My colleague Erica Grieder at The Economist has a nice post up relating Joachim Kalka’s essay on coins in the New Left Review to the possibility that increasing use of debit cards will lead to a more cash-free economy. Strangely, it seems to me that electronic innovations have actually led to more cross-country differences in modes of payment over the past 40 years, rather than less. In the Netherlands, for instance, credit cards are rare; tighter regulation meant they never had the explosion in credit card offerings that hit the US in the ’80s. On the other hand, they were using debit cards much earlier and more ubiquitously than the US.
Meanwhile here in Vietnam, the economy is exceptionally cash-based, considerably more so than in, say, Africa. Here, in fact, they have no checks. Never have. Hence, they’ve never sent bills through the mail: there’s no way to pay them. They send actual human bill collectors around to collect your phone bill, water bill, electric bill, etc. in cash at your door. This is only now beginning to change, with options for electronic bill payment at ATMs or via mobile phone. But while it’s an exceptionally cash-based economy, it’s not coin-based. In fact, for decades, there were no coins at all. It was all paper money. There are still a bunch of antique Chinese coins floating around, with square holes in the middle; they’re used for jewelry and decor. A few years ago, though, the government decided to start issuing coins, because they last longer and are in the long run cheaper to circulate. The result is this:
This is a roll of Vietnamese 5000-dong coins (about $0.25). Here’s the thing: nobody will accept them. I mean, official shops will, and probably chain supermarkets and so forth. But taxi drivers won’t, people in the market won’t, and basically most individual owner-proprietor businesses won’t. Why not? Because they’re afraid they won’t be able to spend them, because nobody will accept them. It’s a completely irrational collective-action problem. The things are issued by the Vietnamese government; they’re clearly unfakeable at any reasonable cost, who would want to fake a $0.25 coin anyway, and if they did, who would care? You could just let it circulate, it wouldn’t do any harm. But for some reason your average Vietnamese person will simply not accept their own government’s coinage as legal tender. They only trust the banknotes. Craziest thing.
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