In discussions surrounding of the world’s monetary systems today there is usually one thing almost everyone can agree on: that money should be controlled by the organizations we call “states” or “sovereign states.” Nowadays when we say “the US dollar” we mean the currency issued by the US government. When we say “the British pound” we mean the money issued by the regime of the United Kingdom.
This assumed need to have state-issued money has not always been the reality, of course. Indeed, the history of the rise of the state is a history replete with efforts by states to replace private-sector money with state-controlled money.
The reasons for this are numerous. Control of the money supply—usually complemented by intervention in the financial sector—allows states much more flexibility in expanding state spending and state borrowing. Perhaps most importantly, this allows states to spend prodigiously in times of war and other “emergencies.”
As we will see, this struggle between the state and private finance has been a long one. It took many centuries for regimes to secure the sort of legitimacy and regulatory power necessary to claim a monopoly over money. And even today, states are still somewhat constrained by the realities of international competition between currencies. They are also constrained by the continued existence of quasi monies that function as stores of value—such as gold, silver, and cryptocurrencies. Yet, it is impossible to deny that the state has made enormous gains in recent centuries when it comes to taking control of money.
The order of these events also remind us of another important aspect of states and money: the rise of states was not conditional on kings and princes seizing control of the production and regulation of money. Rather, the causation runs in the other direction: as states became more powerful, states used that power to also take control of money.