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“The great Oz has spoken! Pay no attention to that man
behind the curtain! I am the great and powerful Wizard of Oz!”

I n refreshing contrast to the impenetrable writings of econo-
mists, the classic fairytale The Wizard of Oz has delighted young
and old for over a century. It was first published by L. Frank Baum as
The Wonderful Wizard of Oz in 1900. In 1939, it was made into a hit
Hollywood movie starring Judy Garland, and later it was made into
the popular stage play The Wiz. Few of the millions who have en-
joyed this charming tale have suspected that its imagery was drawn
from that most obscure and tedious of subjects, banking and finance.
Fewer still have suspected that the real-life folk heroes who inspired
its plot may actually have had the answer to the financial crisis facing
the country today!
The economic allusions in Baum™s tale were first observed in 1964
by a schoolteacher named Henry Littlefield, who called the story “a
parable on Populism,” referring to the People™s Party movement chal-
lenging the banking monopoly in the late nineteenth century.1 Other
analysts later picked up the theme. Economist Hugh Rockoff, writing
in the Journal of Political Economy in 1990, called the tale a “mon-
etary allegory.”2 Professor Tim Ziaukas, writing in 1998, stated:
“The Wizard of Oz” . . . was written at a time when American
society was consumed by the debate over the “financial
question,” that is, the creation and circulation of money. . . . The
characters of “The Wizard of Oz” represented those deeply
involved in the debate: the Scarecrow as the farmers, the Tin
Woodman as the industrial workers, the Lion as silver advocate
William Jennings Bryan and Dorothy as the archetypal American

Chapter 1 - Lessons from the Wizard of Oz

The Wizard of Oz has been called “the first truly American
fairytale.”4 The Germans established the national fairytale tradition
with Grimm™s Fairy Tales, a collection of popular folklore gathered by
the Brothers Grimm specifically to reflect German populist traditions
and national values.5 Baum™s book did the same thing for the American
populist (or people™s) tradition. It was all about people power,
manifesting your dreams, finding what you wanted in your own
backyard. According to Littlefield, the march of Dorothy and her
friends to the Emerald City to petition the Wizard of Oz for help was
patterned after the 1894 march from Ohio to Washington of an
“Industrial Army” led by Jacob Coxey, urging Congress to return to
the system of debt-free government-issued Grenbacks initiated by
Abraham Lincoln. The march of Coxey™s Army on Washington began
a long tradition of people taking to the streets in peaceful protest when
there seemed no other way to voice their appeals. As Lawrence
Goodwin, author of The Populist Moment, described the nineteenth
century movement to change the money system:
[T]here was once a time in history when people acted. . . .
[F]armers were trapped in debt. They were the most oppressed
of Americans, they experimented with cooperative purchasing
and marketing, they tried to find their own way out of the strangle
hold of debt to merchants, but none of this could work if they
couldn™t get capital. So they had to turn to politics, and they
had to organize themselves into a party. . . . [T]he populists didn™t
just organize a political party, they made a movement. They
had picnics and parties and newsletters and classes and courses,
and they taught themselves, and they taught each other, and
they became a group of people with a sense of purpose, a group
of people with courage, a group of people with dignity.6
Like the Populists, Dorothy and her troop discovered that they
had the power to solve their own problems and achieve their own
dreams. The Scarecrow in search of a brain, the Tin Man in search of
a heart, the Lion in search of courage actually had what they wanted
all along. When the Wizard™s false magic proved powerless, the Wicked
Witch was vanquished by a defenseless young girl and her little dog.
When the Wizard disappeared in his hot air balloon, the unlettered
Scarecrow took over as leader of Oz.
The Wizard of Oz came to embody the American dream and the
American national spirit. In the United States, the land of abundance,
all you had to do was to realize your potential and manifest it. That
Web of Debt

was one of the tale™s morals, but it also contained a darker one, a
message for which its imagery has become a familiar metaphor: that
there are invisible puppeteers pulling the strings of the puppets we see
on the stage, in a show that is largely illusion.

The March on Washington
That Inspired the March on Oz

The 1890s were plagued by an economic depression that was nearly
as severe as the Great Depression of the 1930s. The farmers lived like
serfs to the bankers, having mortgaged their farms, their equipment,
and sometimes even the seeds they needed for planting. They were
charged so much by a railroad cartel for shipping their products to
market that they could have more costs and debts than profits. The
farmers were as ignorant as the Scarecrow of banking policies; while
in the cities, unemployed factory workers were as frozen as the Tin
Woodman, from the lack of a free-flowing supply of money to “oil”
the wheels of industry. In the early 1890s, unemployment had reached
20 percent. The crime rate soared, families were torn apart, racial
tensions boiled. The nation was in chaos. Radical party politics thrived.
In every presidential election between 1872 and 1896, there was a
third national party running on a platform of financial reform. Typi-
cally organized under the auspices of labor or farmer organizations,
these were parties of the people rather than the banks. They included
the Populist Party, the Greenback and Greenback Labor Parties, the
Labor Reform Party, the Antimonopolist Party, and the Union Labor
Party. They advocated expanding the national currency to meet the
needs of trade, reform of the banking system, and democratic control
of the financial system.7
Money reform advocates today tend to argue that the solution to
the country™s financial woes is to return to the “gold standard,” which
required that paper money be backed by a certain weight of gold bul-
lion. But to the farmers and laborers who were suffering under its
yoke in the 1890s, the gold standard was the problem. They had been
there and knew it didn™t work. William Jennings Bryan called the
bankers™ private gold-based money a “cross of gold.” There was sim-
ply not enough gold available to finance the needs of an expanding
economy. The bankers made loans in notes backed by gold and re-
quired repayment in notes backed by gold; but the bankers controlled
the gold, and its price was subject to manipulation by speculators.

Chapter 1 - Lessons from the Wizard of Oz

Gold™s price had increased over the course of the century, while the
prices laborers got for their wares had dropped. People short of gold
had to borrow from the bankers, who periodically contracted the money
supply by calling in loans and raising interest rates. The result was
“tight” money “ insufficient money to go around. Like in a game of
musical chairs, the people who came up short wound up losing their
homes to the banks.
The solution of Jacob Coxey and his Industrial Army of destitute
unemployed men was to augment the money supply with government-
issued United States Notes. Popularly called “Greenbacks,” these
federal dollars were first issued by President Lincoln when he was
faced with usurious interest rates in the 1860s. Lincoln had foiled the
bankers by making up the budget shortfall with U.S. Notes that did
not accrue interest and did not have to be paid back to the banks. The
same sort of debt-free paper money had financed a long period of
colonial abundance in the eighteenth century, until King George forbade
the colonies from issuing their own currency. The money supply had
then shrunk, precipitating a depression that led to the American
To remedy the tight-money problem that resulted when the
Greenbacks were halted after Lincoln™s assassination, Coxey proposed
that Congress should increase the money supply with a further $500
million in Greenbacks. This new money would be used to redeem the
federal debt and to stimulate the economy by putting the unemployed
to work on public projects.8 The bankers countered that allowing the
government to issue money would be dangerously inflationary. What
they failed to reveal was that their own paper banknotes were
themselves highly inflationary, since the same gold was “lent” many
times over, effectively counterfeiting it; and when the bankers lent
their paper money to the government, the government wound up
heavily in debt for something it could have created itself. But those
facts were buried in confusing rhetoric, and the bankers™ “gold
standard” won the day.

Web of Debt

The Silver Slippers: The Populist Solution
to the Money Question

The Greenback Party was later absorbed into the Populist Party,
which took up the cause against tight money in the 1890s. Like the
Greenbackers, the Populists argued that money should be issued by
the government rather than by private banks. William Jennings Bryan,
the Populists™ loquacious leader, gave such a stirring speech at the
Democratic convention that he won the Democratic nomination for
President in 1896. Outgoing President Grover Cleveland was also a
Democrat, but he was an agent of J. P. Morgan and the Wall Street
banking interests. Cleveland favored money that was issued by the
banks, and he backed the bankers™ gold standard. Bryan was op-
posed to both. He argued in his winning nomination speech:
We say in our platform that we believe that the right to coin
money and issue money is a function of government. . . . Those who
are opposed to this proposition tell us that the issue of paper
money is a function of the bank and that the government ought
to go out of the banking business. I stand with Jefferson . . . and
tell them, as he did, that the issue of money is a function of the
government and that the banks should go out of the governing business.
. . . [W]hen we have restored the money of the Constitution, all
other necessary reforms will be possible, and . . . until that is
done there is no reform that can be accomplished.
He concluded with these famous lines:
You shall not press down upon the brow of labor this crown of
thorns, you shall not crucify mankind upon a cross of gold.9
Since the Greenbackers™ push for government-issued paper money
had failed, Bryan and the “Silverites” proposed solving the liquidity
problem in another way. The money supply could be supplemented
with coins made of silver, a precious metal that was cheaper and more
readily available than gold. Silver was considered to be “the money of
the Constitution.” The Constitution referred only to the “dollar,” but
the dollar was understood to be a reference to the Spanish milled silver
dollar coin then in common use. The slogan of the Silverites was “16
to 1”: 16 ounces of silver would be the monetary equivalent of 1 ounce
of gold. Ounces is abbreviated oz, hence “Oz.” The Wizard of the
Gold Ounce (Oz) in Washington was identified by later commentators
as Marcus Hanna, the power behind the Republican Party, who

Chapter 1 - Lessons from the Wizard of Oz

controlled the mechanisms of finance in the administration of President
William McKinley.10 (Karl Rove, political adviser to President George
Bush Jr., reportedly took Hanna for a role model.11)
Frank Baum, the journalist who turned the politics of his day into
The Wonderful Wizard of Oz, marched with the Populist Party in
support of Bryan in 1896. Baum is said to have had a deep distrust of
big-city financiers; but when his dry goods business failed, he bought
a Republican newspaper, which had to have a Republican message to
retain its readership.12 That may have been why the Populist message
was so deeply buried in symbolism in his famous fairytale. Like Lewis
Carroll, who began his career writing uninspiring tracts about
mathematics and politics and wound up satirizing Victorian society
in Alice™s Adventures in Wonderland, Baum was able to suggest in a
children™s story what he could not say in his editorials. His book
contained many subtle allusions to the political and financial issues of
the day. The story™s inspirational message was a product of the times
as well. Commentators trace it to the theosophical movement, another
popular trend of which Baum was an active member. 13 Newly-
imported from India, it held that reality is a construct of the mind.
What you want is already yours; you need only to believe it, to “realize”
it or “make it real.”
Looking at the plot of this familiar fairytale, then, through the lens
of the contemporary movements that inspired it . . . .

An Allegory of Money, Politics
and Believing in Yourself

The story begins on a barren Kansas farm, where Dorothy lives
with a very sober aunt and uncle who “never laughed” (the 1890s
depression that hit the farmers particularly hard). A cyclone comes
up, carrying Dorothy and the farmhouse into the magical world of
Oz (the American dream that might have been). The house lands on
the Wicked Witch of the East (the Wall Street bankers and their man
Grover Cleveland), who has kept the Munchkins (the farmers and
factory workers) in bondage for many years.
For killing the Wicked Witch, Dorothy is awarded magic silver
slippers (the Populist silver solution to the money crisis) by the Good
Witch of the North (the North was then a Populist stronghold). In the
1939 film, the silver slippers would be transformed into ruby slippers
to show off the cinema™s new technicolor abilities; but the monetary

Web of Debt

imagery Baum suggested was lost. The silver shoes had the magic
power to solve Dorothy™s dilemma, just as the Silverites thought that
expanding the money supply with silver coins would solve the problems
facing the farmers.
Dorothy wanted to get back to Kansas but was unaware of the
power of the slippers on her feet, so she set out to the Emerald City to
seek help from the Wizard of Oz (the apparently all-powerful President,
whose strings were actually pulled by financiers concealed behind a
“The road to the City of Emeralds is paved with yellow brick,” she
was told, “so you cannot miss it.” Baum™s contemporary audience,
wrote Professor Ziaukas, could not miss it either, as an allusion to the
gold standard that was then a hot topic of debate.14 Like the Emerald
City and the Great and Powerful Oz himself, the yellow brick road
would turn out to be an illusion. In the end, what would carry Dorothy
home were silver slippers.
On her journey down the yellow brick road, Dorothy was first
joined by the Scarecrow in search of a brain (the naive but intelligent


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