Money & Debt: Crash Course World History 202

CrashCourse

17 Jul 201414:04

EducationalLearning

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TLDRIn this Crash Course World History episode, John Green explores the origins and functions of money, challenging the common belief that it evolved from barter. He discusses Adam Smith's theories and anthropologist David Graeber's alternative view that money is a product of human actions, particularly tied to state and military needs. Green also addresses the role of credit and debt in society, suggesting that money's significance is more complex than simply facilitating trade.

Takeaways

💡 Money has three main functions: medium of exchange, unit of account, and store of value, with the first being the most crucial.
🌀 The concept of 'making it rain' with money is humorously contrasted with the actual physics of angular momentum, highlighting the show's educational yet playful tone.
📚 Adam Smith's view that property, money, and markets were foundational to human society is presented, but also challenged later in the script.
🧀 The barter system is described as cumbersome and not as straightforward as some might think, with examples provided to illustrate its inefficiencies.
🪙 The script discusses the evolution of money from bartering to the use of metals, and eventually standardized coins for convenience in trade.
🏛️ Graeber's argument that barter was not the precursor to money and that credit-based exchanges were common in small communities is explored.
📖 David Graeber's 'Debt: The First 5,000 Years' is cited as a key source challenging traditional narratives about the origins and role of money in society.
🤝 The idea that debt and credit, rather than physical money, were the basis for many historical economic exchanges is introduced.
💳 The script suggests that credit and debt have been reimagined in modern times, with credit cards representing a return to trust-based systems, albeit with corporate oversight.
🌐 The role of money in the rise of states and empires, particularly through the need to pay armies, is discussed, with the 'military-coinage-slavery complex' concept presented.
🏛️ The fall of the Western Roman Empire and the subsequent decline of coinage in Europe illustrates the link between state stability and the prevalence of money.
🤔 The script concludes by emphasizing the importance of considering alternative viewpoints in history, suggesting that money is a product of human actions, not inherent nature.

Q & A

What are the three primary functions of money according to economic textbooks?
-The three primary functions of money are medium of exchange, unit of account, and store of value, with the medium of exchange being the most important.
What does John Green humorously argue is the actual reason the world goes 'round?
-John Green humorously argues that the world goes 'round due to the conservation of angular momentum, which is also the principle that allows figure skaters to spin in circles.
What does Adam Smith believe existed before political institutions and was the foundation of human society?
-Adam Smith believed that property, money, and markets existed before political institutions and were the very foundation of human society.
Why does Adam Smith think barter could be cumbersome?
-Adam Smith thinks barter could be cumbersome because it requires a double coincidence of wants, meaning both parties need to have something the other wants, which is not always the case.
What does David Graeber argue about the prevalence of barter in societies without money?
-David Graeber argues that in societies without money, people do not actually barter; instead, they find ways to exchange goods and services based on credit and social relationships.
What does Caroline Humphrey conclude about the existence of a pure barter economy?
-Caroline Humphrey concludes that no example of a pure barter economy has ever been described, suggesting that such a system has never existed.
How does Graeber describe the origin of money in relation to warfare and state-building?
-Graeber describes the origin of money as linked to warfare and state-building, where coinage was used to pay professional armies and facilitate the expansion of empires.
What is the 'military-coinage-slavery complex' as described in the Arthashastra?
-The 'military-coinage-slavery complex' is a concept from the Arthashastra that describes the interdependence of mining for resources, the treasury to fund the army, and the army's need for coinage, which in turn fed the machinery of war.
How did the fall of the Western Roman Empire impact the use of coinage in Europe?
-The fall of the Western Roman Empire led to the disappearance of coinage in Europe, as the state's failure disrupted the established systems of trade and exchange.
What alternative to physical money did people revert to after the fall of the Western Roman Empire?
-After the fall of the Western Roman Empire, people reverted to virtual credit systems that relied more on personal connections and trust rather than state enforcement.
What does John Green conclude about the necessity of money for exchange?
-John Green concludes that while money as we conceive it today isn't necessary for exchange, it is very useful for states and their functioning, and it is the product of human actions rather than human nature.

Outlines

00:00

💰 Introduction to Money's Role in History

John Green introduces the topic of money in world history, emphasizing its three primary functions: medium of exchange, unit of account, and store of value. He humorously addresses a misconception about what makes the world go 'round and then delves into the historical significance of money, referencing Adam Smith's view on the importance of property, money, and markets in the foundation of human society. Green also discusses the evolution from barter to money, highlighting the inconveniences of barter and the development of commodities like metals as a standard for exchange. The paragraph concludes with a critique of Smith's universalization of the creation of money, suggesting that it may not be an inherent part of human nature.

05:00

🏛 The Emergence of Money and Credit Systems

This section explores the origins of money, challenging the traditional narrative that it evolved from barter societies. Instead, it suggests that in small communities, credit was the primary means of exchange, with people trading based on the expectation of future repayment. The paragraph discusses the historical use of the shekel in Ancient Sumer, where money was created for bureaucratic purposes rather than as a circulating medium. It also touches on the idea that money, in the form of coinage, may have been linked to chattel slavery and the rise of state-based warfare. Graeber's theory posits that the use of coins for paying armies and the uncertainty of war led to the rise of coinage, which in turn created a 'military-coinage-slavery complex'.

10:05

🌐 The Role of Money in State and Military Affairs

The final paragraph examines the relationship between money, the state, and military conquests. It explains how rulers like Alexander the Great needed a continuous supply of coinage to pay their armies, leading to the development of mining and slavery. The Arthashastra, an ancient Indian political guidebook, is referenced to illustrate the connection between the treasury, the army, and the conquest of land. The paragraph also discusses how the fall of the Western Roman Empire led to the disappearance of coinage in Europe, with people reverting to credit systems based on personal connections. The video concludes by questioning the necessity of money for exchange and recognizing the importance of alternative viewpoints in understanding history.

Mindmap

Keywords

💡Money

Money is a medium used in the exchange of goods and services, often seen as the driving force behind economic activities. In the video, it is discussed as having three primary functions: medium of exchange, unit of account, and store of value. The video challenges the traditional narrative that money is the foundation of human society, suggesting instead that it is a product of human actions and institutions.

💡Barter

Barter refers to the exchange of goods or services without the use of money, directly from one party to another. The script mentions Adam Smith's idea that barter was cumbersome and led to the creation of money. However, it also presents an alternative view from anthropologist Caroline Humphrey, who argues that no pure barter economy has ever been described.

💡Medium of Exchange

A medium of exchange is an item, such as money, that facilitates the exchange of goods and services. The video emphasizes this as the primary function of money, highlighting how it has become the standard method for transactions in modern economies, as opposed to the barter system.

💡Unit of Account

A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. The script explains that money serves this purpose by providing a common measure to value items in an economy, which is essential for trade and economic stability.

💡Store of Value

Store of value refers to the capacity of an item to preserve worth and be converted back into goods and services at a later time. The video discusses money's role in storing wealth, which is one of its key functions, allowing individuals to save for future use.

💡Command Economy

A command economy is a system where the state or a central authority makes decisions regarding production, distribution, and consumption. The script contrasts this with a market economy, where these decisions are made by individuals and businesses, and mentions the Soviet Union as an example of a command economy.

💡Conservation of Angular Momentum

Conservation of angular momentum is a principle in physics that states the total angular momentum of a closed system remains constant. In the video, it is humorously used to correct the misconception that 'money makes the world go round,' emphasizing that there are fundamental principles that drive the world beyond economic factors.

💡Credit

Credit in the context of the video refers to an arrangement where goods or services are exchanged with the promise of future repayment. It is suggested that in small communities, credit was more commonly used than barter, and it forms the basis of many exchanges, highlighting the importance of trust in economic transactions.

💡Debt

Debt is an obligation that arises from borrowing money or goods and is due for repayment. The video discusses David Graeber's view that debt, as a form of credit, is a social glue that binds communities together through mutual obligations and trust.

💡Coinage

Coinage refers to the process of minting coins from metal. The script explains that coins were created for convenience in trade, as they provided a standardized form of money. The video also explores the historical emergence of coinage and its connection to the rise of states and warfare.

💡Chattel Slavery

Chattel slavery is a form of slavery where individuals are treated as property to be bought and sold. The video suggests a controversial link between the introduction of coinage, the need for a steady supply of precious metals, and the rise of chattel slavery, particularly in the context of ancient empires.

💡State-Based Warfare

State-based warfare refers to conflicts driven by the interests of the state, such as territorial expansion or resource acquisition. The video discusses a shift from honor-based warfare to state-based warfare as a catalyst for the development and use of coinage to pay professional armies.

💡Honor-Based Warfare

Honor-based warfare is a concept where conflicts are driven by personal or collective honor, often depicted in ancient epics like the Iliad. The video questions the existence of purely honor-based warfare, suggesting that even in modern times, the narratives around war often involve stories of honor and ideals.

💡Arthashastra

The Arthashastra is an ancient Indian treatise on statecraft, economic policy, and military strategy, attributed to Kautilya, a minister of the Mauryan dynasty. The video cites this text to illustrate the historical connection between coinage, mining, and the military in state-building and warfare.

💡Virtual Credit Systems

Virtual credit systems refer to non-physical methods of tracking and enforcing debt obligations. The script mentions that when coinage declined in Europe after the fall of the Western Roman Empire, people reverted to these systems, which relied on personal connections and trust rather than state enforcement.

Highlights

The three fundamental functions of money: medium of exchange, unit of account, and store of value, with the first being the most important.

Economic textbooks suggest that money evolved from barter systems, but this is challenged by anthropological evidence.

Adam Smith's view that barter was cumbersome and led to the creation of money is questioned by historical and anthropological perspectives.

The idea that money is a natural progression from barter is disputed by David Graeber, who argues that barter was not common in societies without money.

In small communities, exchange often took place through credit and trust rather than physical money.

Ancient Sumerian money was created by bureaucrats to track resources, not for circulation as we understand it today.

The belief that money is naturally backed by precious metals is not supported by historical evidence from early civilizations.

Graeber's theory posits that credit, not barter, is the precursor to money and is integral to social orders.

The transformation of social relationships through the introduction of monetized trade and the quantification of debt.

Coins emerged around 600 BCE in India, China, and Lydia, coinciding with state-based warfare and the need for professional armies to be paid.

The necessity of a steady supply of metal for coinage to support empires and their armies.

The connection between coinage, slavery, and war, as described in the Arthashastra, a political guidebook for the Mauryan dynasty.

The disappearance of coinage in Europe following the fall of the Western Roman Empire and the return to credit systems.

The argument that money is not a product of human nature but of human actions, such as government and market formation.

The importance of considering alternative historical viewpoints, even when they challenge established theories.

The role of states in the creation and maintenance of money systems and their impact on technological advancements like the internet.

The conclusion that money is a human construct rather than a natural outcome of human economic behavior.

Transcripts

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