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An account of cashless Kurds

Money is merely an idea. In the absence of commodity-pegged money, society has the ability to devise its own solutions.

Last updated: 24 Mar 2014 07:28
Agri Ismail

Agri Ismail is an Iraq-based author. His work has previously appeared in The White Review, the Chimurenga Chronic, the Outpost, the Swedish art journal Glanta and the anthology Uncommon:Dubai.
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Locals can still operate on an IOU basis, barter with valuable commodities such as jewellery, or borrow from friends and family, writes Ismail [Reuters]

Having followed the media frenzy surrounding the two-week United States federal government shutdown in October of 2013, with doom-mongering pundits bemoaning how the lack of funds would destroy the US economy, one would be forgiven for thinking we were witnessing the apocalyptic final scene from the movie "Fight Club", with its plot to bring down the world's credit card companies leaving the world in chaos and rubble. Without the circulation of money, the narrative seems to be, we will revert to the Dark Ages.

This is a narrative that is currently being challenged in Iraqi Kurdistan: As part of the current power struggle between the Iraqi Central Government and the Kurdistan Regional Government (KRG) over the Kurdish region's annual budget and the overarching issue of the Kurds exporting oil, the Central Government decided not to pay out the KRG's salaries for the months of January and February, a sum estimated to have accumulated to over $1 bn. 

The KRG is, by far, the biggest employer in the Kurdish region, employing over a fifth of the region's 5 million residents (as a point of comparison, that is almost as many people as Walmart - the United States' biggest employer - hires in the US, a country of 317 million inhabitants), not to mention the countless more receiving government pensions or social benefits.

The KRG is, by far, the biggest employer in the Kurdish region, employing over a fifth of the region's 5 million residents, not to mention the countless more receiving government pensions or social benefits.

Even those who are not government employees are affected: Many local banks, notoriously unable to keep an acceptable level of liquidity at the best of times, have run out of cash entirely, which has led to local companies and businessmen having to lend banks millions of dollars. After well over two months of this stalemate, the end times should be well upon the Iraqi Kurds.

And yet, on a regular Tuesday at Nali's, one of the many trendy cafes in the Iraqi Kurdish city of Suleimania, there is not a free table to be found. Trying to drive through the local shopping streets with its ramshackle gravity-defying stalls and badly transliterated store fronts is still like experiencing Zeno's dichotomy paradox, where what you imagine should be a desolate consumerist wasteland is as busy as ever, our taxi driver eventually sighing that we'd be better off walking to our destination.

There are no demonstrations demanding salaries to be paid out, there are no strikes and no looting, and though people - understandably - are complaining, they are still going to work and performing the job for which they have yet to be paid.

It is clear that whatever we expect to see from a society where there is no physical money, what is currently going on in Iraqi Kurdistan is subverting it.

There are precedents that tell a similar tale: The Irish bank strike of 1970 left the country for six months without access to any cash at all. Though it was widely expected that the country's entire economy would collapse, an ad hoc solution was improvised where people began using IOUs as money and where local pubs functioned as clearing houses and offering credit checks. 

Money, after all, is merely an idea, and in the absence of commodity-pegged money or fiat money, a society has the ability to devise its own solutions.

Unconventional solutions

The Kurds themselves have dealt with unconventional financial solutions before: In 1993, the UN embargo on Iraq made it impossible for the country to receive its Dinar bills that had been  - hitherto -  printed in Europe (called Swiss Dinars due to the general assumption that they were manufactured in Switzerland, although they actually were printed in the UK).  

The Iraqi Central Bank reached out to a Chinese printer that wasn't covered by the embargo, giving the Iraqi people three weeks to exchange their old Swiss Dinars for the new "Saddam Dinars". The Iraqi Kurds, pariahs then more than ever, could not exchange their bills and so continued using the Swiss Dinars until 2003, though these were obsolete bills that no international bank would ever accept as legal tender. 

What arose was an improvised currency that was, much like BitCoins, finite in their number - there hadn't been any new bills printed after 1989 - and used only in a region that was completely secluded, legally and financially, from the rest of the world.

Yet these obsolete bills quickly became far more valuable, due in large part to their scarcity, than the official Iraqi Dinar that was not only easily counterfeited but moreover being printed in gargantuan quantities to allow for Saddam's government spending. 

Also, historically, villages in the Kurdish area would have very little money and instead operate on a bartering system until villagers would venture into cities to receive payments in cash for their products, not because the villagers needed cash for their day-to-day life, but rather because it was the only way to pay various government fees. Finding alternatives to government-backed money seems deeply rooted, then, in Kurdish society.

Even the tendency to start the year without a salary isn't news to the Kurds: Iraqi accounting practices are so complex and convoluted that the yearly audit is often delayed, making unpaid January salaries the perverse distorted mirror image to the Western world's Christmas bonus.

However, the Iraqi Kurdish region, in the midst of an economic growth unlike any it has ever seen, is no longer as secluded from global financial markets as it was in the 1990s. Though locals can still - with remarkable ease as these past two months have shown - operate on an IOU basis, barter with valuable commodities such as jewellery or borrow from friends and family. Those solutions, however,  break down when faced with the robotic compliance departments of international banks and investors in the region.

And so, when on February 28, 2014, after two months of withholding salaries, Prime Minister Nouri al-Maliki vowed to pay out one of the unpaid months and a letter was sent - two weeks later - to the Central Bank of Iraq to release said funds, there was for the first time not so much a general shrug as there was a sigh.

Money, as we generally define it, might not be as necessary as we think on a microeconomic scale: The Kurdish and Irish examples, along with recent reports that Tide detergent has become a de-facto black market currency in the US, show that workarounds can always be found in societies where people know and trust one another and where this trust can supplant any faith one has in a central bank's fiat.

But if the Kurdish region wants to be part of the international community and to attract foreign investment, such ad hoc solutions will soon no longer be possible.

Agri Ismail is an Iraq-based author. His work has previously appeared in The White Review,  the Chimurenga Chronic, the Outpost, the Swedish art journal Glanta and the anthology Uncommon:Dubai.

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The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

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