- New Directions in Modern Economics series
Edited by John Grahl
Chapter 1: Money and Finance Today
1. 1.1 Money and finance today Trevor Evans INTRODUCTION Money is such a pervasive feature of a capitalist economy that it is easy to take it for granted. Money, of course, did not arise with capitalism – the earliest surviving coins, found in Western Asia, date from the seventh century bc.1 Nevertheless, in the ancient world, as for much of the Middle Ages, monetary transactions were relatively confined, and the lives of large parts of the population were not dependent on them. In a developed capitalist country, by contrast, money is omnipresent. Households depend on obtaining some type of monetary income, in most cases by means of paid work. The principal dynamic of the economy is determined by firms which invest money with the aim of making even more money. And while the state has come to play a major role in the economy, its scope is dependent on raising money, generally either through taxes or borrowing. Although money is so widespread under capitalism, economists differ greatly on its economic significance. The mainstream or neoclassical approach to economics believes that money is like a veil in that it obscures what lies behind it. For this reason, it considers that it is helpful to separate economic analysis into a real and a monetary sphere. According to this view, by first focusing on the real sphere, where money is left out, it is easier to grasp the most important processes that take place in an economy. Neoclassical economists consider that money can then...
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