Money in various forms, from bartering to modern financial tools, has been an important institution for organized societies from the earliest times. History provides examples with many alternatives of the role of money that offer insights on today’s economic issues. Assigning monetary value in objects, like coins, is a part of the evolutionary process of hu- mans. Trusting each other in transactions as well as the establishment of an authority that issues these objects is an evolved psychological condition.
Mainstream economics consider barter inefficient as a method of transaction, thus explaining the emergence of money. However, some researchers have shown that, apart from some specific cases, barter economies were never the norm. In the first agrarian societies humans used elaborate credit systems and gift economies, whereas bartering took place with foreigners. Money as a measuring unit emerged with the need for a quantifiable concept of how much was owed after a “gift” was offered. Thus, money first existed as credit and later acquired the functions as a medium of exchange and value storage.
Historical data from several cultures indicate that differing definitions of debt lead to varying credit systems and subsequent forms and uses of money. In other words, money was first introduced as a unit to measure debt and then received more functions. After the gold standard was abandoned in 1971, money became more credit-oriented to facilitate the growing rate of the capitalist system. ICT enabled the financial system to create more credit tools to cover the ever-rising demand for credit. These tools may have offered more financial liquidity but ultimately led to the financial crisis of 2008.
A growing number of economists is concerned about the widening gap between the real economy and its financial counterpart, noting that new bank products may create value that translates into money but not necessarily real production value as well. Some criticize the way money is used today as a credit tool, claiming that in a world with finite resources; unlimited financial expansion is an illusion. According to Graeber (2011), the incorporation of debt into the planning and distribution of money, what Lietaer (2001) calls the “central information system” of society, deteriorates human relationships by creating unsustainable structures on multiple levels (environmental, ethical, etc). Further, Lietaer (2001) notes that money tends to accu- mulate, a legacy of the first phase of industrial capitalism and, therefore, must be attuned to the information age and its characteristics (eg, decentralization).
This critique is central to the issue concerning the future form of currencies. According to Perez (2002, 2009) and her theory of techno-economic paradigms, we are today at the turning point of the current ICT-driven paradigm. We have gone through the installation period of the information technology revolution where economies experiment with new technolo- gies, while finance capital invests in those technologies, albeit mainly on short-term investments. New financial tools have been created that produce more credit instead of fuelling the real economy. The NASDAQ bubble of 2000 and the more recent financial crisis of 2007 are, according to Perez, consequences of such speculative behaviors. Her argument, based on data from the evolution of the capitalist system since the 18th century, is that what we are living today is not just a financial crisis but a structural change as one period reaches its end and another emerges; one that will better utilize the dynamics of new technologies, creating synergies throughout society.
Source: Vasilis Kostakis, Chris Giotitsas: The (A)Political Economy of Bitcoin, tripleC 12(2): 431–440, 2014, http://www.triple-c.at, CC: Creative Commons License, 2014.