There is no more conservative nation on earth than the British when it comes to money. Let me correct that. The Scots are great money innovators in history. They gave us Michael Linton who invented LETS and John Law who ruined the French government in 1716 by monetising their national debt. No, it’s the English who are so financially conservative.
When Barings Bank collapsed in 1995 because of the activities of one trader, Nick Leeson — who lost $827 million in Singapore betting on currency futures — it turned out that his London bosses had no idea what he was doing. They didn’t really understand the derivatives market that he was trading in. I was also told firmly some years ago by the Washington editor of a UK national newspaper that money was all based on gold — which hasn’t been the case in the UK since 1931.
The truth is that the English still believe that their bank manager is at his desk, drinking sherry, umming and aahing about their overdrafts. In fact, he has long since been replaced by risk software. That’s our national failing. It is endearing in a way, but it’s also dreadfully frustrating. Because it means we’re stuck in the oldest fantasy about money that there is. We imagine that it’s real. And in some ways, this is the source of the crisis in the euro-zone as well. In England, our politicians never argue about this issue — who creates money, where it comes from, what it means — for the reasons I say. But in America, it’s always been the heart of political debate.
Perhaps this isn’t surprising. The question of whether or not they could create their own money — printing it, like Benjamin Franklin — was one of the issues that caused the division with the British. But a century or more ago, the kind of money they should use was absolutely central to the debate. It was the main plank of the now defunct Populist Party, which managed to link Southern and Midwestern farmers, together with the big cities of the Mid West, in a campaign for money based on silver, rather than the less plentiful gold.
The party’s tenets were put together in Omaha in 1892 by a man called Ignatius Donnelly. This was a man who had previously devoted his life to the discovery of Atlantis and proving that Shakespeare never existed. This is Donnelly in his Omaha Declaration:
“The newspapers are largely subsidised or muzzled, public opinion silenced, business prostrate, our homes covered with mortgages, labour impoverished and the land concentrating in the hands of capitalists. The urban workmen are denied the right of organisation for self-protection… a hireling standing army, unrecognised by our laws, is established to shoot them down, and they are rapidly disintegrating to European conditions.”
It’s enough to send a shiver down the spine — European conditions. Ugh.
I mention the Populists because one of their most enthusiastic activists was an unsuccessful Chicago journalist called Frank Baum. Baum may have been an unsuccessful journalist, but he was a very successful promoter of spectacle, largely on behalf of the department stores of Chicago. He knew there was a difference between what was real and what wasn’t. So it isn’t surprising that it was Baum who gave us the Wizard of Oz.
As you may know, the Wizard of Oz is supposed to have been a coded diatribe against money based on gold. OZ is, of course, the way we designate weight in gold. You may remember that Dorothy sets out on the Yellow Brick Road wearing the Witch of the East’s magic Silver Shoes — changed to red in the Judy Garland film. Nobody understands the power of these shoes: “All you have to do is knock the heels together three times and command the shoes to carry you wherever you wish to go,” she is told.
The poor residents of Oz have to wear green-tinted glasses fastened by golden buckles. That is important, for reasons I will come back to. And in the end the Wonderful Wizard, the personification of the gold standard, is revealed as a fraud, hiding behind a curtain, desperately twiddling with levers. This was also Baum himself, the impresario behind the great shows that illuminated the Chicago World Fair.
The message of the Wizard is that it is all fake. It is a show designed to make us believe in the awesome reality of gold. My message is the reverse; we don’t have to dig it up to get rich. We can make our own. The Populists didn’t succeed. They were undermined by the adoption of Free Silver by the Democrats in the person of the great orator William Jennings Bryan — who incidentally ended his life as prosecutor at the Tennessee Monkey Trial in 1925.
At the 1896 Democratic Convention, Bryan brought his acceptance speech to a crescendo by raising his arms above his head and then slowly down into the shape of a cross, with the words: “You shall not press down upon the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold.” Bryan lost the 1896 election, and twice more — which must be some kind of record. But this was also a speech that inspired a generation of radicals, portraying gold as an instrument of torture, weighting us down, the very basis of sin. He described it as an object of veneration that’s turned against us because there simply isn’t enough money for life.
Now, my parents live in a little village in England called Nether Wallop. It is quite easy to picture: thatched roofs, retired major-generals, Labradors. A generation ago, it managed to host two shops, a greengrocers, 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. That was during the impoverished years of the 1940s. Now, when we are incomparably ‘richer’, all that’s left is one pub and a very occasional bus.
The conventional reasons for this — low taxes, over-regulation, fat cat salaries — don’t really explain why, despite unprecedented prosperity, it seems so hard to afford the simplest public services, health, post and education, general stores and the life that goes with them. Perhaps the real question beyond that is, in twenty years time or so, can we afford what we need to make our society civilised? Because if we can’t, I don’t think it’s enough to throw our hands up in despair and give up. I’m not prepared for my children to live less civilised lives than me.
Why aren’t politicians asking about this?
Part of the problem is that, if you just printed more money now, there would be a rush of wind, like the Wicked Witch of the East, and it would shoot into the City of London and Wall Street and Frankfurt. But there still wouldn’t be enough where it’s really needed. The second reason is that those who run the world prefer us to believe that money is real, because they are as much in thrall to the gold mind-set as they ever were. And because of that, we are all as much in awe of money as Dorothy ever was as she approached the Emerald City.
Of course the euro isn’t the Gold Standard, but it sometimes sounds a bit like it. It is about stability of value, about strong money. It makes the same mistake as the Wizard of Oz — it really believes in objective values, and that somehow these values can be reflected everywhere the currency circulates. The fundamental problem at the heart of the euro, and any single currency based on the idea of objective value like gold, is this. Single currencies tend to favour the rich and impoverish the poor. They do so because changing the value of your currency, and varying your interest rate for example, is the way that disadvantaged places are able to make their goods more affordable. When you stop them from doing that, you trap whole cities and regions — the poorest people in the poorest places — without being able to trade their way out.
Of course even Britain has a single currency and it doesn’t work very well either. We have interest rates (or we used to) set to suit the City of London, while the manufacturing regions of the north struggle as best they can. Across Europe, the effects are similar, as we can see from the plight of Greece. Nor is it just different communities. There are different kinds of economy, and big currencies don’t suit them all very accurately. Take the sheer diversity of London. We, all of us — nurses and currency traders — have to get by using the one currency, the value of which is decided by tens of thousands of youthful traders in braces in Wall Street, Frankfurt and the City.
That is fine for the international economy and the financial services sector. But there’s another economy in every city which feeds off the pickings from the rich table above it, but isn’t necessarily part of it. Most of us live in this economy and it has nothing to do with financial services. About $4 trillion goes through the global computers every day, and 95 per cent of that is speculation — mainly foreign exchange speculation. The remaining five per cent is the money for goods and services that we use.
Worse, London’s rich economy threatens to drive out this five per cent economy completely. You can see the same thing happen in offshore financial centres where financial services have priced everything else into oblivion. Because nobody but bankers can afford to live and work there. The problem is that there is no single measure that can sum up all these different kinds of economy at all these different levels. In fact, big currencies don’t measure very well. What they miss out gets ignored. Then it gets forgotten.
Big currencies are gold-standard thinking. They condemn us all to walk around, like the people in the Emerald City, in the Wizard of Oz, wearing tinted glasses which can only recognise what Wall Street says is important. Currencies are not just measuring systems then, they are eyeglasses. They are the way we see the world. If our currencies don’t value things, we just don’t see them. Then they disappear. If you only measure GDP, then the environment, human dignity, community, family all in the end get driven out. That is what faulty measuring rods do, and currencies are measuring rods.
Monoculture money systems drive out other cultures, other species, other languages, other opinions, other forms of wealth. We need new kinds of money that don’t drive out life, or we face what John Maynard Keynes called “a perigrination in the catacombs, with a guttering candle.” And that’s why I say this failure of measurement, this blindness, is the real problem of money. Different people need different kinds of money, which behave in different ways and value different assets.
But we also all need different kinds of money for different aspects of our lives. If we don’t get that, some parts of our cities will be rich and some poor. And some parts of our lives will be rich and some poor. The problem with conventional money isn’t that it is valueless (though it is). Or that it’s based on debt (which it also is). Or even really that it doesn’t measure well (which it certainly doesn’t). It is that no one kind of money can possibly work for the sheer diversity of life. We have to escape from the old idea that money is one, indivisible, totemic, semi-divine, golden truth issued from on high and handed down to a grateful populace.
Yet the attitudes lying behind the Wizard of Oz linger on: As if the debts that are weighing down the eurozone were real, not a human construct; as if the mechanisms of economics were laid down by God some time on the sixth day of the creation of the world. New kinds of money, on the other hand, can reveal to us that, even in the poorest places, there are vast living assets — ideas, skills, time, love even — that can turn our ideas of scarcity on their heads.
The Populists put their faith in silver money that only a government could provide, but I think it’s the self-help message that’s really at the heart of the Wizard of Oz. When the people of Emerald City take their golden glasses off, they find the place isn’t green at all, but it’s still full of riches they just hadn’t seen before. In the end, the Wizard very cleverly makes everyone think he provided them with brains, courage and heart when they actually did it for themselves.
“How can I help being a humbug when all these people make me do things that everybody knows can’t be done,” says the Wizard. “It was easy to make the Scarecrow and the Lion and the Woodman happy, because they imagined I could do anything.”
And there lies the conundrum. When it comes to tackling globalisation or currencies, it’s just like the Wizard of Oz. We can make the world the way we want it, but not if we wait around for some wizard to fool us. We have to remember that we are doing something ourselves. It all depends where you think the wealth lies. Out there, in the vaults or the trading floors. Or here, with us, in every community.
Keynes put it like this:
“London is one of the richest cities in the history of civilisation, but it cannot ‘afford’ the highest standards of achievement of which its own living citizens are capable, because they do not ‘pay’. If I had the power today, I would surely set out to endow our capital cities with all the appurtenances of art and civilisation on the highest standards … convinced that what I could create I could afford — and believing that money thus spent would not only be better than any dole, but would make unnecessary any dole. For what we have spent on the dole in England since the war we could have made our cities the greatest works of man in the world.”
We HAVE the wealth. It doesn’t mean borrowing more, as Keynes set out, or even denominating it using the same unit of value. But it does mean monetising our wealth in other ways.
This is part one of a two part series from the New Economic Foundation’s David Boyle on money and other ways of monetising our wealth. In our June issue he will be writing on alternative and complementary currencies. Subscribe today to receive the next issue in your inbox.
David Boyle is the author of a range of books about history, social change, politics and the future including Money Matters: Putting the Eco Back Into Economics and Funny Money: In Search of Alternative Cash. He has been editor of a number of publications including Town & Country Planning, Community Network, New Economics, Liberal Democrat News and Radical Economics. He is a fellow of the New Economics Foundation.