"Usury can be arrested at present by nationalisation of exchange. The nationalisation of exchange must be undertaken. Metal must be demonetised and reduced to the ranks. Banking must be undertaken by the municipalities and county councils, and by these elective bodies only, while a durable paper currency issued on the basis of the ascertained wealth of the nation, and maintained in true relation to it, shall supersede gold. Then we arrive at a scientific solution of the question of exchange and put in operation the currency and credit system of Socialism."[760]
When the banks and the gold currency have been abolished and when "exchange has been nationalised" the Socialist local authorities will no longer have any difficulty in procuring the unlimited funds they need for the execution of their boundless plans. They will raise the money by the printing of practically unlimited quantities of paper money issued against the security of "the ascertained wealth of the nation." If they wish to spend money, they simply "make it" by means of an ordinary printing press. Could a simpler and more ingenious system for making money be devised?
"Recently notice has been given by leading bankers of their intention to discriminate against municipal loans. And as things now stand, it is certain that, if an organised effort is made generally by the bankers throughout the country by advising clients against such investments and by refusing to accept municipal bonds as collateral security for overdrafts, &c.—a serious check will be put upon public enterprise. Those who imagine bankers either impotent or incapable of such treason against the public interest should remember what took place in the United States in 1893.
"The natural suggestion to be offered as a counter-move to the threat of the bankers and their Industrial Freedom League is to add to those enterprises now under municipal control that of banking. And surely there is nothing which lends itself more easily to municipalisation! If the credit of a banking house can be employed for promoting enterprise and earning dividends, why cannot municipalities employ their own credit directly? In others words, why cannot the credit of a city be utilised to carry on its municipal works instead of it having to borrow the credit of a bank and pay interest charges? Consider how public works are now financed. The London County Council decides to build decent and respectable houses in some locality for the working classes. It requires, we will say, 500,000l. with which to build dwellings for 2,000 families. Bankers are invited to tender for the loan, and finally the Council gets this advance on a guarantee of 3 per cent. per annum, the principal being repayable at the end of thirty-three and a third years. At the end of this period the Council will have paid the bank 500,000l. in interest as well as the 500,000l. original loan. The charge for the loan is equal to the entire cost of the whole undertaking; the result is that each family must pay about twice the amount of rent that it would otherwise have to pay if the Council had not incurred interest charges through borrowing other people's credit. Was there ever greater lunacy in public affairs?
"Suppose that instead of issuing credit in the shape of bonds of large denomination, the Council issued it in notes of small denominations of pounds and shillings. Does anyone mean to assert that that credit which is eagerly purchased by a banker would be refused by a bricklayer or stonemason? Supposing the London County Council was empowered to issue its credit in one-pound notes, as well as large amounts, and supposing it was compulsory that these notes were good in payment of rates. Is there any question as to their being acceptable? The plan is so simple and so safe that at first it seems amazing it should have been so long out of employment."[761]
"Of course gold will drain off abroad—if the foreigners don't follow in our footsteps at once. If the demonetised gold is withdrawn—well, we can have a new currency by nationalising the railways and paying the shareholders 'in current coin'" (which means in unconvertible notes), "not in redeemable, interest-bearing bonds. So long as solid wealth rests behind our issue, our financial policy is sound. Of course, the railway and other shareholders will want fresh investments; they won't find them, because no man will pay interest to usurers when he can monetise his credit at the mere cost of banking and exchange. They must therefore spend it, and the currency will never be restricted henceforward. And this national ownership of exchange can be operated to compel every monopolist to sell his monopoly to the nation."[762]
This insane project is called by the writer, "A scientific way to Socialism."[763]
Surely science is the most abused word in modern language. The creation of money by unlimited issues of paper secured by the national possessions was tried on the grandest scale at the French Revolution. The "assignats" were secured on the national domains, and their security seemed absolute to the revolutionaries. The great Mirabeau had stated on September 27, 1790: "Our assignats are not ordinary paper money. They are a new creation for which there is no precedent. What constitutes the value of metal money? Its intrinsic value. Now I ask you: Does paper which represents the foremost of the possessions of a nation such as France not possess all the characteristics of intrinsic and generally accepted value which metal money possesses?"[764] The "assignats" speedily fell to a discount, although dealing in them at a discount was made punishable with twenty years' imprisonment with hard labour,[765] and they fell ultimately to waste-paper value. A pair of boots worth thirty francs in gold cost 10,000 francs in paper. On paper all were immensely rich. Yet the masses were starving. Unfortunately people cannot live by consuming unlimited quantities of credit notes. They can become prosperous neither by robbing the rich nor by calling a shilling a sovereign, but only by producing more. Greater wealth means simply increased consumption, and increased consumption, unless based on increased production, can only be effected by intrenching upon and diminishing the national capital, the national reserve store of food, clothing, tools, &c., and thus causing widespread misery and starvation.