Review of Social Economy

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Hospitality versus Exchange: The Limits of

Monetary Economies

Stephanie Bell & John F. Henry

To cite this article: Stephanie Bell & John F. Henry (2001) Hospitality versus Exchange:
The Limits of Monetary Economies, Review of Social Economy, 59:2, 203-226, DOI:
10.1080/00346760110036166

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REVIEW OF SOCIAL ECONOMY, VOL. LIX, NO. 2, JUNE 2001

Hospitality versus Exchange: the Limits

of Monetary Economies
Stephanie Bell and John F. Henry
University of Missouri, Kansas City and
California State University, Sacramento

Abstract This paper attempts to specify theoretically the origins of money.

Rather than the exchange-based view of neoclassical economists where money is
seen as a transaction cost-reducing instrument (and where exchange itself is
asserted to be a universal phenomenon), we argue that money is a social
relationship, speciŽ cally a debt relationship, that emerges with propertied, class
society. “Primitive” (pre-class) society could not generate money, as the rule of
hospitality, universally practiced among such organizations, precluded debt and
the self-interested behavior that is consistent with debt. Adopting the Chartalist
position on the matter, we show that money is symptomatic of privilege, of
inequality, of economic and political power.
Keywords: Chartalism, debt, exchange, hospitality, money, property

INTRODUCTION
Early attempts to come to terms with . . . a “primitive money/modern money”
dichotomy . . . confuse the issue by labeling as “primitive” what is obviously very
much a modern phenomenon
(Gregory 1987: 555).
This paper demonstrates that money is a recent social invention that could not
have existed prior to the development of propertied society: money cannot be
more than “6,000” years old. Essentially, money is (or represents) a social debt
relationship that rests on privately controlled productive property. By privately
controlled productive property, we mean noncommunally controlled property,
whereby a segment of the population claims exclusive rights over output
produced by virtue of that control. This private control is not to be equated with
modern private property. Indeed, early private control, such as that of the tribute

Review of Social Economy

ISSN 0034-6764 print/ISSN 1470-1162 online © 2001 The Association for Social Economics
http://www.tandf.co.uk/journals
DOI: 10.1080/00346760110036166
 REVIEW OF SOCIAL ECONOMY

or feudal society of Mesopotamia, was constrained by social obligations initially

guaranteeing that private takings did not interfere with the right of subsistence
of nonproperty holders. Early private control might better be understood as a
private right to usufruct as long as the community was not disadvantaged.
This concern for the effects of privatization on the well-being of the
community is evidenced as late as the seventeenth century in the theoretical
defense of property by John Locke contained in his Two Treatises of Government
(see Henry 1999). In Locke’s famous argument, private property in the modern
sense is permitted only if such appropriation did not work to the “prejudice” of
another, and if sufŽ cient land (property in general) remained unappropriated so
those without property could produce their own subsistence (Henry 1999). By
this time, however, the social separation of property holders from the
community made a mockery of such concerns. Once the process of fragmenta-
tion began, privatization and money took on a symbiotic relationship, develop-
ments in one area feeding off and hastening developments in the other. Money
supports further and more intensive privatization; privatization supports the
further development of money. We have long existed in that period of social
evolution where money, private property, and various other economic institu-
tions are seen as normal and natural. Here, we seek a corrective to this standard
view, for so pervasive are these tendencies that “there is a danger that one might
try to Ž nd money in societies which did not even use it” (Wray 1998: 47).
In this paper we establish a theoretical foundation from which money can be
explained, Ž rst through a cursory argument surrounding early, classless society1
(which we shall term “tribal society”), then through a juxtaposition of the core
features of such a society to characteristics of money. We demonstrate that such
nonpropertied societies lacked the essential requirements that make money
possible. Money is a two-sided balance sheet phenomenon that records a social
debt relationship, which rests on privately controlled productive property.

1 We deŽ ne economic classes by the social relationship people bear to one another in the
process of production. Those who share the same relationship are members of the same class,
independent of whatever other differences might distinguish them. Thus, slaves are socially deŽ ned
by the economic fact that they are the property of another, and slaves cannot exist without
slaveowners.
A classless society, then, is one where all share the same relationship in production. As
production is a necessary requirement in all societies, then as all members of a classless society must
share the same relationship in the production process, all must be producers. Such societies display
no cleavages within the population where some are able to beneŽ t themselves by appropriating the
output produced by others: they are egalitarian.
In class, or propertied societies, one does observe necessary inequalities, or privilege, based on
differing property rights. Some are able to appropriate output without contributing to its production
or to the creation or maintenance of institutions which facilitate production.

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Money is never a physical “thing,” though objects may well be used as an

expression of the debt relation. In fact, it is focus on the physical object that
leads investigators into a blind alley when attempting to discover the roots of
money, ending (or starting) with the position that money is a “medium of
exchange,” a “store of value,” etc. (For a detailed discussion of money from its
debt relation foundation and the role of a propertied society’s state in
in uencing the structure of a (modern) monetary system, see Bell 2001.)
Further, while propertied society is a necessary condition for money to exist, it
is not a sufŽ cient condition. Even where we observe property of certain types,
we do not necessarily observe money (Hudson 1996: 17ff.).
The focal point of this examination will be the principle of hospitality, a
universal practice among pre-class populations (and extending in vulgarized
form well into the early stages of class society), “from which every act in their
social intercourse received a tinge” (Morgan 1851/1962: 123). We show that
money (and other economic categories) could not have existed as long as the
principle of hospitality was intact. And as tribal society continued through the
advent of the domestication of plants and animals, money cannot be older than
“6,000” years.
It is necessary to note that we are not directing this argument to an
examination of “primitive money” (see Einzig 1966, Dalton 1971, Neale 1976).
Rather, we seek to establish a theoretical framework within which such
historical undertakings can then be evaluated. Our examination is directed
toward a logical demonstration, drawing upon aspects of history and some social
institutions to provide a more fruitful framework for further investigation than
that of the typical exchange-barter theory of money. What we can say at this
point—and we believe our argument makes this clear—is that most discussions
of primitive money take as their starting point an invalid (exchange-based) view
of money, which is then used to “demonstrate” why primitive money is different
than modern money. Dalton, for example, while making many cogent points
about the nature of money, accepts the conventional position on modern
money—that its essential feature is its (universal) acceptance as a medium of
exchange—then juxtaposes this identifying feature with the “money-stuff” of
nonmarket, primitive economies (Dalton 1971). As we shall show, this indicates
two fundamental  aws in his understanding of money, one following from a
phenomenon he warns against—viewing the past through concepts applicable to
modern capitalist economies only (Dalton 1971: 167, see below on this point).
The other  aw is more fundamental: Dalton perceives money as a “thing.” In
reality, what may appear to be money in pre-class societies cannot be even a
form of money: it is something else altogether.

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We also do not take up the speciŽ cs of the many variations among different
tribal organizations. We are aware that a multitude of cultural or institutional
differences has always existed among peoples—“primitive” and “modern.”
Here, given our interest in establishing a theoretical foundation to the
understanding of money only, we do not delve into these differences. Rather, we
develop a general argument, surrounding the principle of hospitality, in order to
highlight those characteristics of early classless society that necessarily make
this form of social organization incompatible with a monetary economy.

THE CONSEQUENCES OF MODERN PAROCHIALISM

Those evaluating early egalitarian social formations face two, interrelated
problems. First, it is difŽ cult, if not impossible, to comprehend the meaning and
social ramiŽ cations of equality: the tendency is to see equality in purely
arithmetic terms, then dismiss notions of equality when the quantitative
requirement is not satisŽ ed. Second, any examination of early society is
conducted on the basis of ideas formed in present society, and the main tendency
is to read the present into the past, attempting to discover behaviors and
institutions that are compatible with those of current practices. Thus, we are
continually treated to expositions on humanity’s supposed innate penchant for
warfare. Lorenz’s 1963 theoretical work, On Aggression, and Dart’s discovery
of an early skull exhibiting a fracture “were welcomed with a curious
enthusiasm by a public that seemed eager not only to explain warfare, but also
to explain it away” (Leakey and Lewin 1992: xviii). We read a propertied, class
society into a nonpropertied, classless arrangement, equating practices of that
society to those with which we are familiar. Morgan struck to the root of the
problem in his criticism of those who attempted to interpret American-Indian
society in terms developed for and within propertied society:
When we have learned to speak of the American Indians in language adapted to
Indian life and Indian institutions, they will become comprehensible. So long as
we apply to their social organization and domestic institutions terms adapted to the
organizations and institutions of civilized society, we caricature the Indians and
deceive ourselves.
(Morgan 1876/1967: 70)
There seem to be three principle routes through which we distort the past.
First, we tend to con ate classless with early class society, terming both
“primitive society,” then draw our illustrations from that early class society,
claiming the practices illustrated must have been present in previous arrange-
ments, albeit in modiŽ ed form. Thus, for example, religion becomes nothing
more than a modiŽ cation of the earlier institutions surrounding magic, and, as

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both practices are claimed to amount to the same substance, we can then say that
religion is common to all peoples. This allows us to see those who came before
as essentially the same as ourselves, glossing over the signiŽ cant distinction
between institutions such as magic and religion that represents the substantive
difference between classless and class society.
Totemism differs from mature religion in that no prayers are used, only
commands. The worshipers impose their will on the totem by the compelling force
of magic, and this principle of collective compulsion corresponds to a state of
society in which the community is supreme over each and all of its members. . . .
The more advanced forms of worship, characteristic of what we call religion,
presuppose surplus production, which makes it possible for a few to live on the
labour of the many.
(Thomson 1949/1965: 49)

Second, we assign terms, representing speciŽ c conceptual understandings, to

practices and behaviors to which these concepts simply do not apply. Standard
theory, applicable only in the context of these conceptual notions, can then be
applied to all history, seemingly illuminating practices that would at Ž rst glance
appear outside the pale of conventional argument. When the Spanish colonized
the Americas, they found kings and nobles where none existed. But as they
expected to Ž nd that with which they were familiar, indeed they did Ž nd what
they were seeking (Morgan 1877: 186–214, La Lone 1982: 291–293). (They
also found sheep. As they had seen sheep, but had never before observed the
llama, obviously the llama had to be a type of sheep.) Thus, in capitalist society,
all trade is exchange, and as modern economies are exchange economies, then
all societies that exhibit trade must also exhibit exchange, even though it is
difŽ cult to observe the prices, etc. that are symptomatic of exchange. But we can
use modern economic theory to discover those prices, though they be hidden
from the casual observer, and though early forms of organization will produce
gross inefŽ ciencies as these people do not yet understand all the requirements
for (and beneŽ ts of) the complete institutionalizing of the market (see North
1981). 2
Third, we argue by negation. We “know,” for example, that humans are
aggressive because present society evidences this aggression. We should be able
to Ž nd evidence of this aggression either in the archaelogical record or in
primitive groups that continue to exist into the present. If we cannot Ž nd such
evidence, it must be that primitive peoples, faced with the heavy costs of

2 North has moved away from his earlier position, to be sure, and is now less sanguine as to the
efŽ ciency-based argument that he previously used to explain history. His earlier work, however, well
illustrates the above postulate.

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aggression, developed institutions that mitigated this fundamental human

instinct. Thus, to explain the low crime rates in primitive (actually, early class)
society, Posner (1980) hypothesized that the “absence of privacy” was the
mitigating factor, and this lack of privacy “may itself be an adaptive response to
the high costs of information in a society that lacks public or private
investigatory institutions. . . . One way of reducing information costs is to create
living conditions in which everyone knows everything about everyone else. The
denial of privacy in a primitive society serves to enlist the entire population as
informers and policemen” (p. 6). What is denied in such accounts is the very
possibility that humans are not innately aggressive, individualistic, greedy,
etc.—those behavioral characteristics we assume as natural because they are so
readily observed in current society. To the casual observer, it may appear that
early humans were innately sociable, decent, gregarious. These behaviors are
denied, as they do not Ž t modern man. Rather, to prevent us from destroying
ourselves, we all turn into informers and policeman. We are, after all, nasty and
brutish, and must protect ourselves from ourselves.
Applying the same framework to a larger analysis, we tend to Ž nd all the
necessary conditions for capitalism extant in primitive society. The only missing
element is capitalism itself. Some time ago, one of the most important (thus,
neglected) social theorists of the twentieth century summarized the above line of
argument with regard to anthropology:
One of the most disturbing disclosures of the anthropologists who used the
comparative method was that primitive man was a communist. Such a conclusion
could not be allowed to pass unchallenged. In a recent work, Man’s Rough Road,
Professor Keller of Yale University has devoted much space and not a little heated
eloquence to an endeavor to show that private property and even capitalism have
always existed. He is, it is true, compelled to admit that there are many instances
which he terms “exceptional,” where this is difŽ cult to show. But if primitive
people attach little importance to private property, it is, he argues, because private
property has among them little importance. They would be capitalists if they had
capital, and would, he feels sure, speculate in stocks if they had stock exchanges.
(Briffault 1936/1969: 171)

Essentially, we suffer from what Marx termed “the illusion of the epoch”
(Marx and Engels 1845–1846/1976: 67–68). Ideas are produced that conform to
the dominant interests in the current social organization. These ideas, over time,
increasingly distance themselves from the social foundation upon which they
rest, become increasingly abstract, and eventually acquire the status of universal
truth. When these ideas become universal, they are then used to interpret all
history from the perspective contained in the ideas themselves—a perspective
shaped by the existing society. So, as current society establishes the universal

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standard, and that standard is used to evaluate the past, then history is viewed
and written within a context established by the present.3 What exists is natural
and normal, and normalcy is universal—if only we are sufŽ ciently imaginative
to discover it:
When . . . reason, from want of the facts, is unable to understand and therefore
unable to explain the structure of a given society, imagination walks bravely in and
fearlessly rears its glittering fabric to the skies.
(Morgan 1876/1967: 14)

We Ž nd ample demonstration of the universality principle in arguments

advanced by economists themselves:
(Economic theory) . . . consists of those general laws which are so simple in
nature, so deeply grounded in the constitution of man and the outer world, that
they remain the same throughout all those ages which are within our
consideration.
(Jevons 1905/1965: 198)
It is the purpose of this work to show that the distribution of the income of society
is controlled by a natural law. . . . At the point in the economic system where titles
to property originate . . . the social procedure is true to the principles on which the
right of property rests.
(Clark 1899: v)
The generalizations of the theory of value are as applicable to the behaviour of
isolated man or the executive authority of communist society, as to the behavior of
man in an exchange economy even if they are not so illuminating in such
contexts.
(Robbins 1952: 20).

What gives economics its imperialist invasive power is that our analytical
categories scarcity, cost, preferences, opportunities are truly universal in
applicability.
(Hirshleifer 1985: 53)

It was the neoclassical application of the illusion of the epoch to which

Veblen was responding when he penned one of his most oft-quoted
statements:
The facts of use and wont are not of the essence of this mechanical reŽ nement.
These several categories . . . are hedonistically natural categories of such

3 Illustrations abound. For a striking example that should strike home with economists, see
Marshall Sahlins, The Use and Abuse of Biology (1976) where it is demonstrated that sociobiology ,
the modern form of social Darwinism, is patterned on neoclassical competitive theory, and
neoclassical theory itself is a caricature of capitalist society.

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taxonomic force that their elemental lines of cleavage run through the facts of any
given economic situation, regardless of use and wont, even where the situation
does not permit these lines of cleavage to be seen by men and recognized by use
and wont; so that, e.g., a gang of Aleutian Islanders slushing about in the wrack
and surf with rakes and magical incantations for the capture of shell-Ž sh are held,
in point of taxonomic reality, to be engaged on a feat of hedonistic equilibration in
rent, wages, and interest. And that is all there is to it. Indeed, for economic theory
of this kind, that is all there is to any economic situation . . . all situations are, in
point of economic theory, substantially alike.
(Veblen 1908/1961: 192–193)

With the above argument in mind, we now turn to our necessarily cursory
examination of tribal society.

HOSPITALITY VERSUS EXCHANGE

The centralizing institution around which tribal society is organized is the rule
of hospitality, a universal social relationship among early societies. The essence
of hospitality can readily be understood by examining the following observa-
tions that are representative of literally thousands of such commentaries. The
Moravian missionary, John Heckewelder was in long and direct contact with
various North American Indian tribes—including the Delaware and several
Iroquois tribes—and wrote of his experiences in History, Manners, and Customs
of the Indian Nations. In describing hospitality, he writes:
They think that he [the Great Spirit] made the earth and all that it contains for the
common good of mankind; when he stocked the country that he gave them with
plenty of game, it was not for the beneŽ t of a few, but of all. Everything was given
in common to the sons of men. Whatever liveth on the land, whatsoever groweth
out of the earth, and all that is in the rivers and waters  owing through the same,
was given jointly to all, and every one is entitled to his share. From this principle
hospitality  ows as from its source. With them it is not a virtue, but a strict duty;
hence they are never in search of excuses to avoid giving, but freely supply their
neighbors’ wants from the stock prepared for their own use. They give and are
hospitable to all without exception, and will always share with each other and
often with the stranger to the last morsel. They rather would lie down themselves
on an empty stomach than have it laid to their charge that they had neglected their
duty by not satisfying the wants of the stranger, the sick, or the needy.
(in Morgan 1881/1965: 49)

The French Jesuit Joseph François Letifu, who worked among the Indians of
the Northeast for six years, comments:
If a cabin of hungry people meets another whose provisions are not entirely
exhausted, the latter share with the newcomers the little which remains to them

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without waiting to be asked, although they expose themselves thereby to the same
danger of perishing as those whom they help at their own expense so humanely
and with such greatness of soul. In Europe we should Ž nd few (people) disposed,
in like cases, to a liberality so noble and magniŽ cent.
(in Stannard 1992: 31)

Hospitality followed from the collective control of the production process,

based on collective control of the means of production. Tribal society (and all
society leading to the tribal stage of development) was nonpropertied. While
personal property certainly did exist, such property allowed no control over
others; in particular, personal property could not be used to extract the produce
of another’s labor. Further, as long as the community controlled the productive
equipment, no property-based constraints could be placed on the production of
personal goods held by the population. True, the community as a whole may
have imposed (and probably did impose) social restrictions on the use of land,
etc., but no propertied class could have imposed an artiŽ cial (scarcity) limit to
the production of personal property. Thus, among early peoples personal goods
held little meaning and would readily be given to those in want or who simply
appreciated them (see Morgan 1851/1962, Stannard 1992).
Collective control of the means of production meant that none could live on
the basis of property rights: a “propertied career,” receiving income in the form
of rent, interest, etc. would have been unthinkable. Furthermore, until the
domestication of plants and animals, no sustainable surplus production, allowing
some to live on the labor of others, was possible. Rather, until this epoch in
human history was achieved all had to “work” for a living—all were producers
on “land” that all controlled. Output was produced and consumption undertaken
for the beneŽ t of all. As all produced for all, all had the same objective interests
in promoting the well-being of all: the interests of one were the interests of
everyone. This was equality. All had equal rights, and all shared equal
responsibilities.
Equality must not be understood in some artiŽ cial arithmetic sense. Social
equality (as any other social practice) must be deŽ ned socially. Certainly there
was always some division of labor (mainly on a gender basis). Specialized labor
would no doubt contribute different amounts to aggregate output. Differences in
age, strength, dexterity, etc. would also generate different contributions. As well,
consumption requirements would differ. Age, size, type of work activity, etc.
would all require different caloric intakes, different types of dress, etc. But such
differences were irrelevant. As each saw his or her welfare as inextricably
connected to the welfare of others, each contribution would be viewed equally.
As all shared the same underlying social relationships, all had an incentive to
produce according to ability and consume according to need.

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Hospitality, then, is the extension of the underlying collectivist production/

consumption arrangement. All had an equal right to the output produced by all
on the means of production controlled by all. Hospitality, or the mutual right and
obligation to receive and provide subsistence, was the Ž nal equaliser. “Hunger
and destitution could not exist at one end of an Indian village . . . while plenty
prevailed elsewhere” (Morgan 1881/1965: 45).
Hospitality cannot be cast into a modern insurance context (as does Posner
1980, among others). To do so is to seek a conventional behavior consistent with
modern practice and, thus, to allow tribal institutions to be subjected to
theoretical analysis of a current, supposedly universal, form. As Heckewelder
and Letifu comment, hospitality was not limited to kin: strangers (nonkin) were
offered the same rights, but were under no obligation to provide hospitality—as
they were not kin. Hospitality was not, therefore, based on self-interests, but
represented a social relationship based on an ideological outlook quite different
from (and alien to) that of modern, property-based, humans.
From this basic equalizing and unifying principle, a number of social
ramiŽ cations follow that are germane to the understanding of money and its
origins.

Nonpolitical Organization
Tribal society was a nonpolitical organization. No authority could exist
independent of the population as a whole; none could impose his or her interests
on others. Indeed, the very notion of one’s interests apart from the larger
collective would be unthinkable. In an egalitarian society where the interests of
the individual are those of the collective, coercive behavior leading to
nonegalitarian consequences is incomprehensible. Such behavior connotes a
rupture in the egalitarian principle of equal rights and responsibilities, and this
would be re ected in a breach in the principle of hospitality—a violation of the
main social relationship fortifying the underlying collective production process,
thus placing the entire population in economic jeopardy.
The nonpolitical nature of tribal society can be demonstrated through the
consensual decision-making process these peoples practiced. All major deci-
sions had to be agreed upon by all. (Or, in the case of minor day-to-day
decisions, by the elected representatives of the population who themselves had
to have unanimous support.) As all had the same objective interests based on
their common and equal social relationships in the production process, all would
have to reach agreement as to what those interests were. Decisions were
reached, then, only after consensus was achieved (see Morgan 1881/1965:
1–45.)

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Democratic arrangements, in whatever form, would be foreign to such a

population. Democracy connotes division, fractiousness, inequality. Agreement
cannot be reached as interests are not the same. Hence, democracy appears with
the development of class society (or civilization), where the egalitarian
relationships have been destroyed (though they may appear to continue in
certain formal arrangements). Democracy or any other political structure is
symptomatic of propertied economies.
Clearly, privilege would be antithetical in nonpropertied society. Privilege
connotes a superior-inferior relationship. Those in a privileged position must be
able to establish and maintain that position by requiring others to be placed in a
nonprivileged, inferior position. This cannot be done by consensus—none would
so agree. It must be done through coercion, thus contradicting the egalitarian
relationship lying beneath unanimity.
Tribal society, then, displays no characteristics of what is usually termed the
state. There is no set of institutional forms and mechanisms to force acceptance
of the prevailing social relationships and the consequences of those relationships
apart from the control of the population as a whole. Power cannot exist separate
from the community. Hence, we do not observe laws, standing militaries, police,
prisons, and the like. There was no need for such arrangements: against whom
would these institutions be used, and who would use them?

Nonindividualist Behavior
We Ž nd an absence of self-interested individualist behavior. In classless,
nonpropertied society, the individual does not stand apart from the larger
collective. In fact, the notion of the individual as a singular, independent entity
seems to be utterly lacking in such a society.
Self-interests (as normally understood in the hedonistic, utility-maximizing
sense) can only develop if the perceived interests of the individual are separate
from (and potentially opposed to) those of other members of the population.
Tribal members were clearly aware that their well-being was dependent on the
well-being of the community, and this was predicated upon economic success in
the collective production process to which all contributed and from which all
beneŽ tted. Hence, early peoples saw collective interests only, but collective
interests that were shared by all members. Unanimity in decision making re ects
this underlying ideology, as does the absence of greed (which would violate
hospitality), avaricious behavior, and the like (see Lee 1959: 8, 43–4, 80–2,
Sahlins 1972: 1–39, passim, Gutiérrez 1991: 8–15, Stannard 1992.)
Individualism must arise with the development of propertied economies, in
particular private-propertied economies. If we can imagine an economy

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comprised of only holders of private property (the hypothetical peasant economy

lying at the foundation of neoclassical theory), we can then imagine a society of
pure self-interested individuals. Each member does have interests apart from
others, each must behave on the basis of those interests (see Henry 1999a). In
fact, we do observe individualism arising in the context of peasant structures
(Macfarlane 1979), though real-world peasant societies exhibit quite constrained
self-interested behavior, continuing to practice collectivist behavior in an
attempt to guarantee some level of economic security (Hoppe and Langton
1994: 1–39.)

Subsistence Rights
As all had a right to subsistence (and a responsibility to provide it), it is obvious
that early humans could not engage in exchange of any sort. Exchange requires
several conditions to be satisŽ ed. Goods must be privately owned either by
individuals or organizations; these goods must be marketed—they must be insti-
tutionally organized to allow sale and purchase; some form of gain must be
expected in the transaction; a principle of equal quantitative reciprocity must
be established. Exchange connotes that society has lost collective control over
the production and distribution of output which is determined by social rules and
in the interests of that society. Exchange represents a “disembedded” relation-
ship that is neither controlled by nor dependent on the interests of the
community. All exchange is a form of trade, but trade need not be exchange:
trading can readily take place without satisfying any of the above conditions.
In tribal society, the above conditions cannot be satisŽ ed. One cannot sell a
good at the same time one has a social responsibility to provide that good. Nor
can one purchase a good when one has a right to it. Exchange requires the
commodiŽ cation of goods, and commodities must be privately owned. Again,
exchange is symptomatic of a propertied society.
Primitive society certainly did engage in various forms of trade, however.
Trading relations among primitive peoples were well developed and included
“international” trade (La Lone 1982). But trade was conducted on a non-
exchange basis. Villages would simply transfer goods of which they had a
surfeit to villages producing goods of which the initial village was in need. No
trade was conducted by individuals (merchants) or by the equivalent of Ž rms; no
bartering (higgling) took place; notions of equilibrium-seeking adjustment
processes based on changes in supply and demand would be foreign to tribal
populations. Villages, as they practiced the same egalitarian behavior, could be
trusted to treat each other in an equitable fashion. “Trust and conŽ dence . . .
obliterate(s) the bilateral character in the transaction” (Polanyi 1944/1957: 61).

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As we are all accustomed to seeing trade as exchange, we then tend to see all
trade as exchange. For tribal economies, however, trade extended the rule of
hospitality across tribal lines.4
As pre-class society did not engage in exchange, there was no requirement
for quantitative equivalence in any relationship, including trade. The reciprocity
so highly touted by Polanyi and others (Polanyi 1944/1957: 47ff.), does not (or
should not) imply such equivalence. No requirement was made that one act be
replicated by the same or equivalent act, that one good be traded for an
equivalent object. Quantitative equivalence implies that some agreement is
reached that allows equivalence to be measured. But the only conceptual
understanding of tribal populations was equality, and this equality was seen in
social, not arithmetic terms. And, with no requirement for equivalence, there
was no need for a standard by which to gauge equivalence—no unit of account
in which all goods and acts could be cast and used to measure “fair
exchange.”
There is no free market, no Ž nal measure of the value of individual things, and no
common medium whereby every type of goods and services can be translated into
terms of every other. . . . A primitive distributive system, therefore, does not
consist of Ž nding exact equivalents for the services rendered by the different
factors of production.
(Firth 1958: 69)

Further, as no economic requirements demanded it, early humans exhibited

no concept of time beyond some casual approach to the future and, primarily, to
the past—a concept that tends to be of a circular nature. (For a vivid illustration
of this point in the context of a present-day semi-tribal society, see Kane
1995).

Debtless Society
Lastly, tribal society could not be a debt society. Debt connotes inequality: for
every debtor there must be a creditor, and debtors are placed in an unequal
position relative to the creditor. Parties to debt must occupy different economic
categories or positions, which allow some individuals privileged authority over
others—the bank can seize property and deny one’s right to subsistence.

4 See Sahlins 1972: chs. 5, 6 for various illustrations of nonexchange trade—though Sahlins
does periodically confuse propertied and nonpropertied societies, trade and exchange. Indeed, he
titles chapter Ž ve, “On the Sociology of Primitive Exchange.” Bracken 1997, provides an excellent,
though sometimes turgid, account of the misinterpretation of the British Columbia Indian potlatch by
colonial administrators, a misunderstanding that had devastating consequences for the Indian.

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In a tribal economy, where all share the same underlying social relation-
ships—all are producers on “land” controlled by all—debtors and creditors
would be the same people. Further, if one can even conceive of one section of
the population separate from the whole, those in debt would continue to claim
the right of hospitality, presumably from those holding the debt—and creditors
would have to provide it. This clearly makes no sense. The existence of debt
means that equality has been destroyed, and that property rights have been
created to replace hospitality.
The process through which debt overthrew hospitality, where propertied
relations replaced equality, was a long and rather tortuous process (see Hudson
1996, 1998), but it was here that the conditions necessary for the creation of
money were established. In essence, a process had to unfold in which one
segment of tribal society gained control of the usufruct of the productive
property previously held in common by the tribe. Institutions had to be created
that convinced (or coerced) the portion of the tribe that was now being placed in
an inferior position to accept the changes underway, and, while the older
“forms” of tribal relationships may appear to have remained intact, the
“substance” of those relationships, in particular hospitality, had to be irrevocably
altered. In this regard, the transition from magic to religion is most illuminating
(see Thomson 1946/1965). But as long as hospitality remained the core of
society, in substance as well as in form, the development of monetary
relations—connoting property and inequality—was impossible.

THE DEVELOPMENT OF MONETARY RELATIONS: TWO VIEWS

University libraries have devoted signiŽ cant space to the shelving of books
purporting to explicate the (true) meaning, origin and nature of monetary
relations. Anthropologists, sociologists, historians, philosophers, and economists
all have sought to explain the emergence and evolution of money as a
consequence of certain social relations. For example, Tobin asserts that
“[m]oney is a social institution” (1987: 770). Similarly, both Ingham (1996) and
Foley (1987) argue that money is (or expresses) a social relation. As we have
already seen, modern parochialism often carries over into historical analyses,
resulting in gross distortions of the social practices and relations of the societies
under investigation. We now move to an examination of the dominant theory of
the development of monetary relations. Our objective is to juxtapose this theory,
which takes as its starting point a classless barter economy, to the social and
institutional features of classless society in order to demonstrate the incompati-
bility of classless and money-using societies.

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Exchange-Based Origin of Money

Aristotle was, perhaps, the Ž rst to trace the origin of money to social exchange
relations. For him, money, though it had come to serve other functions,
originated as a medium of exchange. Exchange, it is argued, was initially
conducted on the basis of barter, with individuals trucking their wares to the
local trading venue and attempting to exchange that which they possessed for
that which they desired. Thus, two-party exchange required the famous “double-
coincidence of wants” so that each party would have had to possess just what the
other desired. The theory further suggests that satisfying this requirement
implies that barter economies must have suffered from exchange inefŽ ciencies
and excessive transaction costs. Consequently, these inefŽ ciencies are supposed
to have led to the (spontaneous) development of money as society (collectively)
agreed upon some means of exchange. Thus, money is said to owe its origin to
the elimination of barter-exchange inefŽ ciencies.
According to Melitz (1974), there are three elementary questions regarding
money: (1) What is it?; (2) What does it do?; (3) How did it come about? Within
the economics profession, these questions are almost invariably answered with
reference to the inefŽ ciency-minimizing barter story just described (Mishkin
1995). 5 For example, Duesenberry (1964) answers the Ž rst two questions,
suggesting that “[m]oney is essentially a devise to permit people to exchange
goods and services in a more convenient way than by direct barter” (p. 2). Thus,
money is a tool used to facilitate exchange. Tobin responds to the third
elementary question, asserting that money develops as “somehow the members
of a society agree on what will be acceptable tender in making payments and
settling debts among themselves” (Tobin 1987: 770). The dominant view, then,
is that money emerges to facilitate the (social) relations of exchange.
Importantly, the exchange relations are taken as given. That is, they are viewed
as habitual and universal, so that the analysis proceeds from the “natural”
instinct of individuals to truck, barter and exchange. This is conŽ rmed by
Samuelson, who claims that:
[E]ven [in] the most advanced industrial economies, if we strip exchange down to
its bare essentials and peel off the obscuring layer of money, we Ž nd trade between
individuals and nations largely boils down to barter.
(Samuelson 1973: 55)
By taking exchange as omnipresent, the dominant theory, in its search for the
origin of money, looks to the transition from barter-based exchange to monetary

5 That this is the dominant theory is beyond question. Almost any economics textbook with an
entry on money will trace the origin of money to the collective decision to minimize costs.

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exchange. Furthermore, as exchange is “natural,” and the use of a medium of

exchange merely increases its efŽ ciency, the decision to use money can be said
to proceed from neoclassical rational choice assumptions (Inhgam 1996). Thus,
in the marginalist tradition, Menger argued that rational actors in a barter
economy would discover the individual advantage in holding stocks of the most
“saleable” commodity as a medium of exchange (Menger 1892). Again, it is
important to note that money emerges as an unintended consequence of
individual rationality; no force or coercion by any privileged social class,
government, etc. plays a role in its adoption. Rather, a classless society of
individual producers/consumers simply decides (collectively) to use certain
commodities as media of exchange.
Can the theory that money originated in (classless) barter-exchange societies,
be applied to (classless) tribal society? Clearly not. As tribal societies were
organized along communist (i.e. classless) lines, where behavior was governed
by the rule of hospitality rather than by the rule of self-interested utility-
maximizing exchange, “there was no need for a medium of exchange or even a
numeraire” (Wray 1999: 681). Thus, the claim that “even in societies in which
communal property was the norm, [money] existed as long as individuals held
informal personal possessions” (Parguez and Seccareccia 1998: 3) will not bear
investigation. In short, money could not have emerged in tribal society (where
individuals certainly held informal personal “possessions”) as long as the law of
hospitality was intact.
It is our position that mainstream theory does not and cannot provide a useful
basis for understanding the origin of money. Indeed, the exchange-based story is
subject to many weaknesses. First, there is no evidence that markets ever
operated on the basis of barter (see, e.g., Heinsohn and Steiger 1983, Wray
1998) so that the impetus for the adoption of money (by bartering maximizers)
as a medium of exchange is dubious. Second, as we have argued, there would
have been no reason for the (collective) adoption of any means of exchange by
pre-class societies, for whom the very notion of exchange for personal gain
would have been anathema.
Finally, it is often suggested that in order to fulŽ ll the medium of exchange
function, society settled on metallic currency (usually gold or silver) so that the
money would have (intrinsic) value. We know, however, that the earliest coins
were usually denominated in values too large to have enabled them to serve as
media of exchange in day-to-day exchanges (Innes 1913). Thus, we cannot
locate the origins of money in the exchange relations of primitive markets
supposedly based on barter.
Economics has become synonymous with the study of exchange. As we have
shown, this tendency to focus on exchange has led most economists to seek the

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origin of monetary relations in early exchange relations (i.e. barter exchange)

and has led to the belief that money emerged as a medium of exchange. It is our
contention that just as the exchange process masks important social relations, the
focus on money as a medium of exchange masks important social (class)
relations. We believe that the economy must be viewed as part of a larger social
system and that in order to discover the origin of monetary relations, one must
focus on the political and social attributes of the system under investigation.
This, of course, is the approach of “classical political economy”. As Warren
Samuels describes it, this approach provides:
A theory of the organization and control of the economy, a theory of the economy
as a system of power, with attention to power within between legal and economic
(i.e., market) spheres, and the impact of social structure on economic
organization.
(Samuels 1992: 21)
It is our position that money originates with a form of indebtedness that is
forced on the lower class during the transition from a classless to a privileged or
class society. The dominant theory, which traces the emergence of monetary
relations to exchange relations, abstracts from any such system of power and,
thus, cannot provide a theory of money based on social debt relations. That is,
despite the claim that money “is a social institution” (Tobin 1987: 770), the
exchange-based theory actually provides an asocial theory of money since it
abstracts from the economy as a system of (social) power. This sort of
abstraction was lamented by Polanyi who argued that it “was precisely in the
matter of currency (that it was impossible to separate) . . . the political and
economic spheres” (1944/1957: 196). Again, we must emphasize that the
dominant theory of the origin of monetary relations clearly denies the existence
of any political authority. Thus, for neoclassicists there can be no coercive
power or class interests served by the decision to become a money-using
society. Fortunately, there is a theory that incorporates a system of political
power into a social and historical account of the origin of money. It is to this
theory that we now turn.

Debt-Based Origin of Monetary Relations

In contrast to the conventional theory, which attempts to discover the origin of
money as a medium of exchange, we are concerned with the origin of money as
a debt-relation and, thus, look to the use of money as a unit of account and
means of payment. We must make it clear at the outset that while we view
monetary relations as necessarily implying debt-relations, the existence of debt,
alone, does not imply the existence of money. For example, the notion of debt

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and indebtedness may have originated in pre-class (or nonmonetary) societies

with the concept of wergeld, “the practice of paying . . . for injuries in icted on
others” (Wray 1998: 49). Importantly, members of a minority ruling class did
not impose these payments on the population. Rather, they re ected the
collective will of the tribe. SpeciŽ cally, these payments were designed to
“increase social cohesion” and were made “in order to ‘pacify’ or eliminate
one’s debt for injuries in icted on another” (Wray 1998: 46).6 Thus, the use of
wampum in pre-class society was clearly not for the purpose of making a
monetary payment but for the purpose of “paying” wergeld:
The greatest of all human crimes, murder, was punished with death; but the act
was open to condonation. Unless the family were appeased, . . . they could take his
life whenever they found him . . . . A present of white wampum, sent on the part
of the murderer to the family of his victim, when accepted, forever obliterated and
wiped out the memory of the transaction . . . . The present . . . was not in the nature
of compensation for the life of the deceased, but of regretful confession of the
crime, with a petition of forgiveness.
(Morgan 1851/1962: 331–333, emphasis added)
Wampum was not a unit of account in which all debts were reckoned. Indeed,
tribal society had “elaborate compensation schedules . . . with a variety of
payments for a variety of injuries” (Wray 1999: 681). That is, the origin of
money as a unit of account in which all debts are denominated cannot be traced
to these forms of payment. In fact, it is somewhat problematic to apply terms
like “debt” and “payment” to these customs, and, in so doing, ascribe to our
criticism of those who read the present into the past. The latter might more
accurately be described as “a plea for forgiveness” or an “expression of shame
or remorse,” while it may be more suitable to refer to the former as “a social
obligation” or “an obligation to society.” In any case, the important points
remain the same: Tribal society’s debts were (1) not monetary debts; (2) not
“paid” using money; (3) not imposed by a minority or ruling class. Wray
conŽ rms these points:
[E]ven though the payment . . . required social consensus on the form of payment,
there was no need to settle on a “universal equivalent”, for each speciŽ c injury
in icted put a speciŽ c debt on the individual transgressor. Thus while wergeld may
have been the original source of the notion of debt and measurement of
indebtedness, it probably could not have directly generated monetary payments
because there was little private incentive for standardization of the terms . . . it
seems more likely that money as a unit of account Ž rst appeared as a means of
standardizing tribute or taxes levied by rulers.
(1998: 49–50)

6 The verb “to pay” has its root in that of “to appease,” “to pacify” (Innes 1913: 392).

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Unlike the practice of paying wergeld in tribal societies, payments imposed

by rulers were not levied in the interest of all members of society:
The practice of paying [wergeld] seems to have accustomed the the population to
the notion of measuring value and the palace . . . had great incentive to standardize
the measure of value (even though neither the individuals nor even ‘social
consensus’ would have had such an incentive.
(Wray 1998: 50)
Thus, Wray traces the origin of debt-based money to early class (propertied)
society. SpeciŽ cally, he argues that large palace communities levied “heavy
taxes in the form of barley . . . on producers” (Wray 1998: 50). The ability to
demand these payments rested on the power to direct the use of productive
property. What the rulers wanted, of course, was to expropriate real resources
from the producers. The expropriation was effected through the imposition of
debts, denominated (mainly) in a wheat or barley unit of account, which were
made payable in these resources (e.g. wheat). There is ample evidence of these
practices in Mesopotamia, where these debts, denominated in the grain unit of
account, were recorded on clay tablets (Innes 1913). When the temple received
the grain, the debt was paid and the tablets were broken.7
In time, the palace realized that it was “able to obtain goods and services by
issuing its own money-denominated debt” (Innes 1913: 51). It is in the transition
to money-denominated debt that we Ž nd the origin of coins. In fact, there is
compelling historical evidence that coins were not invented to facilitate private
exchange, but, rather, that the medium of exchange function, “like the other
monetary functions, . . . was an accidental consequence of [its development], not
the reason for it” (Crawford 1970: 46). Indeed, commerce “got along just Ž ne
without coins . . . operating on the basis of debits and credits” (Wray 1999: 682)
for thousands of years until “the Ž rst coins were struck by government, probably
by Pheidon of Argos about 630 BC” (Wray 1998: 44) (see Polanyi 1957/1971).
Moreover, Menger’s (1892) claim—that governments merely sanctioned, ex post,
the private decision to use money—does not rest on solid historical grounds:
When a king . . . mint[ed] coins . . . there was considerable difŽ culty at different
times in getting the public to accept the coins, and one of the kings devised a
punishment to Ž t the crime of refusing one of his coins. The coin which had been
refused was heated red-hot and pressed onto the forehead of the culprit, ‘the veins
being injured so that the man shall not perish, but shall show his punishment to
those who see him’.
(Innes 1913: 384)

7 Interestingly, Wray notes that in addition to monetary debts, “writing and numbers appear to
have their origin in the clay tablets used to record taxes levied and collected” (Wray 1998: 50).

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The thesis that the Ž rst coins were issued by (and for the beneŽ t of) the State
is supported by others who have studied the history/origin of money:
Coinage was invented to make a large number of uniform payments of
considerable value in portable durable forms, and . . . the person or authority
making the payments was the king.
(Cook 1958: 261)

[T]he imposition of taxes payable only in money (and not in goods or in kind) has
been used on numerous occasions in colonial history for the primary purpose of
forcing taxpayers out of a (non-monetary) substistence.
(Goodhart 1998: 16)

Coins were issued by the King in payment of the expenses of the Government,
largely I gather from contemporary documents, for the payment of the King’s
soldiers.
(Innes 1913: 389)

Kraay (1964) makes this observation as well, noting that governments minted
coins to pay mercenaries only in order to create a medium for the payment of
taxes, while Crawford (1970) suggests that coins were intentionally minted in
order to provide state Ž nance. Thus, as we have seen, the power of rulers to
demand certain payments (taxes, Ž nes, etc.) as well as the power to determine
both the unit in which these liabilities are denominated (initially, grains) and
the means by which they may be discharged gives rise to early monetary
relations.
The theory of money that is consistent with these historical facts has been
referred to as the Chartalist theory of money and was developed in opposition to
the theory that money owes its existence to the inefŽ ciencies associated with
barter.8 The theory, in its most general form is perhaps best described in
Knapp’s 1924 work, The State Theory of Money. As the title suggests, the State
plays a central role in the establishment and development of money. Knapp
argued that the State is the central force in the development of a monetary
system. In short, the theory suggests that money as a unit of account and means
of payment rests on the State’s power to “oblige certain selected persons to
become its debtors” (Innes 1913: 398) and its power to specify what “thing” will
be accepted in payment of these debts (mainly taxes). Thus, money originates
with the imposition of debts, which rests on the existence of an authority

8 Knapp deŽ ned money as “a Chartal means of payment . . . the metallic contents of which were
irrelevant for its validity” (1924: 31–38). The word “Chartal” is derived from the Latin “Charta”
indicating a “ticket” or “token.” It is from “Charta” that Chartal money (and the Chartalist theory)
derive their meaning.

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independent of the population as a whole. Simply put, it originates with the State
(or other political authority) and cannot emerge in the absence of propertied
society, which enables a privileged class to impose indebtedness onto others.

CONCLUSION
The exchange-based (dominant) theory of money is both asocial and ahistorical
and, as Schumpeter argued, “follows from the logically prior theory of barter”
(1954: 288). Indeed, it was a hypothetical classless society full of self-sufŽ cient,
bartering individuals who supposedly (collectively) invented money (as a
medium of exchange) in the Ž rst place. However, as we have seen, the theory
does not accord with historical facts.
Aside from the problem of prescribing policy based on a theory that takes the
central institution in a capitalist economy (i.e., money) as irrelevant, there is a
danger that the theory will be applied to analyses of societies that did not even
use it. For thousands of years prior to the development of class society, the rule
of hospitality reigned, and money was quite unnecessary. That is, pre-class or
tribal society did not exhibit the behaviors and institutions (power, privilege,
property, self-interest, and exchange) necessary for a money-using society. It is
only with the breakdown of the rule of hospitality and, thus, with the transition
from a classless to a class society, that the institution of money emerges. The
Chartalist theory provides an appropriate theoretical foundation (one grounded
in historical facts) for monetary theory, and, unlike the dominant theory, cannot
be inappropriately applied to nonpropertied societies.

ACKNOWLEDGEMENTS
A version of this paper was presented at the Eastern Economics Association
meetings in Boston, March, 1999. We thank participants in the session for the
helpful comments, in particular, Matt Forstater, Warren Mosler and L. Randall
Wray. As well, we thank two anonymous referees for most helpful comments.
Last, Bell thanks the Center for Full Employment and Price Stability for
Ž nancial support.

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