WARNING: There may some tongue-in-cheek attempts at humor in the following. No, I do not seriously propose that it happened just this way, but I’m pretty sure the general steps were something like this.
In the beginning, there were few people, each doing everything needed to sustain his own life. They must have been pretty good at, too, because before long (geologically speaking) there were a lot more people. Nothing they needed to live was naturally available in usable form. Fruit and berries had to be picked. Firewood had to be carried. Fish had to be caught. The stuff was out there, but required human action to make it usable by humans. An ocean of fish are of no value until someone catches one of ‘em. A fish is just a fish until human action turns it into food; it’s the human action that adds value.
(A side note on the concept of “natural resources:” The fish gain intrinsic value in their natural state only to the extent of someone’s ability to envision what might be done with them in the future. Oil wasn’t worth squat until some sharpie figured out how to make it slick and burn it.)
One day, someone realized that he was awfully good at making shoes, but not much of an axe maker. His neighbor was a heck of an axe-maker, but ran around barefoot. So this guy goes to his neighbor and swaps a pair of shoes for an axe. Now multiply that process and the principle upon which it is built many, many times and you have an economy and a society built on the free exchange of goods and services. Everyone did what he did best or enjoyed most.
There are only two ways to get what you need: you can produce it or have someone else produce it for you. If you choose the former, your only concern is for the ownership of the raw materials. If you choose the latter, you have two ways of getting it from the other person: without his permission or with it. If you choose the former, you are a thief, pure and simple. (Paying someone else to do your stealing for you doesn’t keep you from being a thief; it makes you a politician, and your employee a tax collector.)
If you choose the latter, there are but two ways of getting the other’s permission: trade for the stuff or just ask him to give it to you. If you choose the latter, you are a beggar. No shame in that, as it stands, but not much future, either. If you choose the former, you must trade something for his goods. Since you are doing this with his agreement, it must be something he will voluntarily accept in exchange. This takes us directly back to the first question in this reduction. If he wants shoes, you must either make the shoes, yourself, or get them from someone else.
To boil all that down, there are three ways of surviving: produce what you need (Whether for self-consumption or trade makes no difference; you are producing the stuff, yourself.), beg for it, or steal it. You are a producer or a parasite. Period. No other options. No amount of window dressing or semantic hair splitting or image-building terminology will change this fact. Beggars and thieves are parasites, consuming the living tissue of the society that keeps them alive. No thief or beggar can survive without producers to prey upon. Do you hear me, Barack?
So in the beginning, wealth was real: shoes, axes, fish, sheep, grain, etc.
When you trade sheep for apples, you have to (1) find an apple farmer who likes mutton, and (2) carry your sheep to him. Man! What a pain! Then someone had a real brainstorm. “I’ll leave my sheep in town, and give the apple farmer a note saying he can have them in exchange for the apples.” That worked pretty good until some sharpie figured out that he could lie about having the sheep, at which point the apple farmer quit accepting paper as trade. It couldn’t have been long before some enterprising gent said, “Tell you what. You leave the sheep with me. I’ll give you a certificate saying you’ve deposited them with me. The farmer knows I’m trustworthy, so he’ll take my certificate, and you won’t have to carry your sheep with you. In exchange for loaning you my reputation, I’ll keep one of the sheep for myself.” Ah. The birth of the banker.
Pretty soon, folks were running all over, exchanging sheep certificates for apple certificates. This not only freed people from hauling sheep all over creation, it also opened up choices. For example, let’s say the apple farmer didn’t like mutton, but he really needed some wheels for his ride. He traded the sheep certificate to the wheelwright for a new set of wheels. There were a jillion different certificates – sheep and apples, of course, and cows, shoes, fishhooks, barrels, plows, services – like plowing, or babysitting – you name it. However the trading was somewhat limited geographically because, while the wheelwright didn’t take the sheep, directly, he still had to be close enough to ‘em to herd ‘em home.
Then someone came up with one of the greatest ideas in all human history. “Let’s set up a standard of exchange, and pick some substance to represent it. The substance needs to be rare enough that not everyone can gave an unlimited supply of it. There were probably a few false starts before they settled on precious metals – silver and gold. It worked like this: you sold your sheep to a broker (dare I say a stock broker?) in exchange for specie. You then carried the specie to the apple farmer and traded it for apples. The farmer had the freedom of trading the specie to anyone for anything. It was universal. It was convenient. It was so flippin’ cool! A bit of this stuff in one’s pocket could be transformed into anything in the world! Even services, like plowing, could be exchanged for it, and it for services. Shoot, folks could be found who would do stuff in exchange for it, and thus was born the idea of working for wages. (And so, too, was born the blues.)
Only one, final evolution remained. Gold is heavy, and if you are going very far it’s a pain to carry much of it. We go now back to the banker. If a man’s reputation were sufficiently strong, he could write out a certificate saying you had so much gold on deposit with him, and you could travel with the certificate. Fits right in your pocket. Your trading partner, even across the Alps, could give that certificate to his banker in exchange for gold or other certificates, which could then be exchanged in Germany as easily as your original could be in Italy. Gold on the banks of the Med could finance business clear up on the North Sea. It was too good an idea to keep secret, and pretty soon, the whole world was using money. Money was not the root of all evil. It was the mechanism by which human society broke the chains of feudalism and spanned the globe. It enabled – and continues to enable – the development of technology, medicine, art… you name it. Any human being can trade labor for money and thus finance his life as a producer, rather than as a parasite.
Barter was surely the basis of it all, and some advocate a return to a barter system. That would catastrophic. Think about the people who work in a semiconductor factory. They make the chips that drive the computers that have changed the world. Without them, all industry would fail, and all finance and investment would crash. But the people who make the bloody things have skills that are utterly useless outside the factory. How much market is there in an agrarian, barter economy for someone who can deposit 12 microns of boron on a silicon substrate? And when you concentrate thousands of people in a small area like a factory town, how can you get enough cattle and cabbage in there to feed ‘em all? The smell, alone, would destroy an economy!
You have to have money to run an industrial or technological society. It was money that freed us from the soil – money that freed us from the plow and the forge – money that let us develop the technology to take us to the stars – money that let Ray Kroc feed cheap hamburgers to more people that were living on Earth 100 years ago. Money the root of all evil? No, it is one of the noblest and finest inventions of the human mind. Money was first built on the integrity and trustworthiness of a handful of visionary men. That’s something, isn’t it? How can something built on trust and honesty and decency and hard work be bad? And yet, it is almost universally regarded as vile and filthy, the source of sin and depravity.
How did that happen?