Free Myanmar's Long Road to National Reconciliation by Trevor Wilson Page B

were unable, or unwilling, to protect theproperty rights of participants in the financial system. Most obviously this was the case with respect to the holders of bank deposits in Burma. This cohort had the rights to their property — their monetary assets — violated in multiple ways, including the complete denial of access to it at critical moments. Such assets ceased even to be useful as the means of exchange, as remittances and transfers ceased, and as established tokens (credit, debit cards and the like) were disavowed. 29 Perhaps even more damaging were the violations of the property rights of borrowers whose loans were recalled by the banks concerned, acting at the explicit direction of the CBM — arbitrarily withdrawing working capital and undermining businesses that had entered into supposedly binding and dependable contracts. Of course, with a number of the private banks, including two of the largest, now seemingly permanently closed, a substantial number of depositors have effectively “lost” their money.
    The importance of a credible regime of property rights for banking and financial systems hardly needs to be stressed — financial assets such as deposits are, after all, little more than notations on paper (not even on paper in the case of electronic banking products) that are merely claims on the issuer, an abstract representation of the real assets and resources into which they are meant to be redeemable. They are symbolic, backed up by nothing other than the trust their holders are willing to invest in the corporate entity that issues them. In the developed financial markets of the world this trust has been hard won. As Drake notes: “Those who decide ... to hold financial assets as wealth need the reassurance, which law and custom confer, that it is safe to do so”. 30 Of course, “law and custom” have seldom conferred such safety in Burma, and the 2003 banking crisis is but the latest reminder of this fact.
Failure of the Fundamental Financial Asset: “Money” in Burma
     
    The most obvious function of money is as a medium of exchange. A more efficient substitute for barter, it is in this role that money allows for the division of labour — famously, one of the factors that Adam Smith posited as partially explaining the “wealth of nations”. But money, especially in its modern form, is much more than simply a means of exchange. As a store of value, money allows for “inter-temporal” decision-making by economic agents. Participants in an economic transaction do not need to instantlyconsume the products of their exchange — rather, money allows consumption to be postponed, brought forward and more generally “liberated” from its initiating transaction. In a practical sense, this allows for saving, for investment, and for the longer-term consumption decisions that people make. Finally, money is a unit of account. Often overlooked, it is this virtue that makes possible the calculation of relative prices, debts, wages, and profits — the signals that allow for the “progressive rationalization of social life”. 31
    It is when we stop to consider the nature of money that the importance of property rights becomes apparent. Once valued because it was a commodity of intrinsic worth (gold and silver, for instance), modern money is merely a socially-constructed “promise to pay”. In its most recognizable form — that is, as embodied in a nation’s currency — this promise is made by the state.
    Currency is at the peak of the money hierarchy in terms of its widespread acceptability, but it is, of course, only a component — and in modern economies with a proper functioning financial system, an increasingly small component — of what we regard as “money”. The major component of money in modern financial systems is that created by financial institutions — claims against them (in the recognizable forms of deposits, credit cards, and so on) that are transferable and, as such, widely