By analyzing the case of Athens during the Classical period (508-323 BCE) the main thesis of this paper is that under direct democracy procedures and the related institutional setup, a monetary system without a Central Bank may function relatively well. We focus on the following issues: (i) Τhe procedures of currency issuing in the Athenian city-state, (ii) why the Athenian drachma become the leading international currency in the Mediterranean world (iii) how and towards which targets monetary policy without a Central Bank was possible (iv) defining the targets of monetary policy and the mechanisms for its implementation (v) the role of money in the economy (vi) the issue of deficit spending (vii) the reasons of the replacement of the Athenian drachma as a leading currency by others from the Hellenistic period onwards (viii) the correlation of our findings regarding the decentralized character of monetary policy in Classical Athens to today’s realities, such as the issue of cryptocurrencies. Our analysis shows that monetary policy without a Central Bank was possible, with its foremost aim being the stability of the currency (mainly, silver coins) in order to enhance trust in it and so, make it an international currency which could outcompete other currencies. Since there was no Central Bank like today, monetary policy decisions were taken by the popular assembly of citizens in combination with the market forces themselves.
In the present essay we analyse the links between the emergence of new arms and forms of war-emergence, the phalanx and its hoplites, and the trieres at sea, its economic base, and the emergence of democracy in classical Greece. We propose that the unique till then in the world phalanx formation, led to the development of particular values and ethics, which again were the necessary conditions for the emergence of democracy, then again, a unique phenomenon. We then turn to seapower, which according to our analysis was a sufficient condition for the establishment and endurance of democracy, because seapower led to a community of economic interests, on which direct democracies like Ancient Athens, were based.
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