The Bavarian Soviet Republic, in which he participated, had a violent end and Gesell was detained for several months on a charge of treason, but was acquitted by a Munich court after a speech he gave in his own defence.
Silvio Gesell's mother was Walloon and his father was German, originally from Aachen, who worked as a clerk in the then-Prussian district of Malmedy, now part of Belgium. Silvio was the seventh of nine children.
After visiting the public Bürgerschule in Sankt Vith, he attended Gymnasium in Malmedy. Being forced to pay for his living expenses from an early age, he decided against attending a university and worked for the Deutsche Reichspost, the postal system of the German Empire. Dissatisfied, he began an apprenticeship to his merchant brother in Berlin. Then he lived in Málaga, Spain for two years, working as a correspondent. He then returned to Berlin involuntarily to complete his military service. After this, he worked as a merchant in Brunswick and Hamburg.
In 1887, Gesell relocated to Buenos Aires, Argentina, where he opened a franchise of his brother's business. The 1890 depression in Argentina, which hurt his business considerably, caused him to think about the structural problems caused by the monetary system. In 1891, he released his first writing on this topic: Die Reformation des Münzwesens als Brücke zum sozialen Staat (The Reformation of the Monetary System as a Bridge to a Social State). He then wrote Nervus Rerum and The Nationalization of Money. He gave his business to his brother and returned to Europe in 1892.
After a stay in Germany, Gesell relocated to Les Hauts-Geneveys in the Swiss canton of Neuchâtel. He farmed in order to support himself while continuing his economic studies. In 1900, he created the magazine Geld- und Bodenreform (Monetary and Land Reform), but it failed in 1903 for financial reasons.
From 1907 to 1911, Gesell was in Argentina again, then he returned to Germany and lived in the vegetarian commune Obstbausiedlung Eden, which was founded by Franz Oppenheimer in Oranienburg, north of Berlin. There, he founded the magazine Der Physiokrat together with Georg Blumenthal. It folded in 1914 due to censorship as World War I began.
In 1915, Gesell left Germany to return to his farm in Les Hauts-Geneveys. In 1919, he was asked to join the Bavarian Soviet Republic by Ernst Niekisch. The republic offered him a seat on the Socialization Commission and then appointed him the People's Representative for Finances. Gesell chose the Swiss mathematician Theophil Christen and the economist Ernst Polenske as his assistants and immediately wrote a law for the creation of Freigeld, a currency system he had developed. His term of office lasted only seven days. After the violent end of the Bavarian Soviet Republic, Gesell was detained for several months until being acquitted of treason by a Munich court. Because of his participation with the Soviet Republic, Switzerland denied him return to his farm in Neuchâtel.
Gesell then relocated first to Nuthetal, Potsdam-Mittelmark, then back to Oranienburg. After another brief stay in Argentina during 1924, he returned to Oranienburg in 1927. There, he died of pneumonia on 11 March 1930.
He promoted his ideas in German and in Spanish.
Villa Gesell, a seaside town in Buenos Aires Province, Argentina was founded by his son, Don Carlos Idaho Gesell, who named it after his father.
Gesell considered himself a world citizen and was inspired by Henry George to believe that the earth should belong to all people, regardless of race, gender, class, wealth, religion, or age and that borders should be made obsolete. But his land reform proposal was different from Georgism. He believed that taxes could not solve the problem of rent on land, as taxes could be transferred to tenants. He thought we must abolish the private ownership of land and put free-land reform, a sort of public lease of land, into effect.
According to Silvio Gesell, it is ineffective to establish welfare systems without abolishing private ownership of land because the proceeds of the labor of workers are determined by the proceeds of labor that they can obtain on free land. The benefits gained by the welfare system are not to increase the proceeds of labor that workers can obtain on free land, but rather to increase the proceeds of labor that they can obtain on the lands of landowners. Private ownership of land converts all the advantages of using one's land into cash and it belongs to the landowner. In order not to cancel the effects of welfare policies, Silvio Gesell's Free-Land reform is needed.
Gesell based his economic thought on the self-interest of individuals, which he saw as a "natural" and healthy motive, in satisfying their needs and being productive. Gesell believed that an economic system must do justice to individual proclivities; otherwise the system would fail. He believed that this stance put him in opposition to Marxism, which, Gesell considered, proposed an economic system that was against human nature.
Believing that the talent and selfishness of individuals must be taken into account, Gesell called for free, fair business competition, with equal chances for all. This included the removal of all legal and inherited privilege. Everyone should rely only on their abilities to make a living. In the "natural economic order" which Gesell recommended, the most talented people would have the greatest income, without distortion by interest and rent charges. The economic status of the less-talented would improve because they would not be forced to pay interest and rent charges. According to Gesell, this would result in less difference between the poor and the rich. Furthermore, greater average incomes would mean that the poor would have a greater chance of escaping poverty, in part because other poor people would have greater disposable income and spending power.
Some regard Gesell's idea as a negative interest rate policy. The difference between them is that, with the free-money reforms of Gesell, hoarding money becomes impossible because the face-value of money is depreciated regularly. This forces the circulation of money. With negative interest, on the contrary, there is the possibility of hoarding money because the face value of money is constant and people can use their money as a means of saving. For example, Japan's negative interest rates are driving up the sales of safes and strongboxes.
Gesell denied value theory in economics. He thought that value theory is useless and prevents economics from becoming science and that a currency administration guided by value theory is doomed to sterility and inactivity.
Keynes argued that Free-money reform (regular depreciation of the face value of money) would create substitutes for money. Substitute as a means of saving could appear, but substitutes for a medium of exchange could not. At present, there are many substitutes for money as a medium of exchange in order to compensate for the irregular circulation of money. If money becomes "more perfect" in a free-money reform, they all disappear. According to Gresham's Law, bad money drives out good money. Here the bad money must be good money as a medium of exchange, therefore if Gesell's free-money begins to circulate, it will drive out all substitutes for money as a medium of exchange. And substitutes as a means of saving doesn't create any problems in "the natural economic order" of Silvio Gesell. They would be problems only when speculation is possible. But speculation is impossible in the new order. Hence Keynes' thought on Gesell's theory was in the prison which bars are consist of the results from the mis-designed monetary system. He was a man in the stomach of a lion which he wanted to hunt.
Some opinions about Gesell:
Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks ... I am a humble servant of the merchant Gesell.
Gesell's chiefwork is written in cool and scientific terms, although it is run through by a more passionate and charged devotion to social justice than many think fit for a scholar. I believe that the future will learn more from Gesell’s than from Marx’s spirit.
Gesell's standpoint is both anticlassical and antimarxist... The uniqueness of Gesell's theory lies in his attitude to social reform. His theory can only be understood considering his general point of view as a reformer ... His analysis is not completely developed in several important points, but all in all his model shows no fault.
We would especially like to certify our great esteem for pioneers such as Proudhon, Walras, and Silvio Gesell, who accomplished the great reconciliation of individualism and collectivism that the economic order we are striving for must rest upon.
Academic economists are ready to ignore the 'crackpots', especially the monetary reformers. Johannsen, Foster and Catchings, Hobson and Gesell all had brilliant contributions to make in our day, but could receive no audience. It is hoped, that in the future economists will give a sympathetic ear to those who possess great economic intuition.
Economic science owes Silvio Gesell profound insights into the nature of money and interest, but Silvio Gesell has always been considered a queer fellow by economic circles. To be sure, he was no professor, which already raises suspicion... The decisive fact is that Silvio Gesell's fundamental ideas with regard to an economic order are correct and exemplary. Exemplary is furthermore, that in the creation of a functional monetary order he should see the 'nervus rerum' of a functional economic and social order.
Silvio Gesell managed to write clearly and make himself understood, a gift that most pure theorists and reformers as well as many practical experts of today lack. The Natural Economic Order makes worthwhile reading even in our days... Gesell developed brilliant concepts and was forgotten, while his less brilliant contemporaries ... dazzled several generations before the realization of their falseness could break through.
Gesell is a smart outsider, who ... treated the subjects of money and interest, the right to full proceeds from labor and suggestions for remedies, in a very original way ... The ideas he conceived regarding his problems and what he deemed appropriate for the crises of his times are worth considering with respect to a fundamental improvement of monetary conditions in general.
Gesell is the founder of the free economy, an economic outsider who nevertheless was recognized by Keynes, in a certain sense, as his forerunner. He is therefore still considered to be above all a Keynesian economist, even a kind of hyper-Keynesian, that is to say, an advocate of a school that propagates the lowest (nominal) interest rate possible as a means of avoiding crises. Gesell, however, also recognized that the problem of a crisis cannot be solved solely by reducing the rates of interest... Gesell suggests, therefore, as the necessary correlative to the introduction of 'free money' ... the introduction of ‘free land’... Gesell's chief work thus carries the title ‘A Natural Economic Order Through Free Land (!) and Free Money’. It proves that the real aspects of an economy – that is to say, the claim on land or resources – must never be lost from view, even if primary importance is attached to monetary factors. This was recognized more clearly by Gesell than by Keynes.Gesell, Silvio. The Natural Economic Order, Revised edition. London: Peter Owen, 1958.
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Nervus rerum. Selbstverlag, Buenos Aires 1891
Die Verstaatlichung des Geldes. Selbstverlag, Buenos Aires 1892
El Sistema Monetario Argentino. Sus Ventajas y su Perfeccionamento. Selbstverlag, Buenos Aires 1893
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La Cuestion Monetaria Argentina. Buenos Aires 1898
Die argentinische Geldwirtschaft und ihre Lehren. 1900
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Denkschrift für die Gewerkschaften zum Gebrauch bei ihren Aktionen in der Frage der Währung, der Valuta und der Reparationen. Selbstverlag, Berlin-Rehbrücke 1922
Die Ausbeutung, ihre Ursachen und ihre Bekämpfung. Zweite Denkschrift für die deutschen Gewerkschaften zum Gebrauch bei ihren Aktionen gegen den Kapitalismus. Vortrag, gehalten in der Sozialistischen Vereinigung zur gegenseitigen Weiterbildung in Dresden am 8. Mai 1922. Selbstverlag, Berlin-Rehbrücke 1922
Die Diktatur in Not. Sammelruf für die Staatsmänner Deutschlands. Freiland-Freigeld-Verlag, Erfurt 1922
Das Trugbild der Auslandsanleihe und ein neuer Vorschlag zum Reparationsproblem. Eine weltwirtschaftliche Betrachtung, eine Warnung vor Illusionen und ein positiver Lösungsvorschlag. Freiwirtschaftlicher Verlag, Erfurt 1922
unter dem Pseudonym Juan Acratillo: Der verblüffte Sozialdemokrat. 1922 (PDF)
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mit Hans Bernoulli und Fritz Roth: Das Problem der Grundrente. Einleitende Gedanken zu einer wissenschaftlichen Abklärung. Selbstverlag des Schweizer Freiwirtschaftsbundes, Bern 1925
Die allgemeine Enteignung im Lichte physiokratischer Ziele. Selbstverlag, Potsdam 1926
Der abgebaute Staat. Leben und Treiben in einem gesetz- und sittenlosen hochstrebenden Kulturvolk. A. Burmeister Verlag, Berlin-Friedenau 1927
Reichtum und Armut gehören nicht in einen geordneten Staat. Werkauswahl zum 150. Geburtstag, zusammengestellt von Werner Onken. Verlag für Sozialökonomie, Kiel 2011, ISBN 978-3-87998-462-6