The History and Impact of Tontines: A Unique Approach to Raising and Managing Money - Prof, Study Guides, Projects, Research of Introduction to Cultural Anthropology

Download The History and Impact of Tontines: A Unique Approach to Raising and Managing Money - Prof and more Study Guides, Projects, Research Introduction to Cultural Anthropology in PDF only on Docsity! Uy, Lien, Kim 1 Belinda Uy Jenny Lien Tanya Kim Professor Maurer Anthro 125S: Tontine 20 March 2008 Tontine: What goes around comes around Q: Why do people take part in a tontine? A: For money. Q: Well, is there a special reason? Or is that the only reason? A: We need money. That’s it. Q: For bills? For anything in particular? A: For getting money. That’s it! Simple. We need it. We get it. Does anything dealing with money simple? In this capitalist society money ensures survival. Without it, some of life’s rewards, luxuries, and even necessities shall be denied. Money as the American cultures knows it; is one, if not the, facet that determines one’s status in life. However, a practice a few centuries old, have allowed people to accumulate riches. That practice is named, tontine. Tontine, in its purest form, really does bring truth to the statement that time truly does mean money. Those who come together for a tontine all share and invest their riches, but after time passes, the last person in the pact, gains all the money. To better comprehend tontine, its history must be understood. The history reveals the origins of the scandals and deceit tontine has bestowed upon the world. Its dramatic past only confirms the varied and complex behaviors that money has over people. Along with the many reactions, also comes with Uy, Lien, Kim 2 the many forms of tontine. This paper shall showcase the Cambodian Tontine and divulge the intricacies within it. The Cambodian Tontine allows people to realize that the evolution and goals of tontine varies within every culture and even with every group that takes part in one. It is a reminder that certain traditions, customs, and practices can not be forgotten, but certainly modified. With a few centuries under tontine’s belt, it has gone through many changes, yet it still survives in the modern world. From reality TV shows to comedy, it lives. The presence of tontine in the contemporary world exemplifies the thoughts and feelings about money, such as: the idea that greed transforms good people to evil, or how the need to survive bands people together, or even how personal and impersonal money can be for people. This paper shall expose the ties tontine forces upon the members, as well as help understand one of the many customs and behaviors dealing with money. First introduced by and named after Italian banker Lorenzo Tonti, the idea behind tontines came forth in an effort to raise money to finance various public works for the French government in 1653. In his scheme, a number of “subscribers” would each invest a share of 300 livres, the then French currency. The subscribers are then divided into ten classes according to their ages. A fixed sum is paid annually among the members of each class to ensure the fair distribution of interest. The concept is much like the system of modern bonds. However, there is a catch: the increase in profits isn’t due to raising interest rates, but rather due the diminishing amount of people in the tontine. In other words, as more and more people die with the passing years, their share is divided among the remaining members. In the end, the sole survivor of each class is able to bask in the glory of taking in all the remaining interest, and with that, the tontine cycle ends. Uy, Lien, Kim 5 in Senegal, West Africa demonstrates how a group of seventeen women join together in the absence of a reliable and accessible banking system to raise approximately 1,000 local francs per person each month (about two U.S. dollars). This system gives them access to money they otherwise would not have to help boast their businesses (Schwarz). Providing capital for businesses or simple personal needs appear to be the most common uses of tontines in Southeast Asia. In many communities, such as that of the Cambodian community, tontines provide a certain comfort level that not only gives them access to money, but limits this access specifically within their own social groups. Hence, “participants in Cambodian tontines believe that the returns from tontines are higher than those available from other saving methods” (Liev). The close ties in social relationships in Cambodian tontines are a far contrast from the national tontines that once took place. The national tontines worked on the basis of people simply buying shares, it was not necessary for all members of each participating class to know the other person, and on such a large scope, it would have been nearly impossible. The government’s involvement provided a sort of guarantee that members would get back more than what they invested. In the Cambodian tontines, the interactions between members through the exchange of money are what Karl Marx a claim is lacking in society at large. Georg Simmel’s The Philosophy of Money, claims that money is impersonal, thus making relationships impersonal, yet through Cambodian tontines, one will clearly see that this is not true in all cases. The system of Cambodian tontines, is one based largely on trust, thus there is a sense of obligation to provide the amount needed each month. Tontine’s integration into a more contemporary culture can be seen in southern California in the form of Cambodian tontines. Cambodian tontine is a type of informal Uy, Lien, Kim 6 rotating savings and credit arrangement (Liev). It starts off with a group consensus on who can join the ‘game’ and ‘play’, or leng. Everyone in the tontine puts in a fixed sum of money into the pot, for example, let us say they put four hundred dollars each among five people which makes the pot total two thousand dollars. With every tontine, there is a Mae, or leader. The Mae is in charge of handling the money and disbursing it properly among the players. The first month, say January, the Mae wins the pot by default because she is the leader. The benefit of being a Mae means that even though you are still borrowing money from the players, you do not have to pay interest on the sum of money you borrowed. Borrowers are responsible for paying back lenders the month after they win the pot. This means the Mae must pay back lenders in February. When you pay back your loan it is the fixed amount in which everyone originally contributed: four hundred dollars. The four hundred dollars which the Mae is paying back is used in the second pot so that the total sum is still two thousand dollars even if the Mae has ‘died’ off, or ‘slap’. If you are not the Mae, it is decided who gets the pot by a secret ‘bidding’. The highest bidder wins the pot for that month and then pays an interest that same month to the lenders in the tontine. Interest is not paid monthly; it is a one time payment if you have won the bid for that month. For example, if you bid forty dollars and it turns out to be the highest bid for the two thousand dollar pot, the interest you will be paying back consists of paying forty dollars back to every lender but only those that are still alive in the tontine. At this point it is three other people, excluding yourself and the Mae, recall that there are still five people total in the tontine. Thus, the total interest you will be paying back is forty dollars to the three surviving players, totaling one hundred and twenty. This goes on and on until only one player survives. The benefit of being the last Uy, Lien, Kim 7 player to survive is that you do not have to pay interest to anyone because there are no more survivors in the game. Thus, the entire time through the tontine, you have only generated interest because you have been a lender the entire time. If you were last, you would only have to pay back the original two thousand dollars which you have acquired through the tontine pot. This is similar to being a Mae because neither has to pay back interest. If this is so, why not just become a Mae to begin with? What is intriguing here is that if a player decides to run off with the pot for the month and having no intention of paying back his or her lenders, the Mae is then burdened with the responsibility of paying each player back four hundred dollars from their own pocket. This is the most unappealing part of a tontine and the riskiest. That is how Cambodian tontine functions. By understanding that process it will help people thoroughly understand the impact that tontines have on Cambodians who participate in them. An interview was conducted to understand why such an unconventional practice was so appealing. Discussing tontines with outsiders or somebody that did not understand the concept of tontine was almost taboo. When asking an interviewee if she has ever been apart of tontines, she replied “Oh! No, no… I can’t talk about that.” The aura that surrounded tontines was very secretive, as if an illegal underground operation was underway. After securing her trust, I proceeded with my interview. Her response to why she joined a tontine seemed quite clear to her, “because we wanted money!” Although her enthusiasm was shocking, what about the risk involved? What would happen if someone left with the pot with no intention of paying back the tontine, “that’s why you only join with people you trust…it’s a risky business.” I then asked if she has ever experienced someone running away with the money and Uy, Lien, Kim 10 stated they “deserve” these riches and the glory of winning. John Locke stated in his Of Property, “… God gave the world to Adam and his heirs in succession… God, who hath given the world to men in common, hath also given them reason to make use of it…” (Locke). Locke wants people to understand that God gave everyone the same rights and properties, but it is up to the person to claim and make use of the “properties” God gave man. Therefore, for the contestants in the game, and the online fan site, it seems there is a consensus attitude of how much they deserve the riches and believe themselves to be the most worthy to take part in a chance for glory. And, as one person suggested, the “cruelty” that may occur in the show will only prove to the audiences who will watch, that the contestant will do anything to win. Since they are prepared to play with such conniving methods, they are entitled to have ten million dollars. Michael Taussig also wrote an example on how selfish people can be when trying to accumulate money. In his article, The genesis of Capitalism Amongst a South American Peasantry: Devil’s Labor and the Baptism of Money, he wrote about the peso bill, “[the bill] is thus believed to receive baptism instead of the child…it is believed that [the bill] will continually return to its owner with interest…[while] the child remains unbaptized... [and] the child’s soul is denied supernatural legitimacy…”(Taussig 137). People are willing to condemn a child the light of God and entering heaven for the purpose of gaining money. The avarice of humans may lead people to be evil. Yet the tontine is not all evil. After all, the Cambodian Tontine is a lovely example of trust and goodliness in people. In the Cambodian tradition people band together in the community and provide money when the bank, lawfully, cannot do anything. Choice and trust come together. This bond binds people to one another and all people can do is hope that everyone shall come through in Uy, Lien, Kim 11 the end. To enter into a tontine, everyone is putting trust into everyone else to not corrupt the rules or procedures. That trust unites everyone to the money pot, making it very personal. In the Cambodian Tontine, most who participate join in order to pay off debts and make ends meet when banks refuse the loans to such people. In one way, it is a very socialist aspect due to that nature that everyone in that tontine group community puts their own money in order to help someone else, while knowing they, too shall be helped when it is their turn in need. It reflects Karl Marx’s idea of commodity fetishism. In his Capital Volume I he states, “In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers. To the latter, therefore, the relations connecting the labour of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things” (Marx). In capitalist society people do not think about the people or the labor that was put into an object. Instead, they subconsciously accept that an object or material is made out of magic. Unlike Cambodian Tontine, or tontine in general, the money is derived from somewhere and someone. People make and break the tontine. And Karl Marx wishes for the markets to reflect that people are the controllers and manipulators of the money and economy. People help each other, and the kindness of tontine reflects the need that people can help people. While, with the help of the reality TV show, the bipolar intentions of tontine is very much realized; with its corruptions and competitive nature that money holds over people. Uy, Lien, Kim 12 The tagline for this Reality TV game show is, “Possession is everything,” which plays an integral part in the game. The show can award ten million dollars to the winner because the produces intend to accumulate the amount using the contestants’ own net worth. On an article by realityexploits, Lynn wrote, “The competitors themselves put up their life savings - every penny - but only one of them will walk away with everyone else’s cash.” The tontine concept is having people invest in a common fund where everyone can acquire an annuity and the longest lasting member gain all the funds. With this new twist in the game, the stakes are higher. On the fan site, when asked why auditioners were willing to give up their life savings one replied, “Having heard what I've heard now [giving up life saving’s] I would have still auditioned. As I said, I'm still not sure exactly how they will interpret ‘net worth’, and until I have to sign a form that says, ‘sign this and your assets are on the table,’ it does not hurt to see where this is all going. When that form does appear in front of me, who knows what will happen?” (Tontinenation). It seems the desire to prove themselves change when it is their own income that is at stake. Some may have nothing to lose, and some may have lots to lose. What are people willing to risk? Is it right people can acquire money? In Aristotle’s, Politics, he mentioned the natural and unnatural way of acquiring money. If he were alive, I believe he would think this game show as a way of unnaturally getting money. He mentioned in part X, “The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting Uy, Lien, Kim 15 Works Cited Adams, Cecil. What’s with tontines, the odd annuities in which you benefit when others die? 22 Jun 1992. <http://www.straightdope.com/classics/a3_172.html> Aristotle. (2000). Politics. (17 March).http://classics.mit.edu/Aristotle/politics.1.one.html. Dave. “Student Needs You! Forum.” Tontine Nation: What would you do to win $10 million dollars? http://www.tontinenation.com/forum/topic/show?id=969613%3ATopic%3A1397 24&page=2 Lange, Andreas, John A. List and Michael K. Price. Using Tontines to Finance Public Goods: Back to the Future? ANTPAC. 08 Mar 2008. <http://www.nber.org/papers/w10958.pdf> Liev, Man H. 26 August, 1997. 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