These societies used to celebrate the harvest season as an important event. If a family grew rice, they would eat some of it immediately after the harvest, and they would store some of it to feed themselves until the next harvest. If after they had stored enough to eat and still had extra, they would have a surplus harvest. This they would traditionally barter trade for other goods they might need. However, if they still had more left, they would simply give the extra away to friends, family and anyone in need. This is what is called a favour. Traditional societies were always doing each other favours. “Whenever we have extra, we share” was the unwritten rule of these societies. Favours such as these were never quantified, for this is what a favour meant. In contrast, when we do a favour, we hope that that favour would be returned to us in some form, when we are in need. This was the social safety net in which traditional societies operated.
As time passed, the farmer who had surplus did not just want to give it away as a favour. He wanted the favour be returned to him whenever he wanted it back. He wanted to measure how much he gave away so that one day he might collect the same or the equivalent amount. He needed to find a way to quantify how much he gave so he began to measure the grains he gave. Furthermore, he would only give it to someone who would promise it back upon request. So the farmer required the person in receipt of the grain to write him a note stating how much he was given and a promise to return the same amount or equivalent when requested.
This note, a promissory note (the term used here for convenience of explanation, but this modern accounting term explains the gist of the meaning) was the beginning of money. Another innovation for the creation of money was the innovation called the market. A market is a place where people who had surplus would gather. If you are looking for a place to exchange favours, you would go to the market since it was a place where you could find many people looking for deals.
As time passed, Farmer-A also realised that he did not need to store grain for his family after harvesting. All he needed to do was to give all his extra grains to Farmer-B in exchange for a note that stated the amount of grain given to him. When Farmer-B harvested his grain, all he needed to do was to go to Farmer-A and exchange his original promissory note for the amount of grains stated in it. In the case where Farmer-A needed grain immediately, he could always exchange his promissory note with Farmer-B with Farmer-C who would be harvesting his crop at that time. Farmer-C would be easy to find in the market, or through word of mouth. Farmer-C would then collect the grain he needed from Farmer-B and the cycle was complete.
This was the beginning of money. Money had a stored value of the total amount of grain written on it without the need for a granary. It was also a medium of exchange, i.e. it could be transferred when needed.
Thus money has several key functions. The promissory note had a stored value which wa measurable and allowed the farmer in the scenario above to collect on what was promised to him at a later date. Instead of storing grains after the present harvest, the farmer could store it after a future one, which would reduce his storage area maintenance workload. It also allowed him to enjoy freshly harvested grain, or other produce like fruits grown by another farmer, thereby reducing the risk of his harvest getting rotten or spoilt.
The note was also exchangeable, i.e. the favour could be transferred. So if I were to do you a favour today, I can ask you to return the favour to someone who did me a favour in the past. The promissory note could also be a good unit of account in that the farmer would know exactly how much grain he would be able to collect with the promissory note at hand. Farmers could handle multiple promissory notes, some owed to them, and some to others.
It is important to keep in mind that the promissory note was linked to something real. We could only produce promissory note which represented the amount of real commodities we produced. We could not produce more notes than actual commodities available. The farmers of the past were powerful people since they had the ability to produce money. However, if they were to produce more promissory notes than actual exchangeable commodities, the promissory note would reduce in value.
For example, if I was a farmer who produced a promissory note for 1 tonne of rice, but only produced 0.9 tonne, then my promissory note which shows 1 tonne of rice could only be exchangeable for 0.9 tonne, for that is all I had. Thus my promissory note would suffer from a lost in value, i.e. inflation. If I were to make a habit of issuing more promissory notes that the real value, eventually people would lose confidence in my promissory note and start looking for others to trade with.
To the Madyan People (We sent) Shu'aib, one of their own brethren: he said: "...give not short measure or weight: I see you in prosperity, but I fear for you the penalty of a day that will encompass (you) all round.
Quran 11:84
There are many forms of promissory notes or money that have been used in the past. The Ancient Egyptians used to deposit their surplus grain in a central granary run by the government. This made sense as the central granary allowed surpluses to be stored for longer periods and were safe from theft. The government would issue a note showing the total amount of grains stored in the central granary. People even used to issue cheques for transactions which were convertible to grains stored in their granary account, making the granary the first ‘modern’ bank. We learn from the Quran that Yusuf (Joseph) was the first person to create a ‘federal reserve’, where he saved for a rainy day. He centralised the administration of the granaries in Egypt and stocked up with ‘money’ in anticipation of the drought to come and wipe out Egypt’s agriculture.
[Joseph] replied: "Place in my charge the store-houses of the land; behold, I shall be a good and knowing keeper.
Quran 12:55
[Joseph] replied: "You shall sow for seven years as usual; but let all [the grain] that you harvest remain [untouched] in its ear, excepting only a little, whereof you may eat.
Quran 12:47
Money in the past was always backed up by something real, something with an intrinsic value. Grain has the intrinsic value of a food item. One kilogram of rice has the same ‘real’ worth today as it did 5000 years ago, One kilogram of rice has been able to feed a family of five for a day since the beginning of time. It was able to be converted to the same amount of energy through the body’s time independent metabolic processes.
Other back-ups for money existed in the past: commodity-based formed based on good such as fish, salt and sugar; and substance-based money based on substances like stones, shells, silver and gold. It is important to keep in mind that this substance-based form of money is a more modern form of money and none of substances have any intrinsic value. Gold is just an ornament and cannot provide sustenance to humans. However, their advantage is that they last longer, allowing the physical form of money greater longevity and providing a strong argument for substance-based money as a mode of exchange function.
Thus money is a tool and not the aim. It was and is a tool to store value. It is a tool to measure and account for value. It is a means to exchange favours between willing peoples. Different forms of money have served better for different uses of money. For example, gold would be better as a concentrated means of exchanging value, but paper is more transportable.
In another sense, grain is a better form to store value since a grain of rice is more valuable to human survival then a gram of gold. Money used to be backed by something with real value like rice (you can eat rice, but not money). Backing up money with something else makes it dependant on the factors of production for that commodity or substance. The writing of the promissory note is dependent on how much grain we can produce from a hectare of land. Similarly, money backed by gold is dependent on how well it can be mined and so on.
The use of money reflects the general trend in the evolution (or devolution) of human civilisation. From a society which emphasised sharing and cooperation like the ‘hunter-gatherer’ societies to the more possessive and competitive society of agrarian society. Even these agrarian societies emphasised sharing and cooperation, which prevailed after the basic needs (food, cloths, shelter) of the individuals were met.
However, the human civilisation experienced a drastic change with the advent of the industrial revolution. This saw the unprecedented growth of human civilisation in the material sense. Rapid technological development based on an uncontrollable lust for the new and easily available fossil fuel energy enabled the level of production to be increase to levels never seen in the history of humanity. Suddenly a single family could cultivate up to 100 hectares of farmland instead of an entire village needed in the past.
The revolution created surpluses never seen in pre-industrialised societies, which also meant more money to ‘play’ with.
What would the modern farmer do with so much excess money?
The industrial machinery produced all forms of product and services to help him part with this money surplus. It needed to produce products for which man would never be satisfied. A man can only eat so much, but he always wants a faster car, a bigger house, a computer with a larger hard disk or a computer operating system with functions he would never use. Thus, the more possessive and competitive agrarian society became a rabid accumulative and egocentric industrial society. Industrial systems were needed for man to posses more and more, regardless of whether he needed it or not. Power began to shift from the farmers in the countryside to the merchants in the cities. The countryside was ‘need’ based, the cities were and are ‘want’ based.
Money slowly evolved to reflect this new reality - or vice versa - probably they evolved together. The evolution of money from being based on commodities such grain, to be based on materials such as gold, moved another step to finally become self valuating. It is now based on nothing!
Money now is only worth whatever the money says it does. Money today is no longer a tool but an aim. This can be seen from our mentality. When we start work after our education, we think about how much money we would like to earn and not about what we would actually want out of life (using money as a tool). In the beginning, the farmer created money to trade his surplus, making farm owners rich.
Today, farmers are the poorest segment of society. Nations where the majority of the population are farmers are often most vulnerable to famine. During the height of its software-boom, Bangalore experienced one of the largest expansions of the middle classes in modern India. However, the same area also experienced severe famine amongst its farming communities. Why are farmers, who are in the business of food production, dying of hunger?
In many locations where tourists flock, local resources are diverted to servicing the needs of tourists with money. Money is used to divert water to swimming pools, water needed by farmers to grow their crops. Although a mutual trade of two willing parties, it does not consider the ‘hidden’ other who may be affected. Modern transaction are selfish in nature, they only consider the short term and the parties making the transaction. They do not consider the implications of their dealing on others.
O YOU who have attained to faith! Do not devour one another's possessions wrongfully - not even by way of trade based on mutual agreement - and do not destroy one another: for, behold, God is indeed a dispenser of grace unto you!
Quran 4:29
Has money outlived its use? The ancient farmers used promissory notes as a means of measureable exchange, so that they could keep track of their surpluses. Money is supposed to do this. Today we say money is a good account of ‘favours’. Money is claimed to be a fair and unbiased way of quantifying our work, so that we may be rewarded accordingly. But how do we then justify farmers in Africa earning USD 50/month when a CEO of a supermarket earns USD 70,000/month. Is it because the CEO’s job involves high pressure and the African farmers’ job does not? If the CEO does not perform and fails in his tasks, he is fired but if the farmer does not perform and fails, he dies. Which is more stressful?
Is it because the CEO works harder? The CEO may work 10 hours a day in his air-conditioned room, but the farmer may ‘only’ works 7 hours, but does this justify such a large discrepancy in earning capacity? Furthermore, it is hard to do 7 hours of physical work, but 10 hours in an air-conditioned room is surely easier, or is it?
How can we justify the farmer in South America earning USD 100/month when a junior investment banker earns in access of USD 7,000/month. After 20 years of farming, the farmer would still only earn the same USD 100/month, but the investment banker would now be earning in excess of USD 50,000/month due to his seniority. Does money really reflect true surplus or true value? How do we justify the child who is working in a sweatshop earning USD 30/month, deprived of his innocence and childhood, whilst the fashion designer in Dubai earns USD 100,000/month.
"And O my people! give just measure and weight, nor withhold from the people the things that are their due: commit not evil in the land with intent to do mischief.
Quran 11:85
Interestingly, the farmers who originally created money can bring the whole system to its knees if they wanted. All they have to do is refuse to sell their crops. They could return to the original system of storing their surplus and giving away excess yield as favours to those who really deserve them. This would bring the investment bankers, the guys or girls sitting constipated in their air-conditioned rooms to an end. For they are unable to eat their USD 50,000/month and they would find nobody to exchange their now worthless paper money for even a single grain. They might even taste the pain and agony of hunger.
This would be true justice and the world could again arrive at peace with itself. But the bankers know this and use every weapon of mass destruction (distraction) at their disposable to stop this from happening. Their most destructive weapon is the four letter word called ‘debt’, which we will explore in future reflections.
[AND THE SONS of Jacob went back to Egypt and to Joseph;] and when they presented themselves before him, they said: "O thou great one! Hardship has visited us and our folk, and so we have brought but scanty merchandise; but give us a full measure [of grain], and be charitable to us: behold, God rewards those who give in charity!"
Quran 12:88
