Making Money: Coin, Currency, and the Coming of Capitalism

A Historical Review by Harvey Sniffen

In Christine Desan’s book Making Money: Coin, Currency, and the Coming of Capitalism, Desan describes how alterations in the monetary policies of 17th-century England set forth a new governance project that orientated the political economy around self interest, private property rights, and accessible credit. This new system of “capitalism,” as Desan defines it, came about through parliamentary changes in the way in which money was created in the country. The royal mint, which held a monopoly on the production of currency for centuries, would relinquish this right to the newly established Bank of England. A private bank, tasked with the production of a new form of fiat currency. This new money, which was no longer considered a commodity money, i.e., one that was backed by and made of valuable metals, enabled the bank to create liquidity out of printed paper money and “pump” the economy with new capital streams. This book, written in the rearview of the 2008 financial crisis, demonstrates that money is more than just a naturally occurring unit of account, a “consensus” belief often held in the field of macroeconomics. In contrast, Desan defends the chartalist tradition and argues that currency and monetary policy are a constitutional project, a political construct, which can be engineered to serve the interests of those who design it.

The first historical intervention Desan presents is for the denaturalization of money. Here, Desan argues that currency is a tool created and augmented by government policy. Desan tracks the birth of money in England as one directly related to the payment of soldiers in a standardized government coin, which then eventually becomes communally accepted and traded amongst peers within. Over time, further standardization occurs and eventually coin evolves into the commodity version of English sterling that become pervasive throughout England for centuries. Desan presents this argument to first demonstrate that coin has always been some unnatural government influenced unit of account. She also does this to demonstrate how governments have the ability to augment money, like that of debased coinage, but also the right to create new versions of money. The next generation of money, a fractional government debt backed fiat currency created by the Bank of England, was a seemingly new technological form of money and credit which would go on to shape England’s economy and its government.

Desan’s next historical intervention is a shift in how money was created and used in society. Originally, with commodity money, in order to make new coins, users were required to bring their own bullion to the mint and were then charged a slight fee in order to create the new coin. Desan describes this period as an illiquid world, as individuals were less like to insert value I.e., silver and gold, into circulation. The evolution of commodity money, government backed fiat currency, would solve this problem. Instead of relying upon precocious metals to be mined, processed, and inserted into circulation, the Parliament would charter the newly created private Bank of Europe with the task of creating new money. In addition to managing the money supply, the Bank of England would be authorized to make loans and issue bonds backed by government debt for a profit. From this moment on, Desan argues, the once illiquid market wouldbegin to see the rapid “pump” of liquidity into the formerly cash-strapped society. Value that was previously locked up in precious metals and land could now be injected into circulation, resulting in nearly 65% more money in circulation over the next century.(254)

Desan finishes the text by arguing that the coming of capitalism in England was a, “constitutional design, a political and legal creation… a governance project all the way down, starting with its money.” (434). In Making Money, Desan was able to plot the chain of causality generated by the transition away from commodity coin and into the new fractional fiat money created by the Bank of England. Money was how individuals interacted with the market, and when money became, “a resource underwritten by public funds and endorsed for expansion by banks operating for profit,” the public’s relation to money and subsequently the market changed. (431) Desan describes this atmospheric change as the “pump” that “institutionalized interest in material profit as the engine” of the market. (296) As the English transitioned from an illiquid to a credit-rich economy, we saw an increase in intellectual debates about free-market principles, a cultural shift toward the acceptance of self-interested profit, a judiciary that protected private property rights, and a government that took on ever-increasing levels of debt, which intrinsically linked its longevity with said debt. The basis of Desans’s denaturalization argument is that these events, these changes, are not possible without the advent of a new form of currency.

I personally accept the binomial reasoning at the heart of Desan’s argument. Desan was able to identify a central unifying point that linked both eras, namely money, historicize its augmentation, and then detail the output. Money offers this unifying point ability as the “unit of account.” Money exists in a tangential relationship to interest, incentive, market activity, and existing forms of hegemony. However, there can be some general push backs that can be applied to the book. The level of discussion around other complex banking systems is quite limited. The author describes the English situation as unique and a process which also evolved over the course of the 17th-century. However, the development of early private centralized banking institutions and reform wasn’t unique to just England. The trading companies of the East Indies constructed their own forms of monetary policy, currency, and credit systems. Furthermore, Desan devotes a significant portion of the book to Hobbes, Locke, and the rhetoric of other liberal theorists while overlooking the fact that some of these individuals were living in Holland, where major banking reform was taking place concurrently with English reform.A comparative analysis could be beneficial here as it may help distinguish what was quintessentially unique to the English dynamic, particularly when it comes to discussions around John Locke, who became increasingly influenced by radical Protestants while living in exile in Amsterdam for five years. In the vein of comparison, England wasn’t the first state to offer fiat currency. During the Song dynasty in China, paper fiat currency was readily available some seven hundred years prior to that offered by the Bank of England. Lastly, Desan does overlook, to some extent, the specific reason why the crown wanted to take on debt in the late 17th-century. The original bonds first offered through the bank were patriotically offered as a means of raising a new navy after defeat by the French during the Nine Years’ War. This does not negate Desan’s argument. but it does show that there are many factors and considerations which precipitated the binomial decision to change the money supply.

In total, Desan’s book is a quintessential text in the understanding of the development of capitalism and its relation to the financialization of the English economy in the 17th and 18th century. Desan provides ample evidence demonstrating the denaturalization of money and how government interventions in monetary policy can guide the market based upon internalized decisions.