5. HOW FREE-MONEY WILL BE JUDGED
A. The Shopkeeper
The coming of Free-Money has made notable changes in my business. In the first place my customers have taken to paying cash, because it is to their immediate advantage to pay promptly, and because they are paid cash themselves. In the second place the sale of goods in small quantities has ceased, I no longer sell goods by pennyworths. Customers were formerly loath to part with their money, because the money did not compel them to pass it on; because they received interest; because they had money in the savings bank; because it was more convenient to have money in the house than goods; and finally because nobody was ever sure when he would receive the money owing to him. The circulation of money was irregular and payments were so uncertain that everyone except those in receipt of a fixed income was forced to keep some money in reserve. And this reserve was formed by purchasing whenever possible on credit and by purchasing only necessities for immediate consumption. Instead of a pound customers bought an ounce, instead of a sack, a pound. It never occurred to anyone to lay in provisions or to provide a store-room when planning a new house. The only possible kind of store was a store of money. A modern house had many rooms for special purposes such as a darkroom, a carpet-room, a box-room, etc., but never a room for provisions.
All this has now changed. The new money constantly reminds men of their duties as debtors, and they are eager to pay, as they are paid, promptly. Money is now compelled to circulate, so its circulation is steady and uninterrupted. It can no longer be arrested by rumours. Regular circulation produces a regular turnover of goods, and as everyone, to avoid loss, is anxious to pay at once for what he has bought, the influx of money into my till has also become regular. We shopkeepers are able to rely on this regular influx of money and are therefore no longer forced to keep a reserve of money; quite apart from the fact that reserves of money are now impossible, since they depreciate. Instead of hoarding money, people now lay in stores; they prefer possession of goods to possession of cash, just as, for the same reason, they prefer paying cash to buying on credit. Instead of minute quantities, the public now buys large amounts of goods in their original packing; instead of a gallon, a barrel; instead of a yard, a roll; instead of a pound, a sack.
From this it might be imagined that we retailers are revelling in the new situation but that, unfortunately, is not so. Luckily for myself I watched developments closely and was able to adapt my business to the changed conditions. For my former retail prices I have substituted wholesale prices, and have in this way managed not only to retain, but greatly to increase the number of my customers. But other shopkeepers who had not the same foresight have been forced to close their shops. Where there were ten shops formerly there is now only one which, in spite of its tenfold increase of turnover, requires less labour to run. The rent of my shop has already been reduced by 90%, because so many shops have been vacated and are being converted into flats. But in spite of a minimum rent and a tenfold increase of turnover my profits are far from having increased proportionately, since other shopkeepers, owing to the general simplification of commerce, have also been forced to reduce their profits. Thus instead of an average profit of 25% I now charge about 1% commission. As I deliver orders in the original packages and am paid cash, a small margin of profit gin suffices. No book-keeping, no bills, no losses! And in spite of the tenfold increase of turnover, my warehouse has not been enlarged. My customers have agreed to take regular supplies which are delivered direct from the railway station. Shopkeeping has developed into a mere consignment business.
My fellow retailers who have been forced to close their shops are, I admit, to be pitied, especially the older ones who are past learning another trade. As their impoverishment has been caused by the introduction of Free-Money, that is, by State-interference, they ought in justice to be compensated by a State pension. And the State is well able to pay this compensation since the disappearance of these middlemen and the consequent cheapening of all commodities has greatly increased the tax-paying capacity of the population. On a former occasion the State felt itself bound to protect landlords against a fall of rent by introducing a duty on wheat, so compensation would seem fully justified in the present case.
I must admit that shopkeeping is enormously simplified by Free-Money. Something of the kind was bound to happen. Neither small retail selling, with the tremendous cost it involved, nor the misuse of credit sales could have continued indefinitely. It was an intolerable abuse that the retail sale of daily necessities should add 25% to their price at a time when labour was forced to struggle hard for a 5 % increase of wages.
Switzerland, with 3,000,000 inhabitants, in 1900 employed 26,837 commercial travellers who paid an aggregate of 320,000 francs for licences. Even if we put their daily expenses at only 5 francs per head, commercial travellers cost Switzerland 48,977,525 francs annually.
In Germany there are 45,000 commercial travellers permanently on the road. (In Switzerland this business is largely carried on as a subsidiary occupation; hence the comparatively large number of travellers and my low estimate of 5 francs a day for expenses). It has been calculated that each of these 45,000 commercial travellers costs 14 marks a day (salary, travelling expenses, hotel bills) and this is certainly not an over-estimate. That amounts to 600,000 marks a day or 218 million marks a year. To this other travelling expenses must be added. We can say that two-thirds of all travelling is travelling on business, and that two-thirds of the hotels in existence exist solely for the service of business travellers.
It was predicted that the introduction of Free-Money would render buyers more amenable, and I observe that their behaviour has already been sensibly modified. Last Saturday a customer who wanted a sewing-machine kept me talking for an hour, but the man seemed unable to make up his mind and kept discovering imaginary defects in my good machine - until I reminded him of the imminent close of the week and the necessity of stamping his currency notes. That worked like a charm, the fortress of his indecision came tumbling down. He looked at his watch, counted his money and calculated that if he delayed any longer he would lose a penny. Forthwith his doubts were resolved, he paid and went off happy. I lost the penny, but the time gained was worth a thousand times as much.
Next a wealthy customer bought some goods but said he had forgotten his purse and asked me to charge the amount to his account. Upon my remarking that as it was Saturday it would pay him to fetch the money and thus avoid the depreciation, he thanked me for my attention, went home, and within a few minutes I had received the money. This enabled me to pay a craftsman who happened to deliver some goods at the same time. Omission to pay ready money would in this case have been simply a piece of indolence on the part of my customer, and this indolence would have prevented me from paying the craftsman. How much labour, risk and worry are saved by Free-Money ! I now employ only one book-keeper instead of ten. It is remarkable that the great problem of cash payment has been solved, as it were accidentally, by the money reform. It was not poverty that kept buyers from paying cash, but self-interest, and immediately any advantage was to be gained by paying cash, cash payment became general. It is well known that under the old system the merchant was not paid more promptly by the rich than by the poor, the reason for the delay being that during the term of respite the debtor was the recipient of interest.
About the depreciation itself I have no reason to complain. Personally, as a merchant, I should welcome an increase of the rate of depreciation from 5% to 10% a year, for that would make buyers still more amenable and book entries would cease entirely, so I could dismiss my last book-keeper. I now see that the more despised money is, the more highly esteemed are goods and their makers, and the simpler is commerce. Workers can be respected only in a country where money is not superior to them and their products. This desirable result, though not quite attained by the present rate would certainly be realised by a rate of depreciation of 10%, so possibly the rate may be raised in favour of the workers.
And what is even 10% on my average cash balance of $1000 ? A hundred dollars a year! A mere trifle, compared to my other expenses. I can moreover contrive to reduce this amount considerably by getting rid of my money still more speedily, that is, by paying not only cash but in advance.
To pay in advance may seem at first sight a ridiculous proposal, but it is really only an inversion of the former custom, when tie goods had to make advances, money following. Money now makes the advances and the goods follow. Pre-payment binds the debtor to supply goods and work, things at his immediate disposal; post-payment obliged him to supply money, a thing he can only obtain indirectly. It is therefore more advantageous and safer for both parties when the money precedes and the goods follow, than vice versa, as formerly.
Payment in advance is all that is needed to satisfy craftsmen and to provide them with the money necessary for carrying on their business. If craftsmen were not forced to deliver their product on credit, they could successfully compete with the trusts.
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