What is the Deep Impact of Gold?

Figure 1. Relief showing Queen Haptshepsut's expedition to Punt.

Few naturally occurring substances have had nearly universal value among ancient and modern societies as gold. We often think of gold as something decorative or worn. However, in the ancient and modern worlds, gold was also the standard in which economies and value of other objects were measured by. In effect, gold helped structure and continues to help structure economies around the world today. It was not until the 20th Century that most countries abandoned the gold standard.


How Gold Became Important for Economies

Gold has been found in a variety of ancient societies in the New and Old Worlds. In almost all these contexts, gold was often buried with high status individual, indicating its value to ancient elites and leaders. This was true for prehistoric as well as historic societies. While gold was valued as a high status object, as societies began to form established governments and kingship, starting in Egypt and Mesopotamia, gold began to take an important value for trade. Initially, the trade was because of demand by elites. However, the value of gold also was in the fact it was not a perishable material. It was one of the few substances that was nearly universally valued, was easily transportable, and was not perishable. Societies in Mesopotamia and Egypt began to see its worth as a safeguard against fluctuations of other important commodities, with grain being the most important one. Silver also played a similar role in societies, where silver was often combined with gold to create electrum.[1]

Another aspect of gold was that it began to be seen as a substance given by the gods, as its purity and shiny luster made it seen as a divine substance. By the 3rd millennium BCE, most likely spanning the Near East and the Indus, gold was used to make statues of gods. One aspect affecting gold was the fact that it was not evenly dispersed. Regions south of the 1st and 2nd cataract in the Nile soon became among the most important sources of gold that Egypt heavily exploited in the 3rd millennium BCE. The security that gold offered as well as its association with the gods increasingly made many objects, including luxury goods such as other precious stones or metals, valued relative to gold. Gold was also a motivator for trade colonization for Egypt, where Punt was famed for its precious items such as gold that Egypt valued for its trade worth as well as the beauty of the substance (Figure 1).[2]

In early Chinese dynasties, gold probably did not play as important a role in society as jade did for luxury objects and wealth display. However, it was still used to decorate objects and often was intermixed with other precious materials. Nevertheless, as gold became a key medium of exchange or value of exchange, gold in China also gained increasing value in the 1st millennium BCE, where it was locally valued and important for trade.[3]

Later Developments

Figure 2. Gold coin from the 1st century CE from the Roman Empire.

While gold gained increased importance in places, particularly as international trade developed more formally in the 3rd and 2nd millennium BCE across the Mediterranean and Central Asia, from there the worth of gold did stall for a period. The next period of expansion likely occurred when coinage was developed. Sometime by the early 6th century BCE, silver and gold were now used to create coins. As coins were intended to symbolize value, it was important now that gold had to be pure. In fact, electrum, which combined silver and gold, was outlawed in Lydia, which has been considered the first state to use coinage. The use of coinage was initially in international trade. As empires developed across the Mediterranean in the mid to late 1st millennium BCE, that now connected the Mediterranean basin with Central Asia and India, coinage became more important for trade. The rise of the Achaemenid and particularly Greek-based empires in Bactria and Seleucia helped spread coinage to many regions. Gold now became the key material that was used for the most valued exchanges across much of the Old World. Expanding Greek colonies in Europe, increased trade across Central Asia, which became the Silk Road, and seaborne trade via India and the Arabian Sea became some of the most important trade routes in the Roman and late Classical period.[4]

In effect, what emerged, as key international trade routes such as the Silk Road developed, was that gold became one of the key commodities that supported the value of trade items such as silk, metals, spices, and other substances traded. The Roman's, with their important trade role, spread the use of silver and gold coins to different areas of their empire in Europe (Figure 2). After the collapse of the Roman Empire, the minting of coins had halted in many regions, particularly northern Europe. However, the Byzantine Empire continued to mint gold coins and the bezant became a standard used by that Empire. The Byzantine Empire dominated Mediterranean trade and southern European trade in the early Medieval period, leading to the gold standard becoming paramount in those regions. Gold continued to be used along the Silk Road and related trade routes.[5]

In Europe, developing kingdoms, such as those developed by the Anglo-Saxons and Franks, began to use silver rather than gold. Silver, thus, became the main standard over gold in Europe. In the 16th century, Spain was motivated in its conquests of the New World in part by gold as it expanded its empire there and began to ship now large quantities of gold. In Europe, gold, once again, began to have greater importance in its role in the economy. It was only under the reign of Queen Anne in the early 18th century, however, and particularly after the Napoleonic Wars, that gold began to play a central role in increased international trade. The British specie began to be the standard that was used in the 18th and 19th centuries, where laws in the early 19th century helped to solidify its role. As Britain's trade empire increased, along with its trade influence, the gold standard, once again, began to spread across the globe, similar to how it did during the Classical period.[6]

Major disruptions occurred in World War I, when the British specie became in short supply and there was increased distruption to international trade during the conflict. The gold coin standard was, thus, changed to gold bullion after the war in Britain. Fluctuations and disruptions occurred due to the Great Depression and World War II; however, gold continues to play a key role in major Western and other economies. During the 1970s and later, that some major economies began to shift away from a gold standard.[7]

Deep Impact of Gold

Gold has had a large impact beyond its immediate decorative qualities. For economies, in the ancient and modern worlds, gold was used to standardize trade across large distances spanning, initially, much of the Old World and later the New World. Given gold's position in international trade, empires also expanded in part to control gold trade. This was the case in the Roman and Byzantine Empires, where expansion included control of gold resources from Africa and parts of Asia. Already in the Bronze Age, Egypt played an important, if not dominant, role in economic and diplomatic exchange because it controlled vast gold resources. In the Amarna Age, in the 14h century BCE, Egypt became the center of diplomatic exchanges across the Mediterranean and Near East because of its control of gold resources. It also used gold to leverage its trade position. Similarly, Britain used its control of gold resources in dictating international trade in the 18th and 19th centuries, where it played a dominant role in international exchanges. This gave Britain a dominant diplomatic role, as it was able to influence economies in the Old and New Worlds.[8]

In effect, gold has been used to control not just trade and prices, but the key role of gold has been its ability to influence international politics. Countries that controlled its supply were able to most influence international trade, political agreements, and forge political alliances. One key outcome was the discovery of the New World. The Spanish in the early 16th century, who explored much of the New World in Central and South America, were able to find large quantities of gold that gave them greater international clout. In effect, gold was one of the key reasons why European colonists and explorers not only displaced native populations but brought European customs and other influences into the New World. Gold may have been a motivator for economic power, but it led to political and cultural changes that also helped to bring the New and Old Worlds together, for better and worse.[9]

Summary

The simple, common appeal of gold led to its prehistoric presence in many societies. However, as societies developed formal governments and international trade developed, gold took on a role of being an important medium for exchange and trade. This influence on the economy helped it to make trade items stable in their prices, but it also motivated states to control gold's access. The first example of how the control of gold gave great power occurred in ancient Egypt in the 2nd millennium BCE. This occurred also in the period of the Roman Empire, where that state played an important role in international trade through its access and control of gold. The Spanish later demonstrated how gold motivated their exploration and imperial expansion. The rise of the British Empire influenced other countries adoption of gold as being an important standard for currency value. Gold, more recently, has been avoided as the standard for currency value. In part, this is because of the history of gold, where its limited distribution has caused imbalances in the world economy, where countries that controlled it were able to gain unprecedented power. For the United States, moving away from the gold standard occurred as a way to avoid gold fluctuations, limitations in currency supply, and control of the economy by foreign powers. However, other countries, such as China, see that in the long-term gold may have great value, particularly if there are future major disruptions to international trade and, once again, a standard such as gold is needed to provide value to currencies or international trade. In effect, the long-term viability of global economies without using gold as a standard could be tested in the years to come.[10]

References

  1. For more on the importance of gold to ancient societies, see: Rapp, George Robert. 2009. Archaeomineralogy. 2nd ed. Natural Science in Archaeology. Berlin ; London: Springer.
  2. For more on the relevance of gold to ancient societies' economy, religions, and culture, see: Bernstein, Peter L. 2004. The Power of Gold: The History of an Obsession. Illustrated ed. New York: Wiley.
  3. For more on how gold developed in China as an important substance, see: Bunker, Emma C. 1993. “Gold in the Ancient Chinese World: A Cultural Puzzle.” Artibus Asiae 53 (1/2): 27. doi:10.2307/3250506.
  4. For more on the role of gold coinage in international trade, see: Harris, Edward Monroe, David Martin Lewis, and Mark Woolmer, eds. 2015. The Ancient Greek Economy: Markets, Households and City-States. New York: Cambridge University Press.
  5. For more on how gold continued to shape world trade in the early Medieval period, see: Bentley, Jerry H., and Herbert F. Ziegler. 2011. Traditions & Encounters: A Global Perspective on the Past. 5th ed. New York: McGraw-Hill, pg. 327.
  6. For more on the spice, see: Andrei, Liviu C. 2011. Money and Market in the Economy of All Times: Another World History of Money and Pre-Money Based Economies. London and New York.
  7. For more on the shifts away from the gold standard, see: Bayoumi, Tamim A., Barry Julian Eichengreen, and Mark P. Taylor, eds. 1996. Modern Perspectives on the Gold Standard. Cambridge: Cambridge Univ. Press.
  8. For more on the ancient ramifications of gold on economies and politics, see: Finley, M. I. 1999. The Ancient Economy. Updated ed. Sather Classical Lectures, v. 48. Berkeley: University of California Press.
  9. For more on the influence of gold in exploration and the importance the New World played in international economies and politics, see: Thomas, Hugh. 2004. Rivers of Gold: The Rise of the Spanish Empire. A Phoenix Paperback. London: Phoenix.
  10. For more on how the move away from the gold standard influences economies, see: Cooper, George. 2010. The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy. Petersfield: Harriman House.