At the Edge of Monetized Societies
Perhaps the best description of the boundary layer between monetized and non-monetized economies in the modern world is the introduction to Jack Weatherford's 1997 book "The History of Money." As a structural necessity until such time as the entirety of humanity becomes fully embedded in a single system for assigning purchasing power in the markets of the world, these boundary layers must be there. It is within these boundaries that many of our challenges and problems persist, chief among them the issues of inequity, poverty, and to a certain extent, our conflicts in values.
Weatherford's book describes easily documented current facts of cultural anthropology. As such, it is a good place from which to start thinking about and constructing models of the long history of boundary layers of monetary systems, and what lay beyond them. In order to construct models which give us a sense for those boundary layers in the deep recesses of time when money was first being invented and enabling complex urban cultures, it can be helpful to take what is known from the archaeological record, construct a model using the strictures of Occam's Razor, and then craft a really bit of good historical fiction to take us there as best as is possible. Fortunately for us, this has been done for several key eras. Let's start in a time well before money existed and take a look at the challenge involved in meaningfully describing the word 'poverty.'
No one description of the history of poverty can convey the variety of its reality. We might truthfully describe two people having identical access to resources, but in radically differing contexts, as being in radically different financial conditions. Here is a screen shot of Rae Dawn Chong playing the Mesolithic woman named Ika from JJ Annaud's 1981 film "Quest for Fire." Is Ika rich or poor? In the context of Annaud's film A person with nothing more than a few simple stone tools and a single set of clothing made of animal hides might be seen as quite well off if picture her in a Mesolithic or even an early Paleolithic context. Yet that same person in the exact same condition would be in a horrific state of abject poverty if we put her in the context of the late Paleolithic after pottery, farming, and the fist cities had come into being. Both wealth and poverty describe relative economic conditions based on the details of who, when, and where. And, as Jered Diamond describes throughout his book "Guns, Germs, and Steel," when two cultures that are in very different eras of technology come into contact, that interface changes things on both sides of the conjunction.
Differences in wealth also occur within a society as it begins to monetize. As we have seen, cities require the invention of a monetary system in order to exist and grow. The whole point of cities is to enable ever more narrowly defined areas of human specialization. In his book, Diamond tends to focus on royalty, the priesthood, and professional militaries; but as cities grow, so does the percentage of its inhabitants who are specializing in the production of specific goods and services. And whether it is the butcher, the baker, or the candlestick maker, if they live in an urban environment, they expect to be paid for their services within the monetary system of their society. And, they expect to be able to procure whatever their needs are in transactions using money as well. This includes the expectation of being able to purchase the productive output of nearby people whose work is not yet within the bounds of the monetized society. The expectations about how economics should work at the periphery have profound implications.
Money has zero value in a barter economy. It is also less valuable at the overlapping interface between a society still existing within a barter economy and one which is fully monetized. Valuation at the periphery exists in two simultaneous perspectives. From the point of view of person A who's economic existence is primarily still in a barter economy, money is less important and thus less valuable. From the point of view of a person B wanting to purchase something from person A, the value they are willing to assign to the productive output (i.e. the goods or services) of person B is significantly less than what they would assign to the output of another person who is also in the fully monetized economy. There are a number of factors that serve to reinforce this valuation differential.
Money can only be used to purchase things that are for sale in a monetized economy. In a pure barter economy, nothing is available for purchase using money. In a barter economy, transactions require an agreed upon exchange of goods or services for other goods or services. But, if some folks next door are using money for their transactions, and the folks in both the monetized and barter economies have goods or services that are attractive across the divide, money is likely to start flowing across that divide. A monetized to non-monetized continuum emerges, and from the point of view of the monetized side of that continuum, the people who live within and beyond that continuum will invariably be perceived to be quite poor.
The zone of desired commerce at the periphery is also a zone of conflict. When someone who is enmeshed in a barter economy refuses to recognize money as being something of value, the person who has the money and wants to use it is likely to become quite frustrated or even angry. History and archaeology tell us that conflicts between different societies at their points of interface has been far more common than peaceful coexistence. It did not require the invention of money to catalyze our inhumanity toward each other, but it didn't help either. It is an unfortunate reality that war, slavery, and economic injustice have often been close associates.
Continuums from the rich to the poor have existed and proliferated ever since humans first began living in cities and inventing money to make them work. Ever since the late Neolithic world, money has been "leaking" out of fully monetized economies and into the barter world surrounding them. The boundary between the a monetized and nonmonetized society has seldom if ever been nicely delineated. The value of money at the point of interface may often have been marginal at best for most people in the boundary layer between the monetized and unmonetized worlds, but it would not have been zero in all cases. It is in this boundary layer that the concept of poverty would have emerged as a matter of necessity.
Diamond makes another key point in his book, but does not elaborate on how it works in the boundary layer. Cities and monetized societies emerge along with the ability of society to transition from hunter-gatherer lifestyles to one in which they are food producers. Some plants and animals become domesticated, and gradually this transition results in vastly greater food resources which in turn enable much higher population levels. What Diamond mentions only superficially though, is that except for the overseers of these new food production processes, the people who do the actual work of food production tend to be held at arm's length from the rest of society and are largely kept in the economic periphery or boundary layer. The people who do the field work or tend the flocks are not given a fair share of the productivity of the rest of society that they enable. Their work enables the social stratification which puts them at the bottom. Some of that new fangled thing called money does make its way out to them, but not much relative to their labor as opposed to how much is flowing from the points of creation of money to those who are closer to that point of monetary creation.
As we described earlier, money has two primary functions. One is the facilitation of transactions or purchase and sale agreements. The other is as a vessel for accumulating the value of our stored work. But for people who live in a pure barter economy, money coming in from a neighboring monetized economy is useless for both of these needs. As one moves out toward the periphery and beyond from the place where money is created in a monetized society, the value of things being measured in money declines. This decline follows a curve something like the one shown here.
Thus it is because of the way money was invented and then evolved, right from the start it was unfair. This lack fairness was not an intent of the invention of money, but it was an axiomatic necessity and almost certainly an unintended consequence. The people who invent money see more value to it than those who are mere users of it. Those way out at the edge of a monetized society, and who are in the process of converting from a barter system and joining the monetized economy, derive the least. Those who get the least d perhaps at first perceive almost no value in this new thing we call money. Perceptions tend to amplify inequities that are already built into any monetary distribution system. People at the edge perceive that their work is less valuable, and the distribution system reinforces that perception, or visa versa. There is another unfortunate consequence of this differential or gradient. As the productive output of people declines as one moves out toward the periphery and well away from the process of money creation, the second function of money also disappear. Not only is there less money for transactions, the is also less or even none for the longer term storage the productive value of one's work. In other words, the savings rate also declines toward zero.
The traditional modern solutions for addressing monetary inequity and insufficient savings rates among the poor has been to gradually invent tools for managing the money supply and targeting economic activity to more fully engage people working at the periphery of economic society in the economy which they are both a part, and which in a fundamental way, they enable by working on its most fundamental elements, such as the production of food, clothing, and housing.
The idea of a regional or national government thinking about money in terms of is supply, and the beginning to try to formulate a monetary policy based on a shared system of values is quite new. The earliest glimmers of a notion of managing the money supply to promote an egalitarian society that I have been able to find are in "The Federalist Papers" of 1788. And quite interestingly, it was James Madison as much or even more than Alexander Hamilton who called attention to the importance of this role of government and who insisted that the the proper goal of monetary policy is to encourage as much of an egalitarian society as possible, thus diminishing the tendency to for factions and disunity. While John Adams was not one of the authors of The Federalist Papers, Hamilton, Jay, and Madison would certainly have been very familiar with Adams' observations about what he viewed as the shocking poverty and social stratification that had emerged in France, and been eager to ensure that similar conditions did not emerge in the newly United States.
If we believe that fairness is a virtue and that monetary policy should strive to make things more fair, then two pressures should be nurtured. One is to try to flatten the line, and the other is to eliminate the periphery by achieving the monetization of the whole world. The notion of choosing virtue and ethical values cannot be escaped in the formulation of monetary policy. If one believes that fairness is a virtue, then policies must consistently apply pressure that is uplifting of the least well off in a society.
Maybe more text here and maybe not.
Maybe more text here and maybe not.
Maybe more text here and maybe not.