The collapse of national capitalism — a Sophoclean tragedy – Part 1 – by Keith Hart


The global economic crisis is not merely financial, a moment in the historical cycle of credit and debt. The removal of political controls over money in recent decades has led to a situation where politics is still mainly national, but the money circuit is global and lawless. Events since 2008 should be seen as the collapse of “national capitalism”, the money system that the world lived by in the twentieth century. This has been unravelling since the US dollar went off gold in 1971 and money derivatives were invented the following year. The idea of central bank money or legal tender is tenacious despite this development. As the need for international cooperation intensifies, the disconnect between economy and political institutions undermines effective solutions. The crisis of the eurozone in 2011-2012 may be understood best as a Sophoclean tragedy in which good intentions cannot remedy the consequences of past mistakes.

The view from 2011/12

The apparent upsurge of global political activism, even of revolution in 2011-12 was the political consequence of the financial crisis of 2007-9. There is still a tendency to see the crisis in economic rather than political terms. In this respect, neoliberalism’s detractors often reproduce the free-market ideology they claim to oppose. The euro is by no means the only symptom of this crisis, but it may well be seen in retrospect as the decisive nail in the coffin of the world economy today.1 One way of approaching our moment in history is to ask not what is beginning, but what is ending. This is not straightforward.

As an antidote to the daily news, I find it useful to attempt a historical periodization of the last two centuries or more, mainly to indicate that the present rupture in history opens up the prospect of several decades of turbulence.

1776-1815First age of war and revolutions
1815-1848The industrial revolution
1848-1873Origins of national capitalism
1873-1914First age of financial globalization
1914-1945‘The second thirty years war’
1945-1979The post-war world revolution
1979-Second age of financial globalization
2008-Third age of war and revolution

My aim is not to predict the inevitably dire outcome of the present global crisis, but to invite public debate at a more serious level that may help us to avoid such an outcome.

National capitalism

“National capitalism” is the synthesis of nation-states and industrial capitalism. Its main symbol has been national monopoly currency (legal tender or central bank money). It is the institutional attempt to manage money, markets and accumulation through central bureaucracy within a cultural community of national citizens. Its origins lay in a series of linked revolutions of the 1860s/early 70s based on a new alliance between capitalists and the military landlord class.

Governments then combined with large corporations to launch a bureaucratic revolution and mass production in the late 19th century. The national system became general after the First World War when states turned inward to manage their economies in war and depression. Its apogee was the social democracy built after 1945; but it has been unravelling since the US dollar went off gold in 1971, a new regime of floating currencies emerged and money derivatives were invented in 1972.

Money expands the capacity of individuals to stabilise their own personal identity by holding something durable that embodies the desires and wealth of all the other members of society. Its chief function is remembering (Hart 2000). People learn to understand each other as members of communities and money is an important vehicle for this. They share meanings as a way of achieving their practical purposes together.

Nation-states have been so successful in a relatively short time that it is hard to imagine society in any other way. I identify here five ideal-types of community all represented by the nation-state:

  • political community: a link to the world and a source of law at home
  • community of place: territorial boundaries of land and sea
  • imagined or virtual community: the constructed cultural identity of citizens
  • community of interest: subjectively and objectively shared purposes in trade and war
  • monetary community: common use of a national monopoly currency

The rise and fall of single currencies is one way of approaching national capitalism’s historical trajectory.

In my article on “heads or tails” (Hart 1986), I argued, following Polanyi (1944), that money is both a token of state authority and a commodity made by markets, at the same time an aspect of relations between persons and a thing detached from persons. States and markets are combined in national capitalism, but policy swings erratically between the two extremes. David Graeber (2011) has made a similar contrast between money as virtual credit and as currency or bullion to analyse the history of debt over the last five millennia.

Money is the principal means for us all to bridge the gap between everyday personal experience and a society whose wider reaches are impersonal (Hart 2009). According to Georg Simmel (1900), it is the concrete symbol of our human potential to make universal society. But we will first have to get past national capitalism as the twentieth’s century’s dominant social form.

In The Great Transformation (1944), Karl Polanyi listed money as a “fictitious commodity” whose exchange in the free market came close to buying and selling society itself. He held that money and markets originate in the effort to extend society beyond its local core; society has to become more inclusive since none is self-sufficient. “Token money” facilitates domestic trade, “commodity money” foreign trade; but conflict between internal and external dimensions often disrupts economy.

In a later article, “Money objects and money uses” (1964), he approached money as a semantic system, like writing. Only modern money combines the four functions of payment, standard, store and exchange in a limited number of “all-purpose” symbols. (This is not the same as “general-purpose money” which just means money can buy anything.) Primitive and archaic forms attached the separate uses to different symbolic objects or “special- purpose” monies. Polanyi argued against the primacy of money as a medium of exchange and for a multi-stranded model of its evolution. It is basically a means of payment or “purchasing power”.

Although this analysis was intended only to illuminate the history of money, Polanyi’s approach offers remarkable insight into the global economic crisis today. Our challenge is to conceive of society as plural rather than singular, as a federated network rather than as a centralized hierarchy, the nation-state. The era of national monopoly currencies is very recent (from the 1850s) and “all-purpose money” has been breaking up for four decades now, since the US dollar went off gold in 1971 (Gregory 1997).

(to be continued…)