How Money Changes Society
Money is the killer app par excellence. Money is something basically insignificant, something that historians tend to overlook. Yet money changes everything and brings in an entirely new form of society.
Money introduces the concept of choice. Admittedly this is a matter of relativity. I call it the difference between one-third choice, and two-thirds choice. Even in the most barbarian societies, such as North Korea or Soviet Russia, people have a certain freedom to do their own thing. Equally even in the most civilised society, the citizens are constrained by laws and by the customs of the society in which they live. But there is a considerably greater amount of freedom. I call this the difference between the one-third and the two-thirds and this difference, this extra degree of freedom that is given by money is the difference between barbarism and civilisation.
In the simplest form of tribal life, the tribe can supply all its own needs. It can grow its own food, herd its own animals, wood will provide the basis for most of its tools and the most complex needs will be flint for making knives, and clay for making pots. Such societies often assemble once a year, traditionally on the longest day, to meet their neighbours, and often to make one of the most important exchanges of all – the exchange of women.
Matters become more complicated with the invention of metal and in particular bronze. Bronze is copper mixed with tin to harden it: the two metals are rarely found together, and thus a larger organisation is needed to organise the necessary exchanges of raw materials — to say nothing of the necessary skills. A big man is needed, a chief: mankind is on its way to complexity.
The next stage comes with the rise of the first city states in Mesopotamia, Egypt and Crete when gift exchange becomes more formalised into a system of redistribution where each level of a highly stratified society pays its dues to the level above – and the results are then redistributed down– at least in theory. In practice the benefits are often in the form of lavish parades and feasts. This is sometimes called the Palace economy, though I still believe that the feudal system in mediaeval Europe is the best example of this –though there is a huge dispute as to whether the term feudalism (which was only invented the 17th century) should be applied outside medieval Europe. But the caste system of India – and similar systems in mediaeval Korea — where you are born into a caste from which you cannot escape — is another facet of the same structure
It is generally thought that pre-money economies operate by barter, exchanging one good for another. In fact barter is rather rare and distinctly unusual. It is something that society rather frowns upon and if you wish to conduct barter with the neighbouring tribe you send out your servant or your slave to do the dirty work for you. Instead primitive economics work by what is known as ‘gift exchange’, or redistribution, or as I would prefer to say by a ‘feudal economy’.
Two major figures have helped to decipher this gift exchange economy . The first is the Polish anthropologist Bronislaw Malinowski, and the second is the Austro-Hungarian economist, Karl Polanyi.