Private Markets and the Monopolization of Money: A Historical Perspective
Introduction:
In Murray Rothbard’s book “What Has Government Done to Our Money?”, he argues that private markets have the ability to produce money without government intervention. This claim challenges the conventional belief that only governments can control and manage money. Upon further investigation, it becomes clear that throughout history, money has originated within market economies, evolving naturally to meet the needs of trade. However, the monopolization of money by governments has prevented private coinage from becoming normalized. This article explores the historical case of the UK’s private coinage industry during the Industrial Revolution and draws parallels to the modern-day attempts at privatizing money with the rise of cryptocurrencies like Bitcoin.
Private Coinage in the UK:
Economist George Selgin’s book “Good Money” sheds light on the overlooked history of the private coinage industry in the UK during the Industrial Revolution. During this period, the Royal Mint neglected to produce small denomination coins required for daily transactions by small businessmen. As a result, a sophisticated industry focused on private coinage emerged. Old button factories were converted into mints, producing coins of various weights and sizes made from copper and silver. These coins were widely accepted as payment and solved the coin shortage issue. The industry operated efficiently, ensuring inflation resistance and adhering to standard weights and measures.
Government Intervention:
Despite the success of the private coinage industry, the Royal Mint eventually sought to monopolize the production of money. In 1812-1813, Parliament passed acts to cartelise minting operations, making the Royal Mint the sole legal producer. This government intervention quickly destroyed the entire industry. This historical case demonstrates that the monopolization of money is not a result of market forces but rather a deliberate imposition by governments to maintain control over the currency.
The Digital Age and Attempts at Privatizing Money:
The advent of the digital age brought new attempts at privatizing money, driven by the need for financial verification and the desire to eliminate intermediaries. Bitcoin, born in 2010, emerged as a solid competitor to nationalized money. However, governments were not receptive to this new form of private money. They responded by imposing heavy regulations, controlling exchanges, and enforcing taxation and reporting requirements. The ongoing crackdown on cryptocurrencies mirrors the government’s historical resistance to private coinage, stifling innovation and maintaining their monopoly on power.
Challenges of Government Management:
Throughout history, government-managed monetary systems have faced numerous challenges and reforms that often worsen the existing system. From the compromised gold standard in the late 19th century to the devaluation of currency in 1933, these reforms have led to inflation and economic instability. The next significant monetary reform is likely to be the global adoption of a central bank digital currency with the power to track and control transactions. To achieve this, governments must eliminate competition, mirroring the events of 1813.
The Path to Denationalization:
The current state of money management is not in the public interest but rather serves the government and its industrial partners in banking and finance. The ultimate solution lies in fully denationalizing money, but achieving this requires challenging the government’s stronghold on economic forces. This age-old problem poses one of the greatest challenges of our time.
Conclusion:
The history of private coinage in the UK during the Industrial Revolution highlights the potential of private markets to produce money efficiently. However, government intervention has consistently monopolized money production to maintain control and power. The emergence of cryptocurrencies like Bitcoin has faced similar resistance from governments seeking to protect their monopoly on currency. By understanding the historical context and challenges of government-managed monetary systems, we can begin to explore alternatives that prioritize the public interest over government control.
