CapitalismLetters

The Invention of Money

The invention of money — discussed last week by Julia Ott — is one of the greatest of all human inventions, comparable to the invention of the wheel, if not quite up to the discovery of fire. If we situate this invention in the context of the class we can see why: money is necessary for abstraction, which is the essence of capitalism, and the source of its revolutionary potential. When we say money we are almost saying mathematics: it is the tool that makes our productive activity predictable, calculable, brings the future into relation with the past. Thus it involves human depth: memory and obligation, promise-making, as well as homo economicus, i.e., the calculating individual. Abstraction or calculability, in turn, is linked to trust or the making of promises, as Nietzsche argues in the second essay of The Genealogy of Morals.

The character of money can be more clearly understood when we contrast its role in capitalism to earlier forms of money. In Western history the first monetized economy develops after 1000 A.D. As Geoffrey Ingham argues, before that money took the form of Wergild, namely revenge: an eye for an eye. This brings out the coercive, Nietzschean element in debt, its relation to authority, which is particularly well developed in David Graeber’s book Debt. Money frees us from one-to-one (or family-to-family, or status-to-status) forms of obligation, but money and debt — however abstract they become — never lose their connection to the conscience.

This connection — calculability and obligation — may serve as a useful revision of Weber’s analysis of the spirit of capitalism. Weber emphasizes the role of Calvinism, because Calvinist guilt and sense of moral obligation produces the hard work and savings associated with industrial capitalism. But Weber ignores the need to escape from moral obligation, which Freud, by contrast, evokes in analyzing the passion to gamble. Gambling is a way of setting aside a harsh superego, betting everything on one throw of the dice. This is developed in Freud’s essay on Dostoevsky and in Otto Fenichel, “The Drive to Amass Wealth,” Psychoanalytic Quarterly, 1938. These considerations are very general. Now let me ask three more specific questions concerning finance and the present crisis of capitalism, our third and last module.

First, there is an almost common-sensical link between finance and the “real economy” that runs through the history of capitalism, and that also informs popular notions. Perhaps the original theoretical version of this idea is found in David Hume’s 1752 “Of Money,” which describes money as a veil. This idea lies behind the “quantity theory of money”: if you increase the money supply prices will rise, but output will remain the same. Monetarists, like Milton Friedman and Ben Bernanke disagree, of course; Bernanke claims that the Fed saved the economy by printing money. But it seems to me the real change in thinking about finance came with Keynes (no monetarist of course), because he placed uncertainty (as opposed to risk) at the center of his conception of how a market economy functions. If this line of thought is valid, there are many implications.

Second, the modern state is based on debt. We see this in England in 1688 with the creation of the Bank of England. Alexander Hamilton saw the same thing in the US, when he said, “a national debt is a national blessing.” The reason is that the debt ties the wealth-owners — Romney’s 53% — to the government, or to the king in the case of England. This is what modern democratic self-government is about: instituting class rule. Until we get to the New Deal, a great part of American politics revolves around debt and the money supply, e.g., the national bank and the silver issue. In general, this is the politics of inflation and deflation. Adam Tooze, in The Deluge, says the great deflation organized by the US after WWI is the most understudied political event of twentieth century history.

Third, there seems to be a general relation of finance to capitalist crisis. Minsky reads Keynes as arguing that finance creates the instability that underlies crisis, but I have something else in mind, namely the ways in which finance reorganizes capital as a resolution of crisis (downward profit). In the US this is the case with the Morgan-led merger movement (1897-1904), which was a response to the Depression of the 1890s, and it may be the case with “financialization,” which was a response to the economic crisis of the 1970s. In this light, the New Deal was a non-finance driven response to the great Depression of 1929 and after. Or perhaps the New Deal should be seen as finance driven, just government finance, as in RFC. This relation of crisis and finance also supplies hints for historicizing the Obama Presidency — a finance driven response to the economic crisis of 2007?

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Eli Zaretsky

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