Silvio Gesell
Johann Silvio Gesell was a German-Argentine economist, entrepreneur, and social reformer. He was the founder of Freiwirtschaft, an economic model for market socialism. In 1900, he founded the magazine Money and Land Reform, but it soon closed for financial reasons. During his time in Oranienburg, Gesell started the magazine Der Physiokrat together with George Heinrich Blumenthal. In 1914, it closed due to censorship. In 1916, he published his most famous work, The Natural Economic Order.
Gesell is mainly known for his monetary theory. In particular, he noted the asymmetry between the durability and hoardability of money and the finite shelf life of goods and services which depreciate due to entropy and the passage of time. He believed that people who are able to save or hoard money have an unfair economic advantage over people who are dependent on producing and selling decayable goods and services for their livelihoods. Gesell theorized that the unfair premium enjoyed by hoarders expressed itself in interest rates and spawned recessions, an argument that later influenced John Maynard Keynes's theory of liquidity preference. To resolve this problem, Gesell proposed a new form of money that depreciates over time.
Gesell also supported free land and free trade. However, he disagreed with Henry George's contention that land value taxes could solve the problem of land rent, as Gesell believed that such taxes could be passed onto the tenants. Instead, Gesell proposed nationalizing all land from current landowners, with the purchases financed by land bonds that would be paid over 20 years from revenues raised by leasing the purchased land through competitive bidding. This would achieve many of the intended effects of Georgism, but with compensation for previous landowners, and with no need to repeatedly reappraise land values. Gesell also criticized Henry George for believing that Georgism would eliminate interest, economic crises, and unemployment.
At the suggestion of Erich Müchsam and Gustav Landauer, Gesell served as the finance minister of the Bavarian Soviet Republic for eight days in 1919. After the republic's violent end, Gesell was detained for several months on a charge of treason but was acquitted by a Munich court after he gave a speech in his own defense.
In the mid-to-late 1900s, Gesell's ideas were published and discussed only in the limited circle of his supporters. Since the beginning of the 2000s, Gesell has received increasing attention among the general public. The reasons for this include discussions about local currencies and cryptocurrencies, the zero interest-rate policy of some central banks, and the desire of some economists for negative interest rates.
Life
Silvio Jean Gesell was the seventh of nine children of Ernst and Mathilde Gesell. His mother, a Walloon, was a daughter of Nicolas and Jeanette Joseph Talbots. His father, Ernst Gesell, a German, originally from Aachen, was a secretary in Malmedy, now part of Belgium but then ruled by Prussia. Silvio Gesell's birthplace at Rathausstraße 81 in St. Vith is decorated with a commemorative plaque. His grandmother Jeanette Talbots, in whose honor Gesell received his middle name, was daughter of the well-known St. Vith builder Josef Lentz. Before her marriage, she worked in Verviers and Andenne as a teacher for Don Carlos, prince of Capua and brother of Francis II of the Two Sicilies.After attending public school in Sankt Vith, he moved to the Gymnasium in Malmedy. He had to pay for his living expenses from an early age and could not afford higher education, so he decided against attending a university and worked for the German Reichspost, the postal system of the German Empire. However, he was dissatisfied with the job, so he began an apprenticeship to his merchant brothers in Berlin. He then lived in Málaga, Spain for two years, working as a correspondent. He then returned to Berlin to complete his compulsory military service. Subsequently, he worked as a merchant in Braunschweig and Hamburg.
In 1887, Gesell relocated to Buenos Aires, Argentina, where he became self-employed and opened a franchise of his brother's business in Berlin. The 1890 depression in Argentina hurt his business considerably, so he transferred ownership of his Argentinian franchise to his brother in 1890. The ongoing economic crisis caused him to think about the structural problems caused by the monetary system. In 1891, Gesell released his first theoretical writing on currency: . He also wrote and published The Nerve of Things and The nationalization of money. He returned to Europe in 1892.
After a short stay in Germany, Gesell settled in Les Hauts-Geneveys in the Canton of Neuchâtel in Switzerland, where he acquired a farm. In addition to working in agriculture, he dedicated himself to studying economics and writing.
He completed his self-taught education by reading the works of the most important economists, trying to contrast their monetary theories. Judging by the quotations, he read David Hume, Adam Smith, David Ricardo, Karl Marx, Pierre-Joseph Proudhon, Henry George, Knut Wicksell, Eugen von Böhm-Bawerk, Carl Menger, Georg Friedrich Knapp, John Law.
He also started publishing a magazine, The Money and Land Reform in 1900, but it was not a great success. He discontinued it in 1903 for financial reasons.
From 1907 to 1911, Gesell lived in Argentina again. He then returned to Germany where he chose to live in the vegetarian-oriented fruit-growing cooperative called Eden in Oranienburg. There, he founded his magazine Der Physiokrat together with George Heinrich Blumenthal. In March 1916, further publication was prohibited due to wartime censorship during the World War I.
Gesell left Germany and returned to his farm in Switzerland. Through his business, he acquired certain assets, with which he was able to dispatch so that crises did not damage him to a large extent. He also received support from his friends, especially from Paul Klemm in Transylvania, Romania, a wealthy wood manufacturer who occasionally paid the printing costs for Gesell's most sold publications.
File:Postkartengruss Gesell.png|thumb|Postcard from Silvio Gesell around 1920. He writes, among other things: "The big house was built by my great-grandfather ," referring to the St. Vith master builder Josef Lentz.
In April 1919, Gesell received a call from Ernst Niekisch from the revolutionary government of Bavarian Soviet Republic to come to Munich. This offered him a seat in the so-called and he was appointed shortly, on suggestion of Erich Müchsam and Gustav Landauer, as the "People's Representative for Finance" situated in Munich. Gesell worked with law Professor from the University of Greifswald and the Swiss physician and mathematician Theophil Friedrich Christen. He wrote a law for the creation of Freigeld, a currency system he had developed. However, his term lasted for only seven days.
After the violent end of Soviet Republic, Gesell was arrested. There he shared a cell with the poet Gustav Gräser, whose writing on revolution he funded. After several months in prison, he was acquitted in July 1919 in a high treason trial for his self-defense speech in front of a Munich court martial. He claimed that he didn't have anything to do with the political decisions of the Republic and was just trying to offer a plan to restructure the economy. The legal costs of the process were paid by the state treasury. However, he, Gräser, and others was deported from Bavaria. Immediately after his discharge, Gesell and his supporters resumed their activism for his revolutionary ideas.
Gesell spent the last decade of his life promoting his theories.
Due to of his participation with the Munich Soviet Republic, the Swiss authorities refused to let him return to his farm, as an "undesirable foreigner". Gesell subsequently retired to, Potsdam-Mittelmark, then back to Oranienburg-Eden once again. In 1924, another stay in Argentina followed. In 1927, he lived in Eden again until he died from pneumonia on 11 March 1930. He was buried in a cemetery in Oranienburg. delivered his funeral speech. Silvio Gesell was married to Anna, with whom he had four children. From his relationship with Jenny Bumenthal, his son Hans-Joachim Führer was born in 1915. Gesell had further relationships and children with Wanda Tomys and Grete Siermann.
Economic philosophy
In his book The Natural Economic Order through Free Land and Free Money, which was self-published, Gesell stated his theories.Gesell based his economical ideas on the self-interest of people, as a healthy and natural inducement which allows them to provide for their necessities and become economically active.
He called for free, fair business competition, with equal chances for all.
This included the removal of all legal and inherited privileges.
Gesell believed that an economic system must do justice to individual proclivities.
Such circumstances should establish an economical order for itself, otherwise it is set up for failure.
For that reason, Gesell referred to his economical model as "natural".
With such a statement, he consciously held himself in contradiction to Karl Marx, who demanded a change in social relations.
Under Freiwirtschaft, the most talented people would have the greatest income, without distortion by risk-free interest and rent-seeking.
The economic status of the less-talented would improve because they would not be forced to pay interest and land rent charges.
According to Gesell, this would reduce inequality between the poor and the rich.
Furthermore, greater per capita incomes would mean that the poor would have a greater chance of escaping poverty, in part because poor people would have greater disposable income and spending power.
Silvio Gesell advocated a world order and considered himself a world citizen.
According to his belief system, inspired by Henry George, the Earth should belong to all people equally, with no difference in race, sex, status, assets, religion, age, or ability to provide.
However, his land reform proposal was different from Georgism.
He believed that land value taxes could not solve the problem of land rent, as he believed that such taxes could be passed onto the tenants.
He believed that the private ownership of land should be abolished and replaced by free-land reform, a sort of public lease of land.
He proposed nationalizing all land from current landowners, with the purchases financed by land bonds that would be paid over 20 years from revenues raised by leasing the purchased land through competitive bidding.
This would achieve many of the intended effects of Georgism, but with compensation for previous landowners, and with no need to repeatedly reappraise land values.
Landowners would no longer own their land, but they would be compensated through the bond payments and could obtain private possession of their land if they pay the leases.
Gesell also criticized Henry George for supporting the fructification theory of interest and believing that Georgism would be sufficient to eliminate interest, economic crises, and unemployment.
According to Silvio Gesell, establishing welfare states without abolishing private ownership of land would be ineffective, because the proceeds of the worker's labor would be determined by the proceeds of labor that they obtain on the lands of the landowners, rather than free-land.
Private ownership of land converts all the advantages of using one's land into cash and thus belongs to the landowner.
In order to not cancel the effects of welfare policies, Silvio Gesell believed that Free-Land reform was necessary.
Some regard Gesell's idea of Freigeld as a negative interest rate policy, but they have different effects.
Under the Freigeld reforms of Gesell, hoarding money becomes impossible because the face-value of money depreciates regularly.
This forces the circulation of money.
By contrast, it is possible to hoard money on negative interests, since the face-value of money is constant and people can use their money as a means of saving.
For example, Japan's negative interest rates drove up the sales of safes and strongboxes.
Gesell denied value theory in economics.
He thought that value theory is useless and prevents economics from becoming science, and that a currency administration guided by value theory was doomed to sterility and inactivity.