alternative currencies
RMJon23
Pound (numerous spots)...does a more appropriate newsgroup exist (maybe
alt.anarchism) to relay ideas of alternative currencies or new ways of thinking
about exchange and money and economic decentralization? -rmjon23]
Los Angeles Times
February 4, 2001
Scrip Offers More Bang for the Bread
Economy: A Vermont town is one of 30 U.S. communities in which residents use an
alternative paper currency to barter goods and services.
Author: LISA RATHKE; ASSOCIATED PRESS
Metro Desk
Article Text:
Radha Tereska Buko gets her hair trimmed, art framed, help with her computer
and an occasional massage for a few slices of bread.
Burlington Bread.
It's an alternative paper currency that allows people to barter their goods and
services--from yoga and violin classes to catering and graphic design.
Organizers say it boosts the local economy and promotes connections within the
community.
"It shows that all of us have talents and skills whether they are in the want
ads or not," says Mark Montalban, a founder. "It helps empower people. They
know they can get services. . . . It values all of our skills more on an
egalitarian level."
For Buko, the currency is a reminder of the world her father grew up with in
Russia, where neighbors supported one another through poverty.
"It speaks of community, and supporting one another's livelihood," she says.
"So that we come more in direct contact with the people who offer services."
Laura Markowitz, a member of Burlington Bread's steering committee, says it's
part of a renaissance of local currencies around the country that surfaced in
the '90s. Now 30 U.S. communities have alternative currencies.
Local currencies became popular after the Depression when it was hard to get
cash, she says, but many of the 400 currencies died after the arrival of the
New Deal and centralized banking.
Currencies like Burlington Bread are as much about people seeking connections
in their communities as they are about economics.
Buko is not much of a consumer. She says she lives simply, teaches meditation
and counsels people on how to reach their goals. She uses Burlington Bread for
things she would not normally treat herself to.
"So there's plenty of places for me to spend bread, and I make relationships
with these people and that's more important to me," she says.
Her daughter, Sierra Tarinelli, makes the most of bread. Tarinelli and her
5-year-old son live with Buko, paying $300 in rent with a combination of bread
and massage, Buko says.
About 130 individuals and a handful of businesses participate in the
alternative currency. The idea is based on a local currency that has taken off
in Ithaca, N.Y.
The first slices hit the market in 1998, and now about $6,000 worth is in
circulation.
Keeping it circulating is daunting.
"The biggest challenge is circulation," says Markowitz. "Bread sitting there is
not like money. When money sits there it earns interest. But bread dies. . . .
The project dies."
She hopes Healthy Living's decision to become the first grocery store to accept
Burlington Bread will get more of it moving.
"That's been a major breakthrough," she says.
The owner of the store, Katy Lesser, was asked to join and given a loan of 100
slices of bread. Like the other retailers, including the Book Rack in Winooski,
Lesser allows customers to pay up to 20% of their bills in bread.
"I really don't need French horn lessons, and I don't need homemade soy milk,"
Lesser said. "We need more businesses in their network. . . . I decided that I
would be the one."
She says she won't use the bread herself. Instead she'll give it away to her
employees as bonuses.
The owner of the Book Rack, however, loves bread.
"I go out and enjoy it," Mike Desanto says. "The bread is good for personal
services, from massage therapist to lawn mowers [repair]."
Accepting the alternative currency builds goodwill with customers whether or
not it boosts sales, he says.
"But we are complete, full supporters of the concept of Burlington Bread," he
says, describing himself as an anti-capitalist capitalist. "I would do almost
anything to keep people from going into chain stores."
RMJon23
March 1, 1999
COLUMN ONE
Cash-Poor Mendocino Is Going to SEED
Joining a trend that's taken root elsewhere, residents of the town and its
civic neighbors are printing their own currency to slow the flow of money out
of the community.
Author: MARIA L. La GANGA; TIMES STAFF WRITER
Metro Desk
Article Text:
The wildflowers had begun to bloom here along the stunning "Forgotten Coast."
Jennifer Kreger was pregnant with her daughter, Yemaya, working hard at her
medical practice, thinking she was in heaven.
Then, in the space of two weeks, five friends in this sparsely populated
artists' haven told her they had to leave town because they simply couldn't
make ends meet.
"The typical person works three part-time jobs to make it," says physician
Kreger. "Still, it just didn't seem realistic that they had to go somewhere
else to survive."
After much research and debate, Kreger and her neighbors figured out what to
do: If there's not enough money here along the Northern California coast, why,
they'd print their own.
On Sunday, after nearly two years of planning, a nonprofit collective in
coastal Mendocino County did just that, issuing its own currency for use in a
dozen small towns to improve the health of the region's struggling businesses.
Keeping local money local "is a tremendous issue here," says Barbara Matheson,
chief administrative officer of the Fort Bragg-Mendocino Coast Chamber of
Commerce. "We have a tremendous leakage of people going out of the area to
shop. They might just be going for one item, but they think, 'why not buy
everything there' "
In the process of printing its own money, the region also will raise the
minimum wage for participants to a de facto $10 an hour, create a regional
monetary policy, turn its back on globalization and cause far-flung neighbors
to meet each other.
Two months after the mighty European Community came out with the much heralded
euro, Mendocino's brightly colored SEED--short for "self-sufficient ecological
economic development"--will quietly begin circulating from Elk to Westport. It
will be the estimated 65th local currency born in this country since the
original Ithaca HOUR was created nine years ago in upstate New York.
The bulk of those regional money systems--with names like Berkeley BREAD and
Kansas City Barter Bucks have been created in the past two or three years, as
news of Ithaca's success spread and fears of economic chaos in the coming
millennium increased.
This is how the SEED works: Each is worth one hour of labor. The Mendocino
folk, in their infinite wisdom, place the value of that hour at $10, be it the
hour of a lawyer or the hour of a laborer.
There will also be half-SEED notes, quarter-SEED notes and eighth-SEED
notes--all on recycled paper and embossed with a serial number to make them
hard to counterfeit. Some will be embellished with redwoods and a waterfall,
others with a naked woman and a large, strategically placed fig.
Anyone interested in joining the new economy will pay a membership fee of $5 to
$5,000 based on financial and business circumstances. Their business or service
will be listed in a quarterly directory, and they will be issued SEED, which
they can use to purchase goods or labor in the community.
A Different Mindset
Millennialists look at such a system as the beginning of serious self-reliance,
a way to step out of the global economy, which they fear could go down on Jan.
1 because of technology's habit of abbreviating years to their final two digits
and confusing computers. 2000? 1900? Who's to say?
"To the extent the infrastructure breaks down, all economic activity becomes
local," says Tom Atlee, editor of "Awakening: The Upside of Y2K." "It ceases to
be a minor effort to create community and becomes survival to create a local
monetary system."
But the millennium is not the first priority here in precious Mendocino, where
every other clapboard house is a bed and breakfast, the automobile of choice is
the well-aged Volvo, coffee is shade-grown, and bumper stickers urge "Kill Your
TV."
Nor is it top of mind in nearby Fort Bragg, Mendocino's blue-collar cousin and
home to the North Coast's few franchise stores (including a Safeway complete
with bait shop), its limited affordable housing, its puffing sawmill and
lighted truck parade at Christmas.
The isolated land of the SEED, accessible only by two-lane highway, is cut off
from Mendocino County's inland population centers by a mountain range and
averages only 17.5 people per square mile.
The county as a whole endures an official unemployment rate--8.2% in
December--that is 50% higher than the state's and nearly double the nation's.
The North Coast economy has long depended on redwoods and salmon, but
environmental regulations, clear cutting and overfishing have caused jobs to
bleed away over the past 15 years.
Tourism continues to grow but has been hampered of late by bad weather. On top
of all that, the biggest stores with the best discounts--the Wal-Mart, the
Kmart, soon, the Costco--are all over the hill in the county seat of Ukiah.
Anything that can keep business on the coast would be a boon, say the SEED's
creators. Still, North Coasters are a breed apart, self-reliant to a fault and
proud of it. So there is as much fervor about the currency's meaning as there
is about its hoped-for economic benefit.
"It's a weird and twisted world, and here's an opportunity to have a tiny
little neighborhood economic affair," says Stanley Miklose, who will accept
SEED at his Fort Bragg natural food store, Down Home Foods. "This is a
ground-level opportunity for us to engage in developing our own value system."
By purchasing more locally, says Kreger, she and her neighbors can avoid
"buying things at stores where the products are made in another country, where
there are no environmental controls, and people get lousy pay."
That's a lot of responsibility for a few pieces of paper printed along the
North Coast (of course) and embellished with the work of local artists (of
course) who are donating their images for the greater good (of course).
Even its proponents admit that the SEED is kind of complicated and definitely
alien to the thinking of a society that grew up pulling greenbacks out of
wallets.
Right now, 160 members have signed on to the new economy. Plumber Donna Feiner
will accept SEED as partial payment, as will Margot Gallant and Cathy Kurvers,
owners of the Book Loft. The Fort Bragg medical clinic will take the currency,
as will Kreger and husband Wade Gray in their family practice.
If you don't own a business and still want to trade in SEED, all you have to do
is list the personal skills--or equipment or space--you're willing to offer in
exchange. Which is why members will be able to get their wood chopped, rent
garden space and a backhoe to dig with, have their children watched.
"It's a different way of looking at money," says Susan Hofberg, a member of the
SEED's core working group whose collective--Corners of the Mouth natural food
store--will accept the currency.
"It's not dollars in a checkbook," she says. "It's goods and services that come
into your life. If you get a haircut or massage or dance lesson you wouldn't
have had otherwise, it's a benefit to your life. A U.S. dollar can be spent at
RiteAid and then leave town. If a SEED is spent in the Mendocino Pharmacy, it
has to be spent [again] here."
Local Currency Deemed Legal
While the message may be just outside the mainstream, the practice of printing
local currency is well within the bounds of U.S. laws. Those prohibit local
governments--but not nonprofit agencies--from printing money, ban private
coinage and insist that paper money like the SEED be in denominations larger
than a dollar.
"Under the U.S. Constitution, federal statutes and regulations, a local
currency modeled after Ithaca HOURS is legal," says Lewis D. Solomon, professor
of business law at George Washington University Law School. "Why? Because it's
not prohibited."
The only caveat is that local currency transactions must be taxed like regular
ones. In most regions, shopkeepers who take all or partial payment in local
currency insist that taxes be paid in U.S. money.
The Ithaca HOUR model on which the SEED is based was the brainchild of Paul
Glover--currently the most quoted man along the Mendocino Coast and a staunch
alternative thinker.
While the HOUR was designed to help the unemployed and underemployed, the
biggest impetus for the currency's creation was to send a message from a
college town that Glover describes as "decidedly liberal and beyond."
"We printed our own money because we watched federal dollars come to town,
shake a few hands, then leave to buy rain forest lumber and fight wars," says
the Ithaca HOUR home page.
But Glover, who runs the program and is paid partly in HOURS, said the effort
grew from its initial 90 members to 1,500, including 400 businesses that see it
as a good marketing device. Glover estimates that several million dollars'
value has so far been traded with paper money inscribed "In Ithaca We Trust."
Still, Glover admits that even in his town, George Washington, Abraham Lincoln
and Benjamin Franklin will never be unseated by bills bearing a Tompkins County
waterfall or a Cayuga Lake steamboat.
"If economic good is defined strictly in terms of gross dollar economic
exchange, then we are still a very small part of the local economy," Glover
acknowledges. "But while once you needed a microscope to measure us, now you
only need a magnifying glass."
A few smaller experiments in local currency sprang up in the decades prior to
Ithaca's, but the Depression was the last time such systems were in widespread
use.
In fact, there are many places in the United States where local currency would
likely fail today, says Susan Witt, executive director of the E.F. Schumacher
Society, a Massachusetts-based nonprofit organization dedicated to renewing
regional communities.
Such efforts "work well in rural communities of a certain size where there are
enough economic transactions going on and in an inner-city neighborhood with a
strong ethnic identity," says Witt. "They don't work in a suburb."
Berkeley, which has circulated BREAD for the past two years, is one of the few
places that falls outside of Witt's model for the perfect local-currency
region. Its program succeeds on the strength of its politics, for if an
alternative lifestyle couldn't flourish there, where could it?
Commitment and Sacrifice Required
More than 300 members are involved in BREAD, and $15,000 worth is in
circulation. But Miyoko Sakashita, who co-founded the system, is most proud of
the egalitarian elements of local currency, among them valuing one person's
labor as equal to another's.
OK, so at first the masseuses balked and charged more than one BREAD an hour.
After all, a high-end massage goes for as much as $100 an hour in Berkeley. But
even BREAD's masseuses are starting to come around, Sakashita says, and
lowering their rates some.
The biggest difficulty for most systems is that they run on burnout-prone
volunteer labor. BREAD hopes to hire someone soon to do the basic grunt work:
Recruit new members, bring in businesses, update membership lists and put out
quarterly directories.
Unfortunately for the Bolinas Sand Dollar, help did not come in time. The
system, says founder Jill Whitcroft, is "in limbo" in this small town just
outside San Francisco.
"People did help, but I was left holding the whole ball of wax," she says. "I'm
a single parent and needed to make a living."
The Mendocino SEED is currently powered by a well-organized working group of at
least half a dozen committed members. But even with that going for it, there
are still hurdles.
Hofberg, for example, is currently trying to figure out where the new money
should go in cash registers at Corners of the Mouth and where to record SEED on
paychecks for those at the collective who are willing to accept it in salary.
But all of that will come in time, once the money is finally in circulation.
Besides, she says, it's just plain fun.
"It's like liking to play store when you're a kid," Hofberg says. "I'd make
food out of Play-doh. Here I am, with real food and play money."
Caption:
PHOTO: (3 photos) A street scene in the coastal town of Mendocino,where some
businesses will begin accepting the SEED, shown in two denominations, above.
One SEED is valued at one hour's worth of labor.
RMJon23
May 6, 2002
COLUMN ONE
Where to Swap Till You Drop
In South American countries such as Chile and Argentina,barter clubs form a
booming parallel economy for those short of cash.
Author: HECTOR TOBAR; TIMES STAFF WRITER
Foreign Desk
Correction: FOR THE RECORD
Los Angeles Times Wednesday May 8, 2002 Home Edition Part A Part A Page 2 A2
Desk 1 inches; 28 words Type of Material: Correction
Barter caption-A caption that accompanied Monday's Column One about the barter
society in South America misstated the 'currency' used at a Buenos Aires fair.
The credito is the correct currency.
Article Text:
In certain neighborhoods of this bohemian port city, you can get your teeth
cleaned, have your hot-water heater fixed or munch on a loaf of homemade bread
without spending any money.
All you need are a few "talents."
That's the name the Valparaiso bartering club has given to its official
"currency," little beige certificates that resemble the Community Chest cards
in a Monopoly game. A club member might pay you 30 talentos if you fix her
kitchen faucet. Take those talentos to the Wednesday night bartering fair, and
you can trade them for jars of homemade preserves (two talentos each) or some
jewelry (five talentos and up).
With money in short supply here and elsewhere across South America, barter
(known as trueque in Spanish) is the engine driving a thriving parallel economy
in which millions of dollars' worth of goods and services circulate in a
self-perpetuating stream of cashless exchanges.
Bartering clubs such as the one in Valparaiso can also be found in the rural
towns of Argentina's southern region of Patagonia, in the impoverished suburbs
of Buenos Aires (which has more than 60 clubs) and in slightly better-off
communities in Uruguay and Brazil. In an era of scarcity and social upheaval,
South America's barter fairs are a home-grown remedy for empty cupboards and
frustrated shoppers, especially among the poor and the middle class.
"It bothers me that everything in our society revolves around money," said
Christian Palma, explaining why he helped launch Valparaiso's barter fair two
years ago. "We're trying to reinvent the idea of a marketplace and create new
types of social ties."
Not everyone is pleased by the spread of the clubs, which were founded in the
late 1990s but have been adding members at a rapid pace in the turbulent
economic climate of the past year. A few observers see in the trueque explosion
a sign that the region's economy is coming apart, even as some merchants feel
that they're being hurt by unfair competition.
In some communities hit hard by unemployment and recession, barter has spread
beyond the clubs. The city government of Allen, near the Andes in south-central
Argentina, allows residents to pay their municipal taxes by bartering.
"People who are going through hard times, who are unemployed or underemployed,
can cover their city debts with goods or services," said Mirta Diomedi, the
municipal finance secretary.
Nine in 10 Allen residents are in default on their city taxes, and the local
government is so cash-poor that it recently had its phones cut off. Now
backyard mechanics can pay off their taxes by fixing city-owned trucks. A man
with a Xerox machine churned out hundreds of copies in lieu of 120 pesos in
taxes (about $40).
Argentina is home to the continent's largest bartering fairs, with about
1million members in a nationwide "Barter Solidarity Network." Trueque boomed in
Argentina after the government partially froze most savings accounts late last
year and began declaring intermittent bank holidays that forced most Argentines
to empty out their wallets to survive.
"The only miracle the crisis has produced in Argentina is el trueque," said
Exequiel Fernandez, a board member of the barter club in Rio Colorado in
Patagonia. "Need has created this," he said one recent Sunday at the club's
fair.
Argentina's crisis is only the most extreme case of a
continentwide phenomenon that has seen most governments slash budgets and
devalue their currencies.
In such a climate, doing business without money has a certain appeal.
"Instead of sitting around, waiting for the crisis to end, a group of people
has created this social currency," said Ivan Cabezas, a university professor in
Santiago, the Chilean capital, and a participant in a barter fair there.
"Between the members of the [barter] group, there's a sense of solidarity that
is not often felt in our society."
To others, however, the spread of barter is just another reminder of how grim
and desperate times have become, and a sign that Latin America is regressing to
its economic childhood.
"Returning to these primitive forms of commerce, which belong to an era in
which a common currency didn't exist or wasn't trustworthy, is in no way a
positive development," the influential Buenos Aires daily La Nacion offered in
a March editorial.
Most barter fairs are organized by neighborhood activists of varying stripes.
For them, trueque is, all at once, a grass-roots rebuff to U.S. commercialism,
a self-help alternative to charity and government handouts, and a way to
rebuild a sense of community.
"The idea is that you have to put something in to get something back," said
Palma of the Valparaiso bartering club.
Palma started the trueque club with 10 other people. Working to build the fair
to its current 300 members has been a bit like watching a laboratory on human
behavior. He's been able to see how ideas about merchandise and value shift
once people begin shopping not with cash or credit cards, but with talentos, or
with baskets of homemade pies.
"When people first come to barter, they're embarrassed," he said. In the
non-barter world, money equals power and prestige. But at the barter fair,
money doesn't buy anything. Instead, you bring what you don't need, or whatever
skill you might have.
In some of the "purest" barter fairs, not even used goods are acceptable for
trading--only the products of one's own labor can be sold. That sort of ethic
presented Palma, an environmental engineer, with a small problem.
"Unfortunately, there's not much of a demand for my services as an
environmental engineer," he said, matter-of-factly. "So I bake bread instead."
On fair days, Palma brings a basket of whole-wheat buns to a meeting room at a
church here.
About 50 people showed up recently, arranging home-grown herbs, jewelry and
other goods on three long tables. There were some old toys, too--the club long
ago gave up the restriction on used goods.
Most people work in pairs: a husband manning the sales table, for example,
while his wife shops with her talentos.
"The Buzz Lightyear is gone already," Manolo Sierralta said to a small boy who
approached his toy collection. The boy began to cry uncontrollably. His mother
tried to calm him down by buying another toy, a small truck that cost a "half
talento."
The talento is printed with an Inca-style drawing of a man holding an ear of
corn. All people who join the club get 10 talentos. Membership is free.
In the Argentine town of Rio Colorado, the barter currency is called a credit,
or credito.
Fair organizers estimate that about 60,000 creditos are in circulation in Rio
Colorado, home to about 15,000 people at the northern fringe of Patagonia. The
town has two bartering fairs with 1,000 families as members. Most clubs require
membership as a way to enforce rules, including the most common one: Everyone
must bring something to sell.
On Sunday afternoons, hundreds of people descend on the site of the largest
fair, the main building of the town's business school. Young mothers pedal in
on bikes loaded with homemade cakes. Taxi drivers--many of whom accept creditos
for their fares--drop off farmers with crates of apples, grapes and plums.
Young porters--also paid in credits--help the sellers carry their goods to a
series of long tables inside. Two tall bulletin boards list all the local
service providers who have signed up to offer their labor for barter, including
four doctors, about two dozen bricklayers and 40 housecleaners.
"I signed up because I wanted to lend a hand to the community," said Beatriz
Santamaria, an orthodontist. But only a handful of people have called her up to
barter. "People take the credits they have and buy only essential things, like
food," she said.
When Mariana Altieri takes to a microphone and announces, "Let the trueque
begin," the aisles between the tables become as crowded as a Macy's on
Christmas Eve. People jostle to line up at the most popular table of all, the
one stacked with the loaves of bread.
This week, the bartering club pooled its resources to "buy" 220 pounds of bread
from a local baker in exchange for half a ton of firewood the club had acquired
in previous trades--the baker used the wood to fire his oven.
Blacksmith Jose Nunez can usually fill his refrigerator and pantry with what he
buys at the fair. He earns credits by selling things such as portable
barbecues, which he offers at a mixed price of 10 credits and 10 pesos. He has
also performed a few jobs outside the fair--installing steel security fences
and such--at the same mixed price.
"You can't buy the steel with credits," he said. No steel mill he knows of will
accept barter. "So I have people pay me cash for the materials and credits for
the labor."
So many goods are being bought and sold at the Rio Colorado fair, it's begun to
generate concern among local merchants, who fear that their struggling
businesses will lose even more customers.
"We've heard that they're selling [homemade] sausages and pasta," said Juan
Jose Reiser, head of Rio Colorado's chamber of commerce. "If a business is
forced to comply with certain standards of hygiene, then why shouldn't these
people do the same?"
Such concerns haven't slowed the growth of the barter fairs, although they have
led some Argentine legislators to propose laws to regulate the clubs. In Chile,
the government is trying to tax them.
After less than two hours of frenzied shopping by club members, most tables at
the Rio Colorado fair are empty. People carry out their purchases in the same
baskets and bags they used to bring things to sell.
The buzz of activity stands in contrast to the dramatic decline in the region's
agriculture-based economy. Trees wither inside abandoned apple orchards at the
edge of town.
The economic panorama is only slightly less bleak in Buenos Aires. The affluent
neighborhood of Palermo hosts a swanky trueque at which antique china might be
traded for cuts of prime Argentine beef. Used cars are sometimes sold for
creditos, as are time shares in vacation homes.
But there is mostly food and used clothes on offer in the Argentine town of
General Conesa, an hour's drive south of Rio Colorado.
The fair was started by a group of women, all teachers. The public school
system in their province is broke, and the women are owed several months' back
pay. They've been on strike, off and on, for weeks. One day they decided to
organize a barter fair to keep themselves occupied.
As the fair grew--it now has 177 members--so did the need for rules.
"When we first got started, it was more orderly," said Elena Harismendi, one of
the founders. "You didn't have to yell and be authoritarian with people to keep
order."
Everyone wears an ID badge now. And the club draws numbers to see who gets to
shop first.
"Before, you would get people pushing each other to get to the things people
wanted to buy the most," said Liliana Corbellini, another of the group's
founders.
Corbellini sends the credits she earns in General Conesa to her son, a
university student in the city of Tandil. He uses the credits to buy food at
Tandil's bartering fair.
"He says that three or four days each week he eats from the credits I send
him," she said.
Later, at her home, she offers a piece of the cake she bought at the fair.
Then some toast covered with marmalade she bought there. And finally a drink
from a mate, a steel cup used to drink the tea of the same name.
"I got that at the trueque too," she said.
Caption:
GRAPHIC: ARGENTINA
CREDIT: Los Angeles Times
PHOTO: Argentine shoppers crowd a barter fair in Buenos Aires where the talento
serves as the common currency. In Valparaiso,Chile, talentos bear an Inca-style
drawing of a man holding an ear of corn.
PHOTOGRAPHER: HECTOR TOBAR / Los Angeles Times
PHOTO: Argentine shoppers crowd a barter fair in Buenos Aires where the talento
serves as the common currency. In Valparaiso,Chile, talentos bear an Inca-style
drawing of a man holding an ear of corn.
PHOTOGRAPHER: RICARDO CEPPI / For The Times
RMJon23
Dec. 2--CHAPEL HILL, N.C.--Even in this faltering economy, there are some
people in the western Triangle who will have a PLENTY to spend this holiday
season.
In lieu of trusty greenbacks, some consumers in Chapel Hill, Carrboro, Durham,
Hillsborough, Pittsboro and Saxapahaw are whipping out a colorful, artsy scrip
called the NC PLENTY to pay for everything from food to auto repairs, as well
as homemade bread, handmade soaps, books, music, massages, psychotherapy, child
care, home construction, Tarot reading and more.
The idea behind the alternative tender is to get people to shop at businesses
that espouse community values and to avoid the big- box retail and
megacorporations with faraway bases. It is a local currency for local
businesses.
"I would rather give my money to my neighbors than somebody who's using slaves
in Thailand," said Emma Skurnick, an art teacher and illustrator who designed
the scrip. "It's just sort of a good way to show your loyalty to the
community."
In the land of the almighty dollar, the PLENTY -- an acronym of sorts for
Piedmont Local EcoNomy Tender -- is worth $10 or one hour of basic labor by a
tradesperson. There is a half PLENTY, worth $5 or half a service hour, and a
quarter PLENTY, worth $2.50 or a fourth of a service hour.
People may join the NC PLENTY organization for $12. In return, they receive
five PLENTYs to spend. About $6,000 worth are now in circulation.
In addition, employees at businesses that accept PLENTYs can take part of their
wages in the multihued bills, and consumers can accept them as change.
The PLENTY system is modeled after similar programs in Ithaca, N.Y.; Madison,
Wis.; the San Francisco Bay area; Floyd, Va., and about 50 communities across
the country. Since the official launching Oct. 5 in a Carrboro park, the
organization boasts more than 100 members with more than 140 kinds of goods and
services available.
How it works: Say someone who repairs automobiles accepts PLENTYs for his
labor, then takes the alternative currency to Weaver Street Market in Carrboro
and buys groceries. The grocery store owner could then take those PLENTYs from
the cash register to pay an employee whose son might need a math tutor.
Now, maybe the tutor who accepts PLENTYs needs a new T-shirt. Instead of
spending the substitute cash at a national chain store, that tutor could go to
a T-shirt business in Orange, Durham, Chatham or Alamance counties that accepts
PLENTYs and help support the local economy.
"I see it as a barter network," said Pam Campa, a pet sitter in Durham.
"It's just a good community building thing when you can trade services or time
for things you want."
PLENTY users must pay sales and income taxes, so transactions might be a mix of
dollars and the alternative scrip. The PLENTY, like the traditional greenback,
has security features built in to make it difficult to counterfeit.
In some circles, people already have dubbed the currency "Carrboro cash."
"I've heard it called that," said Frank Heath, owner of Cat's Cradle, a music
club in downtown Carrboro where a PLENTY will get you at least three beers. "It
underscores the laid-back sort of attitude we've got downtown here. ... I'm as
against the Wal- Martization and The Gap as anyone else. I think this is a way
of stating your preference for supporting local businesses and services."
Annissa Clarke, who prepares dairy- and gluten-free baked products, is the
spark behind the new currency system. She started bringing people together more
than a year ago to help her set up a nonprofit organization that would work to
promote local commerce, fair wages, environmental responsibility, self-reliance
and neighborliness.
All the pieces fell into place this fall.
People have PLENTYs in their wallets, and there is a PLENTY bank for members
who pay the annual membership fee.
The founders are reluctant to put too many PLENTYs in circulation so they can
avoid the natural inflation that occurs when a currency suddenly drops in value
and prices increase.
"People were a little worried about being inundated with PLENTYs," said Joseph
LoBuglio, an engineer and secretary of the PLENTY board of trustees. "It's
going a little slower than we had hoped."
With a limited number of PLENTYs available to the general public, the founders
of the new currency hope to expand the system by recruiting new businesses. But
many shops are not yet ready to find a place in their cash drawers for the new
scrip.
"I heard about this years ago with the Ithaca Hour and had talked about how
cool that was and what a neat thing that would be for our area," said Deb
Cunningham, owner of Eclectic Electric. "I would guess that it would take a few
years to even become a regular currency. I'm definitely still using dollars.
Getting a loop of larger companies in the area would help."
Credit: The News & Observer, Raleigh, N.C.
RMJon23
Alternative Currency Promotes Fresh Thinking About Sustainable Economics
The angry people crowding the streets of Buenos Aires, Argentina last January
were armed with casseroles and wooden spoons and making a hell of a ruckus.
Unemployment was at historic highs, crime had skyrocketed, and the political
system was on the verge of collapse. What was responsible for the sudden
onslaught of bad fortune in this historically wealthy country? The long answer:
a complex intermingling of social, political and economic forces. The short
answer is money.
Money has long had globe-trotting tendencies, and the fortunes of countries
have often been subject to rapid change. Bernard Lietaer, author of The Future
of Money. Beyond Greed and Scarcity (Century, L10.99), writes, "When a
government does something not to the liking of the market, nobody sits down and
says, `You shouldn't do this.' A monetary crisis simply manifests in that
currency."
And yet the picture is not entirely grim. Global capital investment has brought
much positive change, including economic development in India and China. Is
there a way to minimize the instability the system can engender without
jettisoning the gains?
Think Globally, Act Locally
One response to the downside of our money-based economy is the recent growth of
alternative currency and barter trading systems. These programs stimulate local
economic activity, easing the pain of recessions and currency crises. They tend
to encourage a more trusting, cooperative community, since everyone is linked
in local trade. They can also engender accountability, since all business is
out in the oven.
Thomas Greco, author of Money: Understanding and Creating Alternatives to Legal
Tender (Chelsea Green, $19.95), believes these systems improve the health of
communities. "Locally owned businesses are more likely to use local suppliers,
reducing the environmental costs of transport and stimulating local production.
They are more likely to employ local people, and they contribute to the culture
and uniqueness of a community."
With standard currency, there is always incentive to chop down non-interest
bearing trees and put the proceeds into interest-bearing bank accounts. Because
alternative currency systems do not bear interest-and in some cases, actually
have negative interest-there is less incentive to plunder natural resources.
In the U.S., there are several wellknown examples, such as Ithaca-- HOURS,
which have been active since the early 1990s. With nearly 70,000 HOURS in
circulation, the system is creating significant value for Ithaca, New York.
Participants earn HOURS by working for each other on such everyday tasks as
lawn mowing, tooth cleaning, bread baking and local crafts. The accumulated
HOURS then pay for other services. In addition, 10 percent of the funds are
devoted to interest-free grants for local community organizations, such as
senior citizen groups. U.S. dollars are still in circulation, and still are
used for a majority of purchases.
Paul Glover, a tireless promoter of the HOURS system, believes even more is
possible. "In the future, we hope to make loans to purchase regional farms and
prevent suburban sprawl," he says.
LETS Do It
While the Ithaca-HOURS program issues physical currency, some systems rely only
on a book of checks and balances. The LETS system (the name is not an acronym;
it's meant to embody the "Law of Two Feet," meaning, "If you like it, you walk
in. If you don't, then you walk away") is probably the best known of this sort
of exchange, which is also known as mutual credit.
Unlike the HOURS system, which is relatively open and unregulated, LETS
requires membership and stringent accounting. For example, if your neighbor
mows your lawn, he gets a credit in his account and you receive a debit. The
credits and debits are measured in national currencies-dollars in the U.S.-for
familiarity. Basically, it's like a big I.O.U. program, or grassroots credit
cards. As such, it depends on trust, which tends to have a positive impact on
community spirit.
Not everyone is convinced of the merits of these systems, however. An official
of a group involved with currency issues, who asked not to be identified, says,
"What disturbs me is the general evasion of politics that has accompanied the
movement to find solutions at the local level. I see local currencies as
irrelevant-they will never be strong enough to change the money and banking
system, which is one of the great centers of power in the world." Even if the
systems do create value on the local level, few people believe taking them
beyond that is a realizable goal.
If you're interested in starting a local currency, good resources can be found
online. CONTACT: Ithaca HOURS, (607)272-4330, www.ithaca hours.com; LETS
System, www.gm lets.u-net.com; Transaction Net, www.
transaction.net/money/community.
[Author Affiliation]
C.B. GAINES is an intern at E.
Hanuman
> Los Angeles Times
> May 6, 2002
>
> COLUMN ONE
> Where to Swap Till You Drop
> In South American countries such as Chile and Argentina,barter clubs
> form a booming parallel economy for those short of cash.
>
Interesting stuff....
Check these out also:
http://www.ubarter.com/
http://www.bxinsider.com/
http://www.acxbarter.com/
A directory of barter organizations:
http://directory.google.com/Top/Business/International_Business_and_Trade/Barter/?tc=1/
Hanuman
--
The Universe is the practical joke of the General at the expense of the
Particular. - Aleister Crowley
RMJon23
Werner Onken. The American Journal of Economics and Sociology. Malden: Oct
2000. Vol. 59, Iss. 4; pg. 609, 14 pgs
Subjects: History, Economists, Market economies, Equality, Economic theory,
Studies, Socialism
Classification Codes 9175 Western Europe, 9130 Experimental/theoretical, 1130
Economic theory
People: Gesell, Silvio
Author(s): Werner Onken
Article types: Feature
Publication title: The American Journal of Economics and Sociology. Malden: Oct
2000. Vol. 59, Iss. 4; pg. 609, 14 pgs
Source Type: Periodical
ISSN/ISBN: 00029246
Text Word Count 4571
Abstract (Article Summary)
Silvio Gesell (1862-1930) pioneered a version of the market economy that was
about competitive entrepreneurship but not about capitalism. The financial
interests of the hoarders of scarce bank financing and those leveraged with
speculative land dealings were to be sacrificed for the greater good of a
nation of free and enterprising men and women. Gesell was a radical reformer
and quite a famous one, having received more than a respectful mention in John
Maynard Keynes' The General Theory of Employment, Interest, and Money. Keynes
dubbed Gesell a non-Marxian socialist. Gesell founded the Free Economy school,
which is undergoing a renaissance today in Eastern Europe as a possible model
for a redesigned transition economy.
Free money for social progress: Theory and practice of Gesell's acclerated
money
Jerome Blanc. The American Journal of Economics and Sociology. New York: Oct
1998. Vol. 57, Iss. 4; pg. 469, 15 pgs
Subjects: Studies, Social change, Monetary theory, Economists, History,
Economic depression, Social psychology, Manycountries
Classification Codes 9130 Experimental/theoretical treatment, 1130 Economic
theory, 9180 International, 1200 Social policy
Author(s): Jerome Blanc
Article types: Feature
Publication title: The American Journal of Economics and Sociology. New York:
Oct 1998. Vol. 57, Iss. 4; pg. 469, 15 pgs
Source Type: Periodical
ISSN/ISBN: 00029246
Text Word Count 5902
Abstract (Article Summary)
Silvio Gesell proposed a system of stamped money in order to accelerate
monetary circulation and to free money from interest. This was part of a global
socialist system intended to free the economy from rent and interest. In the
1930s, Irving Fisher, who proposed the system to President Roosevelt, and John
Maynard Keynes rendered homage to Gesell's voluntary proposals in the context
of the economic depression. Several experiments took place that were based on
his ideas, notably in the Austrian town of Worgl and in the US. These
experiments were always local and never lasted more than a few months. It is
shown that trust is the main issue of this kind of monetary organization; and
therefore, that such experiments can only take place successfully on a small
scale.
RMJon23
RMJon23
Alternative money has redeeming value: proponents of the repeal of the Federal
Reserve Act accuse the Fed of enslaving Americans with debt and are promoting a
new currency to replace the greenback. (The nation: new cash). Kelly Patricia
O'Meara.
More than $3 million worth of them are in circulation throughout the United
States, with an estimated 30,000 people using them in place of the dollar at an
unknown, yet apparently increasing, number of business establishments.
No, they aren't Disney Dollars, but the principles are similar to those of
mouse money and, surprisingly, to Federal Reserve notes. Those who use them
claim that they are the "real" money, backed by something of value. They mean
to make a statement about their lack of faith in the greenback, the world's
premier currency.
Five years ago economist and retired mint master of the Royal Hawaiian Mint
Bernard von NotHaus began the National Organization for the Repeal of the
Federal Reserve Act and the Internal Revenue Code (NORFED) and started
providing an alternative to the Federal Reserve notes commonly called dollars.
"We have an obligation--a moral obligation--to tell people about the history
and consequences of past fiat currencies and to draw an analogy of what is
going on today in this country," von NotHaus tells INSIGHT.
Von NotHaus contends that the Federal Reserve is not a "federal" agency at all
but a cabal of private and international banks that does not answer to the U.S.
government. He says it is "shadowed in deceptive origins and fraudulent
policies."
According to NORFED literature: "Hundreds of authors and commentators have
gathered an impressive body of facts and documentation to show how the
Constitution of the United States was circumvented to allow the central bankers
control over our money.... These students of the nation's monetary system
aren't kooks--they're professors, political scientists, judges, senators and
even presidents. It is only a matter of time before the truth is revealed that
the Federal Reserve is nothing more than a national scam that has ripped off
the American people and enslaved them with perpetual debt."
That is, of course, one view going back to the scrap between Alexander Hamilton
and Andrew Jackson, and it is a minority opinion. But it is one around which
hard-money advocates have been circling their wagons for nearly two centuries.
Now and then someone such as von NotHaus will come along and go so far as to
produce his own private money.
Von NotHaus isn't alone in his contempt for the Federal Reserve, nor is his
currency the first of its kind. Currently there are approximately 60 different
forms of private currency in circulation throughout the United States, most
notably the "Ithaca HOURS."
Ithaca HOURS are issued by a local community organization and are as valid as
Fed notes for payment or settling debts among consenting parties. Five
denominations of Ithaca HOURS have been issued, one Ithaca HOUR being regarded
as equal to one hour of basic labor, or $10. The lowest denomination is
one-eighth of an Ithaca HOUR, which is equal to one-eighth of an hour of basic
labor, or $1.25. Nearly $85,000 worth of Ithaca HOURS have been issued, with an
estimated transaction value of several million dollars added and kept within
the local community.
Unlike the Ithaca HOURS, which are used within a specific community, or the
Disney Dollar, which must be used exclusively within Disney facilities, the von
NotHaus currency is accepted by businesses nationally and internationally and
is exchanged in denominations that are one-to-one with Federal Reserve notes.
Von NotHaus' currency comes in units of $1, $5 and $10 silver, and a $500 gold
note, all redeemable in precious metal.
Everything about NORFED's American Liberty Currency (ALC) is perfectly legal
and is explained on the organization's Website www.libertydollar.org. Claudia
Dickens, a spokeswoman for the U.S. Bureau of Engraving and Printing, tells
INSIGHT: "Any merchant who wants to accept [the ALC] can do so as long as the
people circulating it do not indicate that it is backed by the federal
government. Where private currency is made for use, and businesses accept it
knowing this, it is perfectly legal."
What sets the ALC apart from other alternative currencies, says von NotHaus, is
that "it is 100 percent backed and redeemable in gold and silver," which is
what this nation's founders constitutionally mandated for the official
currency. "We don't sell currency," explains yon NotHaus, "we exchange it. We
have the $10 silver base, which means that while silver is under $10 an ounce,
every liberty dollar is backed up by one-tenth of an ounce of silver. That
ounce of silver is in the warehouse before the certificate is issued. NORFED
doesn't issue the certificate; we distribute the currency. The warehouse
receipt, which is a legal binding contract as defined by the Uniform Commercial
Code, actually is issued by the warehouseman whose signature is on the back of
every certificate.
"With the Liberty Dollars what people do is currency exchanges--they aren't
purchasing money. There is no sales tax on currency exchanges, and this
currency is designed specifically to function on a one-to-one basis with
Federal Reserve notes, regardless of where the price of silver may go. That's
why we call this `America's inflation-proof currency.' It protects from the
inflation of the Federal Reserve notes."
So how does the ALC work? According to von NotHaus: "More likely than not, a
merchant will accept the currency from you and do the exact same thing they do
with Federal Reserve notes--they would exchange it with another customer. If
the customer doesn't want the ALC then the merchant makes change in Federal
Reserve notes." Von NotHaus continues: "If the people or merchants who have
accepted the ALC don't want it, they can turn it in for silver and they will
get exactly what is specified in the terms on the back of the certificate, or
they can get Federal Reserve notes. That there are some who may not want the
currency isn't surprising. After all, not every merchant accepts American
Express. The fact remains that this currency has real value because it is
redeemable in silver or gold and the Federal Reserve notes are not."
While all of this sounds like utopia to advocates of hard money, not everyone
is convinced of its practicality. Richard Rahn, a senior fellow of the
Seattle-based Discovery Institute, an adjunct scholar of the Washington-based
Cato Institute and author of The End of Money and the Struggle for Financial
Privacy, tells INSIGHT: "There are people out there experimenting with alter
native forms of money, and they all hope that people will start using this
money. Back during the Carter administration when inflation was very high you
could make the case for alternative or gold money, but for the last 20 years or
so inflation has been about 2 or 3 percent. Over time, the value of the dollar
erodes, but if you put your dollars into say CDs [certificates of deposit] or
Treasury bills, you can earn at least a little interest."
The problem with these schemes, continues Rahn, "is that the transaction costs
going into and out of them are pretty substantial and there are holding costs
as well. They [alternative money and private currencies] may make sense in
places where you have high rates of inflation. For example, Argentina would
have been better off in gold money. There are certain advantages in the
international arena, but nobody has really worked the thing to get the
transaction costs down far enough to be really useful. And the reality is that
for the last 30 years the prices of both silver and gold have steadily fallen."
Rohn continues, "While private money is available, it is not a growing trend.
People started talking about it in the 1970s because there was very high
inflation. There were a lot of private currencies and coinages then and there
were many legislative changes making it legal, but there hasn't yet been a
truly successful alternative currency. Maybe at some point people will figure
out how to do it effectively. But if such monies ever became a competitive
threat to the dollar, the government would probably react the way it normally
does and make it illegal."
Von NotHaus argues that using the ALC isn't about investing in commodities.
"Remember," he says, "the spot price of silver in New York is for a 5,000-ounce
ingot. One-ounce silver pieces [U.S. Mint] are sold for spot plus $2 to $4. So
at $5 silver, one-ounce pieces run $7 to $9, which is about the same as the $10
certificate. The price of the certificates includes not only the market value
of the underlying silver, but also the minting, storage, insurance, printing
and distribution. Paying $10 or less for $5 in silver is very reasonable given
the costs involved in producing the currency, and don't forget that it's far
better than the Federal Reserve notes [dollars] whose raw materials [ink and
paper] are worth about 3.5 cents."
There is no telling how successful the ALC will become, but few who are
watching it doubt that its popularity is based on the faith of the people using
it, very much like Federal Reserve notes. To understand the premise behind the
desire of yon NotHaus and others to go to silver- and gold-backed currencies,
one need only compare an ALC certificate with a Federal Reserve note. One is
redeemable in silver, and the other is not redeemable.
RMJon23
Funny money. (Context). (Brief Article) Allison Gifford.
THERE ARE PLENTY OF FUN THINGS MONEY can do--talk, make the world go round, buy
material girls. Just think, without money, Cameron Crowe would have had to
compose some other catchphrase for his hit date flick. And "Show me the gold
bars" doesn't sound nearly as romantic.
But money can also make people neglect important things that help create
healthy communities. Take low-income housing. It's not that there aren't enough
workers to build it--it's just that the market economy won't fund it. Then
there's the credit problem. Economist Michael Linton argues that our credit
system encourages lenders to hoard their money--which slows the economy and
leads to unemployment, and more debt. "Money makes the world go round, but when
money isn't moving, it stops the world," he says.
Over the last 50 years, communities have been trying to drop out of the money
system, or at least counteract some of its problems, with alternative currency.
So far, the most popular template is the one Linton founded in Courtenay, B.C.,
during the early eighties recession--the Local Exchange Trade System (LETS).
There are now 40 of these systems across Canada, and hundreds worldwide,
spanning Europe, Japan, Australia and New Zealand.
Trading LETS "Green Dollars" is similar to bartering, except you're not trading
one thing for another, you're trading information about your debts to the
community. When you make a purchase, you phone the 24-hour LETS hotline, and
the staff plugs it into an accounting program. It doesn't matter if you don't
have any Green Dollars; credit is unlimited, so you can start shopping on a
balance of zero.
The concept may be noble, but if you think the whole spiel sounds a little wavy
gravy, you're not alone. Joining a LETS requires a suspension of disbelief many
are not willing to make. For starters, there are no legal guarantees to ensure
the accountability of users or administrators. According to the LETS manual,
"once it becomes clear who does what, there is no further need for regular
meetings, constitutions and other legal paraphernalia." Not exactly the kind of
guarantee your average business wants to hear.
The result of this vague utopianism is simple: the merchandise sucks. Scan any
LETS online exchange registry, whether it's in Peterborough, Edmonton or
Vancouver, and you'll see scads of reiki, astrological consultations and
massage oil, but very little you can actually eat, and even less you can use to
heat your home or treat illnesses of the non-karmic variety. Consequently,
businesses that offer useful services end up with thousands of Green Dollars,
but can't spend them on anything they need. Allen Pinkerton, former business
manager of Trent University's campus newspaper, Arthur, found this out when the
paper accepted Peterborough Green Dollars in exchange for ads. "We couldn't
even buy things to give away at fundraisers," he says. "All we could buy were
reindeer made out of logs and potholders nobody would want."
Despite these wrinkles, green economists like Brian Milani would rather see
LETS ironed out than abandoned. "If people can create their own money when they
need to, they're not so pressured by the need to get money that they have to
ignore sociological and ecological issues," says Milani, author of Designing
the Green Economy.
Gavin Cameron, a professor of economics at Oxford University, disagrees. "We
don't need LETS to have a greener, more ecologically-focussed economy, we just
need to have a government that gives people and businesses appropriate
incentives to improve the environment and install clean technologies. The idea
that LETS Can clean up the environment is mere quackery," he says.
Still, escaping the money economy is a subject of growing interest and--love or
hate them--alternative currencies are slowly garnering attention. While some
are belly-flopping in pools of patchouli, others are swimming along quite
nicely. Ithaca, NY, for example, seems to have struck a balance between
conventional currency and the big dreams/no management approach. Like LETS,
Ithaca's currency is based on hours of labour, but it differs in two crucial
ways: there is a consensus to keep the currency local, and self-created credit
is not allowed. This gives the Ithaca "Hours" system the credibility LETS so
desperately lacks, and brings in a broader number of organizations. Sure, you
can still buy lots of massages, but you can also get your computer fixed, your
groceries done, heck--you can even buy hearing aids. Ithaca Hours is also
branching out to provide more essential services, including a member-owned
health security system.
Until LETS offers more useful stuff, it will never be more than a glorified
rummage sale. Perhaps the first step is limiting credit, to ease the fears of
fledgling businesses, and then gently telling log reindeer-makers they need not
apply. In the meantime, if you're on the prowl for the perfect macrame plant
holder, you know where to go.
RMJon23
Reinventing money.
THE American fairy tale, Wizard of Oz, is commonly known as the struggle of a
bunch of simple people against some wicked witches and wizards. Now research
into the origins of this tale shows that it was actually a critique of the
banking establishment in the United States of America and perhaps an early
example of monetary activism in the 20th century.
Most of us usually don't stop to wonder about the basic nature or function of
money. We may lament the unequal distribution of money in society and how it
can corrupt human behaviour. However, it seems difficult to imagine that the
functions of money could be moulded in ways that would solve many social and
economic problems.
Yet this is just what a wide range of activists are doing today. They are
reminding us, first, that money is not the same as wealth. For money itself can
neither be eaten, nor worn nor lived in for shelter. Second, such activists are
working out monetary systems that simultaneously nurture community life, help
restore ecological balance and provide employment.
At the dawn of human civilisation all wealth was equated with tangible useful
things. For example, the word capital did not originally mean money. The word
is derived from the Latin word capitis, which means head and it referred to
heads of cattle. In ancient Egypt the monetary system was based on stockpiles
of grains. Till about two hundred years ago wealth was stored mainly in land
and its improvements.
Money, unlike cattle or grain, does not exist in nature. It is an abstract
institution of society, a medium of exchange, invented about 3,000 years ago to
facilitate trade. In some societies money took the form of stones and shells.
By about 1000 AD coins made of precious and semi-precious metals were known all
over the world. Subsequently, paper money was introduced when private banks
made loans. In the 20th century the supply of this paper money came to be
regulated by the Central Bank of each country. Till about 20 years ago, paper
money was backed by gold. Today there is nothing material backing the world's
currencies and yet they exercise a position of supreme power. The consequence
is that money in the bank is equated with wealth, rather than tangibles like
natural resources that actually sustain life.
Take for instance the following logic offered by a Malaysian minister for
forestry to David Korten, author of the book The Post Corporate World. Korten,
who is also co-founder of the People-Centered Development Forum in the U.S.,
narrates how the Malaysian observed that his country would be better off once
its forests were cleared away and the money from the sale was stashed in banks
earning interest. The financial returns would be greater. The image flashed
through my mind of a barren and lifeless world populated only by banks with
their computers faithfully and endlessly compounding the interest on the
profits from timber sales.
The Malaysian Minister's views are based on the fact that in the global economy
money is indeed growing faster than trees. This is because the global monetary
system has got virtually de-linked from the real economy. In 1995 the global
daily exchange of currency was $1.3 trillion, that is 30 times more than the
daily gross domestic product (GDP) of all the developed countries.
Thus, writer-activists like Korten say that we are all victims of the war of
money against life. The consequences of this are rapid depletion of real
wealth, that is natural resources, and concentration of money in the hands of a
few. The world's 450 billionaires are estimated to have combined financial
assets that are greater than the combined annual incomes of half of humanity.
Money is like an iron ring we've put through our noses. We've forgotten that we
designed it, and it's now leading us around, says Bernard Lietaer, a former
banker and now activist-academic based at the University of California,
Berkley. It is time, urges Lietaer, to design a money system that takes us
towards sustainability and community. Lietaer is a Belgian who years ago helped
to design the single European currency system and is now one of the leading
champions of alternative community-based currencies. The Future of Money:
Beyond Greed and Scarcity, the title of Lietaers latest book, conveys the
essence of todays monetary activism. This is one of several books that have
recently been published, in the U.S. and the U.K., on how the existing money
system needs to be, and can be, re-invented. These include The Ecology of Money
and Short Circuit, by the Irish economist Richard Douthwaite, and Time Dollars
by Edgar Cahn and Jonathan Rowe. The Schumacher Society in both the U.S. and
U.K., the New Economics Foundation in the U.K., the American Monetary Institute
and Transaction Net in the U.S. - are among the groups spear-heading such
efforts.
Political activism to challenge the capitalist monetary system is not new. Even
a hundred years ago, in the U.S., there was strong political mobilisation
against monetary policies that favoured the rich at the cost of farmers and
workers. Frank Baum, the author of Wizard of Oz, was a staunch supporter of one
of these movements. The History of Money, a book by the anthropologist Jack
Weatherford, tells of how Baum's tale is actually an attack on the established
banking system that deliberately kept money in short supply.
Scarcity is one of the key problems of the current form of money. Money has
different effects depending on its origins and the purpose it is intended to
serve. Money created to make profits for a commercial bank is intended to
remain scarce and has an entirely different effect compared with a local
currency created by the users themselves purely to facilitate their trade.
Monetary activists are calling for decreasing the hold of scarce currencies and
strengthening sufficient currencies - that is, those created within communities
by mutual credit systems.
The fundamental premise of all this work is that in a healthy economy money is
neither the dominant value nor the sole or even dominant medium of exchange.
Money must be a servant of the creation and protection of real wealth. This
monumental task requires several measures. Korten suggests that a healthy money
system must: (1) make speculation unprofitable; (2) limit the growth of
financial bubbles; (3) increase incentives for cooperation among people and
communities; (4) reward productive work and investment; (5) create a just
distribution of claims to real wealth; (6) provide incentives for patient and
locally rooted investment in real assests; and (7) strengthen the social fabric
of family and community.
This is clearly not a call for boycotting the conventional national currencies.
Local currencies are intended to serve a supplementary function. In extremely
successful situations these currencies do significantly lessen people's
dependence on the conventional currency issued by banks and governments.
The other powerful instrument of a healthy monetary system is zero or negative
interest money. The idea of negative interest or a demurrage charge is based on
the premise that money is a public good, like the telephone or bus transport
and that we should charge a small fee for using it. Under such a system, money
would be used only as a medium of exchange, not as a store for value. Since
this would encourage circulation it would help to create more work and
livelihoods.
Lietaer forecasts that different forms of alternative currencies will be a
major tool for social design in the 21st century, primarily because they will
be conducive to higher levels of employment. I propose that we choose to
develop money systems that will enable us to attain sustainability and
community healing on a local and global scale. These objectives are in our
grasp within less than one generation's time. Whether we materialise them or
not will depend on our capacity to cooperate with each other to consciously
reinvent our money says Lietaer. Over the next few weeks this column will
report in more detail about some aspects of this activism, focussing
particularly on local currencies and the concept of a demurrage charge on
money. Next: Interest-free loans.
RAJNI BAKSHI
RMJon23
DO-IT-YOURSELF MONEY AND THE NEW ALCHEMISTS. (growing movement in France known
as SEL and a recent history of local currencies) David Boyle.
Full Text: COPYRIGHT 2001 MIT Press Journals
There are alternatives to the global economy. David Boyle explores the worlds
local currencies.
It was a small courtroom near the Pyrennees that, in the last few days of 1997,
put France's successful new local currency on the map. Three locals, all of
them born and bred in the UK -- Sarah Two, Roger Evans and John MacCullough --
were on trial in the local court in Foix, in the rural Ariege departement, for
what the prosecutor called 'working illegally'.
It wasn't that they were illegal immigrants or anything -- these are, after
all, the days of the EU Single Market. Their crime was to have been paid for
work using a local homegrown do-it-yourself money.
The men had repaired Sarah's roof, but they hadn't been paid in francs -- the
'acceptable' currency recognised by the global economy. They had been paid with
2,000 'grains of salt', the local currency organised by a growing movement in
France known as SEL, French for salt but also the acronym of the Societe
d'Echanges Local.
Maybe it was because Sarah Two was a member of the local vegan collective that
she enraged a local farmer -- though she was also a flautist, drum-maker and
former postmistress from High Wycombe. Either way, he reported her to the
authorities and the three of them were soon facing a tough sentence of up to
248 hours of community service.
'This kind of behaviour upsets traditional structures and institutionalises a
parallel economy,' said the lawyer representing an angry federation of local
builders. 'It is destructive to our entire political and social system.'
The prosecutor agreed: the French civil code says that service exchanges have
to be of equal value -- and roof tiling and tofu weren't.
'So let's say a SEL is worth one franc,' said the confused magistrate.
'No, it doesn't quite work like that,' said Sarah -- who ended up with a
suspended fine and symbolic one franc damages to the local builders' guild,
only to be acquitted on appeal.
And it doesn't work like that. SEL is similar to the idea of the local exchange
systems LETS, hundreds of which began in the UK in the early 1990s. It means
that local people can trade without cash, but using a notional currency that
stays circulating locally and doesn't flow out of the area to drag in imports
from across the globe.
It also means that people can break out of the global money system as the one
and only measuring rod for success.
'Once financial values dominate everything, there's no longer room for anything
else,' says Alain Bertrand, the small business adviser who moved from Paris to
Ariege to set up the first SEL in 1994. 'Many of the members there also had no
money at all. Without SEL they wouldn't be allowed to do anything -- let alone
mend their roof. It is inhuman that people are forced to define production and
exchange only in money terms.'
The case meant enormous publicity for the whole idea of SEL and Bertrand and
his colleagues were overwhelmed by groups across France wanting to start
similar systems themselves. Soon there was an organisation dedicated to the
idea, SEL'idaire.
Ariege turned out to be particularly fertile soil. Although Tony Blair's family
had famously chosen the area for their 1997 summer holiday -- just as the local
builders were getting hot under the collar about the roof -- this is a poor
rural area of France.
What with farmer Jose Bove's famous attack on McDonald's in Millau, rural
France is increasingly aware that the global economy can be devastating to
traditional life.
The first SEL was launched with the help of the local
Alliance-paysans-ecologistes-consommateurs, as part of their on-going battle
with the WTO and GM food. They gathered in the town hall in Foix in December
1994; three months later, 300 people were using grains de sel.
And in the years that followed, Alain's efforts have generated over 350 SEL
groups -- nurtured in their early days by SEL'idaire -- and a total of about
45,000 people trading around the country.
'What power have we got to change things?' asks Bertrand. 'The answer has to be
bringing things back to local level. By inventing their own specific kind of
money, people involved in SEL are able day by day to change the way things are
produced and choose their own kind of society.'
Since the trial, even the French Government's attitude has moved from outright
hostility to praise from and a request to meet the minister in charge of a new
division of the Finance Ministry known as 'Economie Solidaire'.
'The point is that we are able to do something they're not able to do,' says
Bertrand. 'When we start a group and it starts to grow, people start to build
relationships with each other again, they start to link with other groups --
maybe producing organic food. They start to trust.'
That's the key to the whole idea. Local currencies like SEL, time banks and
LETS in Europe -- and the highly successful printed notes known as 'hours' in
the USA -- are all in their different ways able to rescue a sense of local
community. They rebuild people's confidence, and they re-discover local
resources -- often people's skills -- that the global economy simply forgets.
That is why the Dutch, Australian and Irish governments have all legislated to
allow people to earn their equivalent of grains of salt without damaging their
benefit rights.
The LETS story has become quite familiar in the British press -- though there's
usually a hint of condescension about it -- swapping aromatherapy for knitted
crystals and so on. But it hasn't yet managed to break through into the
mainstream outside some rural pockets and the anti-poverty strategies of cities
like Leicester, Liverpool and Greenwich.
SEL isn't necessarily the same -- as Bertrand points out -- because grains of
salt are rigorously based on time, like the time banks in the USA and Japan
that recently launched in the UK too. Unlike grains of salt, LETS currencies
like bobbins in Manchester or bricks in Brixton sometimes have an equivalent
value in pounds or francs to make them easier to use.
GROWTH OF AN IDEA
But the SEL story demonstrates that local currencies can mushroom as a real
response to globalisation. Bertrand has even taken the idea back to Paris and
made a successful leap from rural to urban.
'I didn't believe it would work there at first, because there was no food to
sell. There were things like English lessons but that wasn't really enough,' he
says. 'But we now have 500 in the group, and you can buy internet training, you
can get office work done in local money, we have a system that brings organic
food in from the countryside.'
This growth by linking up with other organisations is one of the keys to SEL's
success. It has meant that you can hire building space, buy computers, food and
training -- even theatre tickets -- with SEL money. Having a local currency
that stays put, resisting the temptation to shoot off down the wires around the
globe, means neighbourhoods can make the most of what they've already got --
whether it is wasted people, wasted space or wasted resources.
Bertrand's game-plan is to link the SEL groups together enough to provide
low-cost or interest-free credit to small local business all over France -- a
real competitor to the global economy.
The model is WIR in Switzerland, and to understand what that means we have to
delve a little into the secret history of money.
And there is one -- though you won't find it in conventional economic text
books, still less in Peter Jay's recent BBC history of the subject, which
confined itself to kings, governors and banking princes.
The forgotten history of money is about how people can create their own. It
reached a head during the Depression, as communities struggled with the problem
that they had lots of work that needed doing, lots of people desperate to do it
-- but no money to bring the two together.
Ambitious local currencies sprung up in places like Worgl in Austria, and all
over the USA, inspired by the Argentinian trader Silvio Gesell, who had urged
the world to discourage hoarding with 'negative interest rate' currencies.
The great Yale economist Irving Fisher threw his reputation behind the idea --
having just lost some $10 million in the Wall Street Crash -- and soon about
300 US communities were printing their own money.
Faced with the bankruptcy of their local bank, Tenino in Washington State even
minted their own coins in wood. They were snapped up by hungry collectors at
enormous profit to the town.
Then on 4 March 1933, it was all over. Advised that the monetary system was in
danger, President Franklin Roosevelt gave them a short time to wind themselves
up. Local money disappeared for two generations. The only one that survived was
in Switzerland.
WIR stands for Wirtschaftsring and it is Europe's oldest barter currency,
aiming specifically at small and micro-business, and it is now so widespread
that it amounts to a virtual parallel currency with the Swiss franc.
It started in 1934, and by 1993 it had a turnover equivalent to [pound]12
billion and 65,000 corporate members. Its main areas of specialisation are the
building trade, restaurants and food. But members include most kinds of
business - even a circus.
What they can't do is exchange WIR currency for Swiss francs, any more than
grains of salt can be converted. That is both a disadvantage and an advantage
at the same time: the disadvantage is that local currency will never have the
buying power of a global currency The advantage is that it stays circulating
locally, providing mutual credit to members either free (in the case of SEL) or
very cheap (in the case of WIR).
MARGINALISED
The establishment history of money sets all this aside. Conventional economists
regard local currencies as 'barter' and therefore as a throwback. They dismiss
the idea as 'fringe', 'wacky' or - worse - an attempt to defraud the tax
system.
Actually, parallel currencies are already mainstream - it's just that they're
not designed for poor people.
International barter among multinationals now makes up well over 10 per cent of
world trade, with giant corporations like Active International or Atwood
Richards using electronic barter currencies like trade dollars to exchange
resources like outdated stock, media advertising or hotel rooms.
And when any local exchange can't immediately find what they need, they can use
an international currency called universal to barter it from elsewhere. The
Australian company Bartercard encourages UK members to donate their trade
pounds to Metropolitan Police charities, so it can be used to buy play
equipment for children.
Loyalty points like beenz, iPoints and air miles are playing an increasing role
in our lives. The latest loyalty card from Boots has space on it for more than
20 different loyalty currencies. And in case you didn't think this is money:
until recently Northwest Airlines used to pay their entire worldwide PR account
in frequent flyer points.
Even the deputy governor of the Bank of England, Mervyn King, says that a new
generation of private currencies exchanged on the internet is emerging which
might sideline central banks altogether - though he had to go to Wyoming to
admit it.
The point is that big currencies like the euro and the dollar don't work very
well for everybody all the time - even if you're a mega-corporation bartering
unsellable purple toothpaste. Global corporations realise that as much as
anybody - but when local communities want to create their own money, they end
up in court.
Like Italian professor Giacinto Auriti, who recently went on trial for printing
his own currency, known as 'the money of the poor'. Or Isle of Wight County
Council, which was convicted in 1997 for printing its own tokens, that they had
made the mistake of calling 'euros'.
SEL has gone beyond that. But the other myth its success debunks is that local
currencies are purely an Anglo-Saxon phenomenon.
They certainly re-emerged in Anglo-Saxon countries. Like the hours notes in
Ithaca in upstate New York - started in 1992 as a way of fighting off a new
Wal-mart store, and now backed by the local chamber of commerce and accepted at
a third of the town's businesses.
Or the similar Womanshare system in New York City, run by local carpenter Diana
McCourt, whose husband Malachy is one of the celebrated McCourts of Angela's
Ashes fame.
But SEL has also led the way for the rest of the world. There are similar
schemes, using printed notes, in Senegal and other parts of French-speaking
Africa. There are ambitious local currencies in Holland, Germany, Italy and the
first time bank in Slovakia. There are widely used printed currencies across
Latin America, like the tlaloc in Mexico.
Like SEL, the most exciting local currencies are linking up with a range of
other organisations. In Chicago, pupils are earning 'time dollars' by tutoring
other pupils, and spending them on recycled computers.
If you have one of the Minneapolis dual-track HeroCards, you can buy products
at the Mall of America - the biggest shopping mall in the USA - partly in
dollars and partly in a local time-based currency, earned by helping out in the
local community, tutoring in schools or giving lifts to the elderly.
It isn't exactly green, but it does mean that anyone can have some spending
power as long as they've got time and they're prepared to help someone.
SEL and the other 2,000 or so local currencies remain small, but they may be
able to help communities fight off the worst symptoms of globalisation, by
using local resources more efficiently. What the global currencies can only see
as rubbish or useless people can be wealth to a local measuring system. After
all, four million perfectly good computers are put into landfill every year in
the UK.
It also means that people can issue their own currency -- not by themselves,
but with each other. It's like rediscovering alchemy.
'Below the radar beams of many official monetary experts, fundamental change in
our money systems is in fact already well under way, irresistibly driven by the
social and technological forces of the Information Age,' says one of the
designers of the euro, former Belgian central banker Bernard Lietaer, in his
forthcoming book The Future of Money.
REVOLUTIONARY THOUGHT
And when the world depends on the by-products of the $2 trillion a day that is
speculated across global computer screens every day, we do need something else
to rely on.
Five centuries ago, alchemists like the mysterious Paracelsus -- wandering
round Europe in a coloured coat which he never washed -- were the inspiration
behind a revolution against the old order of authority and control.
They toppled the old certainties of medicine and politics with their dreams of
a 'chemical revolution', attacking monopolies and putting power and medical
knowledge in the hands of ordinary people. Now there are suddenly some new
alchemists trying to do the same with money.
They are the vanguard of a money revolution which allows us all to do what
governments and bankers would prefer to keep to themselves: create money.
Alain Bertrand describes SEL as a mixture of protestant rigour -- rigidly
measuring human exchanges -- with informal French 'make-do'. But it is a
protestant revolution. It says that people no longer need priests, in the form
of governments and bankers, to create the money for them. They can do it
directly themselves.
If the international currencies don't protect local life, then we have to be
alchemists enough to create our own. It's as simple as a grain of salt.
But then, if you remember -- it was salt-making that Gandhi chose as his first
symbolic challenge to British imperial rule over India.
David Boyle is the author of Funny Money: In Search of Alternative Cash
(HarperCollins/Flamingo, [pound]6.99).
Barataria: Collective name for the four organisational barter schemes set up in
rural Scotland, County Mayo, Madrid and Amsterdam by the European Commission,
including the Scottish Organisational Currency System (SOCS).
www.sacsystem.org.uk
Hours: Starting with Ithaca hours, the printed currency in upstate New York,
and now spread to around 70 communities across North America, including the
ambitious recent Toronto dollars. www.lightlink.com/hours/ithacahours
Local Exchange and Trading Systems (LETS): Starting in Canada, spreading as
'green dollars' to Australia and New Zealand, there are now 100-200 LETS
currencies in the UK. They take a range of different forms, from the
community-based systems to small barter schemes. www.letslinkUK.demon.co.uk
Systeme d'Echange Local (SEL): Similar to LETS, but rigidly sticking to the
principle of an hour for an hour, using the measure 'heure-au-vert' or 'green
hour', pronounced Eurovert. There are about 350 such schemes. www.selidaire.org
Time banks and time dollars: More like mutual volunteering than barter, members
earn credits for helping out in the local community -- visiting older people,
tutoring and so on -- and can spend them on help for themselves or on recycled
computers. Mainly in the USA and Japan, but there are now 20 time banks in the
UK. www.timebanks.co.uk
Tlaloc: Printed currency from Mexico City, using the name of the local rain
god. www.laneta.apc.org
Womanshare: All-women service exchange, based in New York but with similar
systems in other parts of the world. www.mtdn.org/contents/wsharehtm
RMJon23
The Political Economy of Silvio Gesell: A Century of Activism. WERNER ONKEN.
Full Text: COPYRIGHT 2000 American Journal of Economics and Sociology, Inc.
WERNER ONKEN [*]
ABSTRACT. Silvio Gesell (1862-1930) pioneered a version of the market economy
that was about competitive entrepreneurship but not about capitalism. The
financial interests of the hoarders of scarce bank financing and those
leveraged with speculative land dealings were to be sacrificed for the greater
good of a nation of free and enterprising men and women. Gesell was a radical
reformer and quite a famous one, having received more than a respectful mention
in John Maynard Keynes' The General Theory of Employment, Interest, and Money.
Keynes dubbed Gesell a non-Marxian socialist. Gesell founded the Free Economy
school, which is undergoing a renaissance today in Eastern Europe as a possible
model for a redesigned transition economy.
I
Money: From the Ruler of Markets
IN 1891 SILVIO GESELL (1862-1930), a German-born entrepreneur living in Buenos
Aires, published a short booklet entitled, Die Reformation im Munzwesen als
Brucke zum sozialen Staat (Currency Reform as a Bridge to the Social State).
This was the first of a series of pamphlets presenting a critical examination
of the existing monetary system. It laid the foundation for an extensive body
of writing inquiring into the causes of social problems and suggesting
practical reform measures. His experiences during an economic crisis at that
time in Argentina led Gesell to a viewpoint substantially at odds with the
Marxist analysis of the social question: the exploitation of human labor does
not have its origins in the private ownership of the means of production, but
rather occurs primarily in the sphere of distribution due to structural defects
in the monetary system. Like the ancient Greek philosopher Aristotle, Gesell
recognized money's contradictory dual role as a medium of exchange for
facilitating economic activit y on the one hand, and as an instrument of power
capable of dominating the market on the other hand. The starting point for
Gesell's investigations was the following question: How can money's
characteristics as a usurious instrument of power be overcome, without
eliminating its positive qualities as a neutral medium of exchange?
He attributed this market-dominating power to two fundamental characteristics
of conventional money. First, money as a medium of demand is capable of being
hoarded, in contrast to human labor or goods and services on the supply side of
the economic equation. It can be temporarily withheld from the market for
speculative purposes without exposing its holder to significant losses. Second,
money enjoys the advantage of superior liquidity to goods and services. In
other words, it can be put into use at almost any time or place and so enjoys a
flexibility of deployment similar to that of a "wild card" in a card game.
These two characteristics of money give its holders a privileged position over
the suppliers of goods and services. This is especially true for those who hold
or control large amounts of money.
The hoarders can disrupt the dynamic flow or money balances of economic
activity, of purchases and sales, and of savings and investment. This power to
disrupt enables the holders of money to demand the payment of interest as a
reward for refraining from speculative hoarding. This in turn allows money to
circulate in the economy.
This intrinsic power of money is not dependent on its actual hoarding, but
rather on its potential to disrupt economic activity. This enables money to
extract a tribute in the form of interest in return for allowing the "metabolic
exchange" of goods and services in the "social organism." The "return on
capital" is accorded priority over broader economic considerations, and
production becomes attuned more to the monetary interest rate than to the real
needs of humans. Long-term positive interest rates disturb the balance of
profit and loss necessary for the decentralized operation of markets. Gesell
held that this led to a dysfunction of the social system exhibiting very
complex symptoms: the non-neutrality of interest-bearing money results in an
inequitable distribution of income, no longer reflecting differences in
productivity. This in turn leads to a concentration of monetary as well as
non-monetary capital, and therefore to the predominance of monopolistic
structures in everyday life.
Since it is the holders of money who ultimately decide whether it circulates or
stands still, money can't flow "automatically" like blood in the human body.
The circulation and the correct dosage of the monetary supply can't be brought
under effective public control; deflationary and inflationary fluctuations of
the general price level are inevitable. In the course of the business cycle
when declining interest rates cause large amounts of money to be withheld from
the market until the outlook for profitable investments improves, the result is
economic stagnation and unemployment.
II
Toward a Neutral Servant of Economic Activity
IN ORDER TO DEPRIVE MONEY OF ITS POWER, Gesell did not advocate recourse to
measures aimed at outlawing the taking of interest, such as the canonical
prohibitions of medieval times. On the contrary, he envisaged structural
changes in the monetary system centering about the imposition of carrying costs
on the medium of exchange. This would counteract the inclination to hoard, and
neutralize the liquidity advantage of conventional money. The imposition of
such carrying costs on liquid monetary assets--comparable to a demurrage fee
for freight containers in the field of transport economics--would deprive money
of its power to dominate the market while allowing it to fulfill its designated
function as a medium of exchange facilitating economic activity. Counteracting
disruptions in the circulation of the medium of exchange due to speculative
hoarding would allow the quantity and velocity of the monetary supply to be
periodically adjusted to match the volume of production and the overall level
of economic activity in such a way that the purchasing power of the monetary
unit could be made to possess the same long-term stability as other weights and
measures.
In his earliest works, Gesell referred in particular to "rusting bank notes" as
a method for implementing an "organic reform" of the monetary system. Money,
which had hitherto been "dead foreign matter" with respect to both the social
system and the natural world, would thus be integrated into the eternal cycle
of the life and death, becoming transitory and losing its characteristic of
limitless self-multiplication by means of simple and compound interest. Such a
reform of the monetary system would constitute a regulative holistic therapy;
by removing the cause of disruptions in monetary circulation, Gesell envisaged
that the self-healing powers of the dysfunctional social "organism" would
gradually increase, allowing it to recover from the diverse economic and
structural symptoms of crisis, ultimately reaching a state of equilibrium, in
harmony with the rest of the natural order.
In his main work, Die Naturliche Wirtschaftsordnung durch Freiland und Freigeld
(The Natural Economic Order through Free Land and Free Money), published in
Berlin and Bern in 1916, Gesell explained how the supply and demand of capital
would be balanced in the case of uninterrupted currency circulation so that a
reduction of the real rate of interest below the presently existing barrier of
around 3 to 4% would become possible. Gesell used the term "basic interest"
(Urzins) to denote this pure monetary interest rate of around 3 to 4%, which is
not found to vary very much historically. Interest represents the working
person's tribute to the power of money, and gives rise to levels of unearned
income far in excess of that suggested by its magnitude.
Gesell predicted that his proposed currency reform would gradually cause the
"basic interest" component to disappear from the monetary loan rate leaving
only a risk premium and an administrative charge to allow lending institutions
to cover their costs. Fluctuations of the market rate of interest around a new
equilibrium point close to zero would allow a more effectively decentralized
channeling of savings into appropriate investments. Free Money (Freigeld), a
medium of exchange liberated from the historical tribute of "basic interest,"
would be neutral in its impact on distribution, and could no longer
disadvantage the producers and consumers. Gesell envisaged that access to the
complete proceeds of labor brought about by the elimination of "basic interest"
would enable large sections of the population to give up wage- and
salary-oriented employment and to work in a more autonomous manner in private
and cooperative business organizations.
III
Reinventing Land as a Resource Held in Trust and Not an Object of Speculation
TOWARDS THE END OF THE 19TH CENTURY, Gesell extended his vision of
socioeconomic reform to include land reform. He derived inspiration in this
respect from the work of the North American land reformer Henry George
(1839-1897), author of Progress and Poverty, whose ideas about a "single tax"
on the rental value of land became known in Germany through land reformers like
Michael Flurscheim (1844-1912) and Adolf Damaschke (1865-1935). Damaschke
advocated taxing away the increase in values for the benefit of the community
while retaining the principle of private ownership of land. Gesell's reform
proposals paralleled those of Flurscheim, who called for the transfer of land
into public ownership, compensating the former owners, and thereafter leasing
the land for private use to the highest bidder. Gesell argued that so long as
land remains a tradable commodity and an object of speculative profit, the
organic connection of human beings with the earth is severed. In contrast to
the proponents of nationalist or racia lly oriented Blut and Boden ideologies,
Gesell rejected the association of "blood" with "land." As a widely traveled
citizen of the world he viewed the whole earth as an integral organ of every
individual. All people should be free to travel over the surface of the earth
without hindrance, and settle anywhere regardless of their place of birth,
color, or religion.
IV
The Economic Equality of Women and Men
LIKE THE SINGLE TAX" REFORMERS of the Henry George School, Gesell held that the
rental revenue from the land would enable the state to finance itself without
the necessity of further taxes. In attempting to trace the rightful owners of
these rental revenues in accordance with the principle of causality, Gesell
concluded that the amount of rental revenue depends on the population density
and this in turn depends on the willingness of women to bear and raise
children. For this reason, Gesell proposed to distribute the revenues from the
land rent in the form of monthly payments to compensate mothers for their work
in rearing children. The maternal subsidy would vary in proportion to the
number of their children under the age of majority. He advocated the extension
of this scheme to include mothers of children born out of wedlock and foreign
mothers living in Germany as well. His intention was that all mothers should be
released from economic dependence upon working fathers and that the
relationship between the s exes ought to be based on a love freed from
considerations of power and economic dependency. In an essay entitled Der
Aufstieg des Abendlandes (The Ascent of the West), written to challenge the
cultural pessimism of Oswald Spengler's Der Untergang des Abendlandes (The
Decline of the West), Gesell expressed the hope that the human race, which had
been physically, mentally, and spiritually degraded under capitalism, would
gradually be able to regenerate itself under a reformed economic order and
experience a new cultural renaissance.
V
Other Pioneers of a Market Economy without Capitalism
GESELL'S THEORY OF A FREE ECONOMY based on land and monetary reform may be
understood as a reaction to both the laissez-faire principle of classical
liberalism as well as the later Marxist visions of a centrally planned economy.
It should not be thought of as a third way between capitalism or communism in
the sense of subsequent "convergence theories" or so-called "mixed economy"
models, that is, capitalist market economies with global state supervision.
Rather, free economy was an alternative beyond hitherto realized economic
systems. In political terms it may be characterized as "a market economy
without capitalism." In this sense as he later came to realize and acknowledge,
Gesell had independently discovered and extended the critique of capitalism
formulated by Pierre Joseph Proudhon (1809-1865), the French social reformer
and contemporary of Marx. In the mid-19th century, Proudhon had cited both the
private appropriation of land and the power of interest-bearing money as
responsible for disappointment th at an egalitarian society had failed to
evolve following the demise of feudal absolutism. Proudhon condemned privately
appropriated ground rent as robbery and denounced interest on money as
cancerous usury. These forms of unearned income linked to exploitation led to
the emergence of the haute bourgeoisie as a new ruling class, which molded the
state and church into instruments of domination over the petit bourgeoisie and
the working class. Gesell's alternative economic model is related to the
liberal socialism of the cultural philosopher Gustav Landauer (1870-1919), who
was also influenced by Proudhon and who, for his part, strongly influenced
Martin Buber (1878-1965). There are intellectual parallels to the liberal
socialism of the physician and sociologist Franz Oppenheimer (1861-1943) and to
the social philosophy of Rudolf Steiner (1861-1925), the founder of the
anthroposophic movement.
VI
Free Economy Organizations in Germany and In Switzerland Prior to the First
World War
GESELL'S FIRST co-WORKER, GEORG BLUMENTHAL (1879-1929), combined proposals for
land and monetary reform with the concept of a droit naturel or natural social
order, with which Francois Quesnay (1694-1774) and his fellow Physiocrats had
opposed feudal absolutism at the time of the French Enlightenment. In 1909,
Blumenthal founded the Physiokratische Vereinigung (Physiocratic Association).
This was the first formal organization of supporters of Gesell's free economy
theory which drew its members from the ranks of land reformers, individual
anarchists, and syndicalists in Berlin and Hamburg. When the association's
journal, Der Physiokrat (The Physiocrate), fell victim to censorship during the
First World War, Gesell moved to Switzerland, where he found supporters among
the local land reformers, educational reformers, and in other progressive
circles. They organized themselves into the Schweizer Freiland-Freigeld-Bund
(Swiss Free Land-Free Money-Federation). In two lectures entitled Gold oder
Frieden? (Gold or Pe ace?) and Freiland die eherne Forderung des Friedens (Free
Land-- the Essential Condition of Peace), Gesell explained the significance of
his reform proposals as a way to promote social justice and peace among the
nations.
VII
Between the Two World Wars
AFTER THE END OF THE FIRST WORLD WAR and the subsequent November Revolution in
Germany, Gesell's connections with Gustav Landauer led to his short-lived
appointment as People's Commissioner for Finance in the first Bavarian
Raterepublik. Following the overthrow of the Raterepublik, he was indicted for
high treason but was subsequently acquitted of all charges. Afterwards, Gesell
took up residence near Berlin where he observed and commented on the
development of the Weimar Republic in numerous tracts and pamphlets. He
suggested that by means of a graduated wealth tax of up to 75 percent, an
appropriate contribution to the economic consequences of the war should be
extracted from the large-landed estates and big business interests. At the same
time, he proposed to initiate the domestic accumulation of capital by means of
his land and monetary reform program in order to enable Germany to fulfill the
reparation demands of the victorious Allied powers. He criticized what he
perceived to be the disastrous errors in the economic policies of the rapid
succession of unstable governments. The errors included, (1) the effective
expropriation of large sections of the lower and middle classes by massive
inflation instead of introducing effective currency reform; (2) the protraction
of reparation payments, making Germany dependent upon an influx of foreign
capital; and (3) the abandonment of the stable Rentenmark in favor of the
crisis-prone international gold standard.
Gesell distanced himself from racist ideologies. He aimed to develop an
objective critique of the structural defects in the existing economic order.
This would be free from the subjective racial prejudice of anti-Semitic
demagogues, whose diatribes against so-called "Jewish" usurers he criticized as
a "colossal injustice." Gesell was greatly influenced by Darwin's theory of
evolution and viewed his reform program as a means for encouraging a more
healthy evolution of human society. However, Gesell should not be classified as
a "social Darwinist" because he believed that extremes of wealth and poverty
reflect structural defects in the economic order rather than real differences
in aptitude and productivity. Opposed to ultra-nationalist triumphalism, Gesell
advocated the promotion of mutual understanding between Germany and its
neighbors. He called for the abandonment of expansionist politics and the
formation of a voluntary confederation of European states to promote
international cooperation.
Gesell also drew up proposals for an international post-capitalist monetary
order, advocating an open world market without capitalist monopolies, customs
frontiers, trade protectionism, and colonial conquest. In contrast to
subsequently established institutions, such as the International Monetary Fund,
the World Bank, and the European Union, which act on behalf of the powerful
within the existing framework of unjust structures, Gesell called for the
establishment of an International Valuta Association, which would issue and
manage a neutral international monetary unit freely convertible into the
national currency units of the member states, but operating in such a way that
equitable international economic relations could be established on the basis of
global free trade.
Although the precise degree of influence cannot be established, it is
interesting to note that echoes of Gesell's ideas concerning the International
Valuta Association can be found in J.M. Keynes' original Proposals for an
International Clearing Union submitted on behalf of the British delegation but
rejected by their American counterparts at the Bretton Woods conference in
1944.
The massive inflation of the early post-war years led to a rapid growth of
popular support for Gesell's reform proposals. The membership of Free Economy
organizations reached an estimated 15,000 persons by 1924. In 1924, a split
occurred among Gesell's followers leading to the formation of the moderate
liberal Free Economy Federation and the more radical individualist-anarchistic
and militant-sounding Fysiokratische Kampfund (Physiocratic Task Force). The
split was caused in part by a heated controversy that had been sparked by
Gesell's treatise Der Abgebaute Staat, a wide-ranging polemic in favor of the
"dismantled state." These internal power struggles weakened the Free Economy
movement, which failed to develop into a mass movement. Still, continuous
efforts were made to canvass support among the Social Democratic Party and the
Trade Union movement, as well as among the various peace, youth, and female
emancipation movements that flourished in the Weimar Republic. During the Great
Depression the Freiwirtsc haftsbund addressed memoranda to all parties
represented in the parliament warning of the terrible consequences of the
deflationary policy being adopted at the time, and submitting proposals for
overcoming the crisis. These memoranda generated little or no response. As soon
as the success of practical experiments with Free Money organized by the
Fysiokratische Kampfbund, which included the reopening of a mine at
Schwanenkirchen, began to command public attention, further experiments were
outlawed by the German Finance Ministry under the terms of the Emergency
Decrees of the Bruning government in 1931.
A Free Economy party contested the 1932 Reichstag elections without success.
After the Nazi Party's seizure of power in 1933 many Free Economy supporters
suppressed their misgivings about the true character of the Nazi ideology and
succumbed to the illusory hope that Hitler might act on the earlier rhetoric of
Gottfried Feder concerning "the smashing of interest-slavery." They tried to
exert influence on leading functionaries of the Nazi Party hierarchy in the
hope of bringing about a change of course on economic matters. Despite rather
dubious tactical efforts to conform to the requirements of the new order, in
the spring of 1934 the various Free Economy organizations and publications that
had not already voluntarily disbanded were outlawed.
Initial misjudgments concerning the totalitarian regime had been encouraged not
only by the painful memories of rejection by the political parties of the
Weimar era, but also by uncertainty about the most appropriate way to realize
land and monetary reform. Free Economy associations in Austria (until 1938) and
Switzerland continued their work. English, French, and Spanish translations of
Gesell's main work were published during the second World War. Introductory
brochures were produced in a wide range of languages including Dutch,
Portuguese, Czech, Romanian, and Serbo-Croat as well as Esperanto, reflecting
the work of smaller groups in England, France, the Netherlands, Belgium,
Czechoslovakia, Romania, and Yugoslavia. In North and South America, Australia,
and New Zealand, Free Economy associations were established by German
emigrants.
VIII
Post-War: New Beginnings, Neglect, and Renewals
FREE ECONOMY ORGANIZATIONS were reestablished throughout post-war Germany. In
the Soviet occupation zone they were outlawed in 1948; the Soviet authorities
regarded Gesell either as "an apologist of the monopoly bourgeoisie" or, in the
same way that Marx had dismissed Proudhon, as "a socialist of the petit
bourgeoisie" whose aims were incompatible with "scientific socialism." In
Western Germany, the majority of the Gesell's followers who survived the war
voted to form their own political party to contest elections because of their
negative experiences with the established political parties of the Weimar era.
They founded the Radikalsoziale Freiheitspartei (Radical Social Liberal Party),
which received just under one percent of the votes at the first election to the
Lower House of the German Parliament in 1949. The party's name was later
changed to the Freisoziale Union (Free Social Union), but its support remained
at a negligible level in subsequent elections. A Silvio-Gesell-Haus was
established as a meeting center between Wuppertal and Neviges, where seminars
and conferences on Free Economy and related topics are still regularly held.
In spite of the fact that prominent economists like Irving Fisher and John
Maynard Keynes had recognized the significance of Gesell's work in the
inter-war period, the West German economic miracle of the 1950's and 1960's
largely extinguished public interest in alternative economic models. It was
only towards the end of the 1970's that mass unemployment, environmental
destruction, and the growing international debt crisis led to a gradual revival
interest in Gesell's ideas, ideas that had suffered almost complete oblivion.
In this way, it became possible to pass on the insights of the Free Economy
school to a new generation.
In Switzerland, a significant collection of Free Economy literature is to be
found in the Free Economy Library of the National Economic Archive in Basel. In
Germany the Stiftung far Reform der Geld- und Bodenordnung, a foundation
promoting the reform of the monetary and land order, began to establish a
German Free Economy Library in 1983. To provide a basis for academic research
into Gesell's life and work it also commissioned an 18-volume edition of his
collected works in 1988. In addition to this, a series of secondary literature
entitled Studien zur naturlichen Wirtschaftsordnung (Studies on a Natural
Economic Order) is under development; the first two volumes published were a
centenary review of the history of the Free Economy movement and an edition of
selected writings by Gesell's most important student, Karl Walker.
The German foundation also promotes other publications relating to land and
monetary reform, and in collaboration with the Sozialwissenschaftliche
Gesellschaft (Social Sciences Society) publishes a quarterly periodical,
Zeitschrift fur Sozialokonomie, commenting on social and economic issues. It
has awarded a Karl Walker Prize for academic papers dealing with the problems
arising from the increased decoupling of financial markets from the real
economy (1988), and with proposals for overcoming unemployment (1995).
The Seminar furfreiheiliche Ordnung (Seminar for a Liberal Order) is
responsible for the issue of a series of publications entitled Fragen der
Freiheit (Questions of Liberty). The Initiative fur eine Naturliche
Wirtschaftsordnung (Initiative for a Natural Economic Order) endeavors to
promote popular awareness of Gesell's ideas in cooperation with associated
organizations in Switzerland and Austria. An association called Christen fur
gerechte Wirtschaftsordnung (Christians for a Just Economic Order) promotes the
study of land and monetary reform theories in the light of Jewish, Christian,
and Islamic religious doctrines critical of land speculation and the taking of
interest. Margrit Kennedy, Helmut Creutz, and other authors have examined the
contemporary relevance of Gesell's economic model and tried to bring his ideas
up to date. Of particular importance in this respect have been the various
efforts to examine the correlation between the exponential growth of financial
assets and debts and the environmental ly destructive "growth imperative"
driving the real economy. There have been suggestions for overcoming the growth
imperative and efforts to combine land and monetary reform ideas with proposals
for an ecologically based tax system. The book entitled Gerechtes
Geld--Gerechte Welt (Just Money--Just World) offers a survey of the present
state of these theoretical developments. This book is a compilation of essays
and discussion papers examining the centenary of Gesell's first monetary reform
publications. The congress was held in 1991 in Konstanz under the title: 100
Jabre Gedanken zu einer naturlichen Wirtschaftsordnung--Auswege aus
Wachstumszwang und Schuldenkatastrophe (100 Years of Thought Related to a
Natural Economic Order--Solutions to the Growth Imperative and Debt Crisis).
The collapse of state socialism in Central and Eastern Europe has led to the
temporary triumph of Western capitalism in the ideological struggle between
competing economic models. However, as long as the disparity between rich and
poor continues to increase, as long as exponential economic growth continues to
cause accelerating environmental destruction, and as long as the "developed"
nations of the Northern hemisphere continue to ruthlessly exploit their
"undeveloped" southern neighbors, it is necessary to search for alternatives to
the prevailing economic order. Under these circumstances, Silvio Gesell's Free
Economy model retains its relevance and may yet begin to receive the wider
recognition that it deserves.
(*.) Dr. Werner Onken (Steenkamp 7, D-26316 Varel 2 / Germany) is the world's
expert on Silvio Gesell. He serves as the editor of Zeitschrift fur
Sozialokonomie (Journal of Social Economics) and is the director of the
Freiwirtschaftliche Bibliotek (Library of the Free Economy) which collects and
preserves the historical literature on land and money reforms. Onken has served
as the editor of the Collected Writings of Silvio Gesell (Gesammelte Werke),
recently published in 18 volumes.
RMJon23
Darity, William Jr., "Keynes' Political Philosophy: The Gesell Connection." In
Eastern Economic Journal Vol. 21, No. 1, Winter 1995, pp. 27--41.
Dillard, Dudley, Proudhon, Gesell and Keynes--An Investigation of Some
"Anti-Marxian-Socialist" Antecedents of Keynes' General Theory. University of
California: Dr.-Thesis, 1949. Hackbarth Verlag St. Georgen/Germany 1997. ISBN
3-929741-14-8.
Fisher, Irving, Stamp Scrip. New York: Adelphi Company, 1933.
Gesell, Silvio, The Natural Economic Order (translation by Philip Pye). London:
Peter Owen Ltd., 1958.
Goodfriend, Marvin, "Overcoming the Zero Bound Interest Rate Policy." In
Journal of Money, Credit, and Banking (forthcoming in 2000).
Harrod, Roy, Towards a Dynamic Economics--Some Recent Developments of Economic
Theory and their Application to Policy. London: Macmillan & Co., 1948, Chap.
"Is Interest out of Date?"
International Association for a Natural Economic Order The Future of Economy--A
Memoir for Economists. Lutjenburg 1989 and www.sozialo-economie.de
Kennedy, Margrit, Interest and Inflation-Free Money--Creating an Exchange
Medium That works for Everybody and Protects the Earth. Okemos/Michigan, 1995.
Keynes, John Maynard, The General Theory of Employment Interest and Money.
London: Macmillan & Co. Ltd., 1935, Chap. 16, 23 and 24.
Klein, Lawrence, The Keynesian Revolution. London: Macmillan Press Ltd., 1966
and 1980, chap. 5, pp. 124--152.
Seccareccia, Mario, Early Twentieth-Century Heterodox Monetary Thought and the
Law of Entropy. In A Cohen, H. Hagemann and J. Smithin, Financial Institutions
and Macroeconomics. Boston: Kluwer Academic Publishers, 1997.
Suhr, Dieter, The Capitalistic Cost-Benefit Structure of Money. New York and
Berlin: Springer Verlag, 1989.
Wise, Leonard, Great Money Reformers--Silvio Gesell Arthur Kitson, Frederic
Soddy. London: Holborn Publishing, 1949.
RMJon23
Free money for social progress: theory and practice of Gesell's accelerated
money. (Special Invited Issue: Money, Trust, Speculation and Social
Justice)(Part 2: Trust and Money)(system of stamped money proposed by Silvio
Gesell) Jerome Blanc.
Author's Abstract: COPYRIGHT 1998 American Journal of Economics and Sociology,
Inc.
Silvio Gesell (1862-1930) proposed a system of stamped money in order to
accelerate monetary circulation and to free money from interest. This was part
of a global socialist system intended to free the economy from rent and
interest. In the 1930s, Irving Fisher, who proposed the system to President
Roosevelt, and John Maynard Keynes rendered homage to Gesell's monetary
proposals in the context of the economic depression. Several experiments took
place that were based on his ideas, notably in the Austrian town of Worgl and
in the United States. These experiments were always local and never lasted more
than a few months. This article shows that trust is the main issue of this kind
of monetary organization; and therefore, that such experiments can only take
place successfully on a small scale.
Full Text: COPYRIGHT 1998 American Journal of Economics and Sociology, Inc.
I
Introduction
Money is often the central point of theories that are designed to improve
social organization. In the 1930s, the Great Depression led to a search for
alternative solutions to restart the economy, or at least to slow its decline.
Thousands of people proposed plans for just this purpose. Many of these plans
were based on a reform of the monetary organization, and most were never
actually tried.
This was not the case with a pre-existing theory - Silvio Gesell's theory of
free money - on which John Maynard Keynes showered fulsome praise and which
Irving Fisher tried to apply in the United States. This theory was tried.
Admittedly, there are key differences between Gesell's theory and the several
attempts made to employ it. These differences include the fact that none of the
attempts occurred at a national or worldwide level, despite the preferences of
Gesell and some founders of the experiments. Moreover, the theoretical purpose
of free money became simply the acceleration of monetary circulation, that is,
accelerated money, thus abandoning the other dimensions of Gesell's socialist
theory.
However, both these experiments and their underlying ideas stress the necessity
of the quick circulation of income. It is possible to accelerate the flowering
of society by encouraging the circulation of currency, that is by setting up a
monetary organization that promotes what might be called consumption money.
Money is viewed as a necessary medium of exchange, but its organization is
transformed in order to suppress the disastrous effects of speculation,
hoarding, and usury, which are considered to be the sources of economic crises.
The purpose of this paper is not to reappraise Gesell's theory but rather to
compare his theories to some issues raised by the twentieth-century
experiments. I shall also examine Gesellian socialism and the theoretical
context of Gesell's monetary theory, as well as the debates and social
experiments that grew from these ideas mainly in the period between the world
wars. Finally, I shall discuss the practical issues that face every attempt to
employ accelerated money, especially the central issue of trust, and the
importance that monetary organizations remain local and confined to a single
small region in order to work.
II
Gesellian Socialism and Money
Silvio Gesell (1862 - 1930), born in Germany, worked as a successful importer
in Argentina at the end of the nineteenth century. He began to study economics
when a huge monetary crisis occurred in Argentina in the 1880s. In 1891 he
published Die Reformation im Munzwesen als Brucke zum socialen Staat.(1) He
returned to Europe and started writing The Natural Economic Order, a major work
based on his 1891 book. It was published in 1911, reprinted several times, and
translated into several languages. English translations were published in 1929
and in 1934, the latter based on the sixth German edition.
In Europe, The Natural Economic Order aroused wide interest during the period
between the wars. Gesell acquired many followers . . . and even more
detractors. His admirers considered him a "prophet," but among his detractors,
orthodox economists in particular, he was dismissed as a "crank."(2)
What provoked such a rejection were both Gesell's nonacademic and deeply
heterodox ideas, and his hysterical rhetoric, which was similar to that of many
socialist writers. In fact, Gesell considered himself a socialist - not a
Marxian, but a Proudhonian one.
Gesell was considered by some economists as a stage in heterodox economics
between the monetary theory of Knut Wicksell and that of Keynes.(3) This was in
part due to the fact that he analyzed a monetary economy and stated that
economic crises have a monetary origin. The crises Gesell were interested in
are deflationist ones, like the Argentinean crisis of the 1880s, which gave him
the substance of his theory, and the worldwide one of the 1930s (during which
Keynes wrote his General Theory).
Gesell's theory was intended to change the economic organization of society and
promote progress towards social justice and economic welfare, by way of freeing
the economy and thus establishing what he called a natural economic order. This
move towards a free economy (Freiwirtschaft) requires the freeing of land from
rent and the freeing of money from interest. In an economic organization
cleared of the economic privileges of landowners and moneylenders, workers
would receive the whole value of their output. Competitors would then have a
level playing field, and the economy would subsequently flourish.
Let us now turn to Gesell's monetary proposal of free money. In his theoretical
view of the economy, the stockpiling of wealth is identified as the danger to
be avoided, because it stops the revenue flow dynamics. Gesell, as Keynes did
some years after, denounced the hoarding of money, even as savings deposited in
financial institutions, since high interest rates make loans difficult. Two key
points appear here: hoarding and the cost of credit. Both blockade a part of
the money supply from functioning properly.
Gesell identified the primary function of money in its circulation: economic
dynamics are based on money as a perpetuum mobile.(4) Above all, money has to
have a means of circulation. How then, Gesell pondered, could the slowing of
any monetary flow be prevented? An arrangement favoring monetary circulation
and discouraging the stockpiling of wealth had to be set up.
It is true that many other economists developed ideas promoting the circulation
function of money. Keynes, for example, advocated the lowering of interest
rates. But this is not sufficient to create a monetary utopia. Gesell did
inasmuch as he developed an organizational perspective on consumption money.
One can distinguish two meanings of the idea of a consumption money:
1. The quick and whole spending of money. This means that income is not hoarded
during the period of production that follows its distribution.
2. The disbursement of money in the very place where incomes are created. This
means that income does not get used for consumption or invested elsewhere.
It is possible to mix these two meanings, but their theoretical and practical
consequences are very different. In the first meaning, one can recognize many
less utopian than heterodox authors who wanted to break the cycle of hoarding
and reduce the motive for saving. Keynes was among these; that is why he saw
Gesell as a greater writer than Marx. Gesell advocated destroying the function
of storage of wealth. This led him to advocate an accelerated money,(5) that
is, organizing the acceleration of its circulation.
In the second meaning, the issue to solve is the localization of the formation,
the distribution, and the disbursement of income. Big companies and money
management induce a gap between where incomes are formed and where they are
spent. This leads to projects at the local level intended to speed up the
relocalization of the economic flow. This is not necessarily a return to
autarky linked to fear of outside influences. In the town of Worgl (Austria),
in 1932-1933, the organization of a local accelerated money on Silvio Gesell's
model was simply intended to revitalize the local economy.
Hence, a consumption money can be set up by two means: by reducing or even
destroying the monetary function of store of wealth and by the organization of
local and even strictly closed-region economic flows. The purpose of some
monetary utopias was the creation of the first sort of consumption money, but
the actual application of such a consumption money on a national scale appeared
impossible and so it could only be applied on a local scale. Hence the attempts
to put in practice an accelerated money (as Gesell theorized) led to the
setting up of local regional systems.
III
Toward the Principle of an Accelerated Money
The purpose of Gesell's monetary theory was to free money from interest rates,
in order to set in motion the dynamics of credit, investment, and consumption.
This freeing involved an acceleration of monetary circulation, or an
accelerated money.
The core of Gesell's monetary theory consists of a theory of interest. Like
Wicksell, Gesell distinguishes between a monetary interest rate and a real
interest rate. The second is considered by Gesell as linked to the first; hence
only the monetary interest rate is of importance in his analysis. In Gesell's
theory, then, the monetary domain determines the real one.
The monetary interest rate consists of three parts: a risk premium linked to
the loan, a premium linked to the expected rate of inflation, and, above all, a
fundamental interest rate called "tribute," paid for the natural advantage of
possessing money over other goods. Gesell reasoned that the natural advantage
of money is twofold: first, that money is indestructible and possessing it does
not incur costs; and second, that money is the only liquid good by which
everything can be obtained.
As a necessary remuneration for the advantages of money, paying a tribute
establishes a lower limit to the rate of return on every business project.(6)
This means that someone lends capital only if its interest rate is over the
cost of the tribute, and that someone purchases or invests only if he expects
the selling price to be over the buying price increased by the tribute. If the
numbers do not add up, money will be hoarded and withdrawn from the economic
flows.(7) Hence, the capitalist is likely to break the cycle of economic
activity if he abstains from any economic action.
Hoarding then becomes the cause of economic crisis, and the natural advantages
of money cause hoarding. How then to stimulate the circulation of money and
discourage hoarding? The lowering of the interest rate below that of the
tribute rate(estimated to be nearly 3 to 4 percent a year, according to Gesell)
would be disastrous, because it would encourage hoarding outside of banks. This
is the mechanism of Keynes's awful "liquidity trap."(8)
Gesell stated that the lowering of the interest rate at a level even above that
of the tribute rate would not discourage hoarding and stimulate the circulation
of money. That is why Gesell did not wish to merely lower interest rates.
Rather, he wanted to free money from interest rates altogether. The lowering or
even the abolition of interest is not a way to boost the economy but may be a
consequence of its new organization.
The solution was to be found in the depreciation of money. That is the only way
to pass beyond the mechanism of the tribute. Money, as we have seen, has two
advantages over goods: no carrying costs and general liquidity. The first one
is linked to the store of value function of money, the second to its payment
function. The solution is to give money an artificial carrying cost in order to
suppress the first advantage and privilege the second one. Thus Gesell proposed
his famous stamped money system. Every month or every week notes lose a fixed
percentage of their nominal value, for example, a weekly rate of 0.1 percent of
the nominal value of the notes, i.e., a yearly depreciation of 5.2 percent.(9)
Then, in order to maintain the value of their notes, people would have to
purchase stamps every week at the Post Office.(10) Stamped money means that the
authorities impose on money, not prices, a stable, fixed, and announced
inflation.
Yet, the storage of wealth is safe in Gesell's system. While every deposit in
the savings bank creates a need to buy stamps, it is always the holder of the
notes who needs to buy them. In the case of deposits in savings banks, the
banks have this responsibility. The saver withdraws his deposit at the same
value he deposited it. Hence, the savings bank is stimulated to loan its funds
in order to avoid this costly need. When funds are loaned, the stamps are
bought not by the depositor or the savings bank, but by the borrower who holds
the money. In this system, the disadvantage lies not in borrowing money, but in
holding money idle.
Since it is in the interest of no one to hold notes idle, this system
stimulates deposits, discourages hoarding, stimulates loans, and, finally,
stimulates monetary circulation in general.
IV
Accelerated Money Debates and Experiments
Gesell's ideas and militancy gave occasion for the birth of several groups
promoting his Free Economy. Despite the academic rejection of Gesell's ideas,
Keynes noted that many non-academics were infatuated with his ideas:
In the post-war years his devotees bombarded me with copies of his works. . . .
The last decade of his life was spent in Berlin and Switzerland and devoted to
propaganda. Gesell, drawing to himself the semi-religious fervour which had
formerly centred round Henry George, became the revered prophet of a cult with
many thousand disciples throughout the world. . . . Since his death in 1930
much of the peculiar type of fervour which doctrines such as his are capable of
exciting has been diverted to other (in my opinion less eminent) prophets.(11)
The German hyperinflation of the twenties, the subsequent difficulties
experienced in going back to the gold standard, the monetary disorders and then
the great economic depression with its extraordinary unemployment in Europe and
America, allowed heterodox, even utopian, ideas to flourish. Debates on
Gesellian ideas occurred in the context of the lack of money in Europe from the
beginning of the First World War to the middle of the twenties, and in the
context of the depression of the thirties. Gesell's ideas were well discussed
in Germany, France, Switzerland, Great Britain, Austria, and the United States
long before people experimented with their practical application (Blanc, 1998).
The birthplace of the debates was Switzerland, where Gesell settled in 1900.
Dr. Theophile Christen, Fritz Schwartz, and Gesell created in the 1910s the
Freiland- und Freigeldbund, an organization intended to promote a free economy.
They were supported by the Popular Socialist Party. The free economy projects
were discussed in 1923 at the Monetary Conference convened by the Federal
Council.
An engineer and friend of Gesell, Hans Timm, founded the first experiment with
stamped money. It occurred in Germany in 1930, and was based on an exchange
bank and stamped notes called wara.(12) Soon the government argued that this
system was hurting the issuing privilege of the Central Bank and creating a
risk of inflation. The government lost a court case against the experiment, but
eventually banned by decree the use of this sort of money in October 1931.(13)
Perhaps the most important experiment with accelerated money took place in
Worgl, a little town in Austria, in 1932-1933.(14) It is still considered today
to be the seminal experiment of its type. Founders of LETS (Local Exchange
Trading Systems) all over the world frequently refer to Worgl in order to
outline the historical context of LETS, despite the absence, today, of any
accelerating system of exchanges derived from Gesell's ideas.
Worgl was an impoverished town of 2,000 inhabitants, within its borders there
were 1,500 unemployed. Moreover, the town was in a state of bankruptcy. In July
1932, its mayor, Michael Unterguggenberger,(15) set up a system of stamped
notes called "labor notes" of one to ten Austrian shillings that were issued by
the municipal office. Every month, holders of labor notes had to buy stamps of
1 percent of their nominal value to maintain the notes. The notes issued were
totally backed on a shilling reserve. The municipal office paid a part of the
salaries of the municipal employees. This stamped money circulated in the town
and the neighborhood, people trusting in their final reception by the municipal
office which received them in payment of taxes at par with the Austrian
shilling. Moreover, it secured the convertibility between the stamped notes and
the Austrian shilling, taking a 2 percent duty.
The currency movement in Worgl sharply accelerated.(16) Some paid their taxes
in advance to avoid buying the stamps. The financial situation of the town and
the local economy recovered. The municipality even hired some workers to
perform public works projects. The principle of savings was safe with a system
of deposits, and currency depreciation ended. However, in spite of the apparent
success of the system in Worgl,(17) and the desire of many other towns to set
up similar systems,(18) the Austrian government, goaded by the National Bank of
Austria, banned the system of local stamped money in September 1933.(19)
In the United States, some debates on and experiments with stamped money
occurred in the thirties. In addition to Keynes, it seems that Irving Fisher
was the only other famous economist in this period who observed and encouraged
experiments with Gesell's theories, especially the Worgl one. Fisher even wrote
a book titled Stamp Scrip in 1933. However, this aspect of Fisher's works has
been blotted out of the collective memory of economists.(20)
In the context of the American deflation at the beginning of the thirties,
Fisher proposed to set up a temporary but nationwide system of accelerated
money, wherein depreciation would be 2 percent per week. He wanted the velocity
of money to accelerate, and prices to rise.(21)
Fisher tried unsuccessfully to convince the future President Roosevelt (who was
at that time running for office) of the value of experimenting with Gesellian
theories and other unorthodox projects designed to boost the economy.(22) A
bill intended to allow the government to issue stamped money for a
predetermined period of the deflationist crisis was brought to the US Congress,
but it did not pass.(23)
Yet around 1932-1933, on the basis of the Worgl experiment, some fifteen towns
set up a system of stamped money.(24) Generally, the issued notes were not
backed on an equal dollar reserve, but the necessity of paying stamps of 2
percent of their nominal value every week constituted the reserve. In one year,
a reserve of 104 percent of the nominal value of the issued notes was in place.
There was a strange system of paying stamps at the time of every exchange, not
at every fixed period of one week. This had exactly the opposite consequences
of an accelerated money system, since people were then encouraged to hold their
notes or to barter exchange to avoid paying any duty. Fraud was rampant. Some
private organizations (chambers of commerce, groups of tradesmen) also set up
such a stamping system.
There were some other experiments outside the U.S. as well. In Alberta, Canada,
William Aberhart, disciple of Major Douglas, founder of the theory of social
credit,(25) applied a similar system, which soon failed. In Great Britain,
Henry Buchi unsuccessfully tried to advance the principle of stamped money. In
France, men such as Jean Barral, Pierre Mouton, and Marino-Bertil Issautier
advocated in favor of stamped money systems. An experiment occurred two years
in Nice, France in the thirties, but the government, on the advice of the
Banque de France, soon banned it. Nevertheless, a deputy had proposed a bill to
create just such a system(26) and in 1933, Edouard Daladier, President of
Council, proposed such a system at a Congress of the Radical Party. (However,
he only provoked an outcry.) In 1937, a new project was submitted to the
Radical Party for the financing of large-scale public works by the issuing of a
stamped money not backed by preliminary reserves.(27) New debates on stamped
money also occurred during the war. After the Second World War, two small
French towns set up systems of stamped money, but the founders of the systems
decided to stop them before the government stepped in.(28)
V
Trust and Accelerated Money: The Practical Limits of the Gesellian Utopia
The experiments with Gesellian theory in this century do not provide any
evidence as to how an accelerated money system would work over two or three
years. None lasted more than a few months. Moreover, they never occurred on a
large scale, but always on a local regional scale. The attempts to create free
money were never linked with an attempt to set up a free economy, as Gesell
theorized.
Hence, the Gesellian theory of freeing money from interest and accelerating
monetary circulation generates some questions concerning its viability and the
proper way to set up such a system. At the root of its technical problems,
trust remains the main issue.
We saw that the acceleration of monetary circulation was induced by the regular
depreciation of the nominal value of the means of payment. The main issue of
this way of accelerating the currency is its effect on people's behavior.
Generally, the acceleration of the monetary circulation comes from a
depreciation of the money supply, or from a loss of trust precisely linked to
the depreciation of money. One can see there the beginning of an inflationist
or even hyperinflationist process. Hence such an organization of the
acceleration of currency is dependent on people having confidence in the value
of their money. If this trust does not exist, there is a great risk that
monetary substitutes will appear in order to avoid using money whose nominal
value has to be maintained - inconveniently - by costly stamps.
In order to maintain consumer confidence, the accelerated money system needs,
from a technical point of view, to announce and plan the regular depreciation
of money and to insure that there will be no effect on prices. Moreover, it has
to lock in the payment system so that there is no easy possibility of
substituting a stable money for the depreciating means of payments.
Indeed, the inherent problem with Gesell's system is the existence, in modern
economies, of different means of payment. In Gesell's system, only one sort of
means of payment exists (stamped notes) since deposits cannot be used as bank
money. Yet neither in Gesell's time nor today is this assumption realistic. If
bank money does exist, it can replace the stamped notes, not only as a store of
wealth, but also as a means of payment, since bank money is not saddled with
carrying costs.
That is why Keynes wrote that the system of stamped notes "would clearly need
to apply as well to some forms at least of bank-money"(29). The recent
proposals derived from Gesell's ideas take this issue into account. Every agent
would have two accounts: one current account assigned to bank payments and
bearing the depreciation of money, and one account assigned to savings, not
allowing bank payments and preserving the stability of currency value(30).
Such a system is likely to succeed so long as the following conditions are
fulfilled:
1. The system has to have strict regulations forbidding the use of substitutes
to the depreciating means of payment. The lack of control over such substitutes
would lead to the destruction of the accelerated money system by the behavior
of agents looking for stable means of payment. However, Keynes stated that, in
contradiction to Gesell's assumption, there is a continuum of variously liquid
assets able to serve as money substitutes(31). From a theoretical point of
view, this is enough to destroy any attempt to set up an accelerated money
system. It seems that this difficulty prevents this sort of project from being
set up on a large scale.
2. Actually, trust is the key to the system. Trust is enough to let it succeed,
and the lack of trust severely endangers its success.
On a large scale, an accelerated money system is likely to last only if a
complete shift in thinking occurs. Such a revolution would allow a
transformation of the economic system. This necessity of a revolution in
thought is another way to say that trust is necessary to the system, but that
trust in such a system is quite unlikely to appear in a normal context on a
large scale.
We can observe that the attempts to put stamped money systems into practice
occurred in very specific contexts. The example of Worgl's stamped money shows
that the survival of such a system requires a united, small, and compliant
population, who are fully aware of the advantages of such a system. Hence, in
Worgl, before paying a part of the salaries of the municipal employees with the
stamped notes, the employees agreed to be paid with this money(32). This means
that an accelerated money system would probably be viable on a small scale
only, and, on a larger scale, for a limited time only and under conditions
attractive enough to incite the whole population to play the game(33).
VI
Conclusion
Any experiments with accelerated money seem doomed to stay local, that is, in a
network limited by space and/or purposes, whose participants trust themselves
and the monetary authority. The necessity of a voluntary adherence to a network
serves to limit the scale of such an experiment and to make new members alert
to the consequences of internal money.
Hence, it appears that any attempt to set up an accelerated money system (the
first sort of "consumption money") will eventually lead to a local currency
(the second sort of "consumption money").
In the context of the rising poverty and unemployment in Europe in the eighties
and nineties, the ideas of a free economy and especially of free money are
back. Organizations promoting the sort of economic order Gesell theorized still
exist in Germany and Scandinavia, as well as Great Britain and Mexico. New
debates about the concept of accelerated money are also focusing on how to
manage an economy in an ecologically sound fashion.(34)
Though local currencies were not born in Worgl, the experiment with them there
served as a reference long after it was banned. Today, many experiments with
local currencies hark back to Worgl, even when they are not accelerated in a
similar fashion. Two kinds of local currencies may be distinguished: currencies
used in towns, and currencies used in small, closed groups. Local currencies,
such as Ithaca Hour, were recently tried out in nearly forty U.S. towns.
Despite many differences, Local Exchange Trading Systems (LETS) are based on
similar purposes. These small, closed groups have developed all over the world
since 1983. More than 1,000 LETS exist today, counting more than 50,000 members
around the world. LETS make hoarding both impossible and undesirable. The only
wealth in such systems is in the capacity of exchange (knowledge, goods,
services), and debit accounts are an accounting necessity. LETS attempt to
recreate a social cohesion on a local scale on the basis of a compensation
system of personal accounts. One notable example of a LETS, that of
Saint-Quentin en Yvelines, France, has been creating a sort of accelerated
money by a system of taxation on positive accounts, a peculiar system that
applies some Gesellian ideas.
RMJon23
Notes
1. See Currency Reform as a Bridge to the Social State, which Philip Pye
translated into English in 1951.
2. Keynes, in The General Theory of Employment, Interest, and Money, wrote,
"Like other academic economists, I treated his profoundly original strivings as
being no better than those of a crank." See also Herland, 1992. In the many
histories of economic analysis that exist today, it is very rare to find more
than some indignant sentences on Gesell - and it is likely that no one would
remember Gesell's name and theories if Keynes did not write about them (Keynes,
1936, pp. 353-358).
3. See Herland, 1992. Dillard considered Gesell as a step between Proudhon and
Keynes. Herland stresses that this was just a step that Keynes easily topped.
Only Ludwig von Mises seems to place Gesell above Keynes, but this might be
linked to his rejection of Keynes, more than his acceptance of Gesell's theory.
4. See Herland, 1977, on Boisguilbert, Proudhon, and Gesell.
5. We will employ this term rather than Keynes's "stamped money," since it is
more precise. The purpose of the stamping system is the acceleration of the
circulation of money.
6. Gesell, 1948, pp. 172-175. Some years after, Keynes found in it a proof for
his concept of the marginal efficiency of capital.
7. Gesell's idea implies that the buyer (in his mind, a capitalist) is able to
wait before buying because money has no carrying costs, while the seller has to
sell quickly because of the carrying costs of his goods. Many authors
considered that the buyer has an advantage over the seller, without developing
such a tribute theory. See, for example, Simmel, 1978, p. 214, or Keynes, 1936,
pp. 225, 355-356.
8. Compare Gesell, 1948, p. 191, with Keynes, 1936, p. 207.
9. The different editions of the Natural Economic Order give different periods
and different depreciation rates. The book was translated into English by
Philip Pye and published in 1929, 1934, and 1951. Keynes read the translation
of the sixth German edition, which, with the seventh one, shows a weekly
depreciation of 0.1% (5.2% a year). See Keynes, 1936, p. 357. The French
edition, based on the eighth German one, shows a monthly depreciation of 0.5%
(6% a year). See Gesell, 1948, p. 213, and the notes of the translator. In any
case, these depreciation rates are justified by Gesell's assessment that
hoarding disappears once inflation reaches 5%. See Gesell, 1948, p. 184.
10. See Gesell, 1948, p. 213.
11. Keynes, 1936, p. 354.
12. Wara means Ware (commodity) and Wahrung (circulation).
13. Delannes, 1938, pp. 64-65.
14. See Baudin, 1947, pp. 335-339, Delannes, 1938, and the review Annales de
l'economie collective, 1934.
15. Unterguggenberger had been a trade unionist in the Social Democrat Party.
He refused to be considered a Marxist. Moreover, the social democratic
government of the Austrian Tyrol region refused his experiment as not being
consistent with the party's projects. See Delannes, 1938, pp. 66-68.
16. According to Kennedy, 1996, the 32, 000 shillings issued were exchanged 463
times - generally 21 times with the Austrian shilling.
17. Beyond the idyllic views of the effects of the system, one can stress that
this was a singular experiment. One may stress, along with Baudin, 1947, p.
338, or von Muralt, 1934, that the recovery was partly due to the flow of
tourists visiting these towns to see and buy the stamped money.
18. It seems that 170 Austrian towns (including Innsbruck) were planning to set
up such a system, but they were waiting for a decision on the legal action
against Worgl.
19. See von Muralt, 1934, pp. 321-322.
20. For example, Schumpeter, 1954, was silent on this matter. The paper of the
New Palgrave on Fisher too, though it is rather exhaustive, also does not
mention these proposals, studies, and book of Fisher.
21. See Fisher, 1933.
22. Barber, 1996, p. 17.
23. Delannes, 1938, pp. 99-100.
24. The towns were mostly in Iowa, Kansas, Minnesota, Oklahoma, California,
Nebraska, and Illinois. The largest town was Knoxville, Tennessee. See Fisher,
1933, Delannes, 1938, pp. 82-100, and Baudin, 1947, pp. 336-337.
25. See Keynes, 1936, pp. 370-371, Baudin, 1947, pp. 621-624, and above all
Pullen and Smith, 1997.
26. See Baudin, 1947, p. 339.
27. Delannes, 1938, p. 101.
28. See Science et vie, no. 458, 1958; Cotten et al., 1996, pp. 31-34; and the
current works of Smain Laacher.
29. Keynes, 1936, p. 357.
30. Kennedy, 1996, p. 47.
31. Keynes, 1936, p. 358.
32. Von Muralt, 1934, p. 316.
33. See Fisher, 1933, p. 59.
34. Margrit Kennedy, for example, is the German author of a book entitled
Freeing Money from Inflation and Interest Rates. In it, she proposed a
transformation of society by means of monetary, land, and fiscal reforms. See
also, for example, Cotten et al., 1996.
References
Barber, William J. 1996. Designs within Disorder. Franklin D. Roosevelt, the
Economists, and the Shaping of American Economic Policy, 1933-45. New York:
Cambridge University Press.
Baudin, Louis. 1947. La monnaie et la formation des prix. Les elements [1936].
Paris: Recueil Sirey.
Blanc, Jerome. 1998. Les monnaies paralleles. Approches historiques et
theoriques. Ph. D. Universite Lumiere Lyon-2, Lyon.
Cotten, Christian et al. 1996. L'argent: monnaie de singe, monnaie de sage?
Propositions pour une mutation economique ineluctable, ou comment remettre
l'economie au service de l'homme. Colloque "L'argent au IIIe millenaire"
(Paris, 1996). Barret-le-Bas: Le Souffle d'Or.
Delannes, Janine. 1938. La monnaie fondante. Ph. D. Universite de Poitiers,
Poitiers.
Dillard, Dudley D. 1940. Proudhon, Gesell and Keynes. An Investigation on Some
"Anti-Marxian Socialists." Antecedents of Keynes's General Theory of
Employment, Interest and Money. Ph.D. University of California, Berkeley.
Eatwell, John. Milgate, Murray. Newman, Peter (eds.). 1987. The New Palgrave. A
Dictionary of Economics. London: Macmillan.
Fisher, Irving. 1933. Stamp Scrip. New York.
Gesell, Silvio. 1929. The Natural Economic Order: a Plan to Secure an
Uninterrupted Exchange of the Products of Labour [1911]. Trans. Philip Pye.
Berlin: Neo-Verlag.
-----. 1948. L'ordre economique naturel [1911]. Paris: Marcel Riviere.
-----. 1951a. Currency Reform as a Bridge to the Social State [1891]. Trans.
Philip Pye. Typescript.
-----. 1951b. Nervus Rerum: Continuation of "Currency Reform as a Bridge to the
Social State." Trans. Philip. Pye. Typescript.
Herland, Michel. 1977. "'Perpetuum mobile' et credit gratuit. Deux propositions
oubliees pour ameliorer le fonctionnement d'une economie monetaire," Revue
economique, no 6, novembre.
-----. 1992. "L'utopie monetaire de S. Gesell: un cas d'heterodoxie entre
Wicksell et Keynes," in: Richard Arena and Dominique Torre (eds.), Keynes et
les nouveaux keynesiens, Paris: PUF.
Kennedy, Margrit. 1996. Liberer l'argent de l'inflation et des taux d'interet.
Creer un moyen d'echange que tout le monde puisse utiliser et qui protege la
terre [1990]. Geneve: Editions Vivez Soleil.
Keynes, John Maynard. 1936. The General Theory of Employment, Interest and
Money. London: Macmillan.
Muralt, Alexander von. 1934. "La monnaie a valeur decroissante et l'experience
de Worgl (Autriche)," Annales de l'economie collective.
Pullen, J. M. Smith, G. O. 1997. "Major Douglas and Social Credit: A
Reappraisal," History of Political Economy, vol. 29, no 2, pp. 219-274.
Rist, Charles. 1940. History of Monetary and Credit Theory from John Law to the
Present Day [1938]. London: Allen and Unwin.
Schumpeter, Joseph Aloys. 1954. History of Economic Analysis. London: Allen and
Unwin.
Schweizer Freiland und Freigeld Bund. 1916. Das Geld der Zukunft. Les Hauts
Geneveys: Schweizer Freiland und Freigeld Bund (no 7).
Simmel, Georg. 1978. The Philosophy of Money. London: Routledge.
Unterguggenberger, Michael. 1934. "La fin de l'experience de Worgl: un bilan,"
Annales de l'economie collective.
[Professor Jerome Blanc is doctor of economics and assistant at the Universite
Lumiere Lyon-2. Centre Auguste et Leon Walras (Universite Lumiere Lyon 2),
MRASH, 14 avenue Berthelot, 69363 Lyon cedex 07 (France). Tel: 04 72 72 64 07,
fax: 04 72 72 65 55. E-mail: jerome...@mrash.fr.] Blanc's work in the Centre
August et Leon Walras deals with monetary practices through historical and
theoretical approaches. This paper is part of a work intended to give a
historical interpretation of the emerging LETS (local exchange trading systems)
in France since 1994. It was made possible through collective research on LETS
(with Denis Bayon, Isabelle Guerin, Gilles Malandrin, Jean-Michel Servet, and
David Vallat, forthcoming 1999. This chapter is based on Blanc, 1998, which
describes Gesell's systems and experiments in detail).
EWagner382
mentioned the possibility his grandfather had intended his book as an economic
allegory. I don't know what Frank really had in mind.
I love getting Disney money at Disneyland with Goofy and Mickey's, etc., faces
on the bills.
1132
Dan Clore
>
> Thanks for the posts, RMJon. L. Frank Baum's grandson Roger got irate when I
> mentioned the possibility his grandfather had intended his book as an economic
> allegory. I don't know what Frank really had in mind.
Pretty definitely not the silly economic allegory. See the
excellent annotated edition (a second edition of which came
out in I think 2000) for details.
However, as sombunall RAW fans will have observed (I almost
said "all"--oops), _The Wizard of Oz_ presents, much in the
same manner as _Star Trek_ (I do not add the nonsense about
"the original series"), characters representing the four
terrestrial circuits of the Leary-RAW model:
Dorothy (and Toto) represent the first, oral, bio-survival
circuit. Dorothy spends the entire book/movie attempting a
classic bio-survival retreat; Toto's obvious orality needs
little comment.
The Scarecrow represents the third, time-binding semantic
circuit.
The Tin Woodman represents the fourth, "moral" socio-sexual
circuit. Baum rather explicitly includes both sides of this
circuit, noting the functions of the heart as empathy and
loving.
The Cowardly Lion represents the second, anal-emotional
territorial circuit. The "cowardliness" of this "King of the
Jungle" manifests as submissiveness. (Readers of the novel
will recall that the Wizard gives the Cowardly Lion his
"courage" in the form of alcohol, and immediately remember
that RAW quotes Thomas Nashe on alcohol as a
second-circuit-stimulating drug.)
That the first circuit should be represented by a character
and a dog leads to our next subject, Scooby-Doo, in which
leading characters similarly represent the four terrestrial
circuits.
Norville "Shaggy" Rogers, 17, and Scooby-Doo, a Great Dane,
represent the first circuit. Their frequent expressions of
extreme bio-survival anxiety require little comment, nor
does its relief through the oral medium of Scooby Snacks,
nor their other expressions of extreme orality.
Fred Jones, 17, represents the second circuit. Freddy likes
to take charge, drives the Mystery Mobile, and frequently
schemes to catch villains in traps.
Velma Dinkey, 15, represents the third circuit. Despite her
age, Velma has mastered many symbol systems, including
Egyptian hieroglyphics and Chinese ideograms.
Daphne Blake, 16, represents the fourth circuit.
--
Dan Clore
Now available: _The Unspeakable and Others_
http://www.wildsidepress.com/index2.htm
http://www.amazon.com/exec/obidos/ASIN/1587154838/thedanclorenecro
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News for Anarchists & Activists:
http://groups.yahoo.com/group/smygo
"It's a political statement -- or, rather, an
*anti*-political statement. The symbol for *anarchy*!"
-- Batman, explaining the circle-A graffiti, in
_Detective Comics_ #608
RMJon23
Baum's 'Wizard of Oz' as Gilded Age public relations. Tim Ziaukas.
Abstract: L. Frank Baum's 'The Wizard of Oz' is an excellent example of early
public relations writing. The book, written mostly in 1899 and published in
1900, was part of the movement that officially established the field of public
relations in the 20th century. It is argued that Oz is a piece of promotional
writing and is laden with 'complicated propagandistic intentions.' It was
written at at time when American society was consumed by the debate over the
'financial question,' that is, the creation and circulation of money. The
burning issue during the latter half of the 1800s was the abandonment of
bimetalism, with silver being demoneyed and gold established as the official
legal tender. The characters of 'The Wizard of Oz' represented those deeply
involved in the debate: the Scarecrow as the farmers, the Tin Woodman as the
industrial workers, the Lion as silver advocate William Jennings Bryan and
Dorothy as the archetypal American girl.
"You shall not press down upon the brow of labor this crown of thorns, you
shall not crucify mankind upon a cross of gold."
- from William Jennings Bryan's Cross of Gold Speech, 1896
"The Wicked Witch...looked down at Dorothy's feet, and seeing the Silver Shoes,
began to tremble with fear, for she knew what a powerful charm belonged to
them."
- The Wizard of Oz, 1900
L. Frank Baum's The Wizard of Oz, published nearly a century ago, has become
the most popular American children's story, immortalized through a number of
editions, stage and film productions, and especially the 1939 movie starring
Judy Garland. Images, characters and lines of dialogue from Baum's novel
continue as ubiquitous parts of American popular culture.
Yet Baum's text had a timely agenda for its late-19th-century adult audience,
one that belies its seemingly timeless appeal to subsequent generations.
Written mostly in 1899 (Rockoff, 745) and published in 1900, The Wizard of Oz
was produced while the United States was making the transition from a pastoral
past to an industrial future, from the post-Civil War era to the country's
emergence as a world power at the beginning of the 20th century. Oz reflects
contemporary concerns generated by that transition.
Baum himself said his stories would "bear the stamp of our times and depict the
progressive fairies of today" (Gardner and Nye, 1). Oz does. Given the enduring
popularity of the text in all its incarnations, only a modest - but provocative
- body of critical work, however, bears out Baum's claim. Littlefield, for
example, proves in his ground-breaking essay that "the original Oz book
conceals an unsuspected depth" (50) and then explicates the text as a parable
on populism. In another major exegesis on the novel's contemporary allusions,
Rockoff calls Oz "not only a child's tale but also a sophisticated commentary
on the political and economic debates of the Populist Era" (739). Culver
positions the text in the context of Baum's interest "in the vagaries of
consumer desire" (97).
Finally, in perhaps the most extensive investigation of the issues that anchor
the monetary allusions in Baum's novel, Goldbugs and Greenbacks: The
Antimonopoly Tradition and the Politics of Finance in America, 1865-1896,
Ritter claims that The Wizard of Oz is "filled with metaphors generated in the
money debate of the late nineteenth century" (19).
These critics are correct. Baum's parable is a potent piece of Gilded Age
propaganda, a masterpiece of early public relations writing, and part of the
progressive surge that would result in the formal emergence of public relations
in the generation after Oz.
The Battle of the Standards
The decade that produced Oz was galvanized by the debate over what was known as
"the financial question." Goodwyn emphasizes that
[t]he importance of [the financial question] could scarcely be exaggerated. How
money was created, and on what basis it circulated, defined in critical ways
the relationship of farmers, urban workers, and commercial participants in the
emerging industrial state (10).
These questions lurk at the heart of Oz. Here is the problem.
After independence from England, the United States had officially adopted
bimetalism, that is, a monetary standard in which both gold and silver are used
as legal tender. The Coinage Act of 1853, however, "replaced bimetalism in the
U.S. with a...de facto gold standard. After 1853 bimetalism remained only as a
legal fiction which was finally terminated twenty years later" (Martin, 825).
This is the so-called "Crime of '73," a major legislative win for the gold
people in their increasingly bitter fight with the silvers (and an incident
that would come to have special import in The Wizard of Oz). The "crime" was
the repeal of the silver dollar, "demoneying" silver, further tying the supply
of money to the amount of gold (see Friedman and Schwartz, 113-14). This
demoneying of silver - tying the amount of available dollars more closely to
the amount of available gold, limited the quantity of dollars in circulation,
in turn, making them more valuable. As Uchitelle explains, "[w]hen dollars are
scarce, their value rises. Reflecting this higher value, interest rates rise
for borrowers, and prices drop for goods and services. The money, in effect, is
worth more than it buys" (1). This deflation was bad news for the farmers in
particular: their money bought less and their crops brought less too.
There's more. During the Civil War, the Union issued "greenbacks," named for
the color of the ink used on one side of the bill, whose value was rendered by
fiat of the federal government. Miller and VanHoose point out
that national involvement in monetary and banking affairs had been limited in
scope since the demise of the Second National Bank of the United States over
half a century before; to many of the generation of the 1860s and 1870s,
greenbacks were a federal intrusion into private and state affairs (361).
The Resumption Act of 1875, though, ensured the elimination of the greenbacks
and put the country further on the road to the gold standard. By 1879, then,
the United States was, in effect, on a gold standard, setting the stage for a
final debate on "the financial question," an issue that divided the country and
was at the heart of American politics, and at the heart of The Wizard of Oz.
The issues included in the debate were complicated: Who should issue money, the
federal government or the banks? What metal should "back" it, gold, silver, or
gold and silver? How much money should circulate and how should that be
determined? Opinions divided between the haves and the have-nots, urban and
rural, industrialists and farmers and, of course, Republicans and Democrats.
Generally, East Coast industrialists and bankers, largely Republican, favored
the total resumption of the gold standard. The Democrats, the poor, the
workers, and the farmers thought a bimetallic system, both gold and silver,
would be to their benefit. Many in this group, especially in the Midwest, were
part of the Populist Party, "an agrarian party...formally organized in 1892,
with a platform that among other items demanded free and unlimited coinage of
silver" (Friedman, 116). These populists were as uncertain about the jittery
economy as the East Coast industrialists, who saw foreign investors, most of
whom (like England) were on a gold standard, beginning to melt away like
troubles over the rainbow. Uchitelle adds that
[c]ompetition and over-expansion made these [post-Civil War] industrialists
vulnerable to bankruptcy. That, in turn, made the lenders nervous. And then
[the] conflict over the value of the nation's currency finally pushed the
lenders to call in their loans, which brought on the Panic of 1893 (1).
The panic revealed an economy in trouble and a "general uneasiness about the
currency" (Friedman, 108). Unemployment rose to 18.4 percent in 1894 (Rockoff,
743). Because gold was scarce, the government couldn't issue enough gold-backed
money to make credit available to the farmers who were in big trouble. Prices
plummeted. Farmers wanted more money in circulation so they could get cheaper
credit, and that road, they believed, was paved with the more plentiful silver.
The Eastern industrialists and the federal government, with more of an eye on
the largely gold-bound foreign investors, thought not. They saw a yellow brick
road.
The debate came to a head in one of the most famous political conventions in
American history: the Democratic gathering in 1896 that nominated William
Jennings Bryan on the power of his Cross of Gold speech. Bryan intoned:
[h]aving behind us the producing masses of this nation...we will answer their
demands for a gold standard by saying to them: You shall not press down upon
the brow of labor this crown of thorns, you shall not crucify mankind on a
cross of gold (Koenig, 197).
Bryan snagged the nomination of his party and ran on a platform of unlimited
coinage of silver.
"The Royal Historian of Oz"
Against this background, the future "royal historian of Oz," as Baum liked to
call himself, was "certainly aware of the great events going on around him"
(Ritter, 21). He had taken a curious route to Chicago and the context of what
would turn out to be his masterpiece.
Lyman Frank Baum was born into a well-to-do family near Syracuse, New York, on
May 15, 1856 (see Gardner and Nye, and Baum and MacFall for biography). His
father earned his fortune from the Pennsylvania oil fields. Young Frank dabbled
in printing and theater. He married, fathered two sons, and in 1887, moved to
an area that would become the state of South Dakota, where he ran a variety
store and worked in journalism and witnessed the desperation of the kinds of
people who would be instrumental in the populist movement. Two more sons were
born. In 1891 Baum moved his family to Chicago, where he worked as a reporter
for the Chicago Post. There he marched in "torchlight parades for William
Jennings Bryan... [Baum] consistently voted as a democrat (sic...)[H]is
sympathies seem always to have been on the side of the laboring classes"
(Gardner and Nye, 29). In 1897, he founded the monthly trade publication for
window dressers, The Show Window, the public relations organ for the National
Association of Window Trimmers of America, a group that Baum founded and
headed.
Baum's first book, a collection of his version of Mother Goose tales, was
published in 1897; the second he printed privately in 1898. Between 1897 and
1900 he was working on two books, The Art of Decorating Dry Goods, a manual on
early image-making for the retail business and, of course, The Wizard of Oz.
(Culver's essay brilliantly suggests the connections between Baum's retailing
and his fiction.) However focused Baum may have been on the details of his
professional life, the zeitgeist of currency-crazed America was absorbed into
the parable of a storm coming out of the Middle West, that is, into the highly
allusive text that is The Wizard of Oz.
"Oh God, give us cyclones..." a delegate to the National Silver Party
convention, 1896
Recalling The Wizard of Oz in the context of its times and as a piece of
promotional writing is a historically valuable and often surprising endeavor.
As the work of Oz critics Littlefield, Rockoff, Culver and Ritter make clear,
now-familiar figures and characters take on strange but once urgent meanings
and dimensions.
The plot of The Wizard of Oz is disarmingly simple. An orphan girl, Dorothy
Gale, about six years old, lives on a bleak and depressed Kansas farm with her
aunt and uncle. One day a cyclone begins to rage, and she and her dog take
shelter in the house, which is pulled from its foundation by the cyclone and
blown to the Land of Oz. The house lands on and kills the Wicked Witch of the
East, who had been wearing a magic pair of silver shoes (made ruby slippers in
the Technicolor film, one of the many significant differences between Baum's
and Hollywood's vision of Oz). Dorothy takes the silver shoes herself (in
another change made by the film, which has the good witch assign the slippers
to Dorothy). The good witch tells Dorothy that the Wizard of Oz might help her
get home. "The road to the [Wizard's] City of Emeralds is paved with yellow
brick... so you cannot miss it," the witch explains (Baum, 27). Baum's
contemporary audience couldn't miss it, either.
The story of an archetypal American girl in silver shoes on a road paved with
golden bricks in a country named for the abbreviation for ounce would have rung
loudly for an audience in the 1890s caught up in "the financial question."
(Later Baum claimed that he called his fantasy land Oz after glancing at a file
drawer whose contents went from O-Z [Baum and MacFall, 110], yet this dadaesque
spin, in light of the weight of other monetary evidence, seems apocryphal.)
Rockoff identifies the cyclone as "the free silver movement itself. It came
roaring out of the West in 1896, shaking the political establishment to its
foundation" (745). The Wicked Witch of the East Ritter identifies as Eastern
capitalism (288).
Along the yellow brick road, Dorothy encounters three creatures: the Scarecrow,
the Tin Woodman and the Cowardly Lion - each, like Dorothy, in search of a part
of himself that, of course, he or she has all along - a brain, a heart, the
nerve and the ability to return home, respectively. Each of these American
elements, the farmer, the worker, the loquacious politician, and the archetypal
Americanness that is Dorothy, seems to have a sense that something is missing,
that she or he lacks the ability to fulfill his or her destinies: the farmer
feels stupid and the worker empty; the roar of the politician rings hollow; the
displacement of Dorothy is symptom for a rootlessness brought about by the
government and the powers of capitalism represented by the witches and, of
course, the Wizard of Oz himself.
Baum's intentions seem to be both pro-silver but with some criticism for the
populists as well. Each of these now-familiar characters plays a role in the
metals controversy: the Scarecrow as a symbol for the farmers, the Tin Woodman
for the industrial workers, and the Lion, the great roarer, as an aural pun
which conjures silver's greatest orator, William Jennings Bryan.
Bryan cowardly? By the time Baum was writing Oz, Bryan had lost his first
attempt at the presidency in 1896 but by then the political edge of the silver
issue had been blunted by the gradually returning prosperity. Bryan, Rockoff
points out, was perceived as
soft-pedal[ling] silver and [concentrating] on new issues... [the Populists]
considered this line of action pure cowardice. They wanted the Great Commoner
to fight for silver in 1900 as he had in 1896 (748).
Ritter says that many of the images relating to the Lion in Oz "paralleled
Byran's history as someone who rose on the strength of his oratory, and was
burned in his attempt to confront the powers of Washington" (59).
After a series of adventures, many of which can be fit into the allegory, they
arrive at the Emerald City, the political epicenter of the land obsessed with
silver, gold and Oz, Washington, D. C. There everyone looks at the world
through green-colored glasses. Culver states that
[g]reen is also the color of money, and, for Baum, the spectacles provide a
tool for criticizing the Populist assumption that paper money (greenbacks)
alone would restore the critical distinction between real value and the means
by which the value is expressed and exchanged (114).
The Wizard of Oz agrees to see the motley gang only after he hears about
Dorothy's silver shoes: "Oh, he will see you," the soldier tells Dorothy, "at
first he was angry, and said I should send you back where you came from. Then
he asked me what you looked like, and when I mentioned your silver shoes he was
very much interested" (Baum, 126). The silver shoes are central not only to the
narrative thrust of the tale but also to the underlying concerns of Baum's
largely pro-silver message. The key to all that happens in The Wizard of Oz is
encoded into what one knows about silver.
Before Dorothy and her friends get to see the Wizard of Oz, though, they are
taken to rooms to freshen up. Dorothy follows a green girl (Dorothy has by now
donned the spectacles of Oz) "through seven passages and up three flights of
stairs" to her room. This has been seen as a veiled reference to the "Crime of
'73" (Ritter, 290; Rockoff, 750), an outrage that would be very much still on
the minds of Baum's silver-supporting contemporaries. Literally, the way into
the heart of power at the end of the Yellow Brick Road lies through the
passages of seven and three: for many, the "Crime of '73" led to the eventual
triumph of the gold standard.
The Wizard will grant Dorothy and her friends their wishes if they are able to
kill the Wicked Witch of the West. During an encounter with the evil witch,
Dorothy throws water on her and she melts. Surprised that Dorothy was able to
kill the witch, the Wizard can't make good on his promises, is proven to be a
fake and offers symbolic rewards for the gang of four. The Wizard himself,
Littlefield says, is "a little bumbling old man, hiding behind a facade of
papier mache and noise, might be any President from Grant to McKinley" (54).
While attempting to take Dorothy home in his hot-air balloon, the bumbling but
well-meaning Wizard takes off leaving Dorothy stranded. But the charm of the
silver shoes kicks in again and saves the day.
Dorothy "did not know of the wonderful power the Silver Shoes gave her." - The
Wizard of Oz
By the time Dorothy got home - and by the time Baum published The Wizard of Oz
- the power of the silver shoes, just like the political issue that was "the
financial question" had dissipated. After Dorothy is told of the power of the
shoes by Glinda, the Good Witch of the South - "All you have to do is knock the
heels together three times and command the shoes to carry you wherever you wish
to go" (Baum, 257) - she loses them on the way back to her bleak Kansas farm:
"For the Silver Shoes had fallen off in her flight through the air, and were
lost forever in the desert" (Baum, 259). Between the time Baum conceived of and
executed The Wizard of Oz, the economic conditions that made the silver issue
so urgent grew better and the Spanish-American War diverted public attention to
more dramatic issues (Littlefield, 49). The Gold Standard Act was passed in
March 1900. Friedman and Schwartz conclude that
[t]he gold standard had finally triumphed in the United States, and Bryan's
second defeat in the Presidential election in the fall of 1900 sealed the doom
of silver as a major issue dominating national politics. The price reversal,
which farmers had sought to achieve with silver, was produced after 1897 by the
prodigious increase in the international supply of monetary gold. The 'money'
issue retreated from the center of political controversy (119).
Baum's parable of America at the turn of the century went on to become the
country's most beloved fairy tale, while his complicated propagandistic
intentions faded away when those issues retreated from public discourse. Just
like Dorothy's silver shoes - lost in transit from Oz - this early public
relations aspect of The Wizard of Oz, which was a deft combination of
children's literature and adult political propaganda, was lost in America's
trajectory out of Gilded Age and into the 20th century.
Works Cited
Baum, Frank Joslyn and Rusell P. MacFall. To Please a Child: A Biography of L.
Frank Baum, Royal Historian of Oz. Chicago: Reilly and Lee, 1961.
Baum, L. Frank. The Wonderful Wizard of Oz. New York: Dover, 1960.
Coletta, Paolo E. William Jennings Bryan, Vol. I: Political Evangelist.
LincoLn: University of Nebraska Press, 1964.
Culver, Stuart. "What Manikins Want: 'The Wonderful Wizard of Oz' and 'The Art
of Decorating Dry Goods Windows'." Representations, Winter 1988, n. 21, 97-116.
Friedman, Milton and Jacobson Schwartz. A Monetary History of the United
States, 1867-1960. Princeton: Princeton University Press, 1963.
Gardner, Martin and Nye, Russel B. The Wizard of Oz and Who He Was. East
Lansing: Michigan State University Press, 1957.
Goodwyn, Lawrence. Democratic Promise: The Populist Moment in America. New
York: Oxford University Press, 1976.
Koenig, Louis W. Bryan: A Political Biography of William Jennings Bryan. New
York: Putnam, 1971.
Littlefield, Henry, M. "The Wizard of Oz: Parable on Populism." American
Quarterly. v. 16, 3, Spring 1964, 47-58.
Martin, David. "1853: The End of Bimetallism in the United States" Journal of
Economic History. v. 33, n. 4, 825-844.
Miller, Roger LeRoy and VanHoose, David D. Modern Money and Banking. 3rd. Ed.
New York: McGraw Hill, 1993.
Ritter, Gretchen. Goldbugs and Greenbacks: The Antimonopoly Tradition and the
Politics of Finance in America, 1865-1896. New York: Cambridge University
Press, 1997.
Rockoff, Hugh. "The 'Wizard of Oz' as a Monetary Allegory." Journal of
Political Economy. v. 98, n. 4, 1990, 739-760.
Uchitelle, Louis. "Learning from the Big Booms." The New York Times. Sunday,
June 28, 1998, section 4, pp. 1, 6.
Tim Ziaukas, M.A., M.F.A. is an assistant professor of public relations at the
University of Pittsburgh at Bradford. He is also director of its Public
Relations Program. He is widely published in both trade and consumer
publications, including a number of award-winning articles for Pittsburgh
Magazine.
sned the bold
because you can grow it and have money.
-Sned The Bold http://www.geocities.com/t3dyhand/
"Reality is made out of "Language is virus"
language" -Terence Mckenna -William S. Burroughs
Hatred does not cease by hatred; hatred ceases only by love. -dhammapada
EWagner382
I have always analyzed the Wizard of Oz with the Cowardly Lion representing the
first circuit biosurvival system, since he needs to overcome his cowardice.
The Tin Woodsman represents emotion, it seems to me, the second system. The
Scarecrow correlates with the third system we both agree. Dorothy, with her
yearning for home represents the socio-sexual system domesticity. The movie
makes her older than the book, which even better represents this adolescent
circuit.
The higher systems can break down in various ways. One can see the Wizard as
unsuccessful fifth system activation, or as the fifth system proper. One might
also see the wicked Witch of the East as representing the unsuccessful fifth
system imprint.
I tend to see the WWW (Wicked Witch of the West) as the sixth system and Glinda
as the seventh system, leaving Toto (wholeness and the implicate order) as the
eight system. Siriusly.
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