms of "homogeneous society or mutual recognition." Merleau-Ponty decreed that only the proletariat was capable of achieving this "privileged state" by the seizure of power and the construction of a collective economy. In his later writings, however, he is less optimistic. Merleau-Ponty has Stalinist Russia in mind with this acquiescence. But it in no way is so limited, e.g., the French Revolution.
The call to a collective economy is not solely Marxist. Historically, it is the rule rather than the exception. In the days of yore, however, it was the province of community - the "commonwealth." As community is replaced by society, it is dubbed "socialism."The "ten of thousands of movements" mentioned by Illich might well be found in the central cities of western industrial nations where the young gentries exemplify community-values, or Illich's "use-value life-styles".
A notable shift has occured in social motivation. In the traditional - or simplistic - society, production was for the good of the community. Illich finds the modern expression portrayed by the protagonists of 19th century European novelists which "live in a society that has made it almost impossible to desire, except what others whom one envies either have or want. And when these protagonists pursue their desires in this fashion, they transmogrify their envy into virtue."(Illich, 1980)
For the ambitious and the powerful, money becomes the winnings of a well-played game. Money thus offered the promise of "betterment". But the unrealistic expectation of "betterment" - as in a Great Society - only sent inflationary signals through the economy. The notion of betterment therefore has been revised - not abandoned - but it must be redirected. Wage-income is suppressed - by monetary regimen - to hold down inflation; while profit-income is maximized - by fiscal policy - to facilitate expansion. The rationale is that the economy as a whole is benefited, and to a considerable extent that is true - employment has expanded considerably and even the smallest savings can find a broker on wall street. Yet real wages (the exchange value of wages for all other commodities) remains virtually unchanged in 25 years. The underlying this schema there is a familiar tone - like the French assignat - an exchange of public debt for private wealth.
For those of us who have not amassed alternate holdings in real estate, who cannot manipulate stock exchanges or development policies, we become increasingly dependent on the subtle and abstract properties of currencies - representing, in total, all of the market's interwoven and changing processes. What, for some, is unlimited opportunity, for others becomes only hopeful confusion. Exchange rates and stock prices do not respond so much to the amortization of government borrowings as they do to public uncertainty. Where the system was once founded upon individual freedoms and properties, it now needs aggregate summaries and corporate entities. For the individual - depending upon his sensitivities - there are inner-directedness, indifference, and the remnants of humor.
Hominds are accumulating knowledge of material laws, and the properties of systems and processes. We know that this is far from perfected. We must yet view even our own knowledge by the "gaze which contemplates it and by the will which transcends it."
Economics poses as a pure science: a system of mathematical equations. To the extent that it reduces a population to workers, and work to wages, it has subjugated citizens into a resource of the production process. Power over the production process - and hence, its citizenry - is distributed by monetary flows and holdings. Money here denotes contracts over pigs and corn, to be sure, but also securities and indentures from the longest term bond to the smallest legal tender. Everytime policy is formulated solely or primarily by these abstractions of economic calculation, power shifts from the citizenry - i.e., democracy - to its money - i.e., plutocracy: power distributed on the basis of wealth.
A polity must provide its society with basic needs for survival. Moreover, there is a limit to economic inequality beyond which society disintegrates. This limit is not an objective calculable percentage, but one of expectations. Beyond a comfortable lifestyle, there are always expectations of a better one. Labor may begrudgingly work for its bosses - however oppressive they may be perceived - provided it has become dependent upon wages. But its output may not work quite as well, may be in constant need of repair, or face long delays in production. This will weaken its position in international exchange - a slow and silent form of sedition. Or, a society may erupt into riots and massive looting - the legitimacy of the nation-state is rescinded, and its economy, toppled. There are many examples of this through the history of the world.
Money has been described as "kinetic abstraction", it has no value in itself - only an assigned value due to the wealth it depicts. To the extent that wealth is produced, not fixed by natural constraints, it is not someting possessed; it cannot be hoarded; but must remain suspended in relationships, as in a system for putting-out, and for exchange.
Economic Man, too, is an abstraction. For he also exists in relation. His economic position has social bearing, and political aims. To individualize him is to isolate, also sever and disempower. The principle of self-interest is not economic. It does not make sense in our knowledge of systems. It will come to lose sense in our knowledge of economics.
"Currency debasement was used by the governors of the Greek city states, as well as by their successors on European thrones, to finance self-serving military adventures, including looting expeditions into neighboring territories. The rulers issued coins, proceeded to shave off or otherwise remove some of the value, and legitimized the practice by appropriate decrees designed to encourage the public to use the altered coins as though the fraud had not occurred. In the course of time, ... in the Greek and Roman republics, the coining monopoly drifted into the hands of religious authority.... Burns identifies money as the engine driving the antagonists in the Peloponnesian wars, and debasement as the immediate means to augment scarce resources. But to use that means effectively, unlimited power had to be vested in a central authority, at the expense of democracy." (Bretton, 1980)
"We shall miss the essence of the money difficulty, if we fail to recognize the gulf which separates a weighted quantity of some valued material used for purposes of exchange, from a coinage which, though it be made of that material, becomes also numbers, symbols carrying the insignia of authority, tokens of something else, Coins changed the nature of wealth, which, more clearly separable now from divine right, was to be as powerful as ever. More than any other thing, coinage destroyed the old aristocracy." (Angell, 1929)
"In the opening years of the seventeenth century England.... The teachings of individualism and laissez-faire, with which we are now so familiar, were at that time almost unheard of. The nationalistic ideal was supreme. Furthermore, the resulting concept of national or collective prosperity was placed apart from, and above, the concept of individual prosperity. To the thorough-going Mercantilist, a condition of poverty among the majority of the population was in no way necessarily inconsistent with the prosperity of the state itself, and indeed might often be the essential condition of the latter. "(Angell, 1926)
"The great and ultimate effect of trade is not wealth at large, but particularly abundance of silver, gold, and jewels " which are not perishable, nor so mutable as other commodities, but are wealth at all times, and all places .... The following of such trade, which does store the country with them... is profitable before others." (Angell, 1926)
"Happy the nation in which the citizens are rewarded and motivated not for what they inherit or control or have won by gambling or by stock manipulation, but for the degree to which they have enriched other citizens by production.... The first principle of negative feedback is that you cannot maximize something unless you have an index to tell you at every instant how far you are from the goal. If there were a perfect index for productivity-- which money unfortunately is not-- the manufacturer who provided maximum satisfaction to many customers at minimum cost to society would grow rich in these symbols. ... it is clear that money has some drawbacks as an error- signal. For one thing, it does not show the direction and amount of error, so that when profits fall off, a period of hunting is necessary before a production system can locate the target again.... Money is also a poor error- signal for productivity because of its other index functions which, in many societies past and present, have been antiproductive. Wherever its origin is inheritance and its object is ostentation, production disappears." (Platt, 1966)
"The general modifications introduced into trade by the presence of money are fairly evident. The values of the articles exchanged cease to be expressed in terms of one another, and become expressed in terms of the common measure, money. The consequence is a much wider and quicker tendency to price equalization, since it is now possible to compare prices in different places with a fair assurance that the standard of measurement is the same. But two other consequences follow, and are due to the fact that the value of the common measurement is itself variable. Within any one country, the absolute level of this value is of course of no significance. But the differences in the effects produced by changes in the value of money upon different classes of commodities and services are important. These differences are ones of rapidity in response... and also, frequently, of degree, for permanent changes in relative values may follow.... As between countries, however .... A change in the general level of prices in one country, unaccompanied by an equivalent movement of the exchange rates, will have precisely the same effect upon a foreign country as though demand and cost schedules had themselves changed.
"(When foreign exchange mechanisms are introduced) Articles in one country are no longer exchanged for those produced in another country. They are exchanged for the currency of the country of origin; this is exchanged for claims to the currency of the other country; and these claims, in turn, are directly or indirectly exchanged for goods there. ... Under barter, each transaction is entirely devoid of direct mechanical connection with any other transaction, unless it be those in the particular article concerned. But where a foreign exchange mechanism exists, each transaction is intimately related with all the others taking place at the same time.... Each is primarily dominated by the aggregate of the others, but it also contributes its small share towards determining the aggregate itself. " (Angell, 1926)
"Where speculation enters in, holders of the one currency would abandon their holdings when depreciation is suspected, thus lowering its value whether depreciation would have otherwise occurred or not. Any prolonged deficit of trade would run the risk of exhausting the bullion reserve leading to uncomforting conditions in world trade and finance. These concerns led Britain to abandon the gold standard in 1931, and to attempt to stabilize its currency through official transaction-- the buying and selling of foreign currencies and gold in a way which countered the movements of excessive speculation." (Tew, 1956)
'On the other hand, social commitments often limit the capital which they can acquire, what they can spend, and how they can invest. Thus in closed communities-- and often in open ones as well-- egalitarian styles of life are insisted on. Acquiring more wealth than one's fellows suggests that one has somehow robbed them and snatched more than one's fair share. Conspicuous consumption arouses envy, as it does in modern communities, but rather than awakening increased competition in order to surpass the Joneses, it calls up negative sanctions-- distrust, gossip, ostracism, and witchcraft. There are characteristic institutions whereby such excess wealth" is siphoned off so as to enhance rather than weaken social cohesion." (Potter, et al, 1967)
"But for most people in Europe and the West, wage-labor went through the looking glass between the (seventeenth) and (nineteenth) centuries. Instead of being a proof of destitution, wages came to be perceived as a proof of usefulness. Rather than being a supplement to subsistent existence, wages came to be viewed-- by those who paid them-- as the natural source of livelihood for a population. These populations had been excluded from the means of subsistence by progressive forms of enclosures." (Illich, 1980)
Illich quotes the Prussian Secretary of the Interior, in 1747:
"... from morning till night, we try to have this police cruise through our streets to stop beggary... but as soon as soldiers commoners or the crowd notice the arrest of a beggar to bring him to the poorhouse, they riot, beat-up our officers sometimes hurting them grievously and liberate the beggar. It has become almost impossible to get the poverty-police to take to the streets." (Illich, 1980)
"The villain may well turn out to be capitalism, pure and simple.... By design and inner logic, capital production and accumulation are socially as well as psychologically disturbing influences, opposed to a state of rest. New financial linkages are formed perpetually, within an ever-changing "web of contractual dependencies and mutualities" unnoticed by the general public. ....Increasingly, the new dependencies rest on production methods, and related marketing practices, and objectives which stand in direct conflict with values mandated by considerations regarding the individual's physical and natural environment" .(Bretton, 1980)
"... But this miraculous harmony is destroyed, the proletariat disperses, the party becomes or reverts to an instrument of control and coercion; it is only in principle, in a few privileged moments in history that criticism is incarnated in history and becomes a way of life. The rest of the time it is represented by functionaries .... Every revolution is betrayed because the decline of fervor is inevitable; a new elite is established, the party becomes a bureaucracy." (Aron, 1929)
"The French Revolution may be associated with political democracy only with great difficulty. It should not be so difficult, however, to regard the event as one in a series of incidents in history where government and the governed entered into a compact of sorts. In this case the understanding was that the wealth was to be employed in the interest of the greatest number. There is much room for doubt whether the compact was honored by the Revolutionary regime. There is no room for doubt, though, that the ingenious device invented by the regime to help finance the Revolution and guarantee its survival beyond the initial bloodlettings, the assignat, was in its final analysis an instrument of fraud. ... At one point, the purpose was to enable government to borrow money on the strength of landholdings to finance essential services. But, as is the case all too often, the device ended up providing cheap money for government and speculators, profit for both, and ruin for the economy as a whole." (Bretton, 1980)