The Nature of Money by Geoffrey Ingham

Author:Geoffrey Ingham [Ingham, Geoffrey]
Language: eng
Format: epub, pdf
Publisher: Wiley
Published: 0101-01-01T00:00:00+00:00

Conclusions

The social relations for the ‘manufacture’ of capitalist credit-money were first successfully developed in England from the late seventeenth century onwards, and were copied, with varying degrees of success, throughout the developing Western world. Capitalist credit-money connects the state with the bourgeois classes. The institutional structure of this form of money consists in three–way debtor–creditor relations between the state, rentiers and taxpayers, which are mediated and reproduced by a public bank, an efficient bureaucratic administration and a robust Parliament. Holders of the national debt were given confidence in the state’s promise to pay interest and capital by the funding of the debt with hypothecated tax revenues, collected by a vast army of bureaucrats (Brewer 1989). The terms of the settlement between state, creditors and taxpayers – that is, the levels of borrowing and tax rates – were negotiated and scrutinized in Parliament (North and Weingast 1989). For three centuries, this form of money was grafted on to the existing, but greatly strengthened, precious metal coinage, and thereby its storage of value function was given an additional guarantee. But, as I have frequently stressed, the ratio between money and goods, or money’s purchasing power, was not established directly by the market exchange ratios between precious metal and other commodities. Rather, monetary authorities promised to maintain the conversion price of gold and notes that they had fixed. For most of its history, money in capitalism was produced in a dual or hybrid system in which public metal coinage and private credit were integrated and transformed. As we saw in Part I, the idea of a metallic standard ideologically naturalized the underlying social relations. Apart from its almost entirely symbolic role in the Bretton Woods monetary system, the gold standard has been inoperative for almost a century. 30

The basic elements of the pure form of capitalist credit-money are explored further in the following chapter; but here we might note the immense increase in infrastructural social power that the relatively elastic production of money brought about. What was observed at the time is now widely accepted – that is to say, England was able to defeat France in the struggle for European dominance during the eighteenth century because of its ability, and France’s inability, to create credit-money (Crouzet 1999; Ferguson 2001). In contrast to Patterson’s Bank of England, John Law’s Banque Roy ale (1719) was an utter failure. A detailed comparative analysis cannot be presented here, but there are obvious significant differences. First, France did not have as powerful a bourgeois mercantile class, with such an intimate knowledge of, and confidence in, ‘Dutch finance’, to dictate terms to the state in the creation of financial and monetary institutions. Second, the French state could not provide the two crucial guarantees to its potential creditors – reliably collected tax revenues and gold standard convertibility of notes. In Weber’s terms, France remained a patrimonial polity in which the state was a source of enrichment and not a means for the further creation of wealth. Finance was raised by the sale of offices, and tax collection remained privatized in the hands of tax-farmers.

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