The Natural Economic Order/Part IV/Chapter 5 K
K. The Unemployment Insurance Office
Since the introduction of Free-Money, applications for unemployment benefit have suddenly ceased; my assistants and I have nothing to do. Money now goes in search of goods, and goods are work, employment. Anyone possessing Free-Money invariably endeavours to get rid of it, either by purchasing goods, or by investing it in a new enterprise, or by lending it to others who are in the position to make use of it. The change is this, that no conceivable circumstances, no personal or political considerations, neither a fall in the rate of interest nor even the complete disappearance of interest and profit, can interfere with the supply of Free-Money. Even supposing that the commercial purchase of goods involved a loss instead of a profit, Free-Money is in exactly the same predicament as all other commodities; these also are offered for exchange, even should their sale involve a loss.
Anyone in possession of Free-Money is forced to pass it on, no matter whether that means a loss or a profit. Free-Money commands; it brooks no delay, it breaks all fetters. The speculator or financier who in attack or defence attempts to hinder the circulation of money is struck down by it. With the force of an explosive it bursts open all stores of money, from the cellars of the great banks to the humble money-box of some stable-boy, liberating itself and rushing to the market. Hence the name "Free-Money". Whoever sells goods for Free-Money must immediately purchase goods again. And purchase of goods means sale of goods, and sales of goods mean employment.
Free-Money is embodied demand, demand is sale, and sale is work. The money reform is an automatic insurance against unemployment; not an official insurance spoon-fed by the State and the employers, but the natural insurance inherent in the division of labour. For labour produces goods, and goods tend always to be exchanged for goods. Through the interference of gold, exchange was forced to pay tribute to two extraneous powers, interest and desire of profit, by which it was hampered. The exchange of goods became conditional upon interest and profit. If exchange did not result in interest or profit, it came to a standstill, because money, the medium of exchange, was held back.
With Free-Money such conditions are utterly impossible. Free-Money is a hungry lion seeking whom it may devour; it pounces on the goods, and goods are employment, for it makes no difference whether I buy goods or employ a labourer direct. The merchant from whom I buy the goods will seek to replenish his stock and get rid of the money by ordering new goods from the manufacturer.
An absurdly simple insurance against unemployment, an absurdly simple labour bureau! Every Free-Money note put in circulation by the State is a substitute for an application for employment: every thousand of these notes is a substitute for a labour exchange. Anyone who sells goods and receives money in return will immediately buy goods again, either for himself or through someone to whom he lends the money; so everyone buys the same quantity of goods that he sells, and everyone sells the same quantity of goods that he buys. There is no room for any surplus; the exact quantity of goods produced is sold. Under such conditions how can slumps, overproduction and unemployment occur ? Such phenomena are possible only when people at times, or usually, buy less goods than they themselves produce.
What happened formerly? The merchant had to pay interest on his capital, so he made the purchase of goods dependent on the exaction of interest. If the situation made it impossible for him to add the interest to the selling price of the goods, he left the products of the workers untouched, and the latter were thrown out of work through the cessation of sales. No interest, no money; no money, no exchange of goods; no exchange, no employment.
Interest was the necessary condition of the circulation of money, upon which employment depends. The Reichsbank itself never issued money without interest, even at times when by universal admission the market was short of money — and this in spite of the fact that according to its charter the main task of the Reichsbank was to adapt the monetary circulation to the needs of the market. (I do not reproach the Reichsbank; even a god would have been powerless if bound by the clumsily framed regulations of its charter).
Today the circulation of money has ceased to be conditional. Money means the sale of goods, no matter what the result. Money — sales of goods — employment — money. Under all possible circumstances the circuit is closed.
The merchant was, of course, bound to keep his profit in mind; the selling price had to exceed the purchase price. That was the natural, inevitable and, moreover, fully justified condition of all commercial activity. And the price paid by the merchant or debited to his account was in every case a known and unalterable quantity (except with sales by commission), whereas the selling price was a lottery, and commerce as a whole resembled a gambling table at Monte Carlo. For between the purchase and the sale there was an interval of time during which the market might change.
Before making a purchase the merchant considered the state of the market, trade prospects and home and foreign politics. If he thought that others shared his belief that a general rise of prices was imminent, he hastened to buy, so as to participate in the looked-for rise with as large a stock of goods as possible. If he was not mistaken, if he had many fellow believers, so that many did buy, that alone was reason enough for the expected to happen, namely a rise of prices - no matter what the reasons upon which the expectation had been founded. For it is clear that if everybody believes in the advent of higher prices, everybody possessing a money reserve will buy, and when all money reserves are employed for purchases, prices must rise.
This case supplies proof of the doctrine that he who believeth shall be saved.
The reverse was of course true when there was a general belief in a fall of prices. When a merchant believed that his fellow merchants believed that prices would fall, he tried to dispose of his stock of goods; on the one hand by forcing their sale, if need be through a reduction of prices. and on the other hand by delaying his orders until a more propitious moment. But as his fellow believers acted in the same manner this again was the sole reason for bringing about the thing they feared. Their belief had made fools of them. For under the gold standard everything happened that people believed. Belief reigned supreme. The belief in the coming of higher or lower prices was quite sufficient to make this belief a reality.
Beliefs, moods, weather reports determined whether money was or was not offered in exchange for goods, whether the workers played football or worked night-shifts and overtime. The offer of the whole monetary reserves in exchange for goods depended on belief!
Free-Money has changed all this. Money does not now wait to inquire about the beliefs or moods of its possessor. It commands, it places orders of its own accord. But just because belief has been eliminated from commerce because faith, hope and love of profit no longer influence the circulation of money, demand is regularised. Mercantile hopes and fears are now simply personal matters without any effect on the market. Labour and the demand for goods are no longer dragged at the heels of an arbitrary power, money; they are no longer subject to the will of the possessors of money, for money is now demand itself.
It used to be considered a matter of course that the worker should go out to look for money, that is, work. Only exceptionally did money go out to look for work. Money compelled goods, work, to come to it. No protest was raised against this breach of the principle of equal rights; everyone tolerated the privilege of money — probably because the privilege was supposed to be indissolubly bound up with the monetary system. The worker and the possessor of goods incurred a heavy, daily increasing loss through postponement of the sale, whereas money produced interest for the potential buyer. So it was natural and inevitable that if buyers stayed at home sellers set out to find them and to urge them personally to buy.
This view is now no longer a matter of course. For the possessor of money feels the money burning in his pocket and is compelled to exchange it, just as the worker is compelled by the perishable nature of his power of work (which cannot be stored) to find a purchaser for it as speedily as may be. So the possessor of money no longer waits patiently for the possessor of goods (worker) to come and find him. He rises earlier, looks about him, and goes to meet the goods half-way.
But when two are searching for one another, they will meet sooner and more surely than when only one is on the look-out. The animal kingdom would be in a sorry plight if the females tried to hide from the males. How would the toad in the pond find his mate if she did not crawl out of the mud at his call?
Formerly the possessor of money gained by hiding from the possessor of goods; for the length of the quest made the latter more amenable. In his dressing-gown and bedroom slippers, so as to make it appear that the worker or seller of goods had disturbed him in his slumber. That is how the buyer met the seller!
So money now under all circumstances goes out to seek the commodities. Money has suddenly become hungry. Its hunger-cure has made it nimble and sharpened its hunting instinct. It does not, indeed, run after the goods, for the goods do not slink out of sight; they cannot do so. The two meet half-way. But if money finds no goods to buy, it does not wait until chance throws what it wants at its feet; instead of that it tracks the article to its source, which is labour.
Thus Free-Money has replaced the official insurance by an automatic insurance against unemployment. Free-Money has become an automatic labour bureau, and I and my 100,000 officials have been turned out on the street. By the irony of fate, the only unemployed in the realm are now the officials of the unemployment insurance office!
- Free-Money does not of course guarantee the individual producer the disposal of his output; it only protects the community as a whole. If someone produces poor goods or asks too high prices, or produces blindly without consulting the needs of the market, Free-Money will not enable him to dispose of his produce. The term "unlimited sales", which is repeatedly used here, applies only to the community; after the introduction of Free-Money neither the claims of interest nor the "tone of the market" can obstruct the disposal of goods. Everyone will be compelled to buy immediately exactly as much as he has sold; and when everyone is under such compulsion there can be no surplus. If anyone has no further need of goods he will either cease working or he will lend his money-surplus to others who require more goods than they themselves have sold at the moment. If competition in some commodity is too great (sugar-beet, pig-iron, dancing lessons) its price will fall; and if production at the reduced price does not pay, everyone will know what steps to take.