- - N .3 
 
 A League of Nations 
 
 What Are 
 Fighting For ? 
 
 DEMOCRACY vs. AUTOCRACY 
 
 By 
 JOHN RAYMOND CUMMINGS 
 
 Author ~of Natural Money 
 The Peaceful Solution 
 
 Published by 
 CHITTENDEN CO., CHICAGO 
 
Copyright 
 
 1918 
 Chittenden Company 
 
PREFACE 
 *+&>i J,/?, 
 
 "A League of Nations," as set forth in the following 
 pages, is a simple working plan whereby the peoples of the 
 world can realize what is now almost universally recognized 
 as the only real guaranty of permanent peace between na- 
 tions. This, of course, is in that province of statecraft which 
 we may call internationalism. But if the war settlement 
 results only in establishing permanent peace between nations 
 we may find that there is little improvement, or none at all, 
 in the condition of the mass of humanity. To improve inter- 
 national relations without improving intranational conditions 
 might prove a step backward by giving oppressive govern- 
 ments a sense of security against interference. Had a cohe- 
 sive League of Nations been formed ten or fifteen years ago 
 it is probable the Hohenzollern autocracy would have been 
 guaranteed permanence for centuries to come. "What Are 
 We Fighting For?" deals with this intranational diplomacy, 
 which must be complemental to "A League of Nations" 
 unless we are content to look forward to conditions in other 
 nations such as have prevailed in Russia the past year; un- 
 less the victory (now seemingly near at hand) is to prove 
 a sore disappointment to the millions of heroic men and 
 women who have made it possible. "Democracy vs. Autoc- 
 racy" deals with the fundamentals of these opposing princi- 
 ples, and shows how autocracy works its sinister designs in 
 the disguise of political democratic forms. 
 
 Except "A League of Nations," this booklet is an abbre- 
 viated epitome of a comprehensive system of economic phil- 
 osophy now almost complete. The system is partially set 
 forth in my book, "Natural Money, The Peaceful Solution" 
 (Bankers Publishing Co., New York). 
 
 JOHN RAYMOND CUMMINGS. 
 
 395830 
 
A League of Nations 
 
 Perpetual Peace and 
 Victory for All 
 
 UNLESS this world crisis develops some- 
 thing fundamental, bad as it is, it is but 
 the prelude to a more terrible one not far 
 distant in the future. If it does develop the right 
 fundamental, terrible as it is, it will be the 
 cheapest and best war ever waged a war by 
 which the world achieved righteousness. 
 
 I believe it is almost universally recognized 
 that, whatever the immediate inciting cause, the 
 underlying cause of the war was economic. It 
 is notably a war for world markets, for economic 
 freedom to the extent that it is genuinely demo- 
 cratic, and for economic control to the extent 
 that it is autocratic. 
 
 Even before the war began, the necessity of a 
 League of Nations to conserve peace had gained 
 wide acceptance in the thought of statesmen, 
 sociologists and the people at large. Interna- 
 tionalism among Socialists and the attempt at 
 concert of action among the wage workers of 
 many nations were expressions of this movement. 
 In its violent forms of syndicalism and sabotage, 
 with which we have had to deal to some extent, 
 it is ominous of an economic debacle that would 
 wreck civilization if such methods should pre- 
 vail. Socialists thought they could prevent war 
 
by refusing to participate, but nationalism 
 proved stronger than internationalism, so the 
 Socialists were in the trenches on their respective 
 sides of the national battle lines at the very be- 
 ginning; yet, though nationalism prevailed over 
 internationalism, and though the mass of the peo- 
 ple are resolutely patriotic, even now there is 
 well grounded fear lest the aftermath of the war 
 should be a drastic reorganization, if not a col- 
 lapse, of some of our social institutions which 
 have long been deemed the cornerstones of ma- 
 terial welfare, if not of civilization itself. Lord 
 Northcliffe's leading paper, the London Times, 
 has strongly intimated the necessity of such in- 
 dustrial changes as would have been deemed rev- 
 olutionary before the war, and similar expres- 
 sions are heard on every hand. Not long since, 
 Earl Lansdowne was thought to be paving the 
 way for a compromise peace, with the object of 
 avoiding the internal changes likely to follow in 
 thq wake of a long-protracted war; and there 
 are doubtless many beneficiaries of unjust eco- 
 nomic conditions whose real attitude is, "after 
 us the deluge," whatever position public opinion 
 may force them to assume for the time being. 
 
 The League to Enforce Peace is doing a noble 
 work, but as yet I have seen no statement in 
 specific and definite details of what the world- 
 embracing League of Nations shall be. It is 
 easy to make the general declaration that we are 
 fighting for democracy as against autocracy. 
 This is true, but the boys at the front want to 
 know something more, and the boys behind the 
 boys at the front; that is, the boys at home who 
 are working loyally to sustain the boys at the 
 
front, and the fathers, and mothers, and sisters, 
 and sweethearts who are giving their utmost 
 energies to support the war want to know some- 
 thing more than is conveyed in general state- 
 ments. Many of them have walked the streets 
 or tramped the highways in vain search for 
 employment in this democracy of which we are 
 justly so proud when we compare it with autoc- 
 racy. Some of those now in the trenches did 
 this in 1907, and some were doubtless in the 
 breadlines of New York, Chicago and Philadel- 
 phia. Are they fighting in part to assure their 
 places in future breadlines in a democracy, 
 where opportunity is said to be open to all? Some 
 of them may have read Bismarck's words, 
 spoken in the Reichstag in 1884, "The man who 
 is able and willing to work has a right to say 
 to the Government, 'give me work.' I stand for 
 that as long as I stand in this place." In that 
 declaration he "stole the thunder" of the Social- 
 ists, and by adopting the wise policy and craftily 
 or ignorantly applying it in such way as to sub- 
 serve the ends of autocracy, he rapidly built up 
 the Leviathan Frankenstein that is now seeking 
 to wreck civilization. This policy alone ac- 
 counts not only for the vast amount of energy de- 
 voted to war preparations in Germany, but also 
 for the marvelous economic advance, which has 
 been the wonder of the world. I shall deal in 
 the next chapter with the democratic method of 
 applying the principle Bismarck applied in part 
 only and for the support of autocracy, and shall 
 show a simple method of accomplishing for de- 
 mocracy far more than Germany has accom- 
 plished for autocracy, by recognizing the right 
 
of men to work, but even before outlining my 
 plan for making A League of Nations a reality, 
 I desire to emphasize the necessity of immediate 
 action by specific declarations instead of general 
 statements. 
 
 A Diplomatic Offensive 
 
 As a result of Russia's collapse, we yielded the 
 military offensive to the enemy, and though we 
 have regained that, we are now in imminent 
 danger of permitting him to retain the diplo- 
 matic offensive until the words "too late" be 
 again written in our record of the war's conduct. 
 We have scoffed at the Kaiser's peace drives, but 
 we cannot reasonably assume that his own people 
 see their hollowness and mockery, nor that the 
 danger is ended. Dr. Frank H. Bohn recently 
 said : 
 
 "Within three months Germany will develop 
 a peace propaganda which will require every 
 force of thought and will which our national in- 
 tellect and character can bring against it." 
 
 We should not wait for more peace drives, 
 but should forestall all such action by a single 
 counter-drive expressed in terms so plain, so def- 
 inite and so just that even the German people, 
 deluded and spiritually abused as they have been 
 by false teachers, cannot fail to recognize them 
 as just. Such a statement of what we are fight- 
 ing for will be a double drive. It will inspire 
 our owin soldiers and people to years of effort 
 and self-denial, if need be, and such statement 
 will find its way across No Man's Land and 
 sap the power of autocracy more rapidly than 
 
the most violent offensive of arms. Let us there- 
 fore at once assure our boys in the trenches, our 
 people at home, and the peoples of all the world 
 even of the Central Powers that we are 
 fighting for a regenerated and rejuvenated 
 world, from which the snobbery and shams shall 
 be eliminated and in which Mr. Schwab's aris- 
 tocracy of merit shall be permanently estab- 
 lished; assure our boys that they are not coming 
 back to be mere hewers of wood and drawers of 
 water in the land they have saved, but are com- 
 ing back to a land where no man shall ever pine 
 in enforced idleness, and where the people who 
 perform useful service shall get all the useful 
 things produced, each in proportion to his con- 
 tribution of service. This, as I shall set it forth, 
 should at once go to the boys at the front and the 
 boys at home, as the solemn pledge of a nation 
 in its hour of danger, that they may be inspired 
 with the vision of a world from which economic 
 injustice, with its poverty and suffering, have 
 been eliminated. The boys will then have re- 
 ceived satisfactory answer to the question, "what 
 are we fighting for?" and the Kaiser, and Luden- 
 dorf, and Hindenburg, and the junkers, will 
 have been dealt a fatal blow. 
 
 The Allies' Peace Drive 
 
 The world is in travail. Internationalism is 
 struggling to be born, and humanity is looking 
 to America that this greatest birth of time be 
 not aborted. 
 
 The failure of all efforts thus far to establish 
 internationalism on a firm basis is due to lack of 
 
a world-wide binding interest of sufficient 
 strength to prevent one or more nations from 
 breaking away. Lack of this cohesive element 
 would be a fatal weakness to A League of Na- 
 tions, and internationalism must be a failure un- 
 til the unbreakable bond is discovered and ap- 
 plied. And as the bottom cause of the war is 
 economic, it is obvious that the bond to bind the 
 nations must be economic. Is there such a bond, 
 and is the world ready for its application to the 
 nations? There is such a bond, and the world 
 is ready. Not only is the world ready it is im- 
 patient and there is no time to lose. In one of 
 the morning editorials, under the heading, 
 "America the Hope of Russia," I read: 
 
 "A Russian expert has demanded in the Lon- 
 don Times that a group of representatives of the 
 Entente Allies gather at some convenient point 
 and agree on what is to be done to prevent Ger- 
 many from controlling Russia after the war. 
 There is no agreement now"; and in H. G. 
 Wells' new book, "In the Fourth Year: Antici- 
 pations of a World Peace," I read: "One can 
 trace week by week, and almost day by day, the 
 Americanization of the British conception of the 
 allied war aims." 
 
 Yes, it is to America the world is looking, and 
 we must not disappoint the world's expectations. 
 It is Fate's delight to crush that man or nation 
 that trembles at events and fails to ride them to 
 great purposes. We must not fail. Failure 
 would be a cosmic tragedy. But neither must 
 we be misled by the universal chorus of democ- 
 racy into believing that the "autocrat" and "gen- 
 eral staff' of "The Unseen Empire" have sud- 
 
 10 
 
denly been converted to true democracy. They 
 have not. Our profiteers prove that. 
 
 u To prevent Germany from controlling Rus- 
 sia after the war" we all see the vital impor- 
 tance of this. Most of us see also that Germany 
 must be prevented from controlling Austria- 
 Hungary, Serbia, Bulgaria, Roumania and Tur- 
 key after the war, but how many see the whole 
 truth? Let us not deceive ourselves nor be de- 
 ceived. The larger truth is: We must prevent 
 any^ nation from controlling any other nation. 
 In other words, it is not enough merely to pre- 
 vent German domination of other peoples. We 
 must carry out President Wilson's declaration 
 in good faith and make every nation free. 
 
 To accomplish this we must have an interna- 
 tional organism as definite and positive in its 
 functions as our national government organisms 
 are. Its functions must contact the daily life 
 and interests of the people from day to day, for 
 if the world organism does not do this, it will 
 flounder in helplessness and impotency. 
 
 No nation is honest enough to be permanently 
 bound against its interests by an unwise agree- 
 ment, and it is doubtful whether peoples ought 
 to be bound except by their true interest. What- 
 ever we may decide as to this, it is evidently 
 desirable to bind nations together in such way 
 that the future interest of each nation shall make 
 it impossible for it to break away without suf- 
 fering more future loss than its present gain. 
 This is the whole secret of a binding League of 
 Nations. Any league that rests solely on the 
 
 11 
 
sanctity of a promise will not bind an unscrupu- 
 lous nation, and will bind the scrupulous one to 
 its damage. 
 
 The Unbreakable Bond 
 
 Almost as long as I can remember, it has been 
 a widespread belief that a large part of the 
 world's suffering is chargeable to the greed of 
 bankers, and for two or three decades Big Busi- 
 ness has been a co-defendant in the indictment. 
 They have even been charged by radical reform- 
 ers, of whom I am one apart (being a reformed 
 reformer, but not reactionary) , with bringing on 
 war for their 'own profit, and Big Business has 
 often been depicted as a juggernaut that is ruth- 
 lessly crushing humanity. As a matter of fact, 
 Big Business will remodel the world in a few 
 decades if we provide the social mechanism 
 whereby it can work unhampered by legal re- 
 strictions on the one hand and by industrial un- 
 rest on the other. But to realize this condition, 
 the coming new order must provide for all, not 
 merely for Big Business. Big Business will be 
 bigger in just conditions than is now even 
 dreamed of, but all men must rise together. Class 
 government means war sooner or later, though it 
 is seldom consciously a class war. The social 
 mechanism needful is what the war will bring to 
 the world if we settle it right. But if the men 
 "who do things" do not improve the opportunity 
 by seeing that the war is settled on fundamental 
 principles, then it will be settled as many pre- 
 vious wars have been settled by mere tem- 
 porary shifts. 
 
 12 
 
President Wilson has set the pace and indi- 
 cated the direction, but as yet I have seen no 
 reference in his messages to any specific mechan- 
 ism, such as I am about to propose, the adoption 
 of which will be the means of realizing the lofty 
 ideals he has set before the world. Perhaps he 
 is reserving details for the future, but if we can 
 formulate a plan so obviously just and impartial 
 that no criticism can be made of it, then it seems 
 advisable to state it fully in advance in order 
 that the world may bear witness, and the high 
 ideals of President Wilson suffer no discount; in 
 order that insincere peace drives by the Kaiser 
 may no longer deceive even his own subjects; 
 in order also that cunning reactionaries, who 
 fear the triumph of true democracy more than 
 they fear autocracy, may not, when the imme- 
 diate danger is past, prevent the world from re- 
 alizing the full fruit of its heroic sacrifice. I 
 believe the following is the mechanism required 
 to bring 
 
 Perpetual Peace and 
 Victory for All 
 
 Anyone who knows just a little more than a 
 little about money and banking knows that if 
 the government should reduce the required legal 
 bank reserve from the present average of less 
 than 10% to a still lower proportion, say 5%, 
 the effect would be a pro rata expansion of bank 
 credit and a further advance of prices, soon fol- 
 lowed as a matter of course by demands for wage 
 increase because of the higher cost of living, and 
 later by petitions from the railroads and other 
 
 13 
 
public service corporations for permission to ad- 
 vance their rates because of higher wages and 
 the increased cost of materials. The converse 
 of this is also true; that is, if the government 
 should require bank loans to be contracted from, 
 say ten times the reserve to a smaller multiple, 
 the effect would be a general fall of prices, an 
 increase of the purchasing power of the money 
 unit, a corresponding increase of the burden of 
 all debts and fixed charges, and a final lowering 
 of money wages. It is a vicious circle, and there 
 is no end of our running around it except to fall 
 back and begin over. (The new advance of 
 railway rates was made after this was written.) 
 
 It is generally known that the enormous inflow 
 of gold from abroad since the war began, being 
 an addition to the required gold reserve without 
 any corresponding increase in the reserve re- 
 quirements, became the basis of several billions 
 of new bank credit, thus constituting a consider- 
 able factor in price advance over and above the 
 advance due to the relative scarcity resulting 
 from the employment of tens of millions of men 
 in war. 
 
 One who knows and holds fast to these almost 
 commonplace truths will readily see that, in- 
 stead of issuing bonds to meet the expenses of 
 the war, the United States could issue legal 
 tender bills (treasury notes) receivable for all 
 public dues in lieu of gold (not redeemable in 
 gold), and that this money would always be at 
 par with gold provided the bank reserve require- 
 ments 'were increased in parallel 'with the issue 
 of new money and the new money constituted 
 the added reserve. This is self-evident, for if 
 
 14 
 
the banks can keep private credits at par with 
 gold, surely they can keep as much national 
 credit at par; that is, to the extent of the volume 
 of bank credit required by the demands of busi- 
 ness. 
 
 So let us assume that the government notifies 
 the banks to increase their reserve monthly by 
 from five to ten per cent of the reserve existing 
 at the end of each month, until further notice. 
 Of course this will bring a protest from the 
 banks, but if the government furnishes the in- 
 crease of reserve without charge by depositing 
 legal tender treasury notes, and allows the banks 
 to go on making loans as before, but limited by 
 the increased reserve requirements, the banks 
 will be just so much nearer solvent instead of 
 being technically bankrupt, as they now are; 
 and if this process be continued the government 
 will gradually take over the "unsecured credit" 
 part of the banking business, but will not take 
 it over to hold it. The government will draw 
 checks from day to day in payment for services 
 and supplies, and the money will remain in bank 
 as private deposits, just as nearly all bank cred- 
 its now do. The process will be continued until 
 the legal bank reserve reaches 100%, and 
 bankers will thereafter lend money instead of 
 lending credit, and business men will borrow 
 money instead of "selling money short," as they 
 now do, with bankers as underwriters of their 
 promises. But bankers will not lend money 
 which the owners may demand at any moment. 
 It is not sound business policy to lend money 
 that is subject to call, and banking will never be 
 perfectly safe while the practice continues. It is 
 
 15 
 
simply legalized "check kiting." Only time de- 
 posits should be loaned, for as lenders of money 
 belonging to others (deposits), bankers are mere 
 underwriters. 
 
 Probably some thoughtless persons will de- 
 nounce the proposal as high-handed and confis- 
 catory, but a little thought shows such conten- 
 tion to be unfounded. It is not proposed to take 
 a penny of the banks' assets. Their capital, sur- 
 
 'us and undivided profits will be unimpaired, 
 hey will collect their loans and pay their de- 
 positors the same as if no change had been made 
 in the banking law. They will even continue to 
 lend mere "bank credit" the same as they now 
 do except that the volume of such loans will be 
 limited by the new reserve requirement; and 
 after the reserve reaches 100%, as combined un- 
 derwriters and lenders, they will lend savings 
 deposits. The competition of the market will 
 equalize the return to bankers with the returns 
 to business in general. But the contention that 
 such law would be an encroachment upon in- 
 dividual rights becomes absurd when we com- 
 pare it with what is now actually being done. 
 The taking over of the railroads and telegraph 
 lines and the proposed assumption of govern- 
 ment control of telephones and other enterprises 
 is far more radical than my proposal. In these 
 cases actual property is taken from private con- 
 trol, but in the case of the banks it would not in- 
 volve any change in the personnel of manage- 
 ment nor even government custodianship of pri- 
 vate property. It is a change which ought to be 
 made even if no war were in progress or antici- 
 pated. If anyone doubt this, let him make a sin- 
 
 16 
 
cere effort to show any sound reason why a pri- 
 vate organization-for-profit should be made 
 quasi-governmental in character and granted the 
 special privilege of monetizing credits to the 
 extent of about ten times its own assets by giving 
 them the quasi-governmental character of "bank 
 credit," which is legal tender for all practical 
 purposes. 
 
 There will be no loss to the banks by the 
 change I propose. Their assets will not only be 
 unimpaired, but will soon be greatly enhanced 
 in value. I speak of requiring the banks to in- 
 crease the reserve, but really the depositors 
 themselves will increase it, for even if the gov- 
 ernment should pay the money direct to muni- 
 tion makers and others instead of depositing it 
 in the banks, it would immediately go into the 
 banks. The banks will gradually readjust their 
 business to the new conditions, and will get their 
 returns as compensation for performing the true 
 functions of banking; that is, as quasi-official cus- 
 todians of funds, as social accountants, and as ex- 
 changers (transferrers) of credits between 
 distant points. These are vitally important 
 functions of banking, and ought not be confused 
 with the business of lending and underwriting, 
 as they now are. The businesses are closely al- 
 lied, and will not be disjoined under the new 
 order, but will be properly related. The dis- 
 tinction is merely the distinction between a 
 checking bank and a saving bank, and every 
 bank will soon have a savings department, the 
 deposits of which will be loaned, and probably 
 every customer enjoying the advantage of the 
 checking bank will be required either to pay 
 
 17 
 
higher charges for its services or to keep a speci- 
 fied balance in the savings department. The 
 proposed change therefore amounts to this: 
 
 By requiring all deposits subject to check to 
 be actually in bank, the government makes the 
 business of banking absolutely safe, and by pro- 
 viding the additional reserve it accomplishes 
 this without hardship or inconvenience to the 
 banks or to business. By purchasing supplies the 
 government transfers its interest as depositor in 
 the banks to individual depositors, who get no 
 dividends on 'their deposits in bank and will of 
 necessity pay for all the services rendered, prob- 
 ably in part, as suggested, by carrying their sur- 
 plus as savings deposits. Thus the depositors 
 will become owners of the increase of reserve, 
 but will realize no profit except in the benefits 
 of an indispensable service rendered at a nominal 
 cost. 
 
 The depositors are now owners of all the as- 
 sets of a bank in excess of capital and surplus, 
 and as a lender of credits belonging to its cus- 
 tomers the bank is acting in the double capacity 
 of a loan agent and a guaranty company. An 
 individual's "promise to pay" may be even bet- 
 ter in fact than that of the average bank, yet it 
 will not pass current in trade because compara- 
 tively few people know it is good, whereas even 
 an obscure bank's obligations will be accepted 
 because the banks, being subject to official ex- 
 amination, are impliedly endorsed by the gov- 
 ernment until closed by the bank examiner. 
 
 I say there will be no loss to the banks by the 
 change I propose. They now perform several 
 necessary functions, the value of which is limited 
 
 18 
 
by the volume of production and exchange. If 
 banking is not a monopoly they cannot realize 
 more than the general average return to capital, 
 all things considered (the cost of labor involved, 
 risk carried and the high order of ability re- 
 quired) . If banking is in any sense a monopoly, 
 then the monopoly feature ought to be elimi- 
 nated, but I do not share in the opinion that 
 bankers, as such,* enjoy a profitable monopoly. 
 The greatest fortunes are not made in banking. 
 It is, however, probably true that the banks per- 
 form much service without charge, or below 
 actual cost, and recoup the loss by receiving un- 
 due payment for other service. This will adjust 
 itself and the banking business as a whole will 
 get just what it now gets payment for the serv- 
 ice rendered. But there will be this very great 
 gain to the banker: He will not live in con- 
 stant fear of a general collapse that may make 
 him a criminal bankrupt (a bankrupt in fact, 
 and often imprisoned as a criminal, though his 
 crime may be only technical) ; and because there 
 
 *Xote "As such" is an important qualification, for during 
 the last few decades there has developed what we may call 
 the "promotion banker." The late J. Pierpont Morgan was the 
 most conspicuous of this type, and The United States Steel 
 Corporation was his most notable achievement. However, he 
 was only one of many in New York, Boston, Philadelphia and 
 Chicago. One of their methods was to get control of the 
 enormous funds of life insurance and trust companies and 
 use them for their enterprises; that is, to gain control of rail- 
 ways and railway systems. As these funds aggregate several 
 billions of dollars, the power thus represented is almost beyond 
 comprehension. It has been common knowledge for some 
 years, that an enterprise requiring even a few million dollars 
 could not be financed in New York against the will of these 
 controllers of credit, and most readers will recall how the 
 government itself was not only intimidated and prevented from 
 enforcing the law in the case of The Tennessee Coal and Iron 
 Co. by threats of a panic, but was actually forced to extend 
 assistance to "Wall Street." Many readers will also recall the 
 fact that these financial titans are sometimes at war among 
 themselves, as in the case when the stock of one of the trans- 
 continental railroads went to something like ten times its 
 normal market value because of the rivalry for control. 
 
 19 
 
will be no possible danger of collapse, the re- 
 turns to the business of banking will be without 
 the frequently recurring interruptions of panic 
 and ensuing periods of depression. To deposi- 
 tors there will be the gain of absolute security, 
 which will also benefit bankers, for the millions 
 now hoarded will be deposited in savings banks. 
 So I repeat again, there will be no loss to bankers, 
 but a very substantial gain, both financial and 
 
 in the elimination of anxiety. 
 
 ***** 
 
 As bank credits are now some forty billion 
 dollars, the government can meet the war ex- 
 penses to the extent of at least thirty billion dol- 
 lars without any expansion of the currency (bank 
 credits), and if the government's need should 
 exceed this amount it can proceed in the same 
 way after the reserve has reached 100%, when 
 the effect of further increase will be a general 
 advance of prices if the increase of money vol- 
 ume should outrun the increase in production, 
 but not otherwise. Under the 100% reserve law 
 the money volume may be increased to the ex- 
 tent of the increase in production without caus- 
 ing an increase in prices, and conversely, if the 
 money volume does not keep pace with the in- 
 creasing volume of production the general level 
 of prices must fall. Should the situation be such 
 that money must issue in excess of the present 
 volume of bank credit, such excess will be an 
 automatic and equitable tax upon everybody, for 
 everyone gets the bulk of what he consumes by 
 exchanging money for it. The tax is thus auto- 
 matically distributed without being levied, and 
 spread, and collected, with many "fingerings." 
 
 20 
 
Money issue is a natural source of revenue for 
 the general government to the extent of the per- 
 manent money volume, and where the need tem- 
 porarily exceeds normal issue, as in case of war, 
 excess issue is a tax perfectly distributed by the 
 automatic action of the natural law, and shows 
 in the advance of prices a tax no man can evade 
 or shift. If we assume the general money-wage 
 level to be fixed (as it will be in the perfect social 
 order) the burden of a general advance of prices 
 due to unusual money issue will fall upon those 
 who are living upon past accumulations of credit 
 (money) the same as upon current producers. 
 
 Lest it should not be clear that the foregoing 
 is sound, let us state it in other form, thus: 
 
 Assume that the war is ended, that it was 
 financed largely by the sale of bonds, and that 
 we have a debt of 30 billion dollars bearing an 
 average interest rate of 4^% an annual charge 
 of one billion, three hundred and fifty million 
 dollars. Let the banking law be revised by mak- 
 ing the Federal Reserve Bank a national insti- 
 tution in the sense that it shall be a part of the 
 Treasury Department. Require every individual 
 bank to carry its reserve in the Reserve Bank, 
 increasing it gradually, as previously described, 
 until it reaches 100%, and making the bonds con- 
 stitute the increase of reserve, interest on the 
 bonds to be suspended while so used. 
 
 This is simply another way of doing the same 
 thing as issuing treasury notes and requiring 
 them to be held as the complement of gold in 
 making up a 100% reserve is monetizing the 
 bonds as bank credit after their issue instead of 
 
 21 
 
monetizing bank credit and avoiding bond 
 issue. 
 
 If anyone thinks this would be inflation in the 
 sense that it would lower the purchasing power 
 of the dollar, let him remember that present 
 bank credit is the equivalent of gold or full 
 legal tender bills, and that in the plan proposed 
 there will be no enlargement of the "currency" 
 volume. Instead, we shall simply "demonetize" 
 present bank credit exactly equal to the bonds 
 monetized. In other words, it will simply be a 
 substitution of the nation's credit for the present 
 bank credit made quasi-national by official su- 
 pervision. I think no one will deny that present 
 bank credit is the equivalent of gold for all prac- 
 tical purposes. Technically it is not legal tender, 
 but when it ceases to be legal tender for all prac- 
 tical purposes the banking system is tottering to 
 its fall. 
 
 So there is really no need to prosecute a Lib- 
 erty Loan campaign, and with the passage of a 
 single amendment to the banking law the war 
 will be financed without debt, or if we wait till 
 after the war, the bonds will be monetized and 
 thus turned into a perpetual non-interest bear- 
 ing national credit. 
 
 But important as this is it is only preliminary 
 to and in elucidation <of the plan I have in mind, 
 which is nothing less than a speedy settlement 
 of the war and the prevention of war in the 
 future really a very simple problem. 
 
 If the United States can monetize what we 
 call bank credit, or its bonds, as set forth, ob- 
 
 22 
 
viously other nations can do the same in varying 
 amounts; and still more obviously, many nations 
 acting together can monetize their aggregate 
 bank credits by co-operating in the issue of an in- 
 ternational, polyglot legal tender, a World 
 Money, receivable by all the nations in lieu of 
 gold; not excluding gold, nor redeemable in 
 gold, but the equivalent of gold for all purposes 
 in the realm of each signatory power, just as 
 bank credit now is virtually the equivalent of 
 gold within each nation. So let us consider the 
 proposal as part of an international enterprise, 
 in brief as follows : 
 
 1. Provide for the establishment of a World 
 Congress, a World Bank and a World Court, 
 the Congress to have absolute control of the sea 
 and world highways, the bank's issue to be a 
 legal tender in all the nations signatory, and the 
 court to have original and exclusive jurisdiction 
 in all disputes between nations, and its branches 
 in the various nations to constitute the admiralty 
 court. 
 
 2. Provide that each of the nations signatory 
 shall lodge its bonds with the World Bank and 
 receive in exchange therefor World Money to 
 the extent of its needs for money circulation, and 
 credit in the World Bank for the remainder. For 
 bonds privately held and not surrendered for 
 the purpose, let the individual nations issue tem- 
 porary bonds to make up its quota in the World 
 Bank until the outstanding bonds come in. 
 
 3. Provide that all bonds so lodged with the 
 World Bank shall bear a uniform rate of in- 
 terest payable in World Money as follows: 
 
 23 
 
Two years at 
 
 Two years at 4 % 
 
 Two years at 3^% 
 
 Two years at 3 % 
 
 Two years at 2 l / 2 % 
 
 Two years at 2 % 
 
 and thereafter such rate of interest as may be 
 determined by the World Congress.* 
 
 4. Provide for representation of the various 
 
 nations in the World Congress. 
 
 ***** 
 
 Probably it would be well to leave all other 
 details to the Congress itself, but I may here 
 point out some of the things this League of Na- 
 tions would make possible. 
 
 For the purpose of illustration let us assume 
 the national debts to be monetized are as fol- 
 lows: 
 
 United States 30 billions 
 
 Great Britain 40 " 
 
 France 35 
 
 Italy 15 
 
 Germany 30 " 
 
 Russia 20 ' 
 
 Austria-Hungary 20 " 
 
 Small nations and prov- 
 inces . 10 " 
 
 Total. 200 
 
 *Note If it be decided to punish the Central Powers 
 economically, no better way is conceivable than to put upon 
 them the burden of a handicap in the World Bank. If it were 
 provided that they should pay four per cent, on their bonds 
 in the World Bank for a century, while the interest rate for 
 all others declined to two per cent, in twelve years, and per- 
 haps to one per cent, or lower in twenty years, there need be 
 no fear. It would mean some six hundred to nine hundred 
 million dollars a year burden on Germany alone almost as 
 much annually as she assessed upon France in 1871. 
 
 24 
 
At the declining rate of interest suggested the 
 World Congress would have a revenue of 78 
 billion dollars in twelve years, besides payment 
 for services rendered, which latter should be 
 sufficient for actual expenses. 
 
 With this enormous sum the World Congress 
 should buy all the securities of the Panama, Suez 
 and Kiel canals and make them free to all the 
 nations signatory. Probably it would be well 
 also to pay Turkey and England liberal sums 
 for the Dardanelles and the Strait of Gibraltar 
 and make them free to all nations. Free world 
 highways should also be provided from Siberia 
 to an all-the-year port on tide water. If Ger- 
 many and her allies join the League, world high- 
 ways should be opened from the English Chan- 
 nel to the German frontier, across eastern France 
 to the Mediterranean, and to the Adriatic 
 through Austria-Hungary. 
 
 Buy all the navies of the world and as much of 
 the war equipment as may seem advisable. 
 
 Probably the foregoing would not consume 
 more than five billion dollars (certainly not more 
 than eight), leaving seventy billions or more for 
 the rehabilitation of Belgium, Serbia, Poland 
 and northern France, and for such world enter- 
 prises as the World Congress may deem advis- 
 able. 
 
 Of course this world Congress will be made 
 up of representatives from all the nations signa- 
 tory, and delegates from other nations, should 
 any not enter; may have both a house and a sen- 
 ate; will elect its own president, and pass all 
 laws relating to the sea and other world high- 
 ways. The World Court will be made up of 
 
 25 
 
judges from the various nations, at least from 
 many nations, and the World Bank will be the 
 clearing house of the world, and probably will 
 be the storehouse for all the gold money of the 
 
 world. 
 
 ***** 
 
 It is important to explain that this polyglot 
 World Money will be just what the term signi- 
 fies, a money printed in many languages. The 
 money issued to a nation for domestic circula- 
 tion will be printed upon one side in the lan- 
 guage or languages spoken in that country, and 
 on the other side will be printed in miniature 
 in many languages. This of itself will be a 
 powerful educational influence for world unity. 
 The remainder of each nation's quota will be a 
 credit in the World Bank. For convenience, 
 there will be in each nation a national bank for 
 the use of banks only, and this will be the con- 
 necting link between individual banks and the 
 World Bank, which latter will deal only with 
 this one national bank in each nation. It ought 
 to be a part of the Treasury Department. 
 
 Let it be especially noted that all the money 
 for domestic use in a nation is printed upon one 
 side in the language of that nation. It will be 
 received at par for a World Bank draft, but 
 should a nation break away from the League (as- 
 suming this for the sake of illustration), its 
 drafts would be dishonored. Thus virtually all 
 the money within such seceding nation would 
 be made null and void, and all its credit in the 
 World Bank would be suspended. Whatever 
 domestic system it might then adopt, its interna- 
 tional commerce would be hopelessly handi- 
 
 26 
 
capped, even if the League of Nations inter- 
 posed no material restraints upon it. 
 
 This money will be used by all the peoples 
 of the world, and will always be above par as 
 compared with gold bullion or the coinage of 
 any nation, and will be used in countries not 
 joining the league (should there be any such), 
 because it will pass everywhere in the world 
 without the necessity of being exchanged, and of 
 course it will be used in the payment of all in- 
 ternational balances and in the payment of 
 duties so long as tariffs continue. To the extent 
 that the people of nations not joining the league 
 permanently hold the money they would be giv- 
 ing wealth to the issuing nations. It must also 
 be remembered that in a World Bank, payment 
 of balances between nations will have no effect 
 in reducing the total of credits in the bank. Only 
 the money in actual circulation need be printed. 
 This volume must be sufficient in each nation for 
 the money the people habitually carry in their 
 pockets, and to supply money for payrolls, but 
 this is only a fraction of the total volume of 
 money or money equivalent, nearly all of which 
 is merely a book credit subject to transfer by a 
 written order called a check. 
 
 Is it conceivable that any nation would reject 
 peace upon such terms? And is it conceivable 
 that war could come again, with this world-em- 
 bracing co-oppration? A nation cut off from 
 co-operation with other nations by being dis- 
 honored at the World Bank and having its credit 
 suspended, would be in the position of a 
 business house without banking facilities. Tlje 
 day on which this is proposed to the nations by 
 
 27 
 
that modern miracle, the wireless, will be the 
 latter day of that time which began with the 
 birth in a manger at Bethlehem, from which our 
 world was re-dated; and will be ai realization 
 of That Day's promise: On earth peace, good 
 will toward men. 
 
 And the next day's sun will rise on a world 
 unvexed by war, with a place in the sun for all 
 the sons of men. 
 
 And within a decade the nations will learn 
 that there is a potential money fund in every 
 nation many times greater than its quota of this 
 World Money; equal to at least five times its 
 annual wealth production. 
 
 And soon after the whole money truth is 
 learned, national boundaries will be as little 
 noted as lines of latitude and longitude, for all 
 peoples will be united 
 
 "In a parliament of man, a federation of the 
 world." 
 
 This will be a realization of President Wil- 
 son's hope for "peace without victory" in the 
 sense of the dismemberment, or even the crush- 
 ing defeat, of any nation (if the Central Powers 
 are not hopelessly insane), but in the broadest 
 sense it will be peace 'with victory for all vic- 
 tory of the world over War itself. 
 
 And the most devastating war of all time will 
 have been the cheapest war ever waged, for it 
 will be virtually without debt and the prize 
 gained will be the emancipation of humanity. 
 There will be no occasion for treaties and guar- 
 anties; for alliances and counter alliances; for 
 the balancing of powers against powers; for dis- 
 sembling diplomacy not even for change of 
 
 28 
 
government forms. Injustice cannot long per- 
 sist in a nation bounded by justice, and tyranny 
 will be impotent with freedom just beyond the 
 horizon. Even if some far-away autocrat should 
 fail to join at the first, thinking to preserve his 
 autocracy, he would soon make a journey, like 
 the Queen of Sheba, to learn wisdom. It will 
 be a United States of the World. 
 
 "And they shall beat their swords into plow- 
 shares, and their spears into pruning-hooks: na- 
 tion shall not lift up a sword against nation, 
 neither shall they learn war any more. 
 
 "But they shall sit every man under his vine 
 and under his fig tree ; and none shall make them 
 afraid, for the mouth of the Lord of hosts hath 
 spoken it." 
 
 But let us assume what seems impossible, 
 namely, that Germany prefers annihilation to 
 freedom of the seas and the world's guaranty of 
 "a place in the sun" and unlimited opportunity 
 for development on terms of equality with other 
 nations assume that she prefers annihilation to 
 such terms. Very well, we should be in much 
 better position to accomplish her annihilation 
 than we now are or can possibly become without 
 such League of Nations. 
 
 As for those who would insist upon annihilat- 
 ing Germany, or even the leaders, rather than 
 accept their complete acquiescense, which join- 
 ing the League would be, such persons are only 
 less insane than the Kaiser himself. Such atti- 
 tude would discredit the claim of the Allies that 
 
 29 
 
they are fighting for democracy and would al- 
 most validate the claim of Germany that she 
 was fighting against a concerted purpose to de- 
 stroy her. Against the unquestionable proof that 
 she actually started the war, she would "confess 
 and avoid"; that is, would admit that she did 
 precipitate it at the particular time, because she 
 knew it was inevitable and that her only hope 
 lay in striking before her enemies were fully 
 prepared to accomplish her destruction. 
 
 To further emphasize a plain truth, which is 
 obscure only because it has been obscured by 
 ignorance or by intent, namely, that in permit- 
 ting banks to lend "bank credit" to the extent of 
 eight or ten times their holdings of lawful money 
 the government is delegating to individuals its 
 most important and powerful monopoly func- 
 tion to further emphasize this, let me again ask 
 the reader to formulate an argument in support 
 of the policy. As the system is of a piece with 
 the custom of "farming out the taxes," he may 
 get some help from a study of this ancient abuse. 
 And should he find an argument that seems to 
 validate our "farming out" of the money-issue 
 function, let him make sure the argument does 
 not prove too much. For instance, a bank is a 
 quasi-governmental warehouse in which "social 
 credits" (money) ought to be safely stored, just 
 as wheat, corn, etc., are safely stored in govern- 
 mentally regulated warehouses called grain ele- 
 
 30 
 
vators. If a banker may justly be permitted to is- 
 sue certificates of deposit on mere promises to de- 
 posit (pay) money at a future date, and this to 
 the extent of eight or ten times the actual money 
 deposits in bank, is there any reason why the 
 owner of a grain elevator should not be per- 
 mitted to issue warehouse receipts to the extent 
 of eight or ten times the grain in his elevator, 
 such receipts to be based on promises to deliver 
 grain in the future? 
 
 And it would be well to inquire why virtually 
 all debts, both public and private, should be con- 
 tracted on the basis 'of a price level determined 
 by a large volume of currency (bank credit, 
 which is money for all practical purposes), with 
 the ever-impending liability to payment when 
 the volume of currency has been contracted by 
 twenty, thirty, or even fifty per cent? 
 
 And in view of the universally recognized 
 fact that a judge or juror cannot honorably act 
 in a case in which he is interested, and in view 
 of the further fact that the assets of banks are 
 money and promises to pay money, and that these 
 assets will be increased in value in substantial 
 proportion to the contraction of bank credits, it 
 would be well for the defender of our present 
 system to show why the contraction of credits 
 should be delegated to men who profit by such 
 contraction at the expense of others, the same as 
 if the volume of currency (bank credits) re- 
 mained the same and' all debts were increased 
 twenty, thirty or fifty per cent by a federal sta- 
 
 31 
 
tute or by falsifying the bank balances of in- 
 dividuals. 
 
 And lest it should be thought an indictment of 
 our system is an indictment of bankers, a charge 
 that they are dishonest as a class, I specifically 
 state my belief that with the exception of a small 
 percentage previously referred to, they are men 
 of exceptionally high character. Still with the 
 same exception, they endeavor to protect the in- 
 terests of their clients, even at the risk of their 
 own failure, often in circumstances requiring 
 courage of the highest order. The fault is in the 
 system, which a few unscrupulous men may ma- 
 nipulate to the peril of all ; a system which, even 
 without manipulation, is periodically fraught 
 with danger from influences originating in the 
 industrial order, as I shall presently explain. 
 
 32 
 
What Are We 
 Fighting For? 
 
 I SAID in A League of Nations: "Let us 
 therefore at once assure our boys in the 
 trenches, our people at home, and the peo- 
 ples of all the world even of the Central Pow- 
 ers that we are fighting for a regenerated and 
 rejuvenated world, from which all snobbery and 
 shams shall be eliminated and in which Mr. 
 Schwab's aristocracy of merit shall be perman- 
 ently established; assure our boys that they are 
 not coming back to be mere hewers of wood and 
 drawers of water in the land they have saved, but 
 are coming back to a land where no man shall 
 ever pine in enforced idleness, and where the 
 people who perform useful service shall get all 
 the useful things produced, each in proportion 
 to his contribution of service." 
 
 Can anything be more obviously just than this? 
 Can any reasonable person ask more, or any fair 
 minded person grant less? Yet it means nothing 
 more than our spread-eagle Fourth-of-July ora- 
 tory unless it is definitely formulated as to the 
 social mechanism by which it is to be realized. 
 As I said of our international diplomacy, "To 
 accomplish this we must have an international 
 organism as definite and positive in its functions 
 as our national government organisms are," so 
 I say of this tw/r^-national diplomacy, that in 
 order to make it anything more than "sounding 
 
 33 
 
brass, or a tinkling cymbal," anything more than 
 a campaign catch phrase, we must make it def- 
 inite and specific. 
 
 "The man who is able and willing to work has 
 a right to say to the government, 'Give me work.' 
 I stand for that as long as I stand in this place." 
 The Blood-and-Iron Chancellor knew the so- 
 cialistic "thunder" that was worth sefeling, and 
 he knew how to pervert it to the uses of autoc- 
 racy. This policy is the secret of Germany's 
 marvelous economic development, of her power 
 to battle against half the world ; and it is in large 
 part the secret of the morale of the German sol- 
 diers and people. As said, the principle was per- 
 verted in its application, and made a prop to 
 autocracy, but it was actually applied, and I 
 have read that in several decades there has at 
 no time been more than two per cent of unem- 
 ployment in Germany. If this statement of the 
 low percentage of unemployment is true, it is 
 likely that the high percentage of enforced idle- 
 ness in this and other countries at various pe- 
 riods was industriously advertised to the labor- 
 ing classes in Germany and that they are still re- 
 minded of the contrast. 
 
 The perversion of the principle was an easy 
 matter, for autocracy may safely recognize the 
 individual's right to demand employment if the 
 government instead of the natural law be left 
 to determine the wage. This is the only differ- 
 ence between economic justice and all that even 
 autocracy could ask, for the difference is the 
 whole surplus above a modest subsistence. Thus 
 all the saving made by keeping everybody at 
 work ^vent to the War Lord for implements of 
 
 34 
 
war and for trade drives all over the world by 
 secret subsidies and other unfair methods. Con- 
 sider what Germany's economic position would 
 have been if she had been wise enough during 
 the forty years preceding the war, to make it 
 simply an economic drive for conquering the 
 world markets instead of making her trade con- 
 quest under the handicap of enormously expen- 
 sive war preparations. If all the labor devoted 
 to war preparation had been devoted to making 
 things to use she would have forced other na- 
 tions to recognize the truth Bismarck stole from 
 the Socialists and devoted to the uses of autoc- 
 racy. 
 
 Opportunity is knocking at the door of Ameri- 
 ca, and if we rise to the occasion we shall not 
 only witness "the Americanization of the British 
 conception of Allied war aims," but shall witness 
 the Americanization of the world's conception 
 of war aims and of peace aims. But we must 
 not make the mistake of avoiding consideration 
 of our at-home diplomacy (our peace aims), or 
 of dealing in mere generalties. Specific and 
 easily understood pledges are what we must 
 have. To kill Autocracy and save Plutocracy 
 (if it were possible) were more deplorable than 
 to lose the war. It would be to assure in the 
 near future a world-wide revolution to which 
 the chaos now prevailing in Russia would seem 
 mild by comparison. Let me not be misunder- 
 stood, nor regarded as an alarmist. There is no 
 danger in this direction if we settle the matter 
 right; but there is no escape if we settle it wrong 
 if we kill Autocracy and preserve Plutocracy. 
 And let me not be thought a radical who would 
 
 35 
 
resort to drastic and confiscatory methods of 
 economic reform. I am radical, but I am not 
 running amuck in the economic world. I am 
 fighting such methods, and have already said: 
 "Big Business will remodel the world in a few 
 decades after we provide the social mechanism 
 whereby it can work unhampered by legal re- 
 strictions on the one hand, and by industrial un- 
 rest on the other" ; that is, when we have solved 
 the economic problem, which is really the after- 
 the-war problem, the pre-war problem, the war 
 problem, the labor problem, the money problem, 
 the land problem. Henry Ford and Charles M. 
 Schwab, the biggest Big Business men in the 
 world, are proving this without waiting for fa- 
 vorable conditions, and I believe the men of Big 
 Business in general are rapidly learning the 
 great truth these two men are so conspicuously 
 exemplifying. 
 
 Our difficulty hitherto has been that Big Busi- 
 ness and the industrial classes were both labor- 
 ing under the erroneous belief that their inter- 
 ests are opposed. This belief is still widespread, 
 even among reformers and sociologists, but it is 
 not true. To establish economic justice it is not 
 necessary to "take over" or to confiscate private 
 property, nor even quasi-public property. I 
 have now before me the frantic appeal of the 
 People's Anti-Single Tax League of California, 
 where the proposal to confiscate land value re- 
 ceived more than 250,000 votes in 1916, and 
 hopes to carry this year. This appeal is for 
 financial help, and states that "there is grave 
 danger of a Single Tax law being adopted at the 
 next general election, unless our property owners 
 
 36 
 
wake up to a serious situation." Yes, there is 
 danger, but it will not be averted by perpetuat- 
 ing the present industrial order. Such policy is 
 to invite still more drastic methods when we 
 face the after-the-war problem, of which Lord 
 Lansdowne and many others are so apprehensive 
 that they are suspected of willingness to patch up 
 a peace in their own interest. 
 
 I repeat that there is no occasion to "take over" 
 or confiscate private property. Not only is it 
 unnecessary as a permanent policy (whatever 
 we may find advisable in the present exigency), 
 but it is dangerous. I agree with the London 
 Times' statement that "the boys are not coming 
 back from the trenches to be mere hirelings on 
 the land," but I denounce the George proposal 
 to confiscate land value, and I declare unneces- 
 sary the Socialist proposal to "take over" the in- 
 struments of production; yet, something of this 
 sort or something worse is what we are coming 
 to if we do not adopt the sound and just economic 
 system. Already there are frequent hints that 
 the world will be face to face with repudiation, 
 even should the war end soon, and this, too, I 
 denounce, and have shown how to avoid it. We 
 cannot establish justice by committing injustice, 
 and though we can establish permanent peace 
 among the nations, as I have shown, permanent 
 peace within the nation can be assured only by 
 economic justice. If this war is to end war, there 
 is no room for the statesman (?) who thinks to 
 settle the after-the-war problem by mere mitiga- 
 tion of industrial conditions; who is considering 
 the question, "how little of the demand for just 
 industrial conditions can we grant and still win; 
 
 37 
 
how much can we 'keep back' of the meed of 
 heroism and sacrifice and still escape disaster?" 
 Be he king, lord, commoner, or one of our own 
 chosen servants who is faithless or fearful, I say 
 to him in the words of Peter to Ananias : "Thou 
 hast not lied unto men, but unto God." And you, 
 O conscious servant of Privilege, who think to 
 pay the valorous soldiers of Armageddon with 
 deceitful promises and thereby earn thirty pieces 
 of silver, go hang thyself, that it may be as well 
 with thee as with Judas. It will not do. We 
 must establish economic justice or enter upon 
 another millennium of the Dark Ages in the near 
 future. 
 
 Fortunately it is easier to do exactly right than 
 merely to mitigate conditions, and while the 
 George system would involve incalculable hard- 
 ships and chaos, and Socialism (as hitherto 
 taught) is not practicable, one or the other of 
 these plans is almost certain to be adopted in the 
 near future if the true reform is not adopted. 
 
 I say it is easier to do exactly right than merely 
 to mitigate conditions. Great truths are simple; 
 easily understood and easily applied. There is 
 but one economic law we need consider in order 
 to establish economic justice, and that is the law 
 of value, commonly called the law of supply and 
 demand. This law is to the economic world 
 what the law of gravity is to the solar system 
 the law that preserves its balance, and may be 
 stated thus. 
 
 When the supply of a thing is normal and the 
 demand for it is normal its value will be normal, 
 for normal value is the resultant effect of normal 
 demand acting upon normal supply. 
 
 38 
 
There is no exception to this in all the world, 
 and when anything sells in the open market for 
 less than it ought to command in exchange, it is 
 because there is more competition among sellers 
 to sell it than among buyers to buy it; because 
 the supply of it and the demand for it are not in 
 normal relation. This is as true of labor as it is 
 of labor products, and wages (the value of la- 
 bor) are low solely and only because laborers are 
 forced to compete for employment; because 
 there is more competition among the sellers of 
 labor than among the buyers of labor. The fol- 
 lowers of Henry George think wages are low 
 because rents are high. Not only is this not true, 
 but it is not even true, as Socialists think, that 
 wages are low because rent and interest together 
 take so much of the product. The exact con- 
 verse of this is true, namely: Interest and rent 
 are abnormally high because wages are low, and 
 wages are low because laborers are forced to < 
 compete for employment. 
 
 They are forced to compete for employment 
 because the largest single field of labor normal 
 to organized society is virtually closed. That is 
 the field of public work, the building of high- 
 ways and other public utilities. 
 
 It may seem like a small matter whether high 
 rents cause low wages or low wages cause high 
 rents but the distinction is vital and far-reach- 
 ing; is as important in political economy as it 
 is in medical research to determine whether the 
 bacillus produces the disease or the disease pro- 
 duces the bacillus. For ages the science of medi- 
 cine dealt mainly with effects (treated symp-j 
 toms), but is now dealing with causes and is as- 
 
 39 
 
tonishing the world with its achievements. 
 Economic science has fallen into a similar error 
 and will achieve results as marvelous as those of 
 medicine, surgery and sanitation when it deals 
 with causes instead of effects. Plainly, if high 
 rents cause low wages we must, as Henry George 
 taught, deal with rent, but if low wages is the 
 cause we must deal with wages. 
 
 The simplest truths are last discovered. Econ- 
 omists and statesmen have always supposed that 
 taxes must be collected or bonds sold in order 
 that public work may be done, but this is not 
 true. Public wealth may be monetized as it ap- 
 pears, and a very simple industrial system will 
 not only establish normal wages, but will fur- 
 nish a perfect system of money and supply an 
 abundant revenue for the general government 
 without taxation, thus at once solving the labor 
 problem, the money problem, the land problem, 
 the tax problem; in fact, all economic problems. 
 Naturally; this declaration must seem amazing 
 to a tax-ridden world, the more so because taxes 
 are now at a level hitherto undreamed of, but 
 it is really very simple. It is nothing more than 
 a solution of the "surplus value" problem of the 
 economists. This so-called "surplus value" has 
 been almost a mystery to economic writers for 
 more than a century. It attaches mainly to land, 
 and the belief is almost universal that it neces- 
 sarily appears as land value. Strictly speaking, 
 it appears as privilege value, but the bulk of it 
 attaches to land. The truth is, it appears as land 
 value only because we have not provided the 
 social mechanism to enable it to appear as public 
 wealth. This mechanism is very simple, and 
 
 40 
 
may be provided by a federal statute of fewer 
 than 100 words, in substance as follows: 
 
 From and after the passage of this act public 
 work in the construction of highways and other 
 public utilities shall be open in every t rural 
 neighborhood to all the common labor that of- 
 fers, all labor and material to be paid for in legal 
 tender service certificates, the unit of which shall 
 be a day of common labor. 
 
 It is well known to all economists and to busi- 
 ness men, that when common-labor wages are 
 high all wages are proportionately high, for 
 every skilled laborer finds his own wage ratio to 
 the basic common-labor wage. In order to es- 
 tablish normal wages, therefore, it is necessary 
 only to make the basic wage normal. The basic 
 wage will be normal when there is no competi- 
 tion among common laborers, and skilled labor- 
 ers will soon find their wage ratio to the basic 
 wage, making all wages normal. Let us empha- 
 size this point. The law of supply and demand 
 is a natural law. It is true everywhere and all 
 the time. It is the very basis and foundation of 
 all sound economic philosophy and of all sound 
 business policy. So let us take our stand on this 
 natural law just as we stand by the law of grav- 
 ity. And let us stand by its corollary also, that 
 all wages will be normal when the basic wage is 
 normal. It is as invariably true that the differ- 
 ent grades of labor find their normal ratios to 
 the basic grade as it is that the value of a higher 
 grade of steam coal is normally related to the 
 lowest grade in use. If this basic economic law 
 of supply and demand and its corollary are not 
 
 41 
 
true, then all economic reasoning is idle and un- 
 profitable speculation merely academic. 
 
 When there is no competition for employment 
 the wages of wage workers will quickly advance 
 to the normal proportion of the entire product, 
 and after this proportion is reached, will then 
 advance by as much as the per capita increase 
 in the productiveness of labor. This refers to 
 the real wage (what the money wage will buy), 
 but as the money wage, being a labor-time cer- 
 tificate, will never change, it follows that the in- 
 crease of the real wage ('what the money \ wage 
 will buy) will be realized through increase in 
 the purchasing power of the money unit. 
 
 Now, when the money unit absorbs purchas- 
 ing power by exactly as much as the per capita 
 increase in the productiveness of labor a very 
 curious and vitally important thing happens, 
 namely: The money itself becomes an invest- 
 ment and will accumulate in enormous volume. 
 It will not earn dividends, to be paid periodi- 
 cally, but will increase in exchange value just 
 as vacant land, on the whole, now increases in 
 selling value. Thus a unit of such money saved 
 for future use will buy more product at the later 
 date than it represented when it was earned; 
 will buy the greater product of the same amount 
 of labor currently applied. It will therefore 
 give the money saver (who is a social lender) 
 service for service without lending at interest; 
 that is, without the necessity of "buying a debt" 
 with it. Interest, therefore, in the sense of "eco- 
 nomic interest," will disappear. Borrowers will 
 still pay lenders for the labor involved in the 
 
 42 
 
business of lending (wages) and for the risk car- 
 ried (insurance), but "economic interest" will 
 have disappeared, and when money itself be- 
 comes an investment its volume will be all that 
 the people need for the purpose of saving as 
 soon as it has had time to accumulate probably 
 in from three to five decades. 
 
 When the money unit absorbs this increase in 
 the productiveness of labor (just what vacant 
 land on the whole now absorbs), people will do 
 with the money just what they now do with va- 
 cant land, namely, use it as a "storehouse of 
 value," a safe agency of credit saving for age. 
 And when money may be so used they will cease 
 to buy vacant land for the purpose. It is not 
 true, as Henry George taught, that high land 
 value is caused by speculation.* It is caused 
 by the necessity of using land value to guarantee 
 long-time credits, the great mass 'of which are 
 savings for age. 
 
 And when the money unit absorbs the per 
 capita increase in the productiveness of labor 
 money wages will remain constant. An indi- 
 vidual will increase his money wage by increas- 
 ing his skill, but the general level of money 
 wages will never change. Consider what this 
 means. It means an end of all contention as to 
 wages ; that strikes and lockouts will have been 
 ended forever. When this has become clear to 
 the reader he is in position to appreciate the full 
 import of what I said in a League of Nations: 
 
 *Note Land speculation does temporarily increase nominal 
 values in places where a "land boom" is on, but land value as 
 a whole cannot be maintained above the aggregate of indi- 
 vidual surplus credits to be conserved. This is what land 
 value is. 
 
 43 
 
"Big Business will remodel the world in a few 
 decades if we provide the social mechanism 
 whereby it can work unhampered by legal re- 
 strictions on the one hand and by industrial un- 
 rest on the other." And I think my further 
 statement, that "Big Business will be bigger in 
 just conditions than is now even dreamed of," 
 will also be granted, for with industrial harmony 
 there will be almost no limit to economic 
 progress. 
 
 I said also in "A League of Nations" : "And 
 within a decade (after the League is established, 
 as set forth) the nations will learn that there is 
 a potential money fund in every nation many 
 times greater than its quota of this World 
 Money, equal to at least five times its annual 
 wealth production," so let us see if we can verify 
 this by making an approximate estimate of the 
 money volume required for all the people when 
 they are able to make their savings in the form 
 ofl money; when they are not obliged to keep 
 the money moving by "buying a debt" with it in 
 order, as social lenders, to get "service for serv- 
 ice." Payment for loans will then fall to the 
 cost of conducting the business of lending; that 
 is, as before said, to the cost of the labor in- 
 volved (wages) and the risk carried (insurance) 
 and the overhead charges (expense), which is 
 to say that "economic" interest will disappear. 
 
 Of course we cannot predict exactly what peo- 
 ple will do, but for assumed conditions and as- 
 sumed habits of saving for age, it is a simple 
 actuarial problem and is mathematically exact. 
 
 It is reasonable to assume that when wages 
 are normal every normal man will make ade- 
 
 44 
 
quate provision against the necessity of laboring 
 when he is old, or of becoming a burden upon 
 others. The billions of life insurance and sav- 
 ings deposits attest the desire of the people to 
 provide for age, and that when conditions are 
 favorable this insurance against dependency or 
 the necessity to labor to the end will be many 
 times greater than it now is, when accumulations 
 are restricted by low wages and are often dissi- 
 pated by reason of enforced idleness. 
 
 It is evident that the man who labors forty 
 years, say from the age of twenty to sixty, can 
 easily produce enough surplus to provide for 
 twenty years of freedom from necessity to labor. 
 To do so he must consume only two-thirds of his 
 product during the forty years of labor and save 
 one-third ; and if the individual saves one-third 
 of his product, all the laborers together will 
 save one-third of the total product. This does 
 not mean that what we call "consumption goods" 
 will be stored. The workers' surpluses will be 
 consumed by those already past the productive 
 period of life, who will get them in exchange 
 for "social credits" previously earned and saved. 
 What is surplus to those in the productive period 
 is subsistence to the aged. Let us state it thus : 
 The man in the productive period wants "social 
 credit" in exchange for his surplus, and the man 
 past the productive period wants that surplus in 
 exchange for his "social credit" previously 
 saved. If he cannot exchange his surplus com- 
 modities for "social credit" the laborer cannot 
 provide for old age, so the producer is as much 
 interested to find a consumer for his surplus who 
 can give him "social credit" in exchange for it, 
 
 45 
 
as the owner of "social credit" is to find a pro- 
 ducer with surplus to sell. True money is mere- 
 ly the agency of automatic social accounting. 
 Men will produce enduring forms of wealth, 
 such as houses and various forms of capital, but 
 all their advance provision for goods to be con- 
 sumed from day to day when they are old, and 
 for personal services, should be in the form of 
 "social credit" (money) and will be in this form 
 when we have a perfect money that absorbs the 
 increase the social lender is entitled to. Men 
 of exceptional ability as managers will make a 
 large portion of their savings in the various 
 forms of capital, but wage workers will save 
 mostly in the form of money because it is per- 
 fectly convenient to accumulate from day to day, 
 a little at a time; because it requires no manage- 
 ment, and because it may be spent from day to 
 day, a little at a time, whereas any form of cap- 
 ital, land value, or even a house, must be bar- 
 tered before its equivalent can be consumed in 
 the form of consumption goods and personal 
 service. This necessity of resorting to barter is 
 certain to involve annoying delay, and very often 
 involves serious loss and hardship. It is prob- 
 able that more than three-quarters of the pro- 
 vision for age by wage workers will be in the 
 form of money under the conditions proposed, 
 but if we call it one-half we shall certainly not 
 overstate it. 
 
 As this social credit (money) will be accumu- 
 lated by individuals from year to year during 
 forty years and will be spent from year to year 
 during twenty years, as a whole it will be held 
 thirty years one-half the total period of grad- 
 
 46 
 
ual accumulation and gradual expenditure. 
 Counting both the wealth and "social credit" we 
 have already seen that the annual saving will 
 be one-third the annual production (by our as- 
 sumption) and as it will be held thirty years the 
 volume accumulation will therefore be one- 
 third of thirty years' production, which is ten 
 times the annual total. However, we have as- 
 sumed that half of this will consist of houses 
 and other enduring forms of wealth, so the vol- 
 ume of money will be five times the total annual 
 production. As our annual production is now 
 about 40 billion dollars' worth, the volume of 
 the money proposed will almost certainly be the 
 equivalent of 200 billion dollars in from three to 
 five decades 5x40 billions. 
 
 But every certificate of the money will repre- 
 sent public wealth, whereas all the credit sav- 
 ings for age; that is to say, all long-time credits, 
 now tend to increase land value because that is 
 the only large volume of "social value" avail 
 able. The reason of this expanding of land 
 value is, that all long-time credits must be guar- 
 anteed by some form of "social value" ; that is, 
 by a value that is founded in the social form and 
 is not dependent upon any individual's honesty 
 or continued success. Short-time loans (com- 
 mercial bank credits) can be secured upon goods 
 in the course of manufacture and exchange, and 
 are now so secured, but the volume of such loans 
 is limited to considerably less than the annual 
 production. Commercial bank loans are a vir- 
 tual lien upon the goods in the hands of manu- 
 facturers and merchants, and a close watch is 
 kept upon all such loans by commercial bankers. 
 
 47 
 
Not only will commodity values not serve as se- 
 curity for savings, because of their transitory 
 character, but the volume is little more than suf- 
 ficient for commercial loans, and is already so 
 used very close to the limit of safety. 
 
 If the savings for age could not be guaranteed 
 by social value if the volume of this social 
 value were inadequate then individuals would 
 cease in large measure to produce the surplus 
 they will produce and carry as social credit 
 when there is "social value" to guarantee its re- 
 payment. 
 
 Now, it is evident that so long as the individu- 
 al must carry his long-time credits in the form 
 of loans to other individuals (debt), and so long 
 as these must be guaranteed by "social value," 
 "social value" must be privately owned in order 
 that it may be used to guarantee individual 
 debts. This is necessary in order to induce 
 abundant surplus production, for if individuals 
 caanot carry a large part of their surplus as 
 credit they will not produce abundant surpluses. 
 Land value is therefore performing a vital and 
 beneficial function as compared with the absence 
 of "social value," but land value hampers pro- 
 duction. It does not hamper it as compared with 
 the absence of "social value" in which to carry 
 individual credits, but it does enormously ham- 
 per it as compared with having the same volume 
 of "social value" in the form of public wealth, 
 which is an aid to every form of production and 
 
 exchange. 
 
 ***** 
 
 One of the most stupendously important fea- 
 tures of this proposed industrial and monetary 
 
 48 
 
system is that all its operations are automatic. 
 To begin with, it automatically regulates all in- 
 dustry in the following very simple manner: 
 
 Let us assume that for some reason more than 
 the normal proportion of labor had been en- 
 gaged in public work for a considerable time. 
 This would mean that less than the normal 
 amount had been engaged in private production, 
 and as a result there would be a relative scarcity 
 of commodities. This would cause commodity 
 prices to advance somewhat, and private em- 
 ployers would offer slightly more than the pub- 
 lic wage, thus drawing a part of the labor from 
 public to private employment, increasing private 
 production, lowering commodity prices and so 
 restoring the balance. On the other hand, if 
 more than the normal proportion of labor had 
 been in private employment for a considerable 
 time there would be, relatively, a superabund- 
 ance of commodities, and commodity prices 
 would be abnormally low. Private employers 
 would then release some of their employes, who 
 would go into public work (not to soup-houses 
 and bread-lines), thus again restoring the bal- 
 ance. As a matter of fact, however, there will 
 be no noticeable shifting from private to public 
 work and back again, except of those whose pri- 
 vate employment is seasonal. The balance will 
 be preserved with as little agitation as accom- 
 panies the maintenance of the water level in two 
 connected reservoirs having separate variable 
 supplies. And in the seasonal character of the 
 basic wage worker's employment and our fail- 
 ure to deal with it. is the source of all economic 
 ills. 
 
 49 
 
I must mention one more of the many beauties 
 of the system's automatic operation. Congress 
 will have nothing to say as to what the govern- 
 ment's revenue shall be, and very little to say as 
 to its expenditure. Aside from the "overhead" 
 expenses of the Executive, Administrative and 
 Judicial departments (office expenses) , the work 
 will be done and the money will issue in every 
 rural neighborhood in exact proportion as men 
 were otherwise in enforced idleness or less 
 profitably employed, for public work will be 
 open in every rural neighborhood within go- 
 ing distance of every rural man's home. This is 
 necessary in order that opportunity to labor may 
 be open alike to all. When all the otherwise idle 
 labor is locally employed in every rural neigh- 
 borhood, then public benefits will be automati- 
 cally distributed by operation of the natural law, 
 and the scandal of "log-rolling" and "pork- 
 barrels" will be at an end. 
 
 Naturally it will be asked : Why should pub- 
 lic work be open only in the rural districts? I 
 have already stated that it should be open only 
 to common labor. By this I mean that public 
 employment at common labor only may be de- 
 manded at all times. Much skilled labor will 
 be employed, but a man may not demand em- 
 ployment as a skilled laborer, though a skilled 
 laborer may demand employment at common 
 labor should he be in need of it. As before said, 
 if we keep the basic, common-labor wage normal 
 all wages will be normal. 
 
 Now, the rural district is distinctively the 
 habitat of the typical common laborer, "The 
 Man With a Hoe," the farm laborer; not the 
 
 50 
 
farm owner, nor even the tenant farmer, both 
 of whom are capitalists, but the "hired man." 
 
 Because of the seasonal character of farming, 
 these basic wage workers are in enforced idle- 
 ness during the winter third of the year; not all 
 of them, but probably more than half of them. 
 As a result, there is constant competition for em- 
 ployment and an ever-increasing procession 
 moving from the green fields to the already over- 
 crowded cities, forcing wages down and rents 
 up. And as a complemental effect of this rural 
 idleness during the winter third of the year and 
 the consequent drift to the cities, we have the 
 annual embarrassment of a deplorable shortage 
 of help on the farms during the growing and 
 harvesting season. We have been crying "Back 
 to the land! Back to the land!" for several de- 
 cades, but have not recognized the true reason 
 for the abnormal drift of population to the cities. 
 The little we have done to cure the deplorable 
 congestion of the cities and assure adequate help 
 on the farms in the growing and harvesting sea- 
 son has been mere makeshift. We shall cure the 
 evil entirely and forever when we recognize and 
 deal wisely with the true cause, which is: 
 
 Farmers are short of "hands" in the growing 
 and harvesting season because farm "hands" are 
 short of employment during the winter third of 
 the year. 
 
 This is the whole economic problem in a nut- 
 shell. Give farm laborers continuous employ- 
 ment in the country at normal wages and all 
 economic problems will solve themselves by the 
 automatic operation of the system as previously 
 
 51 
 
explained. Full-time employment, even at the 
 present wage, to a man who is in enforced idle- 
 ness one-third ( of the year will increase his an- 
 nual wage 50%, and absence of competition for 
 employment will be almost or quite as great a 
 factor for wage increase. We may therefore say 
 with confidence, that wages will be almost 
 doubled. Yet no one will be injured, for no 
 debt or confiscation is involved. Even the 
 wealthy need have no fear, for the increase of 
 wages will come largely by increase in produc- 
 tion. Speaking of normal times before the war, 
 we were wasting ten billion dollars' worth of 
 energy annually by enforced idleness, by the do- 
 ing of things which will not be necessary in just 
 conditions, and by the friction of an industrial 
 mechanism that is not automatic in operation. 
 
 Because the statement is so startling, I must 
 explain my assertion that no taxes will be neces- 
 sary for the support of the general government. 
 
 It is evident that no taxes will be necessary un- 
 til the money issue has reached a volume suffi- 
 cient for all the credit savings for age of all the 
 people. We have estimated this at the equiva- 
 lent of 200 billion dollars for our present popu- 
 lation and present productive capacity. On the 
 same basis of reckoning, if our population should 
 increase to 400 millions in another century 
 (which would be at a much lower rate than for 
 the past century), the proportionate money 
 volume would be 800 billion dollars. However, 
 to be conservative, let us divide this by two, and 
 call it 400 billions of dollars representing public 
 wealth and let us say that both the population 
 and the money volume have then reached the 
 
 52 
 
limit. Evidently, then, further money issue 
 without cancellation would produce inflation 
 and a corresponding advance of prices, which is 
 the same as the money's loss of unit value. I 
 think there will be universal agreement that can- 
 cellation must then begin or issue cease. At 
 least I will assume this but even then there will 
 be no occasion to levy taxes, for long before this 
 stage of development is reached there will be an 
 inevitable profit on the public utilities owned 
 by the government. I use the word "inevitable" 
 advisedly, for it would be impossible to conduct 
 the utilities exactly at cost, and all the excess of 
 receipts above cost would be cancellation of 
 money. Even so low a profit as two per cent a 
 year would mean a government income of eight 
 billion dollars without taxation, a seemingly 
 abundant revenue. So taxation is destined to 
 become a thing of the past, so far as the general 
 government is concerned, and the old adage, "as 
 sure as death and taxes," will be amended. Two 
 per cent of 200 billions, the estimated value of 
 public utilities for our present population, would 
 be four billion dollars a year for the government 
 income, to which would be added the increase of 
 money volume due to increase of population. 
 Probably it will be said there must be taxation 
 for the administrative, executive and judicial 
 departments at least, but even this is not true. 
 The administration expense is merely the over- 
 head charge of the social corporation we call 
 government, and all this expense goes into the 
 value of the social product the same as office ex- 
 penses go into the value of a factory's output. 
 
 53 
 
In .the last analysis the President is as truly a 
 builder of highways as Mr. Schwab is a maker 
 of cannon. 
 
 Yet, though ground rents will decline to nor- 
 mal under the proposed system ; though they will 
 become relatively nominal, there will still be 
 some ground rent, and I must call the reader's 
 attention to two vitally important matters as to 
 this fund, namely: (1) It will all be left to 
 the local community and so will all be spent 
 under the eyes of the people who pay it. This is 
 of vast importance, though I may not now tak? 
 time to dwell upon it. (2) All of economic 
 rent (all the annual value of land in excess of 
 the wages of management and risks of owner- 
 ship) may be taken for public use without de- 
 stroying the selling value of the land, when eco- 
 nomic interest no longer prevails. This also will 
 be by an automatic method called Voluntary 
 Tax. By this system every man will value his 
 own holding* and pay the uniform rate of com- 
 munity tax, but will hold it on these conditions : 
 Any individual may purchase through the re- 
 corder's office, at the voluntary valuation by pay- 
 ing to the owner the value he has set and by en- 
 gaging to pay a higher annual tax to the com- 
 munity; provided, however, that owners who 
 are not users may always retain ownership by 
 meeting the increase of tax offered, with a small 
 preference, say 5% of the increase, in their favor, 
 and users may retain ownership by meeting the 
 
 *Note Of course he will not undervalue it, for if he did 
 he would soon be forced to sell at less than its value. Neither 
 will he overvalue it, for he could not sell at such valuation, 
 yet would be paying an annual penalty in the form of a tax 
 higher than he need pay. Owners will be permitted to lower 
 their valuation, with pro rata reduction of tax, but may not 
 increase the valuation. 
 
 54 
 
increase of tax offered, with a large preference, 
 say 25% of the increase, in their favor. Homes 
 may be given a still larger preference, or be al- 
 together exempt from forced sale while so 
 used by the owner. 
 
 This system of taxation will take unearned 
 rent for public use in exact proportion to the 
 fall of the interest rate without destroying the 
 selling value of land. This is evident, for if we 
 assume a site to yield $500 a year of what we call 
 net income, and that it is valued at $10,000 be- 
 cause the interest rate is 5%, then, if the interest 
 rate falls to 4%, someone with $10,000 to invest 
 at 4% will bid $100 of the $500 income into the 
 public treasury and pay the owner his voluntary 
 valuation. If interest later falls to 3% some- 
 body with $10,000 to invest at 3% will bid an- 
 other $100 of the income into the treasury and 
 pay the owner the $10,000 sale value. This pro- 
 cess will go on until the interest rate falls to the 
 costs involved in the business of lending, say one 
 or two per cent, and when money loans yield 
 only wages and risk carried, land can yield only 
 wages of management and the risk involved in 
 land ownership ; that is, risk of loss of rent and 
 possible decline in selling value. 
 
 When it is thus shown that economic interest 
 can be abolished, and is further shown that the 
 disappearance of interest will enable us to take 
 unearned rent without destroying the selling 
 value of land when this is shown, then persis- 
 tence in the effort to take the annual value of 
 land in such manner as to confiscate the selling 
 value is a wicked and indefensible attempt to 
 perpetrate a social crime unparalleled in his- 
 
 55 
 
tory. And the system will not only obviate the 
 grievous wrong of confiscation involved in Sin- 
 gle Tax, but will also abolish the assessor and 
 tax review board, and put an end to the errors 
 and favoritism inseparable from any method that 
 involves official discretion in the levying of 
 taxes. 
 
 The system is simply a method of permitting 
 all long-time credits (savings for age) to appear 
 in the form of public wealth instead of being 
 limited substantially to the volume of land and 
 public debt; that is to say, limited to the volume 
 of privilege value. Public wealth will be the 
 sum of individual credit surpluses. 
 
 An Objection Refuted 
 
 Having shown that the volume of the pro- 
 posed money will be the equivalent of 200 billion 
 dollars or more for our present population and 
 productive capacity, if I should fail to deal with 
 the matter specifically it would almost certainly 
 be said that the generally accepted doctrine 
 known as "the quantitative theory of money re- 
 futes all my reasoning and that no other answer 
 to it is necessary. In substance this theory is : 
 
 Other things being the same, the unit value of 
 money decreases in proportion as the money vol- 
 ume increases. 
 
 I not only indorse this doctrine, but state it in 
 stronger terms and apply it to all things having 
 value. It is not peculiar to money. The unit 
 value of any utility declines by a more rapid 
 ratio than the volume increases other things be- 
 ing the same. Because of this, the four million 
 
 56 
 
extra bales of cotton harvested in 1911 as com- 
 pared with the crop of 1910 were worth $225,- 
 000,000 less than nothing; that is, the larger crop 
 was worth $225,000,000 less than the smaller 
 crop of the year before. The same is true of 
 wheat, corn, fruits, etc., and farmers are said to 
 have considered the advisability of destroying a 
 part of their crops in order to realize more for 
 the remainder than the whole crop could be sold 
 for. The same is true also of manufactured 
 goods, but as factories can be shut down when 
 prices fall the effect is not so pronounced. 
 
 Where, then, is the error in the assumption 
 that the quantitative theory of money refutes my 
 reasoning? Simply this: It does not take into 
 consideration the fact that the demand for 
 money increases in parallel with the increase of 
 the money supply. As the unit value of any- 
 thing is determined by the ratio of the supply 
 of it to the demand for it, it is evident that sup- 
 ply may be increased to any total without affect- 
 ing the unit value if the demand for it is in- 
 creased in like proportion. 
 
 When the money unit absorbs the per capita 
 increase in the productiveness of labor and thus 
 gives surplus producers the increase they are en- 
 titled to, then money itself becomes an invest- 
 ment, the most desirable form of credit saving 
 for age. Thus the demand for money will be 
 increased to five or ten times the volume re- 
 quired for current exchanges, even when busi- 
 ness is on a cash basis. Rightly applied, there- 
 fore, the quantitative theory of money confirms 
 my reasoning and my reasoning confirms the 
 quantitative theory of money. 
 
 57 
 
Bearing in mind the fact that the establish- 
 ment and maintenance of normal wages will 
 be the solution of all economic problems and 
 virtually all political problems, we may state 
 the whole matter in brief as follows: 
 
 1. All economic injustice is comprehended 
 in the statement that wages are low. 
 
 2. Wages are low because laborers are 
 obliged to compete for employment. 
 
 3. They are obliged to compete for employ- 
 ment because the largest single field of labor 
 normal to organized society is virtually closed, 
 namely, the field of public labor. 
 
 4. By opening public work in the rural dis- 
 tricts to all the common labor that offers we shall 
 end competition among common laborers and 
 thereby make the common-labor wage normal. 
 
 5. When the common-labor wage is normal 
 all wages will be normal, for it is the basic wage, 
 to which every skilled laborer finds his own 
 wage ratio. 
 
 6. All wages will therefore be normal so 
 long as there is no competition among common 
 laborers; that is, so long as public employment 
 in the building of highways and other public 
 utilities is open to all the common labor that of- 
 fers. 
 
 7. When the real wage (what the money 
 wage will buy) is normal and the money wage 
 does not change (being a time unit of the basic 
 form of labor) , the real wage advance will come 
 by the money unit's increase of purchasing 
 power. The money itself, will therefore become 
 an investment and will accumulate in even 
 greater volume than land value now accumu- 
 
 58 
 
lates ; will supersede land value as the form "sur- 
 plus value" will take. 
 
 8. But as the money will represent public 
 wealth, the proposed system is nothing more nor 
 less than a simple and direct method of express- 
 ing so-called "surplus value" as public wealth, 
 which aids production, instead of allowing it to 
 be expressed as land value, which limits pro- 
 duction. 
 
 9. If it were possible to administer a Social- 
 istic government without favoritism or corrup- 
 tion, the highest human wisdom could not direct 
 the infinite forces with even a reasonable ap- 
 proach to the efficiency of perfect personal free- 
 dom and an automatic industrial mechanism; 
 and if it were possible to reach the maximum of 
 wealth production under Single Tax, and if land 
 value could expand without limiting production, 
 and if all land value could be equitably assessed, 
 fully collected and equitably distributed without 
 cost if all this were possible, then by this cir- 
 cuitous route "surplus value" would finally be 
 expressed just as it appears in the first instance 
 by the method proposed. Is the "circumlocu- 
 tion" method the natural -method? 
 
 Send this message to the boys at the front, 
 and to the boys in the mills, the shipyards, the 
 factories and on the farm. They will then know 
 without any uncertainty exactly what they are 
 fighting for, and all the hosts of hell and Ho- 
 henzollern will speedily be overcome, if they 
 do not at once turn on their masters and destroy 
 them utterly. Even the Kaiser's paid agents in 
 
 59 
 
this country will turn on him, syndicalists and 
 I. W. W. malcontents will become staunch sup- 
 porters, and even Ireland will be ablaze with 
 loyal enthusiasm. 
 
 The Alternative 
 
 It will be well to consider briefly what is 
 the alternative to the foregoing. Are the re- 
 turning heros, and the dependents of the heroes 
 that do not return, and the only less heroic heroes 
 and heroines who subordinated every other con- 
 sideration to love of country, and made victory 
 possible by loyal service in the shipyards, the 
 factories and fields are they to look forward to 
 such industrial conditions as followed the war 
 of the states in 1873? Are they expected to be 
 content with assurances of "a full dinner pail" 
 when "times are good," and some form of chari- 
 table insurance against bread-lines and soup- 
 houses when times are bad? Are they expected 
 to be content even with the assurance of a farm 
 from the public domain not yet granted to rail- 
 road promoters or speculatively held by the 
 beneficiaries of special privileges, some of whom 
 own and hold idle millions of acres of the 
 choicest lands not yet brought into use? 
 
 Even supposing all multi-millionaires emu- 
 lated the self-sacrificing loyalty evinced by many 
 of them (probably by most of them), and not 
 only relinquished their enormous land holdings, 
 but turned their surplus millions of every form 
 into a common po'ol, not only to provide a farm 
 for every returning soldier who wanted one, but 
 
 60 
 
to improve and stock it even this would not be 
 an adequate provision, for the reason that the 
 total value of farm products is not increased 
 but decreased by redundant production. This 
 has so often been the experience of farmers that 
 they are said to have considered the advisability 
 of destroying a part of their crops in order to 
 enhance the total value. Only a few days ago 
 I was told that in Michigan many apples had 
 been bought on the trees and paid for, but not 
 picked, the reason being that less than the full 
 crop could be sold for more than all of it. The 
 fifteen million-bale cotton crop of 1911 was 
 worth $225,000,000 less than the eleven million- 
 bale crop of the year before, and millions of 
 farmers know from bitter experience, that the 
 same is true of corn, wheat and other products. 
 Not only can we not reward our returning sol- 
 diers by sending them "back to the land," but to 
 do so would be disastrous to the prosperity of the 
 millions already engaged in farming. Abnor- 
 mally cheap food may assure "a full dinner 
 pail," but it cannot assure much more. Unless 
 we have an automatic industrial system and a 
 perfect money we cannot have normal wages; 
 that is, if the mass of the people are not able to 
 purchase their entire product with their money 
 wages, we must again face a gradually accumu- 
 lating "surplus," which will vainly seek a mar- 
 ket in foreign countries. I say "vainly seek a 
 market," for the reason that each of the great 
 nations will have a similar "surplus" to find a 
 market for if it does not establish a home mar- 
 ket capable of consuming as much as its people 
 produce. This can be done only by establishing 
 
 61 
 
normal wages ; that is, by establishing economic 
 justice. International commerce will then be 
 mere exchange of products for the sake of giv- 
 ing all peoples greater variety than can be pro- 
 duced in any one country, and no nation will 
 ever have the least concern as to a market for all 
 the wealth its people can produce. I have never 
 witnessed a more pitiable display of what I may 
 call economic superstition, than that exhibited by 
 an intelligent and successful business man in 
 dealing with this subject. He considered it in- 
 evitable that a so-called "surplus" of commodi- 
 ties must gradually accumulate and finally stop 
 the wheels of industry and force thousands or 
 millions of men into idleness and suffering. "I'm 
 afraid we're going too fast," he said dolefully 
 during one of our so-called prosperous periods. 
 
 Let us look at the matter sanely. 
 
 Always in time of peace there are millions of 
 men in the United States who are in enforced 
 idleness a considerable percentage of the time 
 each year, and at intervals of a few years, in the 
 frequently recurring periods of panic and de- 
 pression, the chronic condition becomes acute. 
 Then our organized charities and municipalities 
 establish bread-lines and soup-houses to mitigate 
 the situation until, with retrenchment and de- 
 privation on the part -of the people, liquidation 
 by many business houses, and reckless extrava- 
 gance and shameful waste on the part of the few, 
 the embarrassing "surplus" is at last consumed. 
 Then the mills and factories resume their activ- 
 ity, most of the people are employed a large part 
 of the time, and people are happy at their work 
 until the same thing happens again. 
 
 62 
 
It is notable that when these periods of dis- 
 tress come, the difficulty always begins in ex- 
 change; never in production proper, and there 
 actually is a "surplus" that cannot be sold; that 
 is, cannot be exchanged, and which is useless un- 
 til it is exchanged. These "surplus" products 
 cannot be exchanged because those who need 
 them (and whose labor produced the larger part 
 of them) have not the money or money equiva- 
 lent with which to buy them, and those who 
 could buy them do not need them; cannot con- 
 sume them; cannot even waste them. Ail this 
 has been long noted and much commented up- 
 on, but there is another notable fact, comple- 
 mental to the foregoing, which has not been co- 
 ordinated therewith so far as I know. Over 
 against this frequently recurring and so distress- 
 fully embarrassing "surplus," which stops in- 
 dustry because it cannot be sold, there is at all 
 times a deplorable shortage of things that do not 
 have to be sold. They are forms of wealth 
 needed by everybody at all times and in all 
 places, and are of such character that they can- 
 not possibly be produced in excess of the need. 
 
 These forms of wealth are highways and other 
 public utilities. 
 
 In order that we may deal with the problem 
 that confronts us at all times rather than with 
 something unusual, let us assume the condition 
 of 1893 to have recurred (as it will a few years 
 after the war ends if we do not establish a just 
 industrial system), and that a congressional com- 
 mittee has taken the matter in hand to see what 
 ought to be done. Assume that the federal sta- 
 tute for open public employment and service 
 
 63 
 
money is under consideration and that the com- 
 mittee is hearing opinions of it pro and con. 
 Assume further, that one of our wise statesmen 
 or professors from a seat of learning, has op- 
 posed it on the ground that "it is not a proper 
 function of government to provide employment 
 for men in enforced idleness." A representative 
 of labor is next heard, and we may imagine him 
 to speak as follows: 
 
 Mr. Chairman and Gentlemen of the Com- 
 mittee : I do not know whether the government 
 should permanently employ all idle men or not, 
 but this I do know, that so long as an industrial 
 system is maintained under which men are often 
 in enforced idleness and obliged to beg, steal or 
 starve, the government should employ all such 
 men until governments learn how to govern so 
 that none shall be in enforced idleness. Men 
 whose wives and children are hungry and cold 
 cannot wait for philosophers to evolve the per- 
 fect social order. The objection of the gentle- 
 man who has just spoken is technical, scholastic 
 mockery, and assumes that men were made for 
 government, not government for men. Such ob- 
 jection is as specious and as foreign to reason as 
 would be a surgeon's refusal to render first aid 
 to an injured person on the plea that his license 
 did not cover the locality. It is not only un- 
 worthy of your consideration, but of an answer. 
 Still, to take Solomon's advice and answer a 
 technical objection technically, I suggest this to 
 the committee : Make the law tentative by pro- 
 viding that it shall be voted upon at each presi- 
 dential election, and shall not become a per- 
 manent law until it shall have been endorsed 
 
 64 
 
three times by a majority of the nation's voters 
 after it shall have been in full operation for 
 three years. And I suggest further (in defer- 
 ence to those who think God made gold in order 
 that men might coin it into money), that gold 
 be not demonetized until the people demonitize 
 it by vote. If we call a unit of this service 
 money a "daylor" there will be no confusion. 
 Let gold still be a legal tender for all contracts 
 expressed in gold, and for taxes, at its market 
 ratio to the new money. There can be no sound 
 objection to this, for every man who prefers 
 gold can contract for gold, and those who pre- 
 fer "daylors" will contract for "daylors." 
 
 Gentlemen of the Committee, consider this : 
 For more than 300 years in this country, and for 
 thousands of years in the old countries, govern- 
 ments have been endeavoring to discover some 
 practicable way to finance the building of high- 
 ways and other public utilities, but no adequate 
 system has ever been found. For years past there 
 have been organizations of business men in the 
 large cities, whose sole purpose is to devise some 
 method to raise funds for the building of high- 
 ways, and these organizations have worked side 
 by side with those philanthropic organizations 
 whose sole purpose is to find employment for 
 men in enforced idleness. Think of the absurd- 
 ity, Gentlemen of the Committee: One organ- 
 ization with much work to do, hunting for some 
 way to get the work done; other organizations 
 seeking work for idle men, yet no power to co- 
 operate! Why this lack of co-ordination? 
 Stated in brief it is nothing more than this : The 
 same school of economic philosophers of nega- 
 
 65 
 
tion who teach that "it is not a proper function 
 of government," etc., have taught also that taxes 
 must be levied or bonds sold in order that public 
 work may be done. This is not true, for public 
 wealth may be monetized as it appears, and tax- 
 ation 'or debt for the support of the general gov- 
 ernment is not necessary. On behalf of the la- 
 boring men of America, if this bill is passed, I 
 promise to build all the highways and other pub- 
 lic utilities needed and to take in payment the 
 service money provided for by the bill. As it 
 will involve no debt and no taxation, can any 
 valid objection be urged against it? Whatever 
 public works are built under the provisions of 
 this bill will be a net gain to the government. 
 If a certificate of the money is not worth much 
 in the market, there will not be much of the 
 money; if a unit of the money is worth much, 
 there will be a large volume of it, and in this 
 respect it is exactly opposite in character to gold 
 and other commodity moneys, for their unit 
 value falls with increase of volume for given 
 conditions. 
 
 And this is also true: A unit of the proposed 
 money must always equal a day of common la- 
 bor, for as the public wage will not change, the 
 unit of money being a time unit of common 
 labor, if the money unit's value could fall below 
 a common-labor day, money would automatical- 
 ly cease to issue, for when the public wage does 
 not attract labor it can only be because private 
 employment is offering more than the public 
 wage. To say that this money will lose unit 
 value, therefore, is equivalent to saying that 
 
 66 
 
wages will fall because public employment is 
 open and laborers are no longer obliged to com- 
 pete for opportunity to labor which is absurd. 
 Again, Gentlemen of the Committee, on be- 
 half of thirty million laborers I challenge all 
 the opponents of this bill to demonstrate their 
 faith in the money they advocate; and that they 
 may have an opportunity to do so, I urgently 
 recommend that gold be retained as a legal ten- 
 der for all contracts expressed in gold, and for 
 public dues at its market value. I would even 
 change the order, and say that public dues may 
 still be expressed in gold, provided the certif- 
 icates be made legal tender at their market value. 
 Will any champion of gold reject this and still 
 declare his faith in gold? Within a decade of 
 the day on which this bill becomes a law, one 
 certificate of the proposed money will buy from 
 three to five gold dollars. And within another 
 decade we shall have several million miles of 
 foundational roads, built without taxation and 
 without debt. 
 
 Suppose the Kaiser should propose the fore- 
 going plan, could the Allies reject it and still 
 contend they were fighting to make the world 
 safe for democracy? And if they accepted it, 
 would not the Kaiser go down in history as the 
 democratic autocrat who tore the democratic 
 mask from plutocracy? 
 
 67 
 
Democracy 
 
 Vs. 
 
 Autocracy 
 
 EVEN from its beginning in 1914, the war 
 was said to be a contest between autocracy 
 and democracy, but this is true only in a 
 relative sense, for true democracy is not yet 
 born. The essense of autocracy is official author- 
 ity in the sense of "official discretion," and 
 though we have the democratic form; have 
 achieved political democracy in a large measure, 
 it is in fact (as yet) merely a subdivided, dele- 
 gated autocracy instead of an hereditary, one- 
 head (mon-arch) one. We elect our officials, 
 but they are autocrats still within the limits of 
 their "official discretion," and often are all the 
 more unscrupulously autocratic because the 
 term is short. It seems probable that even the 
 petty, pilfering, thieving autocrat would be 
 more moderately predaceous if he were the agent 
 of an hereditary autocrat than he thinks he can 
 afford to be with periodic election expenses to 
 meet. 
 
 This "official discretion" is the rock on which 
 democracy will founder if we do not find means 
 to avert the disaster. 
 
 We have no fear for democracy on account 
 of "official discretion" relating to matters having 
 no economic significance, but discretionary 
 
power relating to or affecting the distribution 
 of wealth is the "twilight zone" in which "The 
 Unseen Empire" is more firmly established than 
 any monarch on his throne. The king of this 
 "Unseen Empire" is king by conquest, and is 
 therefore a strong man. His agents are also 
 strong men, and are the more faithful because 
 each one aspires to the succession. They are 
 unscrupulous, and as resourceful as if by nefar- 
 ious inspiration. The influences they bring to 
 bear permeate every activity of life, social, re- 
 ligious, political and economic, and are not ne- 
 cessarily bad in themselves, but only in the use 
 that is made of them; and because the influences 
 are of every conceivable sort, good men serve 
 "The Unseen Empire" unwittingly, even as bad 
 men serve it unblushingly; and this unconscious, 
 unpaid service is the more efficient because it is 
 unconscious. 
 
 Let it be noted that autocracy need not be ab- 
 solute in order virtually to enslave a people. A 
 slight advantage always working against the 
 masses and in favor of the classes will gradually 
 accomplish their enslavement with more cer- 
 tainty than rigorous methods, just as "the house," 
 with a slight advantage in the game, will get all 
 the gambler has, more certainly than the burglar 
 or bold highwayman. 
 
 The "official discretion" which all but nulli- 
 fies our democracy and threatens its destruction 
 is centered in the official distribution of public 
 funds, and in lesser degree in the levying of 
 taxes. 
 
 It is commonly believed that the people do not 
 realize in public benefits more than sixty per 
 
 69 
 
cent of the taxes paid, the remainder being 
 wasted and stolen by indirection. This forty 
 per cent loss occurs in the "circumlocution" of- 
 fice; that is, in the levying, the collecting, the 
 handling and the distribution of the fund, the 
 greatest waste of all being in the manipulation 
 of contracts for public work. And even that 
 which finally appears as public wealth in the 
 form of highways and other public utilities is 
 seldom distributed as it ought to be. Instead, 
 these public benefits are almost invariably so 
 located as to give collateral benefit to officials 
 and their friends and thus entrench the officials 
 politically, even if they do not profit financially. 
 This is so well known as scarcely to need illus- 
 tration. It is not even necessary to consult news- 
 paper files to illustrate the deplorable truth. If 
 congress or the legislature is in session and deal- 
 ing with appropriations you will find it in the 
 morning paper, in yesterday's paper, and again 
 in tomorrow's. The scandal of "log-rolling" 
 and "pork-barrels" is so nearly universal that it 
 has almost ceased to be scandalous, being re- 
 garded as inevitable; and even when (as occa- 
 sionally happens) a public fund is wisely and 
 honestly spent, we are still scandalized by the 
 notability of such instances. 
 
 Now, what is the cure for this "official-discre- 
 tion" autocracy concealed under our democratic 
 form? Obviously it is to abolish official discre- 
 tion, which is to say that we must make our so- 
 cial mechanism as nearly automatic as possible 
 insofar as it relates to economic matters. This 
 is accomplished by the method proposed, which 
 is wholly automatic as to the general govern- 
 
 70 
 
ment, and under Voluntary Tax there will not 
 even be an assessor or a tax review board for the 
 local community. The local authorities will 
 have nothing to say as to what the land tax shall 
 be. The annual payment for every site will be 
 determined by a perpetual competition for its 
 use, and tax officials will be mere clerks and ac- 
 countants. 
 
 Nor will congress have anything to say as to 
 what the government's income shall be under the 
 open public employment system. It may be five 
 billion dollars a year or ten billions the amount 
 will be determined, as previously said, by the 
 amount of enforced idleness which there would 
 be if public employment were not open. And 
 most important of all insofar as political corrup- 
 tion is concerned, the location of the public utili- 
 ties will not be determined by "official discre- 
 tion" (subject to the kind of influence we write 
 with quotation marks). They will gradually 
 be produced in every rural neighborhood, sub- 
 stantially in proportion to its population. 
 
 For several decades the people of many com- 
 munities have been electing good men to office, 
 only to find they are all but impotent to accom- 
 plish any substantial reform, and in many cases 
 they have been charged with bad faith, where 
 failure was really due to the impossibility of 
 overcoming the natural law by statute law. I 
 do not mean by this that the evils they were ex- 
 pected to overcome are effects of the natural law 
 in normal conditions, but that they are the in- 
 evitable effects of existing causes and are natural 
 in the same sense that disease is the natural ef- 
 fect of infringing the laws of health. The futil- 
 
 71 
 
ity of attempting to establish justice by statute 
 law other than in the sense of giving expression 
 to the natural law, is forcibly illustrated by the 
 abortive efforts to abolish interest and to regualte 
 prices and wages by statute. Not only are such 
 attempts futile, but they make matters worse. 
 The natural law is automatic, whether for good 
 or ill, wherefore the attempt to abolish evils 
 other than by conformity to the natural law is to 
 work against nature's automatic mechanism. 
 Our only hope is to make our social mechanism 
 beneficiently automatic, and when we have done 
 this, as briefly outlined in the foregoing pages, 
 a bad man in office, if there should happen to 
 be one, will be as impotent for harm as a good 
 man now is for good. To- the extent that we 
 realize autonomy in our governmental mechan- 
 ism we shall have achieved democracy and ex- 
 tirpated autocracy; shall have established the 
 kingdom of heaven on earth; in other words, 
 shall have established the divine order, which is 
 a theocracy, for the people who are governed by 
 the natural law are divinely governed. 
 
 72 
 
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