What is Money?

Question for the January 2020 WPE Portfolio Reading Set

What is Money?

(Due by 4:00 PM on Wednesday, January 8, CC-01-1313)

Context: The Encyclopedia of Britannica’s classic definition of money, and Thomas Crump’sphilosophical definition of money, both seem complicated; but with some consideration one must realize that money—and the idea of money—is complicated. In this reading set are three examples of currencies invented for specific uses: prisoners in a WWII prison camp using cigarettes as currency; anartist who drew his own money and then convinced people to accept it as payment; and a “local currency,” the Berkshare, invented to encourage support of the local economy in the Berkshires ofMassachusetts.

Question: Are invented or local currencies money? Why or why not?In your essay:

Give a complex definition of “money” based in the reading set

Analyze at least two (your choice) of the three alternative currencies to assess the degree to which these currencies could be considered “money.”

Discuss which of these two (or three) examples of invented currencies is the most like or unlike money, and why. Or, if they are all equally like or unlike money, explain why. For example, you might argue that Boggs bills are or are not money, using the definitions provided. Or, you might argue that Boggs bills are far less like money than the cigarettes in the POW camp. Or, you might argue that Boggs bills are more like money than the Berkshare.

You must use both “Money” and “The Phenomenology of Money” and two of the three remaining essays. (You are free to use all of them.)

Incorporateideasthatsupportyourpositionaswellasideasthatdisagreewithyour position. Quote and/or paraphrase and work directly with material from all the readings in this reading set.

Define and employ key terms that seem to be central to the arguments of your sources and, therefore, to your argument as well. Primary among these key terms is money. Other key terms you may want to use are: economy, medium of exchange, commodities, common measure of value, store of value/wealth, institution, payment/payer/payee, divisibility, portability, uniformity, durability, means of payment, unit of account, medium of exchange, and counterfeiting/reproduction.

You must attribute any material that you summarize, quote, or paraphrase to its source (using the page numbers of the reading set for quotations and paraphrases). Your own ideas and thinking are necessary and important. However, you should base your essay on the information contained in the set of readings, not on your own life experience,on outside readings(including the internet),oron courses you have taken. You may only receive assistance with writing your paper from employees of UMass Boston—not from friends, relatives, or outside tutors. Plagiarism in a portfolio, whether it is in the new essay or in one of the supporting essays, will be treated in the manner as outlined in the Student Code of Conduct, which can be downloaded in PDF form at:https://www.umb.edu/life_on_campus/policies/community/code.

The consequences of violating these policies are serious and may include suspension or expulsion.January 2020 Portfolio Set Question

University of Massachusetts at Boston

Colleges of Education and Human Development, Honors, Liberal Arts, Nursing and Health Sciences, Global Inclusion and Social Development, School for the Environment, Advancing and Professional Studies, and Science and Mathematics

Writing Proficiency Evaluation (WPE) January 2020 WPE Portfolio:

What is Money?

To be submitted on Wednesday, January 8, 9 AM-4:00 PM In the Writing Proficiency Office, CC-1-1300

Table of Contents

1. Anon. “Money.” The Encyclopaedia Britannica. 11th Edition. Volume 18. New York: Cambridge UP, 1911. Pages 694-696.
2. Crump, Thomas. “The phenomenology of money.” The Phenomenon of Money. Routledge, 2011. pages 1-6
3. Bradford, R. A. “The Economic Organization of a P.O.W. Camp.” Economica. New Series, Vol. 12, No. 48 (Nov., 1945), pp. 189-201.
4. Weschler, Lawrence. “Laughing All the Way to the Bank.” Boggs, A Comedy of Values. University of Chicago Press. Extract published in The Guardian. London (UK) 08 May 1999.
5. Larkin, Max. “Betting on Berkshares: A case for experimentalism in economics.” Medium.com.
   Articles reprinted with permission

Notes:

It is essential that you include in your essay specific references to all the required essays. You must attribute any material that you summarize, quote, or paraphrase to its source (using the page numbers of the reading set for quotations and paraphrases). Your own ideas and thinking are necessary and important.However,you should base your essay on the information contained in the set of readings, not on your own life experience, on outside readings(including the internet),or on courses you have taken.You may only receive assistance with writingyourpaperfromemployeesofUMassBoston—notfromfriends, relatives,or outside tutors.Plagiarism in a portfolio, whether it is in the new essay or in one of the supporting essays, will be treated in the manner as outlined in the Student Code of Conduct, which can be downloaded in PDF form at:https://www.umb.edu/life_on_campus/policies/community/code. The consequences of violating these policies are serious and may include suspension or expulsion.

Your portfolio must contain an essay that is at least five full pages (double spaced in 10 or 12 point type) that answers the question above; atleast 15 pages of supporting papers,each one attached to a completed CertificationForm;and a completed PortfolioSubmissionForm.Theexceptiontothe15-pagesupporting-paper requirement only applies to new transfer students whohavenotyetcompletedtheirsecondsemester.Review details on our website, http://www.umb.edu/wpe

January 2020 WPE Portfolio Reading Set Table of Contents

Money

The Encyclopaedia Britannica (1911 Edition)

1. Definition and Functions. –The difficult question as to the best definition of money has been complicated by the efforts of writers so to define the term as to give support to their particular theories. It is hard to frame a precise account which will hold good of the many objects that have served for monetary use. From denoting coined metal, money has come to include anything that performs the money work: though there has been considerable hesitation in extending the term to those forms of credit that are in modern societies the chief instrument of exchange. It is therefore best to avoid a formal definition; and, instead, to bring out the character of money by describing the functions that it performs in the social system. The most important is, clearly, that of facilitating exchange. It is not necessary to dwell on the great importance of this office. The slightest consideration of industrial organization shows that it is based on the division of employments1; but the earliest economic writers saw plainly that division of employments was only possible through the agency of a medium of exchange. They recognized that the result of increasing specialization of labor was to establish a state of things in which each individual produced little or nothing for the direct satisfaction of his own wants, and had therefore to live by exchanging his product for the products of others. They saw, further, that this only became feasible by the existence of an article that all would be willing to accept for their special products; as otherwise the difficult of bringing together persons with reciprocal wants would prove an insurmountable obstacle to that development of exchange, which alone made division of labor possible.

A second function hardly inferior in importance to the one just mentioned is that of affording a ready means for estimating the comparative values of different commodities. Without some common object as a standard of comparison this would be practically impossible. “If a tailor had only coats and wanted to buy bread or a horse, it would be very troublesome to ascertain how much bread he ought to obtain for a coator how many coats he should give for a horse”; and as the number of commodities concerned increased the problem would become harder, “for each commodity would have to be quoted in terms of every other commodity.” There is indeed a good deal to be said for the view that the conception of general exchange value could never have been formed without the previous existence of money; it has certainly support from the evidence of competent observers respecting the methods of exchange followed by savage communities. The selection of some particular article as the criterion makes the comparison of valueseasy. “The chosen commodity becomes a common denominator, or common measure of value in terms of which we estimate the value of all other goods,” and in this way money, which in its primary function renders exchange possible by acting as an intermediate term in each transfer, also makes exchanges easier by making them definite.

Still another function of money comes into being with the progress of society. One of the most distinctive features of advancing civilization is the increasing tendency of people to trust each other. There is thus a continuous increase in relations arising from contract, as can be seen by examining the development of any legal system. Now, a contract implies something to be done in the future, and for estimating the value of that future act a standard is required; and here money which has already acted as a medium of exchange and as a measure of value at a given time, performs a third function, by affording an approximate means of estimating the present value of the future act; in this respect it may be regarded as a standard of value, or as some prefer to say, of deferred payments.

Nor does this exhaust the list of services that money renders. In the earlier stages of economic life it acts as a store of value; for in no other way could a large body of wealth be concentrated.

1 Division of employments: The specialization of jobs, resulting in (for example) people purchasing clothing made by others people rather than sewing their own clothing, or food cooked by other people rather than cooking their own food.

January 2020 WPE Portfolio Reading Set Page 1 of 19

The Phenomenology2 of Money By Thomas Crump3

Underlying a rich diversity of form, money is a single phenomenon. But its nature is not easy to understand, for money gives no information about itself, except that it is money. […]

Money fails to reveal its true nature for two reasons. The first is that, at the deepest level, it is independent of any transactions in which it is used. The second reason, which is complementary to the first, is that money, as soon as it is used for any purpose, generates its own distinctive institutions.

Both reasons need to be further elucidated. The first is best illustrated by an example. The information that X has £1000 standing to his credit at the Y bank tells nothing about how he acquired that sum, nor about how he will spend it, unless certain extraneous assumptions are made about the organization of the socioeconomic system which comprises both X and the Y bank and uses the pound sterling. Even then, the information is insufficient: it needs to be supplemented by X’s own record of past, and his plans for future, transactions. His full bank statement would give some information about the size (if not the nature) of past transactions, but it would still tell nothing about the future.

As for the second reason, the possible uses of money, and the different functions which money must have to support them, are never random. However wide the range of different uses, the form must always be institutionalized. At the present stage it is sufficient to note that money—because of its extreme generality and consistency as a phenomenon—can be functional only if its use in any case is highly specific. To use an analogy, because the potential of the letters of the alphabet to transmit and record language is so utterly general, their usefulness for this purpose—in the case of any one language—depends on maintaining extremely precise specifications in regard to spelling (such as are made manifest in any dictionary).

The fact that in any culture the phenomenon of money is only and always manifest in transactions and institutions has meant that in practice thinking about money is determined by the character of these manifestations, although this is seldom made explicit. This is the basis of what is commonly called‘monetary theory’, which forms the dominant view of the phenomenon of money. […]

By taking the institutions for granted, the monetary theorist is seduced into accepting, as axiomatic, a number of statements about money, which are at most true only in a limited range of monetary systems.

The approach,then,of the present study is that money is essentially a uniform phenomenon, which can become manifest only when it occurs within the confines of an established institution. Although it is the institutions which give money meaning or purpose, its true nature—though not necessarily the forms in which it becomes manifest—is independent of any of them. This being so, the institutions have to be presented in all their diversity, so as to establish, convincingly, that not one institutional configuration can be definitive. A good deal of attention must be paid, therefore, to what is never more than implicit in conventional thinking about money. To use a metaphor from physics, one must look inside the atom, recognizing at the same time that the nature of the investigation, and the results which it may lead to, will depend—at least in part—on the elements chosen for research.

If, therefore, monetary theory normally takes for granted not only money as an observable phenomenon, but also certain functions of money (together with the institutions which support them) and a good deal of what people think about money (which can best be called ‘the culture on money’), it is precisely these aspects of money which provide the starting point for the present book. Money, as an observable phenomenon, apt to be described in objective terms, is essentially the subject matter of a ritual, which is

3 Senior Lecturer in Anthropology, University of Amsterdam

January 2020 WPE Portfolio Reading Set Page 2 of 19

2 Phenomology: Phenomenology is the study of structures of consciousness as experienced from the first-person point of view. The central structure of an experience is its intentionality, its being directed toward something, as it is an experience of or about some object. An experience is directed toward an object by virtue of its content or meaning (which represents the object) together with appropriate enabling conditions. (Stanford Encyclopedia of Philosophy)

described in this chapter under the sub-heading, ‘The ritual of money’. The ritual, as soon as a purpose or function is ascribed to it, becomes an incident in a continuing institutionalized pattern of monetary activity, described under the heading ‘Money as an institution’. Then, because the circulation of money represents a system of social, political or economic interaction, the phenomenon of money must be considered under a third sub-heading, ‘Money as a symbolic system’. […]

The ritual of money

The phenomenon of money is manifest in a particular kind of event, called ‘payment’. Payment is the transfer, from one person (the ‘payer’) to another person (‘the payee’) of an interest which is always expressed as a multiple of a recognized unit with its own name, or ‘denomination’. Money is the means which represents this interest, and enables payments to be made. The ostensible result of a payment, so far as the money used to make it is concerned, is to put the payee in what, before the payment, was the position of the payer. Whatever functions money may have, the payee, in place of the payer, is, by virtue of the payment, put in a position to perform them, and—this is the key point—he can do so only by making a further payment. It is of the nature of money, therefore, to be used for an indefinite succession of payments, that is, to circulate, without being subject to any sort of loss of function.

At the same time, the reason for any particular payment is always extrinsic4 to it. It is this which establishes money as no more than ‘an extreme and specialized type of ritual. This follows directly from the fact that payment, as an observable phenomenon, discloses next to nothing about the use, functions or purpose of money. The questions which now arise are: What form does the ritual take? and What sort of structures are generated and maintained by performing it?

The elementary answer is that money is constituted out of some recognizable substance, which must then, ideally, have certain attributes, such as divisibility, portability, uniformity, durability and relative

inelasticity of supply. In this way there come into existence a number of objects which are recognizably money, in the sense that they are to be used to the exclusion of all other assets for the purpose of making payments, which are then effected by handing over one or more of these objects.

Although the attributes of the money-stuff, introduced in the previous paragraph, would appear greatly to restrict the choice of what may be used as money, the range of things attributed with some of the functions of money, in both primitive and modern societies, is extremely wide. A great deal of confused thinking, particularly about elementary monetary systems, follows from uncritically acknowledging as money a wide variety of objects used for purposes such as exchange.

It is essential to decide, therefore, at this early stage on the sort of restrictions to be imposed on the definition of money. Two such restrictions prove to be essential for a consistent treatment of the phenomenology of money. The first is that a true money must of its nature be capable of circulating indefinitely among those who use it, and the second is that a true money has a distinctive identity as such, so that it has no significant use for non-monetary purposes. These restrictions avoid, in particular, the confusion between primary commodities which are a recognized trade good in a given area (and may therefore readily be exchanged for other interests) and money. In much of the Third World, a primary commodity such as coffee is often a surrogate for money in local transactions, in the first place because almost every household is engaged in its production, and in the second because it can always be sold, that is converted into money, in an open market. In the areas where coffee is produced no one thinks of it as money, and this is chiefly because it is a cash-crop which is always converted into money in the end.

The position remains essentially the same even where no such conversion is possible. The Baruya of New Guinea are subsistence cultivators with an external exchange economy entirely dependent upon the export of salt to neighboring tribes. The Baruya have an effective monopoly of salt production: their export trade in salt is essential for providing them with goods which they cannot produce themselves. Since salt

4 Extrinsic: external to, or outside of.

January 2020 WPE Portfolio Reading Set Page 3 of 19

is their only export, it follows that every import must have an exchange value expressed in terms of it. That is, as far as the Baruya are concerned, every form of merchandise (seeing that they have no significant internal exchange economy) must have a ‘price’ in terms of salt. This line of reasoning, which would‘monetize’ any exclusive export commodity, does not establish, however, where it would then circulate as money. Paradoxically, in the case of the Baruya, there does appear to be some internal circulation of salt, on the basis of gift, and this factor is far more important in establishing it as money. This is not, however, the argument adopted by those theorists who look for the origins of money in cases of this kind. The most that can be said is that some moneys may have originated as trade-goods. In particular, early systems of deposit certainly seem to have been organized on the basis of a unit of account related to the staple crop. More generally, the origin of money may well be related to a change in the function of objects already used for other purposes.

The important point, in any case, is how few objects in general use have the attributes of a satisfactory money-stuff. It is, moreover, an advantage for the user—at least in the long run—for there to be no possibility of confusion as to whether or not a given object is money. These factors explain the pre- eminence of specie5, that is objects used as money and for no other purpose. In practice, the establishment of money in the form of specie has required either the adoption of some object found in nature with all the necessary attributes, and with no obvious alternative use, or the mass production of a similar object by means of a manufacturing process. Historically, the only suitable natural object has been the cowrie, and the only suitable manufactured object, the coin. The diffusion of the cowrie and of coinage over very wide areas of the world, and the decline of alternative currencies, give a practical demonstration of the advantages of these forms of specie.

The character of different forms of specie depends on the balance of the attributes proper to them: that specie is durable not only allows it to link ‘the present to the future,’ so that money can circulate indefinitely, but also distinguishes it from the consumer goods which comprise a substantial part of the basic needs of any population. The uniformity of specie (which is essential to making it recognizable as such) is in no sense problematic in the case of the cowrie (where the natural process of production ensures it) but does raise certain difficulties when it comes to the manufacture of coins, or of other more modern forms of specie, such as banknotes. A coin is more than a piece of metal of recognized weight, size and form: its identity is established by a design impressed upon it in the process of manufacture. But then the control of the manufacturing process becomes critical—an extremely important historical factor […] in relation to the supply of money. The problem can be solved in part by choosing as the raw material for coins precious metals in such short supply that the existing money-stock (that is, the total money held by all transactors6) is maintained at a more or less constant level, with only a marginal supply of new coinage. This is what is meant by ‘relative inelasticity of supply’. At the same time, the coins can be made small and light in weight,which contributes to the ease of using them in transactions.

If, at an elementary level, money tends to be conceived of in the form of specie, there is an alternative form which is no less important. Suppose that, at any given time, the amount of money held by any transactor was as recorded, numerically, in a recognized form of document. The ritual of payment could then be performed by an appropriate alteration in the records. All that would be necessary would be to increase, by the amount of the payment, the number recorded against the name of the payee, at the same time reducing, by the same amount, that recorded against the name of the payer. This alternative system, of ‘scriptural’ money7, is generally regarded as secondary or derivative. It is, for one thing, historically dependent on the invention and use of writing—a skill not found among the many primitive peoples

5Specie: This word traditionally refers only to coins, but the author seems to be referring to all hard money—coins or bills.6 Transactors: Everyone involved in a transaction.

7

Scriptural money is held by a bank in electronic or other non-cash forms. This term is used to differentiate between money stored as numbers

on paper or a digital system and actual banknotes and coins. Cash and scriptural money together make up the total supply of money.

(moneyland.ch) (Note that this term is not intended to refer to sacred writing, but just to writing—in other words, it is money that exists as an

idea that has been written down.)

January 2020 WPE Portfolio Reading Set Page 4 of 19

who have developed their own money. The system would also seem to be unwieldy. But the earliest known writing, that of Sumeria, which can be traced back to the fourth millennium BC, ‘is almost certainly represented by texts of business and administrative character,’ and there is abundant evidence of payments recorded in cuneiform on clay tablets by civilizations which knew nothing of the use of specie. Scriptural money, particularly where it is supported by a numerical system well suited for arithmetical calculation, has great advantages over specie when it comes to dealing with relatively large sums of money, particularly over long distances. From the time of ancient Sumeria to that of the modern corporate state, the system is therefore particularly favored for the transactions in which the state is involved. Finally, the use of scriptural money does give rise to two questions […]: (1) What is the true meaning of the money recorded in the names of individual transactors? (2) How is the aggregate stock of money in circulation determined? […]

A ritual must have not only form; it must have performers. In the foregoing discussion of payment nothing was said about who were admitted to the class of transactors, that is, of payers and payees. Specifically, the class of transactors is defined by the way in which the money happens to be used, which in turn is determined by the purpose underlying the performance of the ritual. […] The difficulty is that—with the exception of certain very restricted types of money—the purposes for which any given money may be used are so varied that the class of transactors admitted to the sphere of payment can be defined only in the very vaguest terms. In the general case, therefore, such transactors are defined according to recognized social, geographic or economic criteria, so that—to take one example—anyone physically present in the United Kingdom may be expected to make payments in [pounds] sterling.[…]

The difficulty, stated in general terms, is that the property of money is so abstract, and its potential use so generalized, that any money is suited to be taken over and used in a sphere of payment quite different to, and independent of,that for which it was originally intended.The extent to which any money is likely to be subject to this process depends upon the imponderable factor of confidence, that is its general acceptability for use in established monetary rituals. […] The function of money as a medium of exchange […], and its use for one particular type of transaction, known as sale […] allows for the almost indefinite extension of the sphere of payment. If, then, […] the use of money exclusively for the purposes of exchange cannot indefinitely maintain a viable monetary system, any sphere of payment in the modern world will inevitably be complex, being constituted out of different uses of money and different classes of transactors, in the way described in the previous paragraph. The higher the level of complexity, the more important are transactions which are performed exclusively in terms of time and money. […]

At the end of the day, whatever the different purposes for the payments made within it, a sphere of payment is constituted out of a number of different points, located in a space-time continuum and representing potential transactors, so that a given stock of money is continually redistributed between them by virtue of the continuous re-enactment of the ritual of payment, and in such a way that all the points, by means of successive performances of the ritual, may be connected with each other.

Money: institution and function

An institution, defined in abstract, is a series of human ‘activities which are repeated or continuous and take place within a regularized pattern’ according to rules established either by tradition or by historical process. The circulation of money within a sphere of payment satisfies the first part of the definition, but to satisfy the second, the rules which govern it must in every case be made explicit. The difficulty about defining money as an institution is that there are any number of different sets of rules which can satisfy the second part of the definition. […]

The point can be made clearer by explaining the monetary institution in functional terms. There are two sides to any such explanation: the first is the function of money on which the institution is based; the second is the function of the institution in the political, social, economic or cultural system of which it is a part. An example makes clear how the two types of function are linked to each other. The market

January 2020 WPE Portfolio Reading Set Page 5 of 19

is the institution based, par excellence, on the function of money as a medium of exchange, and every instance of the performance of the ritual of payment is called a sale. The function of the market, as an institution, is to distribute, or, better, to redistribute, the goods brought to it.

Two questions arise. What are the functions of money at the foundation of any monetary institution? And what functions if any do the different types of monetary institution have in common?

Although there is not complete unanimity, the definition of the different functions of money is well established. The five functions traditional to monetary theory are sufficient for present purposes.

Means of payment. As the preceding sub-section on the ritual of money makes clear, this function is essential to any system based on the circulation of money.

Standard of value.[…]Money is the means for comparing—in quantitative terms—two unlike things on a scale which is common to both of them. The reason for making such a comparison depends on its institutional context, in which there must be, in any case, provision for establishing the scale for all things subject to the common standard of value. If, then, for example, an orange is established as having five points on the scale and an apple as having three, one has the institutional basis for exchanging three oranges for five apples.

Unit of account. The function of money as a unit of account is to relate transactions to a numerical scale. The object of doing so is to establish the relative monetary position of different transactors, in which case the unit of account provides the essential basis for scriptural money. […]

Medium of exchange. The essence of this function is that money is the medium whereby different classes of things may be exchanged with each other. If exchange lies at the foundation of any economic system, then the function of money as a medium of exchange is essential to any economic use of money. In the case of specie, the standard of value may be taken as the basis for establishing money as a means of payment which then functions as medium of exchange. […] In the case of scriptural money, accounts kept in terms of a standard unit provide the basis for transfers made for the purpose—inter alia—of effecting exchanges. […]

Store of wealth. The function of the store of wealth represents the future potential of money for making payments. Money, between payments, is therefore a store of wealth for whoever happens to hold it. The co-existence of the functions of money as a store of wealth and as a means of payment contains an element of paradox. For as a store of wealth ‘money in its significant attributes is, above all, represented as a subtle device for linking the present to the future;’ and the assurance that the payee has that he is under no immediate pressure to make a further payment, and that he may hold his power to do so in reserve, is decisive for the success of any monetary system. At a certain point, however, which is easier to recognize in practice than it is to define categorically, money is withheld from circulation for so long a period that there is no longer any prospect of its being used for making payments. Such ‘hoarding’ of money, which effectively means de-monetization, has played an important part at certain stages in the history of money, by reason of its effect on the quantity of money in circulation. […]

The transaction characteristic of a monetary institution is one of conversion on the basis of reciprocity. The conversion works in two ways. The payer sees the money paid converted into an interest which either may be something tangible or may represent a right enforceable against the payee, or the extinction of a right enforceable against himself (and in these last two cases a third party may sometimes be substituted for the payee). The payee, on the other hand, sees such an interest converted into money.[…]

In practice, conversion is particularly important in two cases in which no such interest is involved. The first case is that of conversion between two different spheres of payment. In modern times this generally means the exchange of one national currency for another […]. This is, however, a consequence of the development, in the course of the past 200-odd years, of national monetary systems, based on a central

January 2020 WPE Portfolio Reading Set Page 6 of 19

bank […] and so the position, before the nineteenth century, was quite different. In Europe, during almost the whole period from the monetary reform of Charlemagne […] to the French revolution, two different systems operated at the same time, one based, essentially, on scriptural money, almost invariably expressed in terms of pounds, shillings and pence, and the other based on local coinage, expressed in a variety of different denominations. The first system, whose money was conceived of as ‘imaginary’, was not uniform, but had different variants in any number of discrete spheres, of which some were determined by political boundaries, while others arose out of the networks established in international trade. It provided, none the less, the ultimate basis for almost all contracts, even though the only possible form of payment—transfer by means of book entries—was acceptable only to a very restricted and specialized class of transactors. Otherwise payment has to be made by resorting to the alternative system. The difficulty here was the multiplicity of separate coinages. The only way out was for every monetary jurisdiction to determine which coins—both local and foreign— were recognized within it, and then the rates of conversion into its own fictitious currency. In practice, unofficial rates, determined by market factors (including the ratio between gold and silver), prevailed over the official rates, which were then forced to adjust accordingly—if sometimes rather slowly. The delay provided what would now be called‘the authorities’ with the means to enhance the value of coin in terms of their fictitious currency. […]

The second special, and important, case of conversion is that into one of the so-called ‘near-moneys’,whose property it is—in the case of both specie and scriptural money—that they can always, in case of need, be re-converted into money. The near-moneys represent a sort of penumbra surrounding the sphere of payment. The holder of specie may reduce it to bullion, which may then be used for making ornaments. In Western Europe, in the early Middle Ages, this process contributed to the suppression of the circulation of money in the form of gold. The monetary function of a store of wealth is retained, so long at least as the possibility of reconversion remains open. In fact, resort to treasure, in the form of gold and silver, for minting coin is the first attested in Athens in the fourth century BC, but other examples occur throughout history, from Byzantium, through early medieval Islam and medieval Europe, to sixteenth-century Holland, where the Baron de Brederode melted down his family plate to strike coin used to pay the soldiers fighting against the Spaniards. In the end, private conversions of this kind became impossible, as the state monopolized the supply of specie, and protected its monopoly by imposing severe penalties on counterfeiting and the reduction of coin to bullion. The state, at the same time,adopted much the same practices—that is,enforced conversions of the stock of specie—as a means of raising revenue. […]

Money as a symbolic system

Money, as the subject matter of a ritual, always represents or signifies something other than itself; the representation is made effective by virtue of the process of conversion established by any monetary institution. One is not interested in money, but in what money will buy. At the most elementary level, therefore, money is a symbol signifying what it can be converted into. […] But the symbolism of money, even in its representations in the form of words, is not confined to this elementary level: the original

Chinese character for ‘currency’, , originally meant a spring, and expressed therefore the idea of fluidity and ubiquity, which are properties characteristic of the circulation of money. Coins, of course, carry obvious visual symbolism: the head of the sovereign, stamped on one side of the coin, makes clear where the power to issue new money is located. At the same time, the fact that a coin is one uniform representation out of countless identical representations provides an instance of a very important type of symbolism, […] in which the part represents the whole. The use of rare, precious and beautiful materials for coinage, establishes the coin as a valued object, fit only to be converted into something of equal value. Following this line of thought, one discovers the origins of specie in precious ornaments, which are brought out for display for certain rites de passage—generally related to birth, marriage and death, which are the only occasions on which they change hands. The question about the accepted origins of money relates to whether the institutions it supports are sacred or profane in terms of the local culture. […]

January 2020 WPE Portfolio Reading Set Page 7 of 19

[A]ll social facts, however important or unimportant, once measured in monetary terms, become comparable. The ritual prolongs their effects beyond the moment of time, to integrate them in both the past and the future. The circulation of these moneys is subject to precise rules, so that, together with men, women, children and other goods recognized in the local culture, they form a system of exchanges which maintains and perpetuates the established patterns of social organization. The implicit immortality of the society, as such, is thus maintained by the mortality of the people and goods which, momentarily, cross its path. Both the living and the dead combine in the eventual destruction of all things, so that in the end nothing remains save these strings of money, and the unceasing ballet which they perform. These moneys, the tangible supporters of the law, are all that remain of the ancestors, and as such they are the all- powerful accomplices to the process of time.

_________________

 

Cigarette pack from WWII

The Economic Organization of a P.O.W. CampBy R. A. Radford8

[Editor’s note: R. A. Radford, who was then a student of economics, served in the British army during World War II. He was captured and remained a prisoner of war (POW) until the end of the conflict. This essay is based on his observations of the economic activity of the POW camps, which was published in 1945. “Radford successively analyses the development and organization of the market, the use of cigarettes as a currency, price movements, the introduction and failure of a paper currency, price fixing by camp authorities and the economic impact of public opinion. (FinanceWatch.org)]

AFTER allowance has been made for abnormal circumstances, the social institutions, ideas and habits of groups in the outside world are to be found reflected in a Prisoner of War Camp. It is an unusual but a vital society. Camp organization and politics are matters of real concern to the inmates, as affecting their present and perhaps their future existences. […]

One aspect of social organization is to be found in economic activity, and this, along with other manifestations of a group existence, is to be found in any P.O.W. camp. True, a prisoner is not dependent on his exertions for the provision of the necessaries, or even the luxuries of life, but through his economic activity, the exchange of goods and services, his standard of material comfort is considerably enhanced.And this is a serious matter to the prisoner: he is not “playing at shops” even though the small scale of the transactions and the simple expression of comfort and wants in terms of cigarettes and jam, razor blades and writing paper, make the urgency of those needs difficult to appreciate. […]

Nevertheless, it cannot be too strongly emphasized that economic activities do not bulk so large in prison society as they do in the larger world. There can be little production; as has been said the prisoner is independent of his exertions for the provision of the necessities and luxuries of life; the emphasis lies in

8 R.A. Radford was born in Nottingham, England in 1919. As a young man, he went to Cambridge University to study economics. When World War II started, he had to interrupt his studies to join the British army. (FinanceWatch.org)

January 2020 WPE Portfolio Reading Set Page 8 of 19

exchange and the media of exchange. […]

Naturally then, entertainment, academic and literary interests, games and discussions of the “other world”bulk larger in everyday life than they do in the life of more normal societies. But it would be wrong to underestimate the importance of economic activity. Everyone receives a roughly equal share of essentials; it is by trade that individual preferences are given expression and comfort increased. All at some time, and most people regularly, make exchanges of one sort or another.

Although a P.O.W. camp provides a living example of a simple economy […], and its simplicity renders the demonstration of certain economic hypotheses both amusing and instructive, it is suggested that the principal significance is sociological. True, there is interest in observing the growth of economic institutions and customs in a brand new society, small and simple enough to prevent detail from obscuring the basic pattern and disequilibrium from obscuring the working of the system. But the essential interest lies in the universality and the spontaneity of this economic life; it came into existence not by conscious imitation but as a response to the immediate needs and circumstances. Any similarity between prison organization and outside organization arises from similar stimuli evoking similar responses.

The following is as brief an account of the essential data as may render the narrative intelligible. The camps of which the writer had experience were Oflags9 and consequently the economy was not complicated by payments for work by the detaining power. They consisted normally of between 1,200 and 2,500 people, housed in a number of separate but intercommunicating bungalows, one company of 200 or so to a building. Each company formed a group within the main organization and inside the company the room and the messing syndicate, a voluntary and spontaneous group who fed together, formed the constituent units.

Between individuals there was active trading in all consumer goods and in some services. Most trading was for food against cigarettes or other foodstuffs, but cigarettes rose from the status of a normal commodity to that of currency. RMk.s [Reichsmarks – the currency of Germany] existed but had no circulation save for gambling debts, as few articles could be purchased with them from the canteen.

Our supplies consisted of rations provided by the detaining power and (principally) the contents of Red Cross food parcels—tinned milk, jam, butter, biscuits, bully10, chocolate, sugar, etc., and cigarettes. So far the supplies to each person were equal and regular. Private parcels of clothing, toilet requisites and cigarettes were also received, and here equality ceased owing to the different numbers dispatched and the vagaries of the post. All these articles were the subject of trade and exchange.

THE DEVELOPMENT AND ORGANIZATION OF THE MARKET

Very soon after capture people realized that it was both undesirable and unnecessary, in view of the limited size and the equality of supplies to give away or to accept gifts of cigarettes or food. “Goodwill”developed into trading as a more equitable means of maximizing individual satisfaction.

We reached a transit camp in Italy about a fortnight after capture and received a Red Cross food parcel each a week later. At once exchanges, already established, multiplied in volume. Starting with simple direct barter, such as a non-smoker giving a smoker friend his cigarette issue in exchange for a chocolate

9 Oflag:

10

biscuits-British-rations/)

https://sergeanttombstoneshistory. wordpress.com/2017/11/25/bully-and-

(Military) a German prisoner-of-war camp for officers in World War II. (thefreedictionary.com) Unlike other POWs, officers were not

required to work while in detention.

Bully beef was tinned corned beef with a small amount of gelatin. (

11 Red Cross food parcels: packages containing mostly food, tobacco and personal hygiene items sent by the International Association of the Red

Cross to prisoners of war.

January 2020 WPE Portfolio Reading Set Page 9 of 19

ration, more complex exchanges soon became an accepted custom. […] Within a week or two, as the volume of trade grew, rough scales of exchange values came into existence. Sikhs12, who had at first exchanged tinned beef for practically any other foodstuff, began to insist on jam and margarine. It was realized that a tin of jam was worth 1⁄2 lb. of margarine plus something else; that a cigarette issue was worth several chocolate issues, and a tin of diced carrots was worth practically nothing.

In this camp we did not visit other bungalows very much and prices varied from place to place; hence the germ of truth in the story of the itinerant priest. By the end of a month, when we reached our permanent camp, there was a lively trade in all commodities and their relative values were well known, and expressed not in terms of one another-one didn’t quote bully in terms of sugar-but in terms of cigarettes. The cigarette became the standard of value. In the permanent camp people started by wandering through the bungalows calling their offers–“cheese for seven” (cigarettes)–and the hours after parcel issue were Bedlam. The inconveniences of this system soon led to its replacement by an Exchange and Mart noticeboard in every bungalow, where under the headings “name” “room number” “ wanted” and “offered”sales and wants were advertised. When a deal went through, it was crossed off the board. The public and semi- permanent records of transactions led to cigarette prices being well known and thus tending to equality throughout the camp, although there were always opportunities for an astute trader to make a profit from arbitrage13. With this development everyone, including non-smokers, was willing to sell for cigarettes, using them to buy at another time and place. Cigarettes became the normal currency, though, of course, barter was never extinguished. […]

The permanent camps in Germany saw the highest level of commercial organization. In addition to the Exchange and Mart notice boards, a shop was organized as a public utility, controlled by representatives of the Senior British Officer, on a no-profit basis. People left their surplus clothing, toilet requisites and food there until they were sold at a fixed price in cigarettes. Only sales in cigarettes were accepted—there was no barter—and there was no haggling. For food at least there were standard prices: clothing is less homogeneous and the price was decided around a norm by the seller and the shop manager in agreement; shirts would average say 80, ranging from 6o to 120 according to quality and age. Of food, the shop carried small stocks for convenience; the capital was provided by a loan from the bulk store of Red Cross cigarettes and repaid by a small commission taken on the first transactions. Thus the cigarette attained its fullest currency status, and the market was almost completely unified.

It is thus to be seen that a market came into existence without labor or production. The B.R.C.S. [BritishRed Cross Service] may be considered as “Nature” of the text-book, and the articles of trade-food, clothing and cigarettes—as free gifts—land or manna. Despite this, and despite a roughly equal distribution of resources, a market came into spontaneous operation, and prices were fixed by the operation of supply and demand. It is difficult to reconcile this fact with the labor theory of value.

Actually there was an embryo labor market. Even when cigarettes were not scarce, there was usually some unlucky person willing to perform services for them. Laundrymen advertised at two cigarettes a garment. Battle-dress was scrubbed and pressed and a pair of trousers lent for the interim period for twelve. A good pastel portrait cost thirty or a tin of “Kam”14. Odd tailoring and other jobs similarly had their prices. […]

One trader in food and cigarettes, operating in a period of dearth, enjoyed a high reputation. His capital, carefully saved, was originally about 50 cigarettes, with which he bought rations on issue days and held them until the price rose just before the next issue. He also picked up a little by arbitrage; several times a

12 The Sikhs are practitioners of an Indian religion first established in the 1500s in the Indian state of Punjab. Many Sikhs are vegetarian, though it isn’t required. They can only eat meat that has been prepared according to their rituals. (“Sikhism” Brittanica.com)

13 Arbitrage: the nearly simultaneous purchase and sale of securities or foreign exchange in different markets in order to profit from price discrepancies. (Merriam-Webster.com)

14 The writing proficiency staff had abandoned the effort to determine what “Kam” is, when an image of it was discovered by accident. Kam appears to be canned meat, possibly ham (similar to Spam). See: https://www.iwm.org.uk/collections/item/object/38779.

January 2020 WPE Portfolio Reading Set Page 10 of 19

day he visited every Exchange or Mart notice board and took advantage of every discrepancy between prices of goods offered and wanted. His knowledge of prices, markets and names of those who had received cigarette parcels was phenomenal. By these means he kept himself smoking steadily—his profits—while his capital remained intact. […]

THE CIGARETTE CURRENCY

Although cigarettes as currency exhibited certain peculiarities, they performed all the functions of a metallic currency as a unit of account, as a measure of value and as a store of value, and shared most of its characteristics. They were homogeneous, reasonably durable, and of convenient size for the smallest or, in packets, for the largest transactions. […]

Cigarettes were also subject to the working of Gresham’s Law15. Certain brands were more popular than others as smokes, but for currency purposes a cigarette was a cigarette. Consequently buyers used the poorer qualities and the Shop rarely saw the more popular brands: cigarettes such as Churchman’s No. 1 were rarely used for trading. At one time cigarettes hand-rolled from pipe tobacco began to circulate. Pipe tobacco was issued in lieu of cigarettes by the Red Cross at a rate of 25 cigarettes to the ounce and this rate was standard in exchanges, but an ounce would produce 30 home-made cigarettes. Naturally, people with machine-made cigarettes broke them down and re-rolled the tobacco, and the real cigarette virtually disappeared from the market. Hand-rolled cigarettes were not homogeneous and prices could no longer be quoted in them with safety: each cigarette was examined before it was accepted and thin ones were rejected, or extra demanded as a make-weight. For a time we suffered all the inconveniences of a debased currency.

Machine-made cigarettes were always universally acceptable, both for what they would buy and for themselves. It was this intrinsic value [for smoking—a habit that was then common –Ed.] which gave rise to their principal disadvantage as currency, a disadvantage which exists, but to a far smaller extent, in the case of metallic currency; that is, a strong demand for non-monetary purposes.

Consequently our economy was repeatedly subject to deflation and to periods of monetary stringency. While the Red Cross issue of 50 or 25 cigarettes per man per week came in regularly, and while there were fair stocks held, the cigarette currency suited its purpose admirably. But when the issue was interrupted, stocks soon ran out, prices fell, trading declined in volume and became increasingly a matter of barter. This deflationary tendency was periodically offset by the sudden injection of new currency. Private cigarette parcels arrived in a trickle throughout the year, but the big numbers came in quarterly when the Red Cross received its allocation of transport. Several hundred thousand cigarettes might arrive in the space of a fortnight. Prices soared, and then began to fall, slowly at first but with increasing rapidity as stocks ran out, until the next big delivery. Most of our economic troubles could be attributed to this fundamental instability.

PRICE MOVEMENTS

Many factors affected prices, the strongest and most noticeable being the periodical currency inflation and deflation described in the last paragraphs. The periodicity of this price cycle depended on cigarette and, to a far lesser extent, on food deliveries. At one time in the early days, before any private parcels had arrived and when there were no individual stocks, the weekly issue of cigarettes and food parcels occurred on a Monday. The non-monetary demand for cigarettes was great, and less elastic than the demand for food: consequently prices fluctuated weekly, falling towards Sunday night and rising sharply on Monday morning. Later, when many people held reserves, the weekly issue had no such effect, being

15 Gresham’s law, observation in economics that “bad money drives out good.” More exactly, if coins containing metal of different value have the same value as legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation (Brittanica.com).

January 2020 WPE Portfolio Reading Set Page 11 of 19

too small a proportion of the total available. Credit allowed people with no reserves to meet their non- monetary demand over the weekend.

The general price level was affected by other factors. An influx of new prisoners, proverbially hungry, raised it. Heavy air raids in the vicinity of the camp probably increased the non-monetary demand for cigarettes [because anxious people smoke more –Ed.] and accentuated deflation. Good and bad war news certainly had its effect, and the general waves of optimism and pessimism which swept the camp were reflected in prices. Before breakfast one morning in March of this year, a rumor of the arrival of parcels and cigarettes was circulated. Within ten minutes I sold a treacle16 ration, for four cigarettes (hitherto offered in vain for three), and many similar deals went through. By 10 o’clock the rumor was denied, and treacle that day found no more buyers even at two cigarettes.

More interesting than changes in the general price level were changes in the price structure. Changes in the supply of a commodity, in the German ration scale or in the make-up of Red Cross parcels, would raise the price of one commodity relative to others. Tins of oatmeal, once a rare and much sought after luxury in the parcels, became a commonplace in 1943, and the price fell. In hot weather the demand for cocoa fell, and that for soap rose. A new recipe would be reflected in the price level: the discovery that raisins and sugar could be turned into an alcoholic liquor of remarkable potency reacted permanently on the dried fruit market. […]

In August, 1944, the supplies of parcels and cigarettes were both halved. Since both sides of the equation were changed in the same degree, changes in prices were not anticipated. But this was not the case: the non-monetary demand for cigarettes was less elastic than the demand for food, and food prices fell a little. More important however were the changes in the price structure. German margarine and jam, hitherto valueless owing to adequate supplies of Canadian butter and marmalade, acquired a new value. Chocolate, popular and a certain seller, and sugar, fell. Bread rose; several standing contracts of bread for cigarettes were broken, especially when the bread ration was reduced a few weeks later. […]

Enough has been cited to show that any change in conditions affected both the general price level and the price structure. It was this latter phenomenon which wrecked our planned economy.

PAPER CURRENCY-Bully Marks

Around D-Day17, food and cigarettes were plentiful, business was brisk and the camp in an optimistic mood. Consequently the Entertainments Committee felt the moment opportune to launch a restaurant, where food and hot drinks were sold while a band and variety turns performed. Earlier experiments, both public and private, had pointed the way, and the scheme was a great success, Food was bought market prices to provide the meals and the small profits were devoted to a reserve fund and used to bribe Germans to provide grease-paints and other necessities for the camp theatre. Originally meals were sold for cigarettes but this meant that the whole scheme was vulnerable to the periodic deflationary waves, and furthermore heavy smokers were unlikely to attend much. The whole success of the scheme depended on an adequate amount of food being offered for sale in the normal manner.

To increase and facilitate trade, and to stimulate supplies and customers therefore, and secondarily to avoid the worst effects of deflation when it should come, a paper currency was organized by the Restaurant and the Shop. The Shop bought food on behalf of the Restaurant with paper notes and the paper was accepted equally with the cigarettes in the Restaurant or Shop, and passed back to the Shop to purchase more food. The Shop acted as a bank of issue. The paper money was backed 100 per cent by food; hence its name, the Bully Mark [BMk]. The BMk. was backed 100 per cent by food: there could be no over-issues, as is permissible with a normal bank of issue, since the eventual dispersal of the camp and

16 Treacle: A sweet syrup, a byproduct of sugar refining.17 D-Day:

The day the Battle of Normandy began (June 6, 1944), “when some 156,000 American, British and Canadian forces landed on five

beaches along a 50-mile stretch of the heavily fortified coast of France’s Normandy region.” Nazi Germany surrendered in May 1945.

(History.com)

January 2020 WPE Portfolio Reading Set Page 12 of 19

consequent redemption of all BMk.s was anticipated in the near future.

Originally one BMk. was worth one cigarette and for a short time both circulated freely inside and outside the Restaurant. Prices were quoted in BMk.s and cigarettes with equal freedom-and for a short time the BMk. showed signs of replacing the cigarette as currency. The BMk. was tied to food, but not to cigarettes: as it was issued against food, say 45 for a tin of milk and so on, any reduction in the BMk. prices of food would have meant that there were un-backed BMk.s in circulation. But the price of both food and BMk.s could and did fluctuate with the supply of cigarettes.

While the Restaurant flourished, the scheme was a success: the Restaurant bought heavily, all foods were saleable and prices were stable.

In August parcels and cigarettes were halved and the Camp was bombed. The Restaurant closed for a short while and sales of food became difficult. Even when the Restaurant reopened, the food and cigarette shortage became increasingly acute and people were unwilling to convert such valuable goods into paper and to hold them for luxuries like snacks and tea. Less of the right kinds of food for the Restaurant were sold, and the Shop became’ glutted with dried fruit, chocolate, sugar, etc., which the Restaurant could not buy. The price level and the price structure changed. The BMk. fell to four-fifths of a cigarette and eventually farther still, and it became unacceptable save in the Restaurant.

There was a flight from the BMk., no longer convertible into cigarettes or popular foods. The cigarette re-established itself. But the BMk. was sound! The Restaurant closed in the New Year with a progressive food shortage and the long evenings without lights due to intensified Allied air raids, and BMk.s could only be spent at the Coffee Bar—relict of the Restaurant—or on the few unpopular foods in the Shop, the owners of which were prepared to accept them. In the end all holders of BMk.s were paid in full, in cups of coffee or in prunes. People who had bought BMk.s for cigarettes or valuable jam or biscuits in their heyday were aggrieved that they should have stood the loss involved by their restricted choice, but they suffered no actual loss of market value.[…]

PUBLIC OPINION

Public opinion on the subject of trading was vocal if confused and changeable, and generalizations as to its direction are difficult and dangerous. A tiny minority held that all trading was undesirable as it engendered an unsavory atmosphere; occasional frauds and sharp practices were cited as proof. Certain forms of trading were more generally condemned; trade with the Germans was criticized by many. Red Cross toilet articles, which were in short supply and only issued in cases of actual need, were excluded from trade by law and opinion working in unshakable harmony. At one time, when there had been several cases of malnutrition reported among the more devoted smokers, no trade in German rations was permitted, as the victims became an additional burden on the depleted food reserves of the Hospital. But while certain activities were condemned as anti-social, trade itself was practiced, and its utility appreciated, by almost everyone in the camp.

More interesting was opinion on middlemen and prices. Taken as a whole, opinion was hostile to the middleman. His function, and his hard work in bringing buyer and seller together, were ignored; profits were not regarded as a reward for labor, but as the result of sharp practices.

Despite the fact that his very existence was proof to the contrary, the middleman was held to be redundant in view of the existence of an official Shop and the Exchange and Mart. Appreciation only came his way when he was willing to advance the price of a sugar ration, or to buy goods spot and carry them against a future sale. In these cases the element of risk was obvious to all, and the convenience of the service was felt to merit some reward. Particularly unpopular was the middleman with an element of monopoly, the man who contacted the ration wagon driver, or the man who utilized his knowledge of Urdu. And middlemen as a group were blamed for reducing prices. Opinion notwithstanding, most people dealt with a middleman, whether consciously or unconsciously, at some time or another.

January 2020 WPE Portfolio Reading Set Page 13 of 19

There was a strong feeling that everything had its “just price” in cigarettes. While the assessment of the just price, which incidentally varied between camps, was impossible of explanation, this price was nevertheless pretty closely known. It can best be defined as the price usually fetched by an article in good times when cigarettes were plentiful. The “just price” changed slowly; it was unaffected by short-term variations in supply, and while opinion might be resigned to departures from the “just price”, a strong feeling of resentment persisted. A more satisfactory definition of the “just price” is impossible. Everyone knew what it was, though no one could explain why it should be so.

As soon as prices began to fall with a cigarette shortage, a clamor arose, particularly against those who held reserves and who bought at reduced prices. Sellers at cut prices were criticized and their activities referred to as the black market. In every period of dearth the explosive question of “should non-smokers receive a cigarette ration?” was discussed to profitless length. Unfortunately, it was the non-smoker, or the light smoker with his reserves, along with the hated middleman, who weathered the storm most easily.

CONCLUSION

The economic organization described was both elaborate and smooth-working in the summer of 1944. Then came the August cuts and deflation. Prices fell, rallied with deliveries of cigarette parcels in September and December, and fell again. In January, 1945, supplies of Red Cross cigarettes ran out: and prices slumped still further: in February the supplies of food parcels were exhausted and the depression became a blizzard. Food, itself scarce, was almost given away in order to meet the non-monetary demand for cigarettes. Laundries ceased to operate, or worked for £s [British pounds sterling], or RMk.s : food and cigarettes sold for fancy prices in £s hitherto unheard of. The Restaurant was a memory and the BMk. a joke. The Shop was empty and the Exchange and Mart notices were full of unaccepted offers for cigarettes. Barter increased in volume, becoming a larger proportion of a smaller volume of trade. This, the first serious and prolonged food shortage in the writer’s experience, caused the price structure to change again, partly because German rations were not easily divisible. A margarine ration gradually sank in value until it exchanged directly for a treacle ration. Sugar slumped sadly. Only bread retained its value. Several thousand cigarettes, the capital of the Shop, were distributed without any noticeable effect. A few fractional parcel and cigarette issues, such as one-sixth of a parcel and twelve cigarettes each, led to momentary price recoveries and feverish trade, especially when they coincided with good news from the Western Front, but the general position remained unaltered.

By April, 1945, chaos had replaced order in the economic sphere: sales were difficult, prices lacked stability. Economics has been defined as the science of distributing limited means among unlimited and competing ends. On 12th April, with the arrival of elements of the 30th U.S. Infantry Division, the ushering in of an age of plenty demonstrated the hypothesis that with infinite means economic organization and activity would be redundant, as every want could be satisfied without effort.

________________________________

 

January 2020 WPE Portfolio Reading Set Page 14 of 19

Laughing All the Way to the Bank By Lawrence Weschler

Example of a hand-drawn Boggs Bill, including a self portrait of the artist

For over a decade, the consuming passion of artist J. S. G. Boggs has been money—or rather value. What he likes to do is draw money—paper notes in the denominations of the world’s standard currencies—and then try to spend those drawings. There are many collectors avid to buy Boggs’s drawings, but he refuses to sell them. He endeavors to find hoteliers, restaurateurs, motorcycle salesmen and the like who will accept his drawings in lieu of cash as part of choreographed transactions, complete with receipts and proper change (he is willing to sell these, at a hefty mark-up, to collectors who are invited to peruse the documentation for clues to the location of the most recent drawings).

From that day in 1984 when he first offered $1 drawn on a cafe napkin for a cup of coffee and a doughnut, his transactions have been the start of a larkish, disconcertingly profound, econo-philosophic chase. For Boggs is raising all sorts of fundamental questions—what precisely is it that we value in art, or in money? How do we value one in terms of the other? How do we place a value on anything? And how is it that we continue to credit the legitimacy of anything as insubstantial as paper money? The subversive implications of these questions raise concern and even indignation among central bankers and treasury policemen, who respond by trying to nail Boggs on counterfeiting charges – from which juries all over the world have tended ever-so-merrily to spring him.

In 1987, Boggs, an American then living in Hampstead, London—he paid his rent by drawing the money–was brought to trial at the Old Bailey by the Bank of England, which accused him of “reproducing” HerMajesty’s pound notes. “These are reproductions,” Boggs insisted passionately from the witness box, thrusting a fistful of standard pound notes into the air; “These, by contrast,” he continued, fanning forth his own drawings, “are originals!” Once, when he and friends ran up a £480 bill in a Chinese restaurant, he offered either Her Majesty’s authentic cash, or a drawing of a non-existent £500 note. The waiter went away, consulted someone, returned and took the drawing—and gave him two real £10 notes as change. In Australia in 1993, he triumphed over the Australian currency police, and the judge in Sydney even awarded him $20,000 in compensation. Around that time, the American Secret Service was beginning to evince an active concern in Boggs’s shenanigans (in the US the relevant prohibition involves “uttering”images “in the similitude” of any actual American currency18), and the other day I decided to invite Boggs, now living in New York, out for lunch (“Off the meter?” he asked; “Yeah,” I assured him, “my treat”) to find out how things have been going since.

At one point, Boggs, a wiry fellow in his forties, recalled an evening a while back at a fancy restaurant where he’d run up a tab, settling it (“There, too, I was off the meter”) with an ordinary $100 bill. Thewaiter had returned with a drawing of his change. How had he reacted? “I accepted it ecstatically!” Boggs

18 According to section 475 of the U.S. Criminal Code, “whoever designs, engraves, prints, makes, or executes, or utters, issues, distributes,circulates, or uses any […] likeness or similitude of any obligation or security of the United States issued under or authorized by any Act ofCongress […] shall be fined.”

January 2020 WPE Portfolio Reading Set Page 15 of 19

crowed.

To date, he figures, he’s spent well in excess of $1 million-worth of his drawings, and the resulting transaction pieces (framed compilations of drawing, receipt, change, and occasionally the thing bought) continue to compound handsomely in value, often fetching upward of $100,000. His work has been acquired by institutions from the British Museum to the Chicago Art Institute, the Museum of Modern Art and the government-sponsored Smithsonian; one of his works was featured in a Smithsonian show, The Realm of the Coin, which travelled the US in 1992-1994 (so one wing of the federal government found itself celebrating Boggs’s achievement at the very moment that another seemed to be gearing up to indict it).

Boggs is consistently feted in numismatic19 circles. When he surfaced at coin conventions, he was regularly hounded for autographs. “I developed a policy. People would ask for my autograph and I’d say, `Okay, autographs are $1, signatures are $100. Which would you like?’ That generally stumped them. But I sign my name two different ways, so I was able to make it work. At one convention I attended, my signature was on prominent display at one booth, and I had a friend inquire its price: $200! The next day it was gone, and the dealer, who’d found out about my presence at the fair, sought me out and offered to buy 100 signatures at $1 each. `Naah,’ I told him, `that’s not how I operate. Just one per customer.’ There’s developed this weird market in my ordinary bank checks–it’s gotten to be like with Picasso: people simply don’t cash them. Over $2,000-worth have not cleared the bank. At one booth at another money convention, one of my checks, for $69, was on sale for $325. `You think you can sell this?’ I asked the guy. `This is my third one,’ he replied.”

Not surprisingly, the Internal Revenue Service, independently of the Secret Service, has taken an increasing interest in Boggs. In 1995 they subjected him, as he puts it, “to a full-blown, analyzes-you- down-to-your-hair-follicles audit,” after which, he says, the agent in charge confided, “You’re the cleanest thing we’ve ever seen. You know, you really don’t have to keep receipts for seven cents.”

Not that everything has gone so smoothly. […] Boggs was plagued by a proliferation of artists who’d taken to forging his money drawings; there was even a collector in Chicago who’d started specializing in bogus Boggs notes. Boggs was trying to figure out if there was some way he could get in on the deal: was it possible to forge oneself? […] Boggs may have lost thousands of dollars owing to the fear of merchants and collectors at the prospect of run-ins with the Secret Service. But paradoxically, his rising worth in the market is clearly a direct function of his transgressive approach and the persecution it provokes. He has often said he’d have stopped a long time ago if only the government hadn’t been so insistently trying to stop him.

He is haunted by what he describes as the “betrayal” of his artistic antecedent, John Harnett, an Americanpainter from over a century ago who’d been arrested by the Secret Service and charged with counterfeiting on account of his four uncannily exact paintings of contemporary greenbacks. “They confiscated his paintings and made him the same proposal they sometimes seem on the verge of making me: ‘If you promise you won’t do it any more, we’ll give you all your stuff back.’ And he caved in—I still can’t get over it! For me to do so would be like saying, ‘All right, you win, I’ll be a zombie; now can I have my toys back?’” He paused before continuing: “Harnett—and Jim the Penman.” This time he was referring to another 19th century master craftsman who’d drawn astonishingly exact replicas of dollar bills which he’d passed for the real thing. “I spend a lot of time thinking about both of them. I bought a Jim the Penman drawing—a long story: part of a challenge to see who could draw better. The exercise made me understand what he was doing—passing those superb drawings as real money—and it made me sick. To be possessed of such surpassing skills and then to squander them like that. Disgusting. It turned my stomach.” It was another of those strange moments with Boggs where, suddenly, things had unaccountably drifted from highest hilarity to utmost seriousness.

19 Numismatics is the art of collecting coins and understanding the art, history and science behind them. (apmex.com)

January 2020 WPE Portfolio Reading Set Page 16 of 19

So, I asked him, what was going on between him and the Feds? Boggs heaved a vast sigh. “Maybe you’ll remember how back in December 1992, the Secret Service swooped down and busted me in my Pittsburgh studio. Or, rather, they didn’t bust me. They seized all my stuff—over 1,300 items as an inventory subsequently revealed: the bulk of my lifework—and then threatened to bust me, darkly implying that they were seizing all that stuff as part of an investigation leading toward my arrest. But then, as the months passed, nothing happened. They suggested that they’d be back for more, and they regularly threatened further raids, but, at least up till now, they didn’t seize anything else. They regularly contacted dealers, collectors, museum people, warning them all off my work, as if I had the plague. But they didn’t bust me…Nor did they return my work.”

In part owing to the publicity generated around his plight, Boggs was able to secure the services of a high- powered young attorney, Kent Yalowitz. Together they appealed directly to Lloyd Bentsen, the treasury secretary in the incoming Clinton administration, who proved oblivious to their pleas. Time passed, nothing happened, and eventually, in 1993, Yalowitz filed a civil suit on Boggs’s behalf before the US Court of Appeals. (The Secret Service thus succeeded in getting Boggs to sue them in civil court, rather than going after him in a criminal court—thereby improving the service’s odds of limiting adjudication to a judge, without recourse to an annoyingly unaccountable jury.) Yalowitz’s plea on Boggs’s behalf, argued before US District Judge Royce Lamberth during two days of hearings, sought the return of his property and the suspension of persecution. As part of his filings, Yalowitz included a full-scale reproduction of a Boggs drawing. “You can’t do that!” the US attorney had sputtered. “It’s against the law!” To which Yalowitz calmly replied: “Indict me.” Yalowitz asked Judge Lamberth to declare once and for all that, in the absence of any imputation of Boggs’s intent to defraud, his work was self-evidently not in violation of any law. Short of that, Judge Lamberth was asked to order the government to put up or shut up: bring a criminal case against Boggs or cease its open-ended persecution of the artist and return his property forthwith.

In December 1993, Judge Lamberth declined to rule on the second prong of Yalowitz’s petition, limiting himself to a forceful judgment in the secret service’s favor over the first prong. The law forbidding the making of “obligations” in the “similitude” of US currency was fairly straightforward, in the judge’s opinion, and Boggs’s work fell well foul of it. The government could go on proceeding in any manner it saw fit.

Yalowitz and Boggs appealed Judge Lamberth’s ruling to a higher court, sitting in Washington DC. […] It took two years before they achieved half a judgment: in December 1995, without any elaborate explanation, the court affirmed Judge Lamberth’s ruling that Boggs’s art violated the law and threw the second part of the case—asking for the government to cease persecuting him—back to Judge Lamberth’s chambers for preliminary adjudication.

It took almost another two years before that part of the case received a proper hearing. “It was a really strange scene,” said Boggs. “And quite tough for me to sit calmly through. The lawyers were arguing over whether my drawings were more like pornography or hard-core drugs. If they were more like pornography, then we were dealing with a question of censorship versus free expression, and it ought to be up to a jury of my peers to make the final determination.” […]

Boggs and Yalowitz now appealed that ruling to the three-member appeals court panel, which declined to intervene; they then appealed to the 10-member court of appeals, which just recently denied them any hearing. Whereupon they began preparing for an appeal to the Supreme Court. Boggs has for years been slotting its marble-columned building on to all his renditions of the back of a $10 bill in anticipation of just such an eventuality.

I asked Boggs how much all this was costing. “So far, my own legal bills have come to almost $800,000. I was mentioning that figure to one of the Secret Service guys—crazy thing is that on a personal level I have all sorts of friends on their side—and he said, `You think that’s something; our side has easily spent five times that’.

January 2020 WPE Portfolio Reading Set Page 17 of 19

“But I realized that I would have to come up with something special, so I contacted Thomas Raymond Hipschen, the chief master engraver with the bureau of engraving and printing in Washington. He’s the incredible artist who’s created the engravings for the new $100, $50 and $20 bills. And I made him a proposal, which he accepted. For starters, I offered my last Pittsburgh $1,000 drawing as a down-payment for a steel-engraved portrait of me, actual money scale. Which he proceeded to produce and which”–Boggs leaned over conspiratorially, and pulled a sample impression out of his satchel—“he did quite handsomely. And I’ve now made eight impressions of this engraving as the basis for eight $100,000- bill drawings.

“That’s how I intend to pay—and, assuming that the law firm can work out any complications with their tax people—there’s no reason why they can’t offer the IRS their fair cut—that’s how I intend to go on paying.” Boggs smiled slyly.

I had a sudden realization that no matter whether the Supreme Court agreed to entertain this particular suit, and if so, no matter how they ruled, the loser was likely to go on appealing, and appealing the appeals, and then mounting fresh challenges ad infinitum: since this was a hilarious nightmare of a case, in which both sides were in a position to go on covering all their costs simply by printing fresh money.

A One Berkshare Note

Betting on Berkshares

A case for experimentalism in economics By Max Larkin

In a conversation this week Michael Lewis told us our financial system suffers from a high-level herd mentality: “People who speak truth to power right now get quickly classified as oddballs, as opposed to important.” I thought immediately of […] Uke Man [who] appeared in a Newshour segment hosted by Paul Solman [playing a Fluke Ukelele, manufactured in Western Massachusetts], in which Solman, rather skeptically, introduces the audience to Berkshares, a local currency used in Western Massachusetts.

The principle is this: the currency, beautifully bedecked in images of the landscape and local heroes like W.E.B. DuBois and the community farmer Robyn Van En, is traded for dollars at the bank, at a 5% discount from the dollar. You can spend the money at around 400 participating businesses across (mainly)southern Berkshire county. Because you lose 5% by changing them back to USD, you’re nudged into keeping your Berkshares in circulation.

These bills have been circulating […] since 2006. But in fact, the Berkshares history is much longer. Local currencies aren’t new in the United States; in fact they were the national norm until the Civil War brought about a radical economic centralization. But the idea is having another moment, visible in Western Mass. and around the world. […]

[Alice] Maggio, herself a product of the Berkshires, is the director of the local-currency program at theSchumacher Center for New Economics, which makes her Berkshares’ chief custodian and evangelist.(The currency is administered by a dues-paying, democratic board of directors.)

January 2020 WPE Portfolio Reading Set Page 18 of 19

The Schumacher people hope that the Berkshares will one day be uncoupled from the dollar, and pegged to a basket of goods produced in the region. That way, if the dollar crashes, a Berkshare will still buy the same amount of milk — and the board could decide to grow or limit supply. Maggio declined to say whether she would assume the role of Berkshares’ Fed Chair if and when that occurs. […]

Here, I think, is the heart of the Berkshares pitch. If the trillion-dollar turnover of ordinary, national currencies represents a kind of global shouting match — backed by central banks, amplified by Wall Street leverage artists, and resounding abroad — these complementary local currencies function as a kind of private, backroom conversation between intimates. By buying Berkshares, neighbors can declare they are willing to buy one another’s local produce, local toys, local ukuleles—and seal the deal with a members- only discount.

One thinks of a few Berkshire towns — like North Adams, slightly out of Berkshare buying range — as monuments to the power of modern capital: how it all but literally floats in and floats out of a place. Like a kind of slow-motion weather event, money has whipped into Detroit, and Haverhill, Mass., and Gary, Ind.— building up their physical plant and infrastructure so long as that promoted profitability — then whipped out and away, leaving something skeletal and defunct behind it. This is, by the terms of the market, a morally neutral phenomenon. Monopoly capitalism is like weather, in that one accomplishes nothing by complaining about it. […]

Alice Maggio is understandably reluctant to present it that way, but to me the local currency strategy seems to me like the defense mechanism of a culturally rich place that its citizens consider precious. It’s a means of slowing money down — of shielding your home from the fast-market money behind corporations, and endlessly repurposing your communal money like compost. It makes local wealth sticky; it makes carpet- bagging and global standardization difficult.

There are, Maggio told me, 135,000 Berkshares in the world, but over the past eight years it’s estimated that five million have circulated through a community of just 20 or 30,000 people. So Mahicans, Van Ens, and Melville bills are a fact of Berkshire life.

I asked Maggio why she chose this as her life’s work so far. She said, “I like the Big Idea.”

And to challenge the authority of the U.S. dollar is a Big Idea. It doesn’t matter who’s doing it, Silicon Valley utopians or Tanglewood regulars. Modern mainstream economics wants to “disrupt” old institutions— like public education and medical care. But it’s downright prim about its own principles.

Of course one strand of conventional wisdom says that local currencies are inefficient, unnecessary, and prone to collapse. I can’t say whether or not it makes perfect economic sense, though I’ve read persuasive things on both sides of the question.

But I am persuaded of one thing — that we don’t see nearly enough economic experimentalism of this kind, that generally it’s a sign of positive health. There are obvious reasons to leave alone the reins of our economic destiny, to accept the system as it comes, even to the point of obvious unfairness and exploitation: those reasons are ignorance and fear.

People feel the risk dearly every time their 401(k) sags. No doubt investors have felt terribly burned by the plunging value of bitcoin just this past year. But Maggio makes the case well that local, complementary currencies have a role to play in America — and the popularity of the Berkshares model should begin to prove it.

January 2020 WPE Portfolio Reading Set Page 19 of 19