INTRODUCTION

Metal money of the present day is in all essentials identical with the money that exchanged the products of antiquity. Gold money unearthed from the ruins of Athens, Rome or Carthage is universally acceptable and circulates freely with the money of modem Europe or America. Apart from possible differences in the fineness of the gold, a kilogram of coins with the stamp of a Roman emperor is equal to a kilogram of coins with the stamp of the German mint. Our money has all the characteristics of the money that Lycurgus banished from Sparta. Money is perhaps the only State-Institution that we have adopted unchanged from antiquity.

But our knowledge of the nature of money is by no means proportionate to its great antiquity. Lycurgus recognised that money made of precious metal disrupts the State by dividing the people into rich and poor. We will not here discuss whether he did well in banishing money, in casting out the good with the bad. But even today we are as far from understanding the recognised evils of money as was Lycurgus. We can applaud Pythagoras for saying "Honour Lycurgus who banished gold and silver, the root of all evil" or sigh with Goethe "Nach Golde drängt, am Golde hängt doch alles. Ach wir Armen!" - but we can go no further. The question, What is wrong with money ? Why is money a curse to mankind ? meets with silence. Even our economists are so perplexed by this problem that instead of investigating it they prefer simply to contradict Lycurgus and Pythagoras and to ascribe the alleged shortcomings of money to defective observation. The Spartan Moses is thus classed among tamperers with the monetary standard, and the great mathematician among moral fanatics.

This failure of science is less due to defects of the human understanding than to certain external circumstances unfavourable to the scientific consideration of monetary theory.

The subject itself repels investigators. Lofty idealists can easily find subjects of investigation more attractive than money. Religion, biology, astronomy, for example, are infinitely more edifying than an investigation of the nature of money. Only the prosaic man of figures feels attracted by this step-child of science. It is comprehensible, it does honour to human nature, that the investigators who have penetrated into the dark continent of monetary science can still be counted on the fingers.

Again, the unfortunate methods hitherto employed. and the connection of the investigation with the now happily moribund doctrine of value, have increased the natural aversion to this branch of science. The pedantic obscurity with which monetary theory has been treated by scientists has caused the public to despise a subject which is nevertheless of vast importance to human development. (The forgotten literature of bimetallism is a praiseworthy exception). Even at the present day the monetary standard seems to the great majority of the public to be simply a certain weight of fine gold, and gold is for most men a substance of small importance. Since the object of monetary theory is held in low estimation, no one buys monetary literature, and the risk of publishing works on monetary theory is too great for most publishers. Much good writing about money has probably remained unpublished - another circumstance that keeps investigators away from monetary problems. Only authors who can afford to publish at their own expense can occupy themselves with the problem of money.

To the latter statement there are exceptions. The works of our university professors are at least bought by students and State libraries, and find publishers. But the exclusion of criticism of the existing order from university teaching prevents university professors from penetrating far into the nature of money. The probe of official science does not go deep, it recoils from the hard underlying layer of controversy. What is true of money is true also of the theories of rent, interest and wages. A university professor who ventured to investigate the controversial basis of these problems would convert his lecture-hall into a field of battle. Controversial matters, politics, theories of wages, rent, interest and money, are out of place in the university, and for this reason economic science must languish in the hands of our professors. A professor has scarcely gone a spade's depth into his subject when the menace: "Thus far but no further !" rings in his ears.

Added to these external difficulties is the fact that the theory of this thorny subject requires knowledge which can only be obtained in practical commerce, and that commerce usually attracts natures incapable of theoretical investigation. Commerce requires men of action, not theorists and ideologists. Commercial pursuits were also, until quite lately, considered dishonourable; Mercury, the God of Merchants, was also the God of Thieves. Commerce was a profession for those who had failed in the schools. Intelligent sons were sent to the university, the rest to the counting-house.

Such is the explanation of the startling fact that although in every other sphere science passes from triumph to triumph, we have as yet no sound definition or theory of metal money. Metal money has been in existence for 4000 years, has during a hundred generations passed through thousands of millions of hands, yet in the management of money every country in the world is guided, not by science but simply by routine.

The lack of a sound theory of money is the reason why the phenomenon of interest has never been satisfactorily explained. For 4000 years we have paid and received countless thousands of millions in interest, yet science is at the present day incapable of answering the question "Whence and why does the capitalist receive interest ?" (* Boehm - Bawerk, History and Criticism of Theories of Interest.)

Attempts to solve the problem of interest have not, indeed, been wanting. As an obvious disturber of the peace, interest has received a far larger share of public and scientific attention than money. All economists of note have dealt with this problem, especially the socialists whose whole effort is fundamentally directed against interest.

But in spite of all these attempts the problem of interest remained unsolved.

The failure is not due to the difficulty of the subject, but to the fact that capital-interest (interest on loans as well as interest on real capital) is the child or by-product of our traditional form of money and can therefore be scientifically explained only with the help of a theory of money. Money and interest, to superficial observers inseparable friends, have also a close inner connection, a connection in theory. A theory of interest can only be deduced from a theory of money.

But theorists upon interest have always, for the reasons given above, neglected the study of money. Marx, for example, can never have given the theory of money five minutes attention - witness his three large volumes upon interest (capital). Proudhon under-rated money less and came nearest to solving the problem of interest.

In the following investigation, begun by chance and helped by favourable outer circumstances, I now offer science, commerce and politics the long sought-for theory of money and interest.

What I investigated was controversial matter. Am I to blame that what I discovered must stimulate sweeping changes in the social order ?

Summer 1911

Silvio Gesell