A World In Debt

Today’s lunchtime reading: A World In Debt, 1936, Freeman Tilden. I wasn’t familiar with either this book or the author until recently; I was lucky enough to find this book through the recommendation of a friend (nobody you know). It is, alas, out of print, and a used copy will set you back at least eight-hundred bucks (I kid you not); the first-edition copy in the image in this post was offered at $1,600. That’s a damn shame (in terms of availability to the general public), but I completely understand why somebody would pay that much for this book: It’s extremely readable, brutally funny, and way too dangerous to every banker, business person, economist, pundit, teacher, and politician on the planet to make this allowed reading, much less required reading, in any school today. Fortunately I was able to find a free PDF copy on the internet (search archive.org — it seems this book is in the public domain; at least I can’t find any current copyright/publisher info on it so hopefully it’ll remain available for free download, both as a rather unnecessarily large 1.8gb (1.8gb?!?! WTF?) PDF file courtesy of the Digital Library of India, as well as a much much MUCH smaller but still admittedly not-exactly-small (92mb) PDF because that’s as small as it could be compressed, thanks to the generosity and magnanimity of the mysterious but obviously well-intentioned Vertigoat). I’m about twenty six pages in and already this is a book I would actually pay eight hundred dollars for. It opens with a prolog “A Letter to John J. Fox, Esq.”, and even if you don’t read the entire book it is very very much worth taking the time to read just this letter:

To John J. Fox, Esq.,
Berkeley, California.
My dear John:

You ask me how I came to write this book. I think there is a little malice in that question, because l can distinctly remember saying to you on more than one occasion that l felt that the world did not stand in need of many more books, or many more writers of books, for a good many years, and perhaps for a good many centuries, to come. And yet, l have written a book. I grant this strange conduct needs an explanation.

Well, I beg you to remember that, back in 1927 and 1928, when the world was in a tornado of prosperity of the paper persuasion, I also said something else to you. I said that this thing had happened before, many times’, and that invariably it had also happened that the balloon was pricked, and deflation followed; that the inevitable penalty for a boom was a crash; that whatever political party happened to be in power when the smash arrived, would be the object of loathing and contempt; and that for several ensuing years the disillusioned populace would be so busy pitying themselves that they would become the victims of every impostor and imposture that effrontery and ignorance could contrive and present. And, indeed, all this came to pass; but l could not pretend to be very wise about my prediction; for any man who had read history, and had managed to keep himself a little aloof from the maddened crowd, could have said the same, and no doubt many did.

He is but a mean man who takes more than a transient pleasure in successfully prophesying a catastrophe (though Lucretius intimates that no man is above a touch of such vanity); so, after a grim smile at the unhorsed cavalry of commerce—those mounted captains of industry and exploitation who had been accustomed to saddle and spur just long enough to forget what one does with feet; and after a sincere ejaculation of pity for the wretched hoplites, washerwomen and sutlers who had ignorantly pawned their valuables to follow such leaders toward the promised land of Something-for-Nothing—I began to speculate upon the principles that must lie behind such feast and such famine, such weal and such woe, such quondam luxury and such present misery. For there must be, I considered (if one could find them), very definite rules that produce, from the identical causes, identical results over two thousand years of written history. And that this unending procession from boom to crash and from crash to boom is one of the most constant of the phenomena associated with social man, we have sufficient testimony. I therefore began to inquire into the nature of this phenomenon, to see if I could trace out a cause that would survive the scrutiny of the scientific method.

In my inquiry, l began most humbly. I first went to great masters of commerce, the bankers, the enterprisers, the geniuses who had been directing the planets and had all but partitioned and capitalized the universe. What did they think of it? God wot what they thought of it, my friend, for all I could get out of them was that something terrible had happened (which l already knew); that it must have been the war; that it was necessary to keep a stiff upper lip (and their lips trembled like tripe as they said this); and that the late J. Pierpont Morgan, Senior, had said that only a fool would sell the United States short. In the next stage I learned that the stock market was not really going down—it was just traveling along at the bottom of a U. If this was indeed true, the distance between the uprights of the U became so great that it was impossible to see them both at the same time.

Not to enlarge on the asininity of the slogans that were mouthed by these frightened gentlemen—whose efforts to remain pompous were as ridiculous as those of an archbishop who has stepped on a banana peel—I came away from them convinced that they were mainly windbags and poltroons, and that most of them possessed an attitude toward life curiously like that of a pickpocket. Not only had they no idea as to what had caused the “depression,” but they were not inclined to care, if only they could devise some way to repair their own fortunes and achieve another following of dupes. But, for the little, ignorant, patient, plodding, unpretending man of petty business, meeting his own fears with courage, meeting his bills if he could, dazed but hopeful and industrious—for this man I found nothing but admiration. He could tell me nothing, because he knew even less than I, but I could see plainly that when the world is plunged into the abyss every so often by the giants of finance, it must be pulled out by these pigmies, whilst the Goliaths sit by and weep over their own bruises.

Then l turned to the economists—the political economists. Lord save us, my friend! what shall l say of the economists? What can anyone say of the economists? Nerissa asked of Portia, “How say you by the French lord, Monsieur Le Bon?” Portia replied, “God made him, and let him therefore pass for a man.” As to economists, let us not be outdone in benevolence by Portia: they are undoubtedly as they were intended to be: but for any adequate explanation of the difficulties and dangers that beset our industrial economy and the fortunes of those who exist within it, you may as well consult the Great Pyramid. Diligently I have perused the modem economists, but l frankly confess that I now know neither what political economy is nor what the economists pretend to teach. If the professors of this alleged science really have any definite notions translatable into practise, it would seem a ripe time to expose them, for the world stands very much in need of enlightenment. Sir Isaac Newton once refused to publish the results of certain experiments he had made, saying that the publication might serve to widen the circle of his acquaintance, “a thing I chiefly study to decline.” Our economists do not seem, so far as mere publicity is concerned, to share Sir Isaac’s aloofness; their love of society is so great as sometimes to appear promiscuous; so it must be that a kind of freemasonry among them seals their lips against revealing the prodigious truths of which they are possessed.
I sought, I say, some clue that would lead to a revelation of a principle that must inevitably tend toward, and result in, the periodic destruction of apparent wealth, annihilating in a short time nearly all the product of the industry and thrift of the previous years: and this without the concurrence of war, famine or plague. It can be shown that nations recover with surprising ease from most wars, famines or plagues: what they seem unable to recover from without first tasting the bitterness of slump, is prosperity, or what passes for prosperity. This is in itself perplexing; for, were not some definite toxic factor at work, it should be just the other way. Accumulation should make further accumulation easier; wealth should proceed toward more wealth; and so, barring civil strife within or conquest from without, world without end. But it is not so; therefore there must be a toxic factor.

What is that factor? A little reflection will reveal that it must be debt. If the first visible effect of a panic or depression is the deflation of debt; then, debt must have caused the panic or depression. Indeed, nobody of common sense has ever suggested any other reason. But then the question arises: how can debt, so sweet, so stimulating, so beneficent, so productive of all blessings—if you believe the professors of modern economy—how can debt suddenly change from dove to serpent, from Jekyll to Hyde, and ruin its faithful friends just as they have come to trust and love it?

To this question the professors of political economy murmur something about the “overextension of credit.” Or, if you insist on being vulgar, you say, “too many people in debt. But that hasn’t explained anything. How did too many people get too much in debt? What is “just enough” debt? Who decides what is “enough”? Does anybody decide? Does anybody think about it at all? What is a good loan? What is a bad loan? Why? How do you know? May a loan that seems like a good loan, really be a bad loan? If so, who knows whether it is good or bad, and how does he know? Does he know at first, or find out afterward? What are the economic consequences of any loan? Does either borrower or lender know? Do they care? Does anybody care? What are the social consequences of a public debt? Do we know clearly even the economic consequences of a public debt? What is the effect of debt upon production? upon distribution? upon work habits? upon thrift? upon politics? upon sovereignty? What is the social effect of creditorship upon the individual? What is the effect of both debtorship and creditorship upon morals? upon religion? upon true education? Most important, what is the effect of debt upon contract, that pledge of faith which is the very essence of civilization? Has political economy anything to do with these questions, or hasn’t it? If not, what is political economy, and why is it? If it has, what have the political economists said about these matters?

So, to find out what the masters had said upon this obviously vital subject (for I assure you I was so sanguine of receiving knowledge that I then had not the slightest intention of writing a book), I ransacked the libraries, both in my own country and in Europe. I found nothing—nothing at all. That is, nothing which could cast more than a random beam upon the object of my speculation. Myriads of volumes upon the specific phases of debt, of course: how to get into debt, how to manipulate debt, how to keep books, how to borrow, how to lend’, books upon banking, books upon brokerage, fiscal technique, statistics without end: but of Debt as an Institution—a mechanism which has become so far-reaching and all-powerful that commerce exists alone by its aid; and of the Consequences of Debt—moral, social, economic and political—implicit in the use of such a convention, all was silence! Can you believe it? Incredible, but true.

To arrive at a parallel for such a lack, you must imagine that, concerning the human body, we had a vast literature dealing with physiology, and not a single treatise to discuss what follows upon the performance of the functions of the living organism, Imagine, further, a medical and anatomical science which coolly ignored the possibility of disease as a factor inherent to the use of the organs; regarding it merely as an accident approaching from exterior sources. Assuredly this is difficult to imagine: but here you have, as nearly as analogy can give, the picture of a political economy which ignores the Pathology of Debt.

This struck me as so anomalous and so senseless that I began to wonder why the political economists had so deliberately avoided the matter. I do not yet know: I can only conjecture that they have wished not to give anybody any pain, not excepting themselves. No doubt they think there is enough evil in life without raking more. Mistress Quickly advised Sir John Falstaff, when he cried out upon God, that there was no need to trouble himself with any such thoughts yet.

Yet what could be more obvious than that, in order to understand the giant destructive forces which have been created in human commerce by the introduction of Credit, and by its extension to its present volume, we must assume a pathology of the mechanism and study it assiduously toward a possible measure of control?

This, then, is the terra incognita into which I have stumbled. It was inevitable that, without a map, I should have wandered a good deal. I have had good instruction from the philosophers and moralists, who were greatly terrified of Debt without always knowing why or being able to tell why. The historians have helped me vastly in this pioneering, because, even when the haze was thick and the undergrowth tangled, I could know at least what sort of terrain to look for, under any present conditions. Much of the progress had to be by way of original thinking: and there is this to be said of original thinking, dear friend: it is often more praiseworthy in purpose than accurate in result. Altogether I am sincerely humble in presenting my book: I know enough of the vast extent and complications of the subject to realize that it is merely a foundation for others to build upon.

There are several other things that I should briefly say. In my speculations upon the disease factor of debt, I have assumed, without question, the continuance of what we call the “capitalist system.” If there are any who believe that this kind of economic behavior is soon to be exchanged for something different or better, I have no quarrel with them, and merely say that if they had hurried a bit more, they could have spared me the pains of writing. It goes without saying that, in a communistic or purely socialistic State, debt would not exist. What need would there be for it?

I use the words “capitalist system” because they have a definite meaning to almost everybody. I do think, though, that what we have, and what most human beings seem to adore— though lovers’ quarrels intervene occasionally—is neither essentially capitalistic nor very much of a system. It seems, in its contemporary aspect, rather to be a queer, adaptable and usually workable improvisation, based upon the hope of taking profit through the use of Debt at compound interest. Capital is one thing; capital-at-interest is not quite the same thing, as I hope pages will presently show. Aristotle was very clear about the distinction: I fear the modern economist is not.

It may be said that I have dwelt, in this book, upon the “dark” side of Debt, and omitted to stress and praise its brighter —or may we say sportive—aspect. This is so; but the reason is apparent enough, I should think. The happier phases of Credit, such as they may be, have been sung by so large a chorus, and with such almost religious intensity, that there was no need of my additional voice. Besides, I aimed to treat one subject and one alone, and never to swerve from that path if I could avoid it: The Pathology of Debt. Fully and adequately to deal with that subject is more than enough for one man.

The whole world is, at the moment of writing, bankrupt. There is a fiction of solvency being maintained. How much longer it can be maintained I do not guess, and nobody knows. The world has several times, and perhaps many times, squandered itself into a position where a total deflation of debt was imperative and unavoidable. We may be entering one more such receivership of civilization. It is a curious fact that in all such periods, men and governments persist in behaving, as creditors, as though the world were operating for cash; and as debtors, as though an economy of pure credit sufficed for all purposes. When one such passionate belief encounters another, the result is never very happy.

Finally, this book is not offered in support of any theory; for the assumption of a disease factor in Debt is hardly a theory. It pretends to initiate a fruitful inquiry; no more.

Sincerely ever,
Freeman Tilden.
Warner, New Hampshire
1 April, 1936

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