Review of Lost Science of Money: Brian Leslie, UK Green Party

The Following book review is by Brian Leslie and is to be posted in February at Sustainable Economics – the bimonthly newsletter of the Green Economy Working Group of the Green Party of England and Wales. Address:

Book Review: The Lost Science of Money: The Mythology of Money — the Story of Power, by Stephen Zarlenga.  American Monetary Institute, 2002  ISBN 1-930748-03-5  (See the web site,, for ordering details and other information.)

This book is timely.  For the half-century since the last World War the crucial topic of the nature and role of money had been all-too-successfully suppressed from academic and public debate by the powerful creators and manipulators of it. It is only in the last decade that the havoc wrought by it on the World’s human societies and economy, as well as the whole environment, has forced it back to the attention of a still small but rapidly growing band of concerned individuals and groups, and the long history of debate on it is being resurrected.
Although written in English, it was first published in German, in Switzerland, in 1999.  The current, first English edition is expanded and updated.
Zarlenga refers to a very wide variety of sources, but for the earlier history, in particular to Alexander Del Mar’s (1836-1926) History of Monetary Systems, published in 1895 and his seven other books on the subject before and after that date.  Del Mar was at one time head of the US Bureau of Statistics.
Emilio Peruzzi’s Money in Ancient Rome was important as a source for the Roman section of the book.

Zarlenga clearly shows the links between the nature of different forms of money, their method of creation and the control/source of it: private or state; and the economic and political power derived from it, as well as usury, and the accidental or intended consequences of all this for society.  In doing so, he notes the fallacies of theories on the subject which have been held or promoted at different times, and the frequently secret agendas of those involved. The naïve view that money is merely a neutral medium-of-exchange is conclusively demolished.
The long-held belief in the commodity nature of money is also totally demolished, and the damaging effects of this belief through history are analysed in great detail.  He points out, for instance, how the relative values ascribed to gold and silver in different parts of the globe have over long periods been secretly used to amass wealth and power, and how the bullion value has rarely matched the coin value, which has depended mainly on legal definition.  How, in fact, Rome grew to power with an internal-only copper-based currency given value by decree of the state, which issued it; Rome’s decline from power started with its adoption of precious metal money.

A point Zarlenga makes which is commonly overlooked, on the ‘value’ of the precious metals, is that their production or acquisition is not just labour-intensive: it generally has involved brutal slavery or conquest.

The growth of the money supply due to the flood of gold and silver into Europe from the Spanish conquest of America, and the extensive piracy against its imports by Britain and other counties, had different effects on Spain and the Northern countries: in Spain the ownership went to the rich, and resulted in atrophy of its productive capacity as it was spent on imports of luxuries, while in the other countries it was more widely distributed, and resulted in growth of industry and general wealth.  In Spain, the huge influx caused massive inflation, but where it was used to increase production and trade, inflation was slight.
Although there was inflation in England and most if not all of Europe between about 1500 to 1650, when gold and silver lost about 80% of their value, since money was dispersed into productive activity (the “Renaissance of the North”), this inflation, spread over some 150 years, was not serious for most people, though it irked the creditors!
Zarlenga comments: “The concentration of wealth in different epochs is often different as to its causes, but generally similar in its negative effects. Again we see that it is not simply the amount of money in existence that influences economic activity — it must be widely distributed to achieve good results.”

Del Mar commented on the ‘Free Coinage Act’ of 1666: “The appropriation of the Goldsmith class of the Royal prerogative has been accomplished in so stealthy a manner that scarcely a trace of it appears in historical works, and none at all in works devoted to political economy…a glaring proof if any were needed of the prejudice and one sidedness which have hitherto animated the teachers of that science. Of all the elements of political economy, money is the chiefest; of all the institutions of money, the right to create it is the most important; yet not a word concerning this once sacred right by the state is to be found in any of the economists.” (The Science of Money, 1904.)

Ending his chapter on ‘The Transfer of Capitalism to England’, Zarlenga quotes Christopher Hollis, from The Two Nations, 1935: ‘At the turn of the century [17th], London established itself as all that Amsterdam was…or, to put the truth with more exact accuracy, an international gang, which had up till then operated from Amsterdam, found it more convenient to operate from London instead.’

He defines two of the essential principles of ‘the science of money’ as “that the value of money doesn’t depend on the value of the material of which it is made, but on the law”, and “the law can normally confer the power of money onto something by making it acceptable in payments due to the Government for taxes and duties.  A full legal tender declaration is not needed to make something money.” (P. 288)

As well as the existing three branches of government — legislative, judicial and executive — he advocates a fourth: “to embody and administer the monetary power”.  He is clear that money creation should be a function of a branch of government.

He deals in great detail with the history of the struggle for money-power in America, in part because he is based there and aims the book primarily at Americans, but mainly because the issues are particularly clearly illustrated in that history, from colonial days to the present.
While he sees the destructive effects of private ‘official’ money creation, and recognises that its value is dependent on law, and that it should be issued by government, and though he suggests several ways for some of it to be spent into circulation, he does not seem to recognise the great importance of its being spent into circulation, and not lent — so not creating debt in the process.  Elimination of the debts so created would remove almost all need for debt, and so virtually eliminate the problems associated with usury.  While Ken  Bohnsack’s ‘Sovereignty plan’, which he advocates and which is getting widespread support among state and district authorities in the USA, would be a big improvement on present conditions (it proposes government-created, interest-free loans from the central government to lower level authorities, down to school boards), it and other proposals for debt-free loans do not go far enough.  They may be politically more ‘realistic’, easier to get adopted, but getting rid of the vast and fast-accelerating levels of debt is a pre-requisite for evolution to a sustainable economy, and is urgent!

Included is a chapter on the Euro, written before its full introduction, in which he urges policies to be developed.  Incredibly, he comments that ‘it would clearly be beneficial’ to ‘the English people’ for Britain to join.

His primary concern is with ‘official’ currencies, used within states and having legal status for payments, especially of taxes.  He notes the view of several well-informed writers over the last century that there can never be an international currency, since money is the creature of the law.  In the past, international trade was mainly through barter, with gold and silver commonly used as commodities.  In mediaeval times, a clearing mechanism was used at trading fairs, variously discounting the different forms of payment — an early exchange-rate mechanism.

He examines the track record of the BIS, IMF and World Bank, and contrasts their declared aims with the results, and notes the rejection of Keynes’ proposed ‘Bancor’ at Breton Woods, and the potential of SDRs to develop into an international currency — given the international ‘law’ to give it legitimacy.  He does not refer to the GCI proposal for EBCUs, or Bernard Lietaer’s ‘Terra’ as alternatives.

One point he stresses which I have to question is that ‘credit’ is not ‘money’.  While the current method of creating it is the source of serious problems which he discusses extensively, if the reform proposed in ‘Creating New Money’ were in place, i.e. banks could no longer create it by extending loans ‘out of thin air’, and only a Currency Commission were to create it and issue it to the Treasury to be spent into circulation, then it would function as money, as in fact it now does, but without leaving the burden of interest-bearing debt with the borrower who first spends it into circulation.

Despite the impressively long ‘selected bibliography’, I failed to find in it any reference to CH Douglas, Richard Douthwaite, James Robertson, or Jane Jacobs, to name a few.