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The second cashless era: Durability of transaction impulse

| Updated: November 16, 2017 21:18:51

The second cashless era: Durability of transaction impulse

Future historians might look back on the 21st Century as the start of some kind of a cashless society. This is not to say the causal factors all erupted in the 21st Century, since the last one-third of the 20th Century sowed some of the irreversible seeds: advent of the credit-card and artificial intelligence with its many human-substituting contraptions, like the robot, one of which may displace multiple workers, thereby multiple pay-checks. Yet, the 21st Century is already set to literally cash in on a cashless opportunity.

If that turns true, it will revive memories of the prior cashless experience in human history over three-thousand years ago, when cash did not exist at all, and barter was the only exchange medium. Of course, this was the original human society when barter catered to almost all of our needs, all basic and manageable. Conquests paved the pathway to a cash economy, typically seen as having become staple incrementally, beginning with standardising South American silver coins from the 15th Century: from land, slaves, women, treasuries, and raw materials seized from the vanquished as booty for many, many previous centuries until the most precious of them all, such as bronze, silver, gold, diamond, and platinum, among others, could be used as bullion upon which to circulate paper notes. Even paper notes progressed from bonds and securities before appearing as publicly available paper currencies. If a point had to be identified in this stumbling cash journey, it would have to be in British North America in late 17th Century, but even then in selected corners of the world before more conquests and the establishment of markets disseminated them.

Between then and the 21st Century prevailed what future historians might dub as the pure cash era: it was pure in that cash became by far the most dominant medium of economic exchange; either that, or it served as the asset upon which many other transactions could be conducted. Certain phases stand out in this irregularly and unevenly distributed cash age: in some nooks and corners, a silver age, highlighted by the seizure of Latin silver by Portuguese and Spanish conquerors from the 15th Century; then the more classified gold phase, shifting the locus to, particularly, Great Britain and the Netherlands, in their Asian voyages.

Cutting a long story short, the phase of the gold standard ended in 1971, when the Bretton Woods institutions, established by Great Britain and the United States during World War II (the International Monetary Fund particularly), collapsed, shifting the fixed exchange-rate to a floating counterpart. The 1950 emergence of the credit card (a Diner's Club innovation), in addition to many more guarantees also permitted cheques of multiple kinds (from personal to bank to travellers) to also substitute for cash, a process that was to grow, not in historical fits and starts, but all too suddenly, so that by the 21st Century, the entire world had been exposed to, and a majority even experienced in, cashless transactions.

The two cashless eras depict differences. First, as deducible, the previous one had to be rooted upon some fixed and dispensable asset, whereas today, as credit-card holders quickly learn, such assets can be nominal, and increasingly, not even necessary, to open an account. Second, originally there were very few and all too private transaction institutions, such as the profession of money-lenders; but today, though there are too many of them, the larger proportion of private

institutions can be distinguished from the more credible public institutions, such as the post-office or nationalised banks. Third, the previous markets were paltry, and dealt mostly with edible, apparel, and specie transactions, whereas today's markets may sometimes be more sprawling with demands that not even mass factory production can hope to fill. Finally, originally the cashless society responded to primarily local demands, though by facilitating long-distance specie exchanges, opened up a geographical expansion that became its most famous and significant long-term contribution; yet, on the other hand, the current cash era compensated for the diminishing returns in geographical expansion (the planet having been scaled to its very limits), fed, and copiously at that, the expanding consumption list, from a few to infinite products (as a comparison of the typical 16th Century household with one today will confirm), as well as from one item of a single product to multiple items of the same product (the wardrobe comes to mind, but so too a library, transportation vehicles, communications media, and so forth).

If the differences partly spell out why each civilisation carries its own personality (whether they be geographically concurrent or historically apart), the similarities give a sense of the cash society's durability. Undergirding both is a transaction impulse that has only been whetted across the centuries, and with that an instinct that has become so basic to the human existence that it is unlikely to vanish before the human species vanishes. This may be one reason why cash will remain in one form or another until eternity: the liquidity it provides so instantly cannot be matched by any non-cash media, whether a cheque, credit card, bullion, and so forth. It is by far the most sought-after non-edible commodity in a recession or depression, which constitutes a second similarity, even though the size, scale, and consequences have often been poles apart. In turn, these point to an institutional anchor more helpful than a bank, one that can cushion recessions/depressions when they arise: the state has won acclaim as the most reliable institution doing so, in turn suggesting, for as long as the state system exists, even in such conjunctional formats as a regional organisation, cash, the most utilised comparative indicator between countries, is not going out of business.

Ultimately, the unequal development of countries feed into the indispensability of cash: affluent societies can dispense with cash for their automated counterparts, but impoverished peoples, who yearn for upward mobility, need to experience the thrills cash brings before replacing it with substitutes.

The series turns to India, a country tagged as "the first digital, cashless society" (Stephen MacBride, Business Insider, July 02, 2017), where, indeed, this shift highlights its relationship with poverty.




Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.

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