The multiple meanings of money

Book review of The Conjuror's Trick: An Interpretive History of Paper Money in India

The Conjuror’s Trick: An Interpretive History of Paper Money in India

Author: Bazil Shaikh

Publisher:Marg Publications

Pages: 248

Price: 1,800

Talking about the new series of banknotes issued after demonetisation, the author says, “Conservatives found the colour palette of the entire series too bright and not quite in keeping with the gravitas and subtlety that a banknote demands. The more playful and jovial elements of society likened the colours to the play-notes of the board game Monopoly.” In one sense the sentence captures the myth of money we have built around ourselves, and it is fascinating to see how quickly (considering the history of mankind) this has become central to our lives. After all, money is a medium of exchange and sophistication took us towards easier mechanisms of storage and transaction. As we move forward, is the meaning of money as we know bound to change? While the author does not ask the question, his book opens up fascinating details that helps us understand the multiple meanings of money.

There are multiple ways of settling exchange of goods and services, and it appears that the most effective and fungible mechanism seems to be through the instrument of currency. But the currency itself is just a promise of a certain value. This value was covered by gold, or some other underlying asset that makes the promise credible. Utopianists such as Robert Owen tried to find alternatives to the fungibility of services by introducing labour exchange —an interesting way of accumulating and hoarding value for services rendered through Labour Notes. However, over a period of time, we have found that all “specific” forms of exchange tend to be limited in their applicability and if we were to move the frontiers, the exchange had to be fungible. But even now, as we are at a particular level of evolution, the boundaries are drawn around sovereigns  —  with nations trying to see if they could become a global reserve currency. We can see that as we evolve, what was just a medium of exchange has in itself become a market and a tool to wield power.

So how does a simple derivative — a note that represents an underlying asset [gold] delink itself and have a life of its own? This is a question that the author does not engage with in detail. It is not fair for us to expect that as well. The objective of the author is not only to explain how paper currency emerged episodically than philosophically. But the events on how each of these episodes continued to foster the credibility — a sense of belief in the medium — is what made the myth a reality. The difference between a Monopoly exchange — a game that simulates life — and a fiat currency is that we start playing Monopoly assuming and believing that is it a myth, while with fiat currency we believe it is for real.

Two elements that are absolutely essential to make it feel like real and both come from the powers of the sovereign. The acceptance that there is one authority that can issue this medium of exchange — the central bank with due authority from the sovereign is the first, and the second element is that any other issues being termed as illegal. The illegal includes the informal (and valid) exchanges as well as fake currency. Even as the underlying asset — gold — becomes irrelevant, the credibility continues, essentially because of the power of the sovereign in being able to raise resources through the power of taxation. In that sense, the evolution of easier forms of exchange comes through the evolution of the organised form of government and the sophistication of the security features of the currency.

If we fast forward from Bazil Shaikh’s fascinating narrative to the present, is there a sense of déjà vu ? Is the sovereign going to lose the power of monopolising the act of issuing currency with a new derivative of a derivative — electronic money? What does the concept of paperless (or cashless) society mean? Is it going to shake the foundations of the monopoly (not the game!) that the sovereign enjoys in managing the medium of exchange? This is an interesting question in the context of crypto currencies. As of now these currencies do not have a sovereign power vested, but are still getting to be accepted as a form of exchange. We cannot wish these developments as a smaller game played by some innovative entrepreneurs running a Ponzi scheme. They are credible enough for sovereigns to take notice. If the function of providing a safe, credible and secure means of exchange is achieved do we still need fiat currency? Or do we move back to a situation where multiple agencies and banks were issuing their own notes and  hundis, and they were quite credible and interoperable?

Mr Shaikh’s book meticulously chronicles the history of paper money and opens up the debate for the evolving meaning of money and the history in the unmaking of paper money. The book is a fascinating narrative of how the story evolved — not only through text, but also through great pictorials and specimens. While the stories themselves are episodic in nature, they add up to a larger philosophical story and encourage us to interrogate the new alignments of power and credibility. This is a painstaking work, a work of love and passion and the author needs to be complimented for providing this to the readers.

The reviewer is faculty member, Centre for Public Policy, IIM, Bangalore; mssriram@pm.me