The Racial Implications of Eliminating the Penny: A Historical and Analytical Perspective

1. Introduction

In 1787, Benjamin Franklin suggested the name 'bit' for the smallest unit of U.S. currency, but Thomas Jefferson won out with 'cent,' which has been the monetary linchpin of many a penny saved, a penny earned, and even tails that bring luck and protection. The penny carries a historical, economic, social, and even magical significance in the United States. However, only increasingly impoverished segments carry it. As one can only stretch a dime just so far, some policymakers have argued that eliminating the penny would essentially round consumer prices up to the nearest nickel and thereby save retailers further inventory and establishment costs. While not a call to arms, this essay is meant to point out the racial implications of what on the surface seems to be a mundane policy decision. After providing some historical context and arguing that the penny still has economic significance for the marginalized and the ghettos, I analyze some historical objections to the elimination of the penny, and close with these common objections in mind. I argue that the racialized dimensions of numismatics, both historically and today, must be considered closely.

In the past few years, numerous scholars have turned their attention to coins and currency as a focus of inquiry. This has been a healthy exercise which has sought to challenge the 'iconic status' of money in American history. More importantly, has been 'the task of uncovering the deep investment of [the nation’s] monetary system in continuous practices of social subordination and racial hierarchy.' Economic historians and political economists have sought after the racial dimensions of the United States' socio-political economy. In lieu of the complex racial motivations that many of the framers of the U.S. Constitution admitted, economic historians have transformed the field of economic history by allowing a careful and critical consideration of rooted and institutionalized racial differences and hierarchies in America to act as a backdrop for a truly meaningful economic history. In teaching, writing policy, doing research, and even serving as a living model of funded research that is efficacious, we look at issues like the penny's significance from the standpoint of various other Americans of color and for thinking about goods like cultural capital and identity formation.

1.1. Background and Significance

According to the Background: The Penny as Anti-Racist Reparation section, the penny has only been around in the United States since 1787, when the first U.S. Mint opened in Philadelphia. In the wake of the Revolutionary War, the penny was conceived as the most basic unit of American currency. Scholars have referred to it as a populist reaction to the then-dominant use of Spanish coins in everyday transactions. The dollar, in contrast, was primarily an exchange tool between merchants. But the penny didn’t reside at the lowest level; despite what Americans are taught, there were half-pennies, half-cents, and smaller denominations. The penny sat at the intersection of the everyday habits of white farmers and the operations of sophisticated banks. Throughout the Money Trees quarter, a white penny featuring Abraham Lincoln, its value relegated it to the domain of the poor.

The title and theme of Eliminating the Penny for Racial Justice, in this meta-theoretical approach, beg a simple question: how much, really, is a penny worth? The answer is that, symbolically at least, it depends. The cost of everyday goods presents an essential place to start; not all goods or services can be neatly rounded; and the market of labor for low-income folks - particularly for incarcerated workers - has a similarly circular effect on the value of the penny. Meanwhile, those with access to smartphones can use digital money if they so choose, and they can cash out their earnings from low-wage gigs regardless of rounding rules. The title question has two very different answers: one for those with access to sidewalks, education, and safe housing, and another for those who do not. The argument for keeping or eliminating the penny, therefore, is not so much a policy dispute: it’s an argument over who needs to be included or excluded in the actions and values of society.

2. History of the Penny

The penny has been around for quite a while. Although its first recorded existence is attributable to Rollo, Duke of Normandy, when he was minted in 1031, its direct precursor, the pre-decimal English penny, was produced as early as 600 CE. By the 1780s and 1790s, when the first US penny was minted, the Industrial Revolution led to pressing needs for coins because of the expansion of trade and population in the country. Following the Civil War, the United States experienced significant economic growth and development. In the wake of the collapse of the second Bank of the United States in 1836, the production of paper money increased significantly. This new money was then integrated into smaller denomination coins, such as the lowly penny. This penny was also made up of a mixture of various metals ranging from tin to zinc, and much of the copper alloy was silver. In the confusion of the Reconstruction era, laws were passed that led to the minting of new pennies. The fifty percent copper, fifty percent nickel coins were lower in value when compared to the metals used to strike the coins into actual currency. Moreover, pennies were minted at the end of the Civil War as an all-copper currency for the first time in US history to represent and memorialize reconciliation, solidarity, and union following a war that ultimately led to the issue of freedom for Black Americans.

2.1. Origins and Development

The penny was initially created during the early periods of American history, inspired by coins and monetary systems from the Anglo-American world, the Roman Empire, and the British Empire. In early America, a cent was meant to be a day’s wage, similar to the Latin term for hundred. In the 19th century, one cent was meant to cover postage, which it did until when the cost of a postage stamp was doubled, making two the new standard. At its inception, the cent had very little purchasing power and served a greater monetary purpose through the way it related to other coins and denominations.

Penny redesigns were dictated by the political and social climate; some presidents and lawmen were also depicted as Indian killers. For the first century, the penny featured an Indian, the next century was colonists, and another eighty years a rendering of Lady Liberty in a Native American headdress followed in the mid-20th century by presidents. There are examples of the penny switching from even having zero on its face to the position of the denomination as "One Cent." With its many changes, different centuries and generations have associated meanings and values attached to the coin. For example, some children may carry luck in their pocket with a penny, while another child may never encounter one. The way those people incorporate the coin into their scope of economics is very different. This thesis provides a history of the penny, what it means, and a variety of reasons why it can be seen as important, while also providing counterarguments.

3. Racial Implications of the Penny

Penny policy and the rhetoric surrounding it involve profound racial implications. A sincere analysis of the penny is inherently bound to the context of a broader world where social inequities and racial disparities alter the lived experiences of human beings every day. This goes beyond the statistical figures about large-scale monetary depravity and materializes in concepts like value. The penny has a face value of 1 cent, the lowest denomination of coin, and its physical existence can indeed invite subliminal, value-based inquiries. What does it imply that such a thing exists? Additionally, what does it imply that such a number is divisible into the whole of our currency? When we are at our lowest, we are dehumanizingly divisible in our worth to the one cent. The penny does not only touch upon material poverty; it is also symbolic of cultural and systemic poverty.

This 'dehumanizing value' of the penny is evident in the stories of the radical instances of abused penny policy, which have colored the asset with a blue-collar resonance of equality and solidarity. Americans are taught this valorizing historical narrative of the penny – it is the coin of Lincoln, a great man who has been immortalized on the penny, and he is a great man who is noteworthy not for his radical amendment of the American economic system, but for his unification of the nation and his mortality. But when Lincoln takes a back seat in rhetoric about the penny, the policy narrative and its racial implications become less valorizing. A people's narrative reflects their storytelling values about themselves, and our national discomfort with the kill-the-penny rhetoric is embodied in our upset not just about the guru of the penny, but also the very fact that the penny seems to tire America and frustrate our deeply held belief in the inherent value of money. In America, the coinage of the USA already bears conflicting symbols of power, ones whose silence is deafening because to solve the conundrum is to face the unsettling social disparity.

3.1. Symbolism and Representation

As analyzed more fully below, the singular value of the penny is its symbolic and representational significance. If the penny is essentially a vehicle for producing a claim that the penny should be conserved for reasons having to do with representation or the signaling effect its absence or modification might produce for the body politic, this signaling effect must be fully understood. We must first ask what the consensus on the symbolism of the penny is—i.e., what the penny has come to "mean" and, relatedly, what meanings are lost with its disappearance. In the context of the broader cultural associations discussed above, what does it mean that endangering the penny or transforming it would signal that "we may not continue to value the face of the first President, nor of the greatest leader this country has ever produced"?

History tells us that American individuals and groups feel increasingly excluded—and further diminished or defamed—when their images are not displayed. The extension of that price and logic to currency means that changing its imagery changes its previous inclusive statement: adding a new image to our money, for some Americans, is a warning that others are less valued. Given this, it should be apposite that the penny should at least be conceived of in relation to the one cent, the formal site and space of penny narration. Charles White is responsible for the original concept of the reverse of the one-cent coin, which was then sculpted by a Mint Sculptor-Engraver. In a nod to jazz, the design consists of a bass, snare, cymbals, and a pedal, a sound most often heard playing a snare beat.

4. Arguments for Eliminating the Penny

One of the most common arguments for eliminating the penny is that it costs more to produce and circulate the coin than it is actually worth. Many countries that have high-value coins do not have an equivalent to the US penny, and most economists agree that transaction efficiencies are gained by having fewer coins with higher retail values. Additionally, there are a number of other intangible operational costs to retailers, including sales tax and cash-drawer accounting and management. The study further alleges that Canadians do not miss their penny, citing an analysis of the roundings made by Canadian retailers after the country stopped producing the coin.

From an environmental perspective, a number of hearings in Congress have focused on the environmental cost of coin production, and the government called for a reassessment of the one-cent coin’s composition in light of the costs and benefits to its intended uses. Reducing the total number of pennies and secondary coins would reduce the costs of moving coins around the country, reduce the workload associated with clearing and distributing coins at thousands of banks, and speed up cash handling at cash registers and self-checkout machines. Persistently low interest rates also restrict monetary policy options; there are only so low rates can go until people start stashing money rather than paying the fees of a bank that is charging them. Streamlining the currency supply would reduce these costs over the long term, while also providing another spur to a segment of the economy that rapidly converts and sorts large volumes of coins: the retailers and other businesses that run coin-counting machines.

4.1. Economic Efficiency

Among the salient concerns to proponents of penny elimination is that of economic efficiency. This line of reasoning suggests that eliminating the penny would produce fairly material efficiency gains. There are significant savings in time to be realized from not making change, or even having to take it. Speed and time are near the heart of the issue, and indeed, several proponents have pointed to making change at the register as a "consumer hassle" that drives up transaction times. Because 80% of cash transactions are under $20 in the U.S., a transition phase would replace at most a small fraction of cash transactions.

To date, we have seen some anecdotes of small business operators who may benefit from such a low-denomination currency elimination, particularly for candy stores. For small food retail activity, some entrepreneurs may be better off selling products that are priced like $3 rather than $2.99. Furthermore, some businesses may benefit from lower handling costs, inventory costs, and greater volume that could be sold. Once-a-year inventory costs are not to be forgotten. The programming of cash registers is done in such a way that prices are rounded up or down only. Everything is either priced as an even number or priced so that the penny trickles down below in the aggregate. Upon the penny’s elimination, the prices at most large retailers might not even change. If anything, prices might decrease.

Indeed, a phased removal of coinage for the U.S. largely identifies benefits that would be reaped by large retailers, and to a second or third order, credit card and service providers. Customers get their change taken care of faster. Indeed, rounding up or down on the aggregate of amounts without coinage has innate distributional effects. Rounding up of prices to two decimal places would presumably be an item of note in the U.S. It costs businesses to round up prices on the aggregate they paid on inputs. If there were to be problems, some retailers and competitors could not switch their thinking on this hardwire setting.

5. Counterarguments and Critiques

Many arguments are put forth against the elimination of the penny. Some people prefer to save the penny for cultural and historical reasons. The coin has a long and varied history, and it has been suggested that it is part of the heritage. Eliminating the penny would have negative effects on charities that rely on small change, people suggest. People who depend on low-value charity will be hardest hit. Other people argue that the nickel should be eliminated instead of the penny. These people prefer the round cost that the penny provides, and they see the nickel as a less practical coin, although many are still made each year. It has also been suggested that businesses would be less affected by the rounding costs for products if the nickel were eliminated. Finally, some feel that people have an emotional attachment to the penny and that it should be kept for these reasons.

The affecting things about the penny make up the counterargument against keeping the penny. Some people believe the possible psychological connections to the elimination of the penny are unfounded and impractical in the making of policy. The arguments against the use of the rounding policy are that it is not fair to people and it would cause a small but lasting change in the fundamental prices of goods available to consumers. The negatives are few, but some caution against arguments that undermine the complexity of deeper issues surrounding the penny and ignore the value of public sentiment in policy decisions. The time and costs of penny elimination are a problem for other opponents of the debate. The actual cost of eliminating the penny will include the time of calls to boycott from sentimental cries. The cost added to a sales tax would rise to 3.249%.

5.1. Historical Context

Despite the apparent lack of controversy surrounding the penny's elimination at face value, there are multiple arguments against the removal of the penny, which have been used by both politicians and scholars to argue against the penny's discontinuance. These arguments not only demonstrate the utilitarian and libertarian framework but also point to more historical and analytical perspectives that explain the negative societal consequences of the penny's elimination. Throughout history, the penny has served as a major – albeit minor – component of commerce and a thread that has tied Americans together in difficult times. The financial crisis and the Great Depression demonstrated the continued functionality of the penny as a piece of commerce, as many retailers began to round transactions down to the nearest nickel to make transactions more affordable. Critics of the elimination of the penny worry that the sentiment surrounding the penny has inhibited genuine discussion regarding the dollar's low purchasing value. The cultural and economic history and the unique experiences of the American people in dark times have conflated into a mist of misleading cultural memory. Additionally, many people criticized the proposals to replace the dollar bill with the dollar coin, as sentiments towards the status of the bill affected the rhetoric of the dollar coin. Although definitive evidence is difficult to consider, the past national experience of the reluctance to replace the traditional legal tender appears to demonstrate that historical biases are real and need to be analyzed in any policy prescription.

6. Case Studies and Examples

A case study panel or individual case studies pertaining to abolishing the penny or lowest denominations exist in Sweden and Europe. Analysis of private roundings in Sweden has demonstrated that people have done moderate private roundings when entering surplus ones into their ATMs for deposit. The use of four separate quadratic regression mathematical models further proved that the same outcomes were taking place when people made cash purchases. After roundings began in Sweden, however, the actual totals for conditioner, vaseline, and utility sporting equipment decreased slightly by 0.6 percent compared to those from October 2010.

One purpose of analyzing the panel data is to measure the general reaction to, and further see conclusions of, abolishing small change. Not only does a panel allow for estimates to review any type of interest volatility, but it also shows standard previous events of the rounding process taking place.

As of 2012, there were recent examples in Europe of residents of specific countries preferring to use higher denominations over the lowest ones they were given. However, multiple reports have provided evidence that existing legislation is too strict in terms of rounding transactions. They also have plans to cancel the one-cent and two-cent national coins in Belgium in 2012. So far, a recent study found that the outcomes of these prior studies showed that most, but not all, types of stores were taking part in rounding cash transactions without any actual rounding cash taking place. Documenting the implications of obtaining results through the usage of different models, residents were rounding cash transactions by an average of 0.1 in 2007. This worked similarly after the rounding directive in 1975 regarding whether up or down rounding would take place after a commerce transaction legally occurred. In return, rounding had been taking place prior to rounding cash, which had already been led over a decade ago.

6.1. Other Countries' Experiences

The Canadian Experience

In the United States, the decision to eliminate the penny is seen as a unique national problem. But in fact, every industrial nation has examined the future of their low denomination coins for fifty years, and many countries have proceeded with demonetization. The most financially and culturally similar of these countries is Canada, and for this reason, it merits close examination here. Both the United States and Canada have relatively low demand for cash, relatively thorough financial inclusivity, and payment habits of people that developers wish were further modernized. Canada is also in close geographic proximity to the United States.

Largely eliminating low denomination coins made some differing impressions in Canada. Some residents at the hearing praised the high-profile publicity of the project, saying that it educated many people about the existence of their many “unspendable” cent coins and that they felt good about that. However, the project was also very unpopular in some quarters. As directed by the central bank, the main narrative of the project was that eliminating the penny would not further round prices upward or spur inflation, and as intended, the discussion was engaged primarily on that matter. It appears in retrospect that being right about that was an important expectation of the public; it would have served an important educational function in continuing to explain the program to the public for this position as well.

7. Public Perception and Media Discourse

While economists are debating whether to eliminate the penny, the issue has been explored via mass media. While considered trivial by economists, the idea was depicted as a significant change by the popular press. Economists have received the most attention from traditional and internet media as they are often interviewed, publish articles in print and on the web, and are asked to serve as expert witnesses before government committees. Many of the articles and interviews with economists are of a positive nature, citing the benefits of inflation and economic policy. Most discussions about the penny in historiography are tied to discussions of economic policy, monetary policy, related topics like inflation, and depressions. The audiences for such pieces fall under a number of varied categories. The list of potential participants includes those who “like” belonging to a group that the penny advocates for some reason, such as conservatives who think that keeping the penny is a way to take a stand against the forces that are “destroying” the US or against government “interference” in people’s lives. Then there are merchants and their media allies who argue that the costs of rounding to the nickel make trading less easy or less secure, or are a form of fraud. Politicians make political hay by associating themselves with the proponents of one or another of the first two sets of causes, and they castigate their opponents as uncaring, deviant, or ignorant of the costs of the policy in question. Although the discourse can be framed or constructed in any number of ways, there are a rather limited number of discursive structures that seem to get played over and over again with slight modifications. The currents and symbols of discourse can produce completely different flows of thought with the same basic linguistic elements.

7.1. Framing of the Debate

Framing the Debate

Our policy choices are deeply informed by American tradition, ideology, and rhetoric, and keeping the penny involves aspects of all three. Keeping the penny reflects American fascination with money, even if the penny is not valuable. Believing that remaining the sole country to issue 1-cent pieces is prestigious, and that in today’s fast-paced world, modernity compels a currency reflecting contemporary taste and technology. Lastly, as coins are symbols of nations, rejecting the penny suggests disapproval of what it symbolizes. Each involves an implicit value judgment, yet they contradict: a fondness for tradition may conflict with modernity, and assigning prestige to a coin’s symbolism may be tempered by available funds. Rhetoric plays a critical role in shaping public opinion, policymakers’ perceptions, and policy outcomes.

An emerging discourse of penny representatives emphasizes the coin as an economic unit, highlighting its utility in day-to-day transactions. Proponents of the Keep the Penny Campaign also argue that the plan to demonetize the coin feeds a “cultural catastrophe” that “removes a part of American history from our society.” This discourse mitigates the potential economic hardships of keeping the penny by couching the debate in terms of shared heritage and goodwill lost. Opponents also draw on the notions of heritage and tradition, although it is implicitly discounted since the penny’s value fails to keep pace with inflation, characterizing it as a relic. The main thrust of the anti-penny discourse may be summarized as an appeal to necessity primarily on grounds of increasing economic efficiency, from transaction savings tied to increased use of electronic payments to the cost of minting and distributing new pennies. In effect, the anti-penny narrative segregates its arguments into ones of microeconomic efficiency and macroeconomic efficiency. These narratives, while constructed from three categories of efficiency, are ontologically and normatively distinct, as they have different implications regarding the future of the penny should abolishment not pass. Moreover, they are similarly temporal, discounting certain realities of American payment habits and costs of producing the penny that belie the unequivocality of their arguments. Future policy may arise that combines elements of the two narratives.

8. Policy Recommendations

How do we reconcile this entangled yarn? What follows can be treated as policy recommendations. Because of the tight relationship and pervasive cross-implications among different social arrangements, it is impossible to disentangle one concept from the other in an analytical way. It is important to keep the broader social context in mind when proposing changes to a currency system. The discussion of the elimination of small coins cannot be separated from its historical and racial implications. Politicians and policymakers need to incorporate a consideration of how their policies might disproportionately affect people of color. An abolition strategy is only just insofar as it is accompanied by an aggressive outreach campaign to ensure no one, especially people of color, is harmed in its wake.

First, we call upon the politicians to make a commitment to a currency system that is rounded to the nearest cent, recognizing that the economic implications will vary. In our minds, a currency system that is rounded to the nearest $0.05, for example, is structurally equivalent to a card-only currency system. Each case will require its own careful cost-benefit analysis accounting for a complicated array of economic factors. However, we dare to suggest that one reason for rounding to the nearest $0.01 (or any currency system that requires small coins) can no longer be the norm is that the cost of transitioning away from these coins with people of color and low-income individuals in mind becomes morally indefensible. The first point we make in recommending a rounding currency system is the structurally identical pragmatic proposal as the optimal price formula. However, as was touched upon in the periphery, this policy encompassing inclusion allows for an ethical calculation embedded in a justice-oriented framework without compromising its numerical validity. Second, the discourse surrounding the proposed policy should include stakeholders from every position in the production chain—the mint, the banking system, private enterprise, consumers, and communities. For a rounded currency system meant to be premised upon equity and compassion, the building of a general coalition would be a step towards that future in the present, and a promise that the inclusion of all voices will remain at the heart of this proposal. Third, if the eliminationist school is guaranteed fruitful discussion, a round system proposal is harmonious with the idea that a portion of the unlikely benefits be directed back into any affected communities through comprehensive educational and outreach programs making citizens aware of an impending systemic transition.

8.1. Addressing Systemic Racism

Systemic racism deeply embedded in economic structures needs to be duly addressed in any discourse about eliminating the penny. As economic justice activists often assert, accumulation and inheritance are but two examples of federal and municipal policy and practice that favor white America. Simply put, as profits accrue to multinational corporations and the richest five Americans displace the bottom 20% as highest taxpayers, low-income Black and Brown earners pay a disproportionate percentage of their household income to sales and property taxes even when living below the poverty line. On the strength of these facts, penny policies scrubbed clean of racial implications create the impression that the Federal Reserve has failed to address the concerns of those calling for overdue systemic change like abolishing the penny.

Money itself can hold symbolic implications just as powerful. Once again, the cost of representation can be viewed from multiple, and in this case parallel, standpoints. With this thread of thought, if and when pennies are abolished, input from affected persons from targeted populations should set policy, directly or indirectly. Certainly, the quantitative anthropological allyship or tokenizing effect of eliciting consultation will be put up for local or national debate, but it pivots on this idea: “The poor, racial minorities, and disenfranchised groups are not part of the racial or demographic diversification strategy of corporations and foundations to showcase the presumed inclusiveness, equitable treatment, anti-racist, and social justice characteristics of their hiring patterns, relationships, corporate governance, or social responsibility outreach.” Therefore, the operant responsibility the Fed, or any delegate setting penny policy, bears is illustratively best dominated by the demographic culture of those who would gain or lose by a transition.

9. Conclusion

Given this, eliminating the penny with the primary rationale of economic gains would fail to fully recognize its symbolic attachment to price. These proposed policy decisions can shape the systemic dimension of these discussions more into giving actual agency for those in power to continue to be in power. Hopefully, the research that I have brought up in this paper can offer something to disaggregate those arguments that rest on the notion that alternatives to cash and checks are efficient. Scholarship in this space is vital.

One of the strongest arguments for the continuation of the penny lies in the tendency of research to overlook the rich array of the symbolic meaning that the penny offers. On a practical and immediate level, we have many people who value the penny as important cost savings. We also have the further aforementioned symbolic value as a signal of what we should prioritize as a country. The penny, then, in both regards, is a vital reflection of our national identity. A direct benefit to any alternative policy position is that we can have policy discussions that include many different people with a large range of values. By conventional analyses that fail to incorporate these ways of valuing the penny, we are missing a lot. Democratic decisions ideally lead to more people being able to find an outcome that lends to favorable possibilities. This paper has simply aimed to point out that a defense of the penny is defensible and neither necessarily irrational nor ill-intentioned.

9.1. Summary of Key Points

By considering the history of the penny, we reveal how continually neglecting to take race seriously in the study of economic inequality has informed the current debate. The debate over elimination hinges on the premise that the coin is valuable as a tool for social justice or that the potential economic gains might be worth the tradeoffs. In examining the arguments, we confront the view that potential gains are negligible to what higher prices will result from the zinc penny. Additionally, we consider arguments against elimination couched in public perception of change, the costs to charity, and economic interests of major stakeholders including banking organizations and coin producers. Moreover, the paper seeks to take seriously the public’s beliefs and emotions by separating opposing positions in economics from pro- or anti-eliminations’ inclusion of slavery in their rhetoric.

In the current literature debating the elimination of the penny, it is well known that the arguments in favor of the penny are almost exclusively economic, framing the subsidization of the penny by the taxpayer as a roundabout, albeit regressive, tax. Typically, these economists argue that eliminating the penny would provide a net gain to society because the production and handling costs are higher than the value of the penny, introducing inefficiencies in the current economic practices. Antagonists often wish to maintain a desegregated economy; grievances against the elimination of the copper coin are associated primarily with nostalgia or take into account the message of patriotic liberty that such a move would embody. These groups defend the current state of currency due to its representation of national unity and appear largely apathetic to economic harms. As any suggestion of a racist economy is a societal taint, stakeholders in these debates avoid any form of racialized discourse at all costs.