Wzard of Oz -- Monetary Allegory - The Wizard of Oz is a monetary allegory written in 1890. That is 120 years ago and it is time we woke up! LESSONS FROM THE WIZARD OF OZ Web of Debt - Chapter 1 "The great Oz as spoken! Pay no attention to that man behind the curtain! I am

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The Wizard of Oz is a monetary allegory written in 1890. That is 120 years ago and it is time we woke up!

LESSONS FROM
THE WIZARD OF OZ

Web of Debt - Chapter 1

"The great Oz as spoken! Pay no attention to that man behind the curtain! I am the great and powerful Wizard of Oz!"

In refreshing contrast to the impenetrable writings of economists, the classic fairytale The Wizard of Oz has delighted young and old for over a century. It was first published by L. Frank Baum as The Wonderful Wizard of Oz in 1900. In 1939, it was made into a hit Hollywood movie starring Judy Garland, and later it was made into the popular stage play The Wiz. Few of the millions who have enjoyed this charming tale have suspected that its imagery was drawn from that most obscure and tedious of subjects, banking and finance. Fewer still have suspected that the real-life folk heroes who inspired its plot may have had the answer to the financial crisis facing the country today!

The economic allusions in Baum's tale were first observed in 1964 by a schoolteacher named Henry Littlefield, who called the story "a parable on Populism," referring to the People's Party movement challenging the banking monopoly in the late nineteenth century.1 Other analysts later picked up the theme. Economist Hugh Rockoff, writing in the Journal of Political Economy in 1990, called the story a "monetary allegory."2 Professor Tim Ziaukas, writing in 1998, stated:

"The Wizard of Oz" . . . was written at a time when American society was consumed by the debate over the "financial question," that is, the creation and circulation of money. . . . The characters of "The Wizard of Oz" represented those deeply involved in the debate: the Scarecrow as the farmers, the Tin Woodman as the industrial workers, the Lion as silver advocate William Jennings Bryan and Dorothy as the archetypal American girl.3

The Germans established the national fairytale tradition with Grimm's Fairy Tales, a collection of popular folklore gathered by the Brothers Grimm specifically to reflect German populist traditions and national values.4 Baum's tale did the same thing for the American populist (or people's) tradition. The Wizard of Oz has been called "the first truly American fairytale."5 It was all about people power, manifesting your dreams, finding what you wanted in your own backyard. According to Littlefield, the march of Dorothy and her friends to the Emerald City to petition the Wizard of Oz for help was patterned after the 1894 march from Ohio to Washington of an "Industrial Army" led by Jacob Coxey, urging Congress to return to the Greenback system initiated by Abraham Lincoln. The march of Coxey's Army on Washington began a long tradition of people taking to the streets in peaceful protest when there seemed no other way to voice their appeals. As Lawrence Goodwin, author of The Populist Moment, described the nineteenth century movement to change the money system:

[T]here was once a time in history when people acted. . . . [F]armers were trapped in debt. They were the most oppressed of Americans, they experimented with cooperative purchasing and marketing, they tried to find their own way out of the strangle hold of debt to merchants, but none of this could work if they couldn't get capital. So they had to turn to politics, and they had to organize themselves into a party. . . . [T]he populists didn't just organize a political party, they made a movement. They had picnics and parties and newsletters and classes and courses, and they taught themselves, and they taught each other, and they became a group of people with a sense of purpose, a group of people with courage, a group of people with dignity.6

Like the Populists, Dorothy and her troop discovered that they had the power to solve their own problems and achieve their own dreams. The Scarecrow in search of a brain, the Tin Man in search of a heart, the Lion in search of courage actually had what they wanted all along. When the Wizard's false magic proved powerless, the Wicked Witch was vanquished by a defenseless young girl and her little dog. When the Wizard disappeared in his hot air balloon, the unlettered Scarecrow took over as leader of Oz.

The Wizard of Oz came to embody the American dream and the American national spirit. In the United States, the land of abundance, all you had to do was to realize your potential and manifest it. That was one of the tale's morals, but it also contained a darker one, a message for which its imagery has become a familiar metaphor: that there are invisible puppeteers pulling the strings of the puppets we see on the stage, in a show that is largely illusion.

Money in the Land of Oz

The 1890s were plagued by an economic depression that was nearly as severe as the Great Depression of the 1930s. The farmers lived like serfs to the bankers, having mortgaged their farms, their equipment, and sometimes even the seeds they needed for planting. They were charged so much by a railroad cartel for shipping their products to market that they could have more costs and debts than profits. The farmers were as ignorant as the Scarecrow of banking policies; while in the cities, unemployed factory workers were as frozen as the Tin Woodman from the lack of a free-flowing supply of money to "oil" the wheels of industry. In the early 1890s, unemployment had reached 20 percent. The crime rate soared, families were torn apart, racial tensions boiled. The nation was in chaos. Radical party politics thrived.

In every presidential election between 1872 and 1896, there was a third national party running on a platform of financial reform. Typically organized under the auspices of labor or farmer organizations, these were parties of the people rather than the banks. They included the Populist Party, the Greenback and Greenback Labor Parties, the Labor Reform Party, the Antimonopolist Party, and the Union Labor Party. They advocated expanding the national currency to meet the needs of trade, reform of the banking system, and democratic control of the financial system.7

Money reform advocates today tend to argue that the solution to the country's financial woes is to return to the "gold standard," which required that paper money be backed by a certain weight of gold bullion. But to the farmers and laborers who were suffering under its yoke in the 1890s, the gold standard was the problem. They had been there and done it and knew it didn't work. William Jennings Bryan called the bankers' private gold-based money a "cross of gold." There was simply not enough gold available to finance the needs of an expanding economy. The bankers made loans in notes backed by gold and required repayment in notes backed by gold; but the bankers controlled the gold, and its price was subject to manipulation by speculators. Gold's price had increased over the course of the century, while the prices laborers got for their wares had dropped. People short of gold had to borrow from the bankers, who periodically contracted the money supply by calling in loans and raising interest rates. The result was "tight" money – insufficient money to go around. Like in a game of musical chairs, the people who came up short wound up losing their homes to the banks.

The solution of Jacob Coxey and his Industrial Army of destitute unemployed men was to augment the money supply with government-issued United States Notes. Popularly called "Greenbacks," these federal dollars were first issued by President Lincoln when he was faced with usurious interest rates in the 1860s. Lincoln had foiled the bankers by funding the government with U.S. Notes that did not accrue interest and did not have to be paid back to the banks. The same sort of debt-free paper money had financed a long period of colonial abundance in the eighteenth century, until King George forbade the colonies from issuing their own currency. The money supply had then shrunk, precipitating a depression that led to the American Revolution.

To remedy the tight-money problem that resulted when the Greenbacks were halted after Lincoln's assassination, Coxey proposed that Congress should increase the money supply with a further $500 million in Greenbacks. This new money would be used to redeem the federal debt and to stimulate the economy by putting the unemployed to work on public projects.8 The bankers countered that allowing the government to issue money would be dangerously inflationary. What they failed to reveal was that their own paper banknotes were themselves highly inflationary, since the same gold was "lent" many times over, effectively counterfeiting it; and when the bankers lent their paper money to the government, the government wound up heavily in debt for something it could have created itself. But those facts were buried in confusing rhetoric, and the bankers' "gold standard" won the day.

Continued..........