Mutualism and Equitable Commerce:
A Libertarian Socialist Catechism
By W. J. Whitman
What is mutualism?
Mutualism is the oldest form of anarchism. It is a school
of anarchist thought that holds that all economic
transactions ought to mutually benefit both parties so
that there is true equity in commerce and that social
order should be based solely upon voluntary and mutual
associations of individuals. The early mutualists held
that equitable commerce, just wages, and just prices
would naturally result from market processes if the
market were set free from all forms of government
intervention.
What is a just wage?
A just wage is a wage that gives the producer the
equivalent
of
what
his
labour
has
produced.
What is a just price?
A just price is a price that is equivalent to the cost of
production. This may be called the “cost principle.”
What is equitable commerce?
Equitable commerce is when the buyer and the seller
equally benefit from the transaction in a sale. Equitable
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commerce is when the trade is so equal that neither party
profits off of the trade but both parties benefit equally.
Can such an arrangement ever come about?
On a free market, trades will probably never be totally
equal, yet there would be no room for substantial profits.
The libertarian socialist understanding of the “labour
theory of value” states that competition under freemarket conditions will tend to force prices down to the
lowest possible level, as each seller will want to lower
his price to undercut the competition. As the sellers
compete, prices drop until they are nearly equivalent to
the cost of production. Under such conditions, the sale of
the product leads to no substantial profit for the seller
because the trade is equal.
Why would the producer produce if he can’t make a
profit?
He would produce because he benefits even without
profit. He will always “break even” but will never be left
with nothing to show for it. Mr. X makes widgets: he
then sells them at cost of production (i.e. the cost of
acquiring the materials plus the cost of labour). Upon
selling the widgets, he receives money as payment. He
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can then use the money to buy other things that he wants
and needs. Under such a free-market socialist system
(aka mutualism), he can live comfortably. He can save a
little money if he wants more expensive things; and he
can buy those things in the future, after he saves enough.
How do mutualists define the term capitalism?
The term capitalism in reference to a specific economic
system was originally coined by Thomas Hodgskin, a
free-market economist and Ricardian socialist anarchist.
Hodgskin used the term to refer to the existing economic
system during the Industrial Revolution, which system
was heavily interventionist in nature. Mutualists follow
this original definition of the term capitalism, and hence
do not regard capitalism as a free-market system.
Capitalism is an economic system in which the State
intervenes in the economy in order to benefit the
capitalist class at the expense of all other classes. The
chief characteristics of the capitalist system are (1) that
wage labour is an ordinary phenomenon and (2) that the
vast majority of people are not capitalists or owners of
productive property.
Kevin A. Carson, the leading contemporary advocate of
mutualism, writes:
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“Capitalism, as distinguished from a free market,
is a system in which the state represents the
owners of capital and land and intervenes in the
market on their behalf. Its enforcement of
special privileges keeps land and capital
artificially scarce and expensive in comparison
to labor, so that labor must pay tribute for access
to the means of production. Let, therefore, the
state remove its guarantees of privilege, and let
the suppliers of land and capital compete in a
free market without entry barriers, and land and
capital
will
cease
to
draw
monopoly
returns.”(Kevin A. Carson, Free Market AntiCapitalism)
Hilaire Belloc, a classical distributist writer, defined
capitalism thus:
“[Capitalism’s]
main
characteristic
is
the
possession of the means of production, that is
land and machinery, by a small number of
citizens, while the great majority of citizens
remain dispossessed not only of the land and
machinery, but of the stores of food and clothing
and housing, without which men cannot
live.”(Nationalization)
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Likewise, John Médaille gives the same definition:
“In capitalist economies, the vast majority of
men are not capitalists; that is, they do not have
sufficient capital to make their own livings,
either alone or in cooperation with their
neighbors, but must work for wages in order to
live.”(Toward a Truly Free Market, Chapter 5)
How can wage labour be a form of slavery? Why do
mutualists say that “wage slavery” is an essential
characteristic of the capitalist system?
Wage labour is a form of slavery if the economic system
renders it necessary for most individuals within society.
If the economic system is designed so as to ensure that
the wage-worker does not have any viable alternative to
wage labour, then the labour contract is not entirely
voluntary. Capitalism as an economic system was
preceded by a process of enclosures of common lands
throughout Europe. In England, for example, there were
common lands that were grazed and cultivated by
ordinary people. After the rise of Protestantism, all of
the common lands were confiscated and given to certain
individuals whom the government happened to favour.
The land naturally belonged to those who cultivated it,
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as labour is the only just means of appropriating
property, but the State arbitrarily took the land out of the
hands of the ordinary workers and farmers and handed it
over to certain privileged individuals who had not
expended any labour in the appropriation of the land,
creating a class of landlords and capitalists. These new
“owners” of the land became landlords and started
charging the farmers rent for the use of the land.
Production is necessary for survival. By removing the
means of production from the hands of the producers,
the State assisted in enslaving the producers to the idle
class of “owners.” Thus, the proletariat or working class
was enslaved to the capitalist class (i.e. that class of
individuals who happen to “legally” own the means of
production).
feudalism,
Capitalism
the
is
heritage
of
merely
industrialized
historical
economic
arrangements that were created by arbitrary State
interventions in the economy.
Is it the case that all wage labour is “wage slavery”?
No, wage labour is not wage slavery if the wage-worker
has sufficient alternatives. It is not wage-slavery if the
economic system allows the average worker the liberty
to survive by means other than wage labour.
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Why do mutualists oppose “big business” as it exists
within capitalistic systems?
Big business is the result of government intervention in
the economy. Under free-market conditions, large
businesses (such as Walmart, Monsanto, Boeing, GM,
etc.) could not possibly exist. The law of diminishing
returns naturally limits the size of any firm. Under freemarket conditions, firms would expand to their optimum
size and then expand no further. The national and
international corporations that we see today are too big
to survive under free-market conditions. Their expansion
past the point of optimum size was subsidized by the
government. If Walmart had been forced to bear the full
burden of the cost of large-scale distribution, the
company would never have expanded on a national basis.
The
creation
of
the
necessary
transportation
infrastructure for such companies was provided by the
State. The railroads and highway systems were created
by the State with tax-payer money. Companies like
Walmart would have stopped further expansion long ago
rather than spending more money in order to create the
necessary infrastructure for expansion. The same goes
for commercial aviation, the internet, etc. Boeing would
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never have created the commercial airline had it not been
for the massive subsidies that it received from the State
for the purposes of research and development of military
aircrafts. The research and development would have
been too expensive and the company would have
pursued safer
investments
that
guaranteed
more
immediate returns.
Moreover, large companies would have been put out of
business by the competition had it not been for the
restriction of competition through government regulation.
Patent laws prohibit competitors from manufacturing the
same or similar products, thereby limiting competition.
The reason that big businesses do so well is because of
their monopolistic/oligopolistic nature. If any competitor
were allowed to manufacture automobiles using the
same technologies as GM, then the potential for
additional profit as the result of large scale would be
outweighed by the additional costs. There would be
nothing to distinguish GM’s product from that of the
competition, rendering it unprofitable to manufacture on
a large scale. Under free-market conditions, we would
see thousands and thousands of smaller-scale local
manufacturers producing cars rather than a few large
corporations in the automotive industry. Businesses
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would generally be smaller, but competition would
ensure that the products would tend to be better.
Is mutualism an individualist or a collectivist school of
thought?
It is neither, or it is a balance of both. Josiah Warren
observed that all communistic experiments carried with
them the problems associated with collective ownership;
for individuals within groups always disagree about the
proper way of managing collective property. Therefore,
Warren rightly concluded that private property and
individual management is generally preferable to
collective property and group associations. Yet, PierreJoseph Proudhon simultaneously recognized alongside
this observation that collective or group action is
sometimes expedient and beneficial. Mutualism stands
between absolute individualism and collectivism,
advocating individual liberty while recognizing the
necessity of collective organization for industry under
certain circumstances. It emphasizes mutuality or the
voluntary association of individuals for productive
purposes. Pierre-Joseph Proudhon writes:
“I call economic forces certain methods of
action, the effect of which is to multiply the
power of labour far beyond what it would be, if
it had been left entirely to individual liberty.
“Thus, what we call the division of labour or
the separation of industries is an economic force:
it has been proven a thousand times since A.
Smith, that a given number of workers will
return four, ten, twenty times more work, if this
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work is partitioned between them in a systematic
fashion, than they would have had if they each
worked separately, each performing all the same
tasks, without agreement and without combining
their efforts.
“For the same reason, or rather for the
inverse reason, that which I was one of the first
to name, the force of collectivity, is also an
economic force: it is equally proven that a given
number of workers will execute with ease and in
a small amount of time a task which would be
impossible for these same workers, if, instead of
grouping their efforts, they purported to act
individually….
“Let us note that mutuality is not the same thing
as association, and that as a friend of liberty as
much as a friend of the group, it shows itself
equally remote from all fantasy and all
intolerance….
“It follows from this that the principle of
mutuality inasmuch as it concerns association,
is not to associate men except insofar as it is
required by the exigencies of production.”
(The Political Capacity of the Working Classes,
Ch. 13)
Why are mutualists opposed to capitalistic managerial
firms? and why do mutualists prefer co-operative
associations, worker-owned industry, and democratic
workers’ self-management?
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Under free-market conditions, it would be more difficult
to accumulate large amounts of capital. The difficulty of
acquiring the necessary capital to start a business
coupled with the greater risks associated with starting a
new industrial endeavor under free-market conditions
would discourage individual’s from starting certain types
of industrial firms. Without the subsidies that are granted
by the State to such industrial endeavors today, it would
be nearly impossible for an individual to organize an
expensive and risky industrial endeavor. Therefore, if
our current industrial society is to continue under a freemarket system, it would be necessary for many industrial
endeavors to be undertaken on a collective basis. In
order to supply the necessary capital and machinery,
people are going to have to voluntarily associate in
something like a guild system. Those who wish to get
the industrial organization running will have to cooperate and together contribute time, labour, and capital
to the business. If individuals are contributing their own
capital and their own property to the industrial endeavor,
then they are naturally to be regarded as part-owners of
the industry.
Workers’ self-management
naturally
follows from this. If the workers have pooled their
capital in order to get the endeavor going, then they are
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truly part-owners of the industry. If they are truly owners,
then the business is partially their property. All men are
to have a say over the management of their own property.
Therefore, management in such a mutualist organization
would
require
a
democratic
approach.
Each
worker/owner would need to be allowed to have some
say in the management of the company, as his property
and livelihood is at stake.
Mutualists hold that the capitalistic joint-stock company
is inconsistent with the concept of private property. If
the shareholder really owns a share of the company’s
business, then a portion of the business is his property.
All individuals have a right to manage their own
property. Yet, joint-stock companies do not allow the
shareholders to have a say over the management of the
firm. Therefore, this capitalistic arrangement is actually
a violation of property rights.
How do mutualists define the term socialism?
Socialism is a critical economic analysis based upon the
“labour theory of value.” Strictly speaking, it is merely
an approach to economics that is critical of the existing
system. Socialism is not to be confused with “state-
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ownership of the means of production.” Benjamin
Tucker writes:
“The economic principles of Modern Socialism
are a logical deduction from the principle laid
down by Adam Smith in the early chapters of his
‘Wealth of Nations,’—namely, that labor is the
true measure of price. But Adam Smith, after
stating this principle most clearly and concisely,
immediately
abandoned
all
further
considerations of it to devote himself to showing
what actually does measure price, and how,
therefore, wealth is at present distributed…. Half
a century or more after Smith enunciated the
principle above stated, Socialism picked it up
where he had dropped it, and in following it to
its logical conclusions, made it the basis of a
new economic philosophy.
“This
seems
to
have
been
done
independently by three different men, of three
different
nationalities,
in
three
different
languages: Josiah Warren, an American; Pierre J.
Proudhon, a Frenchman; Karl Marx, a German
Jew….
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“From Smith’s principle that labor is the
true measure of price—or, as Warren phrased it,
that cost is the proper limit of price—these three
men made the following deductions: that the
natural wage of labor is its product; that this
wage, or product, is the only just source of
income (leaving out, of course, gift, inheritance,
etc.); that all who derive income from any other
source abstract it directly or indirectly from the
natural and just wage of labor; that this
abstracting process generally takes one of three
forms,—interest, rent, and profit; that these three
constitute the trinity of usury… that the only
reason why the banker, the stockholder, the
landlord, the manufacturer, and the merchant are
able to exact usury from the labor lies in the fact
that they are backed by legal privilege, or
monopoly; and that the only way to secure labor
the enjoyment of its entire product, or natural
wage, is to strike down monopoly….
“It was at this point—the necessity of
striking down monopoly—that came the parting
of their ways. Here the road forked. They found
that they must turn either to the right or to the
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left,—follow either the path of Authority or the
path of Liberty. Marx went one way; Warren
and Proudhon the other. Thus were born State
Socialism and Anarchism.”(Individual Liberty,
Ch. 1)
How do mutualists define the term anarchism?
Pierre-Joseph Proudhon, the founder of mutualism and
the first writer to identify himself as an anarchist, wrote:
“As a variety of the liberal regime I have
mentioned anarchy—the government of each by
himself, self-government…. politically, the idea
of anarchy is quite as rational and concrete as
any other. What it means is that political
functions have been reduced to industrial
functions, and that social order arises from
nothing but transactions and exchanges. Each
may then say that he is the absolute ruler of
himself, the polar opposite of monarchical
absolutism…. anarchy is the ideal of the
economists, who attempt strenuously to put an
end to all governmental institutions and to rest
society upon the foundations of property and
free labour alone.”(The Principle of Federation,
Part 1, § 2, 4)
Is mutualism a form of socialism? or a form of
anarchism?
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It is both. Mutualism is also known as “free-market
socialism” or “anarchism.” Anarchy was a term that was
coined in reference to free-market socialism of the
mutualist variety, but the term has since come to be used
by “anarcho-communists” and “anarcho-capitalists” as
well. The mutualists were the first anarchists. They were
also among the first socialists.
Is mutualism libertarian?
Mutualists are the original libertarians. The term
libertarian was coined in order to distinguish the
“anarchist socialism” or “libertarian socialism” of the
mutualists from the “statist socialism” or “authoritarian
socialism” of Marx.
Why do mutualists say that Marxists and “state
socialists” are not really socialists?
Marxists and state socialists are not really socialists
because their ideas are inconsistent with the most basic
tenets of socialism. Socialism holds that “the natural
wage of labour is its product” and that the worker ought
to receive the entire product of his labour. A State that is
funded through taxation is inherently incompatible with
socialism. If a tax is taken out of wages, then the worker
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cannot be receiving the full product of his labour. If a
sales tax is charged, then the product must be sold at a
price that is above the cost of production. If the State
owns industry, then the State itself has taken on the role
of the capitalist. The worker is still not put in possession
of his product, because the State has assumed the role of
the capitalist and claimed the products of men’s labour
as its own.
Marxism does not uphold the “labour theory of value”
and the “cost principle,” but violates both in an attempt
to annihilate the theory of value by introducing “stateownership of the means of production.” Mutualism seeks
to protect the proletariat (i.e. working class) from
exploitation by the capitalists (i.e. owners of productive
property) by making both the capitalists and the
proletarians equal insofar as both will be owners solely
of the products of their own labour or of property
otherwise justly acquired. Marxism, on the other hand,
seeks to confiscate all property—even justly acquired
property—from everyone. State socialism is bent on
ensuring that no one receives the natural wage of his
labour.
“The natural wage of labour is its product,” not the
product of someone else’s labour. If I am a book binder,
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the product of my labour is the book that I produce. If
the State takes my books and gives them to someone else,
then compensates me with some bread, it is manifest that
I have not been put in possession of the product of my
own labour! I have been put in possession of the product
of someone else’s labour. The redistributive schemes of
statist “socialists” are based upon theft, the substitution
of bureaucrats for capitalists (in a fashion that makes the
State hyper-capitalistic since it assumes the exploitative
role of the capitalist class), and the faulty assumption
that receiving the product of another man’s labour is
somehow equivalent to receiving the product of my own
labour. Therefore, mutualists hold that “state socialism”
is not really socialism at all, but merely another form of
capitalism.
How is mutualism better than capitalism?
Under capitalism, usury (i.e. rent, profit, and interest)
cause additional wealth to accumulate in the hands of
those who already hold significant amounts of property.
The accumulation of excessive amounts of property into
the hands of the capitalist class is the result of arbitrary
human law. On a free market, competition would force
prices down to the lowest possible price, making profits
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minimal. Without the capitalistic system of law, unused
land could easily be acquired as private property through
homesteading. Interest would not exist under a mutualist
monetary system. In a mutualist system, labour is the
sole means of acquiring property. This means that the
most wealth will naturally accumulate into the hands of
those who are willing to work the hardest. Those who
work hard will succeed. This ensures that everyone has
an equal opportunity, regardless of who their parents are
and what neighborhood they are born into.
Hasn’t the “labour theory of value” been disproven by
the “subjective theory of value” as espoused by the
Austrian School of economics?
The labour theory of value has not been disproven. The
labour theory of value holds that labour is the “original
purchase price” with which all justly acquired property
(whether land or capital) was appropriated and, therefore,
that all cost can ultimately be reduced to labour if all
property is justly acquired. Furthermore, the labour
theory of value holds that pure competition on a free
market would have the tendency to limit price to the cost
of production. Sellers will constantly attempt to lower
prices in order to undercut their competitors’ prices,
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causing the market price under free-market conditions to
be as low as possible. It is a natural necessity that the
cost of production is the lowest price at which the seller
could sustainably sell his products, so prices would tend
to gravitate towards the cost of production under pure
competition in a free-market system.
Under the existing system of capitalism, prices are much
higher than the cost of production only because
competition is restricted by government regulation. The
assertion of modern economists that the labour theory of
value is bunk because it is observably false under the
existing economic system is a fallacy: the labour theory
of value describes price formation under free-market
conditions, something that is lacking in the existing
economy. If the fact that the labour theory of value is
observably false under existing conditions somehow
refutes the labour theory of value, then it follows that the
fact that supply and demand are constantly in
disequilibrium in existing industrial economies refutes
the law of supply and demand. Not even the most
hardcore Austrian economist would grant that assertion.
Yet, there are often recessions under interventionist
capitalist systems. Government manipulation of interest
rates and artificial creation of credit creates false signals
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for investors, thereby causing them to over-invest in
production, creating a “general glut” wherein the supply
of products is greater than the demand. During the most
recent recession, for example, the automotive industry
produced more automobiles than the market could
consume. Consequently, the government had to bailout
the automotive companies to keep them from collapsing
under the pressure of their own malinvestments (which
malinvestments, interestingly enough, were the result of
false signals that the government created by intervening
in the credit market). The reason that the law of supply
and demand does not apply under the existing form of
capitalism is because government intervention causes
supply and demand to be in a state of disequilibrium—
i.e. because we do not have a free market. The same
applies to the labour theory of value. The only reason
that price is not determined primarily and generally by
cost of production is because we do not have a free
market.
The subjective theory of value is true as far as it goes,
but it does not tell us anything practical about price
formation under free-market conditions. The value of a
good or service depends upon the subjective valuations
of individuals. That is true, as well as obvious. This in
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no way contradicts the labour theory of value, as the
advocates of the labour theory of value did make the
observation that the cost of labour itself was based upon
a subjective judgment. Moreover, if the subjective
theory of value is applied in an absolutist fashion so as
to negate the labour theory of value, then it would also
negate supply and demand, meaning that neither cost of
production nor scarcity nor anything else could play a
role in the formation of prices. Applied in an absolutist
fashion, the subjective theory of value would mean that
prices would be equivalent to whatever people would be
willing to pay, which is not the case because any degree
of competition forces prices down below that point.
Prices are generally lower than the value that people
would actually assign to things. An extreme example
would be water. Water is highly valued in the estimation
of men, but it is not expensive because of the large
supply and impossibility of monopolization.
I heard that Proudhon was opposed to private property,
but you have said that mutualists support private
property?
This confusion is brought about by several factors.
Firstly, Pierre-Joseph Proudhon was not always the most
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consistent writer. He was, after all, at a disadvantage
insofar as he was attempting to create a new political
philosophy. Furthermore, his use of the term property
differed from the common usage of that term. When he
denounced property he was using a very specific
definition of property as it was defined according to
Roman Law and the French legal tradition. Roman Law
supplied the working definition of property that he used
in What is Property, where he famously asserted that
“property is theft.” In that work, he distinguished
“property” from “possession.” He argued that private
possession was a natural right, whereas property was
understood to be a legal privilege. However, he
occasionally used the term property as it is commonly
used. As a result of this muddle-headed switching of
definitions and usages of the term, he sometimes seems
to be contradicting himself.
Instead of the distinction between possession and
property made by Proudhon, most mutualists have
adopted the distinction between natural property and
artificial property in order to convey the same idea.
Thomas Hodgskin’s book The Natural and Artificial
Right of Property Contrasted is the clearest and most
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concise exposition of the mutualist and libertarian
socialist view of property.
Mutualists advocate natural property rights and are
opposed to artificial property rights. An un-owned,
unused, and abandoned piece of land can naturally be
acquired as property through labour. An individual can
appropriate such un-owned property through the addition
of his labour in the process of acquisition. All he has to
do to take possession of the land is expend his labour in
the process of cultivating and maintaining it. He can then
build a house upon the land and the product of his labour
is naturally his. Since the product of the worker’s labour
belongs to the worker, the newly cultivated land and/or
any structures build upon it are the natural property of
the worker. This is the basis of natural property rights
(or possession in Proudhon’s terminology). In contrast to
this, a system of artificial property rights would be
based upon legal documents, words written on paper and
recognized as authoritative by the State. Under a system
of artificial property rights (or just property in
Proudhon’s terminology), it is the person in possession
of an artificial legal document rather than the person that
is in possession of the land that is regarded as the owner.
This arrangement is largely artificial. The libertarian
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socialist or mutualist, therefore, holds that legitimate
ownership of land is inherently linked to occupancy and
use. If the addition of labour is the factor that makes the
acquisition of property legitimate, then the continual
addition of labour in the process of maintenance and
occupation is necessary in order to maintain continual
possession of the land.
What do you think about the gold standard?
The benefit of the gold standard was its stability.
Historically, the gold standard was a relatively decent
arrangement. However, there is no longer any possibility
of a return to the gold standard. The stability of the gold
standard was predicated on its universality. All the
nations in the world were on a gold standard. This
stabilized exchange rates between the currencies of the
various nations. As a result, internal price levels had
some degree of stability as well. If the United States
were to return to a gold standard today, however, it
would not have the major benefits that the gold standard
historically had. Exchange rates would still fluctuate
drastically against foreign currencies, because other
nations are not on a gold standard. The dramatic
fluctuations
25
in
exchange
rates
would
encourage
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speculative investment and arbitrage trading in foreign
currency markets, perpetuating the instability of those
markets
and
creating
bubbles.
Furthermore,
the
instability of foreign exchange rates would result in the
instability of the value of the domestic currency and
cause fluctuation of domestic price levels. The flow of
gold in and out of the country due to international trade
would cause the value of the domestic currency to
fluctuate with supply and demand, rendering the entire
monetary scheme highly unstable.
In A Tract on Monetary Reform, John Maynard Keynes
rightly observed that the chief value of money is as a
medium of exchange and a store of value. Fluctuations
in the value of money are, therefore, harmful. Inflation
and deflation both negatively affect people within
society. Keynes was right about the necessity of
regulating currencies in order to preserve the capitalist
system. For money, as it is typically understood, to exist
and for the economic system to be stable, the currency
must be regulated in order to stabilize its value so as to
guard against drastic fluctuations. However, the David
Friedman model, where private banks issue private
competing currencies and self-regulate their own
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currencies seems to me to be much preferable to the
existing Keynesian arrangements.
Nevertheless, mutualists support neither the gold
standard
nor
regulated
Keynesian-style
monetary
systems. Mutualism proposes a totally different type of
monetary system.
What type of monetary system do mutualists advocate?
Josiah Warren proposed the use of “labor notes” as
currency. Under this system, you could exchange “labor
for labor.” All labour would not be valued equally, as
more difficult and exhausting labour would be worth
more than light labour. Warren’s system of “labor notes”
assigned a specific type of labour and a specific amount
of time to each note. If someone were to go to Warren’s
“Time Store” and purchase a dozen eggs, he could pay
with a “labor note.” The “labor note” served as a
voluntary labour contract in which the individual agreed
to do so much labour of a specific type in order to pay
off the debt. It was basically a system of credits based
upon labour. Josiah Warren’s experiments with this
monetary system were actually quite successful. The
only reason that the system did not catch on is because
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government regulations make it difficult to experiment
with alternative monetary arrangements.
The main benefit of the “labor note” currency system is
that it does not allow for massive accumulation of
capital and speculative investment. The “labor note” can
be spent as a medium of exchange. It can be used as
money or currency. However, it could also be redeemed
in labour. If I had acquired “labour notes” for ten hours
of carpentry work from such-and-such a specific
privately-owned business, then I could take those notes
to that place and command ten hours of labour in
carpentry work. Upon redeeming the notes, the notes
would cease to exist. The value of the notes is in the
labour that they command, not in the yield that they can
bring me from speculative investments. “Labor notes”
are necessarily local currencies. This limits their use to
being a medium of exchange for the facilitation of
economic transactions. The instability and fluctuations
of the business cycle that are created by ordinary
monetary phenomena would not occur under such a
monetary system. The adoption of “labor note” currency
as the ordinary and standard medium of exchange would
eliminate the cycle of recessions and depressions in the
economy.
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An example of a modern “labor note” system is the
Ithaca HOUR, which has been successful for over
twenty years now. It is a local currency in New York.
The HOUR is based upon Warren’s ideas, although it
does differ somewhat from Warren’s system.
Another currency system known as mutual banking was
proposed by Pierre-Joseph Proudhon and espoused by
William B. Greene. The primary difference between this
system and Warren’s was that it relied on the
monetization of the products of labour, rather than the
monetization of labour itself. If I manufacture widgets,
these can be stored in a warehouse somewhere, and
warehouse receipts for the widgets can be issued and
circulated as a medium of exchange. These warehouse
receipts can also be redeemed in widgets. And this will
work with just about any non-perishable product. This is
quite similar to Warren’s “labor notes.” Let it be noted
that this is no different than the monetary system that
developed naturally with precious metals. Gold came to
be used as a medium of exchange because everyone was
willing to accept it as payment. Yet, there were dangers
and inconveniences associated with holding large
amounts of gold. Therefore, people started storing their
gold in warehouses; and the warehouses issued
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warehouse
receipts
or
deposit
notes
that
were
redeemable in gold. After a while, the receipts
themselves began to circulate as money. This is the
origin of paper money. Mutualists hold that there is no
reason why this could not be done with any commodity
or product. “The natural wage of labour is its product,”
so why not monetize the product of labour and use it as a
medium of exchange. The mutual bank’s monetary note
serves as a title or deed to the piece of property in the
warehouse. Under such a system, trade would simply be
barter, with money merely serving as a medium of
exchange.
Pierre-Joseph Proudhon held that the adoption of a
single commodity as the sole medium of exchange and
granting that commodity monopolistic privileges creates
an incentive for speculative investment and leads to
fluctuations in the value of money. The problem is not
money itself as a medium of exchange, but the
prohibition of alternative types of money. Proudhon
writes:
“It is, then, inevitable that this truly
privileged product should become the object of
all the ambitions…the palladium of monopoly….
that, in this capacity as instrument of exchange,
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gold should be taken in its turn for an object of
speculation and serve as the basis of a great
commerce; that, finally, protected by public
opinion, loaded with public favour, it should
obtain power, and by the same stroke destroy the
social fabric! The means of destroying this
formidable force does not lie in the destruction
of the medium—I almost said the depository; it
is in generalizing its principle….
“But if it is true that, in international
commerce, the precious metals have lost their
preponderance, this means that, in international
commerce, all values have reached the same
degree of determination, and like money, are
equally acceptable…. Then, let them formulate
this law; let them explain this organization, and,
instead of talking of credit and forging new
chains for the labouring class, let them teach, by
an application of the principle of international
equilibrium, all the manufacturers who ruin
themselves because they are not exchanging,
teach those workers, who die of hunger because
they have no work, how their products, how the
work of their hands are values which they can
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use for their consumption, as well as if they
were bank-bills or money.”(System of Economic
Contradictions, or the Philosophy of Poverty,
Volume II, Ch. 10)
Like Warren’s “labor note” system, the mutual bank
system would also eliminate depressions and recessions
in the economy. Since there would be competing
currencies—as the various notes would not be backed by
the same thing but each note would be an independent
type of money—, changes in the supply or demand for a
particular type of note would not affect the monetary
system as a whole and money would no longer easily
facilitate speculate investment. The fluctuations in the
value of money and the artificial creation of credit that
lead to malinvestments and economic downturns would
cease to be a problem under a mutualist monetary
system.
In order to make this system work smoothly on a large
scale, the mutual bank would rely on bills of exchange
“as a means by which a debt due from one person may
be
made
available
for
obtaining
credit
from
another.”(William B. Greene, Mutual Banking) This
entire system would actually be much easier to work out
today because of the benefits of computers, the internet,
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and other technologies. An online exchange for “labor
notes” and “bills of exchange” could be set up, making it
easy to transfer credits to whatever form of credit is
needed with the simple click of a mouse. These
monetary ideas are, unfortunately, too complicated to
address in more detail in this short pamphlet.
While these proposed monetary arrangements may seem
complicated, it is important to realize that they are really
no more complicated than our existing monetary system.
In
fact,
these
proposals
are
very
simple
and
commonsensical. The only reason that they seem
complex and confusing is because they are unfamiliar to
us. If you tried to explain the existing monetary system
to someone used to different arrangements, it would
certainly be very confusing and seem quite impossible to
them.
Are mutualists opposed to the military?
Mutualists
do
not
support
the
current
military
organization. However, mutualists are not opposed to
defense agencies in general. We hold that military
organizations, like all organizations, ought to be entirely
voluntary. Not only must the membership be voluntary,
but the members must retain their freedom even within
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the military. This means that the soldier must be allowed
to disobey the orders of his “superiors” if he judges the
orders to be unjust. The soldier must be free within the
organization, free to disobey orders, and free to leave the
military organization at any point.
Josiah Warren, the co-founder (alongside Proudhon) of
modern anarchism, wrote:
“It will be asked, what could be accomplished
by a military organization, if every subordinate
were allowed to judge of the propriety of an
order before he obeyed it? I answer that nothing
could be accomplished that did not commend
itself to men educated to understand, and trained
to respect, the rights of persons and property as
set forth in the Declaration of Independence; and
that here, and only here, will be found the longneeded check to the barbarian wantonness that
lays towns to ashes and desolates homes and
hearts for brutal revenge, or to get office or a
little vulgar newspaper notoriety....
“A man cannot alienate his inalienable right of
self-preservation or sovereignty by joining the
military
or
any
other
combination.
The
assumption that this is possible has produced all
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our political confusion and violence, and will
continue to produce just such fruits to the end of
time, if this childish blunder is not exposed and
corrected.
“Having one man as general over thousands,
arises
from
the
natural
necessity
for
individuality in the directing mind when
numbers wish to move together; but it does not
necessarily imply any superiority of judgment or
motive in the director of a movement beyond
those of the subordinates, any more shall the
driver of an omnibus be presumed to know the
road better than the passengers. They may all
know the road equally well, but if they all
undertake to drive the horses, none of their
purposes will be answered; and it would be
equally ridiculous for the driver, under the plea
of upholding subordination, to insist on carrying
his passengers where they did not want to go, or
refuse to let them get out when they wanted to
‘secede.’...
“The democratic idea, theoretically at the base
of American institutions, has never been
introduced into our military discipline, nor into
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our courts, nor into our laws, and only in a
caricatured and distorted shape into our political
system, our commerce, our education, and
public opinion.”(True Civilization)
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An Outline of the History of Anarchist Theory
The classical liberals developed classical economics
and espoused the “labour theory of value.” They argued
that labour is the “original purchase price” by which
goods and services are acquired. The natural cost of
acquiring property is the amount of labour necessary to
acquire it. The natural price of a good is the cost of
production (because pure competition will force prices
down to the lowest possible point, and “cost of
production” is the lowest possible price).
The first generation of socialists (Robert Owen, Henri
de Saint-Simon, et al.) observed that the “labour theory
of value” as espoused by the classical liberals is not true
under the existing conditions in capitalistic industrial
economies. Therefore, they argued that people ought to
voluntarily organize themselves in communities with the
intention of making labour the sole factor in determining
wages and price. People should agree to set prices at the
cost of production and not take exorbitant profits.
The second generation of socialists (Josiah Warren,
Pierre-Joseph Proudhon, and Karl Marx) tried to
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determine why the theories of classical economics do
not apply under existing conditions. There were two
differing
opinions:
(1)
libertarian
socialism
or
anarchism held that the reason that exorbitant profits
were being made and the price of products was not
limited to the cost of production was the result of
government intervention in the economy [e.g. by
restricting competition through regulation, the prices
were artificially kept higher than they would have been
under free-market conditions]—the proposed solution,
therefore,
is
free-market
anarchism—
vs.
(2)
authoritarian socialism or state socialism, which held
that the reason for exorbitant profits was a failure of
free-markets—the proposed solution, therefore, is to
have regulated markets, state-ownership of the means of
production, and government oversight and management
of the economy.
The libertarian socialists criticized capitalism and
understood capitalism to be a system in which
government intervenes in the economy in order to do the
bidding of the capitalist class at the expense of the
proletariat or working class. The state socialists (led by
Karl Marx), on the other hand, held that the defining
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characteristic of capitalism is the unrestricted market. Of
course, this is blatantly untrue, as no free market ever
existed under capitalism at any point in its history. All
capitalist economies have been heavily interventionist in
nature.
Anarcho-capitalism developed as an attempt to divorce
anarchism from its roots in classical economics and
socialism. The anarcho-capitalists followed Marx in
defining capitalism as a free-market system. Anarchocapitalism developed out of the Austrian School of
economics and Carl Menger and Eugen von BöhmBawerk’s critique of Marxism. The Austrian School
attempted to refute Marxism by attacking “classical
economics” and the “labour theory of value.” By
rejecting the “labour theory of value,” they were able to
keep from having to face the theoretical problems raised
by socialist theory as understood by Marx and, therefore,
did not have to take Marx’s proposed solutions to those
problems seriously. Libertarian socialism or classical
anarchism, on the other hand, does not deny that there is
a problem of exploitation of the proletariat within the
existing system, but merely asserts that Marx’s proposed
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solution is faulty (i.e. government is the problem, not the
solution).
The flowchart below illustrates exactly where anarchism
as a political philosophy comes from.
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