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Mutualism and Equitable Commerce: A Libertarian Socialist Catechism By W. J. Whitman

What is mutualism? Mutualism is the oldest form of . It is a school of anarchist thought that holds that all economic transactions ought to mutually benefit both parties so that there is true in commerce and that social order should be based solely upon voluntary and mutual associations of . The early mutualists held that equitable commerce, just , 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 ? 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

No rights reserved, because there is no such thing as intellectual 1 . 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 , trades 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 under free- market 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

No rights reserved, because there is no such thing as intellectual 2 property. 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 ? The term capitalism in reference to a specific was originally coined by , a free-market economist and Ricardian socialist anarchist. Hodgskin used the term to refer to the existing economic system during the Industrial , 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 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 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 and 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 . 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 Anti- Capitalism) 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.”()

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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 ? Why do mutualists say that “” 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 . 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,

No rights reserved, because there is no such thing as intellectual 5 property. 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 or was enslaved to the capitalist class (i.e. that class of individuals who happen to “legally” own the means of production). Capitalism is merely industrialized , the heritage of 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 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 free- market conditions, firms would expand to their optimum size and then expand no further. The national and international 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

No rights reserved, because there is no such thing as intellectual 7 property. 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 . 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

No rights reserved, because there is no such thing as intellectual 8 property. 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. observed that all communistic experiments carried with them the problems associated with ownership; for individuals within groups always disagree about the proper way of managing collective property. Therefore, Warren rightly concluded that and management is generally preferable to collective property and group associations. Yet, Pierre- Joseph Proudhon simultaneously recognized alongside this observation that collective or group action is sometimes expedient and beneficial. Mutualism stands between absolute and , 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 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 free- market 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 system. Those who wish to get the running will have to co- operate 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

No rights reserved, because there is no such thing as intellectual 11 property. 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 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-

No rights reserved, because there is no such thing as intellectual 12 property. ownership of the means of production.” writes: “The economic principles of Modern Socialism are a logical deduction from the principle laid down by in the early chapters of his ‘ 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; , 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 … 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 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 —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-” 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 “” of the mutualists from the “statist socialism” or “” 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

No rights reserved, because there is no such thing as intellectual 16 property. 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. 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 “state- ownership 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,

No rights reserved, because there is no such thing as intellectual 17 property. 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

No rights reserved, because there is no such thing as intellectual 18 property. 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 , 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 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,

No rights reserved, because there is no such thing as intellectual 19 property. 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

No rights reserved, because there is no such thing as intellectual 20 property. 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

No rights reserved, because there is no such thing as intellectual 21 property. 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

No rights reserved, because there is no such thing as intellectual 22 property. consistent writer. He was, after all, at a disadvantage insofar as he was attempting to create a new . 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

No rights reserved, because there is no such thing as intellectual 23 property. 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

No rights reserved, because there is no such thing as intellectual 24 property. 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 in exchange rates would encourage

No rights reserved, because there is no such thing as intellectual 25 property. 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

No rights reserved, because there is no such thing as intellectual 26 property. 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

No rights reserved, because there is no such thing as intellectual 27 property. government 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 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

No rights reserved, because there is no such thing as intellectual 29 property. 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 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 , 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 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,

No rights reserved, because there is no such thing as intellectual 32 property. 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 even within

No rights reserved, because there is no such thing as intellectual 33 property. 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 long- needed 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 , our commerce, our education, and public opinion.”(True )

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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 (, 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

No rights reserved, because there is no such thing as intellectual 37 property. 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

No rights reserved, because there is no such thing as intellectual 38 property. 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. Anarcho- capitalism developed out of the Austrian School of economics and Carl Menger and Eugen von Böhm- Bawerk’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

No rights reserved, because there is no such thing as intellectual 39 property. 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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