Karl Polanyi's Political and Economic Thought: A Critical Guide by Gareth Dale

Author:Gareth Dale [Dale, Gareth]
Language: eng
Format: epub
Tags: Nonfiction, Social & Cultural Studies, Political Science
ISBN: 9780745658254
Google: 0qk9zQEACAAJ
Publisher: Wiley
Published: 2013-04-24T04:00:00+00:00

MONEY AS MEANS OF PAYMENT AND STANDARD OF ACCOUNTING

At a theoretical level, Polanyi’s formulation of money as a “token of purchasing power” is closely related to Knapp’s theory of money, Chartalism, which had a lasting influence on several heterodox theories of money.53 The main proposition of Chartalism is that “money … is a unit of account, designated by a public authority for the codification of social debt obligations”.54 This proposition rests, of course, on rejecting the idea that money is a medium of exchange “deriving its value from its metallic content”.55

The family resemblance between Polanyi’s approach to money and Knapp’s Chartalism is not surprising, given that Knapp’s book followed in the footsteps of the German historical school and commanded a considerable degree of authority in the German literature on money and monetary history.56 His primary work, The State Theory of Money, was first published in 1905 and went through multiple revisions.57 In this book, Knapp stresses that money as means of payment and unit of value is independent of the actual object that underpins commodity-money.58 The crucial quality of money is that debts and obligations are payable by using the particular object chosen as money, be it a metal or paper ticket. It is the political authority that lends “a use independent of its material” to this object.59

Overall, an unmistakeable element of Knapp’s state theory of money is that it offers a sustained criticism of orthodox theories of money and in particular of both theoretical and practical metallism. Knapp’s work offers a detailed account, both historical and theoretical, of how the acceptance by the public authority is the necessary factor in turning an object used as a means of payment into a generalized medium of exchange. Thus, Knapp upends the conventional causal account of money being primarily a medium of exchange that naturally evolved as commerce and market society developed in history.

The implications of such an argument can best be understood by contrasting it with the orthodox theories of money. In a classic theoretical article that influenced both Austrian and neoclassical economics, Menger60 captures the line of reasoning emblematic of orthodox theories of money:

Money has not been generated by law. In its origin it is a social, and not a state-institution. Sanction by the authority of the state is a notion alien to it. On the other hand, however, by state recognition and state regulation, this social institution of money has been perfected and adjusted to the manifold and varying needs of an evolving commerce, just as customary rights have been perfected and adjusted by statute law. Treated originally by weight, like other commodities, the precious metals have by degrees attained as coins a shape by which their intrinsically high saleableness has experienced a material increase. The fixing of a coinage so as to include all grades of value (Wertstufen), and the establishment and maintenance of coined pieces so as to win public confidence and, as far as is possible, to forestall risk concerning their genuineness, weight, and fineness, and

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