The Stakeholder Myth: Part 1

In this letter, I continue my analysis of Christine Desan’s chapter in Money and the Western Legal Tradition edited by Fox and Ernst. Last time, in “The King’s Shilling,” I corrected a mistake in her presentation of the operation of the free minting system, which wrongly described the trade that “made money” at the mint as involving a fee paid by the merchant to the mint in both nominal and intrinsic terms. In fact, as I showed, this trade is better characterized as a swap of intrinsic for nominal: the merchant gave up some silver, but ended up with a higher (rather than lower, as Desan’s example suggests) amount of money in nominal terms. While the technical operational details of the mint are interesting in their own right, it is perhaps less easy for the reader to see the implications for the current debates that probably brought them to this blog in the first place — and developing them would take me beyond the scope of what I hope to accomplish in this space. 

Here, therefore, I will focus on criticizing an aspect of her story with more immediately obvious implications: the myth of the stakeholder. The basic move of the chartalist school’s revision of the historical narrative about money is to replace the well-known (and, recently, much criticized) myth of barter — according to which money develops as a result of a spontaneous social consensus that using it would make things easier — with a different myth, according to which money was invented when a “stakeholder” at the “hub of the community… identified a unit and began to use it as a kind of receipt to represent resources given to the group” (23). Of course, chartalist writers do not represent this story as a myth: they represent it as the history of what really happened. Nevertheless, a myth is what it is. Desan’s work represents the most sophisticated attempt by a chartalist writer to dress up this myth in historical garb, but, as we will see, this project requires selectively ignoring important aspects of the history that cannot be reconciled with the narrative being advanced.

Usually, chartalists locate the historical invention of money in bronze age Mesopotamia. Here, however, given that the volume in which her chapter appears is limited in scope to the post-Roman west, Desan finds a more appropriate originary moment in early medieval England, which was more thoroughly demonetized than its Continental neighbors in the wake of the collapse of the Western Empire’s fiscal system. This “grave rupture in monetary activity” that followed the withdrawal of the legions after 410 A.D. thus makes it possible to imagine early medieval Anglo Saxon society as a tabula rasa in which money could be invented again, in the same way and for the same reasons as it was the first time. This story, which constitutes the “stakeholder myth,” is simple, and I will presume that my readers are more or less familiar with it: the “community as a whole” has a need to “collect goods and services from many hands and deploy them to a variety of uses.” One way to do this, of course, is just to collect the required goods and services directly in kind. According to Desan, however, there is an inherent inefficiency in this type of administration:

charters from the English seventh and eighth centuries list the produce collected by Anglo-Saxon sovereigns—vats of honey, ‘ambers’ of ale, cows, loaves of bread, geese, and chickens. But romantic as in-kind collections may sound, the supplies must not always have fit the function. Conversely, collecting support in-kind created difficulties for stakeholders… Finding themselves unable to time their demands to match scheduled contributions, one such stakeholder could instead take an amount of goods or services early, giving in return a token that the recipient could provide later at a time of reckoning as proof that the service had been rendered… The intervention, taken by an actor to whom many people were obligated, would create a standard of value across many goods. (23)

We have here a number of somewhat puzzling claims. First, it is difficult to see what is meant by the failure of available supplies to “fit the function,” or how this problem would be solved by the invention of money. If the king is in urgent need of a horse and the barley to feed it, here and now, but there are no horses available, it is not easy to see how the issuance of a receipt for a horse would solve the problem. Second, on the other side of the fiscal circuit, it is unclear why contributions should be “scheduled” in the first place, such that the stakeholder should find it difficult to “time their demands to match.” Even if we imagine, perhaps, that the “scheduled contribution” is a share of the harvest, and the stakeholder requires some grain prior to the harvest, this is not a problem that requires the introduction of a negotiable money instrument: the stakeholder could simply keep a book in which they recorded the early receipt of grain as a credit. If the chartalist is inclined to respond by saying that this requires trust that the stakeholder will keep the book honestly and honor the credit when the harvest comes, and that this problem is solved by the issuance of the coin as a receipt held by the creditor, I will remind them that their view also requires an assumption of trust in the stakeholder’s promise to accept this receipt later at its full value. If we cannot trust the stakeholder to keep the books, why would we trust them to honor their IOUs? Desan seems to imply that the issuance of negotiable receipts, rather than simply keeping a book, is motivated by the desire to coordinate obligations over geography: “the peripatetic habit of the early Anglo-Saxon rulers,” she writes, “may have been driven in part by the need to move to gather support in-kind.” This suggestion that monetization allows rulers to become sedentary, however, is difficult to reconcile with the fact that the practice of paying court visits to the nobility, and thus imposing upon them the upkeep of the court, was one that continued on through the Tudor period and beyond, well after the thorough monetization of English society. We could also point to the example, in another period, of the Seleucid kings, who ruled over a highly monetized society but were nevertheless permanently on the move.

At any rate, we can dispense with trying to make sense of this myth of the stakeholder, since it just isn’t true: it fails to explain, as we will see in a moment, some of the key facts of the history of early medieval Anglo Saxon money. Moreover, we can notice that this myth of the stakeholder is actually identical to the myth of barter it claims to dispel: both stories claim that money is invented as a device for overcoming a problem of double coincidence (the double coincidence of wants, or the double coincidence of supplies and obligations) and thus lowers transaction costs (either in commerce or in the fiscal administration). According to the myth of barter, the difficulty of finding someone who has what I want and wants what I have makes transactions costly, and money lowers this cost; according to the myth of the stakeholder, the difficulty of finding someone who both has what I want and owes it to me makes administration costly, and money lowers this cost. Thus, we have here not history as opposed to myth, but simply two competing versions of what is, at heart, the same myth. The myth of the stakeholder is the myth of barter, transposed into a different key: a verticalist conception of the monetary relation, rather than a horizontalist one. But hum the tune and you’ll find that they are the same.

So what, then, of history? As Desan writes, “coins provide testimony to their own creation” (26). It is, in fact, the coins and the coins alone that testify to their creation. The earliest known type of coin, from a series emitted in ancient Lydia, bears the inscription, “I am the badge of Phanes.” We do not know who Phanes is, what he was thinking when he issued his coin, what his intention was, or what it meant to be his badge. But we do know how much the coins weigh (a little over 14 grams), and we can — both through modern and ancient methods — determine the purity of their metal (an alloy of silver and gold, ranging from about 20% to 70% gold). Chartalists, of course, tend to be uninterested in the study of the material composition of the coins, since their view is that the coin is just a token issued by the stakeholder, and making this token from precious metal is simply an anachronism, an unnecessary inconvenience, or bizarrely — as we saw last time — an anti-counterfeiting measure. But this is an a priori assumption, rather than a result of historical study. It is clear from the coins themselves that the people who made and used them cared a lot about their weights (they went to a lot of effort to make them consistent, which implies that they cared) and purities (they went to a lot of effort to diguise the true purity of the coins, which also implies that they cared). It is therefore only through the study of the coins themselves that we can put our speculations about the history of money on a firm foundation and restrain our inevitable tendency to try to force the facts into our preferred procrustean bed. It is therefore telling that, in fantasizing about the stakeholder’s invention of money in early medieval England, Desan has nothing to say about the coins themselves, other than that they existed. Here is the entirety of her discussion of actually existing coins:

They began to circulate in Britain in the early seventh century, appearing first as gold scillingas and expanding when the English began minting silver sceattas in the 670s. While gold coin often imitated Roman imperial precedents, silver sceattas boasted beautiful and varied designs, including animal forms, diademed busts, and figures like a long-haired or helmeted man with a hawk. For some scholars, the variety suggests that money emerged as a private industry. For others, however, the plethora of types reflects the political geography of Britain at the time — small ‘closely governed’ kingdoms and maritime towns or ‘wics’, each of which could well have produced its own coin. According to that reading, many of the symbols that grace sceattas—the bust, heraldic animals, the helmeted figure—are imprimaturs of the community’s stakeholder. (26)

While her monograph, Making Money, has a slightly longer discussion of these coins, she is there, as here, completely silent on the issue of their weights, and gestures towards the issue of their purity only to make the point that it doesn’t matter: “communities” debase the coins because they need more money, and this is fine because it’s just a token anyway. If interest in this blog continues, I will turn to that text in more detail — there’s a lot of material there; a lot of counterfeit claims in need of Pyxing. But for now, let us open our ears to the testimony of the thrymsas and sceattas themselves and see what they have to tell us. The story that they will unfold for us is a bewildering tangle, involving two different ounces, three different plants, and several hundred years of path dependency, without a tabula rasa in sight. The Anglo Saxon kings didn’t invent anything: as is clear from the evidence of the coins, their goal was to (re-)integrate England into the international monetary system, which had never gone away, and which lacked any single center. What follows is my best attempt to reconstruct this story, though I cannot promise that I have gotten all the details exactly right: I welcome criticisms by other students of the coins, if they have evidence that contradicts my assertions. 

As Desan correctly notes, the gold thrymsas are often Romanizing in style. That is because the thrymsa is a Roman coin, or at least a descendent of one: the “thrymsa” is is the “triens” or “tremissis,” or the third part of the solidus: a large gold coin, introduced by Domitian and reformed by Constantine, which served as the center of the late Roman monetary system that was bequeathed to the middle ages. While the solidi themselves had largely fallen out of circulation, the triens remained, and in the history of this coin we can observe the transition between the late Roman gold period and the early medieval silver period: the triens was gradually debased with silver until it had effectively lost its gold content entirely and therefore ceased to exist as such. In passing, we can note that this oscillation between gold periods and silver periods is one of the most striking facts about monetary history, and one which is — to the best of my knowledge — completely ignored by the chartalists. (In forthcoming work, I will attempt to present a theory of the causes and implications of this historical oscillation, but we cannot get into it here.) At any rate, we should begin by noting that the triens or the “gold shilling” was once in fact, and was later in theory, one third of a solidus. What was the solidus?

The solidus established by the reform of Constantine in 310 A.D. was a highly pure gold coin (no gold coins are completely pure, since some base metal was added to improve the durability of the gold) minted at a standard of one sixth of the Roman ounce, or 72 to the pound. In modern measurements, the Roman ounce is about 27.3 grams… but modern measurements are completely useless for understanding the ancient units of weight in terms of which coins were produced. In order to understand the coins on their own terms, we must express their weights in terms of native units. In reconstructing these systems, the rule of thumb is to remember that everything must be in whole numbers and perfect fractions: ancient people could not measure in terms of fractions of their smallest units, and they designed their systems of counting to be easily divisible by the smallest prime factors: 2s, 3s, 5s, and, somewhat rarely, 7s. Since counting in base 10 does not permit easy division into thirds, people in the past would have found this “modern and rational” system of counting to be highly cumbersome and impractical. The valuation of the (much later) English gold noble at 6s.8d, for example, seems on first impression to a mind used to counting in decimals to be rather arbitrary, but in fact it represents exactly one third of a pound of 20 shillings of 12 pence each. 

So, whole numbers and perfect fractions… but of what? Ancient measures of weight were based on plants, often grains like wheat or barley: by sampling a fairly large number of grains (ritually specified as taken “from the middle of the ear”) it is possible to create standardized weights with statistical errors that might be measurable by modern equipment and thus meaningful to us, but which were not to them. In the Roman case, however, the unit was the siliqua or the carob, amounting to about .19g in modern units. The Roman ounce was defined, in their terms, as 144 (2^4*3^2) siliquae (or 24 scruples, a unit of 6 siliquae). Its sixth, the solidus of Constantine, was thus 24 siliquae, and its 18th part, the triens, was 8 siliquae. 

I specify that this was the solidus of Constantine because the “triens” of late antiquity was, in fact, minted on a different standard, one which is not intelligible in terms of the Roman units. The Constantinian triens of 8 siliquae weighed about 1.52g, but the later “Frankish” triens weigh in at a rather lighter 1.3g, which implies a solidus standard of about 20.6 siliquae. By weight, this is one seventh of a Roman ounce — but the Roman ounce of 144 siliquae cannot be divided into 7ths. Clearly, therefore, when the solidus was lightened, it was also moved on to a different standard, one in which division by 7ths was possible. This standard was the barley grain, the ancestor of the “grain Troy,” weighing about .065g. If the Roman ounce is interpreted on this standard, it measures 420 (2^2*3*5*7) grains, and can therefore be divided into a solidus of 60 grains and a triens of 20. This coin, the Frankish triens or thrymsa, was one of the standards that early Anglo Saxon kings inherited from the past, but it was one that was deteriorating: as the dawn of the silver age advanced, the triens ceased to exist as a coin, and became a unit of account: the gold shilling. That is to say that gold remained the unit of account despite having ceased to exist as a currency: when you owe money, you owe it in terms of a gold coin weighing 21 barley grains, but no such coins exist. The actual payment, therefore, must take place in silver coins that are somehow reckoned in terms of an imaginary gold one. 

This coin was the sceat, or what is now more commonly called an “early penny,” since the term contemporaries actually used to describe it was “paenning.” The sceats are described in the literature as occurring in three phases: a primary sequence, a transitional sequence, and a secondary sequence. It seems (although the argument for this in the literature is somewhat circular, as far as I can tell) that the heavier sceats of the primary sequence are clustered around 18 barley grains, but fall thereafter to weights that seem to cluster around 12 or 14 grains. Since we know from contemporary documentation that the sceat was a coin valued at 20 to the shilling, which we above identified with the Frankish triens of 20 grains, it is easy to see that the weight of the sceat expressed in barley grains directly implies a bimetallic ratio: at a weight of 18 grains, the bimetallic ratio will be 18:1, since 20 sceats of 18 grains silver constitute a shilling of 20 grains gold. The falling weight of the sceat thus represents a falling value of gold against silver, as implied by the correspondence between the coin and the unit of account, which are in different metals. It is almost certainly the case, then, that the decline of the standard of the coinage is a response to changing market values of the two metals, but we must refrain from going down that rabbit hole at the moment.

Since this letter is already lengthy, I will break off the narrative here. In Part 2, coming soon, we will examine the origin of the more familiar units of English money — the pound sterling and the penny — in similar terms. What we will find is that these units are, ultimately, derived from an attempt to reconcile the Roman standard discussed here with an Islamic one, and thus to create a system that would be readily translatable into not only one but two existing international monetary standards. The narrative described by Desan’s work, therefore, is plausible only on the condition that we ignore the importance and centrality of the Islamic world and its monetary system to northern European late antiquity. What I have said so far, however, is already enough to cast doubt upon, if not completely dispel, the myth of the stakeholder. It is not the case, as Desan claims, that Anglo Saxon rulers established a unit of account by circulating tokens in which prices could be reckoned, that the “receipt” issued by the stakeholder became a “unit creating a shared standard of value.” This didn’t happen, because the unit of account already existed: the Anglo Saxon kings inherited it from the Roman past. Far from creating a unit of account by issuing coins, their problem was to find a way to instantiate an existing unit of account (defined in terms of a metal that had fallen out of circulation and a plant that didn’t grow there) into a coin of a different metal and in units of a different plant, without thereby rendering the fractional basis of the system unworkable. 

Stay tuned for next time, and the exciting and rarely told story of the origins of the English monetary standard in the dinar of Caliph al-Khattab. -CD

REFERENCES:

Hines, John. “Units of Account in Gold and Silver in Seventh-Century England:  Scillingas,  Sceattas and  Pæningas.” The Antiquaries Journal, no. 90 (2010): 153–73.