photo by Ivo Naepflin photo.naepflin.com
As Forum friend Keith Hart, author of “The Memory Bank” and an anthropologist by trade, observed recently, summarising these functions more succinctly than I did:
[Polanyi] argued that only modern money combines the four functions (payment, standard, store and exchange) in a few “all-purpose” symbols, national currency. By contrast, primitive and archaic forms of money attached the separate uses to different symbolic objects or “special-purpose” monies. [From A Crisis of Money: the demise of national capitalism | openDemocracy]
It was very interested to hear this point raised in another form at the Future of Money & Technology in San Francisco, where Joe Johnston from Connect.me brought it up in the panel discussion around “The New Value Movement”. He made the point that the money used for local commerce, for “merchants” and for international trade had in the past been different (e.g., wampum, bills of exchange and gold) whereas modern money uses one currency for everything. I think that this conception of “modern money” is one rooted in a particular set of institutional arrangements that emerged at the same time as the nation-state did and so, it seems to me, must be related to it in some way. Bringing the functions together became the preferred mechanism for organising and managing money in the industrial revolution, but it is far from clear where it should be the preferred mechanism for doing the same in the post-industrial revolution. I’ve come to round to this perspective from a technological analysis, but I’m hardly the only person speculating about it.
All of these functions are bundled together into a single (for lack of a better word) asset: currency. Sometimes, these functions are complementary [and sometimes the] functions of money conflict with one another.[From Umair Haque / Bubblegeneration]
Umair was spot on with this, and I think that one of the particular instances of the conflict he refers to arises from the differing requirements for long- and short-term management, an issue related to Joe’s point about “levels”. An efficient, liquid and cost-effective means of exchange (who knows, let’s say, Facebook Credits or Google Bucks) may be entirely different from the best mechanism for deferred payment (who knows, let’s say, Gold or Kilowatt Hours). The fact that technology enables us to choose different currencies for different purposes will have, I imagine, a range of unexpected consequences. I was little disappointed that BBC Radio 4’s recent Analysis programme “What is money” didn’t explore this aspect and take it a little further. I can do no better than refer to the brilliant Professor Glyn Davies on this:
“Similarly in the era of electronic banking ‘national’ moneys are becoming increasingly anachronistic as millions of customers, irrespective of their country of domicile, are eagerly offered a variety of competing financial institutions in a variety of competing currencies. They are spoiled for choice – and national money monopolies are thereby also being ‘spoiled’, in the sense of being reduced in effectiveness. The monetary authorities always try to reassert their monopolistic power – in economic jargon, to make sure that money is exogenously created – as opposed to money supplies produced elsewhere by the working of market forces – or ‘endogenously’ as the economists describe the process.”[From Democracy and Government Control of the Money Supply]
In a world where everyone has a mobile phone and can easily trade with everyone else, globally, then what endogenous monies might come to dominate? The answer is probably none. We aren’t looking at a future gold standard world, or a science fiction galactic credit, but a future of many, many currencies, each of which provides the most efficient means of exchange within a community. Common stores of value will bridge communities, much as beaver pelts were the store of value used to mediate between the wampum world of Native Americans and the specie world of European settlers.
This is why I think that financial institutions looking for new products and services should consider looking at money itself and perhaps open up a sandbox for new currencies. When I looked at the Bernal Bucks experiment in San Francisco before, it struck me that the idea of using local FIs (in that case, a credit union) as the mechanism for bringing new kinds of money (in that case, a local currency) in to play is a good one, but we should be casting the net wider. Perhaps mobile operators and retailers should be looking beyond loyalty points toward new forms of money and, from there, a new kind of financial sector.
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