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Not Enough Inches?

By Jonathan Rowe / January 24, 1992



IN July 1932, Carl Rhodehamel was living in a section of sewer pipe in a Hooverville called "Pipe City," near the Oakland, Calif., waterfront.

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The economic outlook was a little like today's, except much worse. Then, the stock market had crashed, banks had failed, and the nation was staggering under mountains of speculative debt. A Republican president was in trouble, and the main lubricant of production - money - seemed to have suddenly disappeared.

As today, people were looking to the chieftains of finance and industry to get the factories running again. But Carl Rhodehamel had a different idea, and it bears mention in relation to the fragile economy of today.

Like many thrown out of work in the Depression, Rhodehamel was an individual of talent and wit. He had invented key components of early radios and talking pictures at General Electric, and he was an accomplished cellist and composer. Faced with dire economic times, his instinct was to improvise.

He began to meet with a group of unemployed men in an abandoned grocery store, and their discussions led to a conclusion that was radical in its common sense. "Since the system wasn't working to provide their needs, they decided to form their own system," as one account puts it. "Since money was scarce, they dispensed with money altogether."

Rhodehamel and his colleagues decided to live by barter, thus opening up channels of opportunity where none existed before. They began doing home repairs in exchange for unwanted items. These they fixed up and recycled among themselves. Work and resources had materialized out of nothing.

This recycling effort evolved quickly into a far-reaching network of exchange, or "reciprocal" economy. People scoured neighborhoods and even farm areas, searching for unused items and buildings. Within six months, the Unemployed Exchange Association - or UXA as it was called - had grown to 1,500 members. It had a foundry and machine shop, a wood shop and soap factory, and services ranging from dentistry to auto repair. UXA built 18 trucks from scrap and handled some 40 tons of food a week.

All this without money. Instead, members got credits for each hour of labor, which they could use at the commissary for food or repaired items. The idea spread fast, and by 1933 there were at least 175 such networks in California alone, with more than 100,000 members. Conservatives called it socialistic. But it was Roosevelt's New Deal, with its Works Progress Administration and cash-paying jobs, that brought this movement down.

There were other currency experiments in the '30s. The publisher of the Springfield Union Leader in Springfield, Mass., for example, paid his employees in scrip that they could use to buy products from advertisers. Soon the scrip was circulating like money. The eventual return of prosperity brought other systems down, too. But for a brief moment, those involved had realized something easily forgotten.

Money isn't value. It is merely a symbol of value that serves to lubricate the process of exchange. But in a sophisticated economy like that in the United States, money becomes a totem, sought for its own sake. People confuse the pieces of paper with the human capacity and value it represents. And so their sense of economic capacity and supply is limited by the dollars in circulation at any given time.

People are happy to coast along in this dream when times seem good. When the bubble bursts, as it's doing now, then some start to realize that money is a form of mass hypnosis. All that stands behind a dollar bill is the promise of a debtor - the US government - that already owes over a trillion dollars. We're all standing around waiting for more of that to give us permission to exchange our talents for what we need?

In Washington and other capitals, public officials are debating how to get more of these symbols into the economy. Elsewhere, people are asking more basic questions. Michael Linton, a resident of Comax, British Columbia, tried to start a system of computerized service barter there. The system failed; early experiments often do. But Linton's insight bears repeating.

The town was in a severe economic slump. "I said, 'Hey, wait a minute, he recalled later. "There are lots of things in our community and lots of people who need them. What's missing is the money. That was like saying, 'I want to build a table, but I don't have any inches.