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Spare Change : THE HISTORY OF MONEY. By Jack Weatherford . Crown: 320 pp., $25

February 16, 1997|ROBERT HEILBRONER | Robert Heilbroner is the author of "Teachings from the Worldly Philosophy," which was recently selected by Choice as a 1996 outstanding academic book

This is a fascinating book about the force that makes the world go round--the dollars, pounds, francs, marks, bahts, ringits, kwansas, levs, biplwelles, yuans, quetzales, pa'angas, ngultrums, ouguiyas, and another 200-odd brand names that collectively make up the mysterious thing we call money.

In "The History of Money," social anthropologist Jack Weatherford opens our eyes to the extraordinary story of this most creative and, possibly, most destructive invention of human society. Before we have finished his pages, we have learned how often a dollar bill can be folded before it tears (4,000 times), how much gold lies in Ft. Knox (4,600 tons) and that neither the dollar bill nor gold have very much to do with that ethereal stuff that has been more aptly named by someone back in the '30s "the Promises Men Live By."

Money is not as old as humankind. For hundreds of millenniums, society survived in small hunting and gathering groups that had no need for money because they carried on little, if any, regular exchanges with other bands. Money does not arise until something like regular trade comes into being, and this didn't occur in the Western world until about the 6th century BC, when the small kingdom of Lydia (of whose king Croesus we have all heard) began to recognize the usefulness of trade. More important, its kings had the insight to see that the gold gained by exchange could be multiplied if bullion were turned into coin. As Weatherford tells us, "They changed mere trade and barter into commerce."

Commerce was only the first of the changes wrought by the new common language of pecuniary values. The larger story, as Weatherford points out, is the gradual formation of the institutions from which capitalism would gradually arise around the 17th century.

Weatherford brings this lengthy process of socioeconomic evolution to life with dramatic accounts of episodes that opened or closed, or simply epitomized, the long slow transmutation: the gradual, suspicious acceptance of Arabic numerals--imagine trying to write $1,584,890,000,324 using only the Roman M,L,C,V and I, no zeros and no commas!--the evolution of coins into bills of exchange, then the creation of "deposits" in the banks that arose during the Renaissance, followed in the 18th century by the creation of those value-laden pieces of paper we call dollars, pounds, etc.

We also catch glimpses of grimmer moments: the burning alive of the Knights Templar, the strictest and most chaste--but, alas, the richest--of the early monastic orders; the merciless exploitation of the Indians of Latin America, whose sweat provided 18th century Europe with some three-quarters of its gold and silver as well as a 400% inflation of prices. And in the background we catch glimpses of other, perhaps even deeper changes: the displacement of age-old criteria of rank from title to wealth; the metamorphosis of acquisitiveness from a character defect to a talent.

Weatherford does not present this long historical unfolding merely to titillate. The main purpose of "The History of Money" is to introduce us to, and prepare us for, the reincarnation of money that is taking place in our time. "Coin and paper," the author tells us, "account for about 8% of all the dollars in the world. The rest are merely numbers in a ledger or tiny electronic blips on a computer chip," as we have all learned--without understanding exactly what we have learned--when we have gone to our bank and asked to see our "balance."

What are the consequences of this dematerialization of money? They lie, first and foremost, in the extraordinary increase in its power at the expense of that of nation-states. Who or what does "its" refer to? The answer, at once precise and elusive, are the markets of the world in which thousands of individuals, acting on their own account or as agents for others, buy and sell money, largely to "hedge"--limit the risk of--commitments to buy crops, ore, stocks or bonds, or just plain goods.

"In a year a single trading center such as the Chicago Mercantile Exchange," Weatherford tells us, "oversees currency trading the value of which surpasses that of the combined gross national product of the whole world."

The consequences of this genuinely revolutionary change are still little understood. One thing is clear, however: The power of nation-states to pursue their own economic or political courses is seriously limited by the ability of the global money market to mount a ferocious assault on the currencies of nations whose policies do not meet with approval.

The money market is thus a kind of new super-country--let us call it Monetaria. This is not to say that it rules the waves, as once did Brittania: Let us recall that Monetaria lacks not only boundaries, population, a currency of its own, but a government. What it can do, however, is to assert "its" will against the time-honored prerogatives of nation-states to pursue whatever destinies--foolish or wise--they deem best.

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