Establishing an economy (from nothing)

Okay... I'm feeling like a bit of a schmuck right now. I have made it roughly halfway through my novel and realized that the economic system I'd kind of (not really) established just isn't going to work in the grand scheme of things.

Up until now, I've based my economic status on trade. Merchants were considered wealthy because they had the most wares. Thus, those that owned little were poor. That worked for the large, impoverished settlement I started out in.

But as my character has ventured out, I've reached a point where I have to establish some form of regulated currency. Inns and taverns aren't going to be taking in trade for a beer. As such, it would be silly to think that my initial settlement, impoverished though it may be, would not have some form of this currency flowing through it, since it is a crossroads for merchant caravans.

This throws everything off. Now, I'm struggling with the means as to which this currency is established. The world rose from the ashes, so old-world currency is a thing of the past. Much like Fallout's bottlecaps, I need something practical that still cannot be reproduced by just anyone. I'm still thinking metal coins, pressed by a machine that only one region can make, and I have a specific region in mind, but now this will make that region far wealthier than I ever intended them to be.

I suppose I could just have a currency, like gold pieces and offer no explanation whatsoever, but I feel like this would be disingenuous to the story (greed and corruption over depleting natural resources led to the downfall of the civilized world).

Am I over-thinking this? Should I just have everybody pay with seashells and be done with it?

 

I'm not sure I see the logic of:

1. greed led to downfall of civilized world
2. Now we're not allowed to use currency based on precious metals? And even further, people are actually willing to stop doing so?

Well, is there a strong enough government for fiat currency to work? Is there not enough gold and silver in circulation to act as a currency? If not, then isn't there some other metal that has become precious, like copper maybe? It just seems unlikely that people would immediately stop using precious metals as currency after the civilized world met its end. And how are these merchants making a profit? What kind of profit?

 

Relics of the old world, like bullets.

 

In different places lots of things have served as currency- cowry shells, squirrel furs, etc. In other places the need for currency or even barter didn't arise at all, or it was reserved for outsiders. I find it hard to believe that in the ashes of this putrid civilization some communities wouldn't see the expediency of implementing anarchist-communism.

 

You could have them use a variety of small sought-after objects, the relative value of which would depend on if you were buying or selling. That's how the merchants would make their money.

 

At the top end could people use special seals? And with these seals they make paper money? And to lubricate the bottom of the economy these same seal holders create coins.

Obviously there has to be an overseeing authority but without that I can't see any system beyond barter, or using base metals, working.

But I as a reader would accept that if there is a stable power base then they would introduce a system and that I wouldn't need to know the details. But I might be more interested in how land ownership and water management are handled.

But sounds a fun problem to work on.

 

This may not be entirely helpful, but it might help you understand some issues currency could raise. Wikipedia divides currency down in to three options:

Fiat Money (established as money, often by government regulation, which has no intrinsic value)
Commodity Money (a medium which has its own intrinsic value)
representative Money (money which represents something with intrinsic value)

Fiat Money is established as money which does not have intrinsic value. If you are living in a post-apocalyptic world, where all the governments have collapsed, Paper money which is reliant on the government or central banks as a basis for its value is probably out of the question. In the short-term it might survive, but only until something better comes in. It is hard to see how electronic transactions like debit or credit cards would survive either if the power grid went down. The cards themselves have no value with the ability to make a transaction.

If a government or central bank either is unable or refuses to guarantee fiat money's value, the result is usually hyperinflation. This would happen if the government spend far more money in excess of what it took in revenue and just printed money because it needs to. As the amount of money is circulation increases, it can buy less, so it's purchasing power/value goes through the floor.

One of the more famous examples of this happening is from Germany in 1923. The picture below is of a man using money as wallpaper because it was cheaper to use money as wallpaper, than to buy actual wallpaper from a store.




Representative Money is printed on Paper that represents something of value but has little or no value of it's own. This can include a claim on a commodity, such as Gold or Silver. Wikipedia suggests that this form of money predated the invention of Coinage, as temples and palaces often had warehouses where commodities were stored and issues certificates as evidence of deposit. In our time, this produced the Gold Standard and the Silver Standard (i.e. using a fixed weight of Gold or Silver as a unit of account/measurement of value).

Commodity Money has value based on the commodity on which it is made. This can include Gold, Silver, Copper, Salt, peppercorns, tea, decorated belts, shells, alcohol, cigarettes, silk, candy, nails, coca beans, cowries (a kind of sea snail) and barely.

As the concept of commodity money (gold/silver coinage) is more widely understood, its the simplest method of telling a story. If you want to "over-think" this a little more, feel free- but it really comes down to how much detail you want to explain and whether it adds anything to the story you are trying to tell.

 

At its core, currency is based on trust. We trust that we can trade our dollars or pounds or gold or seashells with someone else for the thing we actually want, without too much trouble.

That trust is built on a guaranteed demand, which historically has often meant taxes. If your nation-state demands taxes in seashells, then people are going to need to collect seashells in readiness for the time the taxman comes knocking - and this means seashells will have inherent value.

This is why governments and currency tend to go hand in hand. They support each other.

All that said, I don't think this is something I'm going to think too much about as a reader. Dive in if it helps your world-building, by all means, but if you just show me people using coins I'll accept it and move on.

 

While the dead probably wouldn't leave a lot of gold coins laying around, I think precious metals/gems are the way to go. Jewelry stores are common enough that their wares would do. A lot of it could be melted down into consistent/smaller pieces if need be.

Further, anything finely machined would be valuable, at least for a while. I'm thinking sewing needles or hardware like nails and screws would be convenient enough to carry about.

 

Money will require a government to issue it. If your story includes the idea of a central government (or governments) that all your communities recognise, then coins or other tokens will work fine.

However, if you don't want to go that route, and would prefer that each community lives in isolation without a central government (and would not recognise coins from another government as valid tender), just try to think of what is (a) easily carried around and (b) will be of practical value to people to barter with. If one community produces something another community needs and can't produce itself, that would be barter-material. I think lots of primitive communities used barter or trade goods to exchange for other goods or services in this way.

Metals might be good ...especially if they are of practical use. Food stuffs, spices, dyes, manufactured goods, leather, woven cloth, etc etc. Maybe do some research on trade goods between early settlements in the post-Roman era in Europe, or the ancient world, in places where governments were local and didn't issue currency. Services also might be a barter-able commodity. A skill that can be taken from one community to another would be valuable.

 

Economy is a messy business. I've a degree & work in corp. management. You either go with the flow and invent a random currency to use like most worlds do (both fantasy and post-apocalyptic) or go down the deep rabbit hole and immerse yourself in the ins and outs.

Being stuck halfway there will leave some audience confused, some disappointed. I tend to feel disappointed with most "developed" economy systems in worldbuilding because they're just a single layer over basics & still suffer greatly from the Dunning Kruger effect.

Can easily have something precisely useful.

- Medicine; specific pills. Painkillers (Aspirin currency?), activated carbon, etc.
- Bullets; like carbine ammo or pistol ammo.
- Fuel; coal, gasoline, diesel or jet fuel.
- Electronics; chipsets and circuits that can no longer be created due to lacking industry/knowledge. Perhaps materials that are needed for chipsets: gold & copper.

 

Look at how cigarettes developed into a form of currency amongst the troops in wartime.

 

On that last post, Let me mention the Chicken Ranch in La Grange, Tx - aka The Best Little Whorehouse in Texas. Got its nickname during the depression when bartering was prominent.

 

Tokens, chits, rounds, whatever. Say a merchant buys hay for his mules, he uses a token to pay for it. The person with the token can then go to the inn and use it to buy a "tab" there for drink and food. The barkeep either redistributes the tokens or keeps them. When the tax guy or gov't guy or whoever comes through, they exchange the tokens for either discount tokens with merchants (where does the beer and food come from?) or credits or something.

LOL a lot of somethings and whatevers.

 

You should look at what characteristics currency usually has. Basically, it should be:
a) valuable enough to be used as a countervalue
b) worthless enough to be used as a currency

So you are looking at something that is common enough, but not too common, and with no innate value. In history, gold and silver fit the bill: they were very rare and rare, respectively, so they had value due to rarity and the fact they didn't decay (you don't want money to rot away). But at the same time, they were worthless for any practical applications: value was entirely aesthetic. Consequently, gold and silver were logical choice for currency.

So what would, in your world, fit the bill? In Fallout, bottle caps were actually a good choice: they have no innate value (unlike, say, bullets), but are rare and unique-looking, which gives them market value.