This is a graphic novel explaining the growth of a general economy from its barebones structure to a full-fledged economic system. Through an allegory , the author shows the deep malaise in the functioning of US economy. It starts off with three men on an island Able, Baker and Charlie who merely catch fish,eat, sleep. There is no credit, no investments, no savings to begin with. Able gets a brainwave to make a fishing net that will save him some time to pursue other activities. He under consumes for a day, takes risk , comes up with a fishing net, thus managing to catch 2 fish per day instead of 1 fish. This is the first time the island has a saving and a capital equipment (net). It is also the first time when one of the islanders can do some other activity than merely taking care of survival.

With the new savings, Abel can choose one of the options 1) Save what he has saved 2) Consume what he saved 3) Loan out what he has saved 4) Invest what he has saved 5) Combination of the above options. The author quickly argues that the only way Abel can increase his wealth is by making his wealth available to other members of his community. Baker and Charlie make use of the loan and build their own nets. With more savings, Baker and Charlie build a bigger net (Bigger Capital project) and thus are able to generate far more savings for themselves and the island. This savings were possible only because Abel in the first place did not lend loans for frivolous activities like vacationing etc. Capital Loans were preferred to Unnecessary Consumer Loans as the former increases savings while the latter reduces savings. The point that the author makes is, “Loans for consumption purposes reduce the amount of funds available to finance both capital projects and the production of more consumer goods, and hence can ONLY lower society’s standard of living.”

The increased prosperity of the island gives rise to a need for “effective storage of fish”, and hence fish savings&loan operations kicks off by MaxGoodBank. Its intention is a noble one where it lends to the needy people who pay interest and takes fish deposits and pays the depositors specific number of fish for entrusting the fish with MaxGoodBank. So, island has now savings, credit and investments well oiled in to the society.There is also Manny Fund which invests in risky projects and islanders who have the appetite to take risk invest their fish in Manny Fund and get returns / lose their fish based on the performance of the projects that Manny Fund invests in. However the losses of Manny Fund doesn’t threaten the society’s credit structure.

So, All is well until the islanders decide that they need a govt to take care of law and order situation, protect life and property. The problem starts when Democracy takes an ugly dimension the elected senators become so powerful that they control courts and dispense laws whatever they deem appropriate. Franklin Dee V becomes a senator and he starts making some nasty moves to gain power and sustain power over periodic elections. He passes a law whereby MaxGoodBank is forced to give low interest loans for business, school, minorities and other sections of the society. This in itself is not bad, but by extending the line of credit to people who have no hope of paying it back, wreaks havoc in the system. Franklin Dee V creates another phantom , the Franklin Reserve Notes which say that govt would guarantee fish in return to the printed notes. Basically in a way , Govt has forced MaxGoodBank to exchange fish to some printed paper. Soon, he realizes that his coffers are empty and there is no way he can give back the promised fish for each Franklin Reserve Note. He goes to senators with the plea that their “Franklin Reserve System” could be a catastrophe to the Island.

In this situation, Senators employ fish technicians who work on fish skins and skeletal and turn them in to fish by putting meat from original fish. Basically they are creating fraud fish which are lesser in value than the original fish. In order to cover up their fraud , the senators pass a law that only official fish , marketed as officially decontaminated fish, would be used in the society.They also pass fraudulent laws which create a situation where islanders deposit skeletal remains of fish with Fish Bank. MaxGoodBank sees through this ploy and refuses to cooperate. He is promptly removed and Chesley Bartin is appointed as the new director of Fish Bank. Soon with official fish floated around in the island that were half the size of original fish and naturally there was inflation. The price of everything doubled and consumers were at loss to explain the reasons behind it. Meanwhile the govt congratulated themselves and the islanders saying that inflation was a sign of prosperity. This went for quite sometime until the official fish was 1/3 the size of original fish and prices in the island skyrocketed to 200% from what they were before Franklin Reserve notes.

Islanders saw that they were getting 1/3 of the fish that were available in the sea and started using offshore fish banks. Senators realized the threat it posed to their well being and promptly passed a law to regulate fish that were being deposited in offshore banks. Soon, there was an underground economy for original fish as some islanders did not think that they should give away fish for Franklin Reserve Notes. Subsequently, the shortage forced the prices to jump by 600%. People were laid off, there was unemployment everywhere. What did the govt do ?They chose the easy way out – “Unemployment Insurance” and printed away to glory. These notes created a run on fish bank and there was a severe fish bank crisis in the Island. Chesley Bartin, the director had no clue and ran to the rescue of the govt for a possible solution. The govt ran out of fraudulent tricks and called the economists for a solution. Economists offered “Expand Credit” and “Lower Taxes” solution which obviously were useless as Island was already crippled with no credit. How can you expand credit in a situation credit situation had been manipulated to the hilt?. The situation becomes unmanageable and Franklin Dee V finally asks the islanders to start fishing again and quickly. The Island is back to square one, but with more disastrous situation,  where there are only few people who know how to fish but MANY people who need fish.

The book ends with reiterating that

  • Vote seeking Politicians bring mayhem by interfering in the economic systems and tools

  • Minimum wage law is actually counter-productive

  • Consumer credit wastes credit and it costs society in the sense that there is less credit available for Commercial purposes

Hence the author suggest a possible solution for this island : Government should outlaw bank credit to finance activities that fall under consumer credit. This will kick off a wave of layoffs, painful readjustment of life styles, but ultimately the island would be in a better situation as everything would adjust downwards. Basically a deflation is the cure suggested as the solution to the islanders. However this seems impossible to happen as the ones that will be deeply hurt in the process is the government( that has become bankrupt), is in charge of passing these strict measures. The book leaves the reader with an obvious question – “Is the Island economy doomed, now that it is in this crisis and govt. would never take harsh measures?”

imageTakeaway :

The book was written in 1979 and the situation mentioned in the book is similar to what US is facing now. “Does it take that long for markets, people, other trade countries to see that ‘Emperor has no clothes’ “?, is a question this book leaves you with.