PEOPLE everywhere associate revolution in the twentieth century with the dramatic events that occurred in Russia during [sic] World War I. But there occurred a still greater revolution of which most people are unaware. This was a revolution more gradual, more subtle, and more far-reaching in its consequences. It was a revolution in government fiscal policy, which not only has underwritten the socialist developments in this century by the revenues it has provided the state, but has further promoted these developments through the debilitation and demoralization of personal enterprise that has followed.
The power of any government to make paternalism seem practical, and thus insidiously to socialize the economy, lies entirely in the belief that it can and does issue money. This is the foundation error from which all socialistic projects receive their unsuspected sustenance. To attribute to government the power to issue money, makes of it an apparent fountain of wealth that strikes the ground from under all opposition to the welfare state. If government has the power to issue real money, what can possibly be wrong with paternalism and the socialistic ideology?
The practice of deficit financing seductively turns the minds of the people from the economic means of attainment to the political. For, obviously, when government can continuously take out without putting in, it strengthens itself and commensurately weakens personal enterprise, with the result that the people develop a growing respect for and dependence upon government and a contempt for enervated personal enterprise. This conditions them for progressive socialization and dictatorship. The secret of this process lies overwhelmingly in the Government's power to dilute the money stream. Ideologies have little to do with it; they are an accompaniment more than a cause.
This revolutionary shift in government finance has come about, in the United States, since 1931. Here is the historic record of war deficit financing and of subsequent debt reduction:
Total Deficit Reduced to By
REVOLUTIONARY WAR $ 75 millions $45 millions 1812
War of 1812 $127 millions 0 1836
CIVIL WAR $ 2.8 billions $961 millions 1893
FIRST WORLD WAR $25.5 billions $ 16 billions 1930
FIRST WORLD WAR $25.5 billions $ 16 billions 1930
It is evident that the Government's traditional practice was to run deficits under the stress of war and to reduce them during the succeeding peace. Government money issue power was therefore curbed by fiscal policy. The creation of money was normally the function of private businessmen, and the banking system remained largely the servant of personal enterprise. In the depression year of 1931, however, peacetime deficits were instituted for the first time. Soon thereafter, the policy was adopted of treating the depression as a war and ameliorating it by public borrowing and lending and spending. These deficits, greatly expanded during World War II, have become an established habit that constitutes a veritable politico-economic revolution. Credit is now controlled by the Government, the banks are but branches of the Treasury, and deficit financing is established policy.
Such a policy by a government is, in all innocence, the beginning of a process which culminates in communism, which is but the receiver for bankrupted personal enterprise. By issuing monetary units, government acquires the people's labor and substance, and gives them nothing in return. Simultaneously, exchange, upon which personal enterprise depends, is destabilized, and by this sabotaging process the people, in desperation, are finally compelled to petition the government to go into the production and distribution of the necessities of life. In other words, the process of issuing monetary units, without giving anything in exchange for them, ultimately brings a public demand that the government return something for its issue. With this, the people petition themselves into communism. For when government enters production and distribution, free exchange and, therewith, all freedom, ends.
Lenin reputedly said, "the surest way to overturn the social order is to debauch the currency." Certainly a major instrument of the Bolshevik revolution was the extensive counterfeiting of the Czar's currency with this objective in mind. This deliberate policy is memorialized in the following curious passage translated from the Russian:
“I would like to dedicate this imperfect work of mine to the one who, by the perfection of his own work and its unbounded abundance gave me the impulse to write these pages. I refer to the printing press of the People's Commissariat of Finance. The revolutionary government of France managed to exist and to wage war thanks to paper issues; the 'assignats' saved the Great French Revolution. The paper money of the Soviet Republic supported the Soviet Government in its most difficult moments, when there was no possibility of paying for the civil war out of direct tax receipts. Glory to the printing press! To be sure, its days are numbered now but it has accomplished three quarters of the task. In the archives of the great proletarian revolution, alongside the modern guns, rifles, and machine guns which mowed down the enemies of the proletariat, an honorary place will be occupied by that machine gun of the People's Commisariat of Finance which attacked the bourgeois regime in its rear—its monetary system—by converting the bourgeois economic law of money circulation into a means of destruction of that same regime and into a source of financing the revolution.”*
* Preobrazhensky, Eugeny A., Bumazhnyeden'gi v epokhu Proletarskoi dictatury [English translation: Paper Money During the Proletarian Dictatorship.] Moscow, State Publishing House, 1920, page 4.
Money, the hated device of capitalism, was found, however, to be indispensable to progress, and since the revolution, the dictators of Russia have been trying to restore this instrument of the social order. Thus they have been forced into the position of trying to regain the principal instrument of capitalism—without too obviously retreating from their ideology. In frustration they have turned to robbing their neighbors under the pretense of “liberation” and “democracy.”
The non-communist governments, while innocent of any intent to destroy their monetary systems, are nonetheless proceeding by gradual steps to attain the same ends that the communists did by plan—and the means of accomplishment is the same, namely, counterfeiting, albeit of the legalized variety. Thus are the non-communist governments proceeding blindly toward collapse. The communist governments, for their part, are striving to avert collapse by desperate attempts to steal that which the former in their ignorance are sabotaging. Hence the capitalism vs. communism confrontation is false. It is a fog obscuring the real issue, which is fiscal policy. The real issue is between counterfeit and genuine money.
Socialization, which now threatens every nation in the world and is really unwanted in every nation, is being forced upon every people and every government as the result of deficit financing, which is the Lorelei of the do-gooder politician. She promises relief to the distressed without cost to anyone. This illusion, once accepted, requires more courage to renounce than the politician can muster, and thus the ship of state is led to the rocks. I see no escape but for the people to declare the separation of money and state, and thus forever end unbalanced budgets with their impulsion to socialization and interference with personal rights.
IT SHOULD be obvious to even a superficial observer that it is politicians that create wars, and from this observation the logic should be developed that politics has an affinity for war. War is the escape for political frustration and the steppingstone for ambition. It deflects responsibility for the evil consequences of mal-administration and averts the eyes of the people from embarrassing facts.
While war serves the purposes of politicians, it never serves any purpose of peoples except defensively. Therefore, the war-making power must be taken out of the hands of government and reside with the people. To do this, we must deny to government control over the essential implement of war, which is the money power. If the money power is reserved to the people, they hold the veto power over war, for no war expenditures can be made without their consent. With no money power under his control, the politician has no assurance that the money will be forthcoming and no means of propagating the war spirit.
It is not a matter of much import to examine the various reasons that politicians have had for plunging nations into war, and to attempt to limit this or that cause. It is, however, essential that we detect and remove the means by which it is accomplished. John T. Flynn points out in his As We Go Marching that Mussolini and Hitler controlled their nations and ultimately involved the whole world in war through the money power that automatically fell into their hands with the capture of government.
This money power is invariably the power to conduct deficit financing. No war has ever been fought on a cash basis. And when we examine the deficit power, we find it is simply the power to issue counterfeit money. Thus the people are made to pay for the war under the delusion that they are being paid for conducting it. After the war, they fall into accusative factions, blaming each other for inflation with such epithets as gougers, labor racketeers, profiteers, chislers, robbers, black-marketeers, etc. The only complaint against the politician is for his failure to crack down on this or that group at the behest of its accusers. The politician, who is the author of the whole misery, escapes blame and is beseeched to be the deliverer.
The politician who would wage war successfully must first make war successfully on his own people, and to accomplish this, he deludes them through deficit financing. Having, under this delusion, made war appear profitable, he is able to marshal his people into military action. Every soldier and every soldier's wife and mother, every war worker, every war industrialist, every war banker, every bureaucrat, is "paid" for his services to the god of war. Yet, how can any of these be actually paid when they produce nothing and, on the contrary, only destroy? Destroy this delusion, and you destroy the politician's power to marshal the people for war.
Monetary nationalism is the only nationalism that is inimical to society. Once the power to alienate other nationals monetarily and to corrupt the money supply of a people by false money issues is abolished, lesser economic interferences will dissolve or cease to irritate. But as long as our governments are vast counterfeiting machines, Mars can laugh at peace projects.
The Naturalness of Competition
COMPLETE FREEDOM OF CHIOCE is brought about in exchange by what is known as competition, which is the process whereby selectivity operates and economic affinity is assured. This great and indispensable principle of life is often stigmatized as an evil, and is the victim if not the conscious object of all attacks by planned economy against the natural order. If we cannot hold the principle of free competition inviolate, there is no need to pursue the subject of free money, for money is but the handmaid of competition. Money facilitates competition, and if competition is to be restrained, pursuit of a true monetary system is a contrary aim.
Competition is inherent in exchange. Impediment to one is impediment to the other. Competition is the guarantor of our basic liberty, since without freedom to trade where one's need and preference are best served, all other liberties become atrophied. Competition is the scale that weighs the worth of the service of each man to his fellow man. If there is nothing to impede it, the greatest equity is attained, because each trader has received the acme of satisfaction.
This does not imply that all are assured equal rewards, but rather that all receive their just deserts. Nor does it exclude the action of good or ill fortune. One may, by good fortune, discover a natural value or improved method or possess a special talent that is of limited supply and hence priceable at a higher level. One may, through ill fortune or bad judgment or false effort, lose trading power and even suffer total loss. Competition inspires enterprise, rewards the good servant and punishes the poor one. It is the universal police system through which we all police one another's economic behavior. Through its operation, society ostracizes the bad and honors the good. It never errs; it is never unjust. It is infallible. Though we are dealing here only with man's business conduct, it is well to comprehend that so universal is competition that it is the natural governor of all human behavior.
There must not be read into this tribute to the rule of competition an assertion that competitors do not suffer handicaps that make the competitive system seem harsh. It does imply, however, that such harshness is the result of distortion in the economic system—mainly through the monetary branch—whereby some traders have escaped the salutary influence of competition and thus gained unnatural trading power, adverse to their competitors. The remedy for evil effects in competition is more competition, since it is but the lack of it that produces bias.
Nor must any implication be drawn that competition does not permit society to starve and kill that which is unwanted. How else could it permit progress; how else could it provide the means of punishment for the slothful, the vicious, and the unsocial? How else could it be democratic? The obsolete, the unfit, the unwanted must be eliminated. In life there is death; in death there is life. This is the law of progress. Competition is merely its channel.
Lastly, let it be clear that competition does not lessen the opportunity of any man to grow relatively rich, if such rewards come for services rendered and voluntarily paid. It merely permits society to defeat the extortioner. Nor does it save any man from being relatively poor. It merely secures him against poverty if he can and will render service to his fellow man.
The Essential Capitalism
IN COMMON UNDERSTANDING, the capitalist system means the profit system. To bring sense into the discussion, we must clarify the concept of profit by distinguishing between profit and paper profit. A paper profit is a dream or forecast of power to enjoy wealth. Actual enjoyment or use of wealth is the only realized profit.
"Production for use" is but another way of saying production for profit. The profit system is therefore the use system, with which no one can quarrel. Capitalism is the system of guaranteeing use or profit by private ownership, and since there is no other way of gaining such security, there is no fault to be found with the capitalist system when clearly understood. The desire for use or profit is natural, ownership as a means of assuring it is natural, and free money as a means of conveying and acquiring ownership makes the third of a natural and wholesome trinity.
The effect of the valun upon the capitalist system will be to permit capitalism to be its natural self and to become known for what it really is, namely, the cultural developer of man through its facilitating the first and grandest law of nature, the law of selfishness. The most cooperative, the most social and the most elevating principle of life is selfishness, and capitalism is its handmaid. The impulse of acquisition, which is the driving force in enrichment, brings discontent through disappointment, but never through realization. Capitalism is never criticized when it works. Only its miscarriages bring grief and bitterness.
These disappointments have developed the queer logic of collectivism, which argues that since capitalism has not worked fairly for all, it should not work for any. The collectivists also overlook the fact that capitalism has not worked fairly because of the interference of collectivism. The sufferer from the biased operation of capitalism is the victim of collectivism without knowing it. The political money pretense and all political intervention in personal enterprise are collectivist schemes. True capitalism seeks and permits no political interference; its task is the organization of society on a purely economic basis with complete liberty of action therein assured to every individual.
Capitalism is life itself. There is no starting point in evolution beyond the impulse to live—the law of self preservation—and right there capitalism starts. Self preservation implies self advancement, and thus all life follows a consistent capitalistic line that is unalterable. Despite the handicaps of collectivism, therefore, capitalism functions because there is no other system that will function at all.
The capitalist system has been pushing the world along for several billions of years. He who would abolish it must start a new universe on a new principle.
We must have a new pursuit of Democracy in the market places instead of the capitols of the world.
DEEP IN THE MORES of man has ever been the ideal of liberty and, linked with it, the social consciousness of equality of opportunity, or democracy. Democracy, the agent, would secure liberty, the ideal. How to implement democracy has been the problem of the centuries.
The implementation thus far has been political, and the method has been the consent of the governed. Obviously, unanimous consent cannot be hoped for, so recourse is had to the will of the majority. The rule of the majority is therefore the highest ideal conceivable in the political sphere. This leaves, at best, a tyranny over the minority. Is such an ideal worth striving for?
There is no choice on the political plane. We must either accept this ideal or turn from the political implementation of democracy to another. Fortunately, there is now the hope of economic democracy through a true monetary system that will realize the dream of democracy.
Money can be the perfect register of desire and appraiser of satisfactions. It is the means of keeping man ever attuned to his fellow man. It is a court of arbitration whereunder differences may be easily adjusted. It can be the steady uplifter of the social order. It can be the minimizer of taxation and political intrusions. It can be the preserver of peace. It can dissolve the bounds of social strata. It can make competition perfected cooperation. It can provide security. It can make every voter win the election. It can govern by the unanimous consent of the governed.
There are no majorities or minorities in a money election. The vote is unanimous, and it is all cast for the individual. He shoves his ballot across the counter and takes the winnings. Other individuals are doing the same; nobody is the loser. Everybody has his choice.
The election is constant. The campaign of advertising and sales appeal to the voter is incessant. The voting goes on every minute of the day.
The candidates are innumerable commodities and services, none of which can command the voters' continued support without continued satisfaction. There are no terms of election. There are no age, residence, or citizenship qualifications for the electors. There are no guarantees of permanence to the elected. All is in constant flux, responsive to the wish and whim of the elector. This is democracy idealized and realized.
But are not the ballots unfairly distributed? We are coming to that. The point is that money offers possibilities that can never even be dreamed of in the political realm. We must pursue this promise and turn from political action if we would realize democracy.
Granted a fair distribution of the money ballots, the monetary election system of exchange can realize the ideal democracy. Such fair distribution has never been accomplished. But it can be. If the smallest fraction of effort had been devoted to the pursuit of democracy in money that has been devoted to chasing the comparatively low ideal of democracy in the political realm, we would now be enjoying, through the monetary system, the ultimate democracy.
Even the low ideal of the rule of the majority has never been attained in political democracy. It is doubtful whether the majority has ever prevailed at the ballot box, when we count those qualified voters whose interest could not be sparked sufficiently to visit the polls. In the United States, where the voting ratio is probably the highest, one quarter of the qualified electors has been sufficient to carry an election. But even this segment does not govern; it merely decides who shall govern, and the governors thus chosen govern the non-electing majority as well as the electing minority.
Representative government is but limited dictatorship, inasmuch as political democracy gives the representative no formal or official cue to the action desired by his constituency. Granted that he is honest and conscientious, he still must fall back upon his own judgment of what is right or guess what his constituents might prefer. By this process our millions of statutes have been molded. On top of these statutes have been proclaimed millions of court decisions, also based upon guesses as to what the law makers intended and colored by that nebulous substance, public opinion.
Even if it were possible for the citizen to register his will upon all questions that are involved in political government, he could not spare the time from his task of making a living. But in the very course of making a living, he is automatically registering his preference on Main Street several times a day through his money ballots. Compare the facility of this with political elections once a year or two or four years.
Our markets are our true polling places, where farmer, manufacturer, wholesaler, retailer and consumer are constantly accepting or rejecting proposals. Why do we beguile ourselves with a sham democracy when we have the machinery for a perfect one? But there is sham also in our potentially ideal democracy, the monetary system. This sham is the creature of the mother sham, political democracy. Our monetary system is a political creation, and thus the number of money ballots and their power that each of us can cast in the market places is influenced by political action. Thus we not only pursue the folly of political democracy, but through its inevitable miscarriage we defeat also the operation of a true democracy in our daily exchanges. To attain democracy, we must not only renounce the false premise of political realization, but we must rescue money, the true provider of democracy, from the destructive influence of the state.
Once we have separated money from state, we shall find that the activities and interventions of government may be greatly curbed. Through a monetary democracy, human aspirations will be attainable, and the functions of the state will be very much confined. Money joined to state will inevitably trend toward socialization. Separated, it can be our liberator.