North Money and Liberation The Micropolitics of Alternative Currency Movements (Minnesota, 2007)

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Others located the problems with cooperation in the opposition of financial and commercial elites. Cooperation, they argued, cut against self-interested gold standard financiers who refused to capitalize the exchanges.Whenever a cooperative failed through a lack of credit, the solution seemed to change the money system to enable the cooperative commonwealth to thrive. This was fully fledged Greenbackism,takingthesubtreasuryplantoitslogicalconclusion.Ascommodity prices fell from an equivalent of a dollar a bushel in 1870 to 60 cents in 1890 (or 35 cents in Dakota, 10 cents in Kansas), the Knights of Labor were smashed and the Greenback Party was ridiculed out of existence. Alliance radicals argued that persuasion was not enough. Political action was required to wrest the money system out of the hands of Eastern financial elites, and the Alliance partisans carried this politics into the new People’s Party that emerged between 1892 and the 1896 “Battle of the (Gold and Silver) Standards.”

While the People’s Party in the South focused on cooperation and the subtreasury plan, monetary politics in the new states of the West focused on the need for free silver coinage, an argument that obviously resonated with miners but was also driven by mining interests. The Honest Money League argued for silver currency, claiming, “There is all the difference between true money, real money and paper money [as] there is for your land and a deed for it. Money is a reality, a weight, of a certain metal of a certain fineness. But a paper dollar is simply a deed” (Ingham 2004, 44). Just as the politics of bimetallism developed as a response to the Populist insurgency and the recession of 1893, the new People’s Party managed to elect a significant number of representatives to Congress in 1892 and 1894, leaving “big money”—both Republican and Democratic varieties— severely rattled.The People’s Party, however, failed to reach the magic 51 percent necessary in a two-party, “first past the post” system, and those for whom winning power through election was the aim of the movementconsequentlyincreasinglyarguedthatasingleplatform,for free silver coinage, would unite Populism with the growing numbers of Silver Democrats and sweep all before it. The “wild theories” of the Omaha platform should be renounced. Their opponents argued that this would mean giving in to the Democrats, seen as half of the money power, just at the time when the new People’s Party was at the height of its success, for a policy that Populism’s Greenbackers felt

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was a diversion. It would mean giving up on the subtreasury plan and leaving the banking system, seen at the heart of the oppressive lien system, intact. Populism was split.

The silverites were strengthened when the Bimetallic Leagues comprehensively outorganized the Populist farmer-lecturers after

1894–95 with bestselling pamphlets arguing for silver (as well as Dana’s pamphlet on Proudhon, quoted earlier), which were sold on every rail train and in every cigar shop. These apparently sent everyone “wildly insane on this subject . . . the farmers are especially unruly

. . . you just can’t do anything with them—just got to let them go” (Goodwyn 1976, 243). With silver capturing the imagination, the silverite Populists decided to ensure that Populist forces would support a prosilver Democratic platform in 1896, while the Silver Democrat organization systematically captured the party in time for the 1896 convention to overwhelmingly nominate the prosilver William Jennings Bryan as Democratic candidate for the U.S. presidency. Populists ensured that Bryan was also nominated as the People’s Party candidate, and Populism collapsed as an independent force. Nothing more was heard of the subtreasury plan or of alternative currencies for thirty years.

Bryan’s defeat by the pro–gold standard Republican McKinley2 was helped by finance from the new Gilded Age plutocrats and thousands of flag-waving members of the Sound Money Clubs, who, together with employers, carried out what can only be called a reign of terror to reimpose the violence of financial stability on a nation.

Railways, shops, mills, lumber companies, and factories were closed down on the day of the election, with the owners saying that they would not reopen if Bryan was victorious. Manufacturers received letters from dealers saying that they would no longer supply them if the vote went the wrong way, with the letters posted for the workers to see, while another employer told his workers that their pay would be $10 if Bryan won, $26 if the victor was McKinley. Goodyear workers were told that a vote for Bryan would be seen as an attack on the values of the company (Foner 1955, 337–42). Although the evidence seems to indicate that the majority of rural and urban workers and farmers supported Bryan, they could not cope with the violence, intimidation, corruption, and endless flows of money the Republicans controlled, and Bryan’s defeat settled the money question until the

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Wall Street crash of 1929. No mass party would ever question U.S. capitalism as fundamentally as did Populism, for sound money and common sense became axiomatic, while “populism” was reinscribed as suspect speechifying to plebeian masses with no intention of following through on extravagant promises.

Nonetheless, Populism was not a dream propagated by cynical leaders who said what was needed to get elected. It was a profoundly democratic attempt to strike at the heart of systems of domination in the nineteenth-century U.S. South andWest.The Populists were also ahead of their time, for fiat money has been the norm since 1973, and the world did not cave in when money became just a representation instituted by government (or other) fiat. The Populists also claimed that the true value of a currency rested on the wealth of a country as defined by its productivity, not by the intrinsic value of metal. Again, this is now an uncontested claim.

Populism’s success owed more to the experience of cooperative experimentation—even when it was thwarted—than it did to theorizing about money. When farmers who were not completely subjugated by the lien system cooperated in buying and selling collectively, they were often successful, and by the mid-1890s had some thirteen years’ experience with practical cooperation.They used many micropolitical commitment building mechanisms: mile-long processions of carts decorated with evergreen to symbolize the “living issues” of the Alliance, brass bands, crowds so large that four farmer-lecturers were needed to keep them occupied, flags in carts after a successful bulk sale, and twilight meals feeding thousands. At the core of the movement were the countless discussions and explanations of the subtreasury plan and the need for greenbacks, for abolition of the lien and of usury, and for mobilizations to defend threatened exchanges and the like from finance capital, a mobilization made possible by the selfless, indefatigable work of the farmer-lecturers who systematically covered the country spreading the word of the cooperative commonwealth. This was more than dwarfish, ephemeral cooperation: it was a mass movement. However, it could not meet the needs of the poorest.Where the farmer-lecturer infrastructure was less well developed or where it encountered local micropolitical resistance, it foundered; for example, what was good micropolitics for rural farmers spoke less to urban workers, while lecturers in the Deep South

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were attacked by Democratic mobs and night riders reinforcing racist structures of domination. Miners in the far West were more attracted to demands for free silver—if they could mine it. Populism was thus limited to agrarian America; a broader, lasting movement against “money power” was not built.

By the late nineteenth century, the socialist movement and the rise of trade unions focusing on the economy rather than on finance had replaced money reform as a serious political movement for all but a few enthusiasts. Money would be used for human liberation as the state was taken over either by reform or by revolution. The form of money was neutral, although we would probably replace the image of the monarch (in the United Kingdom, at least) with more stirring socialist symbols to reinforce socialist consciousness. In fact, following the failure of war communism in the early days of the Soviet experience, where toilet paper became more valuable than money, socialists would be as keen on “hard” money as the most conservative central banker (Galbraith 1975, 76).

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4

Twentieth-Century Utopians

GESELL AND DOUGLAS

8

While the m ainstr ea m of socia list thin king focused on changing the economy wholesale, either by reform or by revolution, the monetary strand was kept alive by the

twentieth-century Distributists (Findlay 1972). Originally inspired by the romantic writings of Morris and Ruskin as well as Kropotkinite anarchism, but also by an antisocialist rejection of collectivism as destructive of liberty and private property, Distributism looked to a return to a medievalist economy controlled by guilds and governed by use values rather than by exchange values.The pathologies of finance capitalism were a major element of Distributist thinking, and, inspired by Quaker banking practices built on relations of trust rather than pure financial speculation, Distributism advocated the nationalization of credit and the imposition of a “just price.”

After the First World War, the Distributists’ most visible advocates, Hilaire Belloc and G. K. Chesterton, focused on the need to defend the “little man” from, on the left, socialism (which they saw as destructive of individual freedom) and the welfare state (which they viewed as encouraging dependency on governments to solve problems) and from, on the right, “monopoly capitalism.” By 1924, Distributism had its own newspaper and some twenty-four local chapters in the United Kingdom, although it did not survive the death of Chesterton in 1936. Besides, arguments for the nationalization of credit and a just price were taken up by Social Credit. A concern with the pathologies of finance capital also verged on the anti-Semitic.

Distributism, with its antisocialist concern with the individual small

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man, thus also formed one of the currents from which the British

Union of Fascists emerged.

To the left of Distributism, Guild Socialism attacked the wage system, arguing that wages represented only part of what the worker was entitled to and rejecting the right of capitalists to make a profit. They rejected the disconnection between wages paid and the value of the product produced by labor, thereby dehumanizing labor as merely one of a number of factors of production (Hutchinson, Mellor, and Olsen 2002). Wages were contrasted with “salaries,” which ensure that salaried employees are paid at the same rate irrespective of how hard they work on a particular day, and with pay in the armed forces, where soldiers are paid irrespective of whether they fight or not. Building on this logic, Guild Socialists advocated production for need, and, through mechanization, a reduction in labor time, hinting at a role for the state in organizing production for need that was later taken up by Social Credit. Others took a more decentralized approach, proposing that workers take control of production through their guilds, running industry democratically and providing their own welfare services, as a direct challenge to state socialism. Guild Socialism split when the Russian Revolution forced those who had been critical of state socialism to support an existing socialist experiment under major attack from the capitalist powers. Some went off to join the British Communist Party, such asWillie Gallagher and J.T.

Murphy, while others later became attracted to Social Credit (Findlay

1972, 76–84).

Silvio Gesell and Stamp Scrip

The anarchist stream in money reform was continued by the Argen- tine-based German money reformer Silvio Gesell, who developed arguments for the abolition of interest and for “free money” (Gesell

1958). Gesell identified interest as the prime pathology of the capitalist system and advocated interest-free banking. His ideas remained at the theoretical level during his lifetime; apart from serving a oneweek term as minister in the Munich Soviet in 1918, he did little to implement his plans. After his death, a “Freework” movement in postwar Germany established the Wära Exchange Association (a word compounded from the German words for goods, Wara, and currency,

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Wärung), which issued its own currency notes, interest free as a response to Germany’s financial collapse and experiences of hyperin-

flation (Fisher 1933). With the arrival of the Depression in 1929 the owner of a coal mine in Schwanenkirchen, Bavaria, used Wära notes to reopen his mine, with theWära passed on to local merchants, then to the wholesalers, then on to the manufacturers who returned to the coal mine for coal. Fisher (1933) estimates that during 1930–31 no more than twenty thousand Wära were issued, but some two million people used them.

Gesell-inspired scrip notes issued by local authorities or business associations spread to other towns in Germany, Austria, and Switzerland. In 1932, the town of Wörgl, Austria, used them to fund public works for unemployed people, who spent the notes with local merchants who then paid the notes back to the local authority in local taxes (Dauncey 1988, 282–83). Local state employees were paid 50 percent of their salary in scrip inscribed with the words “TheyAlleviate Want, Give Work and Bread.” The notes could be exchanged for cash, but a service charge was levied that was greater than the costs of passing the note on. Stamp scrip took on Gesell’s ideas for demurrage: scrip could be banked or spent locally, like ordinary cash, but it had to be “validated” with a stamp purchased each week. After fifty-two weeks the note could be exchanged for cash by the local authority, using the receipts from the weekly stamps. If the note was not passed on, the holder of the note would still have to purchase the weekly stamps or the note would be worthless, so it was obviously in his or her interest to purchase something with it rather than hold onto it. Demurrage was intended to increase the velocity of circulation; “slow money,” horded rather than spent, was regarded as the cause of the Depression. The politics of the Wörgl notes are clear from the inscription on the back of each note:

To all. Slowly circulating money has thrown the world into an unheard of crisis, and millions of working people are in a terrible need. From the economic viewpoint, the decline of the world has begun with horrible consequences for all. Only a clear recognition of these facts, and decisive action can stop the breakdown of the economic machine, and save mankind from another war, confusion and dissolution.

Men live from the exchange of what they can do. Through slow money circulation this exchange has been crippled to a large extent, and thus

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millions of men who are willing to work have lost their right to live in our economic system. The exchange of what we can do must, therefore, be again improved and the right to live regained for all of those who have been cast out. (Fisher 1933, 25)

Gesell’s ideas inspired other financial responses to the Great Depression of the 1930s. In the United States, economically distressed farmers began swapping their surpluses with each other, and the movement developed from individual swaps to organized barter exchanges and swap bulletins and newspapers (Fisher 1934, 149). Contemporary reports claimed that the “Swap Movement” had some fifty thousand participants in four hundred exchanges across twenty-nine states (New York Herald Tribune, 15 January 1933). Eventually, warehouse receipts were issued by the barter exchanges; when denominated in dollars, these began to circulate as money and were loaned as money (Fisher 1933, 6). As news of the European scrip movement crossed the Atlantic, in no small part due to its popularization by respected Nobel Prize–winning economist Irving Fisher (1933), local authorities and business associations in the United States also began to issue their own local currency notes, denominated in dollars, and barter grew from an informal movement run by poor farmers into a more formalized stamp scrip system (Fisher 1934, 147–68).The EPIC (End Poverty in California) movement of the Populist socialist Upton Sinclair supported widespread use of scrip as a means of exchange between cooperatives (Sinclair 1963, 282–92). This support provoked claims that scrip was ruining the value of the currency during Sinclair’s 1933 race for the governorship of California. The Roosevelt administration then used Keynesian demand management to do at the macro level what stamp scrip had attempted to do at the local level, and the movement was superseded.

The European scrip movement provoked more intense opposition as Fascism emerged. The Wörgl experiment was shut down by the Austrian central bank (Dauncey 1988, 283). The German experiments were halted by the November 1931 Reich Banking Law, which established the state monopoly over currency issue (Godschalk 1985), although the Gesell-inspired Wir business-to-business barter network in Switzerland continued into the twenty-first century (Douthwaite 1996). However, the lesson of the 1930s is that scrip was seen as an alternative for use in desperate times when the state refused to

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intervene, often through an ideological commitment to laissez-faire economics and, crucially, when taking scrip was the only alternative to no business at all. When the state adopted Keynesianism, be it of the democratic or Nazi variety, scrip was superseded as an ad hoc, uneven, and rather inadequate alternative to demand management. The revival of the economy meant that merchants who were never happy with scrip could demand hard cash again. It was not until the breakdown of the Keynesian consensus in the late 1960s that the first stirrings of a new local currency “movement from below” was seen, and not until the revival of laissez-faire in the 1990s that a really largescale movement emerged. Meanwhile, the move toward state intervention represented by Keynesianism meant that from the 1930s on, the state became the focus for monetary reform.

Social Credit

Although most critics of the capitalist system became socialists, especially after the 1917 Russian Revolution (with the United Kingdom’s

Socialist Party, the country’s oldest socialist group, explicitly focusing on the role of money and wage slavery in ensuring the perpetuation of capitalism), a second strand emerged in the early twentieth century that focused on the inability of liberal, free-trade capitalism to distribute its rewards fairly. Movements for currency reform in the 1920s were inspired by the first successful experiences of state planning of industry and of price controls, which contrasted with the dubious role of the financial sector in profiteering from the debt taken on to wage the First World War and the rapid onset of crisis with the abolition of state control in 1920. This, coupled with the technological optimism that accompanied the mass use of electric power and industrialization, made what critics called “poverty in the midst of plenty,” seemingly overproduction coupled with poverty for millions, unacceptable in a land supposed, after the war, to be “fit for heroes.”

Romantic attachments to medieval guilds in Distributist and Guild

Socialist thinking seemed inadequate now that the state had shown itself able to organize production to win the war.

Social Credit emerged when Major C. H. Douglas developed another panacea for solving economic problems overnight: the “A + B theorem” (Douglas 1937; Hutchinson et al. 2002, 123–41). A factory

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manager, Douglas noted the difference between the wages he paid

(he called them “A” payments) and all the other costs of his produc- tion—for raw materials, plant, bank payments, power costs, marketing, and so on (“B” payments). The price of the goods he produced was obviously constructed from his costs, made up of wages (and dividends to shareholders) and all other costs, A + B. The A payments his workers received were always, by definition, less than the price of the goods in the shops, made up of A + B. Scaling this up, the whole economy is the totality of all A + B payments and combined purchasing power (the totality of A payments is less than the combined value of goods on sale, or B payments). Douglas argued that the result is overproduction and poverty amid plenty because it is a mathematical impossibility for workers to purchase the goods they have produced with the wages they have received if these are less than the price of the products they have made. Either they do not consume, or they make up the difference with credit from banks, charged at interest, so they become slaves to banks. The solution should be the distribution to each citizen of a national dividend that would be the difference between A and B. Technocrats in a national credit agency would calculate the value of the dividend, and, to avoid inflation, prices would be controlled at a “just” or “scientific” price.

Although Douglas was antagonistic to political organization, Social Credit “study circles” emerged in the United Kingdom in the early 1920s out of the fractured Guild Socialist movement, composed of those who rejected the communists (Findlay 1972). Douglas’s ideas were popularized by the New Age, an influential bohemian journal that gave Guild Socialists, Distributists, and supporters of many esoteric, mystical, and eclectic ideas a voice and intellectual credibility in bohemian political circles. However, after a promising start in the early 1920s, outside centers such as Coventry the movement did not really grow beyond 278 paid-up members by the end of the 1920s, with perhaps 1,000 supporters, partly because Douglas himself opposed it. Many of its members eventually became

Marxists by the 1930s, while some joined the British Union of Fascists and others joined other movements for monetary reform, such as the Economic Freedom League, dining groups, or local associations such as the West Riding Association. In 1935, Social Crediters endeavored to persuade the main political parties to adopt the “Na-

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