Silvio Gesell

Who he was: Silvio Gesell was a German-born merchant and farmer, a theoretical economist, socialist, author of A Natural Economic Order and developed the theory of Freiwirtschaft. At age 24, Gesell moved from Germany to Buenos Aires to open a branch of his brother's business but in 1890, as he achieved success, his business began to struggle due to Argentina's depression. Inflationary and deflationary cycles and their impact on society, vis-a-vis effects on his business, led Gesell to contemplate the relationship between the state of a society and its monetary system.

Returning to Switzerland in 1900, Gesell wrote what would become his best-known book, Die naturliche Wirtschaftsordnung durch Freiland und Freigeld, or A Natural Economic Order Through Free Land and Free Money. Gesell criticized political policies for having empty ideologies without concrete economic principles, which he countered with the theory of free land and free money.

Gesell referred to his theory as "natural" because he believed individuals' self-interest naturally leads them to act in ways that are productive, leading to satisfaction of their own needs. An economic system that does not address this condition will undoubtedly fail. Acknowledging human selfishness, Gesell called for free, fair business competition with equal opportunity for all members of society, which demanded the removal of any form of inherited or legal privileges. Gesell argued that a "natural economic order" would lead to highest income, without the distortion of income from interest and rent charges, for the most talented individuals and an increase in income for the less talented, as they would no longer be burdened with interest and rent charge. The outcome would be an equalization of incomes, with a benefit to the extremely poor as all other members of society would have enough to be able to help as needed.

John Maynard Keynes wrote in his book, The General Theory, "I believe the future will learn more from Gesell's than from Marx's spirit," referring to Gesell's "passionate and charged devotion to social justice." Hans Binswanger wrote, "Gesell is the founder of the free economy, an economic outsider who nevertheless was recognized by Keynes ... as his forerunner. He is therefore still considered to be above all a Keynesian economist ... an advocate of a school that propagates the lowest (nominal) interest rate possible as a means of avoiding crises."

While Gesell has seen a revival of late, questions remain about his perspective and outlook. His proponents in the modern era seem to believe in command-and-control economics.

*Modern proponents of Gesell have cited (Gottfried) Feder, the German Nazi economist, as "a great light ... implementing his ideas today would solve basically everything." But Feder was a command-and-control German economist who participated in Hitler's famous 25-point plan to nationalize the German economy.

*Gesell has been called a free-market economist but he wished to ensure a free market by banning inheritance so that everyone would start on an "even playing field."

*Gesell believed in government enforcment of a currency that would lose value by design month to month. Everyone using the currency would have to receive a government stamp proving the money was still worth a certain amount.

*Another proponent of alternative money schemes, Major Douglas, branded Gesell's schemes a regressive "tax."

*Yet another proponent of Gesell's ideas was the famous poet Ezra Pound who went to work for the Italian fascists and was notoriously anti-Semitic. Pound later recanted of his anti-Semitism, calling it a "stupid suburban prejudice."

*Gesell was a supporter of Henry George, who believed in government ownership of the land. George was frequently cited by Fabian socialists along with Major Douglas himself, the other prominent alternative economist of the early 20th century.

*Gesell's theories have received endorsement from such individuals as Reuters' Anatole Kaletsky. According to Wikipedia, "In 2012, Kaletsky was appointed Chairman of the Institute for New Economic Thinking, a foundation established after the 2008 financial crisis with $200m of grants from George Soros, Paul Volcker, William Janeway, Jim Balsillie and other leading financiers. INET was set up post-crisis to challenge the mainstream assumptions in contemporary economic research."

And Wikipedia adds, "On his Reuters' blog, Kaletsky appealed several times the central banks to do 'quantitative easing for the people'." This solution would consist in enabling central banks to create debt-free money and inject it into the economy trough direct cash transfers to the citizens, instead of injecting money through the banking system. Kaletsky claims this radical solution "may be another idea whose time has come."

An argument can certainly be made that Gesell's command-and-control approach to economics provided further credibility to Hitler's national socialist movement and the resurgence of the Gesellian paradigm during this modern crisis of capitalism is likely no accident.

Background: Silvio Gesell was born 17 March 1862 in Sankt Vith, Prussia to a Belgian mother and German father, the seventh of nine children. Silvio attended Gymnasium in Malmedy and went to work for the postal system rather than attend university, as he had to pay his own living expenses from an early age.

Gesell moved to Berlin to apprentice under his brother as a merchant and moved later to Malaga, Spain to work as a correspondent for two years. After completing his involuntary military service in Berlin, he lived in Brunswick and Hamburg, working as a merchant.

Silvio Gesell moved to Buenos Aires in 1887, as the depression in Argentina was worsening. With his business negatively influenced by the economic state of the country, Gesell began to consider the relationship between the monetary system and culture. Gesell's first paper on this topic was issued in 1891, "The Reformation of the Monetary System as a Bridge to a Just State." That was followed with Nervus Rerum and The Nationalization of Money.

In 1892, Silvio Gesell gave his business in Argentina to his brother and returned to Europe, briefly living in Germany before moving to the Swiss canton of Neuchatel, where he farmed while continuing his writing. Gesell founded a magazine called Geld- und Bodenreforn in 1900 that failed and stopped publishing in 1903. Between 1907 and 1911 Gesell lived again in Argentina. Upon his return to Germany in 1911 he lived in a vegetarian commune called Obstbausiedlung Eden, founded by Franz Oppenheimer, in the town of Oranienburg, north of Berlin, where he co-founded, with Georg Blumenthal, Der Physiokrat, a magazine that was closed in 1914 due to censorship.

Gesell returned to his farm in Switzerland in 1915 but was offered a seat on the Socialization Commission of the Bavarian Soviet Republic (a short-lived attempt to establish a socialist state independent of the Weimar Republic) in 1919, which lasted only seven days before his arrest and detention when the new republic came to an end. After several months of detention Gesell was acquitted of treason but was prohibited from returning to his Swiss farm. After another brief period of time in Argentina, he returned to Oranienburg where he died of pneumonia on 11 March 1930.

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