ABSTRACT
This chapter will demonstrate that, unlike the idea of a world system with the hierarchy between core and periphery as envisaged by I. Wallerstein, the global silver march after the late 16th century brought about a mutual interdependence among different types of monetary economies. Unlike A. Frank, who focusses only on the flow of precious metals, the current analysis reveals the diversified responses at ground level by paying attention to base-material currencies, local paper money and local credit.
Global silver flows of unprecedented scale from the 16th century through the 17th century significantly expanded the sphere of anonymous/distant exchange. Excessive liquidity in Quadrant I could not but affect proximate exchanges. Importantly, the contraction of the silver flow after the 17th century following an extraordinarily affluent currency supply in Quadrant I divided local economies across the world in three directions: (1) a currency-oriented path (increasing local currency supply in anonymous/proximate exchanges), (2) a credit-oriented path (intensifying the role of local credit in named/proximate exchanges) and (3) dependence on commercial oligarchies that monopolized locals’ access to anonymous/distant exchange. Among the three paths, the first one was the most common. Increasing the issuance of small currencies (copper coins, shell money, etc.) commonly followed surges in silver flows after the 17th century. It was advantageous for locals to keep a separate local currency for mediating exchanges of local products that could guard against the extreme instability of price movements in distant trade and offer a safe haven for local exchanges. Account books kept to record expenditure for clan rituals by Chinese locals reveal that establishing prices in terms of copper coins, which were available for proximate exchanges, did not coincide with setting prices in terms of silver for distant exchanges. Through interactions among these three paths, meanwhile, new state systems of organizing debts nationwide (named/distant exchanges linked to named/proximate exchanges) emerged, and banking systems originating from named exchanges began to supply anonymous currencies in the form of banknotes. Comparison between three local paper monies – country banknotes in England, domain notes in Japan and native local notes in China – uncovers how the organization of local exchanges determined the way national economies took shape.
