What Is Money?

WHEN I worked in £50Africa as a schoolteacher I found that I spent quite a lot of time thinking about money. Not because I was short of money – on the contrary I had what seemed like a lot, the pink Sudanese fifty-pound notes piling up uselessly in my desk drawer. We were not paid very much, but in our village there was very little to buy. But for many others around me money was a monster that ruled their lives. 

By Richard Walker

While I had money, many people had none at all. For example, my teaching colleagues. Most of them had no money, and received no money. Of course they had salaries, but my colleagues had got into debt and had borrowed from the merchants in the market. In return they had assigned their only assets – their salaries – to their creditors. The merchants drew the salaries directly, and paid the teachers a percentage, not in money but in commodities like cloth and rice, irrespective of whether cloth or rice was wanted. Eventually I learned that pretty well everyone with a salary – everyone who worked for the government – was in the same boat.

Effectively, the salarymen had returned to a pre-money economy. Instead of money, with its wide reach, which is readily transferrable to anyone who recognises it, their personal economies had been degraded to a commodity exchange. You can sell a bag of rice for cash, but only to someone who wants rice.

Sugar on the other hand was different. Everyone without exception wanted sugar. A small glass of hot black tea would contain seven or ten spoonfuls of sugar. A jar of jam would be 95 percent sugar. A sweet dish would contain half a pound. Sugar was almost a form of money, like bullion, universally recognised.

But the merchants never paid in sugar: they offered rice, durum flour, synthetic cloth from Pakistan, dried beans from Zaire, whatever they had too much of. It was a semi-barter economy, and the sight of the head of the science department trying to sell a roll of garishly-striped polycotton to the head of English (who was trying to sell the same polycotton back) was enough to persuade you that a barter economy does not really work.

I was reminded of all this by reading the advance proofs of a new book on money – Money: The Unauthorised Biography – by economist and investment professional Felix Martin, which I reviewed here in The Economist. Martin says that money is what he calls a ‘social technology’. He thinks it is the means by which societies evolve from an organic self-regulating network of social obligations and duties. Moneyless societies – of which there have been many – are based on mutual obligation in a setting of social stasis. But with the arrival of true money, where debts can be freely assigned, and accounted for using a universal currency, something much more individualistic and anarchic is unleashed.

Martin says that currency – which arrived quite late in the day, the first known coins being minted by the Chinese around 700 BC (the Babylonians, the ancient Egyptians and the early Greeks had none) – is not itself money. It is just one small part of the accounting system for the vast body of credit and debt that our economies float upon. It is merely a representative device.

Some years ago I returned to Khartoum, the capital of Sudan.  My mission then was to report on the lives of refugees from the southern half of Sudan, who had been forced from their homes by the second Sudanese civil war and who had found their way north to the capital. Yet as I pursued that story, I found that once again I was learning about money.

It was not difficult to find the southerners. Back in the 1980s there had been few of these dark-skinned tall Africans in the capital. Now the southerners were everywhere, selling snakeskin wallets and belts from kerbside stalls, shouldering sacks of grain and flour in the marketplace.

On The DumpThose who had labouring work were lucky. Others scraped a few piastres from sorting trash on Khartoum’s huge rubbish heaps, but many were destitute, and moneyless. There were families sleeping on the pavements and in shelterless abandoned lots. During the day they sat in the blinding sun. Khartoum in summer is one of the hottest places on earth, a bubble of boiling dust and diesel fumes.

For the Khartoum people who were Muslims and considered themselves Arabs, the African south was something that had always been out of sight, and better kept that way. The Africans were people who professed other religions, who herded long-horned cows in distant swamps and grass plains, who sometimes walked naked. But now the south was here, on the street, among the mosques and the camel trains of the north. Now the Arabs and the Africans were breathing each other’s air.

And the city was growing. Even as the refugees flooded in, rich merchants from all parts of the country, army officers, politicians, aid agencies, all were building homes for themselves. And it was among these raw half-built million dollar villas that many of the southern refugees had gathered, where they lived a strange shadow version of tribal life.

In a dusty space destined to become a swimming pool, a court might be held. If there had been a dispute, or fighting among factions of the Nuer people, or the Dinka people, or the Shilluk, an elder or person of authority would hear the factions state their cases, and give judgment.

The judgment of the court might include a payment of damages. But how could payment be made, by moneyless people, in a harsh city where there was no work?

As it turned out, there was money. An alternative money economy had evolved among the refugees – or rather a number of monetary systems had evolved among different tribal groups. Notes were issued in promissory form, sometimes stamped, sometimes only a handwritten scrawl. The one thing they all had in common was that the currency in which they were denominated was the currency of the cow.

CattleCampThe basic value unit for the Nilotic herders of the south was the cow. And many of the Khartoum refugees had quite recently been forced to abandon vast herds of cattle, assets of immense value. So the refugee currency was based on the promise to pay, at some time in the future, so many cows of such and such a quality. The fact that these herds were not to hand now and in all probability had already ceased to exist did not undermine the money, which continued to be minted and to circulate among the refugees.

Its limitation was the limitation of transferability. I was given one of these cow currency notes, as a keepsake. On paper, it represented a modest fortune. In fact it represented nothing: I was outside the network of obligation, and I could not be expected to deliver or receive the face value of the note. My identity rendered the money valueless.

In that sense the cow note was not true money. Felix Martin quotes the nineteenth century economist Henry Macleod, who asked: ‘Who made the discovery which has most deeply affected the fortunes of the human race? We think, after full consideration, we might safely answer – the man who first discovered that debt is a saleable commodity.’

The civil war ended in 2005, and South Sudan is now an oil rich independent country. The suffering inflicted by Africa’s longest war has to some extent been redeemed. The refugees have returned home – many of them doubtless carrying those cow currency notes, full of expectations that the promises they represented would also be redeemed.

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