There are broader lessons from this currency invention. Many policymakers regard the rise of online banking as a way to tackle illicit trade and money-laundering, because banking digitally leaves a trace. This should mean that digital economies are easier to police than cash-based ones. Some countries are even considering banning paper money entirely as a way to clean up their economies. Yet an understanding of how currency innovation works suggests these hopes are credulous: from remote islands to high-security prisons, money invention is informal, organic and – as Louisiana’s prisons show – can now be untraceable. The new digital “dot” currency is reportedly already being used to launder cash across national borders.
Despite the damage illicit prison markets can do, one ex-convict in his 30s defended the underground prison economy to me: “I’ve got friends inside. This is how they support their families.” He said most prisoners have limited chance to improve their lot. “So they sell drugs, they run tickets and they gamble; this is how they make their money.” Veterans who have spent decades in Louisiana’s prisons defend their economy too, insisting that underground exchanges are a way to keep life inside the prison calm.Simple trades – haircuts, pecans, books, shirt pressing and even tattoos – that were once made using tobacco have shifted to alternative currencies including coffee, packets of noodles and even tins of mackerel. They are a way to make the ultra-long Louisiana sentences a little easier to bear.
For those concerned about the future, the hidden economies of the Louisiana prison system offer a vital lesson. It stems from the power of the informal economy in enabling a society to recover from a shock, and the extraordinary levels of effort and innovation that people will use to establish a trading system if theirs is damaged or destroyed.
Louisiana’s prisons have parallel economies. There is the illicit drug economy that runs on its untraceable dot currency, and alongside it a more innocent marketplace where basic necessities are mediated with some agreed item – currently coffee – acting as a currency. Trades in both economies work because of the most basic law of prison economics – that a prison is a place defined by unsatisfied needs, tastes and demands. Both economies are self-built, organic and highly innovative. Both show that a currency, the provision of which can seem like the ultimate role of the state in an economy, can be established completely informally. Prisons show that the human urge to trade and exchange is impossible to repress, and that solutions to future challenges are as likely to come from informal markets as formal ones.