For Us, The Living

by Robert Heinlein

  Perry blushed to his hair roots.

  "No, no, son. No cause for embarrassment. I invaded your private sphere because I am your physician and have occasion to. Olga is a fine woman, finer than you now imagine. Your association with her is bound to do you good in every way. I am happy to see it." Master Hedrick yawned and glanced at the chronometer. "If I don't turn in fairly soon I shall need a stimulant in the morning to attend properly to my duties. I've just one more thing to say; I want you to make a list of the things you expected to protect or obtain by driving this other young buck away from Diana. Be as explicit as possible and mind how you use your terms. Take as long as necessary and let me see the result. By the way, when do you expect her back?"

  "Tomorrow, probably. She just ran up to Chicago for a special broadcast."

  "That's good. There's a rather interesting job over in surgery tomorrow that she would like to see. Diana's mother is coming here to perform a dexter cerebrectomy. You might drop in too, if such things interest you. Accident case. Very sad. Young rocket pilot."

  "Thank you, sir. I think I will if Diana is back."

  Hedrick arose and knocked out his pipe.

  "Just a minute, sir. Doesn't anyone maintain a lifetime monogamy anymore?"

  Hedrick desisted from tickling Captain Kidd's belly and considered this. "Very possibly. There are a lot of possibilities in a hundred and ninety million people. Seems unlikely though. You might try your hand at working out the equation of probability involved, if it amuses you. I think you'll find enough data on file over in the Archives to give it a try. Well, good night."

  "Good night, sir."

  IX

  "Would have come to see you sooner, but the problem presented unusual features that required study." The speaker was a little stoop-shouldered man with a bulging bald head. He addressed Perry over a glass of sherry in the latter's cottage. "When Master Hedrick told me that he wanted me to explain the theory and practice of our present economic system to a man with the point of view of America 1939,Ithought that he was in need of some of his own treatment. But when he elucidated I realized that I was confronted with the most startling problem in pedagogy I had ever undertaken. I wasn't able to undertake it without preparation. I had to search out and read much of the literature of your period and then spend several days in meditation in order to try to feel the period, understand the point of view, evaluations, and the fallacies of your time."

  Perry shifted uneasily in his chair. "I didn't intend to cause you so much trouble, Master Davis."

  "No trouble at all. You have done me a service. This is a most fascinating approach to the subject that has been my principle interest. By preparing to explain it to you, I understand it better myself. First tell me what you know of the present system."

  "Well, in the first place it has retained private enterprise in industry. There I suppose it's a form of capitalism."

  Davis nodded. "An inadequate word, but let it stand."

  Perry continued, "However, although production, and so forth, is private enterprise, each citizen receives a check for money, or what amounts to the same thing, a credit to each account each month, from the government. He gets this free. The money so received is enough to provide the necessities of life for an adult, or to provide everything that a child needs for its care and development. Everybody gets these checks—man, woman, and child. Nevertheless, practically everyone works pretty regularly and most people have incomes from three or four times to a dozen or more times the income they receive from the government. There is no such thing as unemployment because there is always a demand for more production. Consequently wages are high. However prices are low, and to make the situation even more confusing, merchants regularly sell goods at less than cost, and the government pays them the difference. That is the general set up, if I understand what I have been told. It sounds impossible, an Alice-in-Wonderland business, filled with contradictions that deny common sense. It disturbs me. It challenges my reason. I'd be less annoyed at a perpetual motion machine."

  Davis smiled. "I appreciate your difficulty. It is necessary first to clean your mind of a number of the errors, superstitions, and half truths that went by the name of 'economics' in your day. Consider for a moment the physical facts of the situation that you see around you. Disregard the money aspect for a moment and think in terms of goods, people, production and consumption. What then is the situation?"

  "Well—I see that everyone has a pretty high standard of living, they live in good houses, and eat plenty of good food, and they have plenty of the comforts of life. That's the consumption side. On the production side I see factories and farms, and so forth, that produce at a high rate with lots of labor saving machinery. Nobody has to work very hard unless he really wants to. Anybody that does gets a big return for it in terms of goods and services."

  "Do you see any difficulty in the picture now—still leaving money out of it?"

  "Well, no. The physical wealth is there and the work done is enough to turn it into a high standard of living."

  "Now describe 1939 in terms of physical economy—again leaving out money. Be careful not to use any term that implies money, such as wages, debt, price, and so forth."

  Perry grinned. "You're preparing a trap for me. I can see it coming."

  Davis was serious. "It's not a trap. It's a necessary expedient to lead your mind around its ingrown economic errors and enable it to think correctly. Go ahead and describe it."

  "Okay. The country was just as rich in natural resources—richer as a matter of fact. We had plenty of factories to fabricate raw materials, but lots of them were shut down. Our farms produced liberally, plenty of good food, enough to feed everybody well. We had the technical knowledge, tools and materials to produce an abundance of luxuries and comforts, and in fact we did, for our retail stores were stocked to the ceilings with every sort of desirable article. That is the production side. On the consumption side about half of the population had less to eat than it needed and that of poor quality and wrong variety. In other respects they were worse off, living in houses that were fire traps, and disease breeders, frequently without running water and with primitive heating systems. Most of them had no medical or dental attention and were rotten with disease. My dentist once told me that four-fifths of the population never received dental care in their lives. The next third or so of the population just barely got by. They lived in fair comfort but in the fear of slipping back into squalor. A small group at the top had more than they needed of everything. While I'm speaking of consumption I suppose I should mention that we made a practice of destroying annually a large part of our production, especially food. Some people considered this wasteful, and we devised means to produce less rather than destroy part of what we had produced. But it came to the same thing."

  "You speak of a small group that had too much. Do you know what the result would have been if everybody had consumed share and share alike?"

  "As a matter of fact I do. I used to worry about that and worked it out on my slide rule in 1938 from some figures quoted in Time magazine. That was a news sheet published in those days. The average national income came to about one hundred and thirty dollars per month per family, which wouldn't have been a very high standard of living. But the same figures showed that only thirty per cent of the population had that much or more, seventy per cent had less. I have to mention money at this point, but I'll translate it into goods. A family at that standard of living would live in a cheap house, drive a second hand car, set a decent but not fancy table, have a radio, and go to the movies occasionally. But they would have no reserves, and sickness, accident, or the loss of a job would land them almost overnight in squalor."

  "Then—still speaking in physical terms—was this average standard of living the best the country was capable of, by and large?"

  "Oh no. Not nearly. The country was able to produce at least twice as much as was actually produced. Some authorities said three times or more. But anyone could see by looki
ng around him that much more could have been produced. For one thing at least ten million people were out of work."

  "Very well, then. You have described two different economic systems in terms of the physical realities involved. Now which one of them denies common sense, which one challenges your reason?"

  Perry smiled. "You've sprung your trap, just as I anticipated. The 1939 system is the ridiculous one, certainly—when you look at it that way. But that still doesn't explain your cock-eyed financial arrangements."

  "The paradoxes you appeared to find arise from flaws in your training. They have no reality. I am about to state an axiom: Anything which is physically possible can be made financially possible, if the people of a state desire it."

  "That sounds good, but is it true?"

  "Yes, if the people of the state understand finance. Tell me, what is money?"

  "Money—money is a lot of things. It is a medium of exchange, based on some precious metal, usually gold. It is also a commodity, bought and sold, and rented out for interest. And it's capital for industry."

  "Which one of those things is it?"

  "Well—when you come right down to it, I guess money is gold."

  "That's what J.P. Morgan thought, at least he told a Senate committee that in 1912. I wonder whether he was lying or deluded. Try this definition: 'Money is anything which can always be swapped for goods, or services.' I believe that you will find that to be the only characteristic common to all money, and common to nothing else. How much money does a country need?"

  "How can anybody answer that question?"

  "Apparently nobody tried to before the present economic regime. Money was expanded and contracted in a most senseless fashion. The panic of 1907 for example was produced by a deliberate contraction of money. But the answer to the question is simple, and arises from the nature or purpose of money as we defined it. A country needs enough money to enable its citizens to perform all desired exchanges of goods and services. Your 1939 system did not accomplish this; our 2086 system does."

  "But look—there was plenty of money in 1939. That doesn't make sense."

  "Haven't you just told me that in 1939 there were millions of people who needed things they couldn't buy? And weren't there merchants who had all these things and wanted to sell them very badly, yet couldn't sell them? Wouldn't all this have been very different and vastly improved if the people in dire want had had that money in their pockets to buy from the merchants who had to sell or go bankrupt? Isn't that a shortage of money?"

  "Yes, of course. But where are you leading me?"

  "Patience. In 2086 the government gives money to the people to do that necessary buying."

  "Yes, I know. Master Cathcart told me that the government got this money off the printing press or out of the inkwell—in other words fiat money. How can it be worth anything?"

  "We decided that money was anything which always could be swapped for goods and services. That implies that the person who accepts it believes that he can do likewise. Therefore money is money as long as everybody believes it is money. There is a touchstone which will enable you to determine whether or not people will believe in money: Can you use it to pay taxes? Will the government give you something for it of value, postal service for example? If the people collectively as a state will accept it, then so will the individuals. Our 'fiat' money qualifies. The United States will accept it in exchange for things of value. That is no longer true of your gold. It can't be used for taxes. You may or may not be able to swap it off, it isn't money, and you may be stuck with it. As a matter of fact all United States currency has been 'fiat' currency ever since the United States suspended gold payments in 1933. Since that time the gold standard has been simply a fiction convenient in party politics. However I believe that your principle difficulty is in understanding why it is necessary for the government to create new money and give it away to the consuming public. In order to understand that, it is first necessary to understand the mathematics of the relationship between prices and purchasing power.

  "Before we go into the mathematical theory, let me state the fact which we are to explain: In1939, and before, the sum total of the purchasing power of the public was always less than the total price of the goods offered for sale. This is just another way of saying that 'overproduction', with its attendant unemployment, poverty, labor warfare, and so forth, was a chronic condition. As a matter of fact it is not necessary to understand the mathematics behind it as long as you observe the fact, just as it isn't necessary to know how a house caught fire in order to see that a house is on fire and to realize that something must be done about it. I stated that 'over-production' was chronic and that it is identically the same thing as saying that the public as a whole didn't have the money with which to buy the goods offered for sale. You will certainly agree that such was the condition from 1929 to 1939. It was generally recognized and the government even went so far as to partially make up the spread between prices and income by direct relief—giving money away—and wages for made work—giving money away with a moralistic sugar coating. This would have been sensible had the government created the money by fiat. Instead they borrowed it from the banks who created it by fiat. This was silly as it piled up a national debt to be reckoned with in the future and the money wasn't one whit sounder under the fiat of the banks than it would have been by government fiat. For please understand that the money lent the government by the banks to provide relief did not come into existence until it was borrowed. The bankers took it out of an empty vault—they fished it out of the inkwell. This may be hard to believe but it is the literal truth. Every time a bank loaned money in those days it created it. Of course President Holmes would successfully reclaim this practice for the government decades later, but at this time it was entirely imprudent.

  "But to return to 'over-production'. Before 1929 in the period after the World War until the market crash, the spread between production and consumption was absorbed in several ways; an enormous increase in private credit or debt especially in the development of installment buying, exploitation of foreign fields particularly in Central and South America—which means to give away goods and get engraved paper in return, which later turns out to be worthless; and in losses suffered by practically all farmers and many businessmen. You see, a large percentage of businesses failed even in boom times in which case their inventories were sold below cost.

  "The condition in the World War years is simple to understand. During war, production goes at maximum speed for the war machine and burns up the excess. Of course an enormous load of debt is created which must someday be cancelled in some fashion. Before the World War there were many years in which the pattern was similar either to the boom twenties or to the depression thirties. In either case production always ran ahead of consumption and was disposed of in the usual ways; by the creation of debt, by destruction of price values through bankruptcy, by sending more goods out of the country than were taken in, or by outright destruction of goods as in war, or, as was done in peace time, by crop destruction.

  "The case in which more goods are shipped out each year than are imported deserves special mention. For many years this was regarded as the ideal economic condition although any child can see the absurdity of it, but it was called by all sorts of fancy names; 'Favorable Gold Balance', 'Favorable Trade Balance', 'The American Plan', 'Cornerstone of American Prosperity'. It was taught in the public schools as a natural law."

  "Yes," mused Perry, "I remember being taught that in grammar school. My geography book devoted a whole section to telling how necessary it was."

  "As a matter of fact it was as vicious as it was silly. Each nation tried to sell more than it bought, and this was the basic cause of every war in modern times. The stupidity of the idea should have been obvious, but the nature of the financing system made it inevitable. Since production always exceeded consumption by a wide margin throughout this period,* [*The reader need not accept this without proof. Fortunately the records of the p
eriod are available in the Washington Archives. See statistics of the Department of Commerce, et al., for those years. The Author] it was necessary for a nation to get rid of its excess as best it could or suffer severe economic upset at home. Many were the devices to promote this, for example, the 'protective' tariff and the subsidizing of the merchant marine.

  "There was only one period in which this peculiar financial fallacy was suited to the needs of the country, and that was in the days of the frontier. The system created bankruptcy and poverty, and the victims moved west and developed the country. It is customary to speak of population pressure as causing the movement west, but that is true only in a limited sense. The east was never too crowded in the pioneer days to support its population insofar as land and raw materials were concerned, but it already had a financial system which automatically created a spread between purchasing power and production, and thereby automatically created an unemployed class, which moved west with the next wagon train to rehabilitate itself in a simpler economy. Oh yes, we had an unemployed class in Andrew Jackson's day, but we called them pioneers!

  "So much for the simple fact that in your 1939 economic system over-production or under-consumption or a shortage of purchasing power was a chronic condition. Now let us examine the mathematical nature of purchasing power to discover why this was so. In so doing we shall discover the possible solutions and select the one we like. You see I've done this problem before and can show off how clever I am. You know about Little Jack Horner? I've always suspected that he knew where the plum was before he stuck in his thumb." A grin split Davis' saturnine visage and made him look like a little bald-headed gnome.