AXIOM #1 – Money IS Barter IS Government

AXIOM #1

Money is barter is government.

Economists and other theorists often claim that before money (or a medium of exchange) there was barter. This then paints the picture that barter and money are two distinct things. This claim and the resultant picture it paints are flawed on several grounds.

The first is that the definition of barter is usually defined as necessary exchange due to a division of labour.

The second, which flows from the first is that, no one can engage in necessary exchange due to a division of labour if they first do not own both the product they intend to exchange and the means of producing those products.

Third, and most importantly, neither of the first two can be accomplished without a government.

If anyone claims that before money there was barter this claim must come with an assumption that barter was necessary otherwise why do it? Further, it can only be necessary if there was a division of labour already occurring. However, this apparent division of labour could not exist without a government otherwise there would simply be chaos. We can’t assume that up until the point we needed money everyone respected each others space, land, product, and means of production, and then like a switch, all of sudden we lost all that mutual trust, descended into chaos, and then demanded money, property law etc. The only way anyone can own land, the means of production, and the product, is for there to be a government in the first place to protect all the property, and then and only then would it be possible for any form of barter, let alone exchange using money.

Why then, if a government did indeed exist, would it wait until there was chaos before introducing money? The answer is first, it wouldn’t, and second, it is because both barter and money are the same thing and more to the point, both ‘are’ government itself (and so too is all economic activity). Let me explain.

All economists know that money is nothing more than an IOU. If we wish to entertain the romantic theory that barter existed before money then let us assume that I grew corn and you fished. Your fish is caught on more of a regular basis than the growing of my corn so you give me fish each month on the agreement that when my corn is harvested in 6 months time I give you some of my corn. Now according to all economists, what we have created here is an IOU, I owe you corn in 6 months time because you gave me fish.

It is then suggested that the lack of co-incidence of wants causes these barter exchanges to break down. For instance, you want my corn but I don’t actually want your fish. What are you going to do? And it is here that apparently we saw the need to create a medium of exchange so that you the fisherman can sell your fish to some market (which magically appears now), get your medium of exchange in the form of gold coins or paper notes or whatever, and then go buy my corn, because I am willing to accept these coins or paper notes in exchange for my corn.

The big problem in this fantasy picture is that the very first IOU, you know the one where I agree to give you corn in 6 months time, yes that one, well, this is not worth anything unless there first exists a government in order to protect and enforce it. What is stopping me from telling you to go take a hike just as my corn is harvested? What is stopping you from taking all my corn? In fact what is stopping either of us from taking the whole of the others means of production from them, i.e. the corn farm or the fishing boat? Get the picture?

Therefore, this IOU, in order to have any value requires a government and the governments acceptance to be liable to enforce it.
This means that any type of bartering requires a government and the governments acceptance to be liable to enforce it.
This means that any resource being treated as a commodity requires a government and the governments acceptance to be liable to enforce it.
It also means any thing which is treated as money, whether it be seashells, gold, tally-sticks, or whatever, will only be treated as money because a government says so, and because a government has accepted the liability of enforcing it as money.

The moment anyone entertains the idea that they want to own the land, the means of production, the product thereof, and then exchange it, there must without exception, be a government and the governments acceptance to be liable to enforce it. Without a government you are only moments away from having it all taken from you by someone stronger. The only type of barter that could ever exist without any form of government is gift barter which would be done between tribes or clans as some form of peace offering.

Conclusion:

No economic activity can exist without a government and the governments acceptance to be liable to enforce it. This includes barter, money, property ownership, IOUs, contracts, or whatever comes under the heading of an economic activity. You can not treat any ‘thing’, no matter what that thing is, as a commodity to be exchanged and expect to be able to enforce it without a government, and therefore money already exists by virtue of you treating that thing as a commodity to be exchanged. Money is barter is government.

We will expand on this concept of money ‘being’ government further under the next axiom.

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