BACK TO BARTER.

Auckland Star, Volume LXIV, Issue 41, 18 February 1933, Page 11

BACK TO BARTER.

USE OF SCRIP MONEY. AN AMERICAN EXPERIMENT. THE MOVEMENT EXPLAINED. (By STUAET CHASE.) NEW YORK, January 20. The favourite wisecrack of the depression, "what are you going to use for money '!" turns out to be no wisecrack at all for at least 500,000 persons in the United States to-day. They are buying goods and services with "wooden money"; money which has no legal backing, no authorisation from the Government, but which works. Failing abrupt recovery, of which no signs are now visible, it is probable that before the year i* out millions will be doing business without legal tender. Scores of communities, in 29 States, are using this new and, incidentally, very old method for increasing purchasing power. In Seattle, where the movement eeems to have started more than a year ago, 50,000 members, organised into 20 locals, have not only markedly improved their economic position, but have formed a political party strong enough to influence the city government. Another organisation, the Natural Development Arsoeiation of Salt Lake City, has 30,000 members and branches in four States. State-wide clearing houses are forming, and in New York a national organisation is being developed. Altogether, there are 144 organisations throughout the country. The States where this movement is under way in some form arc Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, lowa, Kansas, Michigan, Minnesota, Mississippi, Montana, Nebraska, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee. Texas, Utah, Washington, Wisconsin and Wyoming. The only rival to wooden money as a new econo : c movement is. technocracy. In that technocracy butters no parsnips to-day, hov ever, many it may butter tomorrow, it is quite possible organised ■barter exchanges and scrip money will bo the outstanding economic development of the year. Unless all signs fail they are destined to sweep the country. Why? Because they provide citizens, particularly unemployed, with desper-ately-needed goods and services without the ignominy of charity and the dry rot of forced, inaction. They provide food and work, and work is almost ae dear a possession as food. Man does not live by bread alone. To Stimulate Purchasing Power. Competent observers agree that whatever the causes of the depression, lack of effective purchasing power tfy the ultimate consumer is prolonging it, and that no recovery is possible until this purchasing power is available. Day by day it shrinks, and the need for its expansion becomes more bitter. There are three major methods, for stimulating purchasing power deliberately: 1. As part of a complete revision of the economic system, on the principle of co-ordinated central planning. 2. By curre--y inflation, with or without a huge pubuc works progr -nme. 3. By voluntary agreement of local communities and groups to accept the wooden money substitute. The first, in my opinion, is Wie ultimate and 'best way, but we shall hardly complete the necessary educational course to put it into operation in 1933. The second has teen the subject of bitter dispute and oceans of rhetoric. The almost universal opposition of bankers and creditors does not presage early adoption. There is a chance, however, that it will be tried in 1933. Wisely guarded and administered, inflation can prove very helpful; badly designed it can prove almost fatal.

With planning out for the moment and inflation dubious, the third method would seem the inevitable immediate choice. Half a million people have already chosen it. While congress argues and captains of industry go into conference, main street can get action; get it in 10 days. Exchange groups are springing up almost by spontaneous combustion. Idle men want work and food, business men want sales, farmers want to dispose of their crope, professional men to market their services. These wants are urgent and cumulatively tremendous. They may be satisfied through barter and scrip exchanges on one condition: co-operation with the group, playing the economic game witli the community rather than alone. This is a hard condition for Americans to meet, but as the depression deepens, more and more are meeting it. The principle may be stated vary simply. Here is a plumber. He has no job, but a splitting toothache. Here is a dentist. He has very few patients and a leak in his bathroom. The plumber says to the"dentist: "If you fix my tooth, I will fix your bathroom." The dentist agrees. The plumber has a job to pay for dental work; the dentist has a patient through whom he pays for plumbing. No cash changes hands, but all the prime values of cash have been served. This is barter, pure and simple, the oldest market system in the world.

Now suppose, in addition to the plumber and the dentist, we had a few farmers, a physician, a barber, a truck driver, carpenters, electricians, ehoe repairers, laundry workers, tailors, a landlord or two, a restaurant, day labourers, and a central office in which all these people were registered, and which could organise and facilitate exchange of goods and services. Each member has agreed to forswear profit, sharp trading and grousing, and to co-operate to the best of his ability. This is the second'step, an organised barter exchange. It is virtually impossible for such a group, even if it included a whole city, to provide members with all their basic needs. The immediate purpose is to fill gaps, create employment, put idle plumbers into touch with idle dentists. "Wooden Money." Under this plan, which many communities have put into practice and which some are experimenting with, the central office must do a lot of bookkeeping,, co-ordinating, interviewing, arranging. Straight barter has 2ver been a clumsy instrument. We go on then to the third step and introduce a medium of exchange, to reduce bookkeeping and facilitate transactions. "Wooden money" usually takes the form of printed scrip, in pads like petty cash tickets, in denominations of five cents, ten cents, up to ten dollarS - x, r 1 The group pays one another tor goods and services in this scrip. It works just as well as regular money, in eoine ways better, because there is no point in hoarding it, lending it or charging i interest for, it, provided the group, has

unanimously agreed to take it. If some will and some won't and some aren't sure, the plan collapses instanter. Experience shows that a small group, grimly determined to honour this medium of exchange, will find the ;in:le widening. Storekeepers come in, taking a part of their weekly turnover in senp; landlords come in; professional people. In Salt Lake railroads are taking, it, coal mines are bought with it and banks are clearing it. Back of the scrip stands not gold or signed paper, but real wealth, the labour and the products of the group. Purchasing power is expanded by the scrip; real wealth is expanded by the goods and services which otherwise would be idle or non-existent.

The usual method for launching scrip is to have the central oflice print it and proceed to get it into circulation by: (1) Lending it to unemployed group members of good character in return for their note, payable in scrip. (2) Buying food with it from group farmers for sale in the exchange store. The farmer pays his help with it, buys other goods from the exchange 6tore, say, shirts or furniturtf, has his hair cut by the group barber. (3) Lending it to business men or tradesmen and taking their note forit, payable in scrip. They use it for paying help, repairs, services, supplies. To Mitigate Depression Ravages. Some scrip is cancelled after each full transaction; most scrip plans have a redemption goal in mind. Some have failed through lack of confidence in the steadfastness of this goal. Professor Irving Fisher is agitating a plan for full cash redemption in one year by affixing a special two cent Stamp, paid for in real money, on a dollar's worth of scrip, every Wednesday. At the end of a year $1.0*4 hae been paid and should be in the bank, deposited by the central office which sells the stamps, to redeem the scrip. A secondary virtue of this plan is rapid circulation —buy something at once and let the next chap put on the stamp. If the stamp is not put on the certificate begine immediately to depreciate. This plan has worked well in certain German communities, and is being tried at Hawarden. It does not require registration of members or catalogue of their abilities and productive capacities. A city government can Start it. It requires only acceptance by enough people to make it work. It leans away from the barter group and approaches the status of legal money, a sort of light cavalry brigade, very fast moving, attached to the regular army. Nakedly stated, to people used to traditional money concepts and traditional economic behaviour, these plans sound fantastic, absurd, dangerous. They work for half a million people; presently a million, two million. They will not solve the problem of purchasing power in its larger and longer aspects, but they may do much to mitigate the intolerable ravages of the depression, to restore self-respect and tangible comfort. Operating on a national scale, they might even prime the pump to etart the economic mechanism moving upward. If scrip enters into really wide circulation its effect should be to supplement the purchasing power of legal money, stimulate business, raise prices, and thus quicken tile circulation of real money. However temporary the economic benefits, the movement cannot fail to teach two very important lessons: Necessity of co-operation and the fact that wealth does not come out of banks, but from human labour, physical and mental.