by WOLFGANG STREECK
Euro coins and banknotes of various denominations PHOTO/Wikipedia
To understand the conflicts that have erupted in and around the Eurozone over the past five years, it may be helpful to begin by revisiting the concept of money. [1] It is one that figures prominently in Chapter Two of Max Weber’s monumental Economy and Society, ‘Sociological Categories of Economic Action’. Money becomes money by virtue of a ‘regulated organization’, a ‘monetary system’, Weber thought. [2] And following G. F. Knapp’s The State Theory of Money [1905], he insisted that under modern conditions, this system would necessarily be monopolized by the state. Money is a politico-economic institution inserted into, and made effective by, a ‘ruling organization’—another crucial Weberian concept; like all institutions, it privileges certain interests and disadvantages others. This makes it an object of social ‘conflict’—or, better, a resource in what Weber refers to as a ‘market struggle’:
Money is not a ‘mere voucher for unspecified utilities’, which could be altered at will without any fundamental effect on the character of the price system as a struggle of man against man. ‘Money’ is, rather, primarily a weapon in this struggle, and prices are expressions of the struggle; they are instruments of calculation only as estimated quantifications of relative chances in this struggle of interests. [3]
Weber’s socio-political concept of money differs fundamentally from that of liberal economics. [4] The founding documents of that tradition are Chapters iv and v of Adam Smith’s Wealth of Nations, in which money is explained as an increasingly universal medium of exchange, serving an (ultimately, unlimited) expansion of trade relations in ‘advanced societies’—that is, societies based on a division of labour. Money replaces direct exchange by indirect exchange, through the interpolation of a universally available, easily transportable, infinitely divisible and durable intermediate commodity (a process described by Marx as ‘simple circulation’, c–m–c). According to Smith, monetary systems develop from below, from the desire of market participants to extend and simplify their trade relations, which increase their efficiency by continually reducing their transaction costs. For Smith, money is a neutral symbol for the value of objects to be exchanged; it should be made as fit as possible for purpose, even if it has an objective value of its own, arising in theory from its production costs. The state makes an appearance only to the extent that it can be invited by market participants to increase the efficiency of money by ‘putting its stamp’ on it, thus making it seem more trustworthy. Unlike Weber, who differentiated monetary systems according to their affinity to countervailing distributive interests, for Smith the only interest that money can serve is the universal interest in ensuring the smooth functioning of as extensive a market economy as possible.
Remarkably, the post-war sociological tradition chose to follow Smith rather than Weber. The demise of the Historical School of Economics—and the fact that structural functionalism, above all Talcott Parsons at Harvard, ceded the economy as an object of study to Economics faculties increasingly purified in a neo-classical spirit—enabled sociology, as it became established in the post-histoire decades after 1945, to dispense with a theory of money of its own. Instead it opted for a quiet life and chose to conceive of money, if at all, in the manner of Smith, as an interest-neutral medium of communication, rather than as a social institution shot through with power—as a numerical value, a numéraire, rather than a social relation. [5] This led to a rupture, both in sociology and economic theory, with the fierce debates of the interwar years about the nature of money and the political implications of monetary systems. These had been at the heart of Keynesian theory, in particular: see the battles around the social and political implications of the gold standard, driven notably by Keynes himself, or around Irving Fisher’s full-reserve banking model.
Of paradigmatic importance here was Parsons and Smelser’s 1956 work Economy and Society, subtitled ‘A Study in the Integration of Economic and Social Theory’. In Parsonian systems theory, money appears as a representation of purchasing power, the capacity to control the exchange of goods. It also has the special social function of conferring prestige, and thus acts as a mediator between ‘detailed symbols and a broader symbolization’. [6] Historically, money develops, as in Smith, through the growth of the division of labour, which demands an abstract representation of economic value so as to make the expansion of exchange possible. Money appears in this process as a ‘cultural object’ which, together with credit instruments and certificates of indebtedness, ‘constitute rights or claims on objects of economic value’—and hence in Weber’s terms as ‘mere vouchers for unspecified utilities’. [7]
Monetary weapons
That money is far more than this is something for which Parsons, and American sociology in general, might have found ample evidence in his own country—not merely in the interwar years, which after 1945 were somehow declared an exceptional era, but in its earlier history. The discovery of that evidence, however, had to await the emergence in the 1990s of the ‘new economic sociology’, which undertook the rehabilitation of Weber’s view of money as weaponry in the ‘market struggle’. A contribution to this development, as important now as it was then, was furnished in ‘The Color of Money and the Nature of Value’, a study by Bruce Carruthers and Sarah Babb of the domestic political conflicts over a new us monetary system after the Civil War. [8] The authors adopted an analytical distinction proposed by the political scientist Jack Knight: monetary systems, like institutions in general, could not be judged merely according to ‘the coordination-for-collective-benefits conception of social institutions’—in other words, by whether they provided an inter-subjectively communicable symbolization of values and value claims. Just as legitimate and even requisite, according to Carruthers and Babb, was the conflict perspective—we might even call it the political perspective—put forward by Knight, in which a monetary system comes into existence as the result of disagreements between actors with competing interests. [9] As such, it may possess more or less asymmetrical distributive effects and conflicting interests, which are often more important in social reality than their efficiency. [10]
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