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( German for "free economy") is an economic
idea In common usage and in philosophy, ideas are the results of thought. Also in philosophy, ideas can also be mental representational images of some object. Many philosophers have considered ideas to be a fundamental ontological category of bein ...
founded by
Silvio Gesell Johann Silvio Gesell (; 17 March 1862 – 11 March 1930) was a German-Argentine economist, merchant, and the founder of Freiwirtschaft, an economic model for market socialism. In 1900 he founded the magazine ''Geld-und Bodenreform'' (''Moneta ...
in 1916. He called it ' (natural economic order). In 1932, a group of Swiss businessmen used his ideas to found the WIR Bank (WIR).


Structure

Freiwirtschaft consists of three central aspects, usually summed up as the Three Fs: * ' (free money) ** All money is issued for a ''limited'' period by ''constant'' value (neither
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reducti ...
, nor
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflati ...
). ** Long-term saving requires investment in bonds or
stock In finance, stock (also capital stock) consists of all the Share (finance), shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which owners ...
s. * ' (free land) ** All
land Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various isl ...
is commonly owned or else the property of public institutions and can only be rented from the community or from government, respectively, not purchased (''see also
Georgism Georgism, also called in modern times Geoism, and known historically as the single tax movement, is an economic ideology holding that, although people should own the value they produce themselves, the economic rent derived from land—including ...
''). * ' (free trade)


History

The basic economic ideas of Freiwirtschaft were published in 1890 by the Hungarian-Austrian economist Theodor Hertzka in his novel ''Freiland - ein soziales Zukunftsbild'' (''Freeland - A Social Anticipation'').


Flaws of the monetary system

Freiwirtschaft claims that current monetary systems are flawed. In mainstream economics, prices convey information. For example, dropping prices on a product mean that there is less demand or more supply of that product. This leads to a buyer buying more, or a seller/producer starting to sell/produce something else, thereby reducing the supply of that product. As a reaction, assuming constant desirability, the price of the product rises again. So, the price, together with the market participants, builds up a
feedback Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause-and-effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handled ...
loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is called ''self-stabilizing''. The key error of the current system, according to Gesell, is the ill-transported information in the price. Money is nothing but claim for goods and services, usable in the economies that accept money in exchange for the former. In a weak economy, money is worth less in goods. But instead of an
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reducti ...
, the result is a
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflati ...
as described above, and less money can now buy the same goods. This feedback loop is ''self-destabilizing'', according to the Freiwirtschaft theory.Norbert Rost
Eine experimentelle Überprüfung der Aussagen der Freiwirtschaftslehre
(An experimental check of the statements of the Freiwirtschaft) (diploma thesis, Dresden, 2003), p. 25ff..


References


Sources

* Helmut Creutz, ''The Money Syndrome – Towards a Market Economy Free from Crises'', Upfront Publishing 2010. * Günter Bartsch, ''Die NWO-Bewegung Silvio Gesells – Geschichtlicher Grundriß 1891-1992/93''. Gauke, Lütjenburg 1994. * Knulp Goeke, ''Die verteilungspolitische Problematik der Freiwirtschaftslehre''. Cologne 1961. * Johannes Heinrichs, ''Sprung aus dem Teufelskreis. Sozialethische Wirtschaftstheorie'' Vol. I, Munich 2005. * Hans-Joachim Werner, ''Geschichte der Freiwirtschaftsbewegung. 100 Jahre Kampf für eine Marktwirtschaft ohne Kapitalismus''. Waxmann, Münster 1990.


External links




Materialien zur Geld-, Zins- und Schuldenproblematik (in German, partly English)

Fairconomy (in German, partly English)
{{Authority control Local currencies Economic ideologies Schools of economic thought Monetary reform Left-libertarianism