REFORM SCHEMES.

Auckland Star, Volume LXV, Issue 220, 17 September 1934, Page 10

REFORM SCHEMES.

GOODS FOR SERVICES N.Z. MONETARY EXPERIMENT. "BUSINESS WITHOUT GOI-D." (BY CHAS. E. WHEELER.) Monetary reform is to-day's prominent subject, unci many are the schemes and theories advanced to put right a system somehow out oC joint. But the quest Is very old, even in this young country, for our contributor is able to describe nn interesting monetary experiment tried in Wellington in the 'nineties. Its authors describing It as "Business Without Gold." The country was climbing out of the trough of depression, and the existing order of things was undergoing critical examination. It was in this fertile soil that an attractive propagandist, Michael Flurscheim, sowed the seed which produced practical results —for a time. Flurscheim wai3 no unknown quantity. He came with a European reputation as a land reformer, and there are many •libraries in New Zealand with his principal work, "A Clue to tho Economic Labyrinth." Another of his books, "Rent, Interest and Wages," advocating land nationalisation, was dedicated to his friends, Henry Georgo and Alfred Russell Wallace, so that he was contemporary with some prominent figures in progressive political movements, and held no mean position himself, becausc ho was an able speaker, and enjoyed much of the facility of his friend, Henry George, in making plain to the average man tho abstruse points of economic theory. Flurscheim's methods of question and answer, and tho use of parables could well be emulated by some of our modern writers on these themes, if they wish to be understood by a wider public.

Coming to New Zealand about 1898 on a lecturing tour, Michael Flurscheim found the opportunity for a practical trial of his monetary theory, and he spent several years in an effort to reform the country's distributive system. It sounds like . the echo of a last-week controversy to read his declaration that "under-coneumption is the cruise of over-production." Why, ho asked, was there an accumulation of useful products when at the same time there was inability on the part of the people to buy sufficient for their needs ? One need not follow him into the details of his arguments, which were clearly and attractively stated. For various reasons, notably land ownership and the interest system, argued Flurscheim, the producer was divorced from full ability to enjoy his products through lack of an adequate circulating medium. Tho impediment was to be found in our currency system, and Flurscheim, with many enthusiastic associates, set to work to provide a more effective alternative. They established in Wellington the New Zealand Commercial Exchange Company to facilitate a system of exchanging between it«s members, goods and services. It was to bo "Business Without Gold," as Flurscheim's pamphlet described it, and those who were willing to try the great experiment agreed to take, in return for their commodities, or of their labour, printed notes issued by tho Commercial Exchange Company for various denominations from (id up to £1, bearing this statement:

"The holder of this note is entitled on, or within a reasonable time after presentation, to goods or services to the value of ten shillings from those members of the New Zealand Commercial Exchange Co., Ltd., who are liable to supply goods or services."

The critical reader will be looking for the catch in this business. Flurscheim, very able as a writer, explained the whole system in a discussion between "Citizen," an ignorant but open-minded person who wanted to know, and "Alember of Commercial Exchange," who was willing to answer all his questions, often at considerable length. The answers take up most of the space.

"Citizen" has been listening to explanations filling thirty pages of a rare pamphlet which seems to be the only survival of the system, but he is still puzzled, and cannot quite understand that these "goods and services" pieces of papor will keep productive and purchasing power always at a level, because, as the enthusiast declares, "this money is issued only to those who need it to make payments with, and only to tho extent of their capacity of supplying goods or services for this money."

"I cannot understand this," retorts the ignorant but open-minded Citizen. "Can you show mo how the new money can raise purchasing power to the level of productive power, or, in other words, how can it do away with want of employment, or over-production—the incomprehensible want of necessaries of life by the very people who aro most anxious to produce them for each other?"

"Member of Commercial Exchange" is very patient, and goes off into further long explanations, which must here be summarised. He asks Citizen to visualise five members of the organisation, including one Jones, known to be an honest, industrious trader, who needs money to go on producing, but cannot provide sufficient security to get it from an ordinary commercial bank. "Well," 6ays the currency reformer, "our exchange allows Jones to draw a cheque for £100, or, if he prefers it, hands him £100 in exchange notes. Jones pays tho £100 to Brown, ordering a new bill of woollens; Brown at once buys; the woollens from Williams, paying'him with Jones' cheque or exchange notes; Williams pays Smith; and Smith pays his debt at Parker's store, at the same time giving a new order. Parker now orders £100 worth of clothing from Jones, sending him £100 exchange money, with which Jones at once pays his debt at the Commercial Exchange. Don't you sec how our new money has creatcd the purchasing power for Jones' clothing, and thus made it a safe basis for a corresponding amount of the new money?"

"I can see it now," comments Citizen, but we must now take the story out of the realms of theory into the everyday world, and see how things worked. The Commercial Exchange Company was incorporated in October, 1898, s.nd had its head office at the comer of Manners Street and Willis Street. The goods and services notes were printed, and a number of Wellington business people who belonged to the exchange agreed to take these notes in part payment for their goods. Some were prepared to accept up to 50 per cent of the selling price, but all of them required a substantial proportion in more easily negotiated cash or commercial bank notes. Then there were employers who paid part of their men's wages in goods and services notes. The samples in the

writer's possession wore paid in this way to a skilled tradesman, who in those times of serious unemployment was glad to take a job from an employer on condition that half wages were to be taken in these experimental pieces of papor. Then our craftsman had to turn from into useful commodities. At first he had a fair range from which to choose. A grocer would take 25 per cent of the value of an order in notes. There was an ironmongery firm prepared to accept 50 per cent. A soap factory at Petone was also in the scheme.

But the idea did not catch on. It failed somewhere, for gradually the tradesmen began, to lessen the proportion of notes which they were prepared to accept. They demanded more and more current cash, until our craftsman found himself in the unhappy position of his own enthusiasm waning, while £20 worth of. goods and services notes remained in his possession, with only ono commodity to be acquired with them, and that was soap.

The great experiment faded out in about twelve months, and its originator, Michael Flurscheim, went to South America, where he was associated with the Freelaiul Colony, conducted on the principles of common land ownership, control of coinmorce by the community, and warrant money. That failure is a story apart, and it only remains to record that Flurscheim returned to Berlin, where he died in April, 1912.