A society without money

by John MacBeath Watkins

In this post, we explored what money is. Short version, money is a sign that the holder of it is owed favors. But what if you had a society that didn't have money?

Money is an ancient institution, Standardized coinage goes back almost 3,000 years, commodity money, representing a given weight of a commodity such as copper, further than that. But most people living in ancient civilizations never saw money. Most were peasants who paid their taxes in commodities and labor, or slave who labored without pay and we given what little they had by their masters, or serfs who were in some cases little better off than slaves.

Some societies, such as the Inca civilization, had no money system at all. The Inca had a centralized system of government, and people worked for the government and were given what they needed by the government. Ancient Egyptians paid their taxes in grain and labor. While we use money to track almost all of our economic obligations, these societies kept track of peoples' obligations largely without the use of money.

The problem is, if you don't have money, you have to keep track of peoples' obligations somehow, and that's easiest to do by defining their obligation very rigidly. If you were an Inca, you labored, and all you produced went to the state, and all you got back came from the state. If you were an Egyptian, you labored on land surveyed by the priests, your obligation depended on your relationship with the state, in time of famine you looked to the state for sustenance, and when the country needed a new pyramid, you got in the harvest, then worked on the pyramid.

There wasn't a lot of freedom in a society like this, because freedom made it hard to know what your obligations were, whether you had met them, and what was owed to you. It was just simpler to have a regimented society in which you were told what to do.

Perhaps most people in these societies liked it that way. They had a place in the world, and they didn't need to go through the business of inventing themselves.

But then, the world started changing too fast for this system to thrive. The late bronze age collapse started about 1200 BCE, and the first standardized coinage showed up on the Anatolian Peninsula about 600 BCE. Instead of the unchanging life promised by the Egyptian Old Kingdom, the kingdom of Lydia, which occupied most of what is now Turkey, arose during the chaos of the late bronze age collapse as one of the new iron age kingdoms. The Lydians needed a system that worked better than barter and could deal with shocks better than the system of bondage to the land that Egypt used.

Trade goods such as grain or copper are not ideal media of exchange, although their use is sometimes referred to as 'commodity money.' We see something similar in prisons, where tins of tuna or packs of cigarettes have been used as media of exchange. Real money is a much more abstract, and has not got the value for use that a bushel of grain or a tin of tuna has. Eating hundred dollar bills might be extravagant, but it would hardly be nutritious.

Using coinage allowed for a much more flexible system, in which trade could follow whatever patterns the current harvest suggested was best, and a stranger could do business in a new town without building the kind of relationship the Egyptians had to their god-king and his representatives.

It also made it a lot easier to cheat. Pirates who stole grain could eat, but pirates who stole money could have whatever they wanted. Instead of conning people for a meal, you could con them for enough money to buy many meals.

Institutions had to adapt. The rule of law had once dealt mainly with stolen animals and such, now it had to deal with new ways of stealing the more abstract thing that was money. Some even said money was the root of all evil.

That saying gives too little credit to the inventiveness of the ancients, who I'm sure found plenty of ways of being evil before money came along. Human beings have never been angels.

The evil of concentrated wealth and power was as much a part of the pre-money civilizations as of those that used money. In fact, without the regimented systems many of these civilizations employed, and the centralized power of the god-king, it would have been impossible to have a large civilization.

So, let's count our blessings. And our money. The concentration of power and wealth that we decry is as old as civilization, and much, much older than the humble coin.