Section:GDN 1J PaGe:11 Edition Date:190830 Edition:01 Zone: Sent at 29/8/2019 17:58 cYanmaGentaYellowbl
Fr iday 30 Aug ust 2019 The Guardian •
11
The problem with barter is that it can be hard to fi nd a
swap that works. Often the person who wants what you
are off ering will not own the thing you want. Economists
have called the rare situation in which a swap will work
out the “double coincidence of wants”, ever since
William Stanley Jevons explained the problems with
barter, and how money solved them, in his 1875 book
Money and the Mechanism of Exchange. Jevons outlined
four separate roles that money can play. First, money is a
medium of exchange, something that everyone accepts
and that “lubricates the action of exchange”. Second, it
is a “measure” – the way that prices are set out today.
Third, it is a “standard” by which future prices may be
set. Finally, it is a way to “store” value – it can transport
economic value over distances or through time.
Because lots of things have the properties Jevons set
out, lots of things can become a circulating currency.
When a currency emerges in this unoffi cial way, it often
has particular physical attributes that make it suitable.
Above all, it must be an object that can change hands
hundreds of times without losing value. Consumer goods
- clothes, shoes, books – would be no good as currency
since once they are bought they become second-hand
and their price drops. Commodities – salt, sugar or grain - are much better : second-hand salt is as good as new.
Furthermore, a commodity tends to make a good
currency if it is “divisible” – easily chopped up and used
in smaller trades. Another key criterion is durability.
Food commodities that rot or spoil would make a poor
currency. And fi nally, ease and cost of transport matters.
Cotton, which is divisible and durable, may seem like
a good informal currency, but it is so light that it lacks
value in small quantities: any meaningful trade would
require transporting huge sacks of it.
Prisons have a rich tradition of inventing informal
currencies. The most obvious prison currency – always
saleable and easily divisible – is tobacco. For a century,
underground trading in Angola ran on it. But in 2015
smoking was banned, and tobacco became contra band.
Around the same time, an aggressive new drug called
mojo – a type of synthetic cannabis – began to infi ltrate
the prison, and many men became hooked.
The underground economy was rocked. Its currency
was now illegal, yet there was huge demand for this
new drug. The foundations of the prison economy had
shifted: what many men wanted changed, as did the
way they could pay for it.
The response in Angola, and across Louisiana’s
prisons, was to adapt rapidly, inventing a new currency,
one that is as high-tech as the designer drug it is often
used to purchase.
On my second trip to Louisiana, I arranged to meet
an ex-convict in his mid-30s who had recently been
released after 16 years in state prisons, including Angola.
“Most people in prison are looking for some kind of way
to get high,” he said. “It is a way to kill time.” But there
is a more specifi c reason why mojo took off so quickly:
“It changes so much that it is hard for them to drug
test for it.” Continual adjustment of the compounds
used in synthetic cannabis means there are thousands
of variants, making detection diffi cult.
Louisiana prisoners remember mojo fi rst appearing
in 2010 or 2011. One ex-convict I met in New Orleans
remembered the rumours: “Everyone was like: ‘You can
smoke it and pass the drugs test.’ But in my mind I was
like : ‘They test you for THC, so if it is not THC that is
getting you high, what is getting you high?’” It was a
wise decision to be cautious, he recalled : “I said no,
but they all started smoking it. Some started having
seizures and aneurysms, and people were freaking out
and getting paranoid and scared. I saw a dude get butt-
naked and jump in a dumpster and refuse to come out.
They were going crazy on it. But they loved it.”
The fi rst rule of prison economics is unsatisfi ed
demand, and on this measure mojo had become king in
Louisiana’s prisons. The demand was huge. Once the
drug had been smuggled in, the only challenge that
remained was how to pay the smugglers. The informal
currencies used inside the prison are often of no real
use outside, so prisoners running serious hustles like
mojo smuggling don’t use them – the way to persuade
guards to smuggle contraband in is with cash.
The use of dollars inside the prison is a puzzle. Anyone
running a major drug operation is going to need to shift
large cash balances, but dollar bills are something sniff er
dogs can detect, and any digital transfers can be traced.
It turns out that drug traders and smugglers face none of
these risks, because Louisiana prisons have a remarkable
new currency innovation. “Cash is contraband, but
people have got cash,” the former prisoner explained,
“but it is not cash like cash in hand. It is untraceable. It is
all based on numbers. People pay each other with dots.”
The new “dot” payment system is the latest in the
ever-evolving system of prison currencies. This new
form of money started with a technological innovation.
It was an idea that Blockbuster video came up with in the
mid-1990s to replace the old, ineffi cient system of paper
gift certifi cates: its fi rst store card. Plastic and shaped
like a credit card, it could be loaded with dollars. Unlike
a paper gift certifi cate, it was durable, allowing parents
and relatives to make periodic uploads as part of an
allowance. The card formed a so-called “ closed loop ”
between the person loading the credit , the company
providing the goods and the person consuming them.
Other stores quickly followed suit. By the late 1990s,
most retailers had adopted some form of gift-credit
system using plastic cards.
Financial fi rms spotted an opportunity, and soon
off ered their own cards. Money still had to be pre-loaded
on to these cards, but the system was now an “open
loop”. The cards were not restricted to a specifi c store –
the cardholder could spend the money anywhere, or
even withdraw it as cash. The idea was that the cards
would be used by young adults – parents loading college
kids’ cards with a monthly allowance – or as a modern
alternative to traveller’s cheques.
The use of pre paid cards has rocketed in the US in the
past 20 years. Usage tripled from 3.3 bn transactions in
2006 to 9.9 bn in 2015. While the innovation was a hit, the
initial customers the fi nanciers had in mind – well-to-do
parents, cash-rich retirees on trips to Venice – were way
off. Pre paid cards are favoured by people with a poor
credit history, usually because they have overdue debts
or are recent immigrants. In the US, users are more likely
to be African American, female, unemployed and/or
have no college degree. The cards are predominantly
used in the south, most of all in Texas.
The name of the prisoners’ new currency comes from
the popular Green Dot brand of these cards, which carry
the Visa or Master card logo and can be used to make
purchases wherever regular credit and debit cards are
accepted. Some users have found ways to set up an
account for the card without using their true
identifi cation details. They then buy a second card,
this one a single-use scratch card called a MoneyPak,
which is used to load the debit card with credit of
anywhere between $20 and $500. Both cards can be
bought pretty much anywhere: at Walmart, at CVS or
any other pharmacy. Scratching away the back of a
MoneyPak reveals a 14-digit number. This number,
the “dots”, is the vital link, carrying up to $500 of
buying power. The user goes online, logs in to their
account and enters the number, and the credit
appears, instantly, on their debit card.
The person buying the Green Dot card can pay in cash,
as can the person buying a $500 MoneyPak, so there is no
trace of who owns them. The benefi ciary of the credit
does not need to see the MoneyPak itself – all they need
are the numbers. Texting someone the 14-digit “dots”
using a contraband phone, sending them a photo or
letter with the numbers, or simply communicating the
numbers over a telephone call will do. The dots are a
currency close to cash: an instant, simple and safe
transfer of value over long distance.To make a large cash payment, a prisoner asks a
friend on the outside to buy a MoneyPak and to pass
on the dots once they have done so. These 14 digits can
then be exchanged with a guard or another prisoner
for something in the prison, including drugs. By
exchanging dots instead of cash, the prisoners keep
their hands clean. The free people on the outside – one
buying the MoneyPak, the other receiving its value on a
Green Dot card – do not need to meet each other, know
each other or link bank accounts. Using prepaid cards in
this way creates an informal currency that is durable,
divisible into payments as small as the MoneyPak
minimum of $20, and is accepted everywhere. It fi ts
precisely the standards for a good currency that
Victorian economists set out in the 19th century.There are broader lessons from this currency invention.
Many policy makers regard the rise of online banking
as a way to tackle illicit trade and money-laundering,
because banking digitally leaves a trace. This should
mean that digital economies are easier to police than
cash-based ones. Some countries are even considering
banning paper money entirely as a way to clean up their
economies. Yet an understanding of how currency
innovation works suggests these hopes are credulous:
from remote islands to high-security prisons, money
invention is informal, organic and – as Louisiana’s
prisons show – can now be untraceable. The new digital
“dot” currency is reportedly already being used to
launder cash across national borders.
Despite the damage illicit prison markets can do, one
ex-convict in his 30s defended the underground prison
economy to me: “I’ve got friends inside. This is how
they support their families.” He said most prisoners
have limited chance to improve their lot. “So they sell
drugs, they run tickets and they gamble; this is how
they make their money.” Veterans who have spent
decades in Louisiana’s prisons defend their economy
too, insisting that underground exchanges are a way to
keep life inside the prison calm. Simple trades – hair-
cuts, pecans, books, shirt pressing and even tattoos –
that were once made using tobacco have shifted to alter-
native currencies including coff ee, packets of noodles
and even tins of mackerel. They are a way to make the
ultra-long Louisiana sentences a little easier to bear.
For those concerned about the future, the hidden
economies of the Louisiana prison system off er a vital
lesson. It stems from the power of the informal
economy in enabling a society to recover from a shock,
and the extraordinary levels of eff ort and innovation
that people will use to establish a trading system if
theirs is damaged or destroyed.
Louisiana’s prisons have parallel economies. There is
the illicit drug economy that runs on its untraceable dot
currency, and alongside it a more innocent marketplace
where basic necessities are mediated with some agreed
item – currently coff ee – acting as a currency. Trades in
both economies work because of the most basic law of
prison economics – that a prison is a place defi ned by
unsatisfi ed needs, tastes and demands. Both economies
are self-built, organic and highly innovative. Both show
that a currency, the provision of which can seem like
the ultimate role of the state in an economy, can be
established completely informally. Prisons show that
the human urge to trade and exchange is impossible to
repress , and that solutions to future challenges are as
likely to come from informal markets as formal ones. •Adapted from Extreme Economies: Survival, Failure,
Future – Lessons from the World’s Limits by Richard
Davies, published by Bantam Press on 5 September
and available at guardianbookshop.comWhen tobacco was
banned in 2015, inmates
quickly found a new,
high-tech underground
currency to replace it
Louisiana State
Penitentiary,
also known
as Angola
GETTY
Richard Davies
is an economist
based in LondonRELEASED BY "What's News" vk.com/wsnws TELEGRAM: t.me/whatsnws