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Why do states issue currency? Some thoughts.
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States all over the world, for thousands of years, have issued currency at great cost. They have to mint or print it, account for it, police against counterfeiting, etc. Why do they bother?
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The simplest explanation is: it allows them to extract value from the public. States issue currency and then demand some of it back in the form of taxes.
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People will labor in ways the state finds valuable in order to get some currency they can use to pay taxes so they don’t go to prison.
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The earliest known coins, in Ancient Greece, were minted by the state to pay mercenary armies. Those little metal tokens weren’t worth anything on their own; they were given value through taxes.
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The state told the public it needed to pay taxes through those little metal tokens called coins, so the public provided food and other provisions to the mercenaries in exchange for some of the tokens the state had paid them.
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This makes quite a bit of sense when the elites who are extracting value from the public *are* the state. A medieval government typically consisted of a monarch and his household. Permanent capitals were rare; the seat of government moved with the monarch.
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So issuing currency and taxing it back extracted resources directly for the elites. Makes sense. They did this to parasitically enrich themselves. But states don’t really operate this way anymore. Governance is depersonalized.
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Except for outliers like Donald Trump, who used his presidency to directly enrich himself and the billionaire parasites in his cabinet, we don’t normally think of government service as a way to directly enrich oneself.
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This is especially true when you consider that the vast majority of the US government is staffed by civil servants who are, generally, not rich and have no hope of becoming rich on a government paycheck.
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So modern states are extracting value from the public, but not directly for themselves, mostly. How, then, are they extracting value from the public? And where is that value going?
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Consider the hut tax. The British imposed hut taxes—annual taxes on dwellings or households—in their African colonial possessions. The point of the hut tax was to force locals to fund their own colonial subjugation...
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...but also something more insidious: to coerce them into laboring for the British. Locals had the temerity to not want to work for their conquerors, so the British imposed taxes that could only be paid with cash acquired via wage labor.
13/ https://www.lawyersgunsmoneyblog.com/2020/05/this-day-in-labor-history-may-29-1935
13/ https://www.lawyersgunsmoneyblog.com/2020/05/this-day-in-labor-history-may-29-1935
This is not just idle speculation; this was an explicit calculation. The fascinating piece below traces the origins of the hut tax in Natal in the 1850. Coercing locals to labor for British settlers was a key and explicit motivation.
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https://ukzn-dspace.ukzn.ac.za/bitstream/handle/10413/6271/Ramdhani_Narissa_1985.pdf?sequence=1&isAllowed=y
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https://ukzn-dspace.ukzn.ac.za/bitstream/handle/10413/6271/Ramdhani_Narissa_1985.pdf?sequence=1&isAllowed=y
In this way, we see the state issuing currency and imposing taxes not to generate value for itself, directly, but indirectly, on behalf of the capital class. This is my working hunch: states issue currency and tax it back to mobilize us into wage labor for the elites.
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Why would the state want us to engage in wage labor? Because, as with the British colonial state in Africa working on behalf of land-owning settlers, the modern stage works on behalf of our capital-owning elites.
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Marx put it succinctly: “The executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie.” The state is not an antagonist of the capital class. It is an *arm* of the capital class. It works for them, on their behalf.
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And because wage labor is so fantastically profitable for the capital class. Masses of people get up each day and, to get the currency they need to pay taxes and avoid prison, sell the better share of their labor.
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Even if you ignore the extraction of surplus value through wage labor, it’s trivially easy to see that capital has been capturing an ever-growing slice of labor’s productivity.
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But what about the simplest and most obvious answer, that states issue currency to facilitate trade, either because a) they benefit from that trade in some manner or b) some sort of altruism?
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But we’ve already seen that people don’t need states to issue currency to facilitate economic exchange. When Irish banks went on strike, the Irish just made their own, spontaneous, organic currency:
21/ https://twitter.com/andyindc1/status/1315997565008203777
21/ https://twitter.com/andyindc1/status/1315997565008203777
Further, it’s not immediately obvious why a state interested in facilitating trade would focus on costly currency, rather than the any of the myriad other ways it could facilitate trade. And anyone arguing that producing currency is a “natural” function of a state...
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...needs to grapple with the question of why other things, like, say, providing health care to the public to ensure a population healthy enough to trade is not just as “natural” and universal as issuing currency is.
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So that’s what I’ve got. States issue currency to extract wealth from the public, which they do through taxes. Taxes used to extract wealth directly for the elites who comprised the state, but now they’re used to coerce us into wage labor...
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...which benefits the capital class the state works for. The state goes through all that expense to make currency so we’ll work exploitive jobs to get that currency to pay taxes. It’s all a giant hut tax, we’re the conquered population, and our elites are the colonists.
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