Content:
Stamp Scrip (by Irving Fisher, 1933)
CHAPTER V
THE SUDDEN SPREAD OF "SCRIP" IN THE UNITED STATES
Oh the whole the American experience with Stamp Scrip is so young that
Schwanenkirchen and Woergl are still the leading cases; but some lessons may
even now be learned from our own experience. Twenty or more towns are embarked
on the plan in one form or another, and many more appear to be in line,
including several large cities.
I shall glance over the high lights of this
brief experience.
HAWARDEN, IOWA
The originator of Stamp Scrip in America was Charles Zylstra of Hawarden,
Iowa. This is a town of 3000 inhabitants. Its finances were in good shape, but
there were plenty of workless men and the usual number of boarders. So, in
October 1932, upon petition, the town decided to issue $300 in Stamp Scrip of
$1.00 denomination. The sum was to be used principally for a town road to be
built by otherwise workless men.
The scrip is redeemable, but there is no
advance redemption fund. The stamps alone are the guaranty, and they are sold by
the town at 3 cents per dollar of scrip, which is redeemable whenever 36 stamps
(aggregating $1.08) have been affixed. There is no set period, however, for
affixing the stamps. The agreement is merely that one stamp is to be affixed
with each transfer of the scrip, so that the redemption date is indeterminate.
The plan was backed by most of the merchants and by one bank and of course
by the otherwise workless men. These agreed to take $1.00 of scrip to 6o cents
of cash in their pay envelopes.
At first, the machinery creaked a little,
some people refused the scrip. But now, I understand, all is working smoothly,
and a new issue of $1000 has been authorized.
But the omission from the
Hawarden plan of the set dates for stamping was, I think, ill-advised. It would
naturally weaken the speed motive and might even reverse it, since it costs 3
cents to transfer the scrip instead of costing 3 cents not to transfer it! Also
the indeterminateness of the date affords a loophole for collusion at the time
of transfer, since both parties to a given transaction may agree to omit the
stamp altogether. Neither party has any motive for checking the other. And
Hawarden has become the precedent, in this respect, for other American towns
which are taking up the Stamp Scrip idea.
EVANSTON, ILLINOIS
In Evanston, Illinois, it was a merchants' association that inaugurated the
Stamp Scrip. They inscribed it with a new word: "Eirma." This is composed of the
initials of the organization name: "Evanston Independent Retail Merchants
Association."
In this long title, the word "Independent" expresses the
motive for the scrip; for what the merchants meant to be independent of was the
shopping in Chicago instead of Evanston and at the chain stores which had
invaded their territory. They thought they could, by an appeal to town loyalty,
prevent the scrip from circulating among their rivals. Accordingly, after
getting a sufficient number of consents, they printed $5000 worth of "Eirma" and
"sold" it to the members according to their respective requirements - for paying
their employees and dealing with one another. In other words, the local members
put up a guaranty fund of $5000 which was held in escrow by a bank. Fifty
stamps, at 2 cents, retired the scrip, which was to he redeemed by the "Eirma"
organization.
In this instance the banks in general did not cooperate. The
bankers' motive of loyalty to a municipal enterprise was lacking. Neither did
the town offer to receive the scrip for tax payments. Nevertheless the town lent
its moral support, as the result of a very ingenious bid which was made by the
Eirma organization. It so happened that the town's own finances were in such
poor shape that it had been obliged to defray some of its expenses by means of
"tax anticipation warrants," later redeemable by the town in cash. So the Eirma
organization agreed to buy these warrants with the cash proceeds of the stamps
as fast as these should be sold.(1) Thus, when the redemption date should
arrive, for the Eirma the redemption would have to be effected with the initial
guarantee fund, not with the proceeds of the stamps. This would leave the tax
anticipation warrants still in the Eirma treasury for distribution to the
members according to their purchases of stamps. The net result, therefore, of
the Eirma dollars amounted to a purchase on the instalment plan of
tax-anticipation-warrants, by the members of the Eirma Association.
But in
Evanston there crops out the first unfortunate result of copying the Hawarden
precedent (of making the stamps affixable, not at set intervals, but with each
transaction). Evanston is a larger place than Hawarden, so that it is not so
easy in Evanston to detect the small disloyalties of the citizens. Accordingly
the chain stores made a flank attack on the local merchants by agreeing with
their patrons to receive the scrip, without stamps, provided the patrons would
receive them back without stamps. Therefore, at last advices, the stamps were
not selling as they should.
The Eirma organization now concedes the
superiority of dated scrip, and would like to pass the whole enterprise over to
the municipality.
RUSSELL, KANSAS (2)
Russell, Kansas, has a population of 2000. On December 21, 1932, the
municipality issued (3) $300 in scrip, exclusively in a 50-cent denomination.
The stamps are 1 cent each; and in spite of the fact that they are attachable
only with each transaction, a check-up seems to show an average turnover of once
every three days. The plan has helped in the clearing up of debts among the
local merchants; but the observers regard it as only partially successful, so
far as concerns the use of the scrip in buying produce from farmers and in
hiring extra labor. It is suggested that not enough care was taken in pledging
the cooperation of the community beforehand.
This town (Russell) supplies
some interesting figures as to the purchase of stamps:
51 per cent are bought by labor and general population
18 1/3 per cent by
grocers
17 1/3 per cent by utilities (gas, water, light, telephone)
6
2/3 per cent by auto supply dealers (gas, oil, repairs)
5 2/3 per cent by
dealers in clothing and housefurnishings
ROCK RAPIDS, IOWA (4)
The town issued $250 of scrip in exclusively 50-cent denominations,
redeemable with 54 stamps, costing 1 cent each. The purpose is to help the
unemployed. People are reluctant to take the scrip from the merchants, but the
turnover seems to be once every four days.
This scrip is foldable, and the
stamps are attached inside.
ALBIA, IOWA (5)
The town issued $401.50 in a 50-cent denomination, redeemable by 54 stamps, 1
cent each, affixed with each transaction. The entire group of business and
professional men are back of the plan, and there are no difficulties. It is said
that useful work has been done for the city which would have been impossible
without the scrip.
GRANITE FALLS, MINNESOTA (6)
Here there are 1800 inhabitants. The first issue of scrip was $1000; and $500
more are, at this writing, soon to be issued. The denominations are 25 cents, 50
cents and $1.00, and the stamps 1 cent, 2 cents and 4 cents respectively,
attachable with each transaction. In the first one and a half months (the last
information), no scrip had come in for redemption. The scrip has been used to
help 30 families by giving work to the men at 30 cents an hour. The work is the
removing of rocks from the streets.
NEVADA, IOWA (7)
This town issued $300 of the Hawarden type of scrip including the 3 cent
stamp. The plan has worked well, and a second issue is, at this writing, being
considered. One new feature here is that the city clerk acts as a clearing
house: he takes scrip from merchants who cannot use it and passes it on to
others who can.
PELLA, IOWA (8)
There are 3600 inhabitants. The scrip issue was by the Chamber of Commerce
and was $500, - Hawarden type. The city handled one half of the issue and the
Chamber, the other half. Some unemployed received work on projects which could
not otherwise have been accomplished. The scrip is said, however, not to help
the unemployed more than once. Nor has it stimulated business. The business men
complain, too, that they bear all the burden of stamping, and that the general
public refuses to receive the scrip in change over the counter. For the sake of
the unemployed this town would like to issue more, but it hesitates, largely
because the circulation seems to be limited to the business men and seems to
clog their tills.
MANGUM, OKLAHOMA (9)
The town, in January 1933;, issued $500 in a $1.00 denomination, to bear
fifty 2-cent stamps. It is used for labor on city projects at $2.00 a day, not
more than two days per week per man. The scrip has thus far proved satisfactory.
ELDORA, IOWA (10)
The town issued $300 of the Hawarden type of scrip. It circulates slowly and
as a business stimulator is not considered of "much if any value," and may he
called successful only in so far as it have $300 of immediate relief to the
unemployed.
JASPER, MINNESOTA
This is a village of 900 inhabitants. It issued $150 of scrip in 25-cent,
50-cent and $1.00 denominations. Redemption of the $1.00 scrip takes thirty-six
3-cent stamps ($1.08). Its purpose is to dive work to the unemployed at 25 cents
an hour, 6 hours per day and not more than two days per week per man.
MERCED AND ANAHEIM, CALIFORNIA
In these towns scrip was issued in the $1.00 denomination, with 4-cent stamps
affixable at each transaction. In both places the plan had to be abandoned: in
Merced, for lack of enthusiasm; in Anaheim, because of a substantial loss.
LEXINGTON, NEBRASKA. (11)
The town has prepared $500 of the Hawarden, or dateless, type of scrip in a
$1.00 denomination, of which $325 was issued (about January 15). In a month,
only $35 worth of stamps had been sold. There is, perhaps, insufficient
diversity of occupation, and the scrip (after hiring labor) tends to clog in the
hands of three or four merchants. "The value, after the initial transactions"
seems "quite problematical."
ENID, OKLAHOMA (12)
On January 16, 1933, the Merchants Association issued 1700 one-dollar "Trade
Checks" with dateless stamps. After one month, the Association reports: "We
regard the plan as successful thus far, as the unemployed are eager to work for
this kind of money, and our business men are cooperating almost 100 per cent . .
. . We do find it necessary to stress the necessity for each business man to
distribute the checks he receives widely by paying a few on local bills, giving
his employees a few on their salary, and using them himself for personal
expenditures, rather than unloading them all on one concern at once.
"We
have had no trouble in getting the merchants to affix the stamps.
"We find
that the checks circulate not only among the merchants, but individuals accept
them, buy stamps from the merchants and pass them on; they have been used to pay
insurance premiums to local agents, rents, etc.
"One of our banks subscribed
$50 toward the guaranty fund which we have behind the checks, another accepted
ten of the checks in part payment for a month's rent by a tenant of an office in
their building, and the other bank has expressed no opposition."
KNOXVILLE, TENNESSEE (13)
Tax anticipation warrants are themselves a sort of scrip; and the experience
of Knoxville in the use of such warrants is instructive. The city, being unable
to find cash for both pay roll and bond payments, began, on June 14, 1932, to
use these tax warrants for the pay roll.
To circulate fast, any medium
requires a receiving motive on the part of the recipient, and a transmitting
motive, on the part of the user, to hurry it along. The motive to receive the
Knoxville tax warrants is supplied in part by the relative scarcity of
conventional money, and in part by the 6 per cent interest carried by these
warrants. The motive to hurry them along seems to be supplied by the fact that
the warrants cannot be deposited in banks.
Also the tax warrants are
themselves usable to pay taxes (60 days after issue), and on taxes thus paid in
advance, the citizen gets a 5 per cent discount, in addition to a credit for the
6 per cent interest already due on the warrant, making sometimes a saving of 11
per cent on the tax. The assistant finance director, Mr. Herbert Cox, says that
"during the last two months warrants have been coming back to the city in taxes
faster than the new ones are issued."
But the warrants circulate for all
other purposes. A motor company even sold the city six automobiles for $3000 in
city warrants as part payment, the balance being old cars "traded in." And
nearly all the local merchants and other interests receive the warrants, in
whole or part-payment, for goods and accounts due, and make change, either in
money or in credit on the next transaction (the credit being evidenced by the
due bills of the merchants). To facilitate making change, the city is
considering the issuance of 25- and 50-cent denominations.
"What about
velocity? Aside from the financial embarrassments of the city government,
business in general had been handicapped by the closing of two large national
banks. Yet the merchants of Knoxville have noticed that the tax warrants offset
these handicaps by circulating faster than money; and they testify that the
extra speed has furnished a stimulus to business.
VARIANTS
Four other variants of the Stamp Scrip idea have come to my attention:
(I) A piece of unexpected but profitable comedy occurred in Tenino, Washington. A bank had failed; and the local Chamber of Commerce bought up a part of the distributive shares of the depositors, paying for these not with scrip, but with redeemable wooden coins in small denominations. These coins were regarded as curiosities, and soon became eagerly sought after as souvenirs. So the Chamber was soon able to negotiate them at $2.50 a piece! The upshot was that with $6500 of profit, it was able to buy the building of the defunct bank and invite another banking corporation to become the tenant and restore a banking service to the town.
(II) The second variant is called the "Baby Bond" plan such as that of J. Rice Scott of Miami, Fla. The bonds are in covers resembling those of a small check book. The denominations run from $5 to $100. The bonds are supposed to circulate like money and be stamped with each transfer at 2 per cent of the face, until there have been fifty or more turnovers, when the bonds are redeemed by the issuing organization. There is no particular logic in calling these booklets "bonds." The idea is the same as the Hawarden idea, the only difference being the larger denominations.
(III) A third variant is a plan which makes no use of stamps at all, but in
order to bring about the extra stimulus to turnover, provides that a certain
percentage of the buying power of the scrip shall drop off or evaporate at
stated intervals. This plan has recently been tried in both Germany (14) and
America, but is very inconvenient. It requires a special computation for each
transfer, it complicates bookkeeping and is apt to repel the next recipient with
the unpleasant idea of progressive depreciation. I doubt if any bank would be
bothered with such scrip. The American experiment along this line was that of
the "Threefold Corporation" of New York," which has now abandoned it in favor of
Stamp Scrip.
Another rather original application of the principle of
"compulsory" circulation is the "Speed Money" which the zealous adherents of the
German-Wära movement started, after the Government had interfered with their
issuance of Stamp Scrip. A Dr. Nordwall, of Norden in Germany advertised in the
local paper one day that he would give to Reichsmark to the first man to come to
his office owing someone else that amount. The money was not to be given away
but could only be used to cancel the debt. Inseparable from the 10-Reichsmark
bill was a messenger boy on a bicycle. All that A, the lucky recipient of Dr.
Nordwall's 10 RM. had to do was to send the boy to his creditor, B; but B did
not get the cash either. He had to tell the boy to whom he owed money, and thus
the 10 RM came to C, who sent it to D, and so on, down the line. In the late
afternoon the boy had to trust his last "customer" with the bill, after he
received the promise to have it handed back to him the next morning. He then got
a receipt stating that he had actually left the money. With this receipt he
could go to the last but one, proving that his debt was paid, getting this man's
receipt for the previous customer. Thus he finally returned to the first, having
cancelled, perhaps 120.-Reichsmarks of debt, getting a small commission from
each debtor for this debt-cancelling service. Instead of a pen penalty for
hoarding, the hungry stomach of the messenger boy sped up the circulation of
this money. The scheme was actually operating, and perhaps it still is, although
I do not know how successfully.
PROSPECTS
From a correspondence with four or five hundred communities in every state of
the Union, and from other sources of information,(16) I gather that there is now
a definite turn toward the Woergl or dated type of Stamp Scrip.
Dothan,
Alabama, a town of 16,000 inhabitants, has issued Stamp Scrip of the dated type.
St. Paul, a city of over a quarter of a million inhabitants, has decided (as
soon as it can get the authority required by law from the Minnesota
legislature), to issue $100,000 of Stamp Scrip of the dated type.
Over a
hundred other municipalities (17) including a fair proportion of large cities,
are seriously considering the issue of Stamp Scrip of the dated type.
In
Kansas, a bill is pending in the State Legislature which, if passed, will
authorize localities to use scrip and will insure uniformity in the issues
(although not of the dated type, unless an amendment can be secured).
In the
state of Iowa, a bill has been passed authorizing the State itself to issue the
scrip and to distribute it among cities and counties. (Here, too, the scrip will
be the undated type unless the proposed law be amended.)
Seven or more other
state governments are seriously considering scrip projects.
On February 17,
1933, Senator John H. Bankhead of Alabama introduced a bill into Congress for
the purpose of authorizing the Federal Government to issue a dated Stamp Scrip
that shall operate as legal tender during the limited period of the issue.(18)
Senator Bankhead's plan is that this emergency issue be injected into the
national circulation, partly through the regular expenditures of the Federal
Government, partly through the expenditures of the state governments among which
certain shares of the scrip issue would be apportioned, and partly through
localities among which the states would further sub-divide the issue.
Before
considering the national aspect, which this proposal opens up, let us see
further how the local application must still be achieved, whether the Federal
Government shall spread the scrip or whether the full responsibility shall
continue to rest on the localities.
(1) The city was to pay no interest on these warrants.
(2) Informant, Mr.
E. B. Danielson, President of the Russell Chamber of Commerce.
(3) December
21, 1932.
(4) Informant: Mr. W. F. Gingrich, Superintendent of Municipal
Public Utilities. (5) Informant: Mr. Roy Wilkinson, City Clerk.
(6)
Informant, Mr. O. P. Berg, City Clerk.
(7) Informant, Mr. C. F. Wilson,
Mayor.
(8) Informant, Mr. Hugo Kuyper, Secretary of the Chamber of Commerce.
(9) Informant, Mr. H. T. Lawrence, City Manager.
(10) Informant, Mr.
James L. Cameron, Mayor.
(11) Informant, Mr. J. L. Olson, Town Clerk.
(12) Informant, O. E. Zink, Secretary of the Retail Merchants Association.
(13) New York Times, Feb. 27, 1933. Knoxville operates under a city
management form of Government.
(14) The Allgemeiner Deutscher Tauschverband
in 1931 is sued such scrip and called it ..."Tauscher," in 1 Mark denomination.
The evaporation was at the rate of 1 Pfennig per week.
(15) Sponsored by the
"Threefold Commonwealth League," 318 W. 56 St., New York City. The scrip (1931 -
1932) was usable by members of this organization at the League Farm, Workshop,
Laundry, Restaurant and Rooming and Apartment Houses.
(16) I should be
grateful for any further information from the reader.
(17) Or influential
elements within them.
(18) See appendix for copy of this bill.