Every man has the right to have his ideas examined one at a time. Ezra Pound
Ezra Pound and Robert Theobald start from the same premise: in the twentieth century we have passed from an economy of scarcity to an economy of abundance, requiring a completely different set of ground rules. Pound realized that even the radical economics of Marx were not enough:
. . . Marxian economics were invented in a time when labour was necessary, when a great deal of labour was still necessary, and his, Marx’s, values are based on labour
The new economics bases value on the cultural heritage, that is to say on labour PLUS the complex of inventions which make it possible to get results of labour, with very little labour, and with a quantity of labour that tends steadily to diminish.1
Theobald, with the benefit of thirty more years of hindsight, goes even further: “Today, our socioeconomic system neither needs all the available workers nor can it provide work opportunities for them.”2
Pound, as we have mentioned, came to economics through Major Douglas. This occurred when Douglas converted Richard Orage, editor of The New Age, and other National Guildsmen, to his principles of economic reform.3 Douglas centered his attention on the supply of money, which he believed should somehow be kept approximately equal to the value of goods available. Under the existing system, this was impossible, since production costs included a certain percentage of interest on debts, old and new, which passed out of active circulation into the hands of the high priests of finance, as we observed in the quotation from Bazelon at the end of the previous chapter.
Douglas proposed that this should be remedied by government subsidy sufficient to make up the difference between, in Marxist terms Money and Value. This subsidy would be in the form of money created by the government on its own credit. It could either be given to the producer, guaranteeing him cost plus reasonable profit, or it could be paid out periodically to the consumer in the form of a National Dividend. Such a system would, of course, depend on a stabilized currency and stringent price controls.4 This is a very rough-and-ready summary, but we are not so concerned with the details of Douglas’s proposals, or their defects, as with how Pound used them.
Another monetary theorist who influenced Pound was Silvio Gesell, a German businessman who became a radical economist. He believed that prosperity depended on keeping money in rapid, circulation. This he proposed to do by issuing currency which required the regular affixing of a tax stamp. Money which sat idle would thus gradually depreciate in value.5
This scheme sounds wilder than Douglas’s proposals and one can think of all sorts of objections, although it was apparently tried with much success in Wörgl, a town in the Austrian Tyrol, until the government authorities put a stop to it. One must keep in mind that, since credit is based on confidence, any system which has the full confidence of its participants will probably succeed.a After all, what is more ludicrous from a social point of view than the present system, which enjoys a confidence so uncritical that the suggestion of any alternative induces immediate panic? Nevertheless, Pound was not committed to either Douglas or Gesell, although he felt that their proposals were worth investigating.6
Neither Douglas nor Gesell attacked the banks directly. Both merely offered a supplementary currency whereby the banks could to some degree be circumvented. Pound went beyond such amelioratives, maintaining that the right to create credit belonged to the government in the name of the people, not to private interests:
I take it that in the perfect economic state the cost of the money. . . is borne by the state, i.e. distributed so as to be a burden on no one in particular. . .
The state conceived as a public convenience. Money conceived as a public convenience. Neither as private bonanza. 7
Much of the reader’s resistance to Pound’s economic proposals may be overcome if he can see past the air of breezy confidence to the man’s essential humility, A strange word to apply to Pound, perhaps; yet again and again, whether speaking of economics, literature, or art, he insists that he is not providing the answers, but rather posing the relevant questions. Behind the jeremiads is a basic optimism: “. . . what man has made he can unmake.”8 This sets him apart in degree, if not in kind., from Brooks Adams who, in spite of his attempts to give advice, as in The Theory of Social Revolutions (1913), was ultimately the captive of his own system. Nor was Adams an active reformer: says Pound, “He had no vocation for martyrdom, he confessed with irony.”9 Which, coming from Pound, is doubly ironic.
SO FAR In this chapter we have been speaking only of theory. But Pound’s economic ideas grew equally from his reading of history. His method, as usual, was to bring useful information from wherever he found it, evolving a form which could carry it across to the reader with the least possible dissipation of force. The problem was much the same as with the distribution of goods: “How are you going to get it from where it is, or can be, to where it is not and is needed?” 10 b The “repeat in history” was subject to the creative intellect, whereby one could redirect it; it was not the inexorable winding down of a mechanism.
Just as Pound looked to certain writers as measures of integrity, so he singled out certain times and places in history as examples of what could be done to ensure just distribution. His instances came principally from ancient Chinese history, for which he had read de Mailla’s eighteenth-century translation of the Tong-kien-kan-mou, Histoire Générale de la Chine, ou annales de cet Empire, in thirteen volumes; renaissance and modern Italy, including the Sienna Bank, Leopoldo (the eighteenth-century Grand Duke of Tuscany), and, alas, Mussolini; and the United States, with special attention to the Constitution, Thomas Jefferson, John Adams, Andrew Jackson, and Martin Van Beuren.
The American precedents were so important to Pound that he set out four quotations from American sources in what he called an “Introductory Text Book”. The first, from John Adams, laments America’s monetary ignorance. The other three, from Jefferson, Lincoln, and the Constitution, assert the right of the government to create credit.11
IF WE were to make up our own “ Introductory Text Book” setting forth Pound’s requirements for the ideal economic state, it might read something like this:
1. The state, not private banks, creates and guarantees money and credit.
2. The money created by the state is a certificate of work done (goods produced).
3. The state establishes fair prices and regulates the supply of money so as to keep it approximately equal to the value of goods available for purchase.
4. It also sees to it that the supply of money is fairly distributed so that the goods may also be fairly distributed.
5. If money is to be fairly distributed, so must work.
6. If the goods are actually to be purchased, supply must correspond to demand, i.e., the goods produced must be useful to someone. This may or may not require government regulation.
We have already discussed Pound’s reasons for preferring public to private creation of credit. Much of his evidence against the banks has already been cited in our analysis of Brooks Adams; we could pile up further instances, but the point has been made. Pound’s precedents for statal money go back to the T’ang Dynasty in the seventh through the ninth centuries12 and include, at a local level, the Wörgl script we have already mentioned. His own family, he learned in 1937, provided another happy instance: his grandfather had financed a section of railway with privately printed money backed by local lumbermen.13 One of his bitterest disappointments was that, at the national level, America never took advantage of the Constitutional right to back its own paper, except for Lincoln’s abortive issue of “greenbacks” during the Civil War.14
Money created for private profit, with nothing to back it except the reputation of a bank, was an abomination. It might perform a useful function, but an indefinite portion always came back to its source, where it drew in still more of the nation’s wealth. Furthermore, the amount in circulation could be manipulated so as to ruin the nation’s debtors.c Instead, money should be issued by the state, but only when there was real wealth, i.e., goods, to correspond to it. Inflation was creating more money than goods; it was not inflation to increase the amount of money to equal the gross national product. A favourite quotation came from Orage:
Would you call it inflation to issue tickets for every seat in a hall, despite the fact that the hall had never before been filled, or more than a fourth of the seats sold, because of there not being enough tickets available?15
But how did you determine what the goods were worth? Those who made them had shown in the past that they were not to be trusted—they either persuaded the public that the goods were worth more than they really were, or they agreed among themselves to overcharge, forcing the consumer to pay up or go without. Therefore the state must intervene to establish just prices, based on cost plus reasonable profit.16
Pound’s main precedent came from the Middle Ages: “The Catholic economy had proclaimed the doctrine of the just price.”17 Indeed it had proclaimed it so vehemently that some merchants lived in mortal fear of cheating. Nor was the buyer absolved from cheating the merchant: Henri Pirenne cites the no doubt exceptional instance of St. Gerald of Aurillac in the tenth century. Having learned that he had inadvertently obtained an ecclesiastical garment at a bargain price, he hurried back to the seller with more money, lest he fall into the sin of avarice.18 Saint indeed! Ordinary twentieth-century sinners, however, needed the supervision of the state.
But even if prices were fair and there was enough money to pay them, some people might still accumulate too much at the expense of others. Therefore a means was necessary to ensure that money was fairly distributed. There were various alternatives, but Pound favoured the fair distribution of work: “I suspect any other.”19 Since the amount of work required was rapidly being reduced by technology, it might be necessary to cut each man’s quota in half; but if there were enough goods for all and they were fairly distributed, no one would suffer from a reduction in work hours.
Even with enough goods available, there might still be acute shortages in certain areas. In that case, “ Either the individual must use his intelligence, or some congeries of individuals (state or whatever) must persuade or foresee or advise or control.”20
Behind all these proposals is Pound’s belief in economic justice for every citizen of the state, Here he is totally unequivocal: “When enough food exists and people cannot get it by honest labour, the state is rotten, and no effort of language will say how rotten it is.”21 Quibbling over the method did not absolve it from its responsibility. And if the people were wise they would see to it that the effort was made:
Wisdom resides less in the means than in the affirmation of ends. If there is the will to attain the end, the means will be found. If the end is perfidious, no means can have in itself any inherent virtue capable of preventing the perversion of justice.22
WRITING THIRTY years after Pound had formulated most of his economic ideas, Robert Theobald is able to deal with phenomena which Pound could hardly have foreseen. And being a Cambridge-trained professional economist, of course, does give him certain advantages. Nevertheless, their thinking coincides on a remarkable number of issues. Before comparing them in detail, however, we should, take the time to summarize Theobald’s most important book, Free Men and Free Markets, written in 1964.
Early in the book, Theobald states his premise in a summary which is worth quoting in its entirety, since it makes clear both his concept of a just economic society, which is compatible with Pound’s, and his opinion of a state-controlled market, which is not:
It is the goal of all Western societies to ensure that each individual has the maximum of freedom in his choice of action compatible with the needs of the society. Such a degree of freedom can only be obtained if the individual is provided with sufficient resources to enable him to live with dignity. No attempt should, however, be made to provide the required resources through government control of the market mechanism, for not only will such an attempt fail but it will also prevent the realization of the original goal: it will restrict individual freedom, rather than advance it. 23
The first part of the book deals with the American economy as it is now structured. It is traditional dogma that business functions for the good of society as a whole, operating in accordance with market forces through the interaction of supply and demand. Both halves of this assumption are incorrect:
(1) Contrary to the official apologists, marketivesd exist, by definition, in order to show a profit. This often leads to conflicts between public and private interest, e.g., pollution.24
(2) Nineteenth-century economists assumed that no marketive would become sufficiently powerful to have a significant effect on supply or demand. But monopoly made it possible to limit output, which prevented supply from increasing fast enough to cause prices to fall. In the twentieth century, marketives not only control supply, but also, increasingly, demand. The latter is accomplished through research and development, advertising, and packaging. With the exception of agriculture and minerals, marketives can thus alter supply and demand to their own advantage. This has had a profound effect on the recent evolution of our socio-economic system.25
But price-fixing is now being undermined by competition between as well as within industries (for instance, plastic competes with glass for bottling). As large-scale competition revives, marketives will turn increasingly to cybernation in order to keep prices down or even reduce them. This will lead to rapidly increasing unemployment, with no prospect of the trend being reversed.26
This growing cybernation will accelerate another trend. Holding back production so as to maintain prices has produced an enormous unused potential. By 1962, actual production was running behind potential production by about twelve per cent, double the figure for 1954.27 Cybernation will make the gap still wider.
In other words, our economic system is irreversibly increasing its unused capacity to produce, while at the sane time creating an ever-larger segment of the population (the old, the sick, the poor, racial minorities, plus a new supply of unemployable unskilled workers) who are unable to consume.
What does a country do with this new abundance? The followers of Keynes believe that you should try to keep effective demand running ahead of supply, i.e., you stimulate growth.28 Since market forces have proved inadequate, the American government, like most European governments, intervenes in the following ways:
(1) It provides minimum subsistence to those unable to work. The ways in which this operates have been strongly influenced by the assumption that (a) unemployment is a temporary phenomenon, and (b) the jobless are somehow to blame for their condition.29
(2) It sponsors job retraining programmes. These are largely ineffective because of the contracting market for unskilled or semi-skilled, labour.30
(3) It stimulates growth through tax cuts. These, however, go mainly to higher income brackets which are already consuming close to their effective limit, not to the lower brackets which would immediately consume those products which are in greatest over-supply.31
(4) It may lower the interest rate. This can stimulate growth by making productive investment more profitable and installment buying cheaper. However, it puts the country at the mercy of the international money market, since investors are liable to withdraw their funds and reinvest them in a more “profitable” country. This in turn threatens to force a devaluation of the currency, which most countries, partly for mystical reasons, try to avoid. And so a high rate of interest is maintained, which biases distribution of income in favour of those with capital at the expense of those who live on salaries and wages.32
(5) It offers special assistance to marketives which are adversely affected by the general trend, towards lower import tariffs.e This has far-reaching implications as to the government’s responsibility to help any marketive which is hurt by any government policy change.33
(6) Finally, it provides the principle stimulus for growth in new direction by subsidizing research and development.f This gives the government unprecedented control over the balance of production (who makes what) and life-or-death power over local economies.34
. . . Meanwhile, the traditional private money regulator, the stock market, has ceased to perform its original function, the allocation of scarce capital. Large corporations tend not to float new stock issues when they want money for expansion; instead, the cost is planned far ahead and built into the price of the product. Thus the public gives it the funds which it used to have to borrow at interest, New companies, which now have difficulty raising money on the market, obtain risk capital from special institutions, many of them backed by the government.
This leaves the stock exchange occupied with the transfer of existing shares from one rich stockholder to another. Falling yields, resulting from falling profits, have recently caused violent fluctuations as investors traded in and out of the market. These could precipitate a crisis only marginally related to the basic health of the economy.35
The stock market; we have said, came into being in order to allocate scarce capital. But the shortage of money is now an illusion, supported by the high interest rate maintained by the government to protect the dollar. Abundance reduces the value of money as well as goods.g Therefore, under the present economic system, abundance is a cancer.36
MUCH OF this summary is not directly related to our discussion, but I have tried to preserve the continuity of Theobald’s argument. His proposals for an alternative system can be stated more succinctly if we have understood his diagnosis.
Theobald’s solution is best stated, to begin with, in his own words:
. . . the establishment of new principles specifically designed to break the link between jobs and income . . . [to] be carried but by the government as the sole body concerned with every member of society and with the adequate functioning of the total socioeconomic system.37
This would be done by establishing a Guaranteed Income (Basic Economic Security) as a constitutional right.38
Such a measure would enable the government to abandon those Keynesian policies which are designed to maintain a forced growth in order to keep jobs growing at about the same rate as the labour force. Instead, available jobs could be kept in line with desired jobs. It would also do away with the growing complexity of social security, unemployment insurance, Aid to Dependent Children, local poverty relief, etc., etc. The administrative procedures for a Guaranteed Income could hardly be more complex than the existing mare’s nest of amelioratives.39
The money distributed through a Guaranteed Income would provide a real rather than an artificial stimulus to the economy, since it would go directly to those most likely to spend it on goods which are in over-supply, both real and potential. (This would, incidentally, cause a significant rise in government income from sales taxes.)40
The cost of a Guaranteed Income, over and above the effective tax increase, could be borne by deficit spending. This presents no danger, since there is no actual shortage of money, nor would there be:
In conditions of abundance, when unused productive capacity is available, the creation of additional claims on resources increases the national income, creates jobs, and generally improves economic conditions in the country. It is only in conditions of scarcity that additional government expenditures impinge on other economic activities.41
Furthermore, an increase in credit would be backed by productive capacity, which is the real backing of any insurance or pension scheme, public or private.
Theobald sets forth the functions of any economic system in a form which neither Pound nor the traditionalists would reject;
. . . first, it must ensure an adequate level of production and an appropriate level of economic growth; second, it must provide for the distribution of the rights to the available production; and third, it must determine the types of [products] to be made and the material to be used in their production.42
But if the ends are traditional, the means are not. The classical economists left all three to the mechanism of the free market. This meant that production came first, with distribution as a by-product. But cybernation has increased production so radically that consumption, left to itself, can never catch up. And so, the economy must shift its primary attention to more equitable mechanisms for distribution:
. . . the economic system needs to divorce the productive function from the distributive function and therefore allow each to work-in a way which will be of maximum benefit to society.43
Under these conditions the free market could be left to its traditional operation:
The level of production could then be determined by desired levels of consumption, rather than consumption being forced by the existence of unused productive capacity. We would, therefore, have the power to determine economic policy on the basis of our social goals rather than continuing to be forced into social actions because of what are, at present, economic necessities.44
a John Collier, in a delightful short story called “ Witches’ Money”, tells of an impoverished village where banking practices were unknown. A visitor, after persuading the local innkeeper to take a cheque, which he has never heard of, inadvertently leaves his book behind. Immediately the rest of the cheques are made out in various amounts and put into local circulation, resulting in immediate prosperity. The system collapses when, as in the case of Wörgl, one of the cheques is presented at a bank in another town.
b Cf. Charles Olson on Projective Verse: “A poem is energy transferred from where the poet got it. . . by way of the poem itself to, all the way over to, the reader.” (Olson, Selected Writings, p.16)
c See quotation from Adams concerning Loyd, above.
d Marketive: “any organization or individual which produces goods and/or services in order to make a profit.” (Theobald, Op. cit., p.36)
e Or, in the present case, it reneges on its agreements and puts the tariff up again in order to force a revaluation, i.e., higher prices, on its competitors.
f This has produced, so far, a wide range of obsolete weapons, a highly controversial airplane, and a war in South-East Asia.
g Not necessarily what it can buy, but rather, what it costs to borrow it.
1 Pound, Jefferson and/or Mussolini, p.36
2 Theobald, Free Men and Free Markets, pp.156-7
3 Davis, Vision Fugitive, p.106
4 Ibid., pp.101-5
5 Pound, What is Money For?, p.9; _____, ABC of Economics, pp.49-50
6 Pound, What is Money For, p.9; _____, ABC of Economics, pp.49-50
7 _____, ABC of Economics, p.55
8 _____, Gold and Work, p.13
9 _____, America, Roosevelt, and the Causes of the Present War, p.5
10 _____, ABC . . ., p.15
11 Pound, What is Money For, p.15
12 _____, A Visiting Card, p.18
13 Ibid.. p.27
14 _____Gold and Work, p.7
15 _____, ABC . . ., p.70
16 Ibid., p.51
17 _____, An Introduction to the Economic Nature of the United States, p.14
18 Pirenne, Economic and Social History of Medieval Europe, p.27
19 Pound, ABC. . ., p.34
20 Ibid., p.28
21 _____, What is Money For?, p.6
22 _____, America . . ., p.14
23 Theobald, Free Men and Free Markets, p.15
24 Ibid., pp.34-7
25 Ibid., pp.34-5, 41-2
26 Ibid., pp.52-5
27 Ibid., p.70
28 Ibid., pp.87-8
29 Ibid., pp.90-3
30 Ibid., pp.93-6
31 Ibid., p.97
32 Ibid., pp.97-8
33 Ibid., pp.99-100
34 Ibid., pp.100-101
35 Ibid., pp.132-5
36 Ibid., pp.136-8
37 Ibid., p.144
38 Ibid., p.147
39 Ibid., p.152
40 Ibid., pp.160-1
41 Ibid., p.163
42 Ibid., p.165
43 Ibid., p.166
44 Ibid., p.167