Money is institutionalised social power, the power of people working together, implicitly or explicitly, in a division of labour to produce a collective output. Money is the result of an institutional process which encapsulates the power of productive collective action in a flexible, tradable instrument. Yet it takes an entire system of hierarchically concatenated institutions to transform a collective's powers of production into a highly liquid instrument. This book outlines the nature of that system. It discusses this process in theory (Part I) before moving on to a series of cases to illustrate how variations in the politics of collective action lead to variable monetary quality (Part II).

Why does something so seemingly insubstantial—a promise, a paper note, a digital ledger entry—have real value? This is perhaps the central mystery of money. Anecdotally, we know that many people still think money is backed by gold (or ought to be), something confirmed by emerging scholarship (for example, Kraemer et al., 2020). In order to fully account for money, we cannot dismiss such perceptions as mere error or false consciousness. Social theory has to explain how a credit instrument, a promise, can durably and systematically function like a real commodity. What is it about the money system that enables promises to function like valuable things? Why are some monies better than others? Why are money systems always hierarchical?

We propose a political theory of money as an answer. Social theorists have of course long argued that money is a social relation, but that still begs the question of why some social relations generate better, more widely acceptable money than others. To answer this question, we need a theory of types of social relations that map onto variable monetary robustness. We also need a theory of the social function of money because what counts as a ‘better money’ itself presupposes a particular historical social formation. The functional requirements of money change with the dominant social formation. As such, the prevailing form of money in any epoch tells us a great deal about how we have chosen to live and work together. The kind of money we have emerges from the kind of society we have.

As money has grown even more abstract, rich nations have become hyper-financialised, and inequality has grown to the point of breaking down the very legitimacy of states.

Introduction

The quality of census data for Jammu and Kashmir (J&K) is circumscribed by uncertain weather, armed insurgency, forced migration, regional and communal polarisation, uneven accounting of armed forces, international conflicts, bureaucratic moral hazard, ineffective legal and administrative measures to check manipulation and changes in borders, reference dates, demarcation of snowbound territory and distribution of mobile population groups. Our ability to understand the impact of these factors on data quality is limited by the poor quality of metadata. It is, however, not clear why successive governments have failed to pay attention to the growing data deficit of J&K. Most recently, the anomalous headcounts of 2001 and 2011 did not prompt a closer scrutiny. We found that the over-reporting of children (Chapter 3) and an unusually large growth of the slum population (Chapter 4) in Kashmir account for several intertwined coverage errors in the reported population of the state. In this chapter, we will show that in 2011 the number of households was also inflated in Kashmir. These anomalies inflate the population shares of both Kashmir and Muslims, and the effect is compounded in the case of the latter by a very sharp rise in the population of Generic Tribes (Chapter 3). We found that conventional demographic and non-demographic factors cannot explain these anomalies and argued that in both 2001 and 2011 enumeration was affected by communal propaganda in Kashmir that fanned fears of demographic marginalisation. Chapters 4 and 5 discussed the political and legal–administrative contexts of the census. The present chapter relates the indifference of New Delhi towards anomalous population statistics of J&K to strong priors that suggest over-enumeration is unlikely, and that too in conflict zones, and to an older tendency to read population growth as a measure of well-being. It then discusses coverage and content errors in census data on Punjab and J&K. It argues that some of the major anomalies in the headcount of J&K are products of deliberate intervention rather than being mere aggregations of random errors at the grassroots.

There have only ever been various monies of differing quality. Our contemporary world is now a world of national monies tied to bank money backstage. Money's variability is part of its ontology. A theory of money has to account for this variation: why do some monies have more value than others? This question points to the material power of money, but not necessarily only through the question of how much of the world of goods and services a particular money can command.

Our theory of money takes the material dimension of money to be irreducible, but it does so via the financial or contractual route rather than the purchasing power or exchange route. This is not to say that the command of wealth is not a key driver of money's ‘substantive value’, to use Weber's term; it obviously is. Yet money remains a liability that promises to pay what is on the asset side of the issuing balance sheet. If credit or debt is part of money's very ontology, then so too is this asset or liability structure that contractually anchors money's value in the material dimension. The nature and extent of this anchoring vary with the form of mutualisation of the issuing balance sheet, economic or political, but both forms point to something external to the credit–debt relationship. There is something holding up money after all.

Nominalists (such as Simmel and Ingham) read money as a tautological social construct—value itself.

Introduction

Located in the north-west extreme of India's ethno-geographic periphery, Jammu and Kashmir (J&K) was initially a Category B state. Unlike other princely states belonging to Category B and Category C that were absorbed into larger states or reconstituted as union territories (UTs), J&K was directly granted the status of a separate state. The state had two capitals: Srinagar (summer) and Jammu (winter). Before being reorganised into two UTs on 9 August 2019, the state comprised three administrative divisions: Jammu (26,293 square kilometres), Kashmir (15,948 square kilometres) and Ladakh (59,146 square kilometres). The last was until recently a part of the Kashmir division and was constituted as a separate administrative division in February 2019, less than six months before the reorganisation of the state. The reorganisation marked the end of the seven-decade-old constitutional arrangement under Article 370 that guaranteed autonomy to the state to accommodate the restive Kashmir Valley amidst domestic and international challenges to the Muslim-majority princely state's accession to India (Timeline 2.1). International and domestic conflicts spawned by the unsettled political status have affected the whole range of government statistics in J&K, compounding the challenge posed by difficult weather and terrain.

In this chapter, we will first discuss the less-than-satisfactory accounting of the area of J&K. This will be followed by a discussion of how political instability, uncertain weather, mobile population groups and shifting reference dates affect headcounts and how our ability to understand their impact on the quality of census data is constrained by the paucity of metadata.

Indeterminate Borders

The territory of J&K under the Indian administration has remained largely unchanged after tribal militia backed by the Pakistani army seized parts of the princely state in 1947 and China occupied parts of Leh in the 1950s and early 1960s. The only officially recognised change on the western front happened under the Simla Agreement of 2 July 1972 after the 1971 Indo-Pakistan war that froze the ‘line of control [LoC] resulting from the cease-fire of December 17, 1971’ (GoI n.d.2). Census reports are deficient in information on international territorial changes, though.

Can we design money without hierarchy, instability and state power? Tech utopians have tried with Bitcoin. Their failure arguably proves that these are indeed fundamental elements of money. Hierarchy emerges willy-nilly in Bitcoin and other cryptocurrencies: ‘central planner’ software architects write the code; ‘mining’ is monopolised; exchanges issue crypto-backed IOUs like banks. Bitcoin could function as a token ‘outside money’ in principle, but its rigidity would be over-disciplining, emulating the anti-democratic gold standard. Bitcoiners’ hostility towards credit is understandable given the political capture of credit systems, but it perhaps ought to be directed at this capture rather than the institution itself. Their techno-libertarianism misses the upside of the political nature of credit money, which allows citizens to relax their collective survival constraint.

Credit is a fundamental part of human sociality because economic life is a going concern, pointing relentlessly to the future. Money as credit is one method by which collectives, political and economic, undertake future-oriented action. Money as a digital fiat token cannot perform this coordinating task in principle, no matter how well engineered, because of its finitude, inflexibility and centrality, especially under conditions of capitalism plus democracy. If flexibility were engineered in, then cryptocurrencies would simply have recreated credit money in a new avatar.

Cryptocurrencies cannot function as money because they have as their target a limited notion of money and a thin idea of the work of social institutions. Designers of cryptocurrencies seek to replace human institutions with ingenious cryptographic functions. In identifying the enemy as fiat money, cryptocurrencies are simply solving the wrong problem. Yet in their failure, they prove the robustness of creditary institutions.

Despite their operational failure, cryptocurrencies succeed in highlighting the fact that money is always designed in accordance with some underlying politics. They thereby implicitly point to the possibility of more democratically designed money systems.

Monetary systems are inherently hierarchical and therefore highly susceptible to political capture. The solution to capture is institutional balance and accountability precisely because alternatives founded on decentralisation are not robust as the failure of cryptos as money illustrates. Indeed, such a decentralisation might be pernicious in its political and economic outcomes.

The technical fact of hierarchy in money condemns the polity to subjecting hierarchy to democratic discipline. There is no pathway that precludes hierarchy: accountable or unaccountable hierarchies are our only options (see Chapter 12).

‘Liberalization’ is imagined as a magic bullet that makes economic processes and allocation of resources efficient, competitive, and meritocratic. However, liberal reforms are anything but one thing; implementation of liberal policies can be radically different in sequence and pace and quite tricky to evaluate without understanding the context. In this chapter, I will not attempt to evaluate whether liberal reforms were a success or failure in India, but will instead try to analyze the conditions – politics, social context, economic dynamics, and contingent events – which shaped the timing of the introduction and the pace and sequence of reform policies.

Liberalization is linked to 1991 for most informed Indians and is perceived as a watershed moment when the Indian economy emerged from the heavy state-centric “license Raj” regime and entered its modern high-growth phase. The National Council of Educational Research and Training's (NCERT) class 11 textbook explains liberalization in 1991 as follows: “India agreed to the conditionalities of World Bank and IMF and announced the new economic policy [NEP]. The NEP consisted of a wide range of economics reforms” (NCERT 2023 [2006], 39). However, I will contest the claim that liberalization was introduced in 1991 and instead argue that the economy had already been reoriented towards private enterprise and markets since the return of the Indira-led INC government in 1980; there were few liberal reforms introduced in 1991, and reforms introduced in the 1990s did not significantly impact growth, investment, or industrial growth. To explain these arguments, I will focus on two specific questions: what were the events that led to the introduction of reforms in India, and why is liberalization linked to 1991?

What Are Liberal Reforms?

Liberal reforms renew the beliefs of early modern and especially 19th-century “classical” liberalism that economic growth will be most rapid with the existence of unfettered markets unimpeded by government regulation. The free movement of the price mechanism will create conditions for the most efficient allocation of goods, services, and capital. The efficacy of “free markets” was based on a myth that the international economic system was free – in the sense of being self-regulating, with natural flows of money and capital – before WW1 which contributed to significant growth in the global economy. As I had argued in Chapter one, the global economy before WW1 was inequitable and supported the appropriation of resources and labor from the Third World to the First World.

In the first two decades after independence, the union government's role as the facilitator of interstate redistribution was closely linked to decennial population censuses. The allocation of seats in the parliament and federal funds tracked the most recent census data. In the mid-1970s, the growing concern over a rapidly increasing population amidst food and other scarcities forced a hasty uncoupling of the census and key federal policies to make room for more aggressive population control measures. This was, perhaps, necessary to protect the interests of states that had already achieved relatively lower levels of fertility. In the following decades, the census could not be conducted in Assam (1981) and Jammu and Kashmir (J&K) (1991) due to political disturbances. (In 1994, substantive changes were introduced in the Census Act, 1948, to expand the scope of punitive measures, among other things.) The year 2001 was therefore very important for the Census of India because the government was trying to enumerate the whole country once again after a gap of three decades, and there was an expectation that interstate redistribution of resources and power could be recoupled with the headcount. There was also a hype around the first census of the new millennium.

While the census managed to cover the entire country in 2001, it was marred by the politicisation of the headcount. The government had to postpone interstate delimitation to until after the first census taken after 2026. Six states – Arunachal Pradesh, Assam, J&K, Jharkhand, Manipur and Nagaland – could not even use the latest data for intrastate delimitation. In some of these states, the civil society and political parties alleged that the process of enumeration was subverted by vested interests and moved courts to challenge delimitation based on a flawed census. At least five others – Chhattisgarh, Meghalaya, Sikkim, Tripura and Uttarakhand – conducted intrastate delimitation under (political) constraints.

Soon after the 2001 census, Radhabinod Koijam, a former chief minister of Manipur, flagged the politically contentious nature of cartographic and demograhic statistics in his neighbourhood. In 2005, in an interview with Sanjoy Hazarika, chief minister Neiphiu Rio admitted that Nagaland's headcount was highly inflated due to political competition among tribes. As a student of engineering and later economics, I found it intriguing that a ‘simple’ measure such as headcount could be so deeply contested.

Robust mutualisation at scale drives hierarchy in money; political mutualisation is more robust than economic; capitalism plus democracy requires a hybrid of both to operate.

The national state just happens to be the most robust mode of political mutualisation at present; others could emerge. The EU can be read as an experiment in a different type of political mutualisation outside the standard, federated state. Its crisis response arguably tells us something about the dimensions of all functional political mutualisations as regards money.

Responding to the credit crisis, the EU muddled through to innovate non-market, institutional sources of state finance that de-marketised government debt, limited the ability of credit markets to be sovereign counterparties and preserved state space to stabilised economies. These were secured by a de facto European fiscal compact at least at the margin. Some kind of fiscal compact and a substantial de-marketisation of sovereign debt appear to constitute institutional minima for effective robust political mutualisation, whatever institutional form they take.

Finance is constructed by law, but what, if any, are the logical bounds of the constructive power of law as regards finance? If political mutualisation is critical to functional money, what dimensions must this mutualisation have? Earlier we concluded that the mutualisation of economic contract is weaker than that of a political contract; while the former can expand to greater scale in good times, it dissolves in stressed states of the world (Pistor, 2013). Hence, states which mutualise citizen balance sheets over the largest economies have the best money. Mutualisation at scale therefore represents the logical limit of the plasticity of law in money.

The EU is an interesting intermediate case between pure economic and pure political mutualisation—a case of complex and uneven political mutualisation under conditions of its particular political settlement between national sovereigns. Intermediate cases often tell us a lot about pure ideal types. The EU's failure of crisis management was in large part a result of the infirmities introduced into its monetary institutions by its fragile political settlement. As with our other cases, the EU's failures in crisis management are instructive as they show the link between the nature of the mutualisation of a community and the money it issues.

In this chapter, I will describe and analyze the historical process through which colonialism shaped the structure of the Indian economy before independence, by understanding the nature of the global economy in the 19th and 20th centuries and how these dynamics shaped the colonial relationship between Britain and India. Further, I will describe the colonial policies that created and transformed the Indian economy, a critique of and resistance to these policies by Indian political actors, and how these dynamics shaped the economic policies of independent India. This chapter is global in outlook and will digress from India to explain how changes in the world economy affected the Indian economy. This will provide a context to understand the structural issues that the economy faced after independence and the trajectory of economic policies that were implemented. Throughout this chapter, I will frame the importance of contingent events, contestation between different interest groups, the crisis in shaping colonial economic policies, and the independence movement in India.

The Great Divergence

Look closely at a graph of GDP growth over the course of the millennia (Bowles 2013, fig. 1.1a) of countries in the world, and you will find that most countries or regions in the world had experienced similar low-level steady growth for 1,500 years. Then something happened in western Europe in the 16th century, when some countries such as Portugal, the Netherlands, and Spain started growing at a slightly faster speed. Then in the mid-18th century, Britain's growth rate took off and left all other countries behind. It took more than half a century for some of the early developing countries like the United States of America (USA), Germany, and France to catch up to Britain. It took more than two centuries for other developed countries in the world to catch up. India joined the race in the mid-20th century, and there's still a long way to go before it catches up. The initial jump in growth experienced by Britain is referred to as the Great Divergence (Pomeranz 2021). This phenomenon is referred to by terms such as the Industrial Revolution, and the birth of capitalism is marked by major social and political transformations in the world – such as the French and the American revolutions, the institution of representative democracy in Britain and France, urbanization, and colonization of land, labor, and resources – on a hitherto unseen scale.