Note: In chapter 2 and 3, I have used the original pagination of Innes, and excluded the new pagination of Wray

CONCLUSION

Generically, as Innes and many others have insisted, all money is credit. Money comprises a standard measure of abstract value, denominated in a unit of account, that is a widely accepted means of payment. The bearer of money holds a claim to goods. 'Money in turn is but a credit instrument, a claim to the only final means of payment, the consumers' good' (Schumpeter 1994 [1954]: p. 321). The representation of the claim has taken myriad specific forms - shells, paper, entries in ledgers, electronic impulses, and so forth. Some of these forms have comprised commodities with significant independent exchange, or market, values -most obviously precious metal coins. But Innes saw clearly that the relationship between the nominal value of the unit of account and real value, or purchasing power, could not be explained, in the first instance, by the 'intrinsic' or market exchange value of precious metal. 'Moneyness' is conferred on a substance or form by the unit of account.

As a theory of money, however, 'practical metallism' has been one of the means by which states have attempted to get their money accepted

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(Schumpeter 1994 [1954]: pp. 699-701). Commodity theories of money have played a persuasive and ideological role by naturalising the social relations of credit that constitute money. But 'theoretical metallism' -that is the belief that money's origins and value is to be found in the 'intrinsic' exchange value of precious metal of which it is made or represents - has been unable to provide a satisfactory explanation of money. Rather, as Innes explained, the bullion value of a nominal money of account was fixed by an authority. In other words, Innes held that the 'money stuff' of the classical coinage systems - from first-century BC Lydia to the final demise of the gold sterling standard in the twentieth century - were no less 'credit' than bankers' notes and entries in ledgers. The rupee, as Keynes observed in making the same point, was a promissory note printed on silver (Keynes 1913: p. 26).

The identification of money as coin, or any other commodity, is a conceptual category error. By the time Innes was writing, this logical confusion was not only fixed in everyday commonsense consciousness, it had also become entrenched academic economic analysis. For example, the early twentieth-century Cambridge school held firmly to the distinction between 'money proper' and 'credit'. Here money is an actual, or symbolic, metallic money; and credit is a residual category that refers to a confusing range of financial instruments - inconvertible paper notes, bank loan, trade credits, etc. By the early twentieth century, economic thinking was, arguably, as bewildered by 'credit' as Daniel Defoe had been two hundred years earlier.
[C]redit gives Motion, yet itself cannot be said to exist; it creates Forms, yet has no Form; it is neither Quantity or Quality; it has no Whereness, or Whenness, Scite, or Habit. I should say it is the essential Shadow of Something that is not (Defoe 1710, An Essay on Publick Credit, quoted in Sherman 1997).
Innes provided one of the most concise, logical and empirical critiques of the orthodox economic position. However, I have suggested that in order to understand the historical distinctiveness of capitalism, the admittedly confused distinction between money and credit should not be entirely abandoned. As I pointed out earlier, to say that all money is essentially a credit is not to say that all credit is money. That is to say, not all credits are a final means of payment, or settlement (see also Hicks 1989). The question hinges not on the form of money or credit - as in most discussions within orthodox economic analysis, but on the social relations of monetary production.These relations comprise the monetary space and the hierarchy of credibility and acceptability by which money is constituted (see OECD 2002). The test of 'moneyness' depends on the
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satisfaction of both of two conditions. First, the claim or credit is denominated in an abstract money of account. Monetary space is a sovereign space in which economic transactions (debts and prices) are denominated in a money of account. Second, the degree of moneyness is determined by the position of the claim or credit in the hierarchy of acceptability. Money is that which constitutes the means of final payment throughout the entire space defined by the money of account (see also Hicks 1989). Pigou's 'money' was 'proper' not simply because it was backed by gold, but because the state pronounced the abstract money of account and established its exchange rate with gold.

NOTES

1. 
   In order to maximise their exchange opportunities, rational utility traders would carry stocks of the most tradable commodity which, consequently, would become the general medium of exchange (Menger 1892).
   
2. 
   One consequence of this conceptualisation of money was the sharp distinction between 'money' and 'credit', which is maintained to this day in mainstream economic textbooks.
   
3. 
   Keynes is dismissive of economic orthodoxy and commented that 'Something that is used as a convenient medium of exchange on the spot may approach to being Money ... But if this is all, we have scarcely emerged from the stage of Barter' (Keynes 1930: p. 3) See Ingham (2000), Hoover (1996). Other contemporaries such as Simmel pointed to commodity money theory's logical error in assuming that the measuring instrument need be fabricated from that which it measures. Innes made the same point in his comment that 'no one has seen an ounce, a foot or an hour' (1914: p. 155). See also the references in Carruthers and Babb (1996) to American monetary 'nominal­ism' at the time of the debate on the gold standard at the end of the nineteenth century.
   

4. 
   It also should be noted that the evidence suggests that another firmly held belief and mainstay of the commodity theory is also false. The discovery of silver in the Americas has conventionally been held responsible for the inflation of the sixteenth century in Europe, but as Fischer has shown, prices rose before the discoveries (Fischer 1996).
   
5. 
   'The general belief that the Exchequer was a place where gold or silver was received, stored and paid out is wholly false. Practically the entire business of the English Exchequer consisted in the issuing and receiving of tallies and the counter-tallies, the stock and the stub, as the two parts of the tally were popularly called, in keeping the accounts of the government debtors and creditors, and in cancelling the tallies when returned to the Exchequer. It was, in fact, the great clearing house for government credit and debts' (Innes 1913: p. 398).
   
6. 
   Schumpeter observed that 'metallists' were either theoretical and therefore mistaken in their belief that the only 'real' money was precious metal; or else they were 'practical metallists' who understood that precious money stuff would be more trusted than a mere promise to pay.
   
7. 
   See Ingham (2000) for a discussion on the question of the 'logical' and 'historical' origins of money of account.
   
8. 
   As if to emphasise the point, he made do with a typical bit of whimsical writing '[Money's] origins are lost in the mists of time when the ice was melting, and may well stretch back into the paradisaic intervals in human history, when the weather was delightful and the mind free to be fertile of new ideas - in the Islands of the Hesperides or Atlantis or some Eden of Central Asia' (Keynes 1930: p. 13).
   
9. 
   See White (1990) for a clear distinction between the economic theory of 'pure exchange' and the structural properties of markets.
   
10. 
    Nineteenth-century positivism sought an answer to the origins of money in nature -hence the commodity. It was argued that other measures, such as length, had natural analogues - such as yards and cubits. There is of course no natural analogue for value.
    
11. 
    For example, it 'cost four times as much to deprive a Russian of his moustache or beard as to cut off one of his fingers' (Grierson 1977: p. 20).
    
12. 
    See Aglietta and Orlean's La Violence de la Monnaie (1982) in which they extend Girard's anthropological speculation on sacrifice, as debt to society, to the genesis of money.
    
13. 
    Weber warned that we must not confuse deposit taking and the book clearance of debts between depositors, by the banks the ancient and classical world, with capitalist transferability of debt. '[OJne must not think in this connection of bank notes in our sense, for the modern bank note circulates independently of any deposit by a particular individual' (Weber 1981: p. 225). See Cohen (1992) for a recent orthodox economic critique of this view.
    
14. 
    Some later twentieth-century versions of the credit theory of money also come very close to identifying money simply with the creditor-debtor relation and its creation of assets and liabilities. Arguing that money represents a promise to pay that is simultaneously an asset for the creditor and a liability for the debtor, Minsky, for example, concludes that 'everyone can create money; the problem is to get it accepted'(Minsky 1986: p. 228). It is rather the case that anyone can create debt; however, the problem is, rather, to get it accepted as money.
    
15. 
    Arrighi's Long Twentieth Century (Arrighi 1994) is an exception that emphasises the essentially financial character of capitalism from its earliest stages. Weber (1981 [1927]) devotes a great deal of attention to money and banking, but rather strangely omits it from his ideal type of capitalism.
    

16. 
    Schumpeter gave greater prominence to the particular monetary structure of capitalism than almost all his contemporaries and seems to have had a direct influence on the French school. (Braudel 1985: pp. 475-6).
    
17. 
    This monetary structure also implies the counterintuitive observation that money would disappear if all debts were simultaneously repaid. One must also add of course that the converse is also true. But this can be overcome, within limits, by the creation of more debt and rescheduling. The time terms of debt repayment and what constitutes an acceptable level (moral and functional) is constantly negotiated. Economics presents this as an objective element of capitalism, but it is a socially constructed normative relationship.
    
18. 
    In fourteenth-century Venice, for example,' [w]hen the Great Council voted that 3 lire a grossi should be the base salary of the watchmen to be appointed by the Signori di Notte, the councillors were probably thinking less about the metallic content of grossi than about the salary of the noble Signori di Notte themselves, which was about 6 lire a grossi' (Lane and Mueller 1985: p. 483).
    
19. 
    As late as 1614, in the Low Countries, for example, over 400 varieties of coins were circulating (Supple 1957, cited in Lane and Mueller 1985: p. 12).
    
20. 
    Monetary policy also involved periodic renegotiations, in recoinages, of the terms of exchange between possessors of coin and bullion and the sovereign mints. In part, these aimed to maintain the nominal value of the coin above its bullion value in order to pre-empt the operation of 'Gresham's Law'.
    
21. 
    Some large payments did involve weighing (Spufford 1988; Lane and Mueller 1985), but this was, in effect, payment in kind.
    
22. 
    'Primitive' deposit banks were very similar to the financial institutions which had existed in Rome during the late Republic, but there is no evidence to suggest direct historical continuity. Money changing and personalised credit relations were maintained throughout Islam during the period of monetary dislocation in Europe during the centuries that followed the fall of Rome. But the stricter prohibition of usury than in Christendom would appear to have inhibited the development of the kind of deposit banking that reappeared in late twelfth-century Italy (Udovitch 1979; Goldsmith 1987; Abu-Lughod 1989). Rather, it would seem that 'primitive' deposit banking was learnt anew and grew from the large-scale routine money changing that followed the reactivation of the mints and the flood of diverse coins into the cities. The term bancus emerged only in mediaeval Europe and derives from the Latin for bench or table used by the money-changers.
    
23. 
    Moreover, banking 'nations' made some of the earliest more general contributions to the development of capitalist practice that were later to be employed in industrial production. They set up business schools that specialised in languages and used arithmetic based on Arabic numerals and the use of the zero, which made possible the double-entry bookkeeping that was especially important for bill exchange per arte (Boyer-Xambeu 1994: pp. 23-4).
    
24. 
    French kings, for example, were among the most 'despotically' powerful of the embryonic states (Mann 1986); and they proclaimed monetary sovereignty with their own money of account and twenty royal mints. But there were also over two hundred baronial mints in France. If multiple coinages and several units of account existed within the same jurisdiction, the area could not be considered politically homogeneous (Boyer-Xambeu 1994: pp. 108-11).
    
25. 
    The attempted ban on bills seriously disrupted the wool trade in 1429 and all parties lost economically (Munro 1979: p. 196). The question cannot be pursued here; but, for example, mediaeval Byzantium's bullionist policies and the esteem with which the gold bezant probably retarded its economic development (see Bernstein 2000: pp. 58-65).
    

26. 
    On the general significance of this balance of power in the development of capitalism, see Weber (1981 [1927]); Collins (1980).
    
27. 
    But it should be noted that the mercantile interests were not unequivocally opposed to the monarch's mediaeval metallism. Parliament consistently enforced the policy of sound metallic money, but insisted that the monarch did not exploit his monopoly minting powers. In the terms of Schumpeter's distinction, the 'practical' as opposed to the 'theoretical' metallist position was beginning to take shape. But it should be emphasised that this was not simply, or even primarily, an 'economic' issue. Sound money was also seen as part of the wider project to build a strong modern state.
    
28. 
    In his Quantulumcunque Concerning Money (1682) the polymath Oxford professor of anatomy and founder member of the Royal Society, Sir William Petty, answered his own rhetorical question, 'What remedy is there if we have too little money?' with 'We must erect a bank, which well computed, doth almost double the effect of our coined money' (Petty 1682: quoted in Braudel, 1985, I: p. 475).
    
29. 
    Indeed, for modern adherents to the commodity theory of money, it remains 'an unsolved problem' how the chaotic and fragile public finances could have sustained the United Provinces as the monetary and commercial centre of the world economy in the mid-seventeenth century (Goldsmith 1987: p. 198).
    
30. 
    There exists a relevant sociology of the emergence of the norms of association in commercial during the eighteenth century. (See Silver 1990, 1997.)
    
31. 
    Weber argues that extensive market relations required the removal of an 'ethical dualism' which was typical of traditional societies. Weber (1981 [1927]). Communal relations were governed by an ethic of fairness whereas outsiders were cheated and ruthlessly exploited. (See also Collins 1980.)
    
32. 
    Conservative groups argued that public banks were only consistent with republics and that the Bank of England effectively gave control of the kingdom to the merchants. The traditional monarchists would have agreed with Marx's later judgement that the state had been alienated to the bourgeoisie.
    
33. 
    The existence of the national or public debt and the establishment and expansion in the bill of exchange business hastened the introduction of the law merchant (lex mercatoria), concerning the transferability or negotiability of debt, into common law and, thereby, into society at large. Bills, promissory notes, certificates of deposit and other financial instruments, used in the mercantile economy, had achieved a degree of transferability in practice and law by the late seventeenth century, particularly in the Low Countries (Usher 1934 [1953]). Even in 'backward' England, as early as the late fourteenth century 'merchants customarily settled their debts by 'setting over' their financial claims to others' (Munro 1979: p. 214). With establishment of the Bank of England, the pace of legal change accelerated until the Promissory Notes Act of 1704 by which all notes, whether payable to 'X', or to 'X or order', or to 'X or bearer, were made legally transferable (Carruthers 1996: p. 130; Anderson 1970). These legal changes gave credit money a monetary space that was, for the first time, coextensive with the public sphere, as opposed to private transactions.
    
34. 
    Between 1695 and 1740, £17 million of gold as opposed to /J1.2 million of silver was minted:'. . . the gold standard had practically arrived, silently a century or more before its legal enactment' (Davies 1994: p. 247).
    
35. 
    However, the very same metropolitan interests that had made it possible to adopt the techniques of 'Dutch finance' also inhibited its immediate further development. The Bank of England's monopoly of joint stock banking, until this grip was relaxed in 1826 and then abolished in 1844, stifled any expansion of the private London banks (which predated the Bank's monopoly) and, arguably, retarded the growth of the private 'country' banks (Cameron 1967: pp. 18-19 also Davies 1996). Nevertheless, the latter grew rapidly after the middle of the eighteenth century: by the 1780s there were over
    

one hundred 'country' banks and the number had increased to over 300 in 1800 (Cameron 1967). Some estimates suggest that bank money had significantly exceeded the metallic coinage by the second half of the eighteenth century (Davies 1996: p. 238).

36. 
    Although it may seem to some to be an elementary point, it must be stressed that the 'money' in such a credit-money system is actually constituted by the system of payments through the transfer of credits. If this cannot be effectively accomplished, the 'money' disappears. This hoary question cannot be pursued here, but all historical evidence suggests that the disappearance of money in this way can be avoided by the authoritative provision of an integrating money of account and a trusted supply of credit at the acme of the hierarchy of credit. As 'a last resort', this can be injected into the system in the event of defaults that threaten money's existence.
    
37. 
    The two developments are connected. The efforts to enhance the domestic power of central banks over the supply of credit money is the corollary of the loss of direct control over exchange rates (Aglietta 2002).