<nettime> The barter origins of money

[Keith Hart <HART_KEITH@compuserve.com>]

>Money freed us from space and time, 5000 years before the internet.
And it also freed us from the tyranny of barter<

By now everyone knows where money came from. Our remote ancestors started
swapping things they had too much of and others wanted. This barter ran
into a bottleneck. It wasn't always easy to find someone who both wanted
what you had and had what you wanted. For many natural products, the timing
of supply and demand may simply not coincide. So some objects were valued
not just for their consumption, but as tokens that most people would be
willing to hold to swap with something else in future. It might be salt or
ox-hides, but metals became the most common items to be used in this way.
Gold, silver and their ilk were scarce, attractive, useful, durable,
portable and divisible. They became the prototype of commodity money. The
restrictions of barter were lifted as soon as sellers would regularly
accept these money tokens, knowing that they could be exchanged at any time
for whatever they wanted to buy. The money stuff succeeded because it was
the supreme barter item, valued not only as a commodity in itself, but also
as a ready means of exchange with everything else.

This is a myth of course. What does it tell us? That money is a real thing
and a scarce commodity. That it rose to prominence because it was more
effective than existing practice. That it originated in barter, the
timeless, 'primitive' form of exchange. What else does it tell us, about
society, for instance? Well, almost nothing. When Adam Smith first told
this story, in a book published at the same time as the Americans declared
their independence, he claimed that the "Wealth of Nations" resulted from
the slow working out of a deep-seated propensity in human nature, "to
truck, barter and exchange one thing for another" (p.17). He went on, "It
is common to all men, and to be found in no other race of animals, which
seem to know neither this nor any other species of contracts. Nobody ever
saw a dog make a fair and deliberate exchange of one bone for another with
another dog. Nobody ever saw one animal by its gestures and natural cries
signify to another, this is mine, that yours; I am willing to give this for
that." He concluded that the distinctive human propensity to make exchange
contracts probably originated in the evolution of reason and speech.

Here too not much is said about the social conditions necessary for such
behaviour. But at least Smith acknowledged a degree of social complexity in
the transactions: the ideas of contract, private property (mine and yours)
and equivalence (fairness), none of which could plausibly be traced to the
non-human world. His latter-day successors have not shown similar modesty,
routinely claiming that the markets of fin-de-siècle Wall Street are
animated by impulses that are not just eternally human, but shared with the
animals too, or at least the primates. Thus one recent exposé is called
Monkey Business: Swinging Through the Wall Street Jungle (Rolfe & Troob,
2000 -- every page number has the icon of a swinging monkey beneath, lest
we forget). More seriously, Inventing Money is the story of Long-Term
Capital Management, once the largest hedge fund in the world. Its founders
had won Nobel prizes in economics for their contribution to financial
theory and its failure in 1998 was as damaging to Wall Street as the East
Asian crisis and the collapse of the Russian rouble in the same year. It
begins with a section entitled, 'The origins of trading':

"In chimpanzee communities, individuals exchange gifts (such as fruit or
sexual favours) within a group to cement alliances, and punish those who
attempt to cheat on such mutually beneficial relationships. Anthropologists
believe that early humans started trading in much the same way. The word
they use to describe this behaviour is 'reciprocity' and our personal
relationships work on this basis." (Dunbar 2000:2-3).

The author finds it necessary to claim that Wall Street culture in the
1990s is an example of human nature, a nature that we even share with the
primates. That is to say, LCTM may have gone wrong, but the system of
trading it exemplifies is as primeval as motherhood. This is one way of
arguing that 'there is no alternative' to the free market (TINA was a
favourite expression of Mrs. Thatcher's). If we can show that there are
alternatives in history or just that the story on view is a defective
representation of social reality, we thereby increase our choices. But
first let us look more closely at what Dunbar actually said.

There are some loaded words here that scholars normally have difficulty
untangling, even with the benefit of dictionaries, never mind on the basis
of observing chimps who don't talk at all -- communities, exchange, gifts,
sexual favours, group, alliances, punish, cheat, mutually beneficial
relationships, anthropologists believe, trading, reciprocity, personal
relationships. That's a lot of metaphysics piled onto the observation that
chimps sometimes hump each other and may pass on the odd bit of fruit.
Notice also that trading is assimilated to politics and personal relations
more generally, on the basis that "anthropologists believe" such human
behaviour emerged "early". There are thus two claims being made: that the
private property complex essential to trading is natural, therefore
inevitable, and that it underpins most other important things in our lives.

Adam Smith seems almost cautious in comparison. When he sought to
demonstrate exchange without the use of money, he drew on reports of
'primitive' exchange from eighteenth century North America, describing
natives bartering beaver for deer skins in what was no doubt a typical
scenario from the fringes of the contemporary world fur trade. It is always
unreliable to draw inferences about prehistory from present-day behaviour
at the margins of civilization. It is one thing to imagine two noble
savages swapping animal skins, quite another to work out how living people
contrive such an exchange as an ongoing social practice. So, for our
purposes, ethnographic descriptions of exchange in societies that have
traditionally known neither states nor merchants nor even money offer
material for thinking about how people might build their own economic
communities now. This was after all once the main reason for doing
anthropology. It was understood that states and capitalism were an
unsatisfactory basis for society, the one being out-of-date and the other a
recent anomaly, so that the study of stateless societies might offer clues
to doing better in future. At the very least, by widening the scope of
knowledge beyond our own situation, we are able to test claims about its
universality.

Traders are unusual people. We might say intuitively that something belongs
to someone either because they made it or because they were given it and
intend to use it. Traders own things they neither made nor will use, but
they still claim the right to the value of their sale. At the same time,
they are willing to give up their goods unconditionally in return for
payment; and their customers then have the right to do what they like with
what they have bought. This kind of behaviour is so commonplace in our
world that it seems reasonable to think of it as eternal. It is in fact
quite rare within the range of known human societies. What gives buyer and
seller confidence that they each have exclusive rights to dispose of the
commodity? It is the power of state law reinforcing their contract and
usually offering similar support for the money involved. They can operate
as isolated individuals only because of the huge social apparatus backing
their exchange. 

Think of a situation where property is not backed up in this way. A group
of nomads herd cattle in the dry savanna, far from the reach of any state.
They can hold onto those cattle only if they mount effective resistance to
other groups who might try to steal them. In such circumstances, an
individual's property rights are a function of being a member of the group,
all of whom have some claim on the cattle, since they all must defend them
together. Trading the cattle would then be a far from simple matter. The
same problem arises when a peasant tries to raise a loan on the security of
family land. If he fails to pay back the loan, the land must be sold to the
bank. But it is often unclear who actually owns the land and sometimes
where it begins and ends. The citizens of advanced capitalist societies are
not immune either. Other family members will have something to say if we
try to sell off grandma's jewels. But this last example is not economically
central, as the cattle and the land are. For us, most of the things we own
were once bought for money through trade.

If trading is a special institution, usually involving money, how else have
people circulated objects between themselves? We have already encountered
barter and the classical economists' assumption that money arose in order
to simplify a cumbersome form of exchange. Barter is a spot transaction
where two parties exchange goods taken to be equivalent. Each has what the
other wants. It is obviously a difficult kind of transaction to pull off.
The timing and the quantities must be right and you have to agree on what
each is worth. Both sides must also have the right to dispose of their
goods without involving others. There is a risk of conflict in any
haggling. How much simpler for me to persuade you to give up your goods in
return for money which you can then hold for purchases from others in
different times and places. You can see their point. What is not convincing
is that such a complicated arrangement as barter would be prevalent before
people thought of inventing money. 

Barter is often found where markets using money prices are ineffective,
usually because of a shortage of liquidity. Thus the Argentinians, in the
crisis of their national currency, the peso, flock to barter clubs. People
have a fair idea of what their goods are worth because of the co-existent
markets they didn't have enough money to participate in. The North American
fur trade in the eighteenth century would be another case in point. The
ratio of beaver to deer skin was broadly set by the world market, but cash
was scarce on the frontier. Nigeria and Brazil, being short of foreign
currency, once arranged to barter oil for manufactures, knowing the price
of each on world markets. This arrangement was closed down after Britain
and France complained that their market share was being usurped by unfair
trade. One of the fastest-growing sectors of trade today consists of
commercial barter networks (b2b), allowing businesses, for a commission, to
swap unsold goods directly between themselves.

Barter does not require faith in any currency or other medium. What you see
is what you get. More important, it allows trade to continue when the
currency is lacking. It is cumbersome because both sides of the swap have
to coincide. Apart from that, barter resembles normal trading quite
closely, especially in its assumptions about property relations. It is easy
enough to conceive of barter as markets without money. Perhaps this is what
recommended it to the economists as a possible precursor of markets based
on money. All that is missing is the money. Everything else is business as
usual, especially the condition of exclusive private property in the goods
traded. Barter is not much of an alternative then, just an inferior market
mechanism. What other candidates are there for moving goods around? We have
already been introduced to the idea of 'reciprocity' as a key concept in
economic anthropology. The author of this idea thought that the original
form of exchange was contained in the gift.

Marcel Mauss was a co-operative socialist. He was therefore interested in
how we make society where it did not exist before, as voluntary
association, and especially in what keeps it going, the glue of social
relations. Anthropologists had recently (in the 1920s) written about
stateless societies with elaborate exchange systems conducted by means of
giving rather than trading; and this recalled to his mind some practices of
the ancient Celts, Indians and Romans. The free gift appears to be an act
of pure selflessness, a bit like the ideal of parenthood. So how are social
relations established or maintained through gifts? What binds us to these
relations? The gift seemed to hold the key to this and it turned out not to
be so free after all. Mauss found the roots of society itself in what he
called the rule of reciprocity, which he took to be a human universal. 

What do we do when we would like to make a social connection? We offer a
gift. Diplomats bring rare items from their homeland; boys offer flowers or
chocolates on a date; middle class guests bring a bottle of wine; lonely
travelers put themselves at the mercy of unknown hosts. What do they hope
to achieve by this? Acceptance of the gift implies reciprocity, a return in
future, at least the expectation of kindness. Mauss concluded that human
beings were bound by giving in three stages. First, there was the
obligation to give; second, the obligation to receive; and third, much the
most important for his theory, the obligation to make a return, to
reciprocate. I give to you so that you will give to me. Although market
economy has evolved a long way from its origin in the gift, all forms of
exchange share this fundamental logic.

For Mauss, the essence of the gift was that it should not be reciprocated
immediately. It would be impolite to return it at once, since this would
constitute a canceling out of any interdependence created by the act of
generosity and therefore no basis for projecting the relationship into the
future. There is thus both a material and a spiritual aspect to the
construction of relations over time. And these relations are highly
personal. It is as if the gift contains a spirit compelling a return to its
source. Mauss speculated that the origin of this institution lay in
sacrifice. Out of fear and insecurity, human beings made gifts to the
spirit powers who they imagined controlled the world, in the hope that they
could compel concessions in return. The awful sense of that religious
alienation then attached itself to gift-exchange between human beings. And,
as anthropologists know all too well, the so-called free gift is never
free, since it exercises some kind of hold over the recipient. If we don't
return the gift in kind, then we must defer to the giver. Parents, the
ultimate givers, ask for nothing but deference from their children. Whoever
heard of parents and children being equal? The surprising fact of giving
therefore is that it generates social inequality.

We all know what to do if we wish to avoid becoming too closely involved
with people through this kind of deferred exchange. We pay our own way, go
Dutch, split the bill into equal parts. This is also the ethos of market
exchange. I pay my money and I walk away free. Markets largely dispense
with the unequal ethos of giving by making the exchange simultaneous and
impersonal, removing time, person and spirit, in the end society itself,
from the circulation of objects and money. But Mauss pointed out that
markets are more than just spot transactions for cash. Many contracts have
a time dimension. We work first and are paid our wages afterwards. We pay
the rent before we occupy the lodgings. And of course the whole principle
of loans and credit is buy now, pay later. We are constantly giving or
receiving in ways that require us to project society into the future as the
expectation of reciprocity, as contracts in other words. Mauss wanted the
citizens of capitalist societies to see the logic of giving that still
underpins our complex interdependence-- and not just at weddings or
Christmas. Exchange is more than the interplay of private interests, more
than the coercion of state laws. It is the way that human beings reconcile
their individuality with belonging to others in society. If that is
difficult to grasp, then perhaps the economic activities of remote South
Sea islanders will make it clearer.

In the Western Pacific, off the coast of New Guinea, a complex system of
inter-island trade once flourished without benefit of merchants, markets or
money and without centralized authority (states). The people shared a
common culture with elaborate material needs that could not usually be met
out of local resources alone. The islands were not self-sufficient: one
would be rich in sago palms, another in stone or clay, while yet another
may be noted for a particular kind of fish. How could these specialist
items circulate between islands in the absence of any guaranteed peace?
Long-distance trips are fraught with danger, making the unrestrained
competition of commercial barter too risky. So an alternative method
evolved, based on the exchange of valuables between leaders of expeditions
and their hosts. "Kula" is both the practice of exchanging these valuables
and the name for the tokens themselves. The leaders emphasize an ethos of
generosity in handing over these valuables as gifts to their partners in
other islands. They deny that it has anything to do with ordinary commerce.
Nevertheless, a lot of mundane trading goes on under the umbrella of these
kula partnerships.

It works like this. Very few communities in the region have official
chiefs. Instead there is an unstable pattern of political leadership in
which "big men" (leaders without office) compete for followers. If people
from island A want to acquire a commodity x from island B, they organize a
canoe expedition under the leadership of a big man who has a longstanding
partnership with a big man in island B. They take with them kula valuables,
of which there are two types: red necklaces and white armshells. These
valuables are named and the history of transactions involving the more
famous ones is well known. Big men vie with each other to attract the best
pieces to themselves. On this occasion the big man from A will set out
carrying, say, red necklaces only and no other commodities. The canoes
arrive empty-handed except for the necklaces. The big men from A and B will
discuss which white armshell the latter may bring the next time he visits
A. In the meantime their followers strike up partnerships, make promises of
valuable exchange and load up the canoes with commodity x. They may also
haggle over other individual items, safe in the peace secured by their
leaders. The canoes return home and, when an expedition from B arrives some
time later, carrying white armshells, the process is enacted again in
reverse, with commodity y being loaded into B's canoes.

The relationship between gift and barter as modes of exchange is perhaps
revealed more clearly in another example. Kula is a ceremonious exchange of
personal ornaments as gifts. "Gimwali" is an undignified haggling,
individual barter, "trade pure and simple".. The contrast between them is
as great as that between generosity and selfishness. On one of the bigger
islands, coastal villagers exchange fish for yams or vegetables with
landlocked villages, allowing a measure of specialization between fishing
and agriculture. Sometimes the exchange takes the form of gift exchange
between community leaders ("wasi", following the pattern of kula); where
there is no such relationship, individual barter at the household level
("vava", like gimwali) is normal. So, whereas in one case a big man hands
over a job lot of fish to his counterpart, who rations them out among his
followers and organizes a future return of yams, in the other individuals
wander from house to house trying to get a reasonable deal for what they
have to sell. The first is marked by ceremony, separation of the moments of
exchange and conflict avoidance; the second by informality, simultaneous
exchange and haggling. Thus one is a temporary framework erected in the
absence of society, implying high social distance and weak political order.
The other is an atomized interaction reflecting a relatively strong social
order. In one case, society has to be made visible by means of the gift; in
the other, it is the invisible background to barter, but a necessary
presence nonetheless.

Wasi and vava are thus different means of securing the same ends, the
circulation of commodities between independent communities. Individual
barter is favoured when the general peace is such as to allow commodities
to be exchanged at their equivalent values; ceremonial gift-exchange is a
temporary construct of peace based on alliance between leaders of
communities at war, with political redistribution of commodities an
inevitable corollary. A breakdown of political relations between coastal
and inland villages might occasion a shift from vava to the more formal
wasi. Equally, unpredictable fluctuations in supply (failure of the fish
catch or a yam glut) might undermine the price-setting mechanism of barter
and require the intervention of big men as rationing or stockpiling agents.
Exchange thus oscillates between two poles in response to imperfections
both of the political order and of supply and demand. Normal conditions
grant low-level agents considerable autonomy which is superseded by
high-level regulation when the environment is especially uncertain. The
reputation of big men hangs on their generosity, so they affect to despise
ordinary commerce. But we should not rely on their rhetoric to deny the
complementarity of gift and barter in practice.

Perhaps we can now take stock of the place that gift and barter occupy in
the conventional myths of market origins. Markets and barter alike depend
on an evolved social order which becomes invisible the more effective it
is. Each depends on private property and tolerance of a degree of
individual conflict in exchange. The essential equality of the parties to a
given trade, reflected in the assumed equivalence of the money and
commodities exchanged, is the result of a complex evolution, not a simple
expression of human nature. At another level, a contrast can be made
between markets and gift-exchange in which "we" moderns are selfish
individuals, whereas "they", the primitives, serve only the interests of
their communities. By labeling one practice primitive and the other modern,
we imply that the direction of social evolution is, however regrettably,
towards economic individualism. Mauss profoundly rejected this argument and
so do I. First of all, market economy rests on social institutions
(including state-administered laws) as well as on individual interests.
Then too, the gift still flourishes in pockets of capitalist societies.
Equally, systems like the kula reveal a rampant egotism on the part of
competing leaders which hardly squares with the stereotype of primitive
communism. 

All of this no doubt sounds pretty esoteric -- South Sea islanders and
defunct Scottish philosophers. But the conventional wisdom about money,
markets and their alternatives perpetuates a blindness to what matters in
economic life that can have devastating consequences. The Cold War was
fought in the name of the State and the Market. One side was society
centralized a single agent, the other society dissolved into individual
atoms. The United States, which operates the largest collective in the
world, the Pentagon, claimed to represent 'free enterprise' against the
'Evil Empire'. Reagan and Thatcher denigrated the state while assiduously
building up its strength. No wonder it was impossible to conceive of
society as both an economic association of individuals and a political
order. 

After the fall of the Berlin Wall, Eastern Europe and soon afterwards
Russia renounced state socialism. Hooray, say most of us. The obvious
candidate as a replacement was liberal democracy and its twin the free
market economy. After a decade of neo-liberal conservatism in the West,
this recipe was in the ascendant. Privatization was the slogan of the hour.
The former socialist societies actually paid consultants to help them
privatize their economies. The notion that western market economies rested
on a complex history of political institutions, like their states, for
instance (whisper the word), had no place in liberal rhetoric. All the
effort went into establishing private property and supplying the money
needed to lubricate the markets. Deregulation was the order of the day, not
the erection of a suitable political framework. The result we all know. The
state was weakened beyond repair; the economy went into a tailspin; and the
consequent void was filled by gangsters.

These criminal mafias bear comparison with the big man societies who make
up the kula ring. Without a framework of lawful institutions, commerce
could only take place under the umbrella of a temporary framework erected
by powerful individuals and their gangs. Violence was everywhere close to
the surface. Contracts were personal and the gift economy took its most
sadistic form ("He made me an offer I couldn't refuse"). This is what
feudal Europe was like before the Italian Renaissance invented modern
states, law and bureaucracy capable of guaranteeing an impersonal order
necessary for commerce, or what Emile Durkheim called "the non-contractual
element of the contract". If we remain unaware of this history, if the
social infrastructure of markets i
s invisible and unheeded, how can we prevent ourselves from sinking back
into barbarism, as we cheerfully encouraged the Russians to, after they
lost the Cold War?

These questions are central if we set about building economic community
where it did not exist before. If anything has emerged from the above, it
is that both the individual and the collective are indispensable to
economic order, both the personal and the impersonal. It is a profound
error to assume that the superficial individualism of commerce was either
primeval (the barter origins of money) or has evolved from its antithesis
in the gift. Only the strongest of social infrastructures operate so
effectively that they are invisible, thereby allowing the actions of many
individuals to flourish. When they are weak, a few leaders assume personal
responsibility for general interests. But at all times, it is the unity of
individual and collective interests that counts. We have to pay attention
to both sides, not oppose them in some fruitless re-enactment of twentieth
century ideology. 

Keith Hart

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