At the outset, we can quickly turn this question into an affirmation and say that yes, an economy without money is possible or has been possible. In fact, money is a relatively recent invention, much more recent than society, civilization, or economy, since the first human societies were organized tens of thousands of years ago and the first civilizations were established at least 10,000 years ago.
And somehow, these societies and civilizations had to organize their use and exchange values, rationalize their resources to satisfy their needs sustainably, among other things; and that is economics. But let us start from the beginning, reflecting on how and why money arose, to understand its importance, which it does have, although it is not totally indispensable, as we shall see later.
The birth of money
It is attributed to Giges, king of Lydia, to have minted the first coin, which occurred around the year 620 BC. Later, in the third century of our era, the Roman emperor Diocletian was one of the first to try to establish a monetary policy in which the value of the sestertius was fixed correctly, to stabilize it, because even within the Empire, such a diversity of coins had been minted and circulated that their value had significantly been devalued; of course, behind this measure was the need to try to cover a fiscal deficit, in terms of the functioning of the public apparatus in general and the army in particular.
Then, despite the existence of coins, during the Middle Ages and the Renaissance, craftsmen, especially within the same guild, often exchanged goods or labor to facilitate transactions, especially since there was no fixed currency and money changers had to intervene, often taking a percentage of the profits for themselves. Of course, when selling their goods to the general public, transactions had to be made with local currency, issued within the kingdom, or burgh.
It was not until the 19th century that the so-called gold standard was established to avoid conflicts regarding the value of one currency and another. And finally, with the Breton Woods agreement in 1944, the dollar was selected as the reference standard. This means an economy without currency, a fixed currency, and/or without a clearly established reference standard for many centuries. But trade and industry continued to exist.
And what’s the problem with money?
Money has come to facilitate commercial transactions, to the extent that it simplifies the mental operations that we would have to do to know how many bales of wool are equivalent to an ox or how many oxen are equivalent to a bale of wool. Assuming that one or the other were interested in the oxen or in the thread. Having the money avoids conflicts of various kinds: cumbersome operations, that the seller is not interested in the merchandise offered in exchange by the buyer. Money is an almost absolute exchange value.
Now, the main drawback of a cash-based economy is that organizations often need money for investments and operations, and they need it immediately; instead, they need what money can buy, like pipes for a boiler; but they don’t have it, and so they have to stop their processes until they can solve their liquidity problems, convert goods into cash, or worse, borrow money, and so restart manufacturing operations. A waste of time.
The real problem with money, for the ordinary citizen and for companies, even for governments, is then called liquidity, which is, in theory, the ability to meet financial obligations, as well as the quality of assets to be converted into cash immediately without loss of value; which also means without loss of time, because one thing affects the other. Combining both ideas, liquidity for a company would be its ability to quickly convert assets into cash. Its survival often depends on this. However, this need not necessarily be the case.
Right now, you may need to go out and buy some bread, but you have no cash in your bank account. What do you do? You can sell the vehicle, but that would be too much money left over after buying the bread; plus, you would be left without a car that you may need. Finally, the process of selling the vehicle may not be fast enough to satisfy your urgent and urgent need to eat. But, if it turns out that the baker has transportation problems and you can help solve them, he may not have to find the cash to pay for a cab, and you may not have to find the money to buy the bread.
This is a simplified way of explaining the matter. Still, we know that in our society, the economy is more complex: on the one hand, there is the fact that man does not live by bread alone, that is, you also have to buy milk, cheese, eggs, ham; and the baker needs, apart from transport, inputs, equipment, pay salaries, taxes… Besides, there are not only the two of you in this universe: there are hundreds, thousands, millions of people, with diverse and varied needs, and agreeing among all of them may not be easy.
Or is there? Can there be a way to simplify this whole thing a little bit so that we can keep ourselves without liquidity problems, even if we don’t have such liquidity? Of course, there is. That’s what new technologies are for. If we can get on a platform to find a soul mate, how can we not find someone who needs some books (which I do have) and provide me with a pipe wrench (which I need)? This is how it is in the so-called Marketplace platforms, where B2B commercial interactions are established (between companies), for exchanges of goods, products, and services, without affecting their liquidity.
It is clarified that we wanted to reflect a little on what happens in an economy without money at all in these lines. However, this does not mean “cashless,” a common phenomenon today, with electronic payments. In all forms of electronic payment, there is still a means of charge with a single or unified standard, even if it is electronic currency, and there is still the problem of liquidity. In other words, the problem is not entirely eliminated; only the dust is swept under the carpet.
However, we must keep things in perspective because a cashless economy is one thing in less complex societies, such as tribal societies, and another in today’s circumstances. To qualify a little the statement at the beginning, perhaps a totally cashless economy is not possible. Still, it is possible to simplify some processes, avoid the loss of liquidity, and concentrate the financial efforts of organizations in investment reinvestment.
Thanks to systems such as the so-called B2B Marketplace platforms, which simplify information flow processes, saving time; above all, their most significant advantage is that companies get much of what they need without affecting their liquidity.