is an economic idea
In the most narrow sense, an idea is just whatever is before the mind when one thinks. Very often, ideas are construed as representational images; i.e. images of some object. In other contexts, ideas are taken to be concepts, although abstract concepts do not necessarily appear as images...

 founded by Silvio Gesell
Silvio Gesell
Silvio Gesell was a German merchant, theoretical economist, social activist, anarchist and founder of Freiwirtschaft.-Life:...

 in 1916. He called it (natural economic order). In 1932, a group of Swiss businessmen used his ideas to found WIR
WIR Bank
The WIR Bank, formerly the Swiss Economic Circle , or WIR, is an independent complementary currency system in Switzerland that serves small and medium-sized businesses...


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 a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

      , nor deflation).
    • Long-term saving requires investment in bonds
      Bond (finance)
      In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

       or stock
      The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

  • (free land)
    • All land is owned by public institutions and can only be rented, not purchased (see also Henry George
      Henry George
      Henry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...

  • (Free Trade
    Free trade
    Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...

    • Free Trade has long been a mainstream position now, but the anti-globalization movement
      Anti-globalization movement
      The anti-globalization movement, or counter-globalisation movement, is critical of the globalization of corporate capitalism. The movement is also commonly referred to as the global justice movement, alter-globalization movement, anti-globalist movement, anti-corporate globalization movement, or...

       largely opposes it.

The (proposed) results include:
  • More private spending for consumption
    Consumption (economics)
    Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...

     and investment
    Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

  • Consumers invest surplus money in expanding companies
  • Full employment
    Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

    : Work for everyone who can work
  • Rate of economic growth
    Economic growth
    In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

     can be set by the society
  • Interest rates drop to almost zero percent in the long run

} prevents high real estate prices
  • Tremendous social disparities will cease
  • Less working hours per week for everyone in the long run

There seems to be an attempt to realize Freiwirtschaft in a small area in Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

, based on artificial money called Gogo
Gogo (economics)
Gogo is a local, stable and convertible means of exchange proposed for use in Grand Forks, British Columbia, Canada.Circulation of the Gogo is limited to the area of Grand Forks in southern British Columbia. Its value is based on the value of the Canadian dollar in 1980, and is forever stable at...



The basic economic ideas of Freiwirtschaft already have been published in 1890 by the Hungarian-Austrian economist Theodor Hertzka
Theodor Hertzka
Theodor Hertzka, or Hertzka Tivadar was a Hungarian-Austrian economist and journalist.-Life:...

 in his novel Freiland - ein soziales Zukunftsbild (Freeland - A Social Anticipation).

Flaws of the money system

claims that current monetary systems are flawed. According to Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

, prices convey information. For example, dropping prices mean that there is less demand or more supply. This leads to a buyer buying more, or a seller starting to produce something else. As a reaction, the price rises again. So, the price, together with the market participants, builds up a feedback
Feedback describes the situation when output from an event or phenomenon in the past will influence an occurrence or occurrences of the same Feedback describes the situation when output from (or information about the result of) an event or phenomenon in the past will influence an occurrence or...

 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.

This is not the case on the finance market. Without the continuous increase of the amount of money in circulation by the central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

, the demand would continuously drop, since the circulation speed decreases. Dropping demand forces companies to lower their prices to make any money at all. When prices start dropping, potential customers put off their purchase as long as possible to get the lowest price, resulting in the demand decreasing even more. The feedback loop spirals down to a point where the company does not make any money at all. That, eventually, results in layoffs and even the bankruptcy of the company. Workers in other companies tend to be even more cautious in spending money, ultimately resulting in the breakdown of the economy.

The key error of the system is the ill-transported information in the price. Money is nothing but claim for goods and services from the economy that accepts the money. In a weak economy, money is worth less in goods. But instead of an inflation, the result is a deflation
Deflation (economics)
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% . This should not be confused with disinflation, a slow-down in the inflation rate...

as described above, and less money can now buy the same goods. The market players do not realize that they are destroying the very economy that should ensure the value of the money. This feedback loop is self-destabilizing. According to Freiwirtschaft theory, this is the reason for the cycle of crisis in world economy.

External links

  • - Introduction to Freiwirtschaft
  • (in German, partly English)
  • (in German, partly English)
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