Book reviews

Citation

Coleman, J. (2000), "Book reviews", European Business Review, Vol. 12 No. 6. https://doi.org/10.1108/ebr.2000.05412fab.005

Book reviews

Book reviews

The Grip of Death

Michael RowbothamJon CarpenterOxford352 pp.ISBN: 1 897766 40 8£15

Creating New Money: A Monetary Reform for the Information Age

James Robertson and John HuberNew Economics FoundationLondon92 pp.ISBN: 1 899407 29 4£7.95

Stop, Think

Paul HellyerChiro MediaCanada242 pp.ISBN: 1 899407 29 4£9.95Distributed by New European Publications

Keywords Banking, Economics

The basic assumption of Michael Rowbotham's book is that most of the money in circulation has come into being not by governments but through loans from banks. The question of debt is the subject that Rowbotham faces head on and he points out (opposite the title page) that "grip of death" is the literal translation of mortgage. Rowbotham argues that there is nothing new about banks creating money through loans and allowing their customers to write cheques. Of course many people would argue that there is no better institution to do this than a bank. What better people than bankers to control our economies?

Rowbotham calls in impressive witnesses to make his case. Sir Arthur Feaverglass's classic study of money, The Pound Sterling, in which he states that 40 per cent of the money stock was created by banks in the eighteenth century, 60 per cent in the nineteenth century and today between 90 and 97 per cent. He also calls in Abraham Lincoln and J.K. Galbraith to substantiate his case. Some of his historical material is interesting in its own right, such as Lincoln's wish to phase out slavery by compensating both farmers and slaves in order to avoid Civil War.

A more modern approach to the same subject is taken by James Robertson and Joseph Huber. They look at the question in the light of modern technological developments. Their thesis is basically simple:

1. 1.

   Central banks should create the amount of new non-cash money (as well as cash) they decide is needed to increase the money supply, by crediting to their governments as public revenue. Governments should then put it in to circulation by spending it.

2. 2.

   It should then become unfeasible and be made illegal for anyone else to create new money denominated in an official currency. Commercial banks will thus be excluded from creating new credit as they do now, and be limited to credit-broking as financial intermediaries.

It would mean, I suppose, that government would get the benefit of the initial introduction of money into use and perhaps render most forms of taxation unnecessary. Certainly there is no doubt that at a time when money is no more than clicks in a computer whirring around the globe, when the euro is revolutionising European monetary systems, the question of the initial creation of money urgently needs considering.

The last of the three books, Paul Hellyer's Stop, Think, the work of a businessman and former Deputy Prime Minister of Canada, brings us closer to the political significance of the creation of money. In his book, Hellyer argues that a world crash is in prospect unless we act quickly, and the banking system, which has given us 45 recessions and depressions in the last 200 years, is fundamentally altered in a way that would result in a massive reduction in world debt.

All these books suggest that banks are making massive "hidden" profits. Is it true? Some years ago I received an interesting paper (now lost) on the ownership of the major multinationals of the world. It argued that small investors had no real say in the major developments in global industry because the financial institutions held slightly over 60 per cent of the shares of all these corporations, which gave them controlling interest. If correct, of course, the question it raises is how the financial institutions have been able to buy such a huge amount of the world's industry?

The nature of money and of debt is surely a subject that must come under rigorous scrutiny as we proceed into the electronic twenty-first century.

John Coleman