Monetary Plurality and Empire: Insights from French Pondicherry After the Seven Years’ War

This study examines a historically localized colonial context to raise and attempt to answer some empirically grounded questions about monetary plurality and monetary transformation in preindustrial economies. Eighteenth-century French Pondicherry’s hybrid colonial monetary system combined multiple currencies such as gold pagodas, silver rupees, and fanams, with four units of account: the gold pagoda, the current pagoda, the rupee, and the livre trounois. Following the Seven Years’ War (1756–1763), the French Empire in Asia underwent a series of administrative reforms. This chapter demonstrates that the imperial policy change resulted in a severe liquidity crisis between 1770 and 1773, which, in turn, led to the creation and negotiation of an increasing variety of money-like instruments in the local money market. More precisely, it studies the monetization of short-term public debt instruments. To circumvent the severe scarcity of cash, the local colonial administration issued a variety of public promises to pay (IOUs) to meet its most important item of expenditure: the salaries of administrative and military employees and the sepoys. These papers were negotiated on Pondicherry’s money market in a manner similar to private IOUs. The local colonial administration encouraged their negotiability, thus making them, in practice, money-like instruments while limiting their legal definition to negotiable instruments. In 1770s Pondicherry, the monetization of public debt paper instruments was therefore a floating process between money market practices and the rule of law.