Two sides of the same coin?

14 February 2016 | ResolutionPossible

Money in the form of coins. | Photo by

Money in the form of coins. | Photo by

It’s a thing so common, governing our lives in so many ways that most of us don’t even think beyond its use: money. Unless we live in a place of the world where there are other mediums of exchange, we all deal with money on an everyday basis. In an age where terms like ‘financial crisis’, ‘bailout’, or ‘austerity’ are an integral part of current debates surrounding our economy, money stands at its core. It seems to be one of the biggest problems and yet hailed as one of the biggest solutions in our society. But – what actually is it?

What is money?

Is money a thing? A symbol, a promise? Or is it debt?

In economics, the three uses of money are medium of exchange, unit of account, and store of value. The value of money is subjective and not tied to its material value. According to conventional economic theory, first came barter which evolved out of the necessity to exchange things. This led to the invention of money to simplify exchanges and then came virtual money, or credit. This orthodox theory of money has been critiqued and challenged by social scientists who argue that this is simply not true: money did not originate from barter. The so-called ‘myth of barter’ is based on the assumption that human nature is grounded on the need to maximise profit and make rational choices, but research has shown that there is no evidence for this. On the contrary, systems of credit existed long before money, recorded on Egyptian hieroglyphs and Mesopotamian cuneiform documents, dating back to roughly 3500 BC. In these systems of accountancy, silver was used but the quantitiy was so little that it played only a very marginal role. All major transactions were paid for by a system of credit, so the use of money was minimal compared to the credit system. In this light, the history of money as taught by standard economics is reversed: first came credit, then money.


Different shells, such as cowry, have been used as currencies in many places of the world. | Photo by Mirja Brand

Money has taken many different forms: from salt, shells, corals to stones, iron rods, tobacco or other materials, money has changed its form throughout history. Even today, money can take different forms: whether we use coins, bank notes or credit cards, money comes in different sizes and shapes. Definitions of money are as plentiful as its forms – however, it makes sense to distinguish roughly between three types of money: money issued by a state, forms of money issued by corporations (e.g. e-money), or forms of money issued by local communities (e.g. the Brixton Pound in London).

money; pounds; fiver; British pounds; pound sterling

A British five Pound note “I promise to pay the bearer on demand the sum of five pounds.” | Photo by Mirja Brand

Today, the value of money is not linked to its material value: money is no longer tied to the gold standard and our monetary systems are based on fiat money – money that is intrinsically useless, it’s used only as a medium of exchange and not backed by any physical commodity like gold.
Money can also be seen as a matter of trust: you need to trust other people to accept a given currency to know that it is exchangeable. Without this fundamental understanding, money cannot work. It only functions because of our mutual trust in it. In this way, it is also a promise: a five-pound note actually says, next to a picture of Queen Elizabeth II, that “I promise to pay the bearer on demand the sum of five pounds”. This is because money is also actual debt. In most modern economies, banks create money by making loans. As unusual as this may sound to people only familiar with the standard economic theory of money, this has recently been published in a report by the Bank of England itself:

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money”.

The Bank of England even states in its report that the actual creation of “money in practice differs from some popular misconceptions” and, further, that the “reality of how money is created today differs from the description found in some economics textbooks”. Social anthropologist David Graeber discusses this very eloquently in a recent article, where he explains how the amount of money in circulation is basically infinite as long as there is someone willing to borrow, whether that will be citizens, the government or corporations. As most monetary system function with fiat money, the promise on a five-pound note does not hold true anymore. Since we have abandoned the gold standard, there is no physical commodity to exchange your banknote with. It is only trust that binds this promise. It’s time to clear up some of those misconceptions that are based largely on orthodox theories of classical economics in order to understand what is happening in our current economy.


Bank of England on Threadneedle Street in London. | Photo by

Beyond the economic: social aspects of money

Anthropologists have long argued for a substantivist approach towards the economy, meaning that the economy is more than just a formal, static institution. A substantivist approach rejects the view that the economy is a rational, acultural and neutral system in which people only look to maximise whatever it is they desire. ‘Substantivism’ puts the economy in context of other social institutions. Ethnographic research in different parts of the world, on capitalist as well as non-capitalist societies, shows that money does not exist separately from society but is embedded in it. It has culture, kinship or religion, as social scientists like Karl Polanyi or Max Weber have told us.

Money is not neutral, objective or value-free, but embedded in social relations and highly subjective. Money, from this perspective, can have a ‘social life’, attached with different meanings and values. It can make a difference, for instance, how we spend our own money or how we got the money. Whether using the money that we earned through hard labour, or money that we have received through less noble means, when making a special purchase, this does matter. Differentiating between money that we have earned ourselves or money that might come from other sources is a distinction that doesn’t change anything about the quantitative value of money, but the symbolic value attached to it makes a considerable (social) difference. Money can serve different purposes, going beyond pure economic transactions. Different amounts of money can be set apart for different purposes, like household money, money used for gambling or money used to buy gifts for loved ones. We have the choice to use money to serve only ourselves, or to help others. Money has different meanings serving different purposes, moving between the economic and the social, shaped by culture and is diversified in practice. It can have a cultural significance and a qualitative – not only quantitative – difference. Money can be influenced by cultural, personal and societal values and is far more than just an impersonal homogeniser. Its meanings are subjective.

The other side of the coin


‘Wages for housework’ | Photo by

We are living in a society where everything comes with a price tag and it is important that we do not forget about alternative forms of value production as well.

The types of activities that produce monetary value – such as paid wage labour – dictate most of our lives and shape our decisions. Getting a job that pays well plays a crucial part in life for most people. However, some of the most essential forms of the production of value are largely ignored by the market economy: activities which roughly fall under the category of ‘domestic labour’. This also includes ‘caring labour’ such as housework, child-care or reproductive workHousework is often seen as separate from wage labour, although they are part of the same system and cannot function without each other – without reproductive work, the labour force cannot exist. If nobody takes care of our offspring, who will we have to do the work that is necessary for our society to sustain itself? Reproductive work is invaluable, whether or not it is recognised by the market.

Questions about money are linked to questions about the market and the economy. In the wake of the financial crisis, alternatives to the current economic system have been suggested. Theories like the Modern Monetary Theory (MMT), experiments with (universal) basic income, local economies with local currencies such as the Totnes Pound (Transition Town), the digital currency Bitcoin or movements dealing with debt resistance have sprung up and find an increasing amount of supporters all over the world.

brixton pound

The Brixton Pound, a local currency in South London. | Photo by

In many countries, experiments with basic income have already happened or are currently in planning. In Germany, Finland, the Netherlands, the United States and India, examples of basic income have shown positive results. Citizens are provided with a fixed monthly amount of money, regardless of their occupation or financial situation. Advocates argue that this will result in higher creativity and thus higher productivity, enabling citizens to lead a better and more meaningful life, grounded on a basic level of financial security.

Whether or not you agree with the concept of universal basic income, in times where wealth inequality is a major global problem – jobs that both enable people to sustain themselves and at the same time live a happy life are becoming sparse – the search for alternatives is growing steadily. Stay up to date with this debate. Let us know what you think. And let’s make sure we question conventional wisdom.

basic income

Basic income experiments are growing worldwide. | Photo by


Research and writing – Mirja Brand

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