Money and financial change at the frontier: shifting monetary regimes and new risk in the everyday economy of a frontier market

Abstract

This study examines monetary change in a frontier economy, setting the changing regime of monetary governance in Pakistan against change in global markets. For Pakistan, an important consequence of the opening up of money and markets to the global economy has been new volatility in the rupee, which has spread risk across the economy. This thesis focuses on the expression of these risks in the everyday economy - amongst households and in local bazaars, in everyday transactions and money practices. Fieldwork indicates that in their use of money for exchange, as a store of value and as a unit of account, people are diversifying away from the rupee into staples like grain, cattle and land as alternatives to state money. But while conventional wisdom would cast this as a return to barter and point to the low levels of ‘financial inclusion’ in the banking sector as the problem, this thesis uses techniques of financial valuation and portfolio analysis to re-frame these ordinary people as strategic operators in financialised markets. These findings suggest that ordinary people move in and out of the rupee and other commodity ‘monies’ in informed and considered ways, casting subsistence commodities as objects of new risk management strategies, and the ‘unbanked’ amongst those at the forefront of financial innovation. Building on this evidence, the thesis contrasts household uses of various commodity monies with the sorts of data currently collected by Pakistan’s central bank. The analysis shows how the emergence of this calculating financial subject operates beneath the radar of central bank analysis, not only with regards to microeconomic strategies themselves, but also with regards to how monetary statistics understate monetary risk. The thesis develops the argument that the theories of money and of monetary policy that dominate central bank analysis and policy settings are not equipped to understand the way that ordinary, generally poor, people engage finance. Finally, the thesis explores how theories of money that inform central banking need to be rethought in light of the evidence assembled in this thesis of new risk linked to the liberalisation of the rupee and experienced in substantive ways in the everyday economy of ordinary people.