One Nation, One Money: Territorial Currencies and the Nation-State

Most nation-states in the contemporary world have attempted to maintain a distinct currency which is both homogenous and exclusive within their territorial boundaries. Indeed, these "territorial currencies" are widely seen as a central symbol of the sovereignty of the nation-state. In the late twentieth century, however, the practice of maintaining territorial currencies is increasingly being challenged by developments such as the EMU initiative, currency substitution, eurocurrency activity and the growth of local currencies. To understand the significance of these developments for the nation-state, this essay looks back into history to investigate the nature of the relationship between the nation-state and territorial currencies. Three broad arguments are developed. First, I demonstrate that territorial currencies are a relatively recent historical creation, emerging for the first time only in the nineteenth century in the leading economic powers of the world. Second, their historical emergence is best explained by a number of developments that accompanied the rise of the "nation-state" in that era. Finally, once territorial currencies were in place, I argue that they also strengthened a number of important features of the nation-state. Drawing on the three arguments, I conclude that the historical relationship between territorial currencies and nation-states has been a very close and important one which has been unjustly neglected in existing academic literature.