Chapter Two from the Manuscript of Shamcher's book, Planet Earth Demands.
MONEY, MONEY, MONEY
I came to Turkey as an engineer in the twenties. The Adana plains were ideal for cotton raising. The Turkish farmer is knowledgeable and hard-working. There was an urgent need for cotton all over Eastern Europe and Asia Minor. This would seem a beautiful and secure business for any bank or combine of banks to finance, but those approached had other commitments (maybe race tracks or circus performances?) so the plains remained unproductive and people had to go without clothes. Then a new regime took over the country, "the Young Turks." Their new Secretary of the Treasury, Saraguglu Shukri Bey, consulted with me who advised him there was no reason why the Government itself couldn't act as a bank and provide the money, if operating as responsibly as banks do, or preferably a bit more responsibly. So the Adana Plains were cottonized, everybody profited and my career as an economist, my third career, had been launched.
I wrote books. I helped run a new Scandinavian bank supported by merchants and the Government, to help relieve the depression haunting us at that time. After World War II, when the Nazi occupiers had crushed the Norwegian economy by reckless printing of money in the face of dwindling supplies, I was named to a commission to repair the damage. This caused our senior economist Wilhelm Keilhau to remark, "If that idiot, Bryn, is going to serve, I quit.” To which Premier Nygaardsvoll responded, "Good, Dr. Keilhau, that rids us of you." I rejected the commission's report and wrote my own.
This ‘Minority Report’ was later accepted by the Norwegian Congress. Luckily a better man than I, the outstanding Norwegian economist Dr. Ragnar Frisch, implemented that policy, while I returned to the States.
In the thirties I had talked to American bankers, who gently comforted me, “Yes, yes, Bryn, we must certainly do something in line with your ideas, though not now, maybe in twenty-five years.' So, twenty-five years later I turned to ingenious Seymour Harris, Senior Advisor to the Secretary of the Treasury under Kennedy and Johnson, and caused him to miss important appointments while he listened, contemplatively. Lovable Arthur Schlesinger even missed luscious luncheons.
I went to Tunisia, heading a United Nations mission as Economiste-Ingenieur to bring relief to Southern Tunisia. When I came back a slam-bang meeting was planned to turn this country into a full employment paradise — when tragedy struck. At present Yale's Dr. John H.G. Pierson, Leon Keyserling of Truman’s time and John Philip Wernette are working for the same policy of full employment, each in his own way. Through these and some others' voices and language patterns we shall look at money, what it is, what we can and cannot afford.
In THE CONTROL OF BUSINESS CYCLES (Rinehart 1940) Harvard’s John Philip Wernette defines money: If we were to attempt to be precise we should probably end with an array of definitions of what is never-money, sometimes-money, always money, legal-tender-always money, non-legal tender-often money and many others. The purest form of money is bank deposits. They have no physical substance but are mere figures in books. Pocket money can be used to make jewelry, to fill teeth or paper walls. Not so bank money. It is generalized purchasing power and cannot be used for any other purpose. Dr. Wernette goes on to explain how, when a bank grants a loan, new money is created throughout the banking system.
This touchy subject has been discussed as long as this republic has been in existence. Some refuse to believe it. Some think it should only be discussed among bankers, not the general public. Ben Franklin, Abraham Lincoln and Mariner Eccles, Chairman of the Federal Reserve System under Truman, all elaborated forcefully on this subject.
Dr. Wernette asks, "Is there any reason to suppose that the amount of money so created – i.e. – the amount that borrowers wish to borrow from banks and the amounts that banks are willing to lend, will turn out to be equal to the amount of money that the people of this country wish to hold and equal to the right amount for functioning of the economic system?" In his later book FINANCING FULL EMPLOYMENT (Harvard University Press 1945) Dr. Wernette proposes, "Control of the total amount of money must be assumed by the Government.” He envisages a "stabilization Board" for creating or withdrawing money when and as necessary for carrying out the nation's wishes within the limits of manpower, resources and monetary stability.
About the risks involved he writes, A do-nothing policy presents greater dangers. On the one hand we have the danger of mismanagement. On the other hand we have the danger of mass unemployment and social upheaval. Of the two, the latter is both the greater danger and the most likely to occur. The less risky course is to implement a stabilization program and to make every effort to see that it is skillfully administered. Anticipating the "bootstrap gag he writes, "We pull ourselves down into depressions by our hat brims. The only way we ever get out is by lifting ourselves by our bootstraps.”
For the "Sound Money" boys he has this: "That money is soundest which contributes most to the economic well-being of the country.” Clearly such a stabilization board would handle urgent functions that no private bank could or would touch, but great care must be shown in the composition of such a board. A "pure” government body with only bureaucrats could wreck the economy through ignorance or corruption. A healthy input of private bankers, as in our present Federal Reserve System, seems mandatory.
Yale's Dr. John H.G. Pierson seems to me to accomplish a smooth cooperation between private and public interests in his plans for guaranteed full employment. His first book, FULL EMPLOYMENT was published by the Yale University Press in 1941. Since then he has been holding responsible positions in the national and international economy and has written three more books and a vast number of articles, some in professional journals (THE AMERICAN ECONOMIC REVIEW), others for a wider public in the New York Times. Washington Post, Congressional Record etc. He has stuck with his FULL EMPLOYMENT aim as his basic theme. He was one who tried to strengthen the Employment Act when Congress was adopting it in 1946 and now he works for the completion of that act so it may achieve what was originally intended. The only condition he would impose on the money managers and other administrators concerned would be a definite level of employment, determined by Congress each year, based on the economic situation.
Not only is this feasible today, but it would lift our entire economy to a higher and more stable level and achieve more of what we wish our economy to achieve. There would be no ‘leveling-off’ of income but a general lift at all levels and the awkward matter of welfare would be reduced to manageable levels, as employment would be available to all who want jobs.
If the current money managers would not know how to help achieve this, able men waiting on the sidelines would step in; assuming, of course, that the citizenry would be sufficiently bright to elect the appropriate teams and not fall for the scare yarns of those who don't understand; w ho think their position is threatened or who have managed to collect or inherit a few dollars and from then on think the ‘system’ that made this bundle for them must be perfect and any change must have a sinister purpose.
There are even some who philosophize: “A little unemployment is good. It will teach those workers and their unions not to make ‘unreasonable demands’ and, so thinking, if they are in key positions they may cause unemployment not merely of the unskilled but, as now, of engineers, scientists, productive minds who contributed more toward the standards and the comforts lie enjoy than any of these self-appointed philosophers.
A few extracts from Pierson's writings will round out the picture. In the WASHINGTON POST May 14 1972 he quotes various politicians’ promises of full employment and adds, Without an explanation of how it can be accomplished, this does little more than widen the credibility gap. Once the focus shifts from merely reducing unemployment to guaranteeing full employment – without going against the grain of tradition — some new ground rules have to be observed. First, the approach must not threaten to have the public sector undermine private enterprise. A Government pledge to serve as employer of last resort needs to be supported by a further pledge that the market for the output of private produce will be sustained at a level high enough to maintain full business prosperity and preclude excessive reliance on the last-resort work program. This is one side of the equation. Yet a basic problem in our society today is its obvious need for greatly expanded services (and capital investments) in the public sector, to counterbalance our over-emphasis on the production of gadgets.
Both our cities and our backyard rural areas cry out for attention. Health, education, housing, anti-pollution, mass transport. Those expenditures, partly private, partly governmental, should be made for their own sake and clearly some initiative must come from Washington. In this sense the government should, as Michael Harrington put it, serve as employer of first — not last — resort.
There follows a detailed explanation' of what action must be taken to implement the plan or to make the Full Employment Act of 1946 work.
In the Congressional Record for March1, 1972, he writes:
A word is needed, about what really is at stake because the arguments over the full employment issue are often pitched on altogether too narrow ground. In briefest summary:
(1) Involuntary unemployment is destructive of personality.
(2) An assurance of continuous prosperity and full employment would weaken the antisocial (usually inflationary) compulsion of business, labor, farmer and other interest groups.
(3) Racial peace seems impossible in this country without universal job opportunity — the present lack of which is also partly responsible for the alienation of youth, not to speak of the helpless bitterness of many older people.
(4) Getting rid of poverty would be greatly simplified as a result of the cash-income effects of continuous full employment (more paid labor, less chance of exploiting labor by paying substandard wages).
(5) The extra wealth (GNP) which would be created under those full activity conditions — the staggering amounts now wasted through avoidable non-production is needed to help finance programs to meet the problems of the cities, backward rural areas, and the environment generally including again problems of poverty but not limited to them.
(6) Internationally, that extra wealth would confirm our ability to extend more generous aid to the world's less developed countries.
(7) More (and more fundamental) than that, confidence in our ability to maintain a market adequate for our own full employment prosperity through domestic policy would substantially deflate our fear of imports and exaggerated preoccupation with export markets and export surpluses; thus it would enable us to be a “good neighbor" that encourages and helps the less developed countries to shift "from aid to trade" as they become ready for it.
The NEW YORK TIMES, 23 January 1972:
To attain full employment is not enough; its continuation has to be assured… universal opportunity to have a bona fide life is what America is supposed to be all about … the vital amendment to the FULL EMPLOYMENT ACT (of 1946) would be this:
Congress would be obligated not to rest content with criticism but to establish final decisions on
(a) a full employment target
(b) a consumer spending target consistent with the recommended government spending program
(c) procedures for adjusting the job total up or down if the target was being missed
(d) similarly contingent methods for adjusting consumer spending.
The HONOLULU ADVERTISER March 27 1970:
From the overall economic standpoint guaranteed full employment would make recessions impossible and inflation highly unlikely, paradoxical as that may seem.
First, the employment and consumer spending guarantees would have ceilings as well as floors to restrain inflation from the side of demand and prevent the price-wage spiral. Secondly, because the Government was offering such guarantees, it would be in a position to persuade business, labor and farm leaders to agree to follow some reasonable set of guidelines in establishing their selling prices so that "cost push” inflation would be restrained too. This is why the outright guaranteeing of full employment would itself provide the best cure for inflation.
Dr. Pierson has purchased a piece of eroded, though in his view reclaimable land on the island of SYROS in Greece, where he plants trees, hoping to remake the land into what it was in Greece's heyday; the work of a generalist, symbol of the wholeness of his outlook.
Beside Dr. Wernette's and Dr. Pierson's approaches to continuous full employment we have the more widely known views and ways of Dr. Leon Keyserling, Chairman of the Council of Economic Advisors to President Truman. Dr. Keyserling now operates out of his Washington D.C. office, more alive than ever.
While there will always be periodic changes in business activity, it may be maintained at levels that are at all times satisfactory. While some may still dislike their jobs, it is possible, in view of our many urgent options, to offer a choice of several jobs to any applicant. The Kennedy Administration planned a supersurvey that would list resources, manpower and potentials and thus put the entire nation to work based, less on workers' previous experience, rather on being taught and trained at work in the new procedures of coming decades.
A slam-bang meeting, a talkaton of all the groups working on various parts of this jigsaw puzzle was planned when tragedy struck. These workers, who had toiled with financial nightmares in many corners of the world, scattered. The effort collapsed.
These repeated efforts to bring sense and reason into the chaos of our economy has been followed by keen observers abroad, not the least because the whole world's economy and happiness is so closely related to America's. Sir William Beveridge, one of England’s clearest and most dedicated thinkers, said on various occasions, "If the United States, possibly the only nation able to achieve full employment here and now — would actually accomplish this, she would thereby do more good than by all her aid and all her wars — not only for herself but for all of us.”
William Beveridge was a long-time leader of England's "Liberal Party" and to understand that term in its English version one needs perhaps to have lived in England. The English liberals do not base their views or their politics on past or present prophets or theories. They look directly, without noticeable bias, at the complex problems facing us.
This chapter on money, to be complete, needs one more face, a Britisher, A. de V. Leigh, General Secretary of the London Chamber of Commerce for thirty-five years. He became the behind-the-scenes leader of world trade and lifted the British Pound Sterling to world prominence.
During World War II he anonymously wrote "A TWENTIETH CENTURY ECONOMIC SYSTEM" from which is quoted his analysis of the then-existing money or banking system — why it so often failed:
When the effective demand for goods is increased so suddenly and largely that current production cannot be speeded up to keep pace with it, stocks begin to diminish and prices rise. The first impetus upward may be given by a relatively small increase in demand from the ultimate consumer or it may be due to psychological causes. The upward movement when once started is however carried forward by the urgent and largely increased the holder of stocks, whether manufacturer, wholesale or retail trader. His action is based upon fear or greed — the fear that if he does not buy now, prices will go higher and the hope that if he does buy now, prices will rise.., still higher and he will reap the benefit. The result of his action is, in fact, that of driving prices higher. When prices are falling he holds off the market in fear that if he buys now his competitors will later buy at lower prices and the hope that if he does hold off, prices will go lower. The effect of his holding off is to drive prices lower. This psychological factor could, it is submitted, be reversed and be made to work in favor of stability.
Under the proposed system traders would know that when prices fell, new purchasing power would speedily be put into the hands of ultimate consumers. The trader, therefore, would rush in to buy before this happened thus helping to bring prices and general business conditions back to stability without intervention. Similarly, when too much purchasing power has forced prices to rise and threatened inflation, the trader would know that action would be taken to contract currency and credit. He would therefore hold off the market waiting for this to happen and by so doing again possibly make official intervention unnecessary. The present psychology would be reversed, with beneficial results.
Money is a mysterious, largely invisible part of our environment. It has been shown how it can be made to serve us rather than haunt us. In addition money is an essential part of any and all aspects of our environment and how to turn it in our favor. But it is not as essential as often assumed, at least not yet. It is not yet time for any overall estimate of reversing the pollution trend. Not for a long time. First of all we must look at the choices facing us.