G.G. McGeer
The Conquest of Poverty

CHAPTER VII.
Lincoln and Roosevelt

Capitalism

Now that we have adopted and applied Lincoln’s national currency system as the basis of the programme of reform necessary to bring about the conquest of poverty, let us imagine that we are sitting in on a radio conversation taking place between President Roosevelt and Abraham Lincoln.  Let us listen while the foremost leader of humanity in the 20th century discusses the problems of this troubled age with the God-guided son of the American frontier;  one who, on giving up his life modelled upon that of the Carpenter of Nazareth, bequeathed to posterity a memory which proves again that while “the paths of glory lead but to the grave”, the paths of unselfish service lead to glorious immortality.  The radio is set and President Roosevelt opens the conversation by saying :

“To-day, Mr. Lincoln, many feel and sincerely believe that capitalism as a political system has failed and that an entirely new basis for social progress must be developed.  How do you regard that conclusion and the idea that the old order must be completely discarded?”

Mr. Lincoln answers :

“While there is much cause for complaint, I see no reason for believing that capitalism has failed;  on the contrary there is much to indicate that it has accomplished all and more than its proponents promised it would.  In my time the vast majority on earth were struggling for a bare existence.  The masses were over-burdened with drudgery and many lived under the continuous threat of inescapable poverty, pestilence and starvation.

“We believed that if the rewards of wealth commensurate with services to humanity controlled only by competitive prices were offered to inventive genius, intelligence and industry, that men would be induced to devise ways and means of subjugating the elements of nature and the resources of the earth in the service of mankind to the end that plenty would abound and that human beings would be relieved from the burden of unceasing toil.  We accepted freedom in domestic trade as a necessary means to a desirable end.  We encouraged men to work long hours and to exercise the greatest possible measure of individual ingenuity.  This we considered necessary to increase the supply of the bare necessities of life, and we hoped it would result in the creation of abundance.  Examined from that point of view, capitalism has succeeded.

“Since my time on earth, Mr. Roosevelt, great changes have come to pass.  Science, guided by education through the control of steam, electricity and internal combustion engine power, has given to your population of 130,000,000 people primary energy equivalent to that of a population of 3,840,000,000 people living in an age of hand labour, and your privilege of increasing that energy is unlimited.

“The development of machinery and the technological achievement that has taken place in every department of commerce, industry, transportation, Communication and social convenience has converted scarcity with human drudgery into abundance with available leisure.  You call it unemployment, but it should be recognized as an opportunity for human souls to cultivate and develop the boundless advantages that cultural and spiritual activities possess.

“Science in agriculture has increased the productivity of land, for by fertilization, irrigation and land treatment, production on good land may be sustained indefinitely and lands formerly looked upon as worthless can be converted into veritable gardens of Eden.

“All production from the land under the guidance of applied intelligence has been improved in quantity and quality.  Animal husbandry has achieved the same results in the production of milk, butter, eggs, meat, leather and wool.  The quantity and quality of every form of food and cover have been vastly improved and increased.  Wastage, formerly inescapable, has been eliminated.  Your cold storage, refrigerator, canning and packing facilities have made the preservation of perishable products possible over almost indefinite periods of time.  Had we been able to save from wastage anything like the proportion now possible, we would have enjoyed, during the Civil War period, something of the same abundance that was the privilege of your people during the World War.  Strange, is it not, that in war you had abundance while in peace your people would starve were it not for public charity? Not only can an abundance be produced, but now it can be transported with ease into every inhabited section of the world.  Trains, ships and aeroplanes go everywhere.  There is no reason now why everyone in the world cannot be well fed, well clothed, and sheltered comfortably.

“The telegraph, the telephone, the radio, the typewriter and the innumerable mechanical aids now employed in commerce as complementary to a ‘wide range of technological achievements in the carrying on of trade make it possible to consummate vast business transactions in minutes that formerly took months and years to complete.  Famine, as a characteristic of modern life, has been eliminated.

“Waterworks and sewerage systems, coupled with the intelligent application of the laws and rules of health, have conquered pestilential disease.  But great as all these achievements are, elementary education has made possible the greatest of all technological accomplishments.  For education by teaching people how to read and write and extending to all an understanding of the elementary principles of accounting, has made possible the substitution of credit transferred by cheque for money of intrinsic value and paper currency convertible into gold.  There need be no shortage of money.

“Government, by setting up a sane monetary system, can not only meet every increase in the cost of government, but it can with ease manage and regulate the currency of a credit system.  No government could do this when gold and silver coins and paper currency based on gold constituted the only form of money that enjoyed public confidence.

“Under the capitalistic system illiteracy has been abolished.  This was not so in my day.  Illiteracy in my time was a great handicap to good government.  Then, on account of lack of the means of communication and the illiterate condition of a large percentage of the people, it was almost impossible to rally public opinion on any great issue before it was too late.

“I did not have at my disposal the power that you possess to rally public opinion for the purpose of disciplining Congress and Senate, or of appealing to the people to protect themselves by condemning any attempt made by avaricious self-interest monopolies to ravage the public domain or to invade the realm of government for the purpose of destroying the liberty and freedom of a self-governing people.  The radio, and you should see that every home is equipped with a good one, makes it possible for you to appeal at one and the same time by conversation to the people in every section of the nation.  With this great institution at your disposal, you can secure the support of the common people by putting into practice the teachings of the Son of God who said, ‘Come unto me all ye who are heavy laden and I will give you rest.’ Christian governments willing to serve the masses in that spirit have nothing to fear from Money Power, Communism or any other form of selfish class or monopolistic interest.  Of course, I know that progress has not been wholly dependent upon selfishness, but admitting that many men have worked faithfully in the service o£ their fellow men without hope or desire for monetary or other reward, we are unfortunately forced to acknowledge at the same time that much of all that has been accomplished has been due to the intensive activity that has been induced by the hope of personal gain.  In any event, under capitalism every facility required for the financing of government, the production and distribution of abundance, the moulding of public opinion, the financing of progress, the enjoyment of leisure by the advancement of cultural and spiritual enlightenment has been developed and is available to you.

“How then can anyone say, in the light of all that has been achieved under the capitalistic system, that it has failed? It has made available an abundance of all that humanity can intelligently enjoy.  Unceasing drudgery can be eliminated from human toil.  Under sound administration all may enjoy the abundance and leisure formerly available only to the few.  Why, that is exactly what capitalism was supposed to do.  Unemployment in the midst of plenty offers the unanswerable proof that as a system it has achieved its primary purpose.  It has made more abundant life with leisure a possibility.

Distribution

Mr. Roosevelt :  “Admitting all you say with regard to the abundance that has been made available under the capitalistic system, does destitution in the midst of plenty not prove that the capitalistic system has failed?”

Mr. Lincoln :  “Not at all.  There is no failure in your capacity to produce, nor is there any diminution in your facility to distribute;  reason and intelligence govern the use of goods available as far as the masses are concerned more effectively now than ever before.  There is no over-production of necessities or comforts measured in terms of human requirements.  Your trouble is, therefore, limited to your money system.  Your medium of exchange is not being properly managed;  otherwise government and consumers would not be short of buying power.

“Now in the capitalistic system the management of money constitutes only one of a very great number of institutions that make up the whole.  It may be likened unto the generator in an electrical system.  If in such a system the generator broke down because it was worn out or unable to carry an increasing load, or because it was being operated by incompetent men, you would not scrap the entire system.  You would, however, replace the generator and place competent men in charge of it.  That is what you must do with your money system.”

Mr. Roosevelt :  “What, in your opinion, constitutes the basic cause of the failure of the monetary system?”

Mr. Lincoln :  “The system itself is at fault.  It is built upon a fraudulent foundation.  This foundation embodies the outrageous proposition that govern ment must delegate its power to create money to a private monopoly and borrow the liquid capital necessary to finance government from the private monopoly by the stupid process of exchanging interest-bearing public credit for non-interest-bearing private credit.

“Under such a system, there will always be a shortage of the medium of exchange.  The worst feature of the system, however, lies in the fact that the government borrows at interest.  Therefore, the government must exact from the taxpayers a levy of taxation that exceeds the total amount put into circulation by the government.  The government thus becomes the main factor in destroying the circulation of the medium of exchange.  Obviously, an individual cannot safely borrow money at interest with which to purchase non-money producing assets or services.  If an individual borrows money at interest in excess of his income to purchase radios and other things which he cannot, in turn, convert into money at a profit, it is certain that the individual will end in bankruptcy.  It is the same with government.  When government borrows at interest to finance non-money producing public enterprises and social services, the government is bound to end bankrupt under a load of unpayable debt, but, worse than that, by assuming an obligation to pay interest on credits issued and advanced by the private money system, the government, by denying itself the right to exercise its privilege of issuing money, aids in creating debt claims that are inextinguishable.  In a system where no one creates or puts into circulation the amount necessary to pay the interest charges, enduring progress is impossible.

“The basic cause of the failure of the monetary system is, therefore, that it cannot function in the service of financing progress.  The existing depres sion is not abnormal.  It is the normal, natural and inevitable result of the existing monetary system.”

Russia and Socialism

Mr. Roosevelt :  “Notwithstanding what you say, there are those who point to Russia saying that the Soviet under a socialistic system has accomplished in a decade more than capitalistic governments have been able to achieve in centuries.”

Mr. Lincoln :  “Those making such statements overlook the fact that Russia has reaped the benefit of all the achievements that have taken place under capitalism.  The socialistic leaders in Russia found it necessary to secure machinery scientists, engineers, trained workmen and many others from capitalistic nations to assist them in their socialistic experiment.  To secure that which was desired from capitalistic nations, the Soviet offered special monetary reward.  More than that, the Soviet found that the idealism of equality under a proletariat dictatorship was impractical.  They were forced to abandon the idea that a modern nation could advance without a money and price system.  The idea that all men, irrespective of the service they were capable of rendering, should be paid upon a basis of equality was also repudiated.  Success in Russia in the realm of industrialism, which is not small, has come in large measure through the abandonment of the false ideal of socialistic equality and through the adoption of the age-old Biblical truth, ‘Thou shalt not muzzle the ox that treadeth out the corn’, and ‘The labourer is worthy of his reward’, and should be paid in accordance with the service he renders.

“In Russia they found that while the ideal of equality is a worthy one, it cannot be accepted as the basis for governmental action until education irons out the social and economic inequalities that now exist.  The Utopia of equality for the time being must remain a state to be achieved by unrelenting and persistent effort.  It must always be remembered that men must possess high intellectual understanding before they can appreciate that you get more by giving than you do by receiving.  That is why a world wherein all may enjoy equality will only be possible when the brotherhood of man under the paternity of God is accepted by a dominating majority.  The general acceptance of ‘Love thy neighbor as thyself’ and service to one’s brother as the only means of proving a love of and respect for God can be brought about as an educational and spiritual achievement, but it cannot be accomplished by the mere preaching of political doctrines or by the enactment of laws.

“You can educate people into equality, but you cannot establish such equality by legislation.  Government can assist the approach to universal equality by financing education.  That is the task which is now before you.  Having emancipated mankind from illiteracy, government must now proceed to expand its educational facilities so that all may be emancipated from ignorance.  You have a long way to go, but success in the past should encourage a high regard for the possibilities of the future.  Russia is the first great nation that has accepted the education and the health of the people as primary responsibilities of national government that should be financed with national currency and public credit issued in a national banking system.  To place the government in a position to meet the payrolls that this policy involves and the added expense of maintaining planned economy, the Soviet abolished private control of credit and a national banking system was set up.

“You will find in this policy the key to the solution of your problems.  It recognizes that the power of the government to create and issue money offers to government the opportunity to finance progress.

“Notwithstanding the mistakes that have been made in Russia, you should not ignore the great political experiment which the Soviet has undertaken.  Christian nations have much to learn in the management of money and in the service that government should attempt to render to the people from the Soviet, notwithstanding its repudiation of God which the Russian leaders may soon recognize as a great political and social error.  Despite the attitude of their leaders, God has not forgotten the Russian people.  For it is still true that God is more anxious to assist people who, knowing not what they are doing, deny God, but who, in the work of conquering poverty for mankind, do God’s work, than He is to aid those people who, knowing what they are doing, acknowledge God and refuse in the work of serving mankind to be guided by the laws of Divine authority.  No nation can expect the blessing of God that attempts to build its social structure upon the most loathsome of all social evils condemned in the Scripture, that of covetousness.

“Of course, if the Soviet persists in its Godlessness it will flourish for a time, but in the end its fate will be that of all political powers that have in the past based their guiding philosophy in mortal and material values.  Like the Chinese, Egyptian and Roman Empires of the past, it will be remembered by its tombs long after its purpose in the world has been completely forgotten.

“Governments, like individuals, can gain immortality only through the acceptance of the Sovereignty of God.  There is no other disciplinary power that can keep either man or civilization steadfast in the unceasing struggle between right and wrong.  Without the guiding power of God all man-made institutions will succumb to the corrupting and corroding powers of evil.  Properly considered, I think you will find that the experience of the Soviet proves that capitalism, properly regulated, is the only system through which effective self government for the people can be maintained.  If its regulation aims to establish the exalted Liberalism of Christ’s teaching, it is bound to succeed in the end.”

Food Destruction

Mr. Roosevelt :  “What do you think of our attempt to improve conditions by decreasing production and by the destruction of food, cotton and other commodities?”

Mr. Lincoln :  “I think you would be better advised to use national currency and credit to increase your production so that you could provide your own people with plenty and help to feed and clothe the starving millions in Europe, Asia and Africa.”

Mr. Roosevelt :  “But the people to whom you refer have no money to pay us for our food and clothing.  We would not make any money by the course you suggest.”

Mr. Lincoln :  “That is quite true.  You would not get any of the other fellow’s money, but you can create and issue for yourselves all the money you need.  Why do you want the money of other nations? They are perfectly willing to exchange their services and goods for yours.  By going to work administering the abundance which you possess in the service of humanity, you will be taking a step towards the establishment of world peace.  The value of such an achievement cannot be measured in money.  You will eliminate American unemployment and save yourselves from going to Hell, a fate that is in store for all those who place their love of money before their plain duty to starving humanity.”

Mr. Roosevelt :  “You say that we can use national currency and credit to put our people to work producing food and shelter for our own and the people of foreign lands in need.  Is there any precedent for such a sweeping change in economic and social relations between nations?”

Mr. Lincoln :  “Why of course there is.  You did that very thing when you joined up with the British Empire to save the people of Belgium and France from the aggression of a military power.  The financing of war proves that the use of national currency and credit for the purpose of putting your own people to work to advance their own interests by assisting the people in foreign lands to retain their freedom, is a straight problem in practical administration.  You can, therefore, use national currency and credit to put your people to work in a war to protect humanity against the oppression of starvation.  That is no less essential and right on the part of a Christian nation than the proposition that you should support a weaker neighbor threatened with the loss of liberty by an attack from a powerful and misguided enemy.”

Mr. Roosevelt :  “Yes, but your proposal that we use our money to help to feed the hungry of our own and foreign lands seems to violate all the economic laws that govern what we are pleased to call ‘good business’.”

Mr. Lincoln :  “Yes, that is true, but my proposal does not violate the laws that govern what you should be pleased to call good Christianity.  Statesmen should know that the laws of economy that apply to the profit-seeking activities of commerce have no application to the business and purpose of government.  That is why business men are seldom statesmen;  for men dominated with the idea of buying for less and selling for more can never understand and properly appreciate the application of the law which declares that ‘the greatest good for the greatest number’ should always rule.  Democracy and Christianity were not founded by business men who were dominated with the idea of investing capital in the hope )f securing money profit.  There is nothing wrong with business profit, but the business man is wrong when he thinks that government should seek profit on public investment.  The government is not interested in money profit.  It should invest national currency and public credit solely for the purpose of advancing the health, education, peace, liberty and contentment of humanity.  The government’s dividends do not consist of money;  they are returned in human values which are infinitely more valuable than money.”

Mr. Roosevelt :  “Do you suggest that the government should issue all the capital required to finance public works, social and all other governmental service, and that government should also create and issue the capital required to finance the creation and distribution of all the useable wealth that can be produced and used beneficially?”

Mr. Lincoln :  “Why not? If the government does not create the capital through a national banking system who will? You have tried bankers and they have failed, and there is no other source to turn to.  Why, let me ask, should the government hesitate to supply itself with needed spending power and the people with needed buying power? All governments should be anxious to make it possible for the poorest citizen in the land to enjoy peace and plenty.  The creation of money is a privilege which the government enjoys.  It should recognize that power as the means of sustaining the life stream of commerce and trade.  Why should there be poverty or lack of cultural and spiritual advancement because of a shortage of money which the government can create? There is no reasonable answer to that question.  The government should look upon the advancement of education, health, superannuation allowances, pensions and all other social services.  the development of transportation, communication and power, the prevention of crime and the maintenance of order and innumerable other governmental activities as opportunities to put national currency and monetized public credit in circulation.  By pursuing this course it can supply at all times the medium of exchange needs of the people.  With the power to create the finances necessary to such public activities, the government is now in a position to provide work and wages for those in health, to feed the hungry, to clothe the naked, to aid the prisoners, to succor the ailing and to provide rest and peace for the weary and the aged.

“Let me draw your attention to one of the innumerable immediate problems with which you are confronted that this policy would solve.  All are agreed that child labour should be eliminated.  All are not agreed, however, that a child should be denied the right to labour as the means of earning a livelihood.  If children are to be denied the right to earn their livelihood, then the government must assume the responsibility of providing for the maintenance of the child until it comes of age, trained and capable of performing the duties of citizenship.  If the government will exercise its power to create money to finance the sustenance and training of children denied the right to work, there will be no justifiable opposition to your worthy effort to release children from the burden of toil.  And a monetary system that prevents you from doing that without disaster to the taxpayer ought to be ‘cut down and cast into the fire’.”

Slum Clearance

Mr. Roosevelt :  “Would you finance slum clearance and better housing in city and country without interest?”

Mr. Lincoln :  “Let me answer that by asking you a question.  If you were an extremely wealthy man possessed of an inexhaustible supply of money and your son was poor and needed a modest but comfortable and sanitary home, would you give him the money or lend it to him? If you lent it to him would you lay upon your son usury? Does your government need to lay usury on the people? Governments that give and take usury are doomed to failure.  The Scripture tells you that.  Don’t you realize that the people and the homes and farms they build belong to the government.  They constitute the wealth of the nation, and the government should be anxious to assist every good citizen to own and possess a home which the government and the individual should be proud of.  Once the people realize what can be done through the intelligent administration of credit they won’t abuse their opportunities;  on the contrary, the vast majority will always support sound and reasonably conservative administration of the nation’s wealth.  Trust the people and co-operate with them and you will always find them reasonable.  If you fear them and allow the bankers to skin as well as shear them, of course you will have trouble.  Use national currency to finance the education, health and contentment of the people and they, in turn, will surprise the world with their lawful, loyal and generous response.  By taking this course you will be giving Christian Democracy a fair trial.  That is what your people want.  Their universal love and respect for the earthly life of Christ proves that those who make up the masses are unselfish.  The generosity of the masses can be developed by education into cultural respectability.  To achieve that end, however, Christian governments must follow and be guided by the laws of God that declare ‘Thou shalt not lend on usury’, for usury is the soul of selfishness.

“Governments with the power to create money need not hesitate in providing the poor and the worthy aged of the land with decent homes, and with an allowance that would give them the privilege of passing through the eventide of life in comfort, in dignity and with a respect for Christian government that such service would command.

“The attitude of government which establishes as sacred the obligation to pay interest on public debt and ignores the government’s plain duty to those who have, through involuntary poverty, age or any other cause, been set aside, constitutes a public scandal.”

Planned Economy

Mr. Roosevelt :  “If the government assumed the responsibility of creating money and issuing it for all these purposes, an enormous increase in the volume of money in circulation would result.  The dangers of inflation and the menace of indulgence would add to our problems.”

Mr. Lincoln :  “Well, that conclusion is only partly true.  There would be problems created which would have to be met and solved.  The new problems would be less difficult to handle, however, than those which come with the bankruptcy, stagnation and destitution that now confronts you.  Surely a government can more easily adjust itself to the administration of problems that it can finance, than it can when it is unable to finance the problems it is attempting to solve.

“By attempting to carry on the government without economic control by borrowing your finances from the private money system and laying usury upon the people instead of exercising your power to issue your own money, you are ‘swallowing a camel and straining at a gnat’.”

Mr. Roosevelt :  “Such a plan undoubtedly would involve a greatly increased volume of governmental service.”

Mr. Lincoln :  “Yes, that is true.  Make no mistake about it;  the success of any scheme of planned economy will depend upon the willingness of those undertaking it to make it all inclusive.  If it is not all inclusive, it will be like an automobile with one or more of the important pieces of its mechanism left out.  You know you cannot run a four-wheeled coach on three wheels.  It simply won’t function.  This is true of your economic structure.

“Now, in coming to a proper understanding of your problem, you must clearly see what you are called upon to do.  You can’t do anything success fully without an objective and some plan to achieve it.  Let us start first with the objective.  It is the maintenance of ordered progress under stable self-government so that all may enjoy peace and plenty.  Now let us examine the broad outlines of a plan that will achieve this result.

“Finance is the first consideration.  You must create a monetary system that will finance the needs of the nation.  Next you must control circulation.  Then you must establish regulation of internal trade and foreign trade.  Now, under the constitution and modern custom, laws are made and enforced by national, state and municipal authority.  Ordered progress will, therefore, depend upon these distinct political structures working in harmonious co-operation.  In much the same way the commercial, industrial and social life of the people is divided into structures.  There is religion, agriculture, labour, industry, commerce, finance, education, journalism, medicine, engineering, science, art, and these structures represent many subdivisions that establish other structures.  They must all be brought into co-operative and sympathetic relations.”

Mr. Roosevelt :  “Your proposal would undoubtedly increase very greatly the cost of government.”

Mr. Lincoln :  “To some extent that conclusion depends upon what you call cost of government Undoubtedly progress involves increased expenditures on the part of both government and individual, but increased expenditures do not always mean increased costs.  For example, under the scheme we are discussing, when government issues national credit to finance the increased work of government and to maintain the greater volume of purchasing power required to achieve the fulfillment of the conquest of poverty now possible, the government finances the wider programme without cost to the community at large.  Putting the medium of exchange into circulation needed to finance a scheme of planned economy should not be treated as a cost of government.  It should be recognized as an exercise of governmental power that adds to the general wealth of the community.”

Mr. Roosevelt :  “In putting this plan into effect, where, in your opinion, should we start?”

The Administration of National Currency

Mr. Lincoln :  “You should start with the administration of national currency and public credit.  The Federal Reserve banking system should be converted into a national banking system.  Along with the general duty of setting up and operating the executive and administrative organization essential to the effective management of the monetary system in its varied ramifications in the domestic and international affairs of the nation, the national banking organization should be specifically charged with the responsibility of serving as the bankers and fiscal advisers of national, state and municipal government.  Its primary duty should be to create and issue the currency and credit transferable by cheque required, so that :

“(1) Good government, national, economic and social security may not be impaired for want of a sound and uniform medium of exchange.
“(2) National, state, municipal and other governmental authority shall be continuously supplied with the finances necessary to the progressive rational advancement of the education, health, peace, liberty and the standard of living of the people.
“(3) Involuntary unemployment may be eliminated.
“(4) Budgets may be balanced and government may extend to each class and section of the nation the same relative quality and quantity of public service.

“In addition to administering the nation’s power to create and issue liquid capital, the national banking organization should assist the taxation authorities in the regulation of circulation.  The national banking system should also aid the government in providing reasonable regulation for the investment of public and private capital.  In the performance of these duties, the management must be empowered to create, alter and vary from time to time and enforce all the rules and regulations necessary to the performance of its duties.  It should administer the gold and silver resources of the nation.  It should maintain a department for the regulation and control of international exchange.  It should also maintain another department to supervise and assist the commercial or merchant banking system, which should be operated as a private enterprise.  Government so equipped should be able to put into practice a truly Christian scheme of Democratic government.”

Mr. Roosevelt :  “But where would we get the men to run the national banking system? How would we organize it and who would we put in charge of it? Where would we get the men to perform honestly and safely these great responsibilities?”

Mr. Lincoln :  “Where did Washington come from? Where did I come from? Where did you come from? Why, from the common people.  How did we organize the army during the Civil War period? How did you organize the army during the Great War period? How did you organize the navy? Whom did you put in charge? How were the Supreme Court and the Courts of Justice, the Post Office and the Department of Revenue and all other departments of government organized? How did we organize in the very beginning of the Republic the scheme of government and a perpetual plan for putting men in charge of it? Why, we used plain common sense, and God and the people supplied the men.

The Personnel of Monetary Management

“The men engaged as managers of the monetary system should be selected from the officials of the existing private money system and from the executives of modern industrial and commercial organizations.  They should be paid adequate salaries and provided with inviting retirement allowances.  They should not be allowed to engage in any other business.  They should be appointed for a sufficient period of time to make their work a career and a life undertaking.  They should only be disqualified for dishonesty.

“There are a host of men, many of whom are university graduates, trained in all the details of domestic and international financial administration with whose ability the officials of the Treasury Department are conversant, who are competent to perform all the duties involved in maintaining a sane and sound monetary system.  No difficulty would arise from a shortage of competent men once the duties of monetary management are defined and undertaken.

Bankers and Public Servants

“Unfortunately the public, guided by the propaganda of Money Power, has developed the idea that the elected representatives of the people cannot be trusted with the appointment of managers of the monetary system.  Led to believe that they cannot trust men like myself, Cleveland, Theodore Roosevelt, Taft, Wilson, Hoover or yourself, with such appointments, they are induced to leave the management of the monetary system to the Morgans, the Mellons, the Warburgs, the Seligmans, the Bakers, the Loebs, the Kahns and a host of others who, in the past and at the present, are the barons of Money Power.  This oligarchy of high finance has been privileged to enjoy the confidence of the people on the promise that a safe administration of finance would be provided by sane and practical men.  Unfortunately, their management of the monetary system has ended incomplete and chaotic failure.  As all reasonable men should have expected, it has resulted in abundance for the few and war, strife, unrequited labour and destitution for the multitude, and ruination for Democratic government.  While sneering at the Christian miracle of creating plenty out of nothing, orthodox finance has adopted the very reverse of that proposition, for it has developed destitution in the midst of abundance.  This latter achievement, however, is not a miracle;  it is the normal and natural product of unbridled usury.

“The common assumption that governments will act dishonestly and unintelligently in the matter of national currency and credit administration is without foundation.  Notwithstanding their past acceptance of this propaganda of Money Power, the people are now aware that while the placing of the management of the monetary system in the hands of men appointed by the government is not without risk, it cannot be left to usurers with any safety whatsoever.  This is so because public servants can be disciplined in the administration of public affairs.  The people know that members of the government can be sent to gaol and that mayors of great cities can be forced to relinquish office.  On the other hand, neither public opinion nor government can discipline the owners of a private money system empowered to issue and control the nation’s currency and credit because in such a situation the men who operate the private money system are more powerful than the government it self.  They control the government.  Under such circumstances the perfection of Democratic government is impossible.

“The idea that representative government cannot be trusted with the appointment of the managers of the monetary system as stewards of the nation’s medium of exchange violates the fundamental basis of Democracy, for the whole scheme of representative government is based upon the assumption that men will always perform their public duties guided by reason and the restraining influence of a recent respect for public opinion.  If men fail to satisfy this assumption, they can be removed from public office in disgrace and proper and effective punishment can be meted out to evil doers.

“Corrupting or conspiring to corrupt the administration of the national banking system should be made a treasonable offence.  With that done, discipline could be maintained.

“The fact that justice is administered by men appointed by government and that the government appoints the vast army of administrative officers, officials and civil servants who run the Customs, the post Office, the educational institutions, the Army and Navy, the Interstate Commerce Commission, Workmen’s Compensation Boards, and who administer public lands, highways and a host of other communal services, and that the men who collect billions of dollars of public revenue annually are government officials, proves that the government can, if it undertakes the task, appoint men competent to advise the government on the problems of monetary policy and to fulfil all the duties involved in the administration of a national currency and credit system.”

Mr. Roosevelt :  “Do you think it is now possible for government to assume the responsibility of monetary management?”

Mr. Lincoln :  “It is not only possible, but it is necessary.  Surely a civilization that can circulate electricity in the service of mankind and develop a network of transportation and communication facilities that connect every portion of the inhabitable globe is capable of managing the simpler problem Of creating and circulating the medium of exchange, which involves no problem beyond that of ordinary bookkeeping.  You know, Mr. Roosevelt, you cannot use mathematicians in a banking system.  You can use bookkeepers, but further than that there is little employment for the advanced intelligence that every other line of human activity requires.”

Mr. Roosevelt :  “How could we prevent the government from abusing its power to prefer its friends?”

Mr. Lincoln :  “Men charged with the administration of national credit cannot unjustly prefer individuals or groups without the discrimination resulting being known.  Complaints would at once arise and the administration would be disciplined by public opinion.  That is the only protection the public has in the administration of justice.

“Of course, no administration of national credit would be perfect, but there is no reason for believing that the general conditions of administration would not be infinitely superior to those which exist under the private money system.  Financiers and bankers are now able to prefer themselves and their friends in business and in politics.  The extent to which the private money system is honeycombed with unjust privilege and preference is now fairly well known.  It is because of the deplorable conditions that exist in that regard that the private money system has lost its power to serve and the respect of the public at large;  in fact, it can be said with truth that the private money system is based upon a scheme that contemplates the use of unjust discrimination, unfair preference and unrighteous privilege.

“The real value of governmental control of credit is to be found in the fact that all public service is answerable to the government, which, in turn, is answerable to the people, while the private control of credit is answerable to no one but those dominated by self-interest.  If the banker and the financier, under the private money system, wish to prefer themselves or their friends to profit from their knowledge, why that is good business.  No one can complain because no law or business practice has been violated and in any event there is no one but the banker to complain to.  If such a situation arose under the administration of a national system the sufferers could complain to the government, and if redress did not come from that quarter, complaints could be lodged with the public.  There is every reason, therefore, to believe that under a national system there would be less of privilege, preference and discrimination than there is to-day under the private money system.  No one who knows anything about the private money system will honestly dispute such an opinion.  More than that, the ethics of public service are entirely different from those upon which support private business.  A public servant is paid to work for the community at large.  His compensation is fixed and he is not allowed to profit otherwise, while in the private field no such restrictions are imposed.  That is why the private banker in the very nature of things cannot serve the public.

Monetary Control of Prices

“Your friends, the academic economists, who, as I have already said, know more that is not true than any other group in the world, will no doubt bewilder you with questions such as :  What is your formula for measuring the discreet amount of medium of exchange that should be put in circulation and ensure the stability of the price level? and others equally absurd.  Now, while it is easy to say that no system of national monetary administration could be worse than that which you now suffer from, you should be perfectly frank in replying to all such questions.  That is an easy position to take, for banker management of the gold standard private money system has utterly failed to provide stability in the price level or anything else.  Therefore, some more effective plan must be developed.  No formula has yet or ever will be developed which can be used as a guide to measure the issuance of the exact amount of the medium of exchange required to stabilize the price level or to maintain rational progress.  You know now that the gold standard and banker rule conflict with the law of supply and demand.  Therefore, public officials serving the needs of the people and progress must be given a trial, and prices must be controlled by something more than the mere expansion and contraction of money.”

Control of Issue

Mr. Roosevelt :  “Many people fear that under such a system too much money will be put in circulation.  How could the situation they fear be prevented? Of what would the standard of issue consist?”

Mr. Lincoln :  “Yes, that is quite true.  Even in my day I was confronted with the same arguments.  The opponents to the national administration of currency and credit have always said that while the supply of money buying power is inexhaustible a national banking system cannot control the issue of currency and credit without the limitation of metal reserves and the further limitation that the levying of taxes to repay the principal and interest provided for in interest-bearing bonds imposes.

“Notwithstanding the arguments of the credit dealers, who profit at the expense of the taxpayers, there are safe and certain guides for the monetary management to follow in performing its duty of maintaining an adequate volume of currency and credit in issue.  In my opinion, the standard of issue should be that which is necessary to maintain good government, decent wages and the elimination of involuntary unemployment.  If there is involuntary unemployment anywhere, government should be able to eliminate it.

“No one can deny that if decent wages are maintained and employment is general that progress and prosperity will ensue.  So long as there is sufficient medium of exchange in circulation to sustain fair prices, the government should be able to prevent the establishment of unfair prices by individuals or groups dominated by selfishness.

“The possible effectiveness of such a standard may be inferred by contrasting its powers with those of the present system.  Surely you can conclude that government, which can always finance work and wages as the exaction of war, is able to finance work and wages as the privilege of peace.  This basis of reasonable conclusion is only one of the innumerable examples available.  It offers, by inference, ample proof of the possible efficacy of the proposed standard of issue over that which has obtained up to the present time.

“Such a standard of issue can be developed and effectively used to permit ‘national planning to adjust consumption with production’.  Hours of labour can be reduced.  Mass leisure and consumers’ buying power can be financed no matter to what extent science continues to eliminate human labour as a factor in the production of the necessities and conveniences of life.

“I do not say that such a system of monetary management can set up and maintain a perfect system of social justice in spite of the government, but I repeat that such a system, with the assistance of government, can provide the people ‘with a uniform currency as sound and effective as the government itself’, and may I here add that while this is the first step towards recovery, it is only one of the many steps that government must take if the standard of living is to be permanently advanced in a stabilized social system.  While monetary management can supply the volume of currency and credit essential to progress, it cannot and should not be expected to regulate or stabilize either progress or prosperity.

“Once a continuous supply of governmental spending power is made available, the monetary management, like an engineering staff on an irrigation system which has provided the means of distributing a continuous supply of water, will have performed its primary function.  The monetary distribution in the social system, like the water works in an irrigation area, creates the opportunity to produce wealth, but it does not and cannot control the industry or the intelligence upon which the success of wealth production actually depends.

“The idea of regulating progress in the social system by arbitrarily issuing and withdrawing purchasing power from circulation is no less absurd than would be an attempt to regulate agricultural activity in an irrigated area by flooding the area with water and then shutting off the supply until the area was dried out.  Ridiculous though it may seem, that is actually how, under the private control of credit, Democratic government has been trying to develop social progress.”

Mr. Roosevelt :  “But the adherents of ‘sound money’ and ‘banker control of currency and credit issue’ immediately ask, if the gold standard and borrowing at interest by government are to be done away with, what would constitute the check on governmental expenditures? Who would control and regulate the issue of the medium of exchange under a monetary system that is deliberately designed to support government in the creation and distribution of plenty?”

Mr. Lincoln :  “Such questions are reasonable and should be fairly answered and, as we shall see, there are sound and practical answers available.

“From the point of view of public finance, the only fundamental change to be made is in the method and practice of creating and issuing capital for governmental expenditure and new investment in the social system.  The national monetary authority becomes the exclusive creator of new capital and that is as it should be.

Control of Governmental Outlay

“Under the new order, all municipal and local authorities would budget for their annual expenditures.  Before these expenditures could be under taken they would have to be approved and co-ordinated with the budget of the State government.  The State and local government budgets would then have to be approved by the State branch of the national banking authority.  After the State and local government budgets had been agreed upon by the banking authority in each State they would have to be co-ordinated with similar budgets in all other States.  They would also have to be brought in line with the budget of the national government and approved by the national bank as the final authority.  Each local and State government and national banking authority would add additional checks that could be relied upon to prevent untimely or improper expenditures.  Haphazard development could be done away with.

“In addition to that, the banking authority should be charged with the specific responsibility of auditing all expenditures made by government.  Under such a plan, State autonomy would not be destroyed.  The expenditures of public funds, however, would be much more carefully safeguarded than they are at the present time.  Government in all its forms would be enabled to extend a quantity and quality of public service never before enjoyed by the people of any nation.

“Similar co-operative administration could and would be undertaken in the financing of home and farm accommodation free of interest charges.  The capital required by domestic and international industrial and trading institutions could be supplied.  Under such a system private, as well as public, investment could be financed and kept within the bounds of reason.  Of course, mistakes will be made in the beginning, but who is there who will say that such a system cannot be developed to serve humanity much more effectively than the present system does?

Financing of Government

“An examination of the method of financing government under this plan produces the answers that should satisfy the most exacting of critics.  Under the monetary management proposed, all governmental enterprise will be financed by an issue of national currency and the monetization of public credit through a nation-wide system of public banking institutions.  When governmental expenditures are approved by the proper authority, credits for such expenditures will be created and established in the national or state banking organization.  They will be issued and circulated in exactly the same way that is employed at the present time.  Cheques drawn upon the national banking organization by proper governmental officials payable to public officials, servants and governmental contractors, pensioners and others, will be honoured by the bank of the nation at my of its branches, which should be, like the Post Office, in operation in every centre of population large enough to warrant the maintenance of a banking service.  The receiver of a government cheque will have the right to cash it or to place the proceeds of the cheque on deposit in a chequing account in the national bank.  If the payee of the cheque so desires, he can deposit his cheque with his own merchant bank, which merchant bank can secure currency for it or carry it on deposit with the national banking organization.

“The privilege of carrying deposits with the merchant banks should be one that every citizen has the right to use with the utmost freedom.  The national banking authority must at all times, however, have the right to say how much the merchant banking organization is entitled to carry on deposit from time to time.  The vesting of this power in the national banking organization is essential if it is to be able to prevent merchant bankers and money dealers from disrupting the effective circulation of the medium of exchange.

“If a depositor wishes to travel abroad or send his money abroad he will be able to do so with greater security than he is to-day because under a system of managed currency, international exchange could and would be stabilized more effectively than it is at present.

“These innovations are not merely the proposals of visionary dreamers.  They should be recognized as the results of dire necessity.  For the failure of the private money system has made it clear that if government, dedicated to the proposition that all are entitled to life, liberty, the ownership of property, the right to work for decent wages and the enjoyment of education, health and happiness, is to survive, the control of the issue of currency and credit, the supervision of the monetary system and the regulation of investment must be restored to government.

“The persistence of public and private bankruptcy proves that there is no alternative to debt repudiation other than the issue of national currency and credit.  If governments are to pay off outstanding interest-bearing obligations, effect the saving to the taxpayers in the cost of financing government, which is now imperative, and provide the spending power of the government and the buying power of the consumer, which is essential to the re-establishment of that progress which is everywhere an apparent possibility, the monetary system must be managed as the nation’s most important public utility.

Monetary and Non-Monetary Factors

“In setting up a national monetary system you should not forget that the failure of the administration of private monetary management, while primarily due to mismanagement influenced by self interest, has also been due to the fact that the monetary system has assumed duties and responsibilities that should be performed and which can only be performed by other departments of government.  Monetary management cannot control circulation without the assistance of the government’s power to withdraw currency from circulation by taxation.”

Taxation

Mr. Roosevelt :  “You no doubt have heard the saying that death and taxes are the only certainties in life.  But under your plan taxes, as we now under stand them, would be done away with.  Would you mind saying a word on taxation?”

Mr. Lincoln :  “Well, I never dreamed that the taxpayers would be as docile as they have turned out to be.  Notwithstanding the lethargy of the taxpayers, you should recognize and correct the deplorable situation that exists.

“The widespread bankruptcy of state and local government, notwithstanding the sweeping confiscation of real estate and other forms of taxable property, the expropriation of family fortunes through the imposition of succession and probate duties, the interference with trade that results when unfair and arbitrary business and income taxes, tariffs, dump duties, excise fees, income and business profits, poll and other taxes are levied to meet excessive cost of government, the duplication and overlapping that now exist in the levy of national, state and local governmental taxes, the burdensome and impossible demands that taxation authorities are now making on almost every conceivable source of possible revenue combined with the unequal and unfair distribution of the burden of public expense, proves the following propositions :

“(1) That the situation existing can be relieved only by a complete re-organization of the existing plan and purpose of the taxation system.
“(2) That the technique of receiving and collecting taxes has now attained that degree of perfection which makes it possible for governmental authority to employ taxation as an apt and efficient means of avoiding the disruption of the social system due to an excessive volume of the medium of exchange continuing in circulation, or as a result of the undue centralization of money wealth in the possession of money manipulators or others.

“By these statements I do not mean to say that the present scheme of taxation is either right or just.  The innumerable inequalities and unnecessary duplications that are everywhere apparent would make such a statement an absurdity.  I do want to say, however, that the defects and inequalities that exist are due to the impossible nature of the task imposed and not to any lack of intelligence or honesty in the methods employed by the taxation authorities.  They have, under the present system, perfected the power of taxation as a collection agency so that fear of too much money remaining in circulation can be wiped out completely.

“Operating in co-operation with a sane monetary system, the taxation authorities can now, on the experience gained and with comparative ease, develop an equally sound and sane system of taxation.

“Taxation, as it is commonly known, must be done away with, for it will not work.  When the government creates and issues its own spending power, taxes need only be levied to aid in maintaining effective circulation.  Then no unfair or unreasonable taxation need be resorted to.

“Unequal taxation exists not only as between individuals, groups and classes, but it exists as between sections of the nation.  That situation should and can be corrected.

“While it is quite true that existing inequality of taxation is due to the fact that some states and communities are better managed and enjoy wiser government than others, dual taxation and unequal levies are, in part, due to the haphazard nature of the operation of government in the three political structures of the nation that operate, paying little regard to the necessity of maintaining policies that will function to produce a general national result.  The administration of the taxation authorities should be based on a desire to maintain throughout the nation the highest possible standard of efficiency developed in any state or municipal organization.  This can be accomplished under the plan outlined.

“Equitable distribution of taxation could be maintained.  Taxes would not be imposed for the purpose of denying to individuals the privilege of accumulating reasonable wealth, nor would millionaires be eliminated;  on the contrary, the number of millionaires should increase.  This plan does mean, however, that no individual, group or organization would be privileged to accumulate currency and credit wealth to the detriment and the well-being of the economic life of the social system.

“To be effective the national taxation authorities would have to be given the power to co-ordinate state and local government levies so that no section or class could enjoy preference or privilege over any other.

“Such a system of taxation would soon be recognized as the means of contributing a service essential to the maintenance of the going concern value of all manner of investment, and the commercial, industrial and other institutions whose operations on a going concern basis are the only means of sustaining true values of wealth and money.  But more than that, there is no other way by which a sound and equitable system of taxation can be maintained.  Under the present unco-ordinated taxation policies which are being maintained by national, state and municipal government authority, chaotic bankruptcy is inevitable.

“In regulating circulation b3 taxation it should be remembered that it is just as dangerous to take too much out of circulation as it is to put too much in.  The withdrawal of a sufficient amount to prevent disruption by excessive issue should be the duty of the taxation authorities.  That duty can be performed by balancing the budget annually.  If that responsibility is to be satisfactorily performed, then it must be the result of proper and effective joint effort on the part of the taxation authorities of national, state and local government, working in close co-operation with the banking officials.

“Under the plan here proposed, the unnecessary public expense of interest is eliminated.  In addition to that, the unsound practice of withdrawing the en tire expenditure of borrowed capital from circulation on an arbitrary date, which results when governments issue bonds, is also wiped out.  The alternative to such arbitrary withdrawal, namely, the further pyramiding of public debts at interest, is likewise abolished.  It would not matter what the expenditure of government might rise to, the budget can be balanced and circulation can be controlled.

Effective Circulation

“By co-ordinating the government’s power to create and issue the medium of exchange with the government’s power to withdraw the medium of ex change from circulation by taxation, monetary management and taxation authority can maintain in circulation whatever volume of the medium of exchange is required.  The evils of inflation and deflation can be avoided.  These departments of government should not, however, be called upon to perform duties and responsibilities that are beyond the reasonable ambit of their power.  The duty of monetary management and taxation authority should be to maintain in circulation an adequate volume of currency and credit.

“Once the circulation of a sound and uniform medium of exchange is guaranteed, monetary management and taxation have performed their main obligations.

“For stability in the price level and economic security, the nation must rely upon the ability of its department of economy.”

The Administration of the Department of Economic Control

Mr. Roosevelt :  “How would you organize and define the duties of a department empowered to administer and maintain ordered and rational progress?”

Mr. Lincoln :  “In exactly the same way that you would organize your department of national banking and your department of taxation.  National, state and municipal authority must be co-ordinated in the support of a nation-wide programme.  Prices, wages, working conditions, production and distribution, standards of living, education, health and all other social services;  public works and public enterprise, must all be kept within reasonable limits.  The plan cannot succeed on any piecemeal basis.  You cannot have national success if one set of conditions exist in Florida and another in California, or if high standards are set up in some city and none are maintained in others.  Little will be gained even if high wages and shorter hours are maintained for public servants and nothing of a similar nature is undertaken for those working in private enterprise.  Standards of real value set up for industrial profit and labour will prove to be futile if similar standards are not established for the farmer and his employees.  Those engaged in the production of commodities saleable in foreign markets cannot survive on prices fixed by world competition in a State where domestic trade enjoys the aid of protection and assistance from government.

“The problem of planned economy must be recognized as the co-ordination of a multitude of activities.  Such a department is necessary to prevent the mean man serving his selfishness and profiting through sharp practice and dishonesty.  It is also necessary to prevent the destruction of individual liberty through the abuse of monopolistic power and unfair competition.

“The men serving in the departments of economic control should be selected for their knowledge of industrial, commercial and social conditions.  Leaders in national and state organizations should be possessed of the true qualities of executive organizers.

“The departments of economy, for the national government must be assisted by similar departments maintained by states and municipal governments.  They should be charged with the responsibility of providing governments with the information upon which policy can be laid down, and the people with the information that will create the public support essential to effective and successful administration.

“Of course the National Industrial Recovery Act contemplates such a programme.  You are now beginning to recognize the sweeping nature of the problem you have undertaken and the need for coordination in all the activities that have to be dealt with.  The N.R.A., of course, is the beginning and you must go on learning from experience to the point where you can command the situation in all its manifold and ever-changing ramifications.  Of course, you cannot succeed with private control of credit, but once you cure that weakness by setting up a national banking system you will find your task much simplified.

“With a sane monetary system in operation, many of the impossible problems confronting the N.R.A, administration will cease to be unsolvable.  Then the N.R.A. may be expanded into a department of economic control that will become the efficient adviser to government upon the quality and quantity of public enterprise and social service that should be undertaken by government.  The broad lines of co-ordinated co-operation that must exist between national, state and municipal authority in the realms of finance and taxation must be fully recognized and accepted in the creation of economic administrative authority.  The department of economy must be relied upon to prevent the clash of strife that comes from uncontrolled competition between individuals, groups, classes and sections of the nation.  It must also guard against the evils of duplication of effort, and what is worse, the cancellation of success by doing something in one place that nullifies what has been done elsewhere.”

Mr. Roosevelt :  “Just what do you mean by that ?”

Mr. Lincoln :  “Well, some of the things that have happened under the N.R.A. will illustrate what I mean.  You aim to raise prices under that Act, but your gold policy calls for lower prices if it is to succeed in increasing foreign trade.  You aim to provide the needy with food and shelter, but your policy of destroying food and limiting agricultural production works the other way.  You aim to take people out of the cities, but your farm policy tends to drive them off the land.  You aim to give people better homes, but by loaning them credit repayable with interest you make it impossible to live in the homes they build.  You aim to finance progress, but by borrowing at-interest you assure public bankruptcy.  There is no use in the government trying to advance progress by taking an assumed surplus of farm produce and converting it into fertilizer with which to increase the surpluses not now saleable.  These disconcerting conflicts were to be expected and had to come to convince all of the real task before you.  Experience under the N.R.A. has proven the necessity for the establishment of economic control upon a much wider and more permanent basis than has been realized up to the present time.”

Mr. Roosevelt :  “But people fear that the establishment of such an authority will mean the adoption of that regimentation which is the chief objection they have to Communism.”

Mr. Lincoln :  “There is no justifiable ground for any such fear.  Much of the work of the Department of Economic Control in a nation where consumers’ buying power is maintained would be educational.  Farmers and others engaged in the development of natural resources, manufacturers and every class of merchant would be kept advised as to the possible consumption of markets and the production required to serve the needs of the people at home and the commodities and services that were exchangeable for the nation’s foreign requirements.  Blind and reckless pursuit of profit in business would give way to reliably informed business administration.

“The vast majority would welcome a system that would be able to render that kind of service.  If by regimentation you mean the prevention of men recklessly producing more than is needed or of withholding from production that which is required solely for the purpose of increasing unrighteous profits, then regimentation would exist, but that is not regimentation.  That is merely the expression of the authority of government which maintains liberty as the privilege of one to do that which he should do as a good citizen.  It should not be the attempt of the Department of Economic Control to fix a discreet level of prices that would eliminate competition.  Prices should be prevented from going to extremes, but within certain broad limits competition should remain as the effective balancing power in the price level and as an inducement to more effective and better service.

“Employers and employees, producers and consumers have definitely indicated their willingness to co-operate with the government in the heroic attempts which have already been made under the National Industrial Recovery Act.  All thinking individuals agree that there is no way of avoiding chaos without planning, and all but incurable self-seekers are prepared to acknowledge the facts.  Planned economy having the generous support of public opinion is, therefore, a practical proposition and it is now established as the basis of future progress.

“Complex and difficult as planned economy undoubtedly is, it is perfectly clear that no hope for success in that department can be entertained unless the problem is undertaken in the spirit that time and experience will effect improvement in its operation.  It must be recognized that freedom on the Prairie is an entirely different thing from freedom in New York City.  Similarly it must be acknowledged that economic freedom in the twentieth century is a very different proposition from what is was in the nineteenth century.

“A study of the Statute books of every leading nation will show how profoundly conceptions of the ideas of freedom and the function of government have altered.  Under the dictation of necessity parliaments find themselves increasingly engaged in passing laws and providing administrative facilities that have for their conscious aim the regulation of the day-to-day affairs of the community.  Government now intervenes in matters formerly thought to be entirely reserved to individual enterprise.  Possibly the best illustration available indicating the need for the new order is the regulation of traffic in metropolitan areas.  Modern methods and practices in transportation have imposed upon government the duty of regulating traffic.  Civic governments cannot avoid the cost which this duty involves.  If government did not intervene the freedom of the individual on the public highways could not be secured.

“Similarly the value of radio service is wholly dependent upon successful governmental supervision.  Radio would be worthless without governmental regulation.

“In modern trade and commerce government control is equally essential if individuals are to enjoy any measure of freedom at all in the channels that carry the ever-increasing volume of trade which is essential to progress.  Without regulation in trade and commerce and in many departments of purely social activity, individual freedom is impossible.  This new orientation has its dangers as well as its merits.  Between liberty and government there is an age-long conflict.  It is therefore of vital importance that the policy of the Department of Economic Control, while truly promoting liberty and advancing the expansion of the economic opportunities of all, should not deprive the individuals of their initiative and independence, which are every nation’s most valuable assets.  Notwithstanding the difficulties which must be dealt with, knowledge based upon experience must be relied upon to safeguard the best interests of the nation, and reason must be depended upon to perfect the technique required to perform these larger duties effectively.”

Mr. Roosevelt :  “In making the administrative adjustments that will permit us to eliminate unemployment and maintain rational progress, how can we maintain s reasonably fair balance of prices as between the agricultural and urban communities and as between the domestic and international trading sections of the nation?”

Mr. Lincoln :  “In normal times competition in a broad way establishes prices on the basis of cost of production plus reasonable profit.  The idea, how ever, that uncontrolled competition will produce a scientific or a just price level is absurd.  There is no way, for instance, by which competition alone can effectively maintain the prices of professional services, such as those of the doctor, the lawyer or the engineer in just and equitable relation with the prices of the labour that goes into the production of a pair of shoes.  That is so because the rules and competitive practices which apply in the realm of the professions are not the same, nor are they related directly to the rules and practices of competition involved in the production and sale of shoes.  This illustration could be extended to innumerable other activities and in innumerable directions.

“No attempt has ever been made other than that recently undertaken in Russia, to establish justice as the guide to all prices.  In an age of plenty, all must recognize, however, that if ordered progress is to be sustained, the prevention of unreasonable prices must be accepted as an important and difficult function of government.

“It is something that must come under the supervision of men equipped with every means of working out agreements between capital and labour.  These men must also possess the power to work out more effective methods of regulating the production and marketing of useable goods and services.  Something in the nature of more equitable relations must be established that will give to the farmers and working masses more of the goods and services that are now available.  The producers of goods for foreign trade must also be assisted to maintain higher standards of living than prices based upon world competition provide.  The control and regulation of prices, like the control of health, must be recognized as a great national undertaking under which the interests of every class and section of the nation will be fully safeguarded.”

Mr. Roosevelt :  “Is not the control of prices the key to permanent progress?”

Mr. Lincoln :  “No.  That is just so much academic economic nonsense.  The idea that high prices and low prices are synonymous with the terms good times and bad times, is misleading and unsound.  That interpretation has developed out of the ‘stone-age’ theory of academic economists who assumed ‘that all things being equal, prices rise and fall with the expansion and contraction of the volume of medium of exchange in issue’.

“Like many other statements of economic law that have grown out of the private control of credit the ‘quantity theory of money’ as stated by academic economists is flatly contradicted by fact.  This may be shown by contrasting the average price level since 1800 with the volume of purchasing power medium of exchange in issue during that period.  The volume of medium of exchange has increased enormously.  The average price level has fallen consistently with the long-term increase in the volume of buying power.  Facts that are known to everyone establish this result as inevitable.  As the buying power increases, the volume of consumption expands;  the demand for production increases and, with greater production, unit prices of cost of production fall.  The law of competition and sound business compels a passing on of this reduction of cost of production to the consumer.  The general average of the price level in time therefore falls with the increase of buying power.

“The erroneous theory that prices rise on the increase of the issue of buying power has grown out of the fact that during war and other periods of heavy public expenditure, self-seekers have taken advantage of the opportunity existing to manipulate prices upwards and into boom crises.  When manipulated prices on an inflated basis collapse, the volume of purchasing power in issue shrinks;  the velocity of circulation declines and inflated prices fall again to new low levels.  If the volume of purchasing power were allowed to shrink indefinitely, reducing consumption and production sufficiently, prices would again rise as a result of the higher cost of unit production that would be involved.  Otherwise, widespread bankruptcy must ensue.

“In the so-called boom years of 1928 and 1929 and to-day people with money are able to purchase and equip their homes with electrical appliances, heating, sanitary and a host of other conveniences, at prices that would be impossible if only a few enjoyed the privilege of using them.  They are also able to purchase automobiles, radios, units of travel and a variety of food, clothing, shelter and entertainment at nominal prices, where 100 years ago the same things could not have been purchased with a king’s ransom.

“There is really no way of measuring the actual fall in the level of prices that has resulted from the enormous increase in buying power that has taken place.

“The problem of price control under the private money system, where buying power is flooded in the social system and withdrawn at the will of the lending community, is an impossible one, but where the monetary management maintains a normal and rational increase in the volume of buying power in issue and maintains an effective circulation by a continuous distribution of wages, pensions and allowances essential to the sustenance of consumers’ buying power, price regulation becomes a matter of practical administration.

“It should be recognized that prices may be too low as well as too high, and the government should be in a position at all times to prevent organized minorities, speculators or others from establishing price and wage levels that are unreasonably low or high.

“The most important factor in the maintenance of fair prices, is the going-concern activity of the social system.  That cannot be maintained without an effective circulation of consumers’ buying power.  That circulation must be adjusted from time to time to the possible rise in the standard of living.

“Of course the problems are real, but many of them are not as difficult as they now appear.  Once government asserts its power to finance progress, many of the problems in the realm of prices and wages that appear to be impossible will automatically disappear.  So long as government exercises its authority to keep wages and prices within the bounds of reason, no other interference with the prices that are set by fair bargaining and fair competition need be undertaken.

“In assuring the circulation of consumers’ buying power, the government must be prepared to recognize that the standardization of hours of work and hourly, daily or weekly rates of pay will not alone be sufficient.  Workers must be assured an annual income from their wages that will give them buying power throughout the year.  It will avail nothing to fix the rate of wages and the minimum daily or weekly hours of the worker unless he is assured of a sufficient number of working hours to give him a proper income throughout the year.”

Mr. Roosevelt :  “There are many who argue that any scheme of planned economy based upon national currency and credit will lead to the socialization of all capitalistic enterprise and that the loss of the unrestricted right to accumulate profits in the form of money that will follow, will end in moral and social disaster.  What incentives to individual enterprise will remain under the system of planned economy that you have outlined?”

Mr. Lincoln :  “No scheme of planned economy needs to do away with the right to accumulate reasonable monetary and property rewards.  But I think it is a great mistake to believe that human progress is solely dependent upon the desire of people to accumulate unlimited riches in the form of money, or property.  Properly administered economic control should offer wider opportunities for individual success in business than rule by Money Power is ever willing to provide.  The unbridled power of a moneyed aristocracy is in itself a dangerous institution and always threatens the destruction of individual incentive and personal liberty.

“Government, I believe, through its educational system, should develop in the mind of every child that the mere accumulation of money is neither a worthy nor a desirable objective in a Christian civilization.  The accumulation of money satisfying merely a love of money should be condemned as a sinful indulgence.  Everyone knows that this course is advisable, for very often men are successful as money makers simply because they are willing to ignore the morals and ethics that govern other men who have a decent respect for the proprieties of fair dealing and honest trade.  Other aims and objectives than that of money making should be encouraged.  Men and women who attain first rank in the realm of the arts and sciences through constructive achievement, should be recognized as the aristocracy of the nation.  Those who contribute to the advancement of the cultural progress of society by assisting people to enjoy a better understanding of the true purposes of life, and who aid progress through the subjugation of the elements of nature and the resources of the earth to human service, are far more important to the social order than are the money makers.  Properly administered the money and the credit wealth of the nation should be generously used to support those whose genius, intelligence and industry make the world a better place as a human habitation.

“As you undertake the task of financing progress you should remember that civilization to-day is not at the end of its march onward and upward, it is only at the beginning.  There are now greater opportunities for achievement in worthy endeavour than there ever were before.  Once a proper plan of financing progress is established there need be no fear of loss of individual incentive coming from the establishment of a sane monetary system and a sound scheme of planned economy.  Men and women will then be able to put behind them the fear of poverty and they should be able to live truly Christian lives.  Righteousness and respectability will take the place of money acquired as the true test of successful citizenship.  Planned economy will offer security to the deserving individual, and the accumulation of money as a security for the future will cease to be the crying necessity it is under the present system.  Thus respectability will take the place of the fear of poverty as the disciplinary power compelling all to accept the need of moderation, goodwill and respect for order as the true foundation of stable government and ordered progress.  Of course the new order does involve the establishment of a better understanding of the real virtues and ideals of Christian citizenship;  but once you are able to finance education upon a sound basis that will prove to be no insurmountable task.

“Planned economy does not mean arbitrary and bureaucratic regimentation by the dictatorship of central authority.  Properly appreciated and properly administered, a department of economic regulation should function as an expression of the government’s desire to co-operate with every class and section in the community to bring about the harmony of action that is essential to secure the most satisfactory national results.”

Mr. Roosevelt :  “Many agree that a national administration of currency and credit, co-operating with departments of taxation and economic control, could greatly improve the situation that exists, but they say no nation can live unto itself, and that until all nations are prepared to co-operate no nation alone can solve its international trading and commercial problems.”

Mr. Lincoln :  “That conclusion is not warranted by the facts.  It is, of course, true that a nation engaged in foreign trade must be willing to secure the co-operation of other nations that are willing to trade with it, but to do that it must establish the means of managing and regulating its international relations so that it may meet and satisfy the fair requirements of other nations and at the same time protect itself against the aggression of nations that are unfair.  International commerce, credit and money, other relations such as immigration and tourist travel must also be kept within reasonable bounds.”

Administration of Department of International Affairs

Mr. Roosevelt :  “How would you organize and maintain the Department of International Relations?”

Mr. Lincoln :  “The men engaged in the administration of this department should be selected for their knowledge of the various activities that make up the total of our foreign trading possibilities.  The Department of Commerce, which was organized in 1865 under the direction of Secretary Seward and with the assistance of Delmar, one of America’s truly great economists, who was in charge of that department at its inception, contemplated the day when planned economy and international trade management would be recognized as essential to the social progress and the national security of your nation.  That day has now arrived.

“The international gold standard, currency manipulation, tariffs, dump duties and trade embargoes have failed to maintain the volume of inter national trade which is now possible.  The mere wiping out of arbitrary and unintelligent trade barriers will not improve the situation.  The ideas of tariff protection and free trade are equally unsound and impractical.

“In the new order that now exists nations must be prepared to consume the equivalent of their own production.  The hope of the protectionist that one nation may thrive by selling more to its neighbors than it buys from them, thus establishing, through favourable balances of trade, prosperity at the expense of its foreign neighbors, is a fallacy born of selfishness that time has ruthlessly exposed.

“Such a policy must lead in the end to the destruction of trade and always carries with it that disturbing aggressiveness which has been the most fruitful cause of war.  You should not allow your neighbor to bankrupt you and it is equally unwise to bankrupt your neighbor.  If you want to trade you must co-operate in keeping each other solvent.  You can only do that by balancing your trade, through deliberate regulation and control.

“Modern transportation and communication having practically annihilated distance as a factor in protecting home markets, no advanced nation can maintain its economic security unless it protects its industry and commerce from invasion by the industry and commerce of foreign nations where the standards of living are low.

“Free trade is under the circumstances impossible.  It would result in irreparable damage to the standard of living already established in the American nation.  The ideal of the sincere free trader is a worthy one, however.  He assumes that under a scheme of free trade all nations will get the benefit of that which can be produced best and under most favourable circumstances.  That result should be the aim and object of managed international trade.

“In a nation like the United States, favoured with a distribution of climate and a diversity of natural resources which make it possible to produce the bulk of the necessities and many of the comforts and conveniences of life at home, the things that must be taken in exchange for available surpluses are those which largely contribute to the increased comfort and luxury of the American people.  The foreign trade and commerce of the nation, therefore, must be built up by exporting American goods to nations that can provide, through their art, science and artizanship and resources, the services and commodities that will help to maintain higher standards in all phases of American life.

“The volume of rubber, tea, coffee, nickel, manganese, pulp and other importations, while substantial, is not sufficient to balance the exportable surpluses that are available in increasing volume.  It is by the development of the importation of luxuries and the use of foreign educational and tourist accommodation that American foreign trade may be substantially increased.  In this way, home markets can be given proper and reasonable protection, and the best that is available in foreign lands may be secured on a basis of fair exchange to improve the general lot of the American people.  In no other way can the people abroad with whom they trade be supplied with American buying power.

“No nation should try to produce at home that which can be more conveniently secured from abroad.  Managed trade, therefore, should represent a com promise between protection and free trade that may be properly described as intelligent trade conducted upon a balanced basis.

“No one who is aware of what is taking place in Russia, Japan, the nations of the British Empire and the nations of Europe can fail to recognize that inter national trade and commerce in the future must be carried on under the supervision, regulation and assistance of national authority.

“The necessity for this innovation is clearly indicated by what is now taking place between governments.  An outstanding example of the new order is to be found in the agreement made between the governments of Japan and India wherein the government of Japan agreed to take 500,000 bales of cotton a year over a period of five years and the government of India in partial exchange agreed to accept 400,000,000 yards of cotton piece goods annually over the same period.  This is only one of the innumerable exchanges that have been effected between nations on a similar basis of trade.  Bonuses to assist foreign traders, trade quotas and trade agreements are now definitely in operation in every trading nation throughout the world.  They are merely the forerunners to permanently controlled and deliberately managed international trade.

“The Department of Economic Control, working in co-operation with the Department of International Exchange and the Department of International Commerce, should be empowered to fix the prices at which all surpluses available for export would be taken over by the Department of International Trade and made available for foreign trade.  When this procedure is followed, the producer of export surpluses becomes possessed of the buying power that makes him a valuable consumer, not only of domestic goods, but of foreign goods as well.  There is little or no use developing commodities for an export market which must be exchanged, in part at least, for the commodities and services of other nations unless the consumer at home can purchase the goods of foreign lands when they are imported and offered for sale.

“What is the use of taking flour, grain and cotton to Japan unless the American consumer can use the silk and other Japanese surpluses that must be taken in exchange?

“There is little or no use in establishing credits in Europe and Great Britain unless the American consumer can purchase and use up those credits by using the foreign goods and enjoying the services which are available to the traveller in foreign lands.  You must therefore use national currency and credit to finance the buying power of all those engaged in production goods for export.

“People must learn that nations buy and trade because they are rich.  They are not rich because they trade.  For under banker rule the more they trade the poorer they become.  Government must finance the consumption of foreign as well as domestic goods and services.”

Mr. Roosevelt :  “Practically all nations are now engaged in agricultural and industrial activities.  They are also all engaged in domestic and foreign trade.  How, then, can the farmers and the producers of foreign trade goods be given prices that will support them in the enjoyment of the same standards that workers for wages and salaries enjoy in cities and in the production of goods and services for domestic trade?”

Mr. Lincoln :  “This is not an easy thing to do, but it is not impossible. “Let us, for the purposes of illustrating the problem, take a base commodity such as grain.  Grain is produced for the home and foreign markets.  In countries such as United States, France, Russia and China, the bulk of the grain produced is required for domestic consumption.  In countries such as Canada, Australia, the Argentine and Manchuria, the bulk of the grain produced is for foreign consumption.  The competition in foreign markets is therefore intensive, with the result that low prices of export grain rule the price of grain in the domestic market.  Hence we find the agricultural community producing grain placed upon a low price standard by world competition.  This low standard reduces the buying power of the farmer and his low standard is, in turn, reflected in a lower standard of living throughout the entire nation.  That situation can be cured.  The government, under regulated production, can fix and pay the price for all grain produced.  For example, it could give to the farmers $1.50 per bushel as the base price for the highest grade.  That price could be used as a standard to which all other prices and wages could be correlated.  All commodities produced alternatively for domestic and foreign trade would have to be dealt with in the same way.  Starting from such a basis, an effective scheme of regulated prices that could be paid by government could be established.  In this way, and in no other, can a balanced standard of living be maintained for those engaged in foreign and domestic trade.”

Mr. Roosevelt :  “That might involve the government in serious losses.  How, for instance, could the government pay $1.50 for wheat if it were selling in foreign markets for 50c per bushel?”

Mr. Lincoln :  “Let me reverse that question, and ask you how the farmer can live in a nation where the prices of many of the things he uses are raised by planned economy and protected markets to levels that are far above the prices he is able to secure for the things he produces and sells in world markets where he has no protection whatever?

“I think you will agree with me that under such circumstances the farmer cannot maintain a decent standard of living.  The situation, however, is very different when government advances national credit in exchange for a commodity which must be sold at a competitive price abroad.  This can be done without any real loss to the government because the cost of buying power to the government is nothing.

“More important than that the government is interested in maintaining a successful agricultural community as an integral part of its economic structure.  This can be done only when the farmers’ buying power is effectively maintained.  When the government advances national credit for a commodity such as grain, it maintains the farmers’ buying power necessary to sustain the going-concern activity of its own social order, thereby gaining enormously in a sound economic adventure.  But in addition encouraging the production of a volume of commodities that are exchangeable in world markets, it places the nation in a position to secure the commodities from foreign markets necessary to maintain its own industry, and to raise the standard of living of its people to the extent at least of the exchange value in world markets of the goods so accumulated.  It cannot do more in any event.  Therefore, by maintaining the buying power in the home market of the producer of foreign commodities three benefits accrue to the nation—

“(1) The producer of foreign trade commodities is sustained in a sound economic position.
“(2) The State maintains the production of commodities that must be used as the basis of its foreign trade.
“(3) The home market for foreign goods and services is increased and supported.

“Under a proper scheme of managed international trade, any losses that appear as between the money price paid by the home government and that secured in foreign markets are purely fictional.  They merely reflect the difference in the conditions of productions and the standards of living of the people of the trading nations.  The only way that a nation, where high standards of living are developed, can prevent the real loss that comes when its higher standards are undermined by foreign competition is by fixing and paying a fair price for all exportable surpluses available.  It can then use its exportable surpluses to secure the maximum of whatever foreign goods and services there are to exchange for what it has to offer.

“In working out this problem, the Department of International Trade would be financed by the national banking organization and it would be assisted by the Department of Economic Control.

“In accepting this obligation, government should remember that the true purpose of international trade between nation and nation is not a matter in which the accumulation of money profit is of paramount importance.  It should be recognized that in the realm of international trade the paramount objective should be a wise balanced exchange of goods and services.  To this end, all the facilities for making and carrying out effective trade agreements with other nations must be developed and maintained as a permanent activity.”

Mr. Roosevelt :  “Does that mean that the international trading department would establish a complete monopoly over all international trading operations?”

Mr. Lincoln :  “Not at all.  It simply means that those engaged in the business of foreign commerce would have the co-operation of the power and wealth of national government to assist them where necessary in expanding and developing trade, where foreign trade was possible and to give them the clearing house facilities, the rules and the regulations which would establish foreign trade on a basis of permanent stability, something it has never enjoyed in the past.

“Let me illustrate what I mean by that with a concrete example.  Let us suppose that A wishes to import wine from France while B has decided to do the same thing from Australia.  Neither has any means of knowing what the other is doing.  What is the result? Both import wine and the market is glutted.  In the meantime American wine makers have developed a product that goes on the market.  Here then you have importers and home producers in trouble.  All have goods to sell but the market cannot absorb what is offered.  Now if the Department of Economic Control were working effectively, with the Department of International Trade, all could be properly advised beforehand of the situation and they would govern themselves with knowledge based upon facts.  Glutted markets and losses in foreign trade ventures could be substantially mitigated.

“Up to the present time all have ignored the price needs of the farmers, the miners of base metal, the lumbermen, the manufacturers and all others engaged in producing goods for foreign trade, simply because some foolish theorists told you that satisfactory results could be achieved by fixing and paying special prices for gold.  But you must come to see that what you have done in the matter of fixing and paying prices for gold can and must be done for the commodities you are going to use as the actual basis of trade with other nations.

“World peace and world prosperity should be the aim and purpose of every trading nation.  The Department of International Commerce should unhesitatingly co-operate with all other nations in helping those of low standards to raise the standard of living of their people.  In that way, the productive energy of every land may be utilized to achieve the conquest of world poverty.  You know, and all should agree with you, that an increase in world consumption means an increase in prosperity at home.  International trade should be used to make nations rich by making the whole world richer in the production and use of wealth.”

Mr. Roosevelt :  “Would the aim of international trade and credit management be to maintain an exact balance of trade between our nation and all other nations with whom we would trade?”

Mr. Lincoln :  “Yes.  that would be the aim, but of course no matter how closely or how efficiently that department performed its duties, overlapping balances would be bound to appear, because in international trade there are conditions that are bound to develop which no one can foretell and no one can foresee.  Drought, changes in modes of living, inventions and a host of other factors can bring about changes that are bound to result in the most carefully made calculations being out of line;  consequently, adverse balances should be expected from time to time.”

Mr. Roosevelt :  “What then would be used to settle and adjust these balances so that trade would not be unnecessarily interrupted?”

Gold and Silver

Mr. Lincoln :  “Gold and silver should be used for that purpose.  In the new era that is possible, humanity’s needs must be served by vast increases of domestic and international buying power.  Gold and silver should be used as the means of settling international trade and credit balances.  No gold whatever and no appreciable amount of silver should be used as domestic or the basis for domestic currency.  Both should be recognized as the means of advancing international trade for it should be recognized that they are established by custom as the effective means of settling overlapping balances between nations.

“As international trade increases the need for gold and silver for that purpose will become increasingly expanded.  That need will grow more rapidly than will the production of those metals.  Gold and silver should be revalued at once;  gold should be raised to $50.00 an ounce and its gradual increase to $100.00 an ounce should be recognized as a possible necessity.  Silver should be raised on a parity with gold, that is to $3.35 an ounce, and its increase to $6.70 an ounce should also be accepted as a possible requirement of the not too distant future.

“Now I appreciate that to the conservative mind this proposed revaluation of gold and silver may appear to be extravagant, but they should not forget that the increase in the value of gold from $20.00 to $40.00 an ounce has failed lamentably to bring about the increases in international trade and debt settlements that were anticipated, nor should it be forgotten that the increase in the price of silver from 26c to 50c an ounce had little or no effect as a factor in increasing world trade.

“It should also be remembered that the New Deal includes an honest and sincere desire to improve the lot of the people of Europe, Russia and the millions that are barely existing in China, Manchuria, Japan, India and Africa.  Gold and silver should be treated as the international currency that will permit the trading nations of the world to lend assistance to establish world peace by aiding in the conquest of world poverty.

“Viewed in that light the volume of international currency, which gold valued at $100.00 an ounce and silver valued at $6.70 an ounce would make available, does not seem out of place.  The possible requirement for international currency that could be developed once the world opportunities for real trade were under effective exploitation are such that no one can possibly estimate the international money needs of the future.”

Merchant Banking, Debts and Investments

Mr. Roosevelt :  “Does the administration af national currency and public credit, planned economy and managed international trade involve the ultimate socialization of private finance and the wiping out of merchant banking?”

Mr. Lincoln :  “Not at all.  For example, when the government pays a pensioner the pensioner receives his cheque in the ordinary way.  He can take it to the national bank and convert it into cash and use the cash in any way he sees fit.  The cheque can be cashed in any merchant bank authorized to do business or in any way that a cheque can be cashed now.  Once the government transfers national credit or national currency to a pensioner it ceases to be national currency or public credit and becomes private finance.  It belongs to the individual who owns it in exactly the same way that his clothes constitute his own property.”

Mr. Roosevelt :  “Yes, I see that, but if the national bank is to finance government and all long-term investments such as home and farm loan mortgages and industrial bonds, what business would there be for a merchant banker to do?”

Mr. Lincoln :  “All and more of the business that merchant banking as an aid to trade was originated to perform.  The right of the merchant banker to invest his own capital and to take deposits and invest them under proper regulation should not be interfered with.  The merchant banks under proper supervision should be allowed to continue and should be developed to serve as clearing houses for local trade and commerce.  The national bank should at all times be ready and willing to supply the merchant banker with his proper currency and credit requirements on a basis that will permit the merchant banker to aid private commerce at rates and fees for services that are just and fair to the commercial banks.

“The private banker should not be allowed to participate in other lines of competitive business, to trade short, to print money, to disrupt commerce by inflating bank credit.  Nor should he be allowed to speculate with or to use his depositors’ funds for the purpose of purchasing assets as his own.  For the valuable and legitimate services he performs as the custodian and investor of funds in short-term credits, and as manager of the clearing house for monetary transactions, he should be fairly and properly paid.  When the merchant banker gives adequate services for the fees he charges, whether he calls the fee interest or not, that is not the kind of usury that the Bible condemns.”

Mr. Roosevelt :  “But if you take away from the merchant bankers the privileges they now enjoy of printing paper money and issuing bank credits as a substitute for money, will their profits be sufficient without raising the charges made to those whom they serve?”

Mr. Lincoln :  “Ample facilities could and must be made to provide the merchant banking system with all the credit and currency required to maintain the private business of the nation, and there need be no attempt to prevent the private bankers from making the fair and legitimate profit that the service they render justifies.  Their total volume of profitable business would increase rather than decline, for under a proper plan of currency and credit management very great increases in sane production to serve intelligent consumption would be reflected in equally great increases in the business of the merchant banker.  The development of rational progress would mean that currency administration, combined with planned economy, would effect a stabilization of the going-concern activity of the industry and commerce of the entire nation.

“Progress would be regulated and the value of real wealth would be secured.  The merchant banker would be free from the danger that exists at all times under the present system of having to deal with uncontrollable periods of progress and equally uncontrollable periods of depression.

“No group in the community would benefit more by a properly managed currency system than would the merchant bankers whose actual business is that of assisting in the exchange of goods and services between producers and consumers.

“Merchant banking is and should be recognized as one of the most worthy and valuable of the institutions that are essential to a trading community.  For that reason, the sound merchant and commercial banker has nothing to fear.”

Debts

Mr. Roosevelt :  “How can we liquidate the enormous volume of interest-bearing debts that have accumulated? How can we avoid repudiation and the disruption of the economic structure and the social order that such a course will produce?”

Mr. Lincoln :  “That is comparatively easy.  It would be unmoral and unwise to wholly repudiate existing debts.  It would be equally unwise to force people possessed of debts to accept at one time the full value of such debts in national currency.  “National, state and municipal debts should be consolidated and liquidated by a scheme of amortization over a period of from twenty-five to fifty years.  At the end of that time the debts should be treated as paid up, and the same applies to mortgages, bonds and other forms of long-term debts.  In that way, present investments would not be injured nor would a haphazard and uncontrollable condition of inflated currency appear.”

Investments

Mr. Roosevelt :  “If public enterprise and long-term investment are to be financed with national currency and credit free from interest charges, what will be available as a secure investment for accumulated savings?”

Mr. Lincoln :  “There is no reason why the government cannot encourage thrift and saving by paying a bonus to depositors in the national banking system.  That is not a violation of the Divine law against usury.  That can be done, but no Christian state should allow any individual to collect interest on a money investment that permits one group to enjoy leisure out of the sweat of the faces of their brethren.

“There is a lot of nonsense talked about the value of usury as a means of inducing possessors of wealth to invest it so it will function in the service of humanity.  The vast majority of the people have proven that they are willing to invest their money as shareholders in legitimate industrial and commercial enterprise.

“Under the system that we have discussed, the volume of business in every channel of trade should be enormously increased.  Under proper regulation opportunities for safe and profitable investment will be definitely enlarged.  Once sound stock exchanges operated by licensed brokers under proper supervision take the place of the mad houses of speculative corruption and hysteria in which stock trading now takes place, shares in industrial and commercial institutions should offer a profitable investment that is just as secure, if not more so, than mortgages, municipal, state and national bonds are to-day.

“Adequate pensions, proper disability and unemployment insurance, fair and just superannuation allowances would be provided, but there would be nothing to prevent those entitled to the standard of living provided by the government to improve that standard by their own intelligence.  industry and thrift.  All should be guaranteed a fair standard of living, but all should be able to improve that standard by their own efforts if it is possible.  There would be ample opportunity to invest savings in even better securities than now exist.

“You know, Mr. Roosevelt, much of the covetousness and greed that exists in the world to-day is due to fear.  Men anxious to perform their duty to themselves and their families struggle valiantly to accumulate reserves of wealth against the days of adversity.  Once the government is willing to perform its Christian duty to every citizen in the land by guaranteeing all against involuntary poverty, that fear of the future will disappear and men will be able to live in a brotherhood of respectable co-operation.”

Mr. Roosevelt :  “If all these things were done would we not have the arrival of the millennium bringing about the Utopia that financiers, monopolists and academic economists denounce as an impossible and an impractical dream?”

Mr. Lincoln :  “Not at all.  Your civilization is just upon the frontier of creative opportunity.  The circulation of buying power provides nothing but the opportunity for progress.  Capital of itself creates nothing.  Like water in an irrigation system, if its circulation is effectively maintained in the social system, it will provide the opportunity for industrialists, commercial leaders, inventors, executives, educationalists and the leaders in every structure of life to cultivate and develop the fruits of intelligence and industry.

“There is more work in the world crying to be done to-day than there are men to do it.  There are problems ahead of civilization to be solved that are infinitely more complex and difficult than any of the problems that have been solved in the past.  The conquest of material, moral and spiritual poverty is a goal that lies far ahead in the future.  Granted that much has been done;  nevertheless there is infinitely much more to do in the future than has been accomplished in the past.  An eternity of opportunity lies before you.”

The Macmillan Committee Report

Mr. Roosevelt :  “Other than your own speeches and messages to Congress, have we available any expressions and authoritative modern opinion that now endorse and recommend the ideas you proposed to Congress during your Presidency?”

Mr. Lincoln :  “Yes.  The report of the Committee on Finance and Industry appointed by the British Government under date of November 5th, 1929, which sat under the chairmanship of the Right Honourable H.P. Macmillan. K.C., now Lord Macmillan, filed with the British Government under date of June 23rd, 1931.  That report constitutes a compendious survey of the operation of the private money system.  It ruthlessly exposes the misguided nature of the fundamental fallacies that bankers and financiers have tried to maintain.

“The report accordingly recommended an entire change in monetary management by stating :

“ ‘It is not advisable or indeed practical to regard the monetary system as an automatic system grinding out the right result by the operation of natural forces aided by a few maxims of general application and some well-worn rules of thumb.  The major objectives of a sound monetary policy which are, among others, the maintenance of a parity of the foreign exchange without unnecessary disturbance to domestic business, the avoidance of the credit cycle and the stability of the price level, cannot be attained except V by the constant exercise of knowledge, judgment and authority by individuals placed in a position of unchallengeable independence, with all the resources and every technical device that is available at their disposal.’

“You will see by this recommendation that the Committee recognized that the men in charge of the monetary system must be ‘placed in a position of unchallengeable independence’.  That broad recommendation is not confined to a mere independence of partizan or corrupt political influence.  It means that, like the Judges of the Supreme Court Bench, they must be independent of self-interest and the corrupting influence of self-seekers.  In short, the managers of the national monetary system must be men who are paid for the performance of a specific public duty, and any one who dares to be corrupt in the performance of that duty should be recognized as a traitor to the nation and punished as a treasonable offender.

“The Macmillan Committee report recognized the wisdom of the Biblical truth that—

‘No man can serve two masters, for where your treasure is there will your heart be also’,

“and its recommendation in that regard can only be carried out when the limit of the remuneration of those responsible for the administration of the national banking system fixed by the government.

“Now without going into too much detail, let me draw your attention to the fact that the report was made at a time of great uncertainty, when the people of Great Britain feared the consequences of abandoning gold.  For that reason, the report was guarded in its recommendations and less pointed than it would be were it made by the same men to-day.  However, from the main report and the observations filed by members of the Committee, an almost complete scheme of managed currency, planned economy and regulated international trade may be secured.

“The Committee, for some reason, overlooked the fact that national currency can be withdrawn from circulation by taxation.  Had that been drawn to their attention they no doubt would have advised that taxation could be used as an effective means of preventing redundant issues of purchasing power remaining in circulation to the detriment of the buying power of the medium of exchange.

“Let me draw to your attention the following observations which are to be found in the report and the address attached to it :

National Ranking

‘(1) The Bank of England ought to be transformed into a public corporation.’ (Page 240.)

Public Credit

‘(2) The vicious circle is now complete.  The decline of new enterprise has reacted adversely on profits and prices, and the low level of prices stands in the way of new enterprise.  It is for this reason that some of us think it may be necessary to invoke governmental enterprise to break the vicious circle. (Section 316.)
‘(3) The best hope of a remedy lies in a monetary policy designed to increase the volume of purchasing power.’ (Page 190.)
‘(4) It is not necessary that the volume of note issue (a fortiori, or the creation and issue of national bank credit) should continue to be regulated as it is now by reference to the amosmt of gold held in reserve.’ (Section 148.)
‘(5) Since the bankers as a whole under banking practice maintain a cash proportion of not the amount of gold which may be held in reserve (i.e., legal tender paper money borrowed from the Bank of England or the Department of Finance in Canada), the bulk of the bank deposits arise out of the actions of the banks themselves, for by granting loans, allowing overdrafts and purchasing securities, a bank creates a credit in its books which is treated as the equivalent of a deposit of money.’ (Sections 71 to 74 inclusive.)
‘(6) The theory that governmental expenditures in the promotion of public enterprise and social service is restricted by the accumulated savings available for investment is erroneous.  When governments distribute wages by financing public enterprises with national currency and credit, the volume of capital for investment is increased.’ (Section 47 of Addendum 1, Page 203, and Section 24 of Main Report.)
‘(7) If governments pursue an inflationary policy, i.e., meet expenditures not out of revenue, but by the issue of paper currency (or the creation of credit in a national banking system), forces are set in motion increasing profits and wages and additional spending arises.’ (Section 24.)

Price Control and Trade Management

‘(8) Gold reserves are held to-day solely to meet temporary deficiencies in the balance of international payments.’ (Section 340.)
‘(9) The circulating media consists overwhelmingly of paper money and bank deposits.  It is this volume of purchasing power which directly affects the price level and not the amount of gold which may be held in reserve.’ (Section 45.)
‘(10) There is nothing inherently impractical in the exercise of the government’s power to deliberately control the price level.  We should be ready to attempt the task and to gain experience by practice.’ (Section 210.)
‘(11) International trade can and should be regulated and controlled by deliberate management.’ (Section 41, Addendum 1, page 201.)

“In the broad principles and administrative policies laid down by the Macmillan Committee, there is nothing proposed that is either unique or new.  The recommendations it offers are based upon the truths that the ancient Hebrew writers recorded as the inspired laws presented to humanity under the direction of God.  They recommend the management of the medium of exchange.  They acknowledge that it should be so managed that it may serve as the basis of a large plan of properly directed and regulated scheme of human progress.

“To anyone who has studied and grasped the economic implications of Christian teachings, the fact that the changes proposed and the policies and practices recommended by this Committee are all to be found in the Bible should not be a matter of surprise.  Unfortunately such an observation is a surprise because few Christians appreciate that the Bible, in addition to taking care of man’s spiritual needs, offers to the Christian world a sound and complete system of practical economy.  The fact is that all our troubles have in the past, and are now disturbing and disrupting human society solely because the economic implications of the teachings of the Bible have never been accepted and put into practice.”

Mr. Roosevelt :  “You mentioned ‘the economic implications of Christian teaching’.  Would you mind explaining what you mean?”

Mr. Lincoln :  “The Scripture is all inclusive.  It offers a plan under which mankind, by conquering material, moral and spiritual poverty, may establish the Kingdom of God on earth.  Unfortunately, theologians have emphasized the spiritual and moral phases of its teachings and ignored the material.  Civilization has now reached the time when the importance of God’s plan for communal life on earth must be put in to practice by government.  There is no other way by which world peace and world progress can be sustained.

“If you will follow closely the teachings of the Old Testament, using the Commandments as the foundation of your laws and the teachings of Christ as the guide for administrative policy, you will find a plain and practical remedy for every problem that now confronts you or your government.”

G.G. McGeer, The Conquest of Poverty, ch 8