Tales of Soft Money — The Sugar of Barbados
Leaving Africa for the West Indies, it is time to explore sugar as a form of money - something which I briefly did in an earlier article on the subject. The end goal of this article is to try to apply the framework of hard and easy money on some of the rich research conducted and summarized by Stuart B. Schwartz and his fellow sugar historians in Tropical Babylons: Sugar and the Making of the Atlantic World, 1450-1680. Schwartz, mostly focusing on the crop itself and how it spread, only touches on the subject of commodity money in the Appendix of his book. To tie it all up with the money framework I include references to certain chapters of Paul Einzig's Primitive Money: In its Ethnological, Historical and Economic Aspects as well.
Sugar cane plantations were introduced to the West Indies in the 16th century by Spanish and Portuguese colonists, who already grew the commodity in the Mediterranean, on Madeira, and on the Canaries. The sugar crops had been introduced to various parts of Europe by Muslims conquering the Iberian peninsula, and later by crusading Christians who had found the produce in the Levant. Fetching a high price on the open market, the crop interested noblemen as well as merchant houses. Yet, growing it in Iberia was not always easy. Producing sugar demanded a lot of water, and there were often opposition to diverting the flow of rivers to sugar mills to the detriment of other, already established mills. Something that further increased cost of production in Iberia was king Phillip III's expulsion of the Moriscos - descendants from the Muslim population left in Spain and Portugal after the ultimate fall of al-Andalus in the 15th century - who had served as a major part of the sugar production work force and who actually knew how to cultivate and process the crop. The high price instead lead to the west-ward expansion of sugar plantations on islands in the eastern Atlantic, where the crop grew with more ease than in the settlers' homelands.
Española (modern day Haiti and Dominican Republic)came to be the powerhouse of Caribbean sugar production after settlers found their way all across the Atlantic. As the gold industry on the island faltered in the beginning of the 16th century due to the near annihilation of indigenous labor, colonists shifted focus to the crop instead. They had earlier verified its ability to grow on the island by planting cane cuttings that Columbus brought from Madeira, and soon enough sugar plantations and mills were sprawling all over the Caribbean.
As sugar cane crops, once cut, had to be processed within 48 hours lest the juice inside dried, the plantations had not only agrarian but industrial elements to them as well. The nature of the whole production process (planting, growing, cutting, milling, cooking, crystallizing, packing and shipping) made for factory-like conditions in which the work force, often made up of slaves, was heavily regimented. A certain Father António Vieira, who visited a Jesuit-owned plantation in Brazil, noted:
People the color of the very night, working briskly and moaning at the same time without a moment of peace and rest, whoever sees all the confused and noisy machinery and apparatus of this Babylon, even if they have seen Mt. Etnas and Vesuvius will say that this indeed is the image of Hell. 
The heavy capital requirement of the industry likely caused lagging effects on where and how it spread. Barbados was one example of a late adopter. Around 1640, its economy was in trouble after the tobacco and cotton industries on the island failed to be competitive (especially its tobacco was deemed inferior to for example Virginian one). British colonists thus appears to, partially with investment and support from the Dutch, have pivoted to establishing a sugar economy instead. Bringing in thousands of slaves from Africa, other local commercial activities were slowly crowded out while sugar expanded to become by far the largest export of the island. One British planter noted:
Men are so intent upon planting sugar that they rather buy food at very dear rates than produce it by labor, so infinite is the profits of sugar works after once accomplished. 
The importance of sugar to the population of Barbados, mixed with other external factors, was enough cause for a new monetary system to evolve. Having no mint themselves, the island population had for quite some time used both cotton, tobacco and foreign silver coins as money. British pounds sterling were severely lacking in the region due to Britain's strict colonial policy of not allowing its silver coins to flow out to its colonies as it felt the relationship ought to be the opposite. In exchange for British protection and specific goods, British authorities argued, the job of its colonies was to provide Britain with cheap commodities as well as to develop markets for its mercantile expansion. The colonists, in other words, had the same problem of chronic silver coin shortages as their North American counterparts (something that Nick Szabo mentions early on in his Shelling Out: The Origins of Money), and had to be inventive around unconventional forms of money to facilitate local trade and value storage.
Being commonly used is not the only requirement for commodity money to evolve. Sugar was often fungible, highly divisible, relatively easy to transport, could be packaged in a standardized way, and was not very perishable if kept away from humidity. The island supply of it was, at least initially, under relative control, and with Britain not exporting its silver coins there, it was enough for the new money to evolve.
And so the Barbados legislature passed several new laws from 1640 and onward, that made sugar legal tender. Some evidence suggest that an initial rate of around 6 pence of what was called Barbados pounds sterling was pegged to one pound of sugar. Despite its name, this Barbados money had nothing to do with specie but was rather part an extensive bookkeeping system - a money of account - the British used for some of its colonies. This explains why the exchange rate of Barbados pounds sterling to British pounds sterling for a long time was close to at par. Due to the bookkeeping system, the colonists only quoted prices in that money, but settled trades in commodity money like sugar. The official exchange rate to sugar fell to 3 pence per pound in 1652, and to 2 pence per pound in the end of that decade. In the 1660's, the fixed exchange rate dropped to 1.5 pence per pound of sugar, after which the British finally started to monetize the island to some degree and took the true significance out of sugar as money there.
This constant appreciation of Barbados pounds sterling should be viewed in the light of it being an artificial product from Britain's monetary bookkeeping system. From Schwartz' accounts it is clear that the Barbados pounds sterling could at times keep the British pound sterling 'peg' due to its issuer artificially appreciating it. As the sugar industry productivity and size increased on Barbados (and on other close-by islands for that matter), cheaper sugar could be used to exchange for goods still quoted in Barbados pounds sterling at a, to sugar, fixed exchange rate. One pound of sugar could initially make a merchant legally entitled to settle a trade- or tax bill worth 6 pence of Barbados pounds sterling. It is likely that the colonial administration, as was the case in North America, directly or indirectly provided much of the slaves and goods Barbados needed to produce all its sugar, while at the same time keeping British pounds sterling out. You can see therefor, how easy it must have been for the administration to devalue sugar money so that plantation owners, despite increasing sugar production, retained virtually the same purchasing power.
In conclusion, the Barbados case was more complicated than when only the free market is involved in pushing a hard and a soft value protocol against each other until one shatters. The complication comes from the British power over the island. But it still goes to show that Barbados merchants or planters that (perhaps involuntarily) stored wealth on sugar money would end up seeing a continuous depreciation hurting their savings. The depreciation of course came from the ease of which sugar production could increase should the price of sugar go up. Colonists on Barbados, trapped under a combination of easy money and British authoritarianism, had no choice but to wait for better value protocols or try to buy harder money like Spanish silver at a large premium.
 Schwartz, S.B. (2004). Tropical Babylons: Sugar and the Making of the Atlantic World, 1450-1680. The University of North Carolina Press., p.3.
 Ibid., p.290.