2. Money's historical process
"The process of money creation is so simple, the mind is repulsed"-J.K. Galbraith
"Ye shall know the truth, and the truth shall make you angry"
-Aldous Huxley
How does power express itself in the 'capitalist system'? Power, to institutionalists, is largely defined by its coercive nature. To add to this concept, it might be useful to borrow from other approaches to construct a more robust understanding of power beyond its coercive nature. Gramscians include the consensual (positive and negative influential power) aspects of power through the notion of hegemony. The process of gaining hegemony within an institution, a class faction or the capitalist system itself is partly a play of power, influence and social psychology. Stephen Gill has argued "hegemony occurs if and when there is widespread acceptance of the key principles and political ideas of a leading class faction or constellation of interests".6 Cox interprets hegemony as an economic, political and social construct that expresses itself "in norms, institutions, and mechanisms which lay down general rules of behaviour for states and for those forces of civil society that act across national boundaries, rules which support the dominant mode of production [of money]" (Cox, p.137). Cox argues that "[a] world hegemony is thus in its beginnings an outward expansion of the internal (national) hegemony established by a dominant social class" (p.137)7.
Money is the economic, social and political underpinning of the 'capitalist system'; it is the source and channel of power by which hegemony is achieved and maintained within this system. Money is usually defined as 1) a medium of exchange, 2) a unit of account and 3) a store of value. But these are the definitions of the functions money performs for us; they do not tell us what its essence is. Thomas Greco argues that money is an agreement, or a consensus, because "we are willing to accept something that in itself may have no fundamental utility to us, but that we are assured can be exchanged in the market for something that does".8 Money is also a claim against the wealth of the community, as Soddy9, Ruskin10 and Aristotle11 before them argued, and what matters is the validity of that claim. The validity of a claim against wealth depends on trust in authority, a willingness to accept the claim and a belief or faith that the claim is worthy. Money is the measure of value for neoclassical economists; if this is the case, then why don't they investigate its nature, how it is created, how it influences the overall process of history and production?
The invention of money, to economists, is of equal importance to the wheel in human historical development. In a sense, the use of money is what separates humans from the rest of the animal kingdom. Most historical analysts, from Aristotle12 to Milton Friedman13 and Susan Strange14 trace the initial development of money from the primitive barter system. Through the process of barter, some goods lent themselves well to being traded, even if one or both parties involved in a transaction had no use for a specific item, because that item could easily be traded again to a third party for what a person wanted. For example, a person could trade his or her services for an object of limited usefulness such as a seashell, scrap of metal, a knife or some other commodity such as gold, especially if a person knew others would readily accept it in exchange for a purchase of their services or commodities. Through this process, money overcame the problem of double coincidence of wants.15
Be Sure to Continue to Page 4 of "E Pluribus Unum: Dollar Hegemony and Money Creation in IPE".
