Soddy, Fuller and Modern Monetary Theory
Born in the late 1800’s, Frederick Soddy and R. Buckminster Fuller led extraordinary lives. Soddy won the Nobel Prize in chemistry in 1921 and Fuller became known for his work in architecture, the geodesic dome, and visionary thinking. Soddy was a British citizen, Fuller an American. Both were deeply rooted in science and the laws of physics, and both spent the latter half of their life trying to apply their knowledge of physical reality to making the world work for everyone. Inevitably their quest led them to the field of economics and the study of monetary systems. Remarkably, though they never worked together, both men reached a similar conclusion: money and economics were largely disconnected from physical reality and productive capability. The result was the unnecessary impoverishment of much of humanity.
Soddy and Fuller were both impacted by World War I. As a British scientist, Soddy saw the devastation caused across Europe by the first war to fully employ scientific knowledge in the act of destroying others. Fuller served as a rescue boat commander in the U.S. Navy. Both men were struck by how nations could seemingly never afford to do any of the tasks necessary to improve the living conditions of people before or after a war, but could always afford whatever it took to go to war. As Fuller stated in his books Operating Manual for Spaceship Earth (1963) and Critical Path (1981), whenever the financial power structure controlling a nation’s politicians feels its interests threatened:
...vast new magnitudes of wealth come mysteriously into effective operation. We don’t seem to be able to afford to do peacefully the logical things we say we ought to be doing to forestall warring – by producing enough to satisfy all the world needs. Under pressure we always find that we can afford to wage the wars.
Soddy wrote in a similar vein referring to World War I in his book Wealth, Virtual Wealth and Debt (1926):
Then, for the first time in history, we saw science used without artificial financial restrictions for the purposes of destruction. A degree of liberality and unity of purpose prevailed which is never lavished upon the less spectacular but more necessary tasks of construction. Year after year the industrialized nations produced an ever-mounting tide of munitions of war, .... There seemed no physical limit to the extent which a nation, shaken out of its preconceived habits of economic thought by the imminent peril at its doors, could turn out the material necessities for its existence.
Whereas now [post war] we have returned to peace and squalor, to idle factories and farms reverting to grass, we are back as a nation to the pre-war conditions with a million and a quarter workers unemployed, unable to feed and clothe ourselves adequately on a military standard, and unable even to build houses in which to live under existing economic conditions. Yet we have the same wealth of natural resources, the same science and inventiveness, with much more favorable conditions for production and an army of unused man-power being demoralized by enforced idleness! .... A nation dowered with every necessary requisite for an abundant life is too poor to distribute its own wealth, and is idle and deteriorates not because it does not need it but because it cannot buy it.
The contemporary version of this incongruity is called austerity. Nation after nation is being told by its politicians that it cannot afford to do anything to help its people. “There is no money to buy it and people must tighten their belts.” Yet all of these nations have abundant physical and human resources waiting to be used and all of these nations mysteriously find whatever money it takes to fight the so-called “war on terrorism.” It is an unnecessary, artificially created state of poverty imposed in the midst of plenty.
Though they did not define it in current terminology, Soddy and Fuller had obviously been thinking in the realm of Modern Monetary Theory (MMT). They understood that food, clothing, a furnished house, a car, and a lawnmower were wealth. Money was simply the claim to wealth, a medium of exchange accepted as valid by a society. It had no value in and of itself. But the manipulation of money exerted great power over the availability of wealth and who had legal claim to ownership.
Having witnessed the enormous productive capability that mysteriously became available during times of war, Soddy and Fuller were fully aware that production of wealth was almost limitless and subject only to the current state of scientific/technical knowhow. In his 1926 writings in Wealth, Virtual Wealth and Debt, Soddy concludes:
There is no longer any valid physical justification for the continuance of poverty. The phenomenon of unemployment and destitution at one and the same time today is solely due to ignorance of the nature of wealth and the principles of economics.
Scarcity in peacetime was the result of faulty economic thinking and manipulation of the money supply by the financial power structure. Nations were said to be in debt. They had spent too much money waging war and now there was no money left. People needed to “sacrifice.” The productive capability available during the war was forced into idleness. In Soddy’s words:
The popular notion that because a nation has in the past generation produced it is unable to do so in the next, that God and usury provide so much and no more, and if we consume much one year we must make up for it in the future, is the inversion of the truth. It contains just enough of the truth as it applies to individuals - that wealth is a real quantity, incapable of spontaneous generation and multiplication - to be plausible; but in national terms it is as fallacious as abstaining from drinking from a river because last year was hot and everyone drank so much.
Being scientist/technologists, Fuller and Soddy felt the need to define wealth, to quantify it in an equation. They knew the components of wealth were physical resources - matter and energy - and the level of knowledge available to most effectively employ these resources. Simplistically stated:
WEALTH = (MATTER + ENERGY) x HUMAN KNOWLEDGE
Energy stored in fossil fuels - Earth’s energy savings account – is, of course, unavailable after the fuels are burned. But both Fuller and Soddy understood that expanding human knowledge would eventually make it possible for humanity to operate on Earth’s energy income using solar, wind, tidal, biofuels, etc. (but for lack of political will and resistance from the fossil fuel industry, we have reached this potential today). Additionally, the First Law of Thermodynamics says the total amount of matter and energy in the universe is constant and can be neither created nor destroyed, only interchanged. Since knowledge can only grow, wealth can only grow.
It is critical to understand that wealth is governed by the laws of physics and is incorruptible, whereas money is governed by the laws of man and is infinitely corruptible. It is also important to note that wealth can be applied productively by enhancing the human condition, or counterproductively by harming the human condition. An example of the counterproductive is weaponry. War is ultimately about who can claim ownership of productive wealth artificially limited by misguided monetary policy. Wealth wasted counterproductively by waging war further reduces available productive wealth and the result is a downward spiral.
However, we can choose an upward spiral. By aligning our man-made economic thinking with physical reality, we can lay the path to ongoing human success. This is the promise of Modern Monetary Theory.