Book review: Human civilisations evolved as two basic models. One was collective, whereby resources were shared according to top-down decisions by a tribal leader or feudal king. Trade among groups involved barter or gifting.
The other was the organic bottom-up market, where resources were transacted using forms of exchange. The crudest form was the trading of cigarettes in World War II prisoner of war camps. Unopened packets of Western cigarettes played the same role in iron-curtained Romania.
David McWilliams, a Dublin-based monetary economist-turned-academic-and-media commentator, is an enthusiast for the market model. His history is intended as an accessible read for those who think money – or even the love of it – is a misunderstood commodity, the source of all evil.
Money’s dubious reputation is well earned, as it traverses a story full of swindlers, speculators and savants. But like the coins that were the basis of money over several millennia, there is another side. That is a story of innovation and ingenuity that moulded major historical events and the civilisation we have today.
The first recorded business was a Sumerian home brewer, Kushim, who bought barley to make beer he later sold. His transactions in cuneiform script survive from 5000 years ago. Apart from writing, the Sumerians in Mesopotamia (modern-day Iraq) also invented accountancy, a legal system and a financial structure, all underpinned by interest, the price of money.
Ancient names associated with wealth, Midas and Croesus, were among the first issuers of coins made from gold, silver and copper. These greased the wheels of Greco-Roman imperial expansion. But the biggest innovation was a change of mindset from the mythical world of divine guidance to more sophisticated thought processes.
“[The Greeks] moved … from reliance on ‘soft thinking’ … to ‘hard thinking’, in which individual logic and reasoning challenge religion and myth,” McWilliams writes. Critically, money paid for armies and was available to anyone.
“The development of this bottom-up technology allowed the market to challenge the old top-down economy, driving commerce and leading to higher living standards across swathes of the ancient world.”
Money had other qualities. It was abstract, fluid and transferable. It did not smell, (“Pecunia non olet”) as Emperor Vespasian declared when the Romans taxed urine, a valuable elixir.
The Romans also invented credit, and it was a credit squeeze, after Tiberius went on a money-printing spree to diminish the wealth of the Senate, that collapsed the empire.
The Dark Ages were so-called in northern Europe because commerce and the production of many common goods and infrastructure such as roads and bridges vanished with the Romans. This region lagged in the medieval world as the power of the Christian rulers peaked with their disdain for usury.
The introduction of metal ploughs to the heavier soils of central Europe increased agricultural production, leading to urbanisation, a revival in commerce and, eventually, the rise of a merchant class.
They first flourished in Florence, which became the commercial capital of Europe as it absorbed the Indian numerical system via trade-minded Arabs. Fibonacci wrote the Book of Calculations in 1202, enabling western Europeans to match the arithmetic of their Arabian equivalents.
The cumbersome Roman numerals survived only on the buildings that were the legacy of the civic-minded bourgeoisie, who revived the construction of sewerage systems, schools, hospitals and orphanages.
Money continued to innovate: annuities in Germany turned the inert wealth of land into cash and therefore capital. Gutenberg, a notorious swindler, made a fortune by printing Bibles that spurred the commerce-friendly Protestant reformation.
Meanwhile, the seafaring empires of Portugal, Spain and Holland easily overcame the less-monied civilisations in the Americas, Africa and Asia. The free-thinking Dutch became the centre of global commerce, creating stock exchanges, bonds and paper currency as well as the disastrous tulip mania.
Today’s economic dominance of the US began in the 18th century with the invention of the decimalised US dollar. It was the first currency to be issued by a federal central bank and, eventually, after the end of the gold standard, became the world’s major fiat currency.
McWilliams tracks the major depressions, counterfeit activity and morsels of gossip in money’s turbulent history. One little-known anecdote is James Joyce’s entrepreneurial skills to open Dublin’s first cinema while he was based in Trieste and still awaiting fame as the author of Dubliners and Ulysses.
The future looks like more of the same, despite cryptocurrencies and unconventional monetary theories. McWilliams views the former as a modern version of tally sticks – the first recording devices. Unlike money’s use for productive capital, he sees bitcoin as a tradable gambling contract that generates no income or cashflow. In the world of money, what goes round comes round.
MONEY: A Story of Humanity, by David McWilliams (Simon & Schuster, $42.99), is out now.
