Homo oeconomicus is not behind us, but before us.
Money is like fire, second only to God as the greatest of man’s inventions and the maker of cities and the builder of civilizations. Known as the fifth element, money raises armies and moves mountains, builds castles and launches ships, shapes the land and plows the sea, digs canals and plants orchards, and gives men the power to govern other men.
Since the invention of money three thousand years ago in Asia Minor, men have struggled to obtain as much of it as possible in whatever form it happened to take: gold bars, cowry shells, silver slugs, copper coins, paper notes. Money has never stayed in the same hands for very long, and the stories of its comings and goings over the course of time provide the drama to Western mythology and literature. Behind the stories lies the more important tale of the endless struggle between great nations, large institutions, and powerful personalities to control the production and distribution of wealth—to determine the definition of money itself.
The history of money encompasses three distinct revolutionary transformations: the invention of the coin, the creation of paper bills, and the shift into electronic currency. Nearly three thousand years ago, in a remote part of Anatolia then known as Lydia, the first revolution brought about the coin. Lydia was a small country lacking the agricultural output to feed the massive armies that sustained the large neighboring kingdoms of Mesopotamia. The Lydians scrounged their livings by selling jewelry and other luxury goods to the Persian Empire. In the seventh century bc, the merchant kings of Lydia began using nuggets of gold and silver in their trade, and, to mark the metal’s purity, they pressed a seal onto the surface of the nuggets, thereby flattening them slightly and inadvertently inventing coins.
Before the coin, kingdoms derived their power from agriculture and conquest; rulers needed nothing more to govern than a strong army and a credible priesthood. The dissemination of coins established markets and created a whole new source of energy that spread around the world and gradually destroyed the great tributary empires of history. Money took away power from priests and armies; it had the transformative ability to turn gold into democracy. With this commercial innovation, Lydia became the richest country in the classical world and the name of its king, Croesus, a synonym for great wealth.
Compared with the physical force of the military and the spiritual authority of religion, money offered a third and completely novel way to organize society. Without regard to rank, class, or standing, anyone with the proper coin could buy a goat or a turnip, a jug of wine or a basket of fish, a parcel of land for a vineyard or a pinch of salt to flavor dinner.
The second revolution in the history of money, taking place over the five hundred years from the beginnings of the Renaissance to the coming of the Industrial Revolution, resulted in the modern capitalist system. The movement originated in the banks of Italy, eventually establishing the paper currencies that banks issued for use in daily commerce. More fluid than its metallic predecessor, paper money hastened the end of feudalism, eliminated the privileges of heredity, and shifted economic power from land ownership to stocks, bonds, and corporations. The financial innovations promoted the rise of mercantile and banking families, among them the Medici, in a new social order where cleverness in business outbid prowess on the battlefield or the glory of a noble name. Such a rearrangement gave rise to the artistic, architectural, and literary expression for which the Renaissance is better remembered today than for its commercial genius.
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