The Money Changers

Currency reform from Aristotle to e-cash

edited by David Boyle, Earthscan (2002)

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Book introduction

“The world is full, on the one hand, of monetary cranks each with a patent panacea for setting all our ills to rights,” wrote the Fabian economist G. D. H. Cole half a century ago. “And, on the other, of orthodox economists, so alarmed at the cranks’ proposals as to be wholly unwilling to make any new discoveries at all, for fear of appearing to sanction some of their notions.”

Of all the intellectual groupings of the 20 th century, the Fabians did more than most to undermine alternatives to conventional ways of thinking about economics, but Cole was right: there never was a profession so terrified of unorthodoxy as economics.

Even in the summer of 2001, the Cambridge economics graduate students who signed the mild protest emerging from the Sorbonne against too much economic abstraction were so afraid for their future careers that they did so anonymously.

Maybe it’s because of its scientific pretensions; maybe it’s because its tenets are so insubstantial. Whatever it is, mainstream economics lives constantly with the fear of insanity, of heresy, of a sudden strange untrained Messiah arising to challenge the way the system works. It is a potent fear, especially for some reason amongst the British.

The trouble is, this is also a fear that stifles debate about fundamentals. It undermines imagination and reform and throttles big ideas at birth.

Of course we needn’t listen to everyone who has a bright idea about money. But the current situation is that conventional economics bundles the whole lot up in the file marks ‘cranks’ and never moves on.

It is now half a century or more since the issues of where money comes from was debated by leading economists – questions like whether we could create more of it, or maybe even create our own. Fifty years ago, John Maynard Keynes or Irving Fisher could struggle with these questions, but since then – silence.

Now suddenly there is a debate emerging again. It’s a debate on the fringes at the moment, about debt, interest and credit. It’s a debate about whether any power can be wrested back from bankers, and it echoes the furious discussions of the 1930s when monetary theorists like C. H. Douglas could fill Wembley Stadium with his supporters, or when they marched down Whitehall as the Greenshirts – firing green arrows into the door of 10 Downing Street.

We might not agree with them all, then or now. But they represent a series of traditions of dissent that it is vital to keep alive if we are going to access any new thinking at all. At the very least it is important to listen to dissenting questions, even if the questioners really are cranks. After all, as another revolutionary economist, E. F. Schumacher, put it: “A crank is a very elegant device. It’s small, it’s strong, it’s lightweight, energy efficient, and it makes revolutions.”

We are in a new century now, and the economic system we have inherited is – by relatively common consent – not working very well. The various players would certainly disagree about how serious the problems are. But the spread of currency crises around the world at the last years of the 20 th century, the collapse of apparently secure financial institutions like Barings and Long Term Capital Management, has made people – especially those at the radical end of politics – look again at the system and wonder.

And when people started to wonder, they found a range of thinkers, often pulled together under the heading TOES from the mid-1980s onwards, who had carried on a tradition of monetary dissent that stretched all the way back to the beginnings of economics.

Some of them had been assistants to the great heretics of the mid-20th century, like Bob Swann. Some of them were idealists who had seen the inside of the system and realised something had to be done, like George Soros, Bernard Lietaer and James Robertson. Some of them just had a practical idea of something that could be done here and now, like Edgar Cahn and Michael Linton.

They didn’t necessarily agree about the means, and they don’t now – nor do they agree what the fundamental problem is. Some of them are pragmatists with more than one foot in the orthodox world; some of them continue the great tradition of heresy, and believe that their one change will usher in an era of peace and enlightenment all by itself. But all of them share something from a tradition of dissent that goes back via Ruskin and Morris to Franklin, Owen and even Aristotle.

Both Ruskin and Keynes, in their own way, reminded us that the money system is simply a means to an end, and if it doesn’t work, we can change it. There is no wealth but life, wrote Ruskin in 1860. It is, at one level or another, the battle cry of all the critics in my book The Money Changers – a reader of the last few centuries of money reform, and a guide to the emerging debate about the future of money.

There is something stirring out there, which is why this book is likely to be of more interest than it was five or ten years ago. Writers like Bernard Lietaer or Michael Rowbotham aren’t necessarily mainstream economists, but they are raising questions and attracting attention.

New kinds of money like LETS, time dollars, loyalty points, trade pounds aren’t normally the stuff of serious economic discourse, yet they are out there in the real world – and they are making an impression. At least ten per cent of world trade, and probably more, now uses barter currencies in one form or another, and there are at least 7,000 local currencies circulating around the world.

Some of them lean a little too far, perhaps, in their belief in the perfectibility of mankind. Some of them lean too far in their belief in the perfectibility of governments. But even the most cynical of the people included in the book probably share a sense that there must be some natural system of money creation that would bring people and planet back into some kind of harmony, with themselves and with each other.

The dream of a sustainable system of money creation holds together the competing currency free marketeers and those who want money-creation to be limited to governments and central banks alone. Because of these common roots, the dividing lines between these reformers are pretty blurred. I’ve tried to group them into broad themes:

    • Those who believe there isn’t enough money in circulation, and can never be.
    • Those who are afraid there is too much – and that the speculation is only for the benefit of the rich.
    • Those who believe there is something corrupt at the heart of the system – and those who have a big idea about the future of money, from Edward Bellamy and William Morris to the e-cash enthusiasts today.
    • Those who have an alternative based on ‘real money’.
    • Those who have an alternative based on ‘free money’.

Behind these broad divisions lies the age-old conflict between debtors and creditors: the former wans to keep the value of their debt intact, while the latter want it to become irrelevant. In that sense, this is also the story of money. It’s the secret history of economics.

Maybe by delving into it, we can tackle some of the uncomfortable economic questions nobody mentions. Why, for example – despite unprecedented prosperity – does it seem so impossible to afford the simplest public services, health, post or education?

My mother and step-father live in a small Hampshire village, which during the Austerity period of the late 1940s managed to boast two shops, a post office, two pubs, a butchers, a village policeman, a doctor and district nurse, and a railway station – connected to a massive local rail network – only a couple of miles away in small town of Stockbridge. Now, when we are incomparably ‘richer’, all that’s left is one pub and a very occasional bus.

The conventional reasons for this – high wages, over-regulation, fat cat salaries – don’t really satisfy me and it’s tempting to think there may be clues in the very design of money and it’s issue. According to Victorian economists, after all, peasants in 1495 had to work 15 weeks to earn the money they needed to live for a year. By 1564, it was 40 weeks – and now look at us.

We need to ask more fundamental questions about why money seems to have this built-in enslavement. Here are three more modern versions of big questions that simply won’t go away:

    • How can we sustain the financial system when speculation is now more than 20 times as powerful as trade, and has more than 20 times as much financial clout – and when the people who run the system in Tokyo, London and New York have more to gain from instability than they do from stability? How can we possibly organise a reliable system of global investment when the financial underpinning – the combined reserves of all the central banks in the world – could now be overwhelmed in just a few hours of foreign exchange trading?
    • How can we create a free society when there is now less money in the economy than there is outstanding debt – in the UK, about £100 billion less? Isn’t the inevitable outcome of such a situation that the ownership of business, land and property will slip inexorably into the hands of the financial institutions, leaving people increasingly enslaved by their mortgages and credit cards?
    • Why is it that a broadly similar percentage of the population has been considered poor for getting on for two centuries? The proportion of people in poverty in London is broadly similar to what it was in the 1880s, though it was measured differently – and the proportion of national income we spend on welfare is broadly similar to what it was in the 1820s, though it was administered differently? Isn’t it possible that this continuing third of the population, and third of the world’s countries, are still considered poor implies some hitherto undiscovered economic ‘law’ about money creation?

The Money Changers won’t answer those questions definitively. But it will at least recognise that they are important, and hopefully – by resurrecting this secret history of economics – we will be in a stronger position together to find some ways forward.