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Silvio Gesell (1862–1930), the founder of Freiwirtschaft and Freigeld
Freiwirtschaft (German for "free economy") is an economic theory and proposal founded by theGerman-Argentine economistSilvio Gesell in his 1916 book,The Natural Economic Order (German:Die natürliche Wirtschaftsordnung durch Freiland und Freigeld). Some of the basic economic ideas of Freiwirtschaft were also independently published in 1890 by the Hungarian-Austrian economistTheodor Hertzka in his novelFreiland – ein soziales Zukunftsbild[1] (Freeland – A Social Anticipation).[2]
Allland iscommonly owned or else the property of public institutions and can only be rented from the community or from government, respectively, not purchased (see alsoGeorgism).
Unrestrainedfree trade supported by an international currency union as paper standard to maintain stable exchange rates and abolition of thegold standard in foreign trade.[4]
Freigeld is particularly unique to Silvio Gesell's economic proposals.Freigeld has several special properties:
It is maintained by a monetary authority to bespending-power stable (noinflation ordeflation) by means of printing more money or withdrawing money from circulation.
It iscash flow safe (a scheme is put in place to ensure that the money is returned into the cash flow – for example, bystamp scrip – requiring stamps to be purchased and periodically attached to the money to keep it valid).
According to Gesell, all human-produced goods are subject to expensive storage, whereas money is not: grain loses its weight, metal products rust, housing deteriorates. Therefore, money has a supreme advantage over all other goods.John Maynard Keynes renamed the concept ofbasic interest articulated in Gesell's bookThe Natural Economic Order with the more familiar termliquidity preference. Being "liquid" – having money – is a great advantage to anybody, much more so than having comparable amounts (pastutility) of any product. The result is that people will not even provide zero-risk, inflation-corrected credits unless a certain interest rate is offered.Freigeld simply reduces this "primordial" interest rate, which is estimated to be somewhere around 3% to 5%, by an absolute, in order to lower the average interest rate to a value around 0.
Freiwirtschaft claims that current monetary systems are flawed. In mainstream economics, prices convey information. For example, dropping prices on a product mean that there is less demand or more supply of that product. This leads to a buyer's buying more, or a seller's/producer's starting to sell/produce something else, thereby reducing the supply of that product. As a reaction, assuming constant desirability, the price of the product rises again. So, the price, together with the market participants, builds up afeedback loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is calledself-stabilizing.
The key error of the current system, according to Gesell, is the ill-transported information in the price. Money is nothing but a claim for goods and services, usable in the economies that accept money in exchange for the former. In a weak economy, money is worth less in goods. But instead of aninflation, the result is adeflation as described above, and less money can now buy the same goods. This feedback loop isself-destabilizing, according to the Freiwirtschaft theory.[6]
Knulp Goeke,Die verteilungspolitische Problematik der Freiwirtschaftslehre. Cologne 1961.
Johannes Heinrichs,Sprung aus dem Teufelskreis. Sozialethische Wirtschaftstheorie Vol. I, Munich 2005.
Kennedy, Margrit (1995).Interest and inflation free money: Creating an exchange medium that works for everybody and protects the earth. Philadelphia, PA: New Society Publishers.ISBN0-86571-319-7.OCLC32201872.
Hans-Joachim Werner,Geschichte der Freiwirtschaftsbewegung. 100 Jahre Kampf für eine Marktwirtschaft ohne Kapitalismus. Waxmann, Münster 1990.
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