Democracy and money are two of the most powerful forces in human history. In this essay I explore their how they’ve shaped each other over time.

A Strange Coincidence

In 640 BC the first money was minted in Lydia, in what is now Turkey. Just a few generations later, the first large-scale democracy was founded in Athens, Greece, just across the Aegean Sea.

Two questions pop out:

Was money somehow a necessary precursor for democracy? Was there something about the Aegean that made it a good incubator for money and democracy?

An Offer That Can’t Be Refused

Early humans primarily concerned themselves with obtaining scarce resources such as food, fertile women, and tools.

Imagine early humans Strong Sam and Weak Will. Will has some extra barley and Sam’s family is hungry. Sam could simply snatch Will’s barley, but if Sam is smart, he might make Will an offer: “Give me some of your barley and I will protect you and the rest of your barley from other people.”

The offer cannot be refused, because Sam could simply take the barley. So Will accepts and gains security, and becomes a serf.

The extra barley make Sam even stronger. The more people he exploits, the stronger he becomes, allowing him to exploit more people. He can hire a soldiers and exploit an entire villages with the exact same offer: “Give me some resources and I will protect you.” Eventually, Sam becomes king.

A version of the above story happened almost everywhere: England, France, Egypt, and Russia, Asia, and the Americas. It’s the inevitable result of any civilization in which people do not have security over their resources.

The Archipelago of Security

Greece took a different path. Early humans who lived on islands had natural security provided free by the sea.

Early boats were small, slow, and fragile. They could not carry heavy armour or a horse. To land on another island, forcibly take resources, and escape without harm would have been very difficult.

Each island had an aristocracy of powerful people, and sometimes but overall the archipelago would have been a bloc of equality. If a resource was scarce on one island, Greeks would have taken a boat to another island and engaged in peaceful trade.

From Equality to Philosophy

In contrast to offers-that-can’t-be-refused, voluntary trade breeds conversation. Needs and wants must be communicated. Offers and counter-offers must be explained. And jokes are always welcome. A more complete reliance on trade allowed ancient Greeks to evolve their language and philosophy more quickly than people living under monarchs.

Trade has been scientifically shown develop empathy between strangers. It seems very likely that the trade networks between individuals created a cultural foundation necessary for democracy.

The Universal Desire

Early traders didn’t sail across the Aegean Sea with undesirable goods. But knowing what is desired on another island required guesswork: do they need olive oil, wool, or wine?

Silver and gold were remarkable resources: rare, shiny, and very dense, they could be melted into any shapes. Despite their inability to provide nourishment or shelter, coins stamped with artwork had a wow-factor. Over time, everybody recognized that value of gold and silver coins.

The emergence of money made trade, travel, and philosophy even easier.

Greeks became empathetic and rich, while maintaining their independence and equality. But as money spread into neighbouring monarchies, armies pushed into the Greek islands with greater force. With their security threatened, Greeks needed to organize a defence. Given the flat hierarchy of Greek, a decision-making process based on popularity was the obvious choice. Each non-slave man received a vote.

The Momentum of Popularity

Modern democracy might have more in common with monarchy than early democracy. Governments offers protection, demand tribute, and there is little discussion.

The greatest problem with modern democracies is modern money. Silver (and gold) started were replaced by paper-money-backed-by-silver starting in the 1600's and ending in 1971, when President Nixon disconnected the US dollar from gold. Today, paper and electronic money are created in ever-increasing quantities and are backed solely by the momentum of popularity.

Rich people in charge of banks are able to create new money at the press of a button.

This increases inequality, which weakens the security of the poor. It allows “would-be-monarchs” to make exploitative offers of protection. Today’s offers of protection are high-interest loans, which perpetuating the trend of increasing inequality.

Equality, the spiritual foundation of democracy, is being eroded by dollars, euros, and yen. Democracies are becoming ruled by corporations like virtual monarchies.

The Security of Bitcoin

Silver played a large part in laying the foundations for a government that upheld equality and mutual respect. Could a new kind of money restore equality and strengthen democracy?

The security intrinsic to bitcoin make it impossible to confiscate or make an offer-that-can’t-be-refused. Each bitcoiner is an island in a archipelago of equals.

Like gold, bitcoin is separate from government. Anybody can create bitcoin, but the mining process is competitive, which means profits are small. Like gold, as the value of bitcoin increases, everyone who has bitcoin becomes proportionally richer. Bitcoin won’t create perfect equality, but it takes a step in the right direction. And by decreasing inequality bitcoin enriches trade, conversation, and philosophy. Bitcoin is truly the people’s money.