William Shepherd

In the days of Laffer Curves and Reaganomics our academic economists Tweedledee and Tweedledoubledee loved to talk of the Public Sector crowding out the Private Sector. You may have been a little hazy as to what this had to do with either the public or the private sector. You were not alone.

George Bernard Shaw refused to accept this dichotomy between public and private sectors, insisting instead on a threefold discrimination between Private Wealth, Common Wealth and Personal Possessions. Many of the economic views of the Founding Fabians...The Fabian Papers were published in 1884...were given academic respectability in the 1930s and 1940s by R.H.Tawney.

In the real world there are many forms of discrimination against the little firm. Money is misdirected away from small local investments by the power of Monetary Dispatronage. Crowding out is a trickle down phenomenon that strikes disproportionately at small microbusinesses within the private sector. When Commercial Banks cut back on loans and overdrafts thousands of little microbusinesses are sent to the wall so the bank can escape the spectacle of large corporate customers defaulting on their credit obligations.

These are the same large organisations who protect their own interests...in collusion with the private banks...by delaying payments to small businesses from 30 to 60 days and beyond thereby ensuring that microbusinesses are hit with the double whammy of credit restriction from the banks and balooning receivables because of non-payment by large companies.

If you are large enough to cause embarrassment to a bank's managing officers you can extend your overdraft to whatever level your accountants demand even though the extension of this one big overdraft might dissolve countless little ones. Here are other examples.

If you want to buy a car or a computer there will be financial intermediaries on hand to lend you money at zero interest rate with many months of payment holidays before the first repayment is due.

If you already own one property and want to invest in a Property Bubble by buying a second property and renting into a declining market borrowing a hundred thousand pounds for the privilege then you can get all the money you want at just a percent or two above the bank rate.

The explosion in property prices in England over the past few years has been driven by the Central Banking mechanism that compels their client Commercial Banks to issue money as a Debt at Interest mortgaged against Real Estate as Collateral. The end result is houses being built and property prices being driven up not by demand by householders for shelter but by the demands of the banking system for security against which to create money...and make profits for the bank's shareholders.

The stupidity of all this is that houses get built and countryside destroyed not because people need homes but because wages fail to put enough money into circulation and so individuals are forced back onto Equity Release as their only way to obtain money.

Residential and Commercial Property today has taken the place held by Gold in the Mercantile Era. But gold does not tarnish and is difficult to extract. Houses and office blocks are easy to build by comparison. And the only way to restrict supply is to ration the licensing of building...otherwise known as Planning Permission. But is it really necessary for half the buildings in the country to be occupied for one half of the day and the other half for the other half? Whither Property Prices when the Idiocy of Commuting is recognised and the habits of a lifetime changed as Ownwork increasingly displaces Jobwork...with a resulting doubling in the number of dwellable buildings?

You may well be charged much more to earn exorbitant profits for financial intermediaries but your failure to secure the best deal is part of a broader problem identified by the guru of self-sufficiency John Seymour in a brief aside in his 1961 classic The Fat of The Land. 'We never sell anything we produce,' he remarked. 'We discovered early that once you start trying to sell you enter a world of thieves and rogues and bounders in which you just cannot breathe. We wished to be included out of that world, please.' You might wish to be included out too.

But if you want ten thousand pounds to invest in a microbusiness with a three-year pay-back and a good healthy return over five years the best the banking fraternity will offer is Credit Card Debt at one and a half percent per month...many times the bank rate. Foregoing the money might be possible but some may have no other option.

These are all examples of Crowding-Out or the rather broader idea of Monetary Dispatronage. Money goes to the wrong people in the wrong place at the wrong time and in the wrong form and its distribution is only loosely related to risk & reward and almost completely unrelated to supply & demand.

Indeed if it relates to anything at all it relates to power and the misalignment of power between those who have spare money and those who are willing and able to use it...which brings us back to Tawney’s crucial distinction between Property and Improperty and between Working Capital & Idle Capital. To talk of Debt and Equity in these circumstances tends to obscure rather than enlighten. At the limit such talk is perverse.

Before Adam Smith economic thinking was closely connected with law and practical politics. The law dealt with property and practical politics was about people. So economic thinking could be said to be concerned with Money and Work.

Kings and priests spoke for their right to collect surplus production, Mercantilists spoke for the merchants and Physiocrats for the landowners. Then came Adam Smith and Classical Economics.

Since then the Historical School have spoken for the status quo, Classical Liberals for profits and capitalism and the followers of Marx for wages and socialism. A small linguistically isolated country like Sweden makes an interesting example.

In medieval times influences on Swedish Economic Thought came from Christian and Humanistic thinking in Southern Europe...transformed via German Hanseatic Towns and Denmark to suit a peasant economy with a weak feudal system. In the 16th century German Technology and Mercantilist Thinking were imported to suit the War Economy of the autocratic Vasa kings.

In the 17th century the Dutch took over from the Germans as chief ideologists when the small Swedish super-power tried to develop its trade. In the first half of the 18th century English Mercantile Thinking was imported to suit Swedish Merchants and the Mines, Mills and Factory Owners. In the second half of the 18th century a distorted version of the teachings of the French Physiocrats reached Sweden.

During the first part of the 19th century English and French influences...Smith, Say, Bastiat...competed for dominance when Economic Liberalism penetrated a country that lagged behind Europe in Capitalist Development by half a century. In the 1870s the German Language regained a leading position through schools of thought on both left and right of the political spectrum...interpreted to suit a relatively more rural, peaceful, democratic and pragmatic tradition.

In the 18th century scholars were fluent linguists who built extensive friendships and patronage networks throughout Europe and America and published their work in universal languages such as Latin while seeing it as one of their duties as a scholar to translate from this universal languages into the vernacular.

So when we are looking at the 18th century and the economic academic environment into which Adam Smith's Wealth of Nations was launched, we find that everywhere there were scholars rooted in the practical economic traditions of their own town, province or country, but learned in other traditions and in continuous touch with the intellectual currents of their age.

The world-famous botanist Carl Linnaeus is typical of this universality of learning. Abroad Linnaeus is regarded as one of the few really well-known Swedes...a scientist of genius who inherited the general mood of optimism and belief in progress of the 18th century. But in Sweden Linnaeus is Swedish to a high degree. Perhaps only Carl-Michael Bellman and Carl Larsson have influenced the psyche of Swedish daily life as profoundly as Carl Linnaeus.

This trio mean to the Swede what Shakespeare, Newton and William Morris mean to the English. The feeling for nature, the sense of discovery inspired by the Swedish countryside and the clear literary style originated in Linnaeus' genius. They were not there before Linnaeus. But 250 years on they permeate the entire Swedish population.

Linnaeus campaigned vigorously for Practical Economics. With a sentiment that would not be out of place in Daniel Defoe's Robinson Crusoe Linnaeus wrote in his Oeconomica Naturae that it was the duty of human beings to extract natural resources 'otherwise God would not have deposited them in the earth'. What's more...this would have made a patriot such as Edmund Burke blush...'the natural resources of Sweden were superior to those of any other country'.

Linnaeus argued for new professorships to be established in Economics, Botany and Natural History as a means of preventing the penetration of the new secular Prussian Economics into the Swedish Universities. He lost the battle with the highly political appointment of Anders Berch as Professor of Economics at Uppsala University in 1741.

Linnaeus fought back on two fronts. He undertook Economic Journeys into the Swedish Provinces on behalf of the government...to Gotland, Öland and Dalarna. Ten years after Berch's appointment Linnaean Professors were appointed to newly established Linnaean Chairs in Economics, Botany and Natural History...Åbo in 1747 and Lund in 1750.

The writings of Swedish economists can be understood by ordinary people and deep ecology is the philosophy underlying much modern Swedish Economic Thought. It is no accident that ecology has pushed further into practical politics in Sweden than elsewhere. Linneaus was a first rate political economist and he had his foot in the door 250 years ago.

Linnaeus' confrontations with Berch and his Prussian Economics at Uppsala University were the first skirmishes in a war that has raged now through three centuries and has engulfed the whole world. Only now as this war of ideas at the heart of economics enters its fourth century, do we find Linnaeus' ideas once again in the ascendancy. Our age is finally catching up with Linnaeus. After three hundred years of Anders Berch's School of Quantity & Dead Matter...econometrics...Linnaeus is making a comeback as the Founder of a School of Quality & Living Beings.

The Bank of England’s charter was quite a normal affair for 1694. Europe's kings and queens were merrily handing out charters and monopolies over other people’s assets at the time. It is rather like going along to your neighbourhood Estate Agent and asking her to sell your next-door neighbour’s house.

But unless you held a gun to your neighbour’s head selling his house might be difficult. There was a Scotsman called John Law for instance who once sold a French King a fiendish plan of this type. It made some people rich - those who got out before the Crash - and it helped America pick up Louisiana for a song a few years later. But it didn’t do the French King much good.

In the days between Brigandage and Empire holding guns to heads was much in vogue. One particularly large gun...a 17th century supergun...was the English Navy with its rule of thumb of having always twice the tonnage on the high seas as everybody else in the world. This big gun is called the US Marines, Shock and Awe or Democracy nowadays.

In the winter of 1795 one hundred years after the pretty piece of rascality that gave birth to the Bank of England Company Tom Paine wrote The Decline and Fall of the English System of Finance which attacked the economic system of the English Government.

Paine predicted that within twenty years the National Currency of England would fail. Paine was well versed in monetary matters having published several essays on money and finance in America while editing American Crisis. He was also able to draw on the expertise of his banker friend Robert Smyth.

At the time of writing, England’s foreign debt was in excess of £400 million...£50 billion at current prices...while the cash holdings of the Bank of England amounted to £1 million.‘Bank notes,’ Paine wrote, ‘were not worth the paper on which they were printed’...adding for good measure that ‘the pound sterling would become ever more overstretched.’

The reason was the ‘iron law’ that ‘the national debt was set to rise annually in continual progression.’ Paine had understood the workings of what Thomas Greco refers to as The Growth Imperative. The prediction came true the following year when the Bank of England suspended convertibility of bank notes.

On 27th April 1796 Tom Paine presented copies of The Decline and Fall of The English System of Finance ‘to the French people’ and to both the Council of Five Hundred and the Council of Elders. A member of the Council of Elders enthusiastically proclaimed that the work should be placed under the eyes of everyone concerned with financial matters...prompting a majority of the Council to vote for its official printing and distribution.

The Directory ordered one thousand copies and took the view that Paine’s work was ‘the most combustible weapon which France could at this moment employ to overthrow and destroy the English government.’ It swiftly despatched these copies to the major financial centres of Europe with the intention of persuading investors to unload their English funds thereby reducing England ‘to the nakedness and abandonment to which she must inevitably descend’.

A few weeks later, the Directory arranged the printing of a German-language edition to influence the financiers of Holland, Switzerland, and Germany, ‘whose interests are essentially linked to those of the Bank of London.’ The Directory sent a hundred copies of this German edition to the Ministry of Foreign Affairs to be distributed by French agents in foreign countries.

Meanwhile more than a dozen editions...as well as five refutations...appeared in London, several editions came out in America, with translations into Italian and other languages, and two German authors published refutations in French. One particular writer, Mr. Joersson, himself in the pay of the English, accused the ‘writer attached to the opposition’ of plotting to reduce ‘an amiable and enlightened people’ to French ‘barbarism.

A hundred and fifty years later in 1932 Winston Churchill started work on his History of the English Speaking Peoples...completed a quarter of a century later. His writings also show a familiarity with money, banking and finance. He writes with authority about the Whigs and their Bank of England Company and makes mention of John Harvey’s Land Bank...the failed Tory attempt to smother the Dutch coup d’état at birth. Once upon a time cabinet ministers understood the treacherous ways of the Money Power and their Clever Clerks. These days are no more.

The current crop of Career Politicians from England’s Celtic Fringes...hijackers of the Labour Party of John Smith and Tony Benn...are ignorant of Financial History and in awe to the financiers who fund their private offices. In their ignorance they believe their thrones to be seats of power...comprehending little of the power behind these thrones. Clause Four of the Labour Party Constitution represents a fundamental pillar of Socialist Thought.

The clause...drafted by Sidney Webb in the house where Tony Benn grew up...brilliantly encapsulates large swathes of Socialist Scholarship. It was brushed aside by the New Labour Cabal in a matter of weeks with no mention of the significance of the party’s intent to control the Means of Exchange...vital to Socialists who believe that Socialism is Equal Money.

Instead a phoney debate was launched on the irrelevance of any reference in the constitution of a New Labour Party to such outdated Marxist Nostrums as Controlling the Means of Production in this modern age of knowledge work and automated factories. Has the new Tory Leader David Cameron been better briefed?

The Tale of Two Willies continues...

And so it went on for almost a year. The merry band of bankers enjoyed themselves immensely. Every few months a few more guineas for the king who paid a few more of the queen’s bills. Every few months a few more details settled to their satisfaction...small details like the written promise that the merry band would pay no tax on their winnings and inconsequential matters like a novel new definition of usury. It would now come in two flavours referred to privately as Major and Minor Usury. But at last it was done.

In 1694 Parliament passed the Charter for the Bank of England. Over the next few decades things carried on much as before. The rich got richer, the poor got poorer. War and Taxes increased by leaps and bounds. Eventually even the English Imperial System started to crumble when the American Colonies had the audacity to declare independence and refuse to pay their taxes. A hundred years later a few Freethinkers began to question the Bank’s Charter mumbling darkly of a National Malaise...even hinting that this Central Banking Monopoly might be the cause.

The Germans have a literary genre they call a Staatsroman - a state novel. These are exercises in literary fiction for the purpose of illuminating the implications of a social theory. This is one reason they were much more receptive to John Seymour's Retrieved from the Future than the English. But we can do it too. G.K. Chesterton did it with The Napoleon of Notting Hill for instance and nobody come more English than the Chester-Bellocs and Distributism.

For the past 15 years I have had a dream of devoting a third of each year writing, another third microbusinessing...I used to call it money-making but this is more realistic...and the other third doing whatever else takes my fancy which before Connie died was sailing the ocean blue. High on my writing agenda is The King of Buen Consejo by William Shepherd. I rather like this king of mine so rather than abandon him I thought I would tell his full life story.

My tale will be in four parts. In the first part I will change the ending to Shaw’s Apple Cart. The election goes ahead, ballots are rigged, the king loses, a republic is declared and the king is sent to St. Anne’s at the head of a company of the King’s Cavalry...his gaolers...to put down the Alderney insurgency. This is a temporary expedient as you cannot have an ex-king and his pretty young queen...complete with a social conscience and charity work among the downtrodden...running around all over the place. They become pretenders and ferment Roalst Rebellion.

Unfortunately for the English Government the king takes a leaf out of Mark Twain’s book about the Connecticut Yankee in the Court of King Arthur, goes among his people in disguise, joins the rebels and is bought off by some splendid titles and the promise of independence for the Confederation of Channel Island States.

After their victory the king will be given a year or two to be footloose and fancy-free among the idle rich while conditions back home deteriorate...republics normally last a decade before imploding. They will appear in popular pamphlets like Tassler and OY!! in a before and after story, go to fashion shows and hobnob with celebrities in Paris and Boston. The second part of the books ends with our queen having a passionate love affair and leaving the king.

As a man I will really go to town in the third part showing that men can be hurt too...even big men cry. In the first part a daughter will have been invented doing good deeds in undeveloped foreign parts...a Priestley character from Festival in Farbridge campaigning against the Arms Race. She returns home, finds Daddy moping around the house, tells him to pull himself together and get a life and drags him off to British Imperial India. Here she leaves him to his own devices to make the best of it...without any money. From time to time he bumps into his old cronies and is almost rumbled but keeps his promise to himself and his daughter to stay disguised for three years.

Meanwhile the reader will be given the first inkling that lust is lapsing and all is not well with the queen. She will need a good friend to help her know herself better...Hetty Clarkson in Edwina Curry's novel Chasing Men is the type I have in mind. In the third part the king is gradually acquire a social conscience and gather the facts upon which his social conscience can go to work. Meanwhile the queen's world falls apart. She retreats back into her rural retreat, goes organic and starts to read books...something that was alien to her before.

Her daughter...the real Jane Austen heroine of the story...now turns her counselling skills onto her mother. She takes her out to see George Bernard Shaw's plays...in particular The Apple Cart...and gets her reading political tracts like The Intelligent Woman's Guide to Socialism and Capitalism and J.B.Priestley's plays and novels. Gradually the queen begins getting ideas better suited to her husband's former station...and to the king’s own improving consciousness. So we have a Bildnungsroman within a Staatsroman here...value for money if ever I saw it. Buy one get one free.

At the end of the third part of the book the queen's daughter contrives a reconciliation between her mother and father...and together they sketch out a fiendish plan to enable the king to reclaim his throne. I'm not going to tell you the fourth part. But I have it all worked out. I believe in happy endings...and I have my Queen-in-Waiting.

In 1693 a gentleman by the name of William Paterson was invited to a private audience with King William III of England. Here is a long-lost transcript of the meeting. After some polite preliminaries about the effect of cannons and gunpowder on the climate Mister Paterson broached the subject on both their minds...sovereigns.

“Look,” said he, “You need money. You’ve no chance of getting any from Parliament. But I have several rich Dutch contacts and they have expressed an interest in helping out. Don’t worry. We’ll sort out the details and tell you what to say. Here’s how the scam…whoops what a giveaway…how the scheme works. It’s up and running in the Netherlands as we speak. And we hear everyone’s pleased with the way it’s working out. So have a chat with the Dutch and get back to us. Same time and same place two weeks from now? Good. This could be the start of a beautiful friendship.”

The King didn’t have to think for long. He knew about the transformation of the Dutch king’s fortune. Soon he would find out what was behind it. And so it was that six weeks later - on his own initiative of course - the King invited the leader of the merry band of brothers that were to form the Bank of England Joint Stock Company to bring two or three of his trusted business colleagues to a specially convened meeting of the Privy Council four weeks hence.

Four weeks later with the meeting duly convened the King opened the proceedings. “Now look here, young fellows. We’ve brought you here to discuss a proposal that will be good for this great country of ours. We appeal to you as patriots. Do not dismiss it out of hand. But take it away with you and think carefully upon it. These are difficult and dangerous times. Your country needs you. The crux of the matter is that Progress requires this country to have a Central Bank. The Netherlands has got one. So we must have one. What will our position be if France and Spain get one and we are left in the lurch? But it must have the support of the Merchant Community. Your task is to gather this support. Do this and I will ask you to run the bank for the benefit of your fellow countrymen. What d’you say?”

“We are intrigued, Your Majesty. Pray tell us the nature of the charter you propose. How will the bank sustain its legal monopoly over the issue of notes of credit? Everybody writes notes. And what are the precise conditions you are proposing for our Royal Charter?”

“Well, my loyal subjects,” the King continued in his most pompous manner, “I have given this matter some thought and have consulted widely in Europe. This is the idea. You supply me with the money I want. And in return I’ll give you a royal monopoly. Only your notes will be legal tender within my realm. How much you print is your business. The only condition is that you print the same amount of money for me. That way we’ll both be happy. Got to stick together, after all? Agitators. Deists and Atheists. Mobs. Eh what?”

“Well, you could blow me down with a feather,” replied the leader of the merry band of brothers. “What a truly brilliant idea. How noble, intelligent and wise are the ways of kings. How truly fortunate we simple businessmen are to have a King with so astute a mind and one so versed in the ways of finance. For peace of mind we will back our notes with gold. But don’t worry. You won’t have to pay for the gold. We will issue some of our legal tender and buy the gold with that. Best to get it for nothing.”

“Yes, yes. Very pretty,” replied the King. “I’ll give that to my Minister without Portfolio Lord Alistair of Campbell to put in the newspapers. I’m a big picture man. I’ll leave you young lads to sort out the details. Good. That’s agreed then. Meeting adjourned.”

After the meeting was over, the King took the leader of the merry band aside. “Went well, don’t you think? Just one question. When do I get my money? Wife’s spending money like there’s no tomorrow. And I’m starting to get discrete enquiries from her shopkeepers. So undignified. Still if they know just a quarter of what I know about my financial situation I can hardly blame them.”

“Here are a few guineas to be getting on with. Mustn’t rush this. Must be seen to haggle. We’ll go around looking uneasy. Slip the word out to those agitators in Parliament that this outrageous proposal will bring us bankers to our knees. Tell the old die-hards in the house that this is our only chance. Some Emperor - any emperor - will be in the City of London ravishing the Flower of English Maidenhood in forty-five minutes unless we sign up. And so on and so forth. Must be statesmanlike about these things.”

“Few details to attend to. Some of your privy counsellors are being difficult. Plenty of side deals needed with Lord Here and the Marquis of Somewhere Else over the next few weeks. And there’s the scoundrel Harvey and his pyramid selling. Land Banks indeed! Must be exposed. Agent for the Vatican they say. All takes time. Companies to register. Shareholders to appoint. No rest for the wicked. Let me know if you need any directorships for your people.”

“Well, thank you. I’ll do that. But we have other ways. Let me have the names of those Privy Counsellors...refer to them in future as teepees...code for Turbulent Priests...then I’ll have my wife have a discrete word with their wives. Normally does the trick. The parliamentary session after next, you say. Nine months, eh? Best you can do? Well if that’s what it takes. Now down to the small print. The price of hats in London beggars belief…” to be continued