When Money Mattered

This week all the news services carried a story about the Dutch central bank shipping many, many tons of gold from the Mad King-led United States to the custody of cooler heads (well, cooling, we hope, after that very hot summer) in London.

On the same day, the FT ran a story by Banu Baweja at UBS Investment Bank about how lots of people keep wanting to buy gold. Prices have eased a bit lately, but there is still plenty of demand, which they reckon will keep going. The Mad King and his only-slightly-less-mad Court are part of it, making the American finance products people generally use to try to balance out risk from other activity a bit suss.

But also, when the world cancelled foreign exchange reserves held by that other mad king in Russia, the UBS folk reckon people have started getting a bit suss on all money. “Reserve and asset managers globally were left confronting a simple question: if $630bn held in Treasuries, Bunds, gilts and other bonds coule become inaccessible overnight, what constituted money?”

Apparently gold is the answer.

Katie Martin from my favourite podcast (Unhedged) this week declared herself ‘long’ (things she loves) gold. Well, not long on gold gold, really she said, but on the place of gold in the news cycle. I’m with Katie, except in history: I am definitely not wanting a return to the gold standard or something stoopid like that.

Which is to say, while I am just about to talk about the materiality of money in the Age of Gold, I don’t think anything dumb like ‘gold is money’, ‘the only real money is gold’ or even that the materiality of money is more material when it is gold than when it is stuff you tap from your phone or credit card at the shops. In fact, money’s historical contingency is key not only to the history I am trying to write, but the politics of money for the foreseeable future. I think (your feedback is sought, please).

Offshoring in practice and metaphor

Let’s start with offshore tax havens, which have been around for a while. Historian Vanessa Ogle shows tax havens and adjacent forms of smuggling caves for money grew markedly between 1945 and 1965. Amidst processes of decolonisation and against the logic of the interventionist welfare state, new legal spaces grew. In the process, a different kind of colonialism meant that on the edges of the new American imperialism, havens grew for what some rich people in the richest bits of the world (not just the US) idealised as free market capitalism. Like magic (except it was in fact the plan), in offshore places they could forge a kind of ‘freedom’ that not coincidentally accrued to themselves a very unequal share of the benefits of capitalism.

While money was offshore, the welfare state nevertheless grew (such as it was). But it was severely disrupted in the 1970s when the US dismantled the basis of the global financial system by ending the promise to exchange US dollars for gold if asked.

In his Very Serious Treatise on Banking, Making Money, Terry Pratchett inserts this dialogue between our hero, Moist von Lipwig and the head of the bank/mint, Mr Bent:

“I read somewhere that the coin represents a promise to hand over a dollar’s worth of gold,’ said Moist helpfully.

Mr. Bent steepled his hands in front of his face and turned his eyes upwards, as though praying.

‘In theory, yes,’ he said after a few moments. ‘I would prefer to say that it is a tacit understanding that we will honour our promise to exchange it for a dollar’s worth of gold provided we are not, in point of fact, asked to.”

This was pretty much how it worked. So when Europe began to notice that the increased flow of US dollars into their region (mostly a result of paying military folk for the War in Vietnam), America was exploiting the central place the dollar had been given at the end of the Second World War. This breached the trust the world had in America’s intention to use the dollar would to stabilise the global economy. This relied on the convertibility of the US dollar to gold. What with some Europeans threatening to ship their dollars to America and ask for the gold, thus breaching the implicit understanding that the promise to pay depended on not, in point of fact, asking for it, President Nixon solved the problem by ending the promise to pay.

This changed the relationships of all currencies to one another. Currency-by-currency stopped fixing their exchange rates to one another – the key to mid-century stability – and started allowing currencies to ‘float’ – values determined against other currencies by the market.

We’ve gotten very used to this, but the scale of the shock was significant. Buying components for the widgets you make (for example) was now complicated by changing exchange rates. Enterprises found that they were not only operating in a much larger and less stable world, but that to compete they also needed to be more agile in shifting their purchasing of things they needed to make widgets – components, human labour, energy sources – to wherever it was cheapest.

At first this was about finding the best deal on exchange rates, but it also turned into a global race to the bottom on labour costs (putting downward pressure on wages), warehouse costs (leading to ‘just-in-time’ production, destabilising employment), and corporate taxes, to try to lure the world’s biggest business to your shores (leading to under-taxing capitalism and undermining the capacity of democracies to redistribute wealth in the interests of producing social stability out of an inherently unfair system).

In his book Offshoring, John Urry shows that these logics also encouraged the movement of money away from where it was made. The increased mobility of the type of globalisation that began in the 1970s was then accelerated in the 1980s when networked computers rapidly sped up the ability to trade in finance. Money was more mobile than humans, goods or indeed anything else.

In this environment, Urry argues, the super-rich were empowered to pursue a very successful kind of class warfare based on a combination of ‘movement, relocation and concealment’, pursing institutional changes (especially tax ‘reform’) that made whole ‘offshore worlds’ possible. This intensified the pattern that philosopher Georg Simmel had noted, where a ‘money economy generates new levels of “consciously will concealment” or secrets.

Such offshoring of wealth was literal and metaphorical. Globalisation now made global the stage (or screen) on which life and major events were performed, ‘transforming’, said Urry, ‘the character and temporality of life’. The increased secrecy attached to the hoarding of wealth, he reckoned, was not just applied to finance, but to everything else the rich and powerful did. In Virtue Capitalists I described a logic where ‘success is the only virtue’, undermining the material reality of what had been moral work: Urry’s analysis suggests that this disconnect between success on the global stage and material truth is a reflection of offshoring.

Offshoring, both as practice and metaphor, blurs the boundary between ‘what is materially present and what isn’t.

Bringing money down to earth

‘It is as though a significant segment of the ruling classes…had concluded that the earth no longer had room enough for them and for everyone else’, producing climate denial that is based on a denial of the relationship between ‘human beings and the material condition of their lives’. So when Trump withdrew the US from climate agreements, this suggested a larger rich-guy pattern of belief that America generally and rich people specifically, don’t belong to the same earth, or are bound by the same material constraints, as everyone else.

Latour says that this ‘active state of denial’ about climate change is also an active denial of ‘the material constraints of living on earth’. It is an ‘offshore reality’ that is epitomised, surely, in Muskism broadly but more specifically, Musk’s Mad Mars scheme.

For Latour this means that we need to come ‘down to earth’. We need to see that humans are not the centre of a world in which nature is in the background. That we and the material world are one.

The Age of Gold matters

And so, as a historian, I want to turn to the past to see the contingency of money to remind ourselves that money is not essential, as in it doesn’t have a single ahistorical essence, but is subject to change. That gives us (some) agency (at least if we work together).

The present also demonstrates how subject the very nature of money (as social practice and kinda determinative of social relations) is to class influence. Even though money in the Age of Gold was wildly different to what money is now, we can be pretty sure class interests helped shape it. It matters to know how that worked and what were the consequences. These help produce history’s cautionary tales. Finding the logics of money as an earlier round of global money grew via the gold standard, will help us look beneath what seems natural about money now, all the better to see our way through the current, highly destructive chaos, towards something better.

This is because I reckon thinking about the materiality of money in the Age of Gold will help make money’s materiality newly weird. Since we use money every day, the way ot works seems so natural. In an offshored world governed by very little cash, its materiality – bringing it down to earth – seems inordinately hard to do. Making it weirder will help with the process of identifying money with the material constraints of living ‘terrestrially’, as Latour asks. It is not that money mattered more (or was more material) because it was gold. But by seeing money as matter in the past will help us make it matter, now.

In the 1850s as the Californian and Australian gold rushes were rapidly transforming what global money was and could be, Karl Marx decided to pursue the project was would eventually result in three volumes of Capital. There were three reasons: firstly, London was a great place to see the kind of society and class formation that made money its centre. And secondly, the British Museum, which then housed the library, had a terrific collection of the primary sources he needed.

But why then? Capitalism has just entered what he called a ‘new stage of development’. Why? The ‘discovery of gold in California and Australia’. Gold was why Marx decided to ‘resume his studies’ in what he called the critique of political economy.

And so it is this Age of Gold to which I am turning, to think about the materiality of money.

Your thoughts and feedback especially at this stage of my project are extremely welcome.