Pros and Cons to a Human Construct
According to vocabulary.com, abstract is defined as existing only in the mind; separated from embodiment. In a sense, money slots right into this category by definition. In “The Invention of Money” by This American Life, a very thought provoking claim is used directly from the get go: “When you understand the money is created out of nothing, you understand all kinds of things.” What do they mean by that? Money has no true value, as its just a measurement humans use to barter for better materials/living capacities in their lives. But just who, who determined what society uses for a standard unit of wealth?
If we take a trip down memory lane, back into the early 20th century. There was an island, a German colony, that used stone “coins” as currency to purchase items from other inhabitants. These islanders are known as Yap Islanders. Now, these stone “coins” that the Yap Islanders utilized in their financial system were valued at the magnitude of the stone. While this initially seems like a foreign notion, it’s eerily similar to our monetary system today. Instead of our linen-cotton blended money, digitalized credit cards, and online third party organizations such as PayPal. The islanders just chose to prioritize limestone spheres whose worth were determined by their size, seen in “The Island of Stone Money” by Milton Friedman. This brings up an interesting proposition; Were those Yap Islander’s poorer than the average person we see today? Or is it really an identical situation as today, with a substitution of our currency for limestone spheres? “The money of other countries often seems to us like paper or worthless metal, even when the purchasing power of individual units is high.” The concept of money and currency, is a human construct that gives items a value determined by society. No value of any piece of linen or coin made of zinc has any value set in stone, no pun intended.
The ability to find and create a standard unit to run what we see as an economy seems to be embedded our human nature. These human tendencies appear to convene over and over in history. Whether it is through the use of limestone by the Yap Islanders, the use of gold throughout the last millennia, the current banknote, or even the future of cryptocurrency. Humans always find themselves giving some inanimate (in the case of cryptocurrency, more of a trust) object a standard value to be used to gain resources in other aspects of their life. It solves a simple issue that people would find themselves in without the concept of worth. It gives people the means to get assets through the use of collective action in society. These currencies are the overall facilitator we see in each of these societies’ economies and also these currencies maintain a standard of value. A value that we follow to the tee, no matter the fluctuation of worth.
Everything gone over so far seems to be an overwhelming positive notion. Through a collective understanding of value, each society gets to run somewhat efficiently on their financial system. A solid structure that if followed, leaves us on a smooth path to attaining our human needs. However, we have not touched base with the negative effects of currency that do not even graze the cynical nature of humans. To breach these negatives, let us take a look at the current era of Zimbabwe. Through Zimbabwe’s financial structure, we can locate and analyze some negative aspects of the abstract of currency. Starting in the early 21st century, Zimbabwe’s financial system went through a period of what is known as hyperinflation. Hyperinflation describes the phenomena of when goods and services drastically rise in price, nearly 50% per month per standard. This 50% number is put to shame when looking into Zimbabwe’s situation. For example, Zimbabwe’s currency, the Zimbabwean dollar, had a denomination of $100 trillion during their last inflation period. This would correlate to a near 156% consistent rise in worth. During the infamous 2008 surge, a single USD would translate to a whopping 2.6 trillion Z$ according to the report of Aaron O’Neill from Statista.com. In current time, Zimbabwe finds themselves having to reset their financial system to create a new currency. This did not seem to work, the current highest denomination is a Z$50 – a 50 dollar banknote – which would rely to be tripled just to buy a beer at the supermarket. Zimbabwe is still seeing a near 550% inflation rate that somehow manages to put their 2008 numbers to shame. Some could believe that with the increasing worth of goods and services, Zimbabwean’s pockets would just rise in number to accommodate the issue. However, Zimbabwean’s pockets are not rising, what is rising is the poverty rate. Zimbabwe’s inability to maintain a financial structure to hold their economy has crippled their country. Alongside the massive jump from the 2019 to 2020 inflation rate of nearly 320%, there is a direct correlation to the poverty rate staying at a near 80%. A mind blowing statistic from macrotrends.net. The poverty connection is a clear issue that the abstract of money holds. While currency gives an economy a proper structure, if not performed to the perfect tee, there has to be those who struggle. Whether this be the homeless in the US, or just the average Zimbabwean, poverty is a consequence to the abstract of money.
The history of money is a roller coaster worth the investigation. Money is an abstract concept that humans naturally created to better their own lives through what they conceive as value. There is no embodiment of worth that currency truly holds. However, whether through the use of gold, the USD, or a limestone, humans have had some sort of item to guide their interests in modernity. But just who, who determined what society uses for a standard unit of wealth? The answer is simple, we did. With money not having true worth, we assign worth to our standard units as it enables us the ability to barter for a better living.
Abstract – dictionary definition. Vocabulary.com. from https://www.vocabulary.com/dictionary/abstract.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
O’Neill, A. (2021, June 1). Zimbabwe – inflation rate 1986-2026. Statista. from https://www.statista.com/statistics/455290/inflation-rate-in-zimbabwe/.
“The Invention of Money.” This American Life, 19 Feb. 2018, https://www.thisamericanlife.org/423/the-invention-of-money.
Zimbabwe poverty rate 2011-2021. MacroTrends. from https://www.macrotrends.net/countries/ZWE/zimbabwe/poverty-rate.