Mises Daily Articles
Government Money Deserves a "Swift" Abolition
It seems that everywhere we look today, government intrusion into people's lives and its expropriation of their property are on the rise. Thankfully, this trend is not inevitable. Ideology ultimately determines the course of the struggle between liberty and power, and history affords many instances where government coercion was rolled back due to the persuasive efforts of a few individuals. Jonathan Swift was one of the rare individuals to have won such a battle through the persuasiveness of his writing.
Swift, a great English satirist primarily known for his novel Gulliver's Travels, fought a courageous campaign against the imposition of debased coinage in Ireland. In 1722, William Wood, an English ironmonger, procured a patent to coin £108,000 in copper coins to augment the old worn stock. Wood attempted to use his monopoly to pawn off debased coins. He might have been successful, but Swift marshaled his corrosive wit against Wood in a series of seven papers written in 1724 and 1725, known collectively as The Drapier's Letters. Fearing the retribution of men in power, Swift assumed the pseudonym M.B. Drapier, "the learned linen draper." Many of Swift's insights are as relevant today as they were then.
In 1722, it had been many years since new copper farthings had been coined in Ireland, and their scarcity was cause for considerable inconvenience. The Irish Parliament applied to England for leave to coin new ones, but predictably their request was denied. Not only did it afford an occasion for the English to call attention to their political domination of Ireland, but it was also an excellent opportunity for a few Englishmen to shower benefits on themselves by exploiting the Irish. The privilege of collecting the plunder finally settled on William Wood. How, you might ask, did Wood gain these favors? He gained them in the way all such monopolistic privileges are obtained, by cozying up with those in the seat of power. Wood secured the patent by bribing the Duchess of Kendall, the King's mistress, who sold him the patent for £10,000. Swift recounts this little episode with clear public-choice reasoning in sparkling prose:
Perhaps you will wonder how such an ordinary fellow as this Mr. Wood could have so much interest as to get his Majesty's broad seal for so great a sum of bad money to be sent to this poor country…. I will make that matter very plain. We are at a great distance from the king's court, and have nobody there to solicit for us…. But this same Mr. Wood was able to attend constantly for his own interest; he is an Englishman, and had great friends, and it seems knew very well where to give money to those that would speak to others that could speak to the king, and tell a fair story.
Immediately after obtaining his patent, Wood set about doing what every government monopolist naturally seeks to do, fleece the public. People in Swift's time were no strangers to debasement.It was universally considered to be a great evil, as Swift notes: "Neither is anything reckoned more cruel or oppressive in the French government, than their common practice of calling in all their money after they have sunk it very low, and then coining it anew at a much higher value." But even in an age accustomed to these things, Wood was unusually bold. At the time, the metal in the English farthing was worth close to its face value.
But Mr. Wood made his halfpence of such base metal, and so much smaller than the English ones, that the brazier would not give you above a penny of good money for a shilling of his; so that this sum of £108,000 in gold and silver, must be given for trash, that will not be worth eight or nine thousand pounds real value. But this is not the worst; for Mr. Wood, when he pleases, may by stealth send over another £108,000 and buy all our goods for eleven parts in twelve under value.
Swift warned that when an agent has the authority to mint coins without being held accountable, it is a recipe for disaster. In this case,
Mr. Wood will never be at rest, but coin on: so that in some years we shall have at least five times £108,000 of this lumber. Now, the current money of this kingdom is not reckoned to be above four hundred thousand pounds in all; and while there is a silver sixpence left, these bloodsuckers will never be quiet.
By laying forth the obvious pitfalls of Wood's patent, Swift's letters flamed the incensed passions of the Irish populace. The Drapier's Letters were considered such a nuisance that at one point £300 was offered for revealing the identity of the author.
By the end of 1724, the English Privy Council ordered an inquiry into Wood's patent. Finally in 1725, due in no small part to Swift's heroism, the monopoly was overturned, and Wood's coinage was withdrawn. Swift had accomplished a considerable feat for Irish liberty.
This victory was made much easier because the law did not oblige anyone to take Wood's coins without consent. Though this was not for lack of trying, as Wood was "working underhand to force his halfpence upon" them. In considering this fortuitous circumstance, Swift exposed the danger inherent in the government monopoly of the mint:
But your great comfort is, that as his majesty's patent does not oblige you to take this money, so the laws have not given the Crown a power of forcing the subject to take what money the king pleases; for then by the same reason we might be bound to take pebblestones, or cockleshells, or stamped leather for current coin, if ever we should happen to live under an ill prince; who might likewise by the same power make a guinea pass for ten pounds, a shilling for twenty shillings, and so on; by which he would in a short time get all the silver and gold of the kingdom in his own hands, and leave us nothing but brass or leather, what he pleased.
But alas! Alas! It all has come to pass, just as Swift had forewarned. Today we no longer have the comfort of laws preventing the government from forcing us to take whatever money it pleases. All the gold was stolen from the people against their will and piled up in Fort Knox, and unbacked paper trash was given in its place.
Governments in the 20th century were no longer restrained in how much money they could print, and the age of inflation was ushered in. The damage caused by this inflation is incalculable.Even in America the damage is great.By entering into the economy through the credit market, inflation is responsible for economy-wide business cycles. And by using seigniorage to mask the cost of deficit spending, governments are able to fund a vast array of bloated welfare-warfare schemes.
I wish on these schemers the same fate that Swift wished on Wood:
I have heard scholars talk of a man who told the king that he had invented a way to torment people by putting them into a bull of brass with fire under it, but the prince put the projector first into his own brazen bull to make the experiment. This very much resembles the project of Mr. Wood; and the like of this may possibly be Mr. Wood's fate; that the brass he contrived to torment this kingdom with, may prove his own torment, and his destruction at last.
It is too late to boil in their own pot those individuals who were guilty of perpetrating the fraud which has unleashed the devastation of inflation. But at least we can oust the bankers who administer this maniacal monetary regime and the constables who guard it. We must demand our right to use whatever money we wish to, whatever good or commodity individuals free from coercive interference would spontaneously adopt.
Once we have a market supplied money, we can finally burn the paper trash that fuels government plunder and causes macroeconomic fluctuations. It will be our elegy to the tyranny of money theft.
Most people are rationally ignorant of the destructiveness of inflation. But if they really understood, they would be outraged by it. Thus their passions are an untapped powder keg ready to go off. If only we had a man of Swift's eloquence to light the fuse.
The extent to which governments have devalued money throughout history is truly remarkable. As Adam Smith wrote in The Wealth of Nations "For in every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins." See Murray Rothbard's brilliant book What Has Government Done to Our Money for a scathing critique of this government failure.
See J.G. Hülsmann, "The Cultural and Spiritual Legacy of Fiat Inflation."
The amount of inflation in America is staggering. In 1913, the year that the Federal Reserve Act was passed, $100 was worth $2030 in 2006 dollars, which means that the purchasing power of money has been eroded almost twenty fold in a little over 90 years. See www.aier.org/research/col.php.