This is the true and remarkable story of private coinage and banking in Britain in the early years of the Industrial Revolution (1775-1850). Making money was a business in demand. The needs of business for small denominations were changing. Merchants needed small denomination coins in copper and silver.
The Royal Mint couldn’t be bothered. It made coins to serve the elites, not the new and burgeoning working class. Free enterprise stepped in with a new industry that truly saved the day–before the Crown cruelly stamped it out and ended one of the most beautiful experiences with private money in world history.
It is very likely you have never heard of this episode. You can read dozens of histories of the early years of capitalism and know nothing of this spectacular industry – to say nothing of its lessons for today.
What is going on here? George Selgin, professor at the University of Georgia, has discovered the monetary equivalent of the lost city of Atlantis. He has written a full-scale historical narrative–one that is deeply interesting and engaging–that has been largely unknown, even to scholars of the Industrial Revolution.
It is not only the first full-scale history of this episode ever written. It is likely to maintain a place as the definitive work for many decades. It is 400 pages, but always and everywhere very interesting. It includes 20 pages of color photos. The prose is elegant, and the method of analysis is thoroughly Rothbardian: this is flesh-and-blood history of real human beings.
Selgin tells of the stories of the merchants, the button makers who turned into coin makers, the way the system worked, its wonderful innovations and its evolution, and reveals the cruelty and destructiveness behind the government’s suppression of the industry.
The industry developed to the point at which 20 independent mints were involved in making coins. The private coins served the merchants and the workers, while the government’s currency served the landed rich. The new industry was like capitalism itself: it was designed for everyone to the benefit of everyone.
The private coins tended to be better quality than the government’s coins. Why? Because private merchants could refuse them, and consumers could too. There was competitive control over them and an inexorable tendency for currency to improve in every way. That’s why the book is called “good money.”
And what of Gresham’s Law, the tendency of “bad money” to drive out good money? Selgin’s account demonstrates something striking: it only holds under government system of money which overvalue bad money. In a private system, good money–like good products and services in a free markets–outcompetes the low-quality money. In a market-based money system, there is an inexorable tendency for good money to win out.
The story is riveting in its own right, not only as monetary history but as business history. He has highlighted a fantastic industry that has long gone unnoticed. But beyond that, there is a massively important economic point. What Selgin has done here is help us to understand something critically important: were it not for the state, a wholly private money system would emerge from market exchange. That means private coinage, private weights and measures, market-driven exchange rates between different kinds of monies, and a fully private banking system to go along it with it.
In fact, this is precisely how money originates: from the within the market. Why does the state intervene? The British case is typical. The state wants to control the economy, tax the economy, and control the people. If a fully private system comes about, the state finds its job all-but impossible. That is why the state takes over at the expense of private enterprise.
In other words, the state is not responding here to a market failure but a market success. It is not a “public goods” rationale that leads to state intervention but old-fashioned jealousy over power and wealth. Selgin’s book shows this not through polemics but through a completely new telling of real-life events about which we’ve previously known next to nothing.
The story alone is engaging and entertaining. But readers will have to brace themselves for the conclusion: “The episode compels one to ask, first of all, whether modern governments should be in the coin-making business at all.” He is right that “economists tend to take governments’ monetary prerogative fro granted.” This spectacular book by Selgin could change that forever.
The impact of this book, one of the most important historical narratives ever written by an Austrian economist, will be felt for many years. He has shown us the real history behind what has been largely theory in previous works. Think of this as a historical application of Mises’s Theory of Money and Credit or Rothbard’s What Has Government Done to Our Money.
Selgin was the first Mises Institute scholarship student, and the publication of this book by the University of Michigan Press was made possible in part by the Mises Institute.