Instead of a Book/Money and Interest




[Liberty, August 6, 1881.]

"Somebody gets the surplus wealth that labor produces and does not consume. Who is the Somebody?" Such is the problem recently posited in the editorial columns of the New York Truth. Substantially the same question has been asked a great many times before, but, as might have been expected, this new form of putting it has created no small hubbub. Truth's columns are full of it; other journals are taking it up; clubs are organizing to discuss it; the people are thinking about it; students are pondering over it. For it is a most momentous question. A correct answer to it is unquestionably the first step in the settlement of the appalling problems of poverty, intemperance, ignorance, and crime. Truth, in selecting it as a subject on which to harp and hammer from day to day, shows itself a level-headed, far-sighted newspaper. But, important as it is, it is by no means a difficult question to one who really considers it before giving an answer, thought the variety and absurdity of nearly all the replies thus far volunteered certainly tend to give an opposite impression.

What are the ways by which men gain possession of property? Not many. Let us name them: work, gift, discovery, gaming, the various forms of illegal robbery by force or fraud, usury. Can men obtain wealth by any other than one or more of these methods? Clearly, no. Whoever the Somebody may be, then, he must accumulate his riches in one of these ways. We will find him by the process of elimination.

Is the Somebody the laborer? No; at least not as laborer; otherwise the question were absurd. Its premises exclude him. He gains a bare subsistence by his work; no more. We are searching for his surplus product. He has it not.

Is the Somebody the beggar, the invalid, the cripple, the discoverer, the gambler, the highway robber, the burglar, the defaulter, the pickpocket, or the common swindler? None of these, to any extent worth mentioning. The aggregate of wealth absorbed by these classes of our population compared with the vast mass produced is a mere drop in the ocean, unworthy of consideration in studying a fundamental problem of political economy. These people get some wealth, it is true ; enough, probably, for their own purposes: but labor can spare them the whole of it, and never know the difference.

Then we have found him. Only the usurer remaining, he must be the Somebody whom we are looking for; he, and none other. But who is the usurer, and whence comes his power? There are three forms of usury: interest on money, rent of land and houses, and profit in exchange. Whoever is in receipt of any of these is a usurer. And who is not? Scarcely any one. The banker is a usurer; the manufacturer is a usurer; the merchant is a usurer; the landlord is a usurer; and the workingman who puts his savings, if he has any, out at interest, or takes rent for his house or lot, if he owns one, or exchanges his labor for more than an equivalent,—he too is a usurer. The sin of usury is one under which all are concluded, and for which all are responsible. But all do not benefit by it. The vast majority suffer. Only the chief usurers accumulate: in agricultural and thickly-settled countries, the landlords; in industrial and commercial countries, the bankers. Those are the Somebodies who swallow up the surplus wealth.

And where do the Somebodies get their power? From monopoly. Here, as usual, the State is the chief of sinners. Usury rests on two great monopolies,—the monopoly of land and the monopoly of credit. Were it not for these, it would disappear. Ground-rent exists only because the State stands by to collect it and to protect land-titles rooted in force or fraud. Otherwise the land would be free to all, and no one could control more than he used. Interest and house-rent exist only because the State grants to a certain class of individuals and corporations the exclusive privilege of using its credit and theirs as a basis for the issuance of circulating currency. Otherwise credit would be free to all, and money, brought under the law of competition, would be issued at cost. Interest and rent gone, competition would leave little or no chance for profit in exchange except in business protected by tariff of patent laws. And there again the State has but to step aside to cause the last vestige of usury to disappear.

The usurer is the Somebody, and the State is his protector. Usury is the serpent gnawing at labor's vitals, and only liberty can detach and kill it. Give laborers their liberty, and they will keep their wealth. As for the Somebody, he, stripped of his power to steal, must either join their ranks or starve.



[Liberty, September 17, 1881.]

One of the most noteworthy of Thomas Jefferson's sayings was that he "had rather live under newspapers without a government than under a government without newspapers." The Czar of Russia proposes to make this alternative unnecessary by establishing a national weekly journal to be distributed gratuitously in every village, whose carefully-concocted news paragraphs, severely-sifted political items, and rose-tinted editorials shall be read aloud on Sundays by designated officials to the assembled multitudes. This absurd proposal is no more absurd than that of a delegate to the State Convention of the Massachusetts Greenbackers, who desired that the government should add to its functions that of the collection of news to be furnished gratuitously to the daily journals. And this again is no more absurd than some of the proposals actually endorsed by a majority of the delegates to the same convention, nearly all of whose measures and methods, in fact, are quite of a piece with those of the aforesaid Czar.

For instance, one of the resolutions adopted (and we grieve to say that it was introduced by no less a person than our excellent and earnest friend, J. M. L. Babcock of Cambridge) asks the legislature to compel all corporations to distribute their profits in excess of six per cent. among their employees in the proportion of the scale of wages. Saying nothing of the fact that this resolution seriously offends liberty by denying that the equitable distribution of property which the labor movement seeks must result, not from legislative enactment, but from the free play of natural laws, it also offends equity by admitting that capital is entitled to a portion of labor's product, and that the producer is entitled to exact a profit from the consumer! Yet we are told that only one man in that whole convention had the brains and the courage to rise from his seat and proclaim the great truth that, if labor can claim anything, it can and should claim all. What wonder that this half-hearted, half-headed Greenback party excites among intelligent people no sentiment higher than that of a pity akin to contempt! Mr. Babcock's resolution would take the labor movement off of its basis of right, and degenerate it into an unprincipled scramble for spoils by which the strongest would profit. Take the half-loaf who will; we shall never cease to reiterate that the whole loaf rightfully belongs to those who raise the wheat from the soil, grind it into flour, and bake it into bread, and not the smallest taste of it to the sharpers who deceive the unthinking masses into granting them a monopoly of the opportunities of performing these industrial operations, which opportunities they in return rent back to the people on condition of receiving the other half of the loaf.




[Liberty, October i, 1881.]

My dear Mr. Tucker:

Why do you "grieve" at a difference of opinion between us? Am I to be bribed to agree with a valued friend by the fear that he will grieve if I do not? Liberty, I should say, imposes no such burden on freedom of thought, but rather rejoices in its fullest exercise.

I did not know that the "no-profit" theory had become so well established, or so generally accepted, as to render ridiculous any proposition not based upon it.

Yet that is the only point I understand you to urge against the measure I proposed. But I never could see that labor, in its unequal struggle for its rights, gained anything by extravagant claims. Whatever contributes to production is entitled to an equitable share in the distribution. In the production of a loaf of bread (the example which you set forth in a magnificent paragraph), the plough performs an important, if not indispensable service, and equitably comes in for a share of the loaf. Is that share to be a slice which compensates only for the wear and tear? It seems to me that it should be slightly thicker, even if no more than "the ninth part of a hair." For suppose one man spends his life in making ploughs to be used by others who sow and harvest wheat. If he furnishes his ploughs only on condition that they be returned to him in as good state as when taken away, how is he to get his bread? Labor, empty-handed, proposes to raise wheat; but it can do nothing without a plough, and asks the loan of one from the man who made it. If this man receives nothing more than his plough again, he receives nothing for the product of his own labor, and is on the way to starvation. What proportion he ought to receive is another question, on which I do not enter here; it may be ever so small, but it should be something.

Capital, we will agree, has hitherto had the lion's share; why condemn a measure which simply proposes to restore to labor a portion at least of what it is entitled to ?

I say nothing on the theory of "natural laws," because I understood you to suggest that point only to waive it.

Cordially yours,

J. M. L. Babcock.[1]



[From Ruskin's Letters to British Workmen.]

What you call "wages," practically, is the quantity of food which the possessor of the land gives you to work for him. There is, finally, no "capital" but that. If all the money of all the capitalists in the whole world were destroyed—the notes and bills burnt, the gold irrecoverably buried, and all the machines and apparatus of manufactures crushed, by a mistake in signals, in one catastrophe—and nothing remained but the land, with its animals and vegetables, and buildings for shelter—the poorer population would be very little worse off than they are at this instant; and their labor, instead of being "limited" by the destruction, would be greatly stimulated. They would feed themselves from the animals and growing crop; heap here and there a few tons of ironstone together, build rough walls round them to get a blast, and in a fortnight they would have iron tools again, and be ploughing and fighting, just as usual. It is only we who had the capital who would suffer; we should not be able to live idle, as we do now, and many of us—I, for instance—should starve at once; but you, though little the worse, would none of you be the better eventually for our loss—or starvation. The removal of superfluous mouths would indeed benefit you somewhat for a time; but you would soon replace them with hungrier ones; and there are many of us who are quite worth our meat to you in different ways, which I will explain in due place; also I will show you that our money is really likely to be useful to you in its accumulated form (besides that, in the instances when it has been won by work, it justly belongs to us), so only that you are careful never to let us persuade you into borrowing it and paying us interest for it. You will find a very amusing story, explaining your position in that case, at the one hundred and seventeenth page of the "Manual of Political Economy," published this year at Cambridge, for your early instruction, in an almost devotionally catechetical form, by Messrs. Macmillan.

Perhaps I had better quote it to you entire; it is taken by the author "from the French."

"There was once in a village a poor carpenter who worked hard from morning till night. One day James thought to himself, 'With my hatchet, saw, and hammer I can only make coarse furniture, and can only get the pay for such. If I had a plane, I should please my customers more, and they would pay me more. Yes, I am resolved I will make myself a plane.' At the end of ten days James had in his possession an admirable plane which he valued all the more for having made it himself. Whilst he was reckoning all the profits which he expected to derive from the use of it, he was interrupted by William, a carpenter in the neighboring village. William, having admired the plane, was struck with the advantages which might be gained from it. He said to James:

"'You must do me a service; lend me the plane for a year.' As might be expected, James cried out, 'How can you think of such a thing, William? Well, if I do you this service, what will you do for me in return?'

" W. 'Nothing. Don't you know that a loan ought to be gratuitous?' l82 INSTEAD OF A BOOK. "J. 'I know nothing of the sort; but I do know that if I were to lend you my plane for a year, it would be giving it to you. To tell you the truth, that was not what I made it for.'

"W. 'Very well, then; I ask you to do me a service; what service do you ask me in return?'

"J. 'First, then, in a year the plane will be done for. You must therefore give me another exactly like it.'

"W. 'That is perfectly just. I submit to these conditions. I think you must be satisfied with this, and can require nothing further.'

"J. 'I think otherwise. I made the plane for myself, and not for you. I expected to gain some advantage from it. I have made the plane for the purpose of improving my work and my condition; if you merely return it to me in a year, it is you who will gain the profit of it, during the whole of that time. I am not bound to do you such a service without receiving anything in return. Therefore, if you wish for my plane besides the restoration already bargained for, you must give me a new plank as a compensation for the advantages of which I shall be deprived.'

"These terms were agreed to, but the singular part of it is that at the end of the year, when the plane came into James's possession, he lent it again; recovered it, and lent it a third and fourth time. It has passed into the hands of his son, who still lends it. Let us examine this little story. The plane is the symbol of all capital, and the plank is the symbol of all interest."

If this be an abridgment, what a graceful piece of highly-wrought literature the original story must be! I take the liberty of abridging it a little more.

James makes a plane, lends it to William on 1st of January for a year. William gives him a plank for the loan of it, wears it out, and makes another for James, which he gives him on 31st December. On 1st January he again borrows the new one; and the arrangement is repeated continuously. The position of William therefore is that he makes a plane every 31st of December, lends it to James till the next day, and pays James a plank annually for the privilege of lending it to him on that evening. This, in future investigations of capital and interest, we will call, if you please, "The Position of William."

You may not at the first glance see where the fallacy lies (the writer of the story evidently counts on your not seeing it at all).

If James did not lend the plane to William, he could only get his gain of a plank by working with it himself and wearing it out himself. When he had worn it out at the end of the year, he would, therefore, have to make another for himself. William, working with it instead, gets the advantage instead, which he must, therefore, pay James his plank for; and return to James what James would, if he had not lent his plane, then have had—not a new plane, but the worn-out one. James must make a new one for himself, as he would have had to do if no William had existed; and if William likes to borrow it again for another plank, all is fair.

That is to say, clearing the story of its nonsense, that James makes a plane annually and sells it to William for its proper price, which, in kind, is a new plank. But this arrangement has nothing whatever to do with principal or with interest. There are, indeed, many very subtle conditions involved in any sale; one among which is the value of ideas; I will explain that value to you in the course of time (the article is not one which modern political economists have any familiarity with dealings in), and I will tell you somewhat also of the real nature of interest; but if you will only get for the present a quite clear idea of "The Position of William," it is all I want of you.




[Liberty, October 1, 1881.]

Liberty's strictures, in her last issue, upon the proposal of the Massachusetts Greenbackers, adopted at their Worcester convention, to ask the legislature to compel all corporations to distribute their profits in excess of six per cent, among the employees in proportion to their wages has stirred up Mr. J. M. L. Babcock, the author of that singular project, to a defence of it. And in defending it against Liberty, he is obliged to do so in behalf of capital. It seems a little odd to find this long-time defender of the rights of labor in the rôle of champion of the claims of capital; but we remember that he is one who follows the lead of justice as he sees it, take him where it may.

Before proceeding to the main question, he gives us two minor points to settle. First, he very pertinently asks why we "grieve" at his course. We answer by taking it all back. As he says, Liberty should rejoice, rather than grieve, at the honest exercise of the right to differ. When we hastily said otherwise, we said a very foolish thing. Yes, worse than that; in so far we were false to our own standard. Mr. Babcock has Liberty's sincerest thanks for recalling her to her own position. May he and all never fail to sharply prod us, whenever they similarly catch us napping!Reading this paragraph eleven years later, I am inclined to regret that I wrote it. So few are the manifestations of good nature in my polemical writings, that I can ill afford to disown any of them; but it really seems that on this occasion I tried a little too hard to be fair. The grief for which I thus apologized was over the fact that Mr. Babcock held an opinion in favor of injustice,—not over the fact that, holding such an opinion, he gave expression to it.

Second, he assumes that the profit idea cannot be ridiculous (as we pronounced it), since its converse is not well established or generally accepted. To say that the no-profit theory is not well established is to beg the principal question under discussion; to say that, because the theory is not generally accepted, the few friends that it has are not entitled to ridicule the position of its enemies is not in accordance with the nature of ideas or the custom of Mr. Babcock. How often have we listened with delight to his sarcastic dissection and merciless exposure to the light of common sense of some popular and well-nigh universal delusion in religion, politics, finance, or social life! He is in the habit of holding ridiculous all those things, whoever supports them, which his own reason pronounces absurd. And he is right in doing so, and wrong in saying that we ought not to follow his example. So, while it is clear that on the first minor point Mr. Babcock has the better of Liberty, on the second Liberty as decidedly has the better of Mr. Babcock.

Now to the question proper. Labor, says our friend, never gains anything by extravagant claims. True; and no claim is extravagant that does not exceed justice. But it is equally true that labor always loses by foolish concessions; and in this industrial struggle every concession is foolish that falls short of justice. It is to be decided, then, not whether Liberty's claim for labor is extravagant, but whether it is just. "Whatever contributes to production is entitled to an equitable share in the distribution!" Wrong! Whoever contributes to production is alone so entitled. What has no rights that Who is bound to respect. What is a thing. Who is a person. Things have no claims; they exist only to be claimed. The possession of a right cannot be predicated of dead material, but only of a living person. "In the production of a loaf of bread, the plough performs an important service, and equitably comes in for a share of the loaf." Absurd! A plough cannot own bread, and, if it could, would be unable to eat it. A plough is a What, one of those things above mentioned, to which no rights are attributable.

Oh! but we see, "Suppose one man spends his life in making ploughs to be used by others who sow and harvest wheat. If he furnishes his ploughs only on condition that they be returned to him in as good state as when taken away, how is he to get his brea ?" It is the maker of the plough, then, and not the plough itself, that is entitled to a rewar ? What has given place to Who. Well, we'll not quarrel over that. The maker of the plough certainly is entitled to pay for his work. Full pay, paid once; no more. That pay is the plough itself, or its equivalent in other marketable products,said equivalent being measured by the amount of labor employed in their production. But if he lends his plough and gets only his plough back, how is he to get his bread? asks Mr. Babcock, much concerned. Ask us an easy one, if you please. We give this one up. But why should he lend his plough? Why does he not sell it to the farmer, and use the proceeds to buy bread of the baker ? See, Mr. Babcock? If the lender of the plough "receives nothing more than his plough again, he receives nothing for the product of his own labor, and is on the way to starvation." Well, if the fool will not sell his plough, let him starve. Who cares? It's his own fault. How can he expect to receive anything for the product of his own labor if he refuses to permanently part with it? Does Mr. Babcock propose to steadily add to this product at the expense of some laborer, and meanwhile allow this idler, who has only made a plough, to loaf on in luxury, for the balance of his life, on the strength of his one achievement? Certainly not, when our friend understands himself. And then he will say with us that the slice of bread which the plough-lender should receive can be neither large nor small, but must be nothing.

To that end we commend to Mr. Babcock the words of his own candidate for Secretary of State, nominated at the Worcester convention, A. B. Brown, editor of The Republic, who says: "The laborers of the world, instead of having only a small fraction of the wealth in the world, should have all the wealth. To effect this all monopolies should be terminated,—whether they be monopolies of single individuals or 'majorities,'—and labor-cost must be recognized as the measure and limit of price." If Mr. Brown sticks to these words, and the Greenbackers to their platform, there is going to be a collision, and Mr. Brown will keep the track. But lest Mr. Brown's authority should not prove sufficient, we refer Mr. Babcock further to one of his favorite authors, John Ruskin, who argues this very point on Mr. Babcock's own ground, except that he illustrates his position by a plane instead of a plough. Mr. Babcock may find his words under the heading, "The Position of William," immediately following his own letter to us. If he succeeds in showing Mr. Brown's assertions to be baseless and Mr. Ruskin's arguments to be illogical, he may then come to Libertyfor other foes to conquer. Till then we shall be but an interested spectator of his contest.



[Liberty, October 15, 1881.]

My dear Mr. Tucker:

It is entirely immaterial in this discussion whether my position is "odd" or otherwise. The question at issue must be settled, if settled at all, on its own merits; and no prejudice either for or against capital can affect the argument. Let us burden it with no irrelevant matter. My question was simply this; Is a man who loans a plough entitled in equity to compensation for its use; and if not, why not?

This question (I say it with all respect) you evade. But, until it is answered, no progress can be made in this inquiry, It is no answer to say, "Let him sell his plough." He does not sell it; he loans it, as he has a natural right to do. Another borrows it, as he has a natural right to do. I repeat: Is it just to pay for its use?

You gain nothing when you say, "Let him sell"; for, if I followed you there, it would only be to present the same question substantially in another form. You might then suggest another alternative, until we "swung round the circle," and came back to the first. So let us save time and meet it at once. If it cannot be met where I proposed it, I do not see that It can be answered anywhere. If your theory will not bear an application to the example I stated, what is it good for? I have never seen a good reason why the plough-maker is not entitled to pay for the use of his plough.

You refer me to certain "authorities,"—Brown and Ruskin. I do not bow to authorities on questions of this nature; and I supposed you did not. I ask for a reason, not a name. Brown's proposition, which I affirm as stoutly as he does, does not answer my question. Ruskin is equally remote. He concludes that the case he examines is one of sale and purchase. That is not the case I stated at all. If there be an answer to my question, I am sure you are capable of stating it.

Yours cordially,

J. M. L. Babcock.

We have no wish to waste these columns in repetition; but this charge of evasion is a serious one, which can be thoroughly examined only by reviewing ground already traversed. One of the objects that we had in view in beginning the publication of this journal was the annihilation of usury. If in our first direct conflict with a supporter of usury we have been guilty of evasion, we are unfitted for our task, and ought to abandon it to hands more competent. But we unhesitatingly plead "not guilty."

Mr. Babcock argued that the man who makes a plough and lends it is entitled to a portion of the loaf subsequently produced in addition to the return of his plough intact. He now asserts that we answered this by saying, "Let him sell his plough." No, we did not. On the principle that only labor can be an equitable basis of price, we argued in reply as follows: "The maker of the plough certainly is entitled to pay for his work. Full pay, paid once; no more. That pay is the plough itself, or its equivalent in other marketable products, said equivalent being measured by the amount of labor employed in their production." True or false, this answer is direct and tangible; in no sense is it evasive. Then Mr. Babcock asked this other and distinct question: "If he furnishes his ploughs only on condition that they be returned to him in as good state as when taken away, how is he to get his bread?" We replied that we did not know, and that, if he was such a fool as to do so, we did not care. Nothing evasive here, either; on the contrary, utter frankness. Touched a little, however, by Mr. Babcock's sympathy with the usurer thus threatened with starvation, we ventured the suggestion that, instead of lending his plough to the farmer, he might sell it to him, and thus get money wherewith to buy bread of the baker. This advice was gratuitous, we know; possibly it was impertinent, also; but was it evasive? Not in the least.

Finally, thinking that Mr. Babcock might agree, as we do, with Novalis that a man's belief gains quite infinitely the moment another mind is convinced thereof, we called his attention to two other minds in harmony with ours on the point now in dispute, A. B. Brown and John Ruskin. But not as authorities, in Mr. Babcock's sense of the word. Still, Mr. Brown being Mr. Babcock's candidate for Secretary of State, and party candidates being supposedly representative in things fundamental, we deemed it not out of place to cite a proposition from Mr. Brown that seemed to us, on its face, directly contradictory of Mr. Babcock. To our astonishment Mr. Babcock accepts it as not inconsistent with his position, at the same time declaring it irrelevant. Argument ends here. If we hold up two objects, one of which, to our eyes, is red and the other blue, and Mr. Babcock declares that both are red, it is useless to discuss the matter. One of us is color-blind. The ultimate verdict of mankind will decide which. In quoting from Mr. Ruskin, however, we did not ask Mr. Babcock to accept him as authority, but to point out the weakness of an argument drawn from an illustration similar to Mr. Babcock's. Mr. Babcock replies by denying the similarity, saying that Ruskin "concludes that the case he examines is one of sale and purchase." Let us see. Ruskin is examining a story told by Bastiat in illustration and defence of usury. After printing Bastiat's version of it, he abridges it thus, stripping away all mystifying clauses:

James makes a plane, lends it to William on 1st of January for a year. William gives him a plank for the loan of it, wears it out, and makes another for James, which he gives him on 31st December. On 1st January he again borrows the new one; and the arrangement is repeated continuously. The position of William, therefore, is that he makes a plane every 31st of December; lends it to James till the next day, and pays James a plank annually for the privilege of lending it to him on that evening.

Substitute in the foregoing "plough" for "plane," and "loaf" or "slice" for "plank," and the story differs in no essential point from Mr. Babcock's. How monstrously unjust the transaction is can be plainly seen. Ruskin next shows how this unjust transaction may be changed into a just one:

If James did not lend the plane to William, he could only get his gain of a plank by working with it himself and wearing it out himself. When he had worn it out at the end of the year, he would, therefore, have to make another for himself. William, working with it instead, gets the advantage instead, which he must, therefore, pay James his plank for; and return to James what James would, if he had not lent his plane, then have had—not a new plane, but the worn-out one. James must make a new one for himself, as he would have had to do if no William had existed; and if William likes to borrow it again for another plank, all is fair. That is to say, clearing the story of its nonsense, that James makes a plane annually and sells it to William for its proper price, which, in kind, is a new plank.

It is this latter transaction, wholly different from the former, that Ruskin pronounces a "sale," having "nothing whatever to do with principal or with interest." And yet, according to Mr. Babcock, "the case he examines [Bastiat's, of course] is one of sale and purchase." We understand now how it is that Mr. Babcock can charge us with evasion. He evidently conceives his method of meeting a point to be straightforward. If it be so, certainly ours is evasive. If, on the other hand, our course has been straightforward, evasion is too mild a term for his. It is better described as fiat misstatement; purely careless, of course, but scarcely less excusable than if wilful. Again we invite our friend to a careful examination (and refutation, if possible) of the arguments advanced.



[Liberty, November 12, 1881.]

Mr. Tucker:

In your issue of October 15, I notice a question by J. M. L. Babcock, and, although you have answered it, yet I beg to give my answer. The question is this: "Is a man who loans a plough entitled in equity to compensation for its use?" My answer is, "Yes." Now, then, what of it? Does that make something for nothing right? Let us see. We must take it for granted that the loaning of the plough was a good business transaction. Such being the case, the man who borrows the plough must give good security that he will return the plough and pay for what he wears out. He must have the wealth or the credit to make the owner of the plough whole in case he should break or lose the plough. Now, I claim that this man, having the wealth or credit to secure a borrowed plough, could transmute that same credit or security into money, without cost, and with the money buy a plough, were it not for a monopoly of money. For a monopoly of money implies a monopoly of everything that money will buy.

If the people should give to landholders, as a right, what they now give to bondholders as a special privilege—why, you might loan ploughs for a price, but the price would not include a money cost, as is inevitable under our present monetary system.

Let us remember that an individual transaction under a system of monopoly does not represent nor illustrate the truth as it would be under a natural or just system. Again, superficial ideas do not always harmonize with the central truth.

Briefly, but truly yours,





[Liberty, November 26, 1881.]

My dear Mr. Tucker:

Allow me just to say that "Apex" is in error in supposing he has answered my question. It appears by his own comment that his "Yes" means that the plough-lender is entitled to pay for the wear and tear of the plough. I asked: Is he entitled to pay for its use? I marvel that he should overlook the distinction, for I had been careful to mark it in my first statement. When the question as I put it is answered in the affirmative, I shall be ready to answer the other, "What of it?" But I am still left to the mournful impression that my question is not answered.

Yours cordially,

J. M. L. Babcock.



[Liberty, November 26, 1881.]

Paying money for the use of money is a great and barbarous wrong. It is also a stupendous absurdity. No one man can use money. The use of money involves its transfer from one to another. Therefore, as no one man can use money, it cannot be right and proper for any man to pay for the use of that which he cannot use. The people do use money; consequently, they should pay whatever the money may cost.

Money is necessarily a thing which belongs to society. This is one of the great truths of civilization which has been generally overlooked. For this whole question of the rightfulness of interest turns on the question, "What is money?" So long as the people shall continue to consider money as a thing of itself objectively—why, there is no hope for humanity. All wealth is the product of labor, but no labor can produce money. There can be no money until some wealth has been produced, because money is a representative of wealth.

Money is a form of credit—credit in circulation. It is not a thing of substance. The great object of money is to exchange values. Now, value is an idea, and money is used to represent, count, and exchange values. The symbol or token of money is not the money itself. Therefore, as money is not a thing of substance, and cannot wear out, it is and ever must be a great wrong and an utter absurdity to give wealth for the use of an idea.

In equity compensation implies service or labor, and as money does not cost labor, why, labor cannot justly be demanded for its use. But let us look at it practically. The people use money; the people furnish the money; and, if the cost of issue is paid, there can be no other expense. The great difficulty touching this whole matter is a barbarous misconception of the nature of money and a more barbarous disposition to monopolize power and rob the weak. For—let us ask—who pays the great tax of interest? Not those who have and handle the money; not those who use the money; but the poor, the weak, the ignorant, the dupes of the ruling class. We can illustrate this by a fact of to-day. If five or more men having one hundred thousand dollars, and no more, organize and establish a national bank, just so soon as their bank is in operation they have the use and income of one hundred and ninety thousand dollars. Now, is it not clear that, this company having got ninety thousand dollars for nothing, somebody has lost that amount? For, if one man gets a dollar that he has not earned, some other man has earned a dollar that he has not got. That is as certain as that two and two make four.

If all men could use their own credit in the form of money, there could be no such thing as interest. Yet, to put this idea into practice, there must be organization and consolidation of credit. Commercial credit, to be good, must be known to be good. A man's credit may be good to the extent of a thousand dollars, but, that fact not being generally known, he must, as things are, exchange his credit for that which is known to be good, and pay a monopoly price for the privilege of using his own credit in the form of money.

Let us remember that no man can borrow money, as a good business transaction, under any system, unless he has the required security to make the lender whole in case he should lose the money. What a stupendous wrong is this—that a man having credit cannot use it, but must exchange it and pay a monopoly price, which is really for the privilege of using his own credit!

And again, he cannot pay this himself, but must compel the poor man to work out this tax; the latter must pay this interest in the enhanced price of goods. I wonder if the people will always be thus blind and stupid!

So long as business men, as such, and laborers shall continue to permit the few shrewd moneyed men to monopolize commercial credit—that is, money—just so long will it be hard times for business and labor. What we want now is the organization of credit on a just and equal plan. William B. Greene solved this whole matter and summed it up in two words: "Mutual Banking." That is what we want.





[Liberty, December 10, 1881.]

"Apex" says that it is a barbarism to pay interest on money. That is another way of saying that a state of society in which wealth is not universalized is barbarous, since, in our present stage of evolution, those who have no capital of their own will be glad to borrow from those who have, and to pay interest for the use of the capital.

For it is really capital that is borrowed, and not money, the latter being only the means for obtaining the former, as money would be worthless if it could not be exchanged for the capital needed. We see already that, as the loanable capital of a country increases, the rate of interest diminishes, and when the accumulated wealth of the world becomes large enough no one will pay interest.

But to denounce the payment of interest to-day, and (if it could be done) to forbid the man of ability, but lacking means, borrowing the capital he needs, or, in other words, using his credit, would not tend to universalize wealth and so destroy usury; but, on the other hand, it would discourage the production and accumulation of capital, since one of the principal incentives to that production is the use of capital to increase production and add to one's wealth. It is obvious that, unless the use of capital added to the productiveness of labor, no one would wish to borrow, and no usury could be had. It should not be forgotten, in considering this question, that, in the last analysis, reducing things to their simplest, individualized form, the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production. For example, two men work side by side; one consumes all he produces, the other saves part of his product. In time the latter has saved enough to enable him to build or buy a tool by the aid of which he accomplishes four times as much work as before, and is able to go on adding to his accumulation. The one who has not saved, seeing the advantage of the use of capital, naturally desires to obtain the same benefit for himself; but, not liking to save and wait until he can create capital, he proposes to borrow a portion of the capital of the other. By means of this borrowed capital he can quadruple his product, and is very willing to give a part of his increased product to the neighbor who has befriended him. Would he not be a mean sneak if he were not glad to do so? By the use of the borrowed capital he is not only enabled to pay for the advantage gained, but, by his greater power to produce, he can, in a short time, buy his own tools and no longer be forced to borrow.

Although our present system of business is vastly complicated, and we sometimes seem to borrow money merely, the actual transaction being kept out of sight, yet the case supposed is the real basis of all just payment of interest. I believe there will be a state of society in which money will not be necessary, but that state cannot be built up by commencing at the top. We must build from the foundation, understanding things as they are as well as knowing how they ought to be.

The question is asked—and it is a very important one, and, simple as it is at bottom, a complex one as it stands—What is money? It would simplify this matter very much if all would agree to call coin, or money having value as merchandise, money, and paper, or representative money, currency, or notes. It is plain that the representative money is that which must be and is principally used in this country and in all commercial countries. Coin money derives its real value in exchange, and as a measure for the exchangeable value of other products, from the fact that it costs labor to produce it; and, although government laws may foolishly try to make it pass for more than its cost value, they never succeed in doing so. No government ever has succeeded in overriding natural law, though they may and often do obstruct the operations of Nature's laws to the great detriment of Nature's children. The simplest form of representative money, or currency, is furnished by Josiah Warren's labor note, which was substantially as follows (I quote from memory):

For value received, I promise to pay bearer, on demand, one hour's labor, or ten pounds of corn.

Josiah Warren.

Modern Times, July 4, 1852.


So long as it was believed by his neighbors that the maker of such notes always had the corn on hand with which to redeem them (since their redemption in labor would rarely be practicable or desirable), they would pass current in that locality; and, in fact, such "labor notes" did pass to a limited extent at Modern Times. Interesting as that experiment was, and showing clearly, as it does, the principle at the basis of all good currency, it could not be extended so as to satisfy the needs of a great commercial country, or, safely, of a large neighborhood.

But a currency, to be good, must possess precisely the qualifications and qualities of that labor note, with the addition of a guaranty, universally recognizable, that the notes actually do represent solid wealth with which they will be redeemed on demand. Now, there is one thing, and only one, that government can rightfully or usefully do in the way of interference with the currency, the ebb and flow of which is governed by natural laws altogether out of the reach of State or national governments; and that is to issue all the notes used for currency on such terms that it shall be universally known truly to represent actual, movable capital (not land, which is not property in the true sense, and which cannot be carried off by any one wishing a note redeemed), pledged for its redemption. There should be no monopoly, but any and every person complying with the terms should be furnished with the national note. Of course, no one who had not the requisite capital could procure these notes, and rightly so, because notes made by those who have no capital would swindle the people. And, as our government has no property or capital, except the necessary tools for carrying on the affairs of the nation, and as government should have no debts and no gold and silver accumulated, it is obvious that it cannot properly make a good note beyond the amount which could be redeemed in payment of taxes. And, as taxes ought to be diminished and ultimately abolished, there is no valid basis for a government note to be used as currency. Neither will Mutual Banks answer any good purpose if the notes are based on land.


The remarks that follow are not intended to debar "Apex" from answering his opponent in his own time and way, but simply to combat, from Liberty's standpoint, such of the positions taken by "Basis" as seem to need refutation.

The first error into which "Basis" falls is his identification of money with capital. Representative money is not capital; it is only a title to capital. He who borrows a paper dollar from another simply borrows a title.[3] Consequently he takes from the lender nothing which the lender wishes to use; unless, indeed, the lender desires to purchase capital with his dollar, in which case he will not lend it, or, if he does, will charge for the sacrifice of his opportunity,—a very different thing from usury, which is payment, not for the lender's sacrifice, but for the borrower's use; that is, not for a burden borne, but for a benefit conferred. Neither does the borrower of the dollar take from the person of whom he purchases capital with it anything which that person desires to use; for, in ordinary commerce, the seller is either a manufacturer or a dealer, who produces or buys his stock for no other purpose than to sell it. And thence this dollar goes on transferring products for which the holders thereof have no use, until it reaches its issuer and final redeemer and is cancelled, depriving, in the course of its journey, no person of any opportunity, but, on the contrary, serving the needs of all through whose hands it passes. Hence borrowing a title to capital is a very different thing from borrowing capital itself. But under the system of organized credit contemplated by "Apex" no capable and deserving person would borrow even a title to capital. The so-called borrower would simply so change the face of his own title as to make it recognizable by the world at large, and at no other expense than the mere cost of the alteration. That is to say, the man having capital or good credit, who, under the system advocated by "Apex," should go to a credit-shop—in other words, a bank—and procure a certain amount of its notes by the ordinary processes of mortgaging property or getting endorsed commercial paper discounted, would only exchange his own personal credit—known only to his immediate friends and neighbors and the bank, and therefore useless in transactions with any other parties—for the bank's credit, known and receivable for products delivered throughout the State, or the nation, or perhaps the world. And for this convenience the bank would charge him only the labor-cost of its service in effecting the exchange of credits, instead of the ruinous rates of discount by which, under the present system of monopoly, privileged banks tax the producers of unprivileged property out of house and home. So that "Apex" really would have no borrowing at all, except in certain individual cases not worth considering; and, therefore, when "Basis," answering "Apex," says that "it is really capital that is borrowed, and not money," he makes a remark for which there is no audible call.

The second error committed by "Basis" he commits in common with the economists in assuming that an increase of capital decreases the rate of interest and that nothing else can materially decrease it. The facts are just the contrary. The rate of interest may, and often does, decrease when the amount of capital has not increased; the amount of capital may increase without decreasing the rate of interest, which may in fact increase at the same time; and so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sine qua non of the universalization of wealth.

Suppose, for instance, that the banking business of a nation is conducted by a system of banks chartered and regulated by the government, these banks issuing paper money based on specie, dollar for dollar. If now a certain number of these banks, by combining to buy up the national legislature, should secure the exclusive privilege of issuing two paper dollars for each specie dollar in their vaults, could they not afford to, and would they not in fact, materially reduce their rate of discount? Would not the competing banks be forced to reduce their rate in consequence? And would not this reduction lower the rate of interest throughout the nation? Undoubtedly; and yet the amount of capital in the country remains the same as before.

Suppose, further, that during the following year, in consequence of the stimulus given to business and production by this decrease in the rate of interest and also because of unusually favorable natural conditions, a great increase of wealth occurs. If then the banks of the nation, holding from the government a monopoly of the power to issue money, should combine to contract the volume of the currency, could they not, and would they not, raise the rate of interest thereby? Undoubtedly; and yet the amount of capital in the country is greater than it ever was before.

But suppose, on the other hand, that all these banks, chartered and regulated by the government and issuing money dollar for dollar, had finally been allowed to issue paper beyond their capital based on the credit and guaranteed capital of their customers; that their circulation, thus doubly secured, had become so popular that people preferred to pay their debts in coin instead of bank-notes, thus causing coin to flow into the vaults of the banks and add to their reserve; that this addition had enabled them to add further to their circulation, until, by a continuation of the process, it at last amounted to eight times their original capital; that by levying a high rate of interest on this they had bled the people nigh unto death; that then the government had stepped in and said to the banks: "When you began, you received an annual interest of six per cent. on your capital; you now receive nearly that rate on a circulation eight times your capital based really on the people's credit; therefore at one-eighth of the original rate your annual profit would be as great as formerly; henceforth your rate of discount must not exceed three-fourths of one per cent." Had all this happened (and with the exception of the last condition of the hypothesis similar cases have frequently happened), what would have been the result? Proudhon shall answer for us. In the eighth letter of his immortal discussion with Bastiat on the question of interest he exhausts the whole subject of the relation of interest to capital; and "Basis" cannot do better than read the whole of it. A brief extract, however, must suffice here. He is speaking of the Bank of France, which at that time (1849) was actually in almost the same situation as that described above. Supposing, as we have just done after him, a reduction of the rate of discount to three-fourths of one per cent., he then asks, as we do, what the result would be. These are his words in answer to Bastiat, the "Basis" of that discussion :

The fortune and destiny of the country are to-day in the hands of the Bank of France. If it would relieve industry and commerce by a decrease of its rate of discount proportional to the increase of its reserve; in other words, if it would reduce the price of its credit to three-fourths of one per cent., which it must do in order to quit stealing,—this reduction would instantly produce, throughout the Republic and all Europe, incalculable results. They could not be enumerated in a volume; I will confine myself to the indication of a few.

If, then, the credit of the Bank of France should be loaned at three-fourths of one per cent., ordinary bankers, notaries, capitalists, and even the stockholders of the bank itself would be immediately compelled by competition to reduce their interest, discount, and dividends to at least one per cent., including incidental expenses and brokerage. What harm, think you, would this reduction do to borrowers on personal credit, or to commerce and industry, who are forced to pay, by reason of this fact alone, an annual tax of at least two thousand millions?

If financial circulation could be effected at a rate of discount representing only the cost of administration, drafting, registration, etc., the interest charged on purchases and sales on credit would fall in its turn from six per cent. to zero,—that is to say, business would then be transacted on a cash basis; there would be no more debts. Again, to how great a degree, think you, would that diminish the shameful number of suspensions, failures, and bankruptcies?

But, as in society net product is undistinguishable from raw product, so in the light of the sum total of economic facts CAPITAL is undistinguishable from PRODUCT. These two terms do not, in reality, stand for two distinct things; they designate relations only. Product is capital; capital is product: there is a difference between them only in private economy; none whatever in public economy. If, then, interest, after having fallen in the case of money to three-fourths of one per cent.,—that is, to zero, inasmuch as three-fourths of one per cent. represents only the service of the bank,—should fall to zero in the case of merchandise also, by analogy of principles and facts it would soon fall to zero in the case of real estate; rent would disappear in becoming one with liquidation. Do you think, sir, that that would prevent people from living in houses and cultivating land?

If, thanks to this radical reform in the machinery of circulation, labor was compelled to pay to capital only as much interest as would be a just reward for the service rendered by the capitalist, specie and real estate being deprived of their reproductive properties and valued only as products,—as things that can be consumed and replaced,—the favor with which specie and capital are now looked upon would be wholly transferred to products; each individual, instead of restricting his consumption, would strive only to increase it. Whereas, at. present, thanks to the restriction laid upon consumable products by interest, the means of consumption are always very much limited, then, on the contrary, production would be insufficient; labor would then be secure in fact as well as in right.

The laboring class gaining at one stroke the five thousand millions, or thereabouts, now taken in the form of interest from the ten thousand millions which it produces, plus five thousand millions which this same interest deprives it of by destroying the demand for labor, plus five thousand millions which the parasites, cut off from a living, would then be compelled to produce, the national production would be doubled and the welfare of the laborer increased fourfold. And you, sir, whom the worship of interest does not prevent from lifting your thoughts to another world,—what say you to this improvement of affairs here below? Do you see now that It is not the multiplication of capital which decreases interest, but, on the contrary, that it is the decrease of interest which multiplies capital?

Now, this reduction of the rate of discount to the bank's service, and the results therefrom as above described, are precisely what would happen if the whole business of banking should be thrown open to free competition. It behooves "Basis" to examine this argument well; for, unless he can find a fatal flaw in it, he must stand convicted, in saying that "when the accumulated wealth of the world becomes large enough, no one will pay interest," of putting the cart before the horse.

"Basis" is in error a third time in assuming that "Apex" wishes to "forbid the man of ability, but lacking means, using his credit." It is precisely because such men are now virtually prohibited from using their credit that "Apex," and Liberty with him, complains. This singular misconception on the part of "Basis" indicates that he does not yet understand what he is fighting.

The fourth error for which "Basis" assumes responsibility is found in his statement that "in the last analysis the possessor of capital has acquired it by a willingness to work harder than his fellows and to sacrifice his love of spending all he produces that he may have the aid of capital to increase his power of production." A man who thoroughly means to tell the truth here reiterates one of the most devilish of the many infernal lies for which the economists have to answer. It is indeed true that the possessor of capital may, in rare cases, have acquired it by the method stated, though even then he could not be excused for making the capital so acquired a leech upon his fellow-men. But ninety-nine times in a hundred the modern possessor of any large amount of capital has acquired it, not "by a willingness to work harder than his fellows," but by a shrewdness in getting possession of a monopoly which makes it needless for him to do any real work at all; not by a willingness "to sacrifice his love of spending ail he produces," but by a cleverness in procuring from the government a privilege by which he is able to spend in wanton luxury half of what a large number of other men produce. The chief privilege to which we refer is that of selling the people's credit for a price.

"Basis" is guilty of several other errors which we have not space to discuss at length. He supposes that to confine the term money to coin and to call all other money currency would simplify matters, when in reality it is the insistence upon this false distinction that is the prevailing cause of mystification. If the idea of the royalty of gold and silver could be once knocked out of the people's heads, and they could once understand that no particular kind of merchandise is created by nature for monetary purposes, they would settle this question in a trice. Again, he seems to think that Josiah Warren based his notes on corn. Nothing of the kind. Warren simply took corn as his standard, but made labor and all its products his basis. His labor notes were rarely redeemed in corn. If he had made corn his exclusive basis, there would be no distinction in principle between him and the specie men. Perhaps the central point in his monetary theory was his denial of the idea that any one product of labor can properly be made the only basis of money. To quote him in this connection at all is the height of presumption on the part of "Basis." A charge that his system, which recognized cost as the only ground of price, even contemplated a promise to pay anything "for value received," he would deem the climax of insult to his memory. "Basis," in donning the garments of Josiah Warren to defend the specie fraud, has "stolen the livery of heaven to serve the devil in." "Basis" is wrong, too, in thinking that land is not a good basis for currency. True, unimproved vacant land, not having properly a market value, cannot properly give value to anything that represents it; but permanent improvements on land, which should have a market value and carry with them a title to possession, are an excellent basis for currency. It is not the raw material of any product that fits it for a basis, but the labor that has been expended in shaping the material. As for the immovability of land unfitting it for a basis, it has just the opposite effect. Here "Basis" is misled by the idea that currency can be redeemed only in that on which it is based.

But this fertile subject has taken us farther than we intended to follow it. So here, for the present, we will quit its company, meanwhile handing over "Basis" to the tender mercies of "Apex," and heartily indorsing almost all that "Basis" says at the close of his article concerning the true duty of government, as long as it shall exist, regarding the currency.



[Liberty, October 13, 1888.]

John Ruskin, in the first of his "Fors Clavigera" series of letters to British workmen, opened what he had to say about interest by picturing what he called "the position of William." Bastiat, the French economist, had tried to show the nature of capital and interest by a little story, in which a carpenter named James made a plane in order to increase his productive power, but, having made it, was induced by a fellow-carpenter named William to lend it to him for a year in consideration of receiving a new plane at the end of that time besides a plank for the use of it. Having fulfilled these conditions at the end of the first year, William borrowed the plane again on the same terms at the beginning of the second, and year after year the transaction was repeated to the third and fourth generations of the posterity of William and James. Ruskin disposed of this plausible story in a sentence by pointing out that the transactions of William and James amounted simply to this,—that William made a plane every 31st December, lent it to James till 1st January, and paid James a plank for the privilege of thus lending him the plane overnight.

Ruskin called this "the position of William," and, though he threw down the gauntlet right and left, he never could find an economist rash enough to undertake to dispute the justice of his abridgment of Bastiat's tale. At last, however, one has appeared. F. J. Stimson has discovered the fallacy in "the position of William," and confidently tells the readers of the Quarterly Journal of Economics that it lies in Ruskin's tacit assumption that the plank which William paid James was the only plank which the plane had enabled him to make during the year. Mr. Stimson is so proud of this discovery that he puts it in italics, but I am unable to see that it shows anything except Mr. Stimson's failure to get down to the kernel of the question at issue.

If Ruskin made the assumption attributed to him,—which is improbable,—he did so because he knew perfectly well that the number of planks which the plane enabled William to make ought in equity to have had no influence upon the plane's selling or lending price, always provided the number was great enough to make it worth while to have manufactured the plane in the first place. If Mr. Stimson were half the economist that Ruskin is, he would know that, in the absence of monopoly, the price of an article worth producing at all is governed, not by its utility, but by the cost of its production, and that James consequently, though his plane should enable William to make a million planks, could not sell or lend it for more than it cost him to make it, except he enjoyed a monopoly of the plane-making industry.

The fallacy in "the position of William" remains undiscovered. Perhaps a few more such failures to discover it as Mr. Stimson's may convince the people that there is no fallacy there to be discovered. On the whole, the original policy of James's friends was the safer one,—to ignore "the position of William" on the ground that his champion, Mr. Ruskin, is not an economist, but an artist.




[Liberty, October 8, 1887.]

It will be remembered that, when a correspondent of the Standard signing "Morris" asked Henry George one or two awkward questions regarding interest, and George tried to answer him by a silly and forced distinction between interest considered as the increase of capital and interest considered as payment for the use of a legal tender, John F. Kelly sent to the Standard a crushing reply to George, which the latter refused to print, and which subsequently appeared in No. 102 of Liberty. It may also be remembered that George's rejecion of Kelly's article was grounded on the fact that since his own reply to "Morris" he had received several articles on the interest question, and that he could not afford space for the consideration of this subordinate matter while the all-important land question was yet to be settled.

I take it that the land battle has since been won, for in the Standard of September 3 nearly three columns —almost the entire department of "Queries and Answers" in that issue—are given to a defence of interest, in answer to the questions of two or three correspondents. The article is a long elaboration of the reply to "Morris," the root absurdity of which is rendered more intangible by a wall of words, and no one would know from reading it that the writer had ever heard of the considerations which Mr. Kelly arrayed against his position. It is true that at one or two points he verges upon them, but his words are a virtual admission of their validity and hence a reduction of interest to an unsubstantial form. He seems, therefore, to have written them without thought of Mr. Kelly; for, had he realized their effect, he could not—assuming his honesty—have prepared the article, which has no raison d'être except to prove that interest is a vital reality apart from money monopoly. On the other hand, assuming his dishonesty, the suspicion inevitably arises that he purposely smothered Mr. Kelly's article in order to subsequently juggle over the matter with less expert opponents. Unhappily this suspicion is not altogether unwarrantable in view of the tactics adopted by George in his treatment of the rent question.

The matter seems, too, to have taken on importance, as it is now acknowledged that "the theory of interest as propounded by Mr. George has been more severely and plausibly criticised than any other phase of the economic problem as he presents it." When we consider that George regards it as an economic law that interest varies inversely with so important a thing as rent, we see that he cannot consistently treat as unimportant any "plausible" argument urged in support of the theory that interest varies principally, not with rent, but with the economic conditions arising from a monopoly of the currency.

But, however the article may be accounted for, it is certainly before us, and Mr. George (through his sub-editor, Louis F. Post, for whose words in the "Queries and Answers" department he may fairly be held responsible), is discussing the in-terest question. We will see what he has to say.

It appears that all the trouble of the enemies of interest grows out of their view of it as exclusively incidental to borrowing and lending, whereas interest on borrowed capital is itself "incidental to real interest," which is "the increase that capital yields irrespective of borrowing and lending." This increase, Mr. George claims, is the work of time, and from this premise he reasons as follows:

The laborer who has capital ready when it is wanted, and thus, by saving time in making it, increases production, will get and ought to get some consideration,—higher wages, if you choose, or interest, as we call it,—just as the skilful printer who sets fifteen hundred ems an hour will get more for an hour's work than the less skilful printer who sets only a thousand. In the one case greater power due to skill, and in the other greater power due to capital, produce greater results in a given time; and in neither case is the increased compensation a deduction from the earnings of other men.

To make this analogy a fair one it must be assumed that skill is a product of labor, that it can be bought and sold, and that its price is subject to the influence of competition; otherwise, it furnishes no parallel to capital. With these assumptions the opponent of interest eagerly seizes upon the analogy as entirely favorable to his own position and destructive of Mr. George's. If the skilful printer produced his skill and can sell it, and if other men can produce similar skill and sell it, the price that will be paid for it will be limited, under free competition, by the cost of production, and will bear no relation to the extra five hundred ems an hour. The case is precisely the same with capital. Where there is free competition in the manufacture and sale of spades, the price of a spade will be governed by the cost of its production, and not by the value of the extra potatoes which the spade will enable its purchaser to dig. Suppose, however, that the skilful printer enjoyed a monopoly of skill. In that case, its price would no longer be governed by the cost of production, but by its utility to the purchaser, and the monopolist would exact nearly the whole of the extra five hundred ems, receiving which hourly he would be able to live for the rest of his life without ever picking up a type. Such a monopoly as this is now enjoyed by the holders of capital in consequence of the currency monopoly, and this is the reason, and the only reason, why they are able to tax borrowers nearly up to the limit of the advantage which the latter derive from having the capital. In other words, increase which is purely the work of time bears a price only because of monopoly. Abolish the monopoly, then, and what becomes of Mr. George's "real interest" except as a benefit enjoyed by all consumers in proportion to their consumption? As far as the owner of the capital is concerned, it vanishes at once, and Mr. George's wonderful distinction with it.

He tells us, nevertheless, that the capitalist's share of the results of the increased power which capital gives the laborer is "not a deduction from the earnings of other men." Indeed! What are the normal earnings of other men? Evidently what they can produce with all the tools and advantages which they can procure in a free market without force or fraud. If, then, the capitalist, by abolishing the free market, compels other men to procure their tools and advantages of him on less favorable terms than they could get before, while it may be better for them to come to his terms than to go without the capital, does he not deduct from their earnings?

But let us hear Mr. George further in regard to the great value of time to the idler.

Suppose a natural spring free to all, and that Hodge carries a pail of water from it to a place where he can build a fire and boil the water. Having hung a kettle and poured the water into it, and arranged the fuel and started the fire, he has by his labor set natural forces at work in a certain direction; and they are at work for him alone, because without his previous labor they would not be at work in that direction at all. Now he may go to sleep, or run off and play, or amuse himself in any way that he pleases; and when an hour—a period of time—shall have elapsed, he will have, instead of a pail of cold water, a pot of boiling water. Is there no difference in value between that boiling water and the cold water of an hour before? Would he exchange the pot of boiling water for a pail of cold water, even though the cold water were in the pot and the fire started? Of course not, and no one would expect him to. And yet between the time when the fire is started and the time when the water boils he does no work. To what, then, is that difference in value due? Is it not clearly due to the element of time? Why does Hodge demand more than a pail of cold water for the pot of boiling water if it is not that the ultimate object of his original labor—the making of tea,for example—is nearer complete than it was an hour before, and that an even exchange of boiling water for cold water would delay him an hour, to which he will not submit unless he is paid for it? And why is Podge willing to give more than a pail of cold water for the pot of boiling water, if it is not that it gives him the benefit of an hour's time in production, and thus increases his productive power very much as greater skill would? And if Podge gives to Hodge more than a pail of cold water for the pot of boiling water, does Podge lose anything that he had, or Hodge gain anything that he had not? No. The effect of the transaction is a transfer for a consideration of the advantage in point of time that Hodge had, to Podge who had it not, as if a skilful compositor should, if he could, sell his skill to a less skilful member of the craft.

We will look a little into this economic Hodge-Podge.

The illustration is vitiated from beginning to end by the neglect of the most important question involved in it,—namely, whether Hodge's idleness during the hour required for the boiling of the water is a matter of choice or of necessity. It was necessary to leave this out in order to give time the credit of boiling the water. Let us not leave it out, and see what will come of it. If Hodge's idleness is a matter of necessity, it is equivalent, from the economic standpoint, to labor, and counts as labor in the price of the boiling water. A storekeeper may spend only five hours in waiting on his customers, but, as he has to spend another five hours in waiting for them, he gets paid by them for ten hours' labor. His five hours' idleness counts as labor, because, to accommodate his customers, he has to give up what he could produce in those five hours if he could labor in them. Likewise, if Hodge, when boiling water for Podge, is obliged to spend an hour in idleness, he will charge Podge for the hour in the price which he sets on the boiling water. But it is Hodge himself, this disposition of himself, and not the abstraction, time, that gives the water its exchangeable value. The abstraction, time, is as truly at work when Hodge is bringing the water from the spring and starting the fire as when he is asleep waiting for the water to boil; yet Mr. George would not dream of attributing the value of the water after it had been brought from the spring to the element of time. He would say that it was due entirely to the labor of Hodge. Properly speaking, time does not work at all, but, if the phrase is to be insisted on in economic discussion, it can be admitted only with some such qualification as the following: The services of time are venal only when rendered through human forces; when rendered exclusively through the forces of nature, they are gratuitous.

That time does not give the boiling water any exchangeable value becomes still more evident when we start from the hypothesis that Hodge's idleness, instead of being a matter of necessity, is a matter of choice. In that case, if Hodge chooses to be idle, and still tries, in selling the boiling water to Podge, to charge him for this unnecessary idleness, the enterprising Dodge will step up and offer boiling water to Podge at a price lower than Hodge's, knowing that he can afford to do so by performing some productive labor while waiting for the water to boil, instead of loafing like Hodge. The effect of this will be that Hodge himself will go to work productively, and then will offer Podge a better bargain than Dodge has proposed, and so competition between Hodge and Dodge will go on until the price of the boiling water to Podge shall fall to the value of the labor expended by either Hodge or Dodge in bringing the water from the spring and starting the fire. Here, then, the exchangeable value of the boiling water which was said to be due to time has disappeared, and yet it takes just as much time to boil the water as it did in the first place.

Mr. George gets into difficulty in discussing this question of the increase of capital simply because he continually loses sight of the fact that competition lowers prices to the cost of production and thereby distributes this so-called product of capital among the whole people. He does not see that capital in the hands of labor is but the utilization of a natural force or opportunity, just as land is in the hands of labor, and that it is as proper in the one case as in the other that the benefits of such utilization of natural forces should be enjoyed by the whole body of consumers.

Mr. George truly says that rent is the price of monopoly. Suppose, now, that some one should answer him thus: You misconceive; you clearly have leasing exclusively in mind, and suppose an unearned bonus for a lease, whereas rent of leased land is merely incidental to real rent, which is the superiority in location or fertility of one piece of land over another, irrespective of leasing. Mr. George would laugh at such an argument if offered in justification of the receipt and enjoyment of unearned increment or economic rent by the landlord. But he himself makes an equally ridiculous and precisely parallel argument in defence of the usurer when he says, in answer to those who assert that interest is the price of monopoly: "You misconceive; you clearly have borrowing and lending exclusively in mind, and suppose an unearned bonus for a loan, whereas interest on borrowed capital is merely incidental to real interest, which is the increase that capital yields, irrespective of borrowing and lending."

The truth in both cases is just this,—that nature furnishes man immense forces with which to work in the shape of land and capital, that in a state of freedom these forces benefit each individual to the extent that he avails himself of them, and that any man or class getting a monopoly of either or both will put all other men in subjection and live in luxury on the products of their labor. But to justify a monopoly of either of these forces by the existence of the force itself, or to argue that without a monopoly of it any individual could get an income by lending it instead of by working with it, is equally absurd whether the argument be resorted to in the case of land or in the case of capital, in the case of rent or in the case of interest. If any one chooses to call the advantages of these forces to mankind rent in one case and interest in the other, I do not know that there is any serious objection to his doing so, provided he will remember that in practical economic discussion rent stands for the absorption of the advantages of land by the landlord, and interest for the absorption of the advantages of capital by the usurer.

The remainder of Mr. George's article rests entirely upon the time argument. Several new Hodge-Podge combinations are supposed by way of illustration, but in none of them is there any attempt to justify interest except as a reward of time. The inherent absurdity of this justification having been demonstrated above, all that is based upon it falls with it. The superstructure is a logical ruin; it remains only to clear away the débris.

Hodge's boiling water is made a type of all those products of labor which afterwards increase in utility purely by natural forces, such as cattle, corn, etc.; and it may be admitted that, if time would add exchangeable value to the water while boiling, it would do the same to corn while growing, and cattle while multiplying. But that it would do so under freedom has already been disproved. Starting from this, however, an attempt is made to find in it an excuse for interest on products which do not improve except as labor is applied to them, and even on money itself. Hodge's grain, after it has been growing for a month, is worth more than when it was first sown; therefore Podge, the shovel-maker, who supplies a market which it takes a month to reach, is entitled to more pay for his shovels at the end of that month than he would have been had he sold them on the spot immediately after production; and therefore the banker who discounts at the time of production the note of Podge's distant customer maturing a month later, thereby advancing ready money to Podge, will be entitled, at the end of the month, from Podge's customer, to the extra value which the month's time is supposed to have added to the shovels.

Here Mr. George not only builds on a rotten foundation, but he mistakes foundation for superstructure. Instead of reasoning from Hodge to the banker he should have reasoned from the banker to Hodge. His first inquiry should have been how much, in the absence of a monopoly in the banking business, the banker could get for discounting for Podge the note of his customer; from which he could then have ascertained how much extra payment Podge could get for his month's delay in the shovel transaction, or Hodge for the services of time in ripening his grain. He would then have discovered that the banker, who invests little or no capital of his own, and, therefore, lends none to his customers, since the security which they furnish him constitutes the capital upon which he operates, is forced, in the absence of money monopoly, to reduce the price of his services to labor cost, which the statistics of the banking business show to be much less than one per cent. As this fraction of one per cent. represents simply the banker's wages and incidental expenses, and is not payment for the use of capital, the element of interest disappears from his transactions. But, if Podge can borrow money from the banker without interest, so can Podge's customer; therefore, should Podge attempt to exact from his customer remuneration for the month's delay, the latter would at once borrow the money and pay Podge spot cash. Furthermore Podge, knowing this, and being able to get ready money easily himself, and desiring, as a good man of business, to suit his customer's convenience, would make no such attempt. So Podge's interest is gone as well as the banker's. Hodge, then, is the only usurer left. But is any one so innocent as to suppose that Dodge, or Lodge, or Modge will long continue to pay Hodge more for his grown grain than his sown grain, after any or all of them can get land free of rent and money free of interest, and thereby force time to work for them as well as for Hodge. Nobody who can get the services of time for nothing will be such a fool as to pay Hodge for them. Hodge, too, must say farewell to his interest as soon as the two great monopolies of land and money are abolished. The rate of interest on money fixes the rate of interest on all other capital the production of which is subject to competition, and when the former disappears the latter disappears with it.

Presumably to make his readers think that he has given due consideration to the important principle just elucidated, Mr. George adds, just after his hypothesis of the banker's transaction with Podge:

Of course there is discount and discount. I am speaking of a legitimate economic banking transaction. But frequently bank discounts are nothing more than taxation, due to the choking up of free exchange, in consequence of which an institution that controls the common medium of exchange can impose arbitrary conditions upon producers who must immediately use that common medium.

The evident purpose of the word "frequently" here is to carry the idea that, when a bank discount is a tax imposed by monopoly of the medium of exchange, it is simply a somewhat common exception to the general rule of "legitimate economic banking transactions." For it is necessary to have such a general rule in order to sustain the theory of interest on capital as a reward of time. The exact contrary, however, is the truth. Where money monopoly exists, it is the rule that bank discounts are taxes imposed by it, and when, in consequence of peculiar and abnormal circumstances, discount is not in the nature of a tax, it is a rare exception. The abolition of money monopoly would wipe out discount as a tax and, by adding to the steadiness of the market, make the cases where it is not a tax even fewer than now. Instead of legitimate, therefore, the banker's transaction with Podge, being exceptional in a free money market and a tax of the ordinary discount type in a restricted money, market, is illegitimate if cited in defence of interest as a normal economic factor.

In the conclusion of his article Mr. George strives to show that interest would not enable its beneficiaries to live by the labor of others. But he only succeeds in showing, though in a very obscure, indefinite, and intangible fashion,—seemingly afraid to squarely enunciate it as a proposition,—that where there is no monopoly there will be little or no interest. Which is precisely our contention. But why, then, his long article? If interest will disappear with monopoly, what will become of Hodge's reward for his time? If, on the other hand, Hodge is to be rewarded for his mere time, what will reward him save Podge's labor? There is no escape from this dilemma. The proposition that the man who for time spent in idleness receives the product of time employed in labor is a parasite up on the body industrial is one which an expert necromancer like Mr. George may juggle with before an audience of gaping Hodges and Podges, but can never successfully dispute with men who understand the rudiments of political economy.




[Liberty, October 18, 1890.]

Auberon Herbert, in his paper, Free Life, asks me how I "justify a campaign against the right of men to lend and to borrow." I answer that I do not justify such a campaign, have never attempted to justify such a campaign, do not advocate such a campaign, in fact am ardently opposed to such a campaign. In turn, I ask Mr. Herbert how he justifies his apparent attribution to me of a wish to see such a campaign instituted.

It is true that I expect lending and borrowing to disappear, but not by any denial of the right to lend and borrow. On the contrary, I expect them to disappear by virtue of the affirmation and exercise of a right that is now denied,—namely, the right to use one's own credit, or to exchange it freely for another's, in such a way that one or the other of these credits may perform the function of a circulating medium, without the payment of any tax for the privilege. It has been repeatedly demonstrated in these columns that the exercise of such a right would accomplish the gradual extinction of interest without the aid of force, and the nature of this economic process has been described over and over again. This demonstration Mr. Herbert steadily ignores, and the position itself he never meets save by a sweeping denial, or by characterizing it as unphilosophical, or by substituting for it a man of straw of his own creation and then knocking it down.

The Anarchists assert that interest, however it may have originated, exists to-day only by virtue of the legal monopoly of the use of credit for currency purposes, and they trace the process, step by step, by which an abolition of that monopoly would gradually reduce interest to zero. Mr. Herbert never stops to analyze this process that he may find the weak spot in it and point it out; he simply declares that interest, instead of resting on monopoly, is the natural, inevitable outcome of human convenience and the open market, and then wants to know how the Anarchists justify their attempt to abolish interest by force.

It is as if Mr. Herbert were to maintain (as I suppose he does maintain) that freedom in the domestic relation would gradually lessen and perhaps abolish licentiousness, and I were to answer him thus: "Oh, no, Mr. Herbert, you are unphilosophical; prostitution does not rest on the compulsory marriage system, but is the natural, inevitable outcome of human convenience and desire; how do you justify, I should like to know, a campaign against the right of men and women to traffic in the gratifications of the flesh?" In such a case Mr. Herbert, I imagine, would say that I had studied his teaching very carelessly. And that is what I am forced to say of him, much against my will.

If it be true that interest will exist in the absence of monopoly, then there is some flaw in the reasoning by which the Anarchists argue from the abolition of monopoly to the disappearance of interest, and it is incumbent upon Mr. Herbert to point this flaw out, or else admit his own error. It is almost incredible that an argument so often reiterated can have escaped the attention of so old a reader of Liberty as Mr. Herbert, but, lest he should plead this excuse, I will state that it is most elaborately and conclusively set forth in the pamphlet, "Mutual Banking," by Col. Wm. B. Greene. If, after mastering the position, he thinks he can overthrow it, I shall be glad to meet him on that issue.




[Liberty, November 29, 1890.]

To the Editor of Liberty:

I am sorry if I have misinterpreted Liberty. I have not what I wrote before me, but I do not think I could have had the slightest intention of imputing to Liberty a FORCE campaign against interest; but I believed (am I wrong?) that I had seen both interest and rent denounced in Liberty as objectionable and opposed to the interests of society. It was to this I was referring as a moral campaign. My own position is that interest is both moral and useful, and often more than anything else a chance of a better future to workmen. If workmen would give up punching the head of capital, and, instead of that little amusement, resolutely combine for the purpose of investing in industrial concerns, so as gradually to become the part-owner of the industrial machinery of the country, whilst they no longer remained wholly dependent upon wages, but partly upon wages, partly upon the return 'of invested money, I believe the great problem of our time would be approaching its solution.

As regards rent, I think that all Anarchists, including even sober-minded Liberty, use force to get rid of it. The doctrine of use-possession seems almost framed for this purpose. Even if it suits certain persons to sell me a hundred acres, and it suits me to buy it, and it suits other people to rent it from me,—as I understand. Liberty would not sanction the proceeding. We are all of us, in fact, to be treated as children, who don't know our own interests, and for whom somebody else is to judge. You may reply that under the Anarchist system no action would be taken to prevent such an arrangement; only that no action would be taken to prevent the tenants from establishing themselves as proprietors and ignoring their rent owed to me. Good; but then how do you justify the fact that there is a proposed machinery (local juries, etc.) to secure the possessor who holds under use-possession in his holding and to prevent his disturbance by somebody else? Put these two opposed treatments together, and it means to say that a certain body of men have settled for others a form in which they may hold property, and a form in which they may not. The desires and the conveniences of the persons themselves are set aside, and, as in old forms of government, a principle representing centralization and socialistic regulation obtains. Is this Anarchy?

Auberon Herbert.

Mr. Herbert's disclaimer is of course sufficient to establish the fact that he did not mean to charge me with an attempt to prohibit lending and borrowing. But I must remind him that the charge which he made against me he made also at the same time against his correspondent, Mr. J. Armsden; that Mr. Armsden interpreted it as I did and protested against its application to himself (though gratuitously allowing that it was justly applicable to me); and that Mr. Herbert made rejoinder, if my memory serves me, that he had misunderstood Mr. Armsden. Now, I cannot see why Mr. Herbert should not admit in the same unqualified way that he misunderstood me, instead of suggesting that I misunderstood him. But this is of little consequence; I am satisfied to call it a case of mutual misunderstanding.

To avoid such misunderstanding in future, however, is of real importance; and to that end I must further remind Mr. Herbert that, when I use the word right, I do so in one of two senses, which the context generally determines,—either in the moral sense of irresponsible prerogative, or in the social sense of accorded guarantee. Mr. Herbert, knowing that I am an Egoist, must be perfectly aware that it would be impossible for me to enter upon a moral campaign against any special right in the sense of irresponsible prerogative, for it is the Egoistic position either that no one has any rights whatever or—what amounts to the same thing—that every one has all rights. But it would be equally impossible for me to enter upon a moral campaign against a right in the sense of accorded guarantee, unless it were a case where I should consider myself justified, if it seemed expedient, in turning that moral campaign into a force campaign. For I could have no objection to any accorded guarantee save on the ground that the thing guaranteed was a privilege of invasion, and against invasion I am willing to use any weapons that will accomplish its destruction, preferring moral weapons in all cases where they are effective, but willing to resort to those of physical force whenever necessary. So Mr. Herbert is now duly cautioned not to charge me with maintaining, against any right whatever, a campaign which anything but expediency makes exclusively moral.

To go now from the general to the particular. I could not engage in any sort of campaign against the right to lend and borrow, because I do not consider that right a privilege of invasion. If, however, lending and borrowing should disappear in consequence of the overthrow of that form of invasion which consists of the monopoly of the right to issue notes as currency, that is not my affair.

It is the contention of the Anarchists that lending and borrowing, and consequently interest, will virtually disappear when banking is made free. Mr. Herbert's only answer to this is that he considers interest moral and useful. Does he mean by this that that is moral and useful which will disappear under free competition? Then why does he favor free competition? Or does he deny that interest will so disappear? Then let him disprove the Anarchists' definite and succinct argument that it will. In my last article, to which his present article is a reply, I strongly invited him to do this, but as usual he ignores the invitation. Nevertheless he and all his Individualistic friends will have to meet us on that issue sooner or later, and he may as well face the music at once.

Now, a word about rent. It is true that Anarchists, including sober-minded Liberty, do, in a sense, propose to get rid of ground-rent by force. That is to say, if landlords should try to evict occupants, the Anarchists advise the occupants to combine to maintain their ground by force whenever they see that they can do so successfully. But it is also true that the Individualists, including sober-minded Mr. Herbert, propose to get rid of theft by force. "Even if it suits certain persons to sell me" Mr. Herbert's overcoat, "and it suits me to buy it, and it suits other people to rent it from me—as I understand," Mr. Herbert "would not sanction the proceeding. We are all of us, in fact, to be treated as children, who don't know our own interests, and for whom somebody else is to judge." The Anarchists justify the use of machinery (local juries, etc.) to adjust the property question involved in rent just as the Individualists justify similar machinery to adjust the property question involved in theft. And when the Individualists so adjust the property question involved in theft, this "means to say that a certain body of men have settled for others a form in which they may hold property and a form in which they may not," regardless of "the desires and conveniences of the persons themselves."

Yes, this is Anarchy, and this is Individualism. The trouble with Mr. Herbert is that he begs the question of property altogether, and insists on treating the land problem as if it were simply a question of buying and selling and lending and borrowing, to be settled simply by the open market. Here I meet him with the words of his more conservative brother in Individualism, Mr. J. H. Levy, editor of the Personal Rights Journal, who is trying to show Mr. Herbert that he ought to call himself an Anarchist instead of an Individualist. Mr. Levy says, and I say after him: "When we come to the question of the ethical basis of property, Mr. Herbert refers us to 'the open market.' But this is an evasion. The question is not whether we should be able to sell or acquire in 'the open market' anything which we rightfully possess, but how we come into rightful possession. And, if men differ on this, as they do most emphatically, how is this to be settled?"




[Liberty, August 18, 1888.]

To the Editor of Liberty:

During the past six months I have read your paper searchingly, and greatly admire it in many respects, but as yet do not grasp your theory of interest. Can you give space for a few words to show from your standpoint the fallacy in the following ideas?

Interest I understand to be a payment, not for money, but for capital which the money represents; that is, for the use of the accumulated wealth of the race. As that is limited, while human wants are infinite, it would appear that there will always be a demand for more than exists. The simplest way of solving the difficulty would, therefore, be to put the social capital up and let open competition settle its price. Added accumulation means greater competition to let it, so that its price will be lowered year by year. But can that price ever become nothing so long as men have additional wants that capital can assist to fill? Yet Mr. Westrup advocates a rate of interest based on the cost of issuing the money,—that is, allowing nothing for the capital. Is "stored labor" so plenty as to be cheaper than blackberries?

For illustration, A has $1,000 worth of land, buildings, etc., in a farm, but sees that he can use $1,500 worth profitably. So he places a mortgage of $500 on the place and invests it in more property. Now to say that he should have that additional property merely for the cost of issuing the paper which represents it during the transfer would be like saying that, when he bought his house, he should have it merely for cost of the transfer papers,—the deeds, etc.,—paying nothing for the house itself.

In a line my query is: Where do your definitions of interest and discount on money diverge?

Yours truly,

J. Herbert Foster.

Meriden, Connecticut.

Discount is the sum deducted in advance from property temporarily transferred, by the owner thereof, as a condition of the transfer, regardless of the ground upon which such condition is demanded.

Interest is payment for the use of property, and, if paid in advance, is that portion of the discount exacted by the owner of the property temporarily transferred which he claims as payment for the benefit conferred upon the other party, as distinguished from that portion which he claims as payment for the burden borne by himself.

The opponents of interest desire, by reducing the rate of discount to cost, or price of burden borne, to thereby eliminate from discount all payment merely for benefit conferred.

But they are entirely innocent of any desire to abolish payment for burden borne, as it certainly would be abolished in the case supposed by Mr. Foster, were A to obtain his extra $500 worth of property simply by paying the cost of making out the transfer papers. A certainly could not thus obtain it under the system of credit proposed by the opponents of interest. His obligation is not discharged when he has paid over to the man of whom he buys the property the $500 which he has borrowed on mortgage. He still has to discharge the mortgage by paying to the lender of the money, at the expiration of the loan, in actual wealth or valid documentary claim upon wealth, the $500 which he borrowed. That is the time when he really pays for the property in which he invested. Now, the question is whether he shall pay simply the $500, which is supposed to represent the full value of the property at the time he made the investment, or whether he shall also pay a bonus for the use of the property up to the time when he finally pays for it. The opponents of interest say that he should not pay this bonus, because his use of the property has imposed no burden upon the lender of the money, and under free competition there is no price where there is no burden. They declare, not that he should not pay the $500, but that the only bonus he should pay is to be measured by the cost of making out the mortgage and other documents, including all the expenses incidental thereto.

The only reason why he now has to pay a bonus proportional to the benefit he derives from the use of the property is found in the fact that the lender of the money, or the original issuer of the money, from whom the lender procured it more or less directly, has secured- a monopoly of money manufacture and can therefore proportion the price of his product to the necessities of his customers, instead of being forced by competition to limit it to the average cost of manufacture. In short, what the opponents of interest object to is, not payment for property purchased, but a tax upon the transfer papers; and the very best of all arguments against interest, or payment for the use of property, is the fact that, at the present advanced stage in the operation of economic forces, it cannot exist to any great extent without taking this form of a tax upon the transfer papers.

Shall the transfer papers be taxed? That is the question which Liberty asks, and Mr. Foster has already answered it in the negative by saying that open competition should be left to settle the price of capital. But when this open competition is secured, it will be found that, though there may be no limit to the desire for wealth, there is a limit at any given time to the capacity of the race to utilize capital, and that the amount of capital created will always tend to exceed this capacity. Then capital will seek employment and be glad to lend itself to labor for nothing, asking only to be kept intact, and reimbursed for the cost of the transfer papers. Such is the process by which interest, or payment for the use of property, not only will be lowered, but will entirely disappear.



[Liberty, December 1, 1888.]

To the Editor of Liberty:

I have read attentively Mr. Westrup's farther statement on mutual banking, but fail to see wherein he touches what is to my mind the vital point. He says that the system "would not be making use of capital that belonged to some one else." Then I cannot see how it would answer its purpose. The bank itself has no capital save the pledges advanced by borrowers, and if they take out no more than they put in, they make no gain, but are merely to the expense of the transaction. On the other hand, if they do take out more, some one else must have put it in. They do not increase their wealth by using their own property as a basis on which to make advances to themselves. It is only when some one else accepts it as a pledge on which to advance his property that they have made a gain. And if there is no one to be paid a dividend but "the same borrowers," that some one else will go unpaid.

The borrower's object is to get the use of additional capital, not of the money that represents it during the transfer. If he gets it, "some one [else] is deprived of the use of that much wealth," as two cannot use the same property at the same time. Our farmer worth $1,000, who borrowed $500 and invested it, found at the end of the transaction that he had at his disposal $1,500 worth of property. Now, where did the last $500 worth come from? Like all created things, its ownership vested rightfully in its creator; the farmer was not that creator, or he would not have had to borrow it. The bank, in issuing a volume of circulating medium, neither increased nor diminished the aggregate wealth of the country appreciably. It engaged in no "productive" industry. It did not create 500 dollars' nor 500 cents' worth of property. In fact, Mr. Westrup's rate of interest represents what it did create in additional value in making out the transfer papers,—a fraction of one per cent, of the $500. If, then, neither the bank nor the farmer created it, is it not clear that they "made use of capital that belonged to some one else"?

The distinction between owning property and merely having the use of it has been pointed out to me, but appears largely verbal, for the only value of property is the use thereof. At any rate, it seems clear that our farmer gets the use of $500 worth of property so long as he pays the expense of keeping $500 of circulating medium afloat. He uses his $1,000 worth of property as a guarantee to the producer of the $500 of value that the latter shall receive back his property intact, but with no payment for use.

If I have understood correctly the reply to my former letter, this is Liberty's idea; but I do not see that Mr. Westrup coincides. However, if I am in error, I trust I am "open to conviction" and await further light.

J. Herbert Foster.

Mr. Foster's difficulty arises from the futile attempt, which many others have made before him, to distinguish money from capital, the real fact being that money, though not capital in a material sense, is, in the economic sense and to all intents and purposes, the most perfect and desirable form of capital, for the reason that it is the only form of capital which will at any time almost instantly procure all other forms of capital. Practically speaking, that man has capital who holds an instantly convertible title to capital.[4]

If this be true, then Mr. Foster's claim that mutual banking involves the "making use of capital that belongs to some one else" falls immediately. Does he mean to say that, when the borrower of a mutual bank's notes goes into the market and buys capital with them, he is thereby keeping the seller out of his capital? If so, then Mr. Foster, when he pays his butcher cash for a beefsteak for his to-morrow's breakfast, is keeping his butcher out of his capital. But does either he or his butcher ever look at his conduct in that light? If that is being kept out of capital, then is the butcher only too glad to be thus deprived. He keeps a shop for the express purpose of being kept out of his capital, and he feels that it's very hard lines and a very dull season when he isn't kept out of it. He knows that, when he sells a beefsteak to Mr. Foster for cash, he parts with capital for which he has no use himself and gets in exchange a title convertible whenever he may choose into such capital as he has use for, and he knows further that he greatly benefits by the transaction. The position of Mr. Foster's butcher is precisely parallel to that of the manufacturer of machinery who sells a plough or a press or an engine to a borrower from a mutual bank. Clearly, then, Mr. Foster's sympathy for this manufacturer is misplaced. Of course the position which I have just taken does not hold with notes that will not command capital,—that is, that are not readily received as money. But that is not the point under dispute. When Mr. Foster shall question the solvency of mutual money, I will meet him on that point also. For the present my sole contention against him is that the man who exchanges a material value for good money is not thereby kept out of his capital.



[Liberty, July 26, 1890.]

When I saw the word "Interest" at the top of an article in a recent issue of To-day, I said to myself: This looks promising; either the editor of To-day is about to remove the basis (so far as his paper is concerned) of Mr. Yarros's vigorous criticism upon journals of its class that they fail of influence because they neglect to show that individualism will redress economic grievances, or else he has discovered some vital flaw in the Anarchist economics and is about to save us further waste of energy by showing that economic liberty will not produce the results we predict from it. Fancy my disappointment when, on reading the article, I found it made up, seven eighths, of facts and historical remarks which would be more-interesting if less venerable, but which, though pertinent as throwing light upon the conditions under which interest arose, prevailed, and fluctuated, have not the remotest bearing upon the arguments of those who dispute the viability of interest to-day; one-sixteenth, of the assertion of an economic truism, equally without significance in connection with those arguments; and, one-sixteenth, of the assertion of an economic error, which assertion betrays no familiarity with those arguments (although it is within my knowledge that the editor of To-day possesses such familiarity in a considerable degree), and which error can be sufficiently refuted by stating it in a slightly different form.

The irrelevant facts I ignore. I do not care a copper whether interest was twelve per cent, in Aristotle's time or eighteen in Solon's; whether Catholicism and Mohammedanism were united in their aversion to it; whether Jew or Christian has been the greater usurer. The modern opponents of interest are perfectly willing to consider facts tending to refute their position, but no facts can have such a tendency unless they belong to one of two classes: first, facts showing that interest has generally (not sporadically) existed in a community in whose economy money was as important a factor as it is with us to-day and in whose laws there was no restriction upon its issue; or, second, facts showing that interest is sustained by causes that would still be effectively, invincibly operative after the abolition of the banking monopoly. I do not find any such facts among those cited by To-day. The array is formidable in appearance only. Possession of encyclopædic knowledge is a virtue which Spencer sometimes exaggerates into a vice, and a vice which some of his disciples too seldom reduce to the proportions of a virtue.

To the economic truism I will give a little more attention, its irrelevancy being less apparent. Here it is: "The existence of interest depends, of course, primarily upon the existence of private property." I call this a truism, though the word "primarily" introduces an element of error. If we are to inquire upon what interest primarily depends, we shall start upon an endless journey into the realm of metaphysics. But without entering that realm we certainly can go farther back in the series than private property and find that interest depends still more remotely upon the existence of human beings and even of the universe itself. However, interest undoubtedly depends upon private property, and, if this fact had any significance, I should not stop to trifle over the word "primarily." But it has no significance. It only seems to have significance because it carries, or seems to be supposed to carry, the implication that, if private property is a necessary condition of interest, interest is a necessary result of private property. The inference, of course, is wholly unwarranted by logic, but that it is intended appears from a remark almost immediately following: "Expectations have been entertained that it [interest] will eventually become zero; but this stage will probably be reached only when economic products become common free property of the human race." The word "probably" leaves the writer, to be sure, a small logical loophole of escape, but it is not expected that the reader will notice it, the emphasis being all in the other direction. The reader is expected to look upon interest as a necessary result of private property simply because without private property there could be no interest. Now, my hat sometimes hangs upon a hook, and, if there were no hook, there could be no hanging hat; but it by no means follows that because there is a hook there must be a hanging hat. Therefore, if I wanted to abolish hanging hats, it would be idle, irrelevant, and illogical to declare that I must first abolish hooks. Likewise it is idle, irrelevant, and illogical to declare that before interest can be abolished private property must be abolished. Take another illustration. If there were no winter, water-pipes would never freeze up, but it is not necessary to abolish winter to prevent this freezing. Human device has succeeded in preventing it as a general thing. Similarly, without private property there would be no borrowing of capital and therefore no interest; but it is claimed that, without abolishing private property, a human device—namely, money and banking—will, if not restricted, prevent the necessity of borrowing capital as a general thing, and therefore virtually abolish interest; though interest might still be paid in extraordinary cases, just as water-pipes still freeze up under extraordinary conditions. Is this claim true? That is the only question.

This claim is met in the single relevant sixteenth of To-day's article,—that already referred to as an economic error. But it is met simply by denial, which is not disproof. I give the writer's words:

The most popular fallacy upon the subject now is that the rate of i nterest can be lowered by increasing the amount of currency. What men really wish to borrow usually is capital,—agencies of production,—and money is only a means for the transfer of these. The amount of currency can have no effect upon the abundance of capital, and even an increase in the abundance of capital does not always lower the rate of interest; this is partly determined by the value of capital in use.

This paragraph, though introduced with a rather nonchalant air, seems to have been the objective point of the entire article. All the rest was apparently written to furnish an occasion for voicing the excessively silly notion that "the amount of currency can have no effect upon the abundance of capital." As I have already said, to show how silly it is, it is only necessary to slightly change the wording of the phrase. Let it be stated thus: "The abolition of currency can have no effect upon the abundance of capital." Of course, if the former statement is true, the latter follows. But the latter is manifestly absurd, and hence the former is false. To affirm it is to affirm that currency does not facilitate the distribution of wealth; for if it does, then it increases the effective demand for wealth, and hence the production of wealth, and hence the abundance of capital. It is true that "an increase in the abundance of capital does not always lower the rate of interest." An extra horse attached to a heavy load does not always move the load. If the load is heavy enough, two extra horses will be required to move it. But it is always the tendency of the first extra horse to move it, whether he succeeds or not. In the same way, increase of capital always tends to lower interest up to the time when interest disappears entirely. But though increased capital lowers interest and increased currency increases capital, increased currency also acts directly in lowering interest before it has increased the amount of capital. It is here that the editor of To-day seems to show unfamiliarity with the position of the opponents of interest. It is true that what men really wish to get is capital,—the agencies of production. And it is precisely because money is "a means for the transfer of these "that the ability to issue money secured by their own property would make it unnecessary for them to borrow these agencies by enabling them to buy them. This raises a question which I have asked hundreds of times of defenders of interest and which has invariably proved a "poser." I will now put it to the editor of To-day. A is a farmer owning a farm. He mortgages his farm to a bank for $1,000 giving the bank a mortgage note for that sum and receiving in exchange the bank's notes for the same sum, which are secured by the mortgage. With the bank-notes A buys farming tools of B. The next day B uses the notes to buy of C the materials used in the manufacture of tools. The day after, C in turn pays them to D in exchange for something that he needs. At the end of a year, after a constant succession of exchanges, the notes are in the hands of Z, a dealer in farm produce. He pays them to A, who gives in return $1,000 worth of farm products which he has raised during the year. Then A carries the notes to the bank, receives in exchange for them his mortgage note, and the bank cancels the mortgage. Now, in this whole circle of transactions, has there been any lending of capital? If so, who was the lender? If not, who is entitled to any interest? I call upon the editor of To-day to answer this question. It is needless to assure him that it is vital.




[Liberty, August 16, 1890.]

To-day's rejoinder to my criticism of its article on interest is chiefly remarkable as an exhibition of dust-throwing. In the art of kicking up a dust the editor is an expert. Whenever he is asked an embarrassing question, he begins to show his skill in this direction. He reminds one of the clown at the circus when "stumped" by the ring-master to turn a double somersault over the elephant's back. He prances and dances, jabbers and gyrates, quotes Latin forwards and Greek backwards, declaims in the style of Dr. Johnson to the fish-wife, sings algebraical formulæ to the music of the band, makes faces, makes puns, and makes an excellent fool of himself; and when at the end of all this enormous activity he slyly slips between the elephant's legs instead of leaping over his back, the hilarious crowd, if it does not forget his failure to perform the prescribed feat, at least good-humoredly forgives it. But I am not so good-natured. I admit that, as a clown, I find the editor interesting, but his performance, appropriate enough in a Barnum circus ring, is out of place in the economic arena. So I propose to ignore his three pages of antics and note only his ten-line slip between the elephant's legs, or, laying metaphor aside, his evasion of my question.

I had challenged him to point out any lending of capital in a typical banking transaction which I had described. He responds by asking me to define capital. This is the slip, the evasion, the postponement of the difficulty. He knows that, if he can draw me off into a discussion of the nature of capital, there will be an admirable opportunity for more clownishness, since there is no point in political economy that lends itself more completely to the sophist's art than this. But I am not to be turned aside. I stick to my question. In regard to the notion of capital the editor of To-day will find me, so far as the immediate question at issue is connected with it, the most pliable man in the world. I will take the definition, if he likes, that was given in the previous article in To-day. There it was said that money was one thing and capital another; that capital consists of the agencies of production, while money is only a means for the transfer of these; that what men really want is not money, but capital; that it is for the use of capital that interest is paid; and that this interest, this price for the use of capital, lowers, generally speaking, as capital becomes plentier, and probably cannot disappear unless abundance of capital shall reach the extreme of common property. Now I have shown (at least I shall so claim until my question is answered) that in the most ordinary form of transaction involving interest—namely, the discounting of notes—there is absolutely no lending of capital in the sense in which capital was used in To-day's first article, and the consequence, of course, is that that defence of interest which regards it as payment for the use of capital straightway falls to the ground. But if the editor of To-day does not like the view of capital that was given in the article criticised, he may take some other; I am perfectly willing. He may make a definition of his own. Whatever it may be, I, for the time being and for the purposes of this argument, shall say "Amen" to it. And after that I shall again press the question whether, in the transaction which I described, there was any lending of anything whatever. And if he shall then answer, as a paragraph in his latest article indicates, "Yes, the bank lent its notes to the farmer," I shall show conclusively that the bank did nothing of the kind. If I successfully maintain this contention, then it will be demonstrated that the interest paid in the transaction specified was not paid for the use of anything whatever, but was a tax levied by monopoly and nothing else.

Meantime it is comforting to reflect that my labor has not been entirely in vain. As a consequence of my criticism of To-day's article on interest, the editor has disowned it (though it appeared unsigned and in editorial type), characterized it as "trivial" (heaven knows it had the air of gravity!), and squarely contradicted its chief doctrinal assertion. This assertion was that "the amount of currency can have no effect upon the abundance of capital." It is contradicted in these terms: "Evidently money is a necessary element in the existing industrial plexus, and increase of capital is dependent upon the supply of a sufficient amount of money." After this I have hopes.




[Liberty, October 16, 1891.]

In a letter to the London Herald of Anarchy, Mr. J. Greevz Fisher asserts that "government does not, and never can, fix the value of gold or any other commodity," and cannot even affect such value except by the slight additional demand which it creates as a consumer. It is true that government cannot fix the value of a commodity, because its influence is but one of several factors that combine to govern value. But its power to affect value is out of all proportion to the extent of its consumption. Government's consumption of commodities is an almost infinitesimal influence upon value in comparison with its prohibitory power. One of the chief factors in the constitution of value is, as Mr. Fisher himself states, utility ; and as long as governments exist, utility is largely dependent upon their arbitrary decrees. When government prohibits the manufacture and sale of liquor, does it not thereby reduce the value of everything that is used in such manufacture and sale? If government were to allow theatrical performances on Sundays, would not the value of every building that contains a theatre rise? Have not we, here in America, just seen the McKinley bill change the value of nearly every article that the people use? If government were to decree that all plates shall be made of tin, would not the value of tin rise and the value of china fall? Unquestionably. Well, a precisely parallel thing occurs when government decrees that all money shall be made of or issued against gold or silver; these metals immediately take on an artificial, government-created value, because of the new use which arbitrary power enables them to monopolize, and all other commodities, which are at the same time forbidden to be put to this use, correspondingly lose value. How absurd, then, in view of these indisputable facts, to assert that government can affect values only in the ratio of its consumption! And yet Mr. Fisher makes this assertion the starting-point of a lecture to the editor of the Herald of Anarchy delivered in that dogmatic, know-it-all style which only those are justified in assuming who can sustain their statements by facts and logic.




[Liberty, June 27, 1891.]

To the Editor of Liberty:

In reference to your remarks upon my recent contribution to the London Herald of Anarchy, dogmatism of manner must often be adopted to avoid verbosity; it is not necessarily an assumption of infallibility.

The action of governments with regard to gold is not truly analogous in its economic effects to the prohibition of theatrical performances on Sunday. In the last-named case, or in any similar case which we may suppose, the effect is to diminish demand and to prolong or retard consumption. Thus, if we were prohibited from wearing shoes, boots, etc., on Sunday, or if every seventh person were prevented from using them, then boots which now wear out in six months would last seven months, and we may suppose theatres which now last seven years or seventy would then be worn out in six or sixty. The immediate effect of opening theatres on Sunday would probably be to increase their value very greatly; but eventually others would be built, and competition would reduce the previously enhanced value. The residual enhancement of value would be that resulting from the increased expense of producing the last increment in the number of theatres which the market in its altered circumstances could support. There is good reason to doubt whether this would be appreciable in the cases taken of articles of considerable durability. If the government could reduce the consumption of food-stuffs, such as wheat, and simultaneously of all substitutes, by one-seventh, it would be a very different matter.

But in the case of gold the interference of governments in the present day has little effect in increasing consumption. They do not collect it to consume it, but simply to sell it. In this country, beyond specifying this metal as the vehicle of value in contributing to the revenue, the interference appears to be limited to a restriction of the liberty of citizens to exchange promises of delivery of gold to bearer on demand. Bank-notes (or bills, as they seem to be called in your country) may only be issued by certain bankers, and by them only in a certain complex relation to the amount of gold they hold. But this is only a restriction in form, and not in quantity, because checks, drafts, and promissory notes other than to bearer on demand are issuable in unlimited quantity, subject to certain taxes—from which the other notes are not wholly exempt—and are transferable without further tax. What has this to do with the consumption of gold? Next to nothing!

Now there is no legal obstacle, nothing, in fact, whatever except the inconveniences of bulk, fluctuation of value, and other inherent defects, to prevent the introduction and circulation of promises of wheat, cotton, oil, iron, or other commodity. This would not have any material effect upon the consumption, production, cost, or value of these commodities. Speculative sales of "futures" tend on the whole to steady values and to diminish the frequency and the intensity of gluts and famines.

Gold and silver are not used (in the sense of being consumed) by their circulation. They are merely conveyed, transferred, and exchanged more frequently. The fact that they are so often bought by people who do not themselves require to use them is not unique. Every merchant does the same with the commodity to which he devotes his attention.[5]

The peculiarity is that the trade in gold is familiar to every one. The portability, divisibility, and recognizability of this substance force it upon the attention of every one who avails himself of the services of others. The production and circulation of contracts for its future delivery are not unique. This is also done in the case of many other commodities. In both cases there is a very great convenience and economy; and in both there is a very appreciable danger. Any such writings of individualists as may in any way give the impression that the free circulation of mutual indebtedness, miscalled "mutual money," will be free from this element of danger are pernicious. Freedom to incur and to exchange debts is exceedingly desirable, but rather because they will encourage, purify, and chasten the spirit of enterprise than that they will in themselves bring very noticeable economic gain.

Apart from the wear and tear involved, neither the government nor any one else consumes one ha'penny worth more of gold by reason of its adoption in taxation and commerce as the most usual vehicle of value. Its use for this purpose may cause the world to hold a larger stock than it otherwise would; but this is in every way a benefit, because it steadies its value. If the metal were neglected, as platinum was until recently, then famine and glut might be observed. This would greatly lower the utility of gold as an intermediate exchange commodity, and would not help us to devise a substitute. It would throw upon every trade, including those who sell their own labor, a burden of doubt and uncertainty in estimating its fluctuations. The evil that government does by collecting needless millions is immeasurably greater than by its so-called maintenance of the gold standard.

Yours respectfully,

J. Greevz Fisher.

78 Harrogate Road, Leeds, England.

Dogmatism can be justified only by the event. In its use not only does nothing succeed like success, but nothing succeeds but success. And nothing fails like failure. If Mr. Fisher, in addressing the Anarchists upon finance as if they were babies and he a giant, shall succeed in making his assumed superiority felt as a reality, he will not only be forgiven for his dogmatism, but highly respected for his knowledge and power; but if it shall appear that the ignorance and weakness are on his side rather than theirs, he will be covered not only with confusion by his error, but with ridicule by the collapse of his pretension. It is only just, however, to say that a comparison of his letter to Liberty with his letter to the Herald of Anarchy shows progress in the direction of modesty.

Already Mr. Fisher's pride has been followed by a fall. The central position taken by him at the start that government cannot affect the value of gold or any other commodity except by the slight additional demand which it creates as a consumer he has been forced to abandon at the first onslaught. If government were to allow the opening of theatres on Sunday, it would not thereby become a consumer of theatres itself (at least not in the economic sense; for, in the United States at any rate, our governors always go to the theatre as "deadheads"), and yet Mr. Fisher admits that in such a case the value of theatres would immediately rise very greatly. This admission is an abandonment of the position taken at first so confidently, and no other consideration can make it anything else. The fact that competition would soon arise to reduce the value does not alter the fact that for a time this action of government would materially raise it, which Mr. Fisher originally declared an impossibility. But even if such a plea had any pertinence, it could be promptly destroyed by a slight extension of the hypothesis. Suppose government, in addition to allowing the theatres now existing to open on Sunday, were to prohibit the establishment of any additional theatres. Then the value would not only go up, but stay up. It is hardly necessary to argue the matter further; Mr. Fisher undoubtedly sees that he is wrong. The facts are too palpable and numerous. Why, since my comment of a month ago on Mr. Fisher's position, it has transpired that the cost of making twist drills in the United States has been increased five hundred and twenty per cent. by the McKinley bill. Government cannot affect value, indeed!

In the paragraph to which Mr. Fisher's letter is a rejoinder I said that "when government decrees that all money shall be made of or issued against gold or silver, these metals immediately take on an artificial, government-created value, because of the new use which arbitrary power enables them to monopolize." Mr. Fisher meets this by attempting to belittle the restrictions placed upon the issue of paper money, as if all vitally necessary liberty to compete with the gold-bugs were even now allowed. Let me ask my opponent one question. Does the law of England allow citizens to form a bank for the issue of paper money against any property that they may see fit to accept as security; said bank perhaps owning no specie whatever; the paper money not redeemable in specie except at the option of the bank; the customers of the bank mutually pledging themselves to accept the bank's paper in lieu of gold or silver coin of the same face value; the paper being redeemable only at the maturity of the mortgage notes, and then simply by a return of said notes and a release of the mortgaged property,—is such an institution, I ask, allowed by the law of England? If it is, then I have only to say that the working people of England are very great fools not to take advantage of this inestimable liberty, that the editor of the Herald of Anarchy and his comrades have indeed nothing to complain of in the matter of finance, and that they had better turn their attention at once to the organization of such banks as that which I have just described. But I am convinced that Mr. Fisher will have to answer that these banks are illegal in England; and in that case I tell him again that the present value of gold is a monopoly value sustained by the exclusive monetary privilege given it by government. It may be true, as Mr. Fisher says, that just as much gold would be used if it did not possess this monopoly. But that has nothing to do with the question. Take the illustration that I have already used in this discussion when I said: "If government were to decree that all plates shall be made of tin, would not the value of tin rise and the value of china fall?" Now, if the supply of tin were limited, and if nearly all the tin were used in making plates, and if tin had no other use of great significance, it is quite conceivable that, if the decree prohibiting the use of china in making plates should be withdrawn, the same amount of tin might continue to be used for the same purpose as before, and yet the value of tin would fall tremendously in consequence of the admitted competition of china. And similarly, if all property were to be admitted to competition with gold in the matter of representation in the currency, it is possible that the same amount of gold would still be used as money, but its value would decrease notably,—would fall, that is to say, from its abnormal, artificial, government-created value, to its normal, natural, open-market value.




[Liberty, July 11, 1891.]

To the Editor of Liberty:

It is much to be regretted when Liberty is wounded in the house of her friends. This is caused by those who regard liberty as a panacea for every ill, or perhaps it would be better to say who regard the inevitable vicissitudes and inequalities of life as evil. There is no more philosophical reason for believing that all men can be equal, rich, and happy than for believing that all animals can be equal, including, of course, that they should all be equal to men.

Freedom is exceeding fair. It is by far the most excellent way. Under liberty the very best possible results in every department of human activity, including commerce, will be obtained. But it won't make fools successful. One of its recommendations is that folly will more surely be remedied by getting its medicine than by the grandmotherly plan of pro- tection in all directions. In many cases cure is better than prevention. Little burns, we may be sure, save many lives, (1)

It seems to be a fashion novadays amongst reformers to rail at our existing systems of currency and to regard government interference here as greater and more pernicious than in many other matters. The truth, however, is that there is scarcely anything which more completely illustrates the powerlessness of government to establish code in opposition to custom than the unvarying failure of unsound currency enactments, and the concomitant dwindling of monetary law into a mere specification of truisms, a registration of established practice, or a system of licensing certain individuals to carry on certain kinds of trade. But all these are evils not perculiar to the money trade, nor do they here produce more injurious results than in the cases of priests, doctors, accountants, lawyers, engineers, and other privileged faculties. (2)

Schemes to bring about the abolition of interest, especially when the authors promulgate this as a necessary consequence of free trade in banking, are pernicious, and in their ultimate effect reactionary. Low rates of interest depend upon the magnitude of the mass of capital competing for investment rather than upon the presence or absence of the really trifling interference of governments with the modes in which debt may be incurred. What is called free trade in banking actually means only unlimited liberty to create debt. It is the erroneous labelling of debt as money which begets most of the fallacies of currency-faddists, both coercionary and liberationist. (3)

The principal error of the former is that they advocate schemes for the growth and preferential marketing of government debt. The ignis fatuus of some of the latter is a vision of people both using their property and pledging it at the same time; (4) while some go so far as to dream of symbolical money of indefinite value. Thus we have Mr. Alfred B. Westrup contributing "Citizens' Money" and "The Financial Problem, both of which tacitly attempt to expound a method to enable every one to get into debt and keep there. (5)

The introduction to the first-named essay seems by implication to assert that the price of gold is too high, though no attempt is made to show how displacing it from currency would reduce the price as long as its cost and utility remain what they now are; while the author himself appears to think that money can be made very much more plentiful and yet maintain its value, although he is contending that this value depends upon monopoly or scarcity. The last-named essay plainly assumes that by some such scheme poverty can be abolished. (6)

Banking is not the only financial operation in which government interferes. In the case of insurance companies, benefit societies, limited liability corporations, partnerships, trusts, insolvencies, and hundreds of other ways government is continually interfering. Most of this interference is well meant. Most, if not all, of it is actually injurious in itself, apart from the waste, the jobbery, and the imbecility of officialism it involves. These concomitant evils, though far greater than those directly resulting from the interference, had better for the time being be left out of sight. Their treatment belongs to the general subject of liberty, and they only incidentally pertain to the financial interference of government, as they do to all its other interference. Ignoring then the saving in cost, the immediate effect of the total abstention of government from its protection of the public from financial folly and roguery would be that a great crop of fresh schemes, bargains, and arrangements would offer themselves to those desirous of entrusting any of their wealth to the management of others. A very large proportion of these schemes—possibly the majority—would be unsound. (7) Amongst the unsound, unless its expounders grievously misrepresent it, would undoubtedly be found such mutual banking as is proposed by Mr. Westrup. He is altogether on a wrong tack. His whole talk is about money; but this term in his mouth means indebtedness, trust, credit, paper instruments binding some one to deliver something. Now, credit is not a representative of wealth, as Mr. Westrup so con- stantly declares. Mr. Westrup's money is a representative of a promise or debt. It may in many cases, as a matter of history, show that A has entrusted certain wealth to B; but it does not guarantee that B has preserved it, and still less does it assure the holder that B can at call deliver or replace the borrowed articles, or any equal number of similar articles, or an equivalent value in some other articles. (8) As Mr. Donisthorpe insists in his "Principles of Plutology" (p. 136); "There is [at each moment] a certain amount of every valuable commodity in existence, neither more nor less; nor can it be increased by a single atom though the whole population suddenly, as if by inspiration, began craving and yearning for it." (9) Again, what is there to show that any necessity exists, as Mr. Westrup asserts, for enabling all wealth to be represented by money? If I give a man a loaf for sweeping my door-step, the loaf does not represent the work, nor does the work represent the loaf. All we know is that I desire the sweeping more than I desire the loaf, and the laborer desires the loaf more than his ease or idleness. If I give a guinea for a hat, this guinea does not represent the particular hat or any hat. It does not represent it while in my possession before the exchange, nor in the hatter's possession after the exchange. Gold is valuable; it does not merely represent value. The value represents an estimate of the comparative labor necessary to produce the last increment needful to replenish the stock of gold at a rate equivalent to its consumption,—this consumption depending upon the comparative utility of gold in relation to its own value and that of other commodities. Or at a given hat-shop it represents an estimate of the cost of bringing as much more gold to the place as equivalent to the cost of bringing another hat to the shop. (10)

Mr. Westrup's fallacious analysis of commerce dogs his steps in every process of his reasoning. The gravest evils of the interference of government in monetary matters are little more than its cost and the deadening influence of fancied protection. The reform which monetary liberty would secure would not include any redistribution of the products of labor. This depends partly upon the possibility of the laborer possessing the skill of a speculator and of a producer and exercising both at the same time, and partly upon the enormously disproportionate share of taxation which he has to bear. These and many other evils, in so far as they are increased by government, depend not upon arbitrary money, but upon the arbitrary alienation of the substance of the citizen. It is a most trivial incident that the plunder is nominally priced in and redeemed by one commodity. The evil is that it should be taken. The form makes but an infinitesimal difference.

Mr. Westrup would do well to ask himself these questions, and, in answering them, to assign the grounds upon which he proceeds in arriving at the conclusions. (11)

1. Would the value of gold be (a) increased (b) reduced by mutual banking? And what percentage?

2. Is gold the only commodity produced and bought by people who don't want to consume it?

3. Would gold lose its pre-eminence as the commodity the value of which is most correctly estimated, and which it is therefore safest to buy at market value when disposing of our own or our purchased produce?

4. What has the rate of interest to do with the net or residual increment of wealth remaining as a surplus after maintaining the population? Is this less in the United Kingdom where interest is low than in the United States where interest is high?

5. How could legislation maintain the value of gold if it became as abundant as copper? Would the volume of money then be greater than now? Would the rate of interest be affected by this alteration apart from the changes due to the act of transition from the present state of dear gold to the supposed state of cheap gold?

6. How is the voluntary custom of selling preferentially for gold a monopoly? Are cattle a monopoly where used as a medium of exchange?

7. What analogy is there between a law to require the exclusive consumption of hand-made bricks and any laws specifying that the word Dollar in a bond shall imply a certain quantity of gold ? Does any government force anyone to consume gold in preference to any other commodity? Does government consume gold in constructing its offices and defences, or does it merely swap it off for other commodities? Is all silver or gold in the United States delivered to government as fast as made, or does government purchase it in the open market?

Yours, etc.,

J. Greevz Fisher.

78 Harrogate Road, Leeds, England.

Pending the arrival of any answer Mr. Westrup may desire to make to the foregoing criticisms upon his pamphlets, for which purpose the columns of Liberty are open to him, I take the liberty of offering some comments as well as answers to Mr. Fisher's questions.

(1) I know of no friend of liberty who regards it as a panacea for every ill, or claims that it will make fools successful, or believes that it will make all men equal, rich, and perfectly happy. The Anarchists, it is true, believe that under liberty the laborer's wages will buy back his product, and that this will make men more nearly equal, will insure the industrious and the prudent against poverty, and will add to human happiness. But between the fictitious claims which Mr. Fisher scouts and the real claims which the Anarchists assert it is easy to see the vast difference.

(2) I do not understand how "the unvarying failure of unsound currency enactments" makes the interference of government with finance seem less pernicious. In fact, it drives me to precisely the opposite conclusion. In the phrase, "concomitant dwindling of monetary law into a mere specification of truisms," Mr. Fisher repeats his attempt, of which I complained in the last issue of Liberty, to belittle the restrictions placed upon the issue of paper money. When he has answered the question which I have asked him regarding the English banking laws, we can discuss the matter more intelligently. Meanwhile it is futile to try to make a monopoly seem less than a monopoly by resorting to such a circumlocution as "system of licensing individuals to carry on certain kinds of trades," or to claim that the monopoly of a tool not only common but indispensable to all trades is not more injurious than the monopoly of a tool used by only one trade or a few trades.

(3) It is true that if the mass of capital competing for investment were increased, the rate of interest would fall. But it is not true that scarcity of capital is the only factor that keeps up the rate of interest? If I were free to use my capital directly as a basis of credit or currency, the relief from the necessity of borrowing additional capital from others would decrease the borrowing demand, and therefore the rate of interest. And if, as the Anarchists claim, this freedom to use capital as a basis of credit should give an immense impetus to business, and consequently cause an immense demand for labor, and consequently increase productive power, and consequently augment the amount of capital, here another force would be exercised to lower the rate of interest and cause it to gradually vanish. Free trade in banking does not mean only unlimited liberty to create debt; it means also vastly increased ability to meet debt: and, so accompanied, the liberty to create debt is one of the greatest blessings. It is not erroneous to label evidence of debt as money. As Col. Wm. B. Greene well said: "That is money which does the work of the tool money." When evidence of debt circulates as a medium of exchange, to all intents and purposes it is money. But this is of small consequence. The Anarchists do not insist on the word "money." Suppose we call such evidence of debt currency (and surely it is currency), what then? How does this change of name affect the conclusions of the "currency-faddists"? Not in the least, as far as I can see. By the way, it is not becoming in a man who has, not simply one bee in his bonnet, but a whole swarm of them, to talk flippantly of the "fads" of men whose lives afford unquestionable evidence of their earnestness.

(4) Mr. Fisher seems to think it inherently impossible to use one's property and at the same time pledge it. But what else happens when a man, after mortgaging his house, continues to live in it? This is an actual every-day occurrence, and mutual banking only seeks to make it possible on easier terms,—the terms that will prevail under competition instead of the terms that do prevail under monopoly. The man who calls this reality an ignis fatuus must be either impudent or ignorant. Unfortunately it is true that some believers in mutual banking do " dream of symbolical money of indefinite value," but none of the standard expositions of the subject offer any such fallacy; and it is with these that Mr. Fisher must deal if he desires to overthrow the mutual banking idea.

(5) Mr. Westrup's method, if I understand it, would not "enable every one to get into debt and keep there," but rather to get into debt and out again, greatly to the advantage of the borrower and of society generally. Mr. Westrup does not contemplate the issue of bank-notes against individual notes that never mature.

(6) Mr. Fisher, in his remark that "no attempt is made to show how displacing gold from currency would reduce the price as long as its cost and utility remain what they now are," is no less absurd than he would be if he were to say that no attempt is made to show how displacing flour as an ingredient of bread would reduce the price of flour as long as its cost and utility remain what they now are. The utility of flour consists in the fact that it is an ingredient of bread, and the main utility of gold consists in the fact that it is used as currency. To talk of displacing these utilities and at the same time keeping them what they now are is a contradiction in terms, of which Mr. Fisher is guilty. But Mr. Westrup is guilty of no contradiction at all in claiming that money can be made very much more plentiful and yet maintain its value at the same time that he contends that the present value of money is due to its monopoly or scarcity. For to quote Colonel Greene again:

All money is not the same money. There is one money of gold, another of brass, another of leather, and another of paper; and there is a difference in the glory of these different kinds of money. There is one money that is a commodity, having its exchangeable value determined by the law of supply and demand, which money may be called (though somewhat barbarously) merchandise-money; as, for instance, gold, silver, brass, bank-bills, etc.: there is another money, which is not a commodity, whose exchangeable value is altogether independent of the law of supply and demand, and which may be called mutual money. … If ordinary bank-bills represented specie actually existing in the vaults of the bank, no mere issue or withdrawal of them could effect a fall or rise in the value of money: for every issue of a dollar-bill would correspond to the locking-up of a specie dollar in the banks' vaults; and every cancelling of a dollar-bill would correspond to the issue by the banks of a specie dollar. It is by the exercise of banking privileges—that is, by the issue of bills purporting to be, but which are not, convertible—that the banks effect a depreciation in the price of the silver dollar. It is this fiction (by which legal value is assimilated to, and becomes, to all business intents and purposes, actual value) that enables bank-notes to depreciate the silver dollar. Substitute verity in the place of fiction, either by permitting the banks to issue no more paper than they have specie in their vaults, or by effecting an entire divorce between bank-paper and its pretended specie basis, and the power of paper to depreciate specie is at an end. So long as the fiction is kept up, the silver dollar is depreciated, and tends to emigrate for the purpose of travelling in foreign parts; but, the moment the fiction is destroyed, the power of paper over metal ceases. By its intrinsic nature specie is merchandise, having its value determined, as such, by supply and demand; but, on the contrary, paper money is, by its intrinsic nature, not merchandise, but the means whereby merchandise is exchanged, and, as such, ought always to be commensurate in quantity with the amount of merchandise to be exchanged, be that amount great or small. Mutual money is measured by specie, but is in no way assimilated to it; and therefore its issue can have no effect whatever to cause a rise or fall in the price of the precious metals.

This is one of the most important truths in finance, and perfectly accounts for Mr. Westrup's position. When he says that money can be made very much more plentiful and yet maintain its value, he is speaking of mutual money; when he says that the present value of money depends upon monopoly or scarcity, he is speaking of merchandise money.

(7) As sensibly might one say to Mr. Fisher, who is a stanch opponent of government postal service, that "the immediate effect of the total abstention of government from its protection of the public from the roguery of private mail-carriers would be that a great crop of fresh schemes would offer themselves to those desirous of intrusting any of their letters to others to carry. A very large proportion of these schemes—possibly the majority—would be unsound." Well, what of it? Are we on this account to give up freedom? No, says Mr. Fisher. But, then, what is the force of the consideration?

(8) Mr. Westrup's money not only shows that A has given B a conditional title to certain wealth, but guarantees that this wealth has been preserved. That is, it affords a guarantee so nearly perfect that it is acceptable. If you take a mortgage on a house and the owner insures it in your favor, the guarantee against loss by fire is not perfect, since the insurance company may fail, but it is good enough for practical purposes. Similarly, if B, the bank, advances money to A against a mortgage on the latter's stock of goods, it is within the bounds of possibility that A will sell the goods and disappear forever, but he will thus run the risk of severe penalties; and these penalties, coupled with B's caution, make a guarantee that practically serves. To be sure, Mr. Westrup's money does not assure the holder that the bank will deliver the borrowed articles on demand, but it does assure him that he can get similar articles or their equivalents on demand from any customers of the bank that have them for sale, because all these customers are pledged to take the bank's notes; to say nothing of the fact that the bank, though not bound to redeem on demand, is bound to redeem as fast as the mortgage notes mature.

(9) I perceive the perfect truth of Mr. Donisthorpe's remark, but I do not perceive its pertinence to the matter under discussion.

(10) Nor do I detect the bearing of the truisms which Mr. Fisher enunciates so solemnly. They certainly do not establish the absence of any necessity for enabling all wealth to be represented by money. This necessity is shown by the fact that, when the monetary privilege is conferred upon one form of wealth exclusively, the people have to obtain this form of wealth at rates that sooner or later send them into bankruptcy.

(11) I conclude by answering Mr. Fisher's questions.

The value of gold would be reduced by mutual banking, because it would thereby be stripped of that exclusive monetary utility conferred upon it by the State. The percentage of this reduction no one can tell in advance, any more than he can tell how much whiskey would fall in price if there were unrestricted competition in the sale of it.

Neither gold nor any other commodity is bought by people who don't want to consume it or in some way cause others to consume it. Gold is in process of consumption when it is in use as currency.

Mutual banking might or might not cause gold to lose its pre-eminence as the most thoroughly constituted value. If it should do so, then some other commodity more constantly demanded and uniformly supplied would take the place of gold as a standard of value. It certainly is unscientific to impart a factitious, monopoly value to a commodity in order to make its value steady.

Other things being equal, the rate of interest is inversely proportional to the residual increment of wealth, for the reason that a low rate of interest (except when offered to an already bankrupted people) makes business active, causes a more universal employment of labor, and thereby adds to productive capacity. The residual increment is less in the United Kingdom, where interest is low, than in the United States, where interest is high, because other things are not equal. But in either country this increment would be greater than it now is if the rate of interest were to fall.

If gold became as abundant as copper, legislation, if it chose, could maintain its value by decreeing that we should drink only from gold goblets. If the value were maintained, the volume of money would be greater on account of the abundance of gold. This increase of volume would lower the rate of interest.

A voluntary custom of selling preferentially for gold would not be a monopoly, but there is no such voluntary custom. Where cattle are used voluntarily as a medium of exchange, they are not a monopoly; but where there is a law that only cattle shall be so used, they are a monopoly.

It is not incumbent on Anarchists to show an analogy between a law to require the exclusive consumption of hand-made bricks and any law specifying that the word Dollar in a bond shall imply a certain quantity of gold. But they are bound and ready to show an analogy between the first-named law and any laws prohibiting or taxing the issue of notes, of whatever description, intended for circulation as currency. Governments force people to consume gold, in the sense that they give people no alternative but that of abandoning the use of money. When government swaps off gold for other commodities, it thereby consumes it in the economic sense. The United States government purchases its gold and silver. It can hardly be said, however, that it purchases silver in an open market, because, being obliged by law to buy so many millions each month, it thereby creates an artificial market.



[Liberty, August 15, 1891.]

To the Editor of Liberty:

There is not the slightest analogy between allowing theatres to be consumed on Sundays and allowing silver or iron to be sold on the same terms as gold. Currency is only buying and selling; it is not consuming. The customary adoption of gold as currency and the endorsement of this custom by edict involves only a very insignificant increase in its consumption. Most other commodities waste much more than gold in the processes of stocking, marketing, and distributing from points of production to points of consumption. An admission that if government allowed an increase in the consumption of theatres it would raise the price, in no way affects any known proposal or enactment in regard to gold as currency, because currency laws have so little effect upon the consumption of gold. There are laws which possibly affect the value of the precious metals. There are such as prohibit mixing them freely in all proportions, producing utensils or other articles of consumption. Thus, if the removal of the present restrictions should lead to a larger consumption of silver in culinary articles, this would slightly raise the price of silver.

But what is the use of pursuing a false analogy? If government simply facilitated the sale of theatres, how would that affect their price in the market? A comparison of the effects of facilitating consumption does not illustrate the effects of facilitating exchanges. It is in the power of government to alter the values of the precious metals enormously within the areas of their dominion by prohibiting their importation or exportation or by duties or bounties. It will be time enough to discuss these matters when they are proposed. They are not analogous to the attempts to fix the value of silver by the schemes of the bi-metallists, and they have still less analogy to the statutes which are supposed to determine the value of gold, but which, as a matter of fact, do nothing of the sort. To state that one-fourth ounce of gold shall exchange for one-fourth ounce of gold is simply to cumber the statute book with a "chestnut." No government ever does stipulate "that all money shall be made of or issued against gold or silver," and it is in supposing that it does so that some of our comrades get wrong. What is called money in the above sentence means a bond or promise to deliver coin. There is nothing to prevent any one from issuing bonds or promises to deliver something else, such as petroleum, pig-iron, wheat, lard, and so on. If you promise delivery of petroleum on demand or at a date named, you only discharge your bond by legally tendering the petroleum as specified. The law of England allows this. To prevent it would disorganize all trade. W'hat is prohibited is the production and issue of notes in one particular form,—namely, promises to pay gold to bearer on demand. It is a most vicious equivoque to call such instruments money, and to exclude checks, drafts, bills, notes, whether drawn for gold, silver, iron, lard, or even labor.

Space prohibits (even when a condensed statement, which will be misnamed dogmatism, is employed) showing that even under our truck laws no one is prohibited from using or taking as a payment, flour, bread, meat, calico, boots, and so on.

The analogy as to an enactment that all plates should be made of tin is equally misleading and unsound. Government does not enact that all marketable articles shall be made of gold, or that all articles capable of being sold for future delivery shall be made of gold. There is no benefit to this argument in confounding acts which would seriously affect consumption with acts which have little or no such effect. The gold embodied in coins is marketable stock; it is not in consumption, as the tin would be if it had a monopoly in plate production. We want plates to use; we carry coin always to sell. It is not withdrawn from the market so as to raise its price, but is constantly brought afresh to market so as equally to lower it. Besides this, the illustration assumes and implies that for gold there is no other use of great significance but coin-making. If this were so, then the Westrups, the Tarns, and the Tuckers would have the argument all on their own side. The fact is, however, that the gold mines are not kept open to supply coin, but to supply the arts.

There is yet another fallacy in our comrades' position. It would be no monetary disadvantage if the facts really were as they suppose. If gold were twice as dear, or twice as cheap, its merchants would make just the same profit, bankers and financiers would not lose or gain—neither would anybody except the producers and consumers of gold. Grocers' profits are not affected by the price of sugar, but the growers and users are both vitally concerned.

There would seem to be nothing whatever in English law to prevent the establishment of a bank without any specie issuing inconvertible paper, which the customers mutually agree to accept at par value, but there is little likelihood such a scheme would be workable. It would tax the powers of a very clever master of legal or Anarchical phraseology to specify upon the notes the responsibility of each customer and to preserve the power of these customers fulfilling their agreements. Before one could vise such notes to buy a breakfast or a railway ticket there would have to be a rather involved and tedious disquisition upon economics. No Anarchist would propose to embody such arrangements in a statute like our limited liability laws. Such notes would therefore be simply of the nature of mortgage bonds, for which there would possibly be a market and a price. The price would probably be below rather than above par.

Free trade in gold and in credit is desirable. Its desirability is proportionate to the restrictions which exist, but these are not very great or grievous. The field for their discussion opens only when our comrades' present mists have rolled away. But they bear no comparison with acts for the purchase by government of great quantities of silver, acts for repairing worn gold coin at public expense, and, above all, acts for tariffs designed to hamper trade and acts for raising public revenue in general.

Let our comrades in Liberty, Egoism, and The Herald of Anarchy rise to more vital matters when they touch upon the economics of coercion. The evils of coinage are greatly overstated, and to them are attributed effects with which they have no connection.

J. Greevz Fisher.

78 Harrogate Road, Leeds, England.

Mr. Fisher's article, printed above, is nothing but a string of assertions, most of which, as matters of fact, are untrue. The chief of these untruths is the statement that in exchanging gold we do not consume it. What is consumption? It is the act of destroying by use or waste. One of the uses of gold—and under the existing financial system its chief use—is to act as a medium of exchange, or else as the basis of such a medium. In performing this function it wears out; in other words, it is consumed. Being given a monopoly of this use or function, it has an artificial value,—a value which it would not have if other articles, normally capable of this function, were not forbidden to compete with it. And these articles suffer from this restriction of competition in very much the same way that a theatre forbidden to give Sunday performances suffers if its rival is allowed the privilege. Mr. Fisher may deny the analogy as stoutly as he chooses; it is none the less established. This analogy established, Mr. Fisher's position falls,—falls as surely as his other position has fallen: the position that government cannot affect values, which he at first laid down with as much contemptuous assurance as if no one could deny it without thereby proving himself a born fool. So there is no need to refute the rest of the assertions. I will simply enter a specific denial of some of them. It is untrue that gold is not withdrawn from the market to raise its price. It is untrue that the gold mines are kept open principally to supply the arts. It is untrue that, if gold were twice as dear or twice as cheap, bankers would not lose or gain; the chief business of the banker is not to buy and sell gold, but to lend it. And I believe it to be untrue—though here I do not speak of what I positively know—that English law permits the establishment of such banks as Proudhon, Greene, and Spooner proposed. Mr. Fisher certainly should know more about this than I, but I doubt his statement, first, because I have found him in error so often; second, because nine out of ten Massachusetts lawyers will tell you with supreme confidence that there is no law in Massachusetts prohibiting the use of notes and checks as currency (yet there is one of many years' standing, framed in plain terms, and often have I astonished lawyers of learning and ability by showing it to them); and, third, because I am sure that, if such banks were legal in England, they would have been started long ago.




[Liberty, August 22, 1891.]

To the Editor of Liberty:

One does not lay oneself open to a charge of disloyalty to the principles of liberty by guarding against extravagant hopes. It seems necessary to keep this in mind before saying a word against any anticipations formed by ardent and able advocates of liberty like yourself. It is a hyperbole (possibly open to misconstruction) to imply that some advocates of liberty regard it as a panacea for every ill. It therefore is a great advantage when its expected benefits are clearly defined as in your issue of the nth. You believe that under liberty the laborer's wages will buy back his product. This is fortunately a definite issue. It implies that if there be a naked producer or a commodity the complete production of which, including all the outlay needful for its delivery to the consumer at the very moment when he needs to consume it, occupies time and demands the empolyment of wealth in material, sustenance of producer, and tools, of none of which this producer is possessed, this pauper producer shall retain the full value of his product notwithstanding his partial dependence upon some one who provides the necessaries for his production in anticipation of his fruition. Is not this a fair and correct interpretation of your phrase? and supposing it to be so, does it not show that you expect too much?(1)

The facilitation of credit and the so-called circulation of debts as a substitute for currency, together with all schemes for mutual banking or schemes for the more rapid development of commerce, imply that valuables shall be temporarily placed at the disposal of others than their owners who meanwhile sustain a privation and also take a serious risk, but that these owners shall obtain no recompense beyond the bare return of their valuables unimpaired. (2) If a complex and therefore intricate scheme or calculation results in producing something out of nothing it opens a suspicion that there is some concealed flaw in the train of thought. Credit without remuneration, debt without cost, unlimited or very plentiful money without depreciation, are the desired and hoped results of the new schemes. It is most important to distinguish between demanding liberty to try these schemes, and pledging liberty to their success. Unfortunately it does not appear to be sufficient to call attention to this distinction. Ardent friends will often unite the cause of the fad with that of the principle unless the fad itself be destroyed. There are faddists who avoid this pitfall. (3) Thus there are some who advocate a reform of spelling, but as advocates of freedom decline to make even that hoped success of reformed spelling, or its hoped rapid progress under a free system of education, a plea or prop for arguments to emancipate teaching from government restriction, or for enforced alienation of citizens' property for its support. Teaching ought to be free not because it is argued that spelling would be reformed and the reform would be good, but simply that the reform may get a chance and if good may succeed. So government restriction on banking and credit ought not to be repealed because Westrup's or Greene's finance would prevail and bless the people, but so that this and any other device may be tested and if good succeed. (4)

As against the scheme itself the contention is that wealth originates solely in production, and that with plentiful production the wealth of the poor will increase even though the wealth of some rich people is vastly, and, as it is thought, inordinately increased. But this banking scheme does not add to production. (5) It is but a scheme for destroying one source of income of the rich or appropriating it to the poorer producer. Without any attempt at deduction experience dictates the induction that the chances are in favor of the man with a special faculty for successful financial operations rather than of students of principles. The man who can actually value a horse, a house, a crop of wheat, is more useful in pursuing his function as a speculator than a student who can ably analyze the components of value by prolonged and tardy research. The trader helps society most and at greater risk, so those of them who succeed have the greater gain, and it is probably cheaper to society to pay this figure for the organization of commerce than dabble in amateurish schemes. The experience of co-operation—both its successes and its failures seem to point in this direction in this country. (6)

Government interference in finance has broken down whenever it has done serious violence to sound economical principles. At present it does not do so. It needlessly coins some metal. This is in England unaccompanied with the gross error of buying and hoarding increasing quantities of a metal whose production has been greatly cheapened of late. Apart from the silver folly of your government the residual evils of government coinage are infinitesimal, and they are not commercial. They are confined to the loss arising from carrying on a productive or distributive process by government under monopoly rather than by free individuals in combination or separately under the economic control of competition. Here they end. It is pure fancy unsupported as yet by evidence or true analogy that they interfere with the movements of the metal, or materially coerce the markets into using an inferior commodity as its most reliable and most fluent investment, (7) There is not the slightest use for the purposes of this argument in comparing a law en- forcing the use of golden drinking-vessels with any laws connected with the use of gold as currency. A true analogy would be found in studying the effect of monetizing iron by law. Such a law would not demonetize gold unless it were much more tyrannical in its mode of prescribing iron as a legal tender than our present law is in prescribing gold. (8) All government income, borrowings, taxes, postage, school pence, court fees, all government outlay in wages, war material, grants to localities, payment of interest upon debt and all accounts, court verdicts, official valuations, bankrupt statements, and so on, would be in terms of iron. But I should be free to promise future delivery, or acceptance of gold, or to sell my services or my products for gold as I now am to promise to give or take iron at an agreed time and place or to hire myself for iron or for board and lodging or any other mode of recompense I can get any one to agree upon. (9) Now it is quite likely the first effect of this would be to raise the price of iron and thereby lower the value of gold in comparison with iron, coal, and other economic components of the value of iron. It is also quite likely it would stimulate the production of iron. But both of these effects would combine to maintain a larger stock of iron hanging as a buffer between producer and consumer. This would steady value, but it would also in time counteract the first temporary effects of the supposed monetization of iron, and neither price nor production would continue to be excessive—with the sole exception of the small increase of consumption from wear and tear of coins. It would not in all probability displace gold as the money in the market, because government, instead of doing as it now does, registering, and taking praise for the best monetary substance, would attempt to monetize an ill-adapted commodity, a task beyond its strength, and would sustain defeat as it has often done when debasement or other anti-economic schemes were undertaken.

If as you assert the main utility of gold consists in the fact that it is used for currency, then your general position is impregnable. But that this is not sound is somewhat implied by Greene, who recognizes gold and silver as merchandise. "Specie is merchandise having its value determined, as such, by supply and demand." The words "as such" may simply imply "therefore" or may imply an idea on Greene's part that the value of specie as money was otherwise determined. But what evidence have we that the very frequent resale of gold—called its monetary circulation—is effectual in altering its price (wear and tear excepted)? Every time gold is bought in or gathered in taxes the tendency is to put up the price, and every time it is thrown into market or spent by government in outlay it tends to lower its value. These operations do not constitute a monopoly. Any one can buy and any one can sell gold coin. There is no monopoly in the matter. The monetary privilege is not a monopoly, and it grows in the open market, not in the fancied forcing-house of government. Greene alleges (in small caps) that mutual money would neither raise nor lower the price of specie. You hold that it would be tangibly reduced by mutual banking. Which is correct? (10) Comparing the reduction in value you anticipate with one which might arise in the price of whiskey if there were unrestricted competition in the sale of it, you overlook the fact that there is unrestricted competition in the sale of gold bullion and specie. Moreover, though we cannot tell by what amount the price of whiskey would be reduced by unrestricted competition, we can tell of what the fall would consist. It would be limited to such relinquishment of profit as would be forced upon the dealers by competition. If consumption increased, it might raise the price by its effect upon marginal or residual production yielding a diminished return, or it might be lowered by cheapening production by remunerating economic employment of capital. This is a false and inapplicable analogy.

It is no more correct to say that gold is in the process of being consumed when it is in use as currency than to say that the inevitable waste or deterioration of commodities on the road from producer to consumer is economically an act of consumption. (11) Production is not complete until the commodity reaches the hands of a person who applies it to the direct gratification of some personal craving. The waste of gold in the function of currency is part of the cost which the consumer has to repay when that coin has been converted into a consumable product which he purchases. The only exception is that this cost may fall upon some other product when the less waste of gold is voluntarily substituted for the waste of any other commodity if one seeks to transport to a distant market mere value irrespective of its embodiment. It is as if one temporarily needed a certain weight to steady a machine, but was indifferent as to whether it was embodied in stone, iron, or gold, all of which he happens to have in stock, but which he can subsequently consume or sell unimpaired, and whose employment for this purpose only infinitesimally deteriorates the ponderable and does not impoverish his trade stock because it does not withdraw the ponderous article from inspection or sale.

It is not correct to reply to a monetary question by pointing out that government might keep gold as dear as it now is even if it were as cheaply produced as copper, by decreeing that we should drink only from gold goblets. If this could have such effect it would be inapplicable to this discussion, because it would be decreeing consumption while currency is not consumption, but only marketing. But it would fail, because of the durability of substance. Only by buying up the metal at the desired value could the value be maintained. No purchases of gold with gold would alter its value. Silver, copper, wheat would have to be used to buy up gold at the value it was desired to maintain, and of course no government would have the strength for this. (12) It must be remembered that miners would be sellers at cost. The United States government raises the price of silver now while it is a buyer. If it tipped it in mid-ocean it would then consume it in an economic sense. When it becomes a seller the price must fall. The fact that there is a possibility the law may change at any moment even now keeps the price from rising as it Would if the silver were immediately consumed or destroyed instead of being hoarded. Surely it is a very palpable error to say that when government sells or spends gold it consumes it in an economic sense. If I swap a horse for a cow and kill and eat the cow, do I consume the horse? (13) I took the horse from the market when I bought it, and I return it to the market when I offer to sell it. The question of the metal has demanded so much elucidation that debts as commodities and as currency must wait a future communication.

J. Greevz Fisher.

78 Harrogate Road, Leeds, England.

(1) No, this is not a correct interpretation of my phrase, because it is based upon a conception of the term product seriously differing from my own. If a laborer's product is looked upon as the entirety of that which he delivers to the consumer, then indeed Mr. Fisher's point is well taken, and to expect the laborer's wages to buy back his product is to expect too much. But that is not what is ordinarily meant by a laborer's product. A laborer's product is such portion of the value of that which he delivers to the consumer as his own labor has contributed. To expect the laborer's wages to buy this value back is to expect no more than simple equity. If some other laborer has contributed to the total value of the delivered article by making a tool which has been used in its manufacture by the laborer who delivers it, then the wages of the laborer who makes the tool should also buy back his product or due proportion of value, and would do so under liberty. But his portion of the value and therefore his wage would be measured by the wear and tear which the tool had suffered in this single act of manufacture, and not by any supposed benefit conferred by the use of the tool over and above its wear and tear. In other words, the tool-maker would simply sell that portion of the tool destroyed in the act of manufacture instead of lending the tool and receiving it again accompanied by a value which would more than restore it to its original condition. Mr. Fisher's interpretation rests, furthermore, on a misconception of the term wages. When a farmer hires a day-laborer for a dollar a day and his board, the board is as truly a part of the wages as is the dollar; and when I say that the laborer's wages should buy back his product, I mean that the total amount which he receives for his labor, whether in advance or subsequently, and whether consumed before or after the performance of his labor, should be equal in market value to his total contribution to the product upon which he bestows his labor. Is this expecting too much? If so, might I ask to whom the excess of product over wage should equitably go?

(2) Every man who postpones consumption takes a risk. If he keeps commodities which he does not wish to consume, they may perish on his hands. If he exchanges them for gold, the gold may decline in value. If he exchanges them for government paper promising gold on demand, the paper may decline in value. And if he exchanges them for mutual money, this transaction, like the others (though in a smaller degree, we claim), has its element of risk. But, as long as merchants seem to think that they run less risk by temporarily placing their valuables at the disposal of others than by retaining possession of them, the advocates of mutual money will no more concern themselves about giving them recompense beyond the bare return of their valuables unimpaired than the advocates of gold and government paper will concern themselves to insure the constancy of the one or the solvency of the other. As for the "something out of nothing" fallacy, that is shared between God and the Shylocks, and, far from being entertained by the friends of free banking, is their special abomination. "Credit without remuneration!" shrieks Mr. Fisher in horror. But, if credit is reciprocal, why should there be remuneration? "Debt without cost!" But, if debt is reciprocal, why should there be cost? "Unlimited or very plentiful money without depreciation!" But if the contemplated addition to the volume of currency contemplates in turn a broadening of the basis of currency, why should there be depreciation? Free and mutual banking means simply reciprocity of credit, reciprocity of debt, and an extension of the currency basis. Mr. Fisher has been so inveterate a drinker of bad economic whiskey that he has got the economic jim-jams and sees snakes on every hand.

(3) In applying it to his own views also, Mr. Fisher takes the sting out of the word "fad." But it was and is my impression that he originally applied it to the views of the free money advocates, not in the playful spirit in which all independent men call themselves "cranks," but in the contemptuous spirit in which they are given that appellation by the mossbacks. And it was natural enough. In finance, Mr. Fisher is a mossback. Contempt for contempt,—that's fair, isn't it?

(4) It has been repeatedly stated in these columns that we ask nothing but liberty. Given liberty, if we fail, we will subside. Nevertheless, with Mr. Fisher's permission, we will continue to put in our best licks for liberty in those directions which seem to us most promising of good results. Meanwhile we accord to Mr. Fisher the privilege of rapping away for spelling reform so long as he does it at his own expense, which is not the case at present. (My readers may not see the point, but Mr. Fisher and my printers will.)

(5) This I deny. It is the especial claim of free banking that it will increase production. To make capital fluent is to make business active and to keep labor steadily employed at wages which will cause a tremendous effective demand for goods. If free banking were only a picayunish attempt to distribute more equitably the small amount of wealth now produced, I would not waste a moment's energy on it.

(6) Here we have a very good reason why I should continue to debate with Mr. Fisher rather than form a banking partnership with Mr. Westrup. Very likely the banking firm of Westrup, Tucker & Co. would come speedily to grief. But I am none the less interested in securing the greatest possible liberty for banking so that I may profit by the greater competition that would then be carried on between those born with a genius for finance. But what about Proudhon, Mr. Fisher? He was no amateur. He could value, not only a horse, but a railroad, the money kings utilized his business brains, his Manual for a Bourse Speculator served them as a guide, and, when he started his Banque du Peuple, it immediately assumed such proportions that Napoleon had to construct a crime for which to clap him into jail in order to save the Bank of France from this dangerous competitor. Amateur, indeed!

(7) On the contrary, there is an abundance of evidence. The suppression of Proudhon's bank was a coercion of the market. And in this country attempt after attempt has been made to introduce credit money outside of government and national bank channels, and the promptness of the suppression has always been proportional to the success of the attempt.

(8) Here Mr. Fisher becomes heretical. The champions of gold are proclaiming with one voice that the monetization of silver will prove the demonetization of gold.

(9) Just as free, and no more so. But this is no freedom at all. I tell Mr. Fisher again that it is a crime to issue and circulate as currency a note promising to deliver iron at a certain time. I know that it is a crime in this country, and I believe that the laws of England contain restrictions that accomplish virtually the same result.

(10) There is no contradiction between my position and Greene's. Greene held, as I hold, that the existing monopoly imparts an artificial value to gold, and that the abolition of the monopoly would take away this artificial value. But he also held, as I hold, that, after this reduction of value had been effected, the variations in the volume of mutual money would be independent of the price of specie. In other words, this reduction of the value of gold from the artificial to the normal point will be effected by the equal liberty given to other commodities to serve as a basis of currency; but, this liberty having been granted and having taken effect, the issue of mutual money against these commodities, each note being based on a specific portion of them, cannot affect the value of any of these commodities, of which gold is one. It is no answer to the charge of monopoly to say that any one can buy and sell gold coin. No one denies that. The monopoly complained of is this,—that only holders of gold (and, in this country, of government bonds) can use their property as currency or as a basis of currency. Such a monopoly has even more effect in enhancing the price of gold than would a monopoly that should allow only certain persons to deal in gold. The price of gold is determined less by the number of persons dealing in it than by the ratio of the total supply to the total demand. The monopoly that the Anarchists complain of is the monopoly that increases the demand for gold by giving it the currency function to the exclusion of other commodities. If my whiskey illustration isn't satisfactory, I will change it. If whiskey were the only alcoholic drink allowed to be used as a beverage, it would command a higher price than it commands now. I should then tell Mr. Fisher that the value of whiskey was artificial and that free rum would reduce it to its normal point. If he should then ask me what the normal point was, I should answer that I had no means of knowing. If he should respond that the fall in whiskey resulting from free rum "would be limited to such relinquishment of profit as would be forced upon the dealers by competition," I should acquiesce with the remark that the distance from London to Liverpool is equal to the distance from Liverpool to London.

(11) It is Mr. Fisher's analogy, not mine, that is false and inapplicable. The proper analogy is not between gold and the commodities carried, but between gold and the vehicle in which they are carried. The cargo of peaches that rots on its way from California to New England may not be economically consumed (though for my life I can't see why such consumption isn't as economic as the tipping of silver into the Atlantic by the United States government, which Mr. Fisher considers purely economic), but at any rate the wear of the car that carries the cargo is an instance of economic consumption. Now the gold that goes to California to pay for those peaches and comes back to New England to pay for cotton cloth, and thus goes back and forth as constantly as the railway car and facilitates exchange equally with the railway car and wears out in the process just as the railway car wears out, is in my judgment consumed precisely as the railway car is consumed. That only is a complete product, Mr. Fisher tells us, which is in the hands of a person who applies it to the direct gratification of some personal craving. I suppose Mr. Fisher will not deny that a railway car is a complete product. But if it can be said to be in the hands of a person who applies it to the direct gratification of some personal craving, then the same can be said of gold.

(12) I did not mean to say for a moment that a government could carry out such an arbitrary policy of fixing values to an unlimited extent without a revolution, but only that as far as the attempt should be made, the economic result, pending the revolution, would be as stated.

(13) Yes, to a trifling extent. And if the horse were then to be used to buy a sheep, and then to buy a dog, and then to buy a cat, and then to buy a cigar, until finally he could not be sold for enough oats to keep him from falling in his tracks, it is my firm conviction that the horse in that case would be economically consumed in fulfilling the function of currency.




[Liberty, February 26, 1887.]

I must refer once more to the Winsted Press and its editor. It is lamentable to see so bright a man as Mr. Pinney wasting his nervous force in assaults on windmills. But it is his habit, whenever he finds it necessary or thinks it timely to say something in answer to free-money advocates, to set up a windmill, label it free money, and attack that. An instance of this occurs in a scolding article on the subject in his issue of February 17, as the following sentence shows: "We had a little taste of this free currency in the days of State wildcat banking, when every little community had its State bank issues." The italics are mine,—used to emphasize the substitution of the windmill State for the giant Freedom. How could State bank issues be free money? Monopoly is monopoly, whether granted by the United States or by a single State, and the old State banking system was a thoroughly monopolistic system. The unfairness and absurdity of Mr. Finney's remark become apparent with the reflection that the principal English work relied upon by the friends of free money, Colonel Greene's "Mutual Banking," was written expressly in opposition to the then existing State banking system, years before the adoption of the national banking system. Mr. Pinney would not fall back upon this idiotic argument if he had a better one. That he has none is indicated by his saying of free money, as he says of free trade: "In theory the scheme is plausible. In practice it would probably be an abomination." Mr. Finney's old conservative, cowardly, Calvinistic refuge! When driven into a corner on a question which turns on the principle of Liberty, he has but one resort, which amounts practically to this: "Liberty is right in theory everywhere and always, but in certain cases it is not practical. In all cases where I want men to have it, it is practical; but in those cases where I do not want men to have it, it is not practical." What Mr. Finney wants and does not want depends upon mental habits and opinions acquired prior to that theoretical assent to the principle of liberty which the arguments of the Anarchists have wrung from him.




[Liberty, March 26, 1887.]

Pinney of the Winsted Press grows worse and worse. It will be remembered that, in attacking the free-money theory, he said we had a taste of it in the day of State wildcat banking, when every little community had its State bank issues; to which I made this answer: "How could State bank issues be free money? Monopoly is monopoly, whether granted by the United States or by a single State, and the old State banking system was a thoroughly monopolistic system." This language clearly showed that the free-money objection to the old State banks as well as to the present national banks is not founded on any mistaken idea that in either case the government actually issues the money, but that in both cases alike the money is issued by a monopoly granted by the government. But Pinney, not daring to meet this, affects to ignore the real meaning of my words by assuming to interpret them as follows (thus giving new proof of my assertion that he wastes his strength in attacking windmills):

It is apparently Mr. Tucker's notion that State banks were an institution of the State. They were no more a government institution than is a railroad company that receives its charters from the State and conducts its business as a private corporation under State laws.… For purposes of illustration, they answer well, and Mr. Tucker's effort to lessen the force of the illustration by answering that they were institutions of the State, because they are called for convenience State banks, is very near a resort to wilful falsehood.

What refreshing audacity! Pinney knows perfectly well that the advocates of free money are opposed to the national banks as a monopoly enjoying a privilege granted by the government; yet these, like the old State banks, are no more a government institution than such a railroad company as he describes. Both national and State banks are law-created and law-protected monopolies, and therefore not free. Anybody, it is true, could establish a State bank, and can establish a national bank, who can observe the prescribed conditions. But the monopoly inheres in these compulsory conditions. The fact that national bank-notes can be issued only by those who have government bonds and that State bank-notes could be issued only by those who had specie makes both vitally and equally objectionable from the standpoint of free and mutual banking, the chief aim of which is to secure the right of all wealth to monetization without prior conversion into some particular form of wealth limited in amount and without being subjected to ruinous discounts. If Mr. Pinney does not know this, he is not competent to discuss finance; if he does know it, it was a quibble and "very near a resort to wilful falsehood" for him to identify the old State banking system with free banking.

But he has another objection to free money,—that it would enable the man who has capital to monetize it, and so double his advantages over the laborer who has none. Therefore he would have the general government, which he calls the whole people, "monetize their combined wealth and use it in the form of currency, while at the same time the wealth remains in its owner's hands for business purposes." This is Mr. Finney's polite and covert way of saying that he would have those without property confiscate the goods of those who have property. For no governmental mask, no fiction of the "whole people," can disguise the plain fact than to compel one man to put his property under pawn to secure money issued by or to another man who has no property is robbery and nothing else. Though you leave the property in the owner's hands, there is a "grab" mortgage upon it in the hands of the government, which can foreclose when it sees fit. Mr. Pinney is on the rankest Communistic ground, and ought to declare himself a State Socialist at once.

Certainly no one wishes more heartily than I that every industrious man was the owner of capital, and it is precisely to secure this result that I desire free money. I thought Mr. Pinney was a good enough Greenbacker to know (for the Greenbackers know some valuable truths, despite their fiat-money delusion) that the economic benefits of an abundance of good money in circulation are shared by all, and not reaped exclusively by the issuers. He has often clearly shown that the effect of such abundance is to raise the laborer's wages to an equivalence to his product, after which every laborer who wishes to possess capital will be able to accumulate it by his work. All that is wanted is a means of issuing such an abundance of money free of usury. Now, if they only had the liberty to do so, there are already enough large and small property-holders willing and anxious to issue money, to provide a far greater amount than is needed, and there would be sufficient competition among them to bring the price of issue down to cost,—that is, to abolish interest. Liberty avoids both forms of robbery,—monopoly on the one side and Communism on the other,—and secures all the beneficent results that are (falsely) claimed for either.




[Liberty, April 23, 1887.]

Having exhausted the resources of sophistry, and unable longer to dodge the inexorable and Procrustean logic of Pinney the anti-Prohibitionist, Pinney the Protectionist has subsided, and is now playing possum in the Procrustean bed in which Pinney the anti-Prohibitionist has laid him. But Pinney the Greenbacker evidently hopes still, by some fortunate twist or double, to find an avenue of escape yet open, and thus avoid the necessity of doing the possum act twice. Accordingly, in his Winsted Press of April 7, he makes several frantic dashes into the dark, the first of which is as follows:

Our first objection to free money was that the great variety of issues, coupled with a questionable security, would limit circulation to local cir- cuits and subject the bill-holder to harassing uncertainty as to the value of currency in his possession and to constant risk of loss. To illustrate this defect we mentioned the experience of the people with the old State bank bills, which experience, disastrous as it was, did not offer a fair parallel, simply and solely because it was not disastrous enough, the banks being limited and regulated in a measure by State laws and machinery to enforce contracts. Our Boston Procrustes thereupon plunged straight into trouble by denying the similitude, because forsooth the old banks were incorporated institutions not perfectly free to cheat their creditors, forgetting that, in so far as they differed from free banks, the difference in point of security, scope of credit, etc., was in our favor.

That is one way of putting it. Here is another. Free money advocates hold that security is one (only one) essential of good money, and that competition is sure to provide this essential, competition being simply natural selection or the survival of the fittest, and the fittest necessarily possessing the quality of security. But they have never held that it was impossible for monopoly to furnish a temporally secure money. It may or may not do so, according to the prescribed conditions of its existence. Pending the universal bankruptcy and revolution to which it inevitably will lead if allowed to live long enough, the national bank monopoly furnishes a money tolerably well secured. But the old State bank monopoly furnished a money far inferior in point of security, not because it was a freer system,—for it was not,—not because the conditions of its existence were less artificially and compulsorily prescribed,—for they were not,—but because the conditions thus prescribed were less in accordance with wise business principles and administration. The element of competition, or natural selection, upon which the free money advocates rely for the supply of a money that combines security with all other necessary qualities, was just as much lacking from the old State bank system as it is from the present national bank system. Therefore, to say of the State banks that, "in so far as they differed from free banks, the difference in point of security, scope of credit, etc., was in their favor" is to beg the question entirely; and accordingly, when Mr. Pinney, as sole proof of an assertion that free money would be unsafe money, offered the insecurity of the old State bank bills, I informed him that there was not the slightest pertinence in his illustration, whereby I plunged, not myself, but Mr. Pinney into trouble.

To get out of it he performs a double which eclipses all his previous evolutions. Finding that he must deal in some way with my statement that the monopoly of money inheres in the compulsory conditions of its issue, chief among which are the government bond basis in the national bank system and the specie basis in the old State bank system, he asks:

How then about your free banking? Are there not any "compulsory conditions?" Free bank notes can be issued only by those who have government bonds, or specie, or property of some sort, we suppose, so there are your "compulsory conditions," enforced by the business law of self-preservation (for State law is not to be mentioned in Anarchist ears), and "the monopoly inheres in these compulsory conditions." Behold, then, the new monopoly of those who have property!

To this absurdity there are two answers. In the first place, it is not true that under a free banking system "notes can be issued only by those who have property of some sort." They can be issued and offered in the market by anybody who desires. To be sure, none will be taken except those issued by persons having either property or credit. But there is no monopoly of issue or the right to issue, no denial of liberty. If Mr. Pinney should claim that this answer amounts to nothing because issue is valueless without circulation, I shall then remind him of my previous statement that the circulation of an abundance of cheap and sound money benefits those who use it no less than those who issue it, and tends to raise the laborer's wages to a level with his product,—a point which he carefully avoids in his last article, because he knows that he cannot dispute it, having frequently maintained the same thing himself.

But, in the second place, Mr. Finney's argument that the possession of property is a necessary condition of the issue and circulation of money, and that therefore free money is as much a compulsory monopoly as that of the government which prescribes the possession of a certain kind of property as a condition of even the issue of money, is precisely on a par with—in fact, is a glaring instance of—the reasoning resorted to by those friends of despotism who deny political and social liberty on the ground of philosophical necessity. The moment any person, in the name of human freedom, claims the right to do anything which another person does not want him to do, you will hear the second person cry: "Freedom! Impossible! There's no such thing. None of us are free. Are we not all governed by circumstances, by our surroundings, by motives beyond our control? Bow, then, to the powers that be!" Boiled down, the argument of these people and of Mr. Pinney is this: "No one can do as he pleases. Therefore you must do as we please." It needs only to be stated in this bald form to be immediately rejected. Hence I shall attempt no further refutation of it. Mr. Pinney will please bear in mind hereafter that, when I use the word monopoly, I refer not to such monopolies as result from natural evolution independent of government, but to monopolies imposed by arbitrary human power. He knew it very well before, but he must dodge, and this was the only dodge left. Let the reader note here, however, how his double undid him. He says that under free banking the condition of a secure basis for money would be "enforced by the business law of self-preservation," exactly the opposite of his original charge that free money would be unsafe.

But he is not yet done with this twaddle about "compulsory conditions." Read again:

Mr. Tucker cannot see that there is any difference in principle between a law which absolutely prohibits the sale of an article, and a law which taxes the seller of that article. The tax is a "compulsory condition" which prohibits till it is complied with. The possession of property is another compulsory condition which prohibits free banking till it is complied with. Therefore there is no difference between absolute prohibition of free banking and the monopolistic condition that practically prohibits a man from being a free banker unless he can put up the security.

Utter confusion again! Mr. Pinney seems unable to distinguish between disabilities created by human meddlesomeness and those that are not. The law which prohibits a sale and the law which taxes the seller both belong to the former class; the lack of property belongs to the latter, or rather, it belongs to the latter when conditions are normal. It is true that the lack of property which at present prevails arises in most cases out of this very denial of free banking, but I cannot believe that even Mr. Pinney would cap the climax of his absurdity by assigning as a reason for the further denial of free banking a condition of affairs which has grown out of its denial in the past. The number of people who now own property, and the amount of property which they own, are sufficient to insure us an abundance of money as soon as soon as its issue shall be allowed, and from the time this issue begins the total amount of property and the number of property-owners will steadily increase.

To my objection to his government money monopoly that it would be Communistic robbery to mortgage all the wealth of the nation to secure all the money of the nation, Mr. Pinney can only make answer that the possibility that the government would foreclose the mortgage—that is, increase taxation—would be very remote. As if any possibility could be considered remote which is within the power and for the interest of lawmakers to achieve, and as if it were not the end and aim of government to tax the people all that it possibly can!



[Liberty, May 16, 1891.]

Liberty is asked by the Mutual Bank Propaganda of Chicago to answer the following questions, and takes pleasure in complying with the request.

"1. Does the prohibitory tax of ten per cent, imposed by Congress on any issue of paper money other than is issued by the U. S. Treasury limit the volume of money ? If not, why not?

Yes. "2. Whence did the State originally derive the 'right' to dictate what the people should use as money?"

From its power.

"3. If an association or community voluntarily agree to use a certain money of their own device to facilitate the exchange of products and avoid high rates of interest, has the State the right to prohibit such voluntary association for mutual advantage?"

Only the right of might.

"4. Do not restrictions as to what shall be used as money interfere with personal liberty?"


"5. Has the question of free trade in banking—i.e., the absence of all interference on the part of the State with making and supplying money—ever been a matter of public discussion?"


"6. What effect does the volume of money have upon the rate of interest?"

I suppose the intention is to ask what effect changes in the volume of money have upon the rate of interest. Not necessarily any; but any arbitrary limitation of the volume of money that tends to keep it below the demand also tends to raise the rate of interest.

"7. Can the business of banking and the supply of money be said to be under the operation of supply and demand where the State prohibits or restricts its issue, or dictates what shall be used as money?"

Inasmuch as they often are said to be so, they evidently can be said to be so, but whoever says them to be so lies.

"8. Is there such a thing as a measure or standard of value? If so, how is it constituted, and what is its function?"

There is such a thing as a measure or standard of value whenever we use anything as such. It is constituted such either by force or by agreement. Its function is implied in its name—measure of value. Without the selection, deliberate or accidental, conscious or unconscious, of something as a standard of value, money is not only impossible, but unthinkable.

"9. What becomes of the 'standard' or 'measure' of value during suspensions of specie payment?"

Nothing. It remains what it was before. Certain parties have refused to pay their debts; that's all.

"10. Are you in favor of free trade in banking, including the issue of paper money? If not, why not?"





[Liberty, June 13, 1891.]

Readers of Liberty will remember an article in No. 184 on "The Functions of Money," reprinted from the Galveston News. In a letter to the News I commented upon this article as follows:

I entirely sympathize with your disposal of the Evening Post's attempt to belittle the function of money as a medium of exchange; but do you go far enough when you content yourself with saying that a standard of value is highly desirable? Is it not absolutely necessary? Is money posible without it? If no standard is definitely adopted, and then if paper money is issued, does not the first commodity that the first note is exchanged for immediately become a standard of value? Is not the second holder of the note governed in making his next purchase by what he parted with in his previous sale? Of course it is a very poor standard that is thus arrived at, and one that must come in conflict with other standards adopted in the same indefinite way by other exchanges occurring independently but almost simultaneously with the first one above supposed. But so do gold and silver come in conflict now. Doesn't it all show that the idea of a standard is inseparable from money? Moreover, there is no danger in a standard. The whole trouble disappears with the abolition of the basis privilege.

The News printed my letter, and made the following rejoinder:

It will occur that in emphasizing one argument there is such need of passing others by with seeming unconcern that to some minds other truths seem slighted,—truths which also need emphasizing perhaps in an equal, or it may be, for useful practical reasons, in a superior degree. The News aims at illustrating one thing at a time, but it is both receptive and grateful to those correspondents who intelligently extend its work and indicate useful subjects for discussion, giving their best thought thereon. A Boston reader, speaking of the standard of value, states an undeniable truth to the effect that without a thing or things of value to which paper money can be referred and which can ultimately be got for it, such money would be untrustworthy or worthless. The News in a past article was discussing primary commerce and the transition to indirect exchange. No agreed standard for valuation is needed while mere barter is the rule; but it is indispensable as soon as circulating notes are issued. The vice of the greenback theory is that the notes do not call for anything in particular, and so, if their volume be doubled, their purchasing power must apparently decline one-half. A note properly based on gold, silver, wheat, cotton, or other commodity has a tangible security behind it. The one thing may be better than the other, but the principle is there in all. It is, however, a notable truth that the standard for valuation can be nothing better than an empirical one. Like mathematical quantities, value has no independent existence, but, unlike mathematical quantities, value has not even existence as a quality of one object. It cannot be compared to a measure of length, which posesses the quality of extension in itself. Gold is assumed to vary little in relation to other things, and they to vary much in relation to gold. Nobody can know how much gold does vary in the relation. The notable steadiness is in the amount of labor which will produce a given quantity and the length of time which it will last. The basis of the assumed steadiness of gold is thus found. But if the standard for use in making valuations be confessedly empirical and value an elusive quality not of things separately, but of things in relation, there is a countervailing difference between a standard of length and a standard of value, which results in disposing of the objection that the standard is empirical. Why would it be a serious objection to a yardstick if it were longer or shorter from day to day? Because thus the customer would get more or less cloth than was intended. But why is that? Because the function of the yardstick is to measure for delivery as great a length of cloth as its own length. But now let us visit a bank or insurance office. We want a loan of circulating notes or a policy of insurance. The property offered as security is valued. Assume that gold is taken as the standard, and that the loan or the policy is for $600 on a valuation of $1000. It is no matter in these cases if the standard varies, provided it does not vary to exceed the margin between the valuation and the obligation. The property pledged is merely security for the loan, or, in the case of insurance, the premium paid is a per cent. of the amount insured. The margin between the valuation and the loan is established to make the loan abundantly safe. The policy is safely written through the same expedient. The empirical standard of value has a needful compensation about it which the yardstick or other measure neither has nor needs,—viz., the valuing goods does not deliver them. It is provisional. In case of default in paying back the loan, the goods are sold and the same money borrowed is paid back, but the residue goes to the borrower. It is therefore an efficient compensation for the lack of an invariable standard of value that the actual standard in any case is simply used as a means of estimating limits within which loans are safe. All danger is avoided by giving the borrower the familiar right in case of foreclosure. It is sometimes a fine thing to discover distinctions, but it is a frequently a finer thing to discover whether or not the distinctions affect the question.

While not hesitating for a moment to accept the News's explanation that, when hinting that a standard of value is not indispensable, it was speaking of barter only, I may point out nevertheless that there was a slip of the pen, and that the words actually used conveyed the idea that something more than barter was in view. Let me quote from the original article:

It is manifest that a medium of exchange is absolutely necessary to all trade beyond barter. A standard of value is highly desirable, but perhaps this is as much as can be safely asserted on that question.

It seems to me a fair interpretation of this language to claim the meaning that in trade beyond barter it is not sure that a standard of value is absolutely necessary. And this interpretation receives additional justification when it is remembered that the words were used in answer to the Evening Post's contention that, in comparing the two functions of money, its office of medium of exchange must be held inferior to its office of measuring values.

However, the News now makes it sufficiently clear that a standard of value is absolutely essential to money, thereby taking common ground with me against the position of Comrade Westrup. Still I cannot quite agree to all that it says in comment upon the Westrup view.

First, I question its admission that a measure of value differs from a measure of length in that the former is empirical. True, value is a relation; but then, what is extension? Is not that a relation also,—the relation of an object to space? If so, then the yardstick does not possess the quality of extension in itself, being as dependent for it upon space as gold is dependent for its value upon other commodities. But this is metaphysical and may lead us far; therefore I do not insist, and pass on to a more important consideration.

Second, I question whether the News's "countervailing difference between a standard of length and a standard of value" establishes all that it claims. In the supposed case of a bank loan secured by mortgage, the margin between the valuation and the obligation practically secures the note-holder against loss from a decline in the value of the security, but it does not secure him against loss from a decline in the value of the standard, or make it impossible for him to profit by a rise in the value of the standard. Suppose that a farmer, having a farm worth $5000 in gold, mortgages it to a bank as security for a loan of $2500 in notes newly issued by the bank against this farm. With these notes he purchases implements from a manufacturer. When the mortgage expires a year later, the borrower fails to lift it. Meanwhile gold has declined in value. The farm is sold under the hammer, and brings, instead of $5000 in gold, $6000 in gold. Of this sum $2500 is used to meet the notes held by the manufacturer who took them a year before in payment for the implements sold to the farmer. Now, can the manufacturer buy back his implements with $2500 in gold? Manifestly not, for by the hypothesis gold has gone down. Why, then, is not this manufacturer a sufferer from the variation in the standard of value, precisely as the man who buys cloth with a short yardstick and sells it with a long one is a sufferer from the variation in the standard of length? The claim that a standard of value varies, and inflicts damage by its variations, is perfectly sound; but the same is true, not only of the standard of value, but of every valuable commodity as well. Even if there were no standard of value and therefore no money, still nothing could prevent a partial failure of the wheat crop from enhancing the value of every bushel of wheat. Such evils, so far as they arise from natural causes, are in the nature of inevitable disasters and must be borne. But they are of no force whatever as an argument against the adoption of a standard of value. If every yardstick in existence, instead of constantly remaining thirty-six inches long, were to vary from day to day within the limits of thirty-five and thirty-seven inches, we should still be better off than with no yardstick at all. But it would be no more foolish to abolish the yardstick because of such a defect than it would be to abolish the standard of value, and therefore money, simply because no commodity can be found for a standard which is not subject to the law of supply and demand.




[Liberty, June 27, 1891.]

To the Editor of Liberty:

It is not only a delusion, but a misuse of language, to talk of a "standard of value." Give us a standard of pain or pleasure, and you may convince us that there can be a "standard of value." I am well aware of the difficulty of discussing this question, even with so precise an editor as Mr. Tucker; but since he has called in question the views presented in my pamphlet, I feel called upon to lay before the readers of Liberty some additional arguments to show the correctness of what Mr. Tucker has honored me by calling "the Westrup view."

Let us consider for a moment the practical workings of a Mutual Bank, as near as we can foretell them.

The incentive to organize a Mutual Bank is the opportunity of borrowing money at a very low rate of interest and no additional expense. This desideratum is not confined to a few individuals, but is well-nigh universal. It follows, therefore, that the starting of a bank will draw to it a large number of people, embracing producers and dealers in almost, perhaps all, commodities. One of the conditions in obtaining the notes (paper money) of the Mutual Bank is that they will be taken in lieu of current money without variation in the price of the commodities by those who borrow them. This condition is just, and will be readily acquiesced in without a murmur. At the very outset of the Mutual Bank, then, we have at least dealers in most of the ordinary commodities who will accept its money in place of current money. This certainty of its redemption in commodities at their market-price in current money guarantees its circulation.

Strictly speaking, the Mutual Bank does not issue the money; it simply furnishes it and is the custodian of the collateral pledged to insure its return. It is the borrowers who both issue and redeem.

The transaction between the bank and the borrower is of no interest to the public previous to the issue of any of the money by the borrower. Neither is it concerned with the transaction between the borrower and the bank after the former has redeemed a the money he borrowed.

Discussing theories is far less important than efforts to put in practice such momentous reforms as the application of the mutual feature to the supply of the medium of exchange. If Comrade Tucker really desires the establishment of Mutual Banks, it seems to me he would naturally discuss the practicability of such institutions. Let him point out wherein the above forecast is unsound. Let him show the necessity for a "standard of value" and suggest how to introduce one; perhaps I may become converted. I shall most surely acknowledge my error if I am convinced, but I have no time or inclination to discuss any abstract theory about a "standard of value." The one question that seems to me of importance is the practicability of the Mutual Bank. If it is not practicable, why is it not so? If it is, why waste time and space in discussing whether the first or the second or any other commodity exchanged becomes the "measure or standard of value"; especially as "the whole trouble disappears with the abolition of the basis privilege."

Alfred B. Westrup.

Mr. Westrup's article sustains in the clearest manner my contention that money is impossible without a standard of value. Starting out to show that such a standard is a delusion, he does not succeed in writing four sentences descriptive of his proposed bank before he adopts that "delusion." He tells us that "one of the conditions in obtaining the notes (paper money) of the Mutual Bank is that they will be taken in lieu of current money." What does this mean? Why, simply that the patrons of the bank agree to take its notes as the equivalent of gold coin of the same face value. In other words, they agree to adopt gold as a standard of value. They will part with as much property in return for the notes as they would part with in return for gold. And if there were no such standard, the notes would not pass at all, because nobody would have any idea of the amount of property that he ought to exchange for them. The naïveté with which Mr. Westrup gives away his case shows triumphantly the puerility of his raillery at the idea of a standard of value.

Indeed, Comrade Westrup, I ask nothing better than to discuss the practicability of mutual banks. All the work that I have been doing for liberty these nineteen years has been directed steadily to the establishment of the conditions that alone will make them practicable. I have no occasion to show the necessity for a standard of value. Such necessity is already recognized by the people whom we are trying to convince of the truth of mutual banking. It is for you, who deny this necessity, to give your reasons. And in the very moment in which you undertake to tell us why you deny it, you admit it without knowing it. It would never have occurred to me to discuss the abstract theory of a standard of value. I regard it as too well settled. But when you, one of the most conspicuous and faithful apostles of mutual banking, begin to bring the theory into discredit and ridicule by basing your arguments in its favor on a childish attack against one of the simplest of financial truths, I am as much bound to repudiate your heresy as an engineer would be to disavow the calculations of a man who should begin an attempt to solve a difficult problem in engineering by denying the multiplication table.

I fully recognize Mr. Westrup's faithful work for freedom in finance and the ability with which he often defends it. In fact, it is my appreciation of him that has prevented me from criticising his error earlier. I did not wish to throw any obstacle in the path or in any way dampen the enthusiasm of this ardent propagandist. But when I see that admirable paper, Egoism, of San Francisco, putting forward those writings of Mr. Westrup which contain the objectionable heresy;[6] and when I see that other admirable paper, The Herald of Anarchy, of London, led by his or similar ideas to advocate the issue of paper bearing on its face the natural prices of all commodities (!); and when I see Individualists holding Anarchism responsible for these absurdities and on the strength of them making effective attacks upon a financial theory which, when properly defended, is invulnerable,—it seems high time to declare that the free and mutual banking advocated by Proudhon, Greene, and Spooner never contemplated for a moment the desirability or the possibility of dispensing with a standard of value. If others think that a standard of value is a delusion, let them say so by all means; but let them not say so in the name of the financial theories and projects which the original advocates of mutual banking gave to the world.




[Liberty, June 18, 1892]

Natural science and technical skill, which have revolutionized so many things, may yet revolutionize political economy, and in a way little dreamed of. It has long been known that the water of the ocean contains gold and silver. The percentage of these metals, however, is so very small that at first thought it hardly seems worth noticing. And as a matter of fact little notice has been taken of it, but principally for the reason that the extraction of the metals by any advantageous method has been deemed an impossibility. Now comes the Fairy Electricity, whose wand has already achieved so many wonders, and promises us a new miracle, which, though possibly less strange in itself than some others, will be more far-reaching in its results than all the telegraphs and telephones and railways imaginable. She proposes, by stretching long series of iron plates across channels and through various parts of the seas and ocean and running an electric current though them, to precipitate the gold and silver from the water upon these plates. It is estimated that one-half of one horse power is all that is needed for the purpose, and that it will consequently be possible to get gold in this way at a cost equal to but one per cent. of its present value.

But where does the revolution in political economy come in? some one may ask. Does the connection seem remote to you, my thoughtless friend? Then think a bit and listen. Every ton of sea-water contains half a grain of gold and a grain and a half of silver. Has that an insignificant sound? If so, let us appeal to mathematics. We shall find that, at the rate of half a grain of gold and a grain and a half of silver to each ton of sea-water, the entire seas and oceans of the world (I take the figures from a scientific journal) contain 21,595 billion tons of gold and 64,785 billion tons of silver. As good fish in the sea as ever were caught? I should say so, and much better! Why, this means, to speak at a venture, that there is several billion times as much gold in the water as has been extracted from the land up to date. Now, if this gold can be taken from the water, as is claimed, at the rate of a dollar's worth for a cent, soon it will be scarcely worth its weight in good rag-paper. The much defamed "rag baby" will be a very aristocratic personage beside it. In that case what will become of "the metal appointed by God in his goodness to serve as the currency of the world"? Would it be possible to more thoroughly revolutionize political economy than by dethroning gold? And could gold be more effectually dethroned than by reducing its value to insignificance? Its monetary privilege would disappear instantly and of necessity, and the era of free money would dawn, with all the tremendous blessings, physical, mental, and moral, that must follow in its wake. As Proudhon well says: "The demonetization of gold, the last idol of the Absolute, will be the greatest act of the revolution of the future."

All hail, then, Electricity! On with your magnificent work! Lend a hand, you believers in dynamite; we offer you a better saviour! This good fairy is carrying on a "propaganda by deed" that discounts all your Ravachols. Success to her! May she force gold, the last bulwark of Archism, to become, through offering itself for sacrifice on the altar of Liberty, the greatest of Anarchists, the final emancipator of the race!

Money, said Adam Smith, in one of those flashes of his intellectual genius which have so illuminated man's economic path, money is "a wagon-way through the air." If Electricity shall make of this wagon-way a railway, it will be the most signal, the most useful of her exploits.




[Liberty, August 13, 1892]

Apropos of my editorial of a few weeks ago, forecasting the probable increase in the supply of gold through its extraction from the ocean and the consequences thereof. Comrade Koopman writes me: "If this is so, every craft that sails the ocean blue will carry an electrical centre-board to rake in the gold as it sails along. I am afraid, though, that the governments will betake themselves to platinum (I believe Russia tried it once) or some other figment, and so postpone their day of reckoning. But what a shaking-up a gold deluge will give them if it come! I hope we may be there to see." If the present adherence to gold were anything but a religion, there would be some ground for Comrade Koopman's fears. But, so far as the people is concerned, it is only a religion. To uproot the idea that gold is divinely appointed to serve as the money of the world is to destroy the godhead. In vain, after that, will the priests of plutocracy propose a change of deities. The people will say to them: "If you lied when you told us that gold was God, you are lying now when you place platinum on the celestial throne. No more idolatry for us! Henceforth all property shall stand on an equality before the Bank. In demonetizing gold we monetize all wealth." The Anarchists are fighting the old, old battle,—the battle of reason against superstition. In the earlier phases of this battle, science, after a time, re-enforced the philosophers and gave the finishing stroke in the demolition of the theological god. Perhaps it is reserved for science to similarly re-enforce the Anarchists in their task of smashing the last of the idols. Of this, however, I am not as hopeful as I was. A fact has lately come to light that fills me with misgiving. No sooner is it proposed to begin the extraction of gold and silver from the ocean by the new and cheap method than a man pops up in England to say that he patented this method a year or two ago. If his patent is valid (and I see nothing to the contrary), this man is virtual owner of the entire 21 billion tons of gold and 64 billion tons of silver which the ocean contains. All the priests and bishops and archbishops and cardinals of finance must kneel to him as Pope. "Nearest, my God, to Thee," will be his hymn henceforth, or rather till some luckier individual shall discover a still cheaper way of securing the ocean's treasures and thereby become Pope in his stead. This one perfectly logical and appalling possibility ought to be sufficient in itself to sweep away as so much cobweb all the sophistry that has ever been devised in support of property in ideas. Gold, after all, is not the last of the idols; in mental property it has a twin. And my remaining hope is that science, with its new discovery, may do double duty as an iconoclast, and destroy them both at one fell stroke.



[Liberty, November 23, 1889.]

The most important book that has been published this year comes to Liberty from the press of the J. B. Lippincott Company, of Philadelphia. It is a little volume of something over a hundred very small pages, printed from very large type. For ten years to come it probably will be read by one person where "Looking Backward" is read by a thousand, but the economic teaching which it contains will do more in the long run to settle the labor question than will ever be done by "Looking Backward," "Progress and Poverty," and "The Co-operative Commonwealth " combined. Its title is "Involuntary Idleness: An Exposition of the Cause of the Discrepancy Existing between the Supply of, and the Demand for, Labor and Its Products." The book consists of a paper read at the meeting of the American Economic Association in Philadelphia on December 29, 1888, by Hugo Bilgram, the author of that admirable little pamphlet, "The Iron Law of Wages," with which most readers of Liberty are familiar. I am strongly inclined to hail Mr. Bilgram's new work as the best treatise on money and the relation of money to labor that has been written in the English language since Colonel William B. Greene published his "Mutual Banking."

The author prefaces his essay with a very convenient and carefully prepared skeleton of his argument, which I reproduce here, since it gives a much better idea of the book than any condensation that I might attempt:

The aim of the treatise is to search for the cause of the lack of employment, which is obviously due to the observed fact that the supply of commodities and services exceeds the demand, although reason dictates that supply and demand in general should be precisely equal. The factor destroying this natural equation is looked for among the conditions that regulate the distribution of wealth,—i.e., its division into Rent, Interest, and Wages.

The arguments evolved by the discussion of the Rent question, which of late has excited much public interest, being unable to account for the apparent surfeit of all kinds of raw materials, the topic of rent is eliminated by assuming all local advantages to be equal.

At first an examination is made of the relation of capital to the productivity of labor, and that of interest on capital to the remuneration for labor, showing that high interest tends to reduce the productivity of, as well as the remuneration for, labor. Low wages being also concomitant with a scarcity of employment, it is inferred that a close relation exists between the economic cause of involuntary idleness and the law of interest,

Following this clue, the two separate meanings of the ambiguous word "Capital" are compared, showing that money, which can never be used in the act of production, cannot be capital when that term is used in its concrete sense; and since capital is capable of producing a profit only when the same is used productively, the fact that interest is paid for money-loans, when that which is loaned cannot be used productively, must be traced to an independent cause. The usual argument that with money actual capital can be purchased is rejected, because money and capital would not be interchangeable if their economic properties were not homogeneous. This compels a search for a property inherent in money that can account for the willingness of borrowers to pay interest on money-loans.

It is then shown that interest on money-loans is paid because money affords special advantages as a medium of exchange, and the value of this property of money is traced to its ultimate utility, or, in other words, to the increment of productivity which the last addendum to the volume of money affords by facilitating the division of labor.

Returning to the question of interest on actual capital,—i.e., the excess of value produced over the cost of production,—the question as to what determines the value of a product leads to the assertion that capital-profit must be due to an advantage which the producer possesses over the marginal producer. This is found to be due to the interest payable by the marginal producer on money-loans.

An ideal separation of the financial from the industrial world reveals a tendency of the industrial class to drift into bankruptcy by force of conditions over which they have no control. Those who are at the verge of bankruptcy being the marginal producers, others who are free of debt will reap a profit corresponding to the interest payable by the marginal producers on debts equal to the value of the capital they employ; hence the rate of capital-profit will tend to become equal to the rate of interest payable on money-loans, and the power of money to command interest, instead of being the result, is in reality the cause of capital-profit.

The inability of the debtor class to meet their obligations increases the risk of business investments, and the accumulation of money in the hands of the financial class depriving the channels of commerce of the needed medium of exchange, a stagnation of business will ensue, which readily accounts for the accumulation of all kinds of products in the hands of the producers and for the consequent dearth of employment. The losses sustained by the lenders of money involve a separation of interest into two branches, risk-premium and interest proper, and considering that the risk-premiums equal the sum total of all relinquished debts, the law of interest is evolved by an analysis of the monetary circulation between the debtors and creditors.

This analysis leads to the inference that an expansion of the volume of money, by extending the issue of credit-money, will prevent business stagnation and involuntary idleness.

The objections usually urged against credit-money are considered and found untenable, the claim that interest naturally accrues to capital is disputed at each successive stand-point, and in the concluding remarks an explanation is given of the present excess of supply over the demand of commodities and service, confirming the conclusion that the correction of this abnormal state is contingent upon the financial measure suggested.

Admirably accurate as the foregoing is as an outline, it conveys only a faint idea of the beautifully calm, logical, and convincing way in which the argument is worked out and sustained. It seems impossible that any unbiased mind should follow the author's reasoning carefully from the start to the finish and not accept the conclusion which he reaches in common with Liberty,—namely, that our financial legislation is the real seat of the prevailing social disorder, and that the only way to secure remunerative employment to all who are able and willing to work is to abolish the restrictions upon the issue of money.

Moreover, the author not only establishes the strength of his own position, but throws numerous and powerful sidelights upon the weaknesses of others. He shows the inadequacy of Henry George's theory as an explanation of enforced idleness, the futility of protection, tariff reform, factory acts, and anti-immigration laws as measures of relief from stagnation of commerce, and the absurdity of the fiat-money theorists and all who hold with them that the value of money is dependent upon its volume. If Mr. Lloyd, who lately proposed the use of communistic credit-money, will get Mr. Bilgram's book and carefully read pages 64-77 inclusive, I think he will be satisfied of the unsoundness of any credit-money system that does not specifically assure the ultimate redemption of each note by value pledged for its security.

Having thus declared my high appreciation of this book, I may add a word or two by way of criticism. The policy of the author in abandoning what he himself considers the true definition of the word capital and adopting the definition generally sanctioned by the economists is of very questionable utility. It is true that he does not allow this confessed misuse of a word to vitiate his argument, but it forces him nevertheless to separate capital from money; and thereby he strengthens the hold of the delusion which is exploited so effectively by the champions of interest,—namely, that in an exchange of goods for money the man who parts with the goods is deprived of capital while the man who parts with the money is not. If Mr. Bilgram had used the word capital to mean what he thinks it means,—all wealth capable of bringing a revenue to its owner,—he would have deprived his opponents of their favorite device for confusing the popular mind.

But this is a question of words only. It involves no difference of idea between Mr. Bilgram and Liberty. On another point, however, there is substantial disagreement. When Mr. Bilgram proposes that the government shall carry on (and presumably monopolize, though this is not clearly stated) the business of issuing money, it is hardly necessary to say that Liberty cannot follow him. It goes with him in his economy, but not in his politics. There are at least three valid reasons, and doubtless others also, why the government should do nothing of the kind.

First, the government is a tyrant living by theft, and therefore has no business to engage in any business.

Second, the government has none of the characteristics of a successful business man, being wasteful, careless, clumsy, and short-sighted in the extreme.

Third, the government is thoroughly irresponsible, having it in its power to effectively repudiate its obligations at any time.

With these qualifications Liberty gives Mr. Bilgram's book enthusiastic welcome. Its high price, $1.00, will debar many from reading it; but money cannot be expended more wisely than in learning the truth about money.




[Liberty, October 1, 1881.]

To the Editor of Liberty:

In view of the favorable criticism which "Involuntary Idleness" received at your hands, I gladly accept the invitation to state my reasons for advocating governmental management of the circulating medium, rather than free banking.

My studies have led me to the conviction that mutual banking cannot deprive capital of its power to bring unearned returns to its owner. Referring to my exposition of the monetary circulation between the financial and the industrial group, and the inevitable effects flowing from the power of money to bring a persistent revenue, it follows that a normal condition can only be attained if interest on money loans is reduced to the rate of risk, so that, in the aggregate, interest will just pay for the losses incurred by bad debts ; and this desideratum will not result from mutual banking.

The members of such banks must no doubt be in some way assessed to defray the expenses and losses incurred by the banking associations, and these assessments are virtually interest payable for the loan of mutual money. While these rates are lower than the current rates of the money-lenders, the mutual banks will be more and more patronized, which will have a depressing effect on the current rate of interest. But the increase of membership will cease as soon as the current rate has adapted itself to the rate payable to the mutual banks.

We must now assume that the assessments of the mutual banks are in substance equitably distributed among their members; otherwise, such banks cannot compete against others who have adopted the more equitable rules. These assessments must obviously cover not only the expenses of the banks, but also occasional losses; and that such losses should be assessed in proportion to the rate of risk attached to the security each "borrower" offers for the faithful redemption of his obligation requires here no explication. But other outlays, such as the making of the notes, together with all the attending expenses, must also be paid by the members of the mutual banks, and this increases the interest virtually payable by the borrowers beyond the rate of risk. Consequently competition will be incompetent to lower the current rate of interest to this desirable point. Money-lenders will therefore still be able to obtain an income from the mere loan of money, and capital will continue to return interest to the wealthy. The germ of the inequitable congestion of wealth will still linger after the introduction of mutual banking.

At this point the question arises as to who should pay for that part of the expenses of the financial system that relates to the production of the money tokens. The answer is not difficult when it is considered that the benefit of the medium of exchange accrues to those who use it. They should contribute, as near as possible, in the proportion in which their handling wears the tokens, for in the long run the cost of production will virtually resolve itself into the cost of replacement. Not the borrowers, then, who as members of the mutual banks would be obliged to do so, but the people at large, in whose hands the money circulates, are in equity under the obligation of this expense. And to accomplish this I see no other way than for the people to instruct their representatives to make the notes at public expense, distribute them according to the demand, and charge no cost to the borrowers exceeding the rate of risk attached to the securities offered by them.

I should of course never attempt to deny that mutual banking would be by far better than the present oppressive system. But the question at issue is between mutual banking, which would not remove but only mitigate the source of involuntary idleness, and a system involving a complete eradication of the cause of the discrepancy of the supply and the demand of commodities. My preference for the latter does, however, not imply that any restrictions should be placed upon mutual banking; such institutions could for obvious reasons not compete against the government institution, and would fail to find a suitable soil for their growth.

Before concluding I also wish to meet the objection of the critic of "Involuntary Idleness" to the use of the word "Capital" in its concrete sense. Having frequent occasion to refer to "labor products used for further production" in contradistinction to "money," I elected to use the shorter term "capital," especially as I had no need to refer, during the discussion, to its other and perhaps more appropriate meaning. I attempted to express thoughts, and made use of words as tools, the selection of which cannot commit me to any opinion. In fact, I am convinced that "Capital" in contradistinction to "Wealth" must lose its significance in either of its concepts as soon as the people learn to make honest laws.

Yours truly, Hugo Bilgram.

Philadelphia, January 18, 1890.

Mr. Bilgram, then, if I understand him, prefers government banking to mutual banking, because with the former the rate of discount would simply cover risk, all banking expenses being paid out of the public treasury, while with the latter the rate of discount would cover both risk and banking expenses, which in his opinion would place the burden of banking expenses upon the borrowers instead of upon the people. The answer to this is simple and decisive: the burden of discount, no matter what elements, many or few, may constitute it, falls ultimately, under any system, not on the borrowers, but on the people. Broadly speaking, all the interest paid is paid by the people. Under mutual banking the expenses of the banks would, it is true, be paid directly by the borrowers, but the latter would recover this from the people in the prices placed upon their products. And it seems to me much more scientific that the people should thus pay these expenses through the borrowers in the regular channels of exchange than that they should follow the communistic method of paying them through the public treasury.

Mr. Bilgram's statement that money-lenders who, besides being compensated for risk, are compensated for their labor as bankers and for their incidental expenses "thereby obtain an income from the mere loan of money" is incomprehensible to me. He might just as well say that under government banking the officials who should receive salaries from the treasury for carrying on the business would thereby obtain an income from the mere loan of money. Under a free system the banker is as simply and truly paid only the normal wage of his labor as is the official under a government system.

But, since Mr. Bilgram does not propose to place any restriction upon private banking, I have no quarrel with him. He is welcome to his opinion that private banking could not compete with the governmental institution. I stoutly maintain the contrary, and the very existence of the financial prohibitions is the best evidence that I am right. That which can succeed by intrinsic merit never seeks a legal bolster.

I am agreeably disappointed. In challenging Mr. Bilgram on this point, I, knowing his intellectual acumen, had braced myself to withstand the most vigorous onslaught possible against Anarchism in finance, but it was a needless strain. Mr. Bilgram has struck me with a feather.



[Liberty, April 19, 1890.]

To the Editor of Liberty:

My rejoinder on your remarks on my last communication, in your issue of February 15, was unavoidably delayed.

Above all, I must admit an omission in my exposition, but, since it was on both sides of the question, the result remains unaffected. I had paid no attention to the labor involved in making loans. Including this admitted factor, my argument is this: The expenses of mutual banks may be divided into three categories,—i.e., risks, cost of making loans, and cost of making the tokens. These three items are represented in the interest payable by the patrons of such banks, and, while they determine the current rate of interest, those who lend money which they have acquired have to bear only two of these items, and will obtain interest composed of the three, and consequently receive pay for work they have not performed. And capital having the power of bringing an unearned income as long as money is thus blessed, I still hold that justice is not attained until the gross interest is reduced to the rate of risk and cost of making loans, the cost of making the tokens being defrayed by public contributions.

It cannot be denied that "the burden of discount falls ultimately, not on the borrowers, but on the people"; the trouble is that the people are compelled to pay more than this discount, and my desire is that they should cease to pay this excess which now falls into the hands of the owners of capital.

Should the question of free banking become a political issue, I should heartily cooperate with you in furthering the object. But this does not prevent me from advocating a government issue, provided the borrowers are charged no more than risk and cost of making the loans, as a preferable measure. Yours truly, Hugo Bilgram.

Philadelphia, March 31, 1890.

To the above there are at least two answers. The first is that that factor in the rate of interest which represents the cost of making tokens is so insignificant (probably less than one-tenth of one per cent., guessing at it) that the people could well afford (if there were no alternative) to let a few individuals profit to that extent rather than suffer the enormous evils that result from transferring enterprise from private to government control. I am not so enamored of absolute equality that I would sacrifice both hands rather than one finger.

The second answer is that no private money-lenders could, under a free system, reap even the small profit referred to. Mr. Bilgram speaks of "those who lend money which they have acquired." Acquired how? Any money which they have acquired must have originated with issuers who paid the cost of making the tokens, and every time it has changed hands the burden of this cost has been transferred with it. Is it likely that men who acquire money by paying this cost will lend it to others without exacting this cost? If they should, they would be working for others for nothing,—a very different thing from "receiving pay for work they had not performed." No man can lend money unless he either issues it himself and pays the cost of making the tokens, or else buys or borrows it from others to whom he must pay that cost.




[Liberty, December 13, 1884.]

To the Editor of Liberty:

The "Picket Duty" remarks of November 22 in regard to the importance of "free money" (with which I mainly agree) impel me to say a few words upon the subject. It is desirable, it seems to me, that Liberty should give its ideas upon that subject in a more systematic form than it has yet done (1). To be sure, it is easy for those who think to see that, if all laws in regard to money were abolished, commerce would readily provide its instruments of exchange. This might be promissory notes, or warehouse receipts, bills of lading, etc.; but, whatever it might be, the Anarchist could not doubt it would be better than that ever issued under monopoly.

Theoretically, at least, Liberty has expressed the idea that any circulating medium should be made redeemable; but in what? If in gold, or in gold and silver, does it not involve the principle of a legal tender, or of a tender of "common consent?" and they do not greatly differ (2). It seems to me that the great fraud in regard to money starts just here, and vitiates all forms of finance as of trade (3). I define money to be a commodity or representative of a commodity, accepted by or forced upon the common consent, as an invariable ratio and medium of exchange. Now, since the price of all things else is variable and subject to extreme fluctuations, the dollar in exchange, and especially where the exchange is suspended as in borrowing, or buying on credit, becomes, as friend Pink suggests, a "war club" rather than a tool or instrument of commerce.

Pardon me if I inflict some technicalities upon the readers of Liberty. I would discard the use of the word value from questions of exchange, or else divide its several parts, as value in use, value in service and compensation, and value in exchange. But ratio is a much better word. I would then define the Ratio of Utility to be the proportion in which any thing or service effects useful ends, in sustaining human life or adding to human enjoyment,—a constant Ratio.

The Ratio of Service, the proportion in which different services, of the same duration in time, effect useful ends.

The Ratio of Exchange, the proportion in which one commodity or service will exchange for another service or commodity at the same time and place. This is a variable ratio, whose mean is the ratio of service.

I cannot stop now to argue the correctness of these definitions. It must be seen, unless a commodity could be found which would answer every useful purpose, and could be readily obtained by all, it could not be made a tender without inflicting great injustice on the many. But as such commodity cannot be found, a commodity, gold, has been assumed to have an invariable value, although the most variable in value of all the metals, and about the least useful; of a limited and irregular production and widely varying demand. With the addition of silver to the standard, the great injustice to labor is only divided, not changed.

As defined above, the only invariable ratio is that of use. A pound of flour of the same quality will at all times and places satisfy the same demand for food. The hundredweight of coal will at all times and places give off the same amount of heat in combustion, etc., having no reference either to the money or labor cost. Now, since labor is the only thing which can procure or produce articles of use, that is naturally the controlling element in exchange, and the only thing that commands a stable price or furnishes a stable ratio.

Though gold is assumed as the standard of value, it is well known that for ages the "promise to pay" this has constituted mainly the currency and medium of exchange of most nations.

The method of issuing this promissory money has been a great injustice to industry, and its almost infinite extension of the usurpation of the gold-tender fraud is now robbing labor of a large share of its production by the control it gives to the usurer and speculator, who can make the rate low when produce is coming under their control, and high when it is being returned for use to the people; and can make money scarce and dear when they loan it, and plenty and cheap when they gather it in.

I think I have shown that the base of the money evil lies mainly in the monstrous assumption that the value of one of the most variable of things should be assumed to be an invariable quantity, and the standard of measurement of all other things. A gum elastic yardstick or gallon measure, or a shifting scale-beam, would suggest far more equitable dealing.

I know of but one invariable standard, and that is labor; but what is its unit? And by what method shall it be expressed? Can Liberty give us light upon this subject? (4) I have yet seen no feasible method by which credit or debt can serve safely as money, nor any honest way in which fiat money can be put in circulation. It appears to me now that, while men seek credit, they will have to pay interest, and that only by restoring opportunity to those who are now denied it by our monopolies of land, of money, and of public franchises, and so relieving them of the necessity of borrowing, can we hope to mitigate the evils of our money and trade iniquities. (5)

Credit being an incompleted exchange, in which one of the equivalents is not transferred, if we are to acknowledge it as an economic transaction, I see not why we should not accept that also where neither of the equivalents are transferred, as in produce and stock-gambling. (6) McLeod, I think, saw this dilemma, and therefore holds that the negotiable promissory note is payment for the things for which it is given. Yet, nevertheless, at maturity it will require a transfer of the counterbalancing equivalent, just the same as if a mere book account.

Credit is doubtless necessary under an inverted system of industry, finance, and trade; but I am unable to see that it has any place in an honest state of things, except to conserve value, as where one puts things in another's care. It is vastly convenient, no doubt, for the profit-monger and speculator, as for the usurer, and without it neither could well thrive. In agreeing with the Anarchists that the State should not interfere to prevent, regulate, or enforce credit contracts, perhaps I go beyond them in excluding it from any economic recognition whatever, except as a means of conserving goods from decay and depreciation, involving always a service for which the creditor should pay.

J. K. Ingalls.

(1) Liberty is published not so much to thoroughly inform its readers regarding the ideas which it advocates as to interest them to seek this thorough information through other channels. For instance, in regard to free money, there is a book—"Mutual Banking," by William B. Greene—which sets forth the evils of money monopoly and the blessings of gratuitous credit in a perfectly plain and convincing way to all who will take the pains to study and understand it. Liberty can only state baldly the principles which Greene advocates and hint at some of their results. Whomsoever such statements and hints serve to interest can and with secure the book of me for a small sum. Substantially the same views, presented in different ways, are to be found in the financial writings of Lysander Spooner, Stephen Pearl Andrews, Josiah Warren, and, above all, P. J. Proudhon, whose untranslated works contain untold treasures, which I hope some day to put within the reach of English readers.

(2) Yes, it does involve one of these, but between the two there is all the difference that there is between force and freedom, authority and liberty. And where the tender is one of "common consent," those who do not like it are at liberty to consent in common to use any other and better one that they can devise.

(3) It is difficult for me to see any fraud in promising to pay a certain thing in a certain time, or on demand, and keeping the promise. That is what we do when we issue redeemable money and afterwards redeem it. The fraud in regard to money consists not in this, but in limiting by law the security for these promises to pay to a special kind of property, limited in quantity and easily monopolizable.

(4) It is doubtful if there is anything more variable in its purchasing power than labor. The causes of this are partly natural, such as the changing conditions of production, and partly and principally artificial, such as the legal monopolies that impart fictitious values. But labor expended in certain directions is unquestionably more constant in its average results than when expended in other directions. Hence the advantage of using the commodities resulting from the former for the redemption of currency whenever redemption shall be demanded. Whether gold and silver are among these commodities is a question, not of principle, but of statistics. As a matter of fact, the holders of good redeemable money seldom ask for any other redemption than its acceptance in the market and its final cancellation by the issuer's restoration of the securities on which it was issued. But in case any other redemption is desired, it is necessary to adopt for the purpose some commodity easily transferable and most nearly invariable in value.

(5) Does Mr. Ingalls mean that all money must be abolished? I can see no other inference from his position. For there are only two kinds of money,—commodity money and credit money. The former he certainly does not believe in, the latter he thinks fraudulent and unsafe. Are we, then, to stop exchanging the products of our labor?

(6) It is clearly the right of every man to gamble if he chooses to, and he has as good a right to make his bets on the rise and fall of grain prices as on anything else; only he must not gamble with loaded dice, or be allowed special privileges whereby he can control the price of grain. Hence, in a free and open market, these transactions where neither equivalent is transferred are legitimate enough. But they are unwise, because, apart from the winning or losing of the bet, there is no advantage to be gained from them. Transactions, on the other hand, in which only one equivalent is immediately transferred are frequently of the greatest advantage, as they enable men to get possession of tools which they immediately need, but cannot immediately pay for. Of course the promise to pay is liable to be more or less valuable at maturity than when issued, but so is the property originally transferred. The borrower is no more exempt than the lender from the variations in value. And the interests of the holder of property who neither borrows nor lends is also just as much affected by them. There is an element of chance in all property relations. So far as this is due to monopoly and privilege, we must do our best to abolish it; so far as it is natural and inevitable, we must get along with it as best we can, but not be frightened by it into discarding credit and money, the most potent instruments of association and civilization.



[Liberty, March 27, 1886.]

J. M. M'Gregor, a writer for the Detroit Labor Leaf, thinks free land the chief desideratum. And yet he acknowledges that the wage-worker can't go from any of our manufacturing centres to the western lands, because "such a move would involve a cash outlay of a thousand dollars, which he has not got, nor can he get it." It would seem, then, that free land, though greatly to be desired, is not as sorely needed here and now as free capital. And this same need of capital would be equally embarrassing if the eastern lands were free, for still more capital would be required to stock and work a farm than the wage-worker can command. Under our present money system he could not even get capital by putting up his farm as collateral, unless he would agree to pay a rate of interest that would eat him up in a few years. Therefore, free land is of little value to labor without free capital, while free capital would be of inestimable benefit to labor even if land should not be freed for some time to come. For with it labor could go into other industries on the spot and achieve its independence. Not free land, then, but free money is the chief desideratum. It is in the perception of this prime importance of the money question that the greenbackers, despite their utterly erroneous solution of it, show their marked superiority to the State Socialists and the land nationalizationists.

The craze to get people upon the land is one of the insanities that has dominated social reformers ever since social reform was first thought of. It is a great mistake. Of agriculture it is as true as of every other industry that there should be as few people engaged in it as possible,—that is, just enough to supply the world with all the agricultural products which it wants. The fewer farmers there are, after this point of necessary supply is reached, the more useful people there are to engage in other industries which have not yet reached this point, and to devise and work at new industries hitherto unthought of. It is altogether likely that we have too many farmers now. It is not best that any more of us should become farmers, even if every homestead could be made an Arcadia. The plough is very well in its way, and Arcadia was very well in its day. But the way of the plough is not as wide as the world, and the world has outgrown the day of Arcadia. Human life henceforth is to be, not a simple, but a complex thing. The wants and aspirations of mankind are daily multiplying. They can be satisfied only by the diversification of industry, which is the method of progress and the record of civilization. This is one of the great truths which Lysander Spooner has so long been shouting into unwilling ears. But the further diversification of industry in such a way as to benefit, no longer the few and the idle, but the many and the industrious, depends upon the control of capital by labor. And this, as Proudhon, Warren, Greene, and Spooner have shown, can be secured only by a free money system.




[Liberty, May 1, 1886.]

In answer to my article, "Free Money First," in Liberty of March 27, in which was discussed the comparative importance of the money and land questions, J. M. M'Gregor, of the Detroit Labor Leaf, says: "I grant free money first. I firmly believe free money will come first, too, though my critic and myself may be widely at variance in regard to what would constitute free money." I mean by free money the utter absence of restriction upon the issue of all money not fraudulent. If Mr. M'Gregor believes in this, I am heartily glad. I should like to be half as sure as he is that it really is coming first. From the present temper of the people it looks to me as if nothing free would come first. They seem to be bent on trying every form of compulsion. In this current Mr. M'Gregor is far to the fore with his scheme of land taxation on the Henry George plan, and although he may believe free money will be first in time, he clearly does not consider it first in importance. This last-mentioned priority he awards to land reform, and it was his position in that regard that my article was written to dispute.

The issue between us, thus confined, hangs upon the truth or falsity of Mr. M'Gregor's statement that "to-day landlordism, through rent and speculation, supports more idlers than any other system of profit-robbing known to our great commonwealth." I take it that Mr. M'Gregor, by "rent," means ground-rent exclusively, and, by the phrase "supports more idlers," means takes more from labor; otherwise, his statement has no pertinence to his position. For all rent except ground-rent would be almost entirely and directly abolished by free money, and the evil of rent to labor depends, not so much on the number of idlers it supports, as on the aggregate amount and quality of support it gives them, whether they be many or few in number. Mr. M'Gregor's statement, then, amounts to this: that ground-rent takes more from labor than any other form of usury. It needs no statistics to disprove this. The principal forms of usury are interest on money loaned or invested, profits made in buying and selling, rent of buildings of all sorts, and ground-rent. A moment's reflection will show any one that the amount of loaned or invested capital bearing interest in this country to-day far exceeds in value the amount of land yielding rent. The item of interest alone is a much more serious burden on the people than that of ground-rent. Much less, then, does ground-rent equal interest plus profit plus rent of buildings. But to make Mr. M'Gregor's argument really valid it must exceed all these combined. For a true money reform, I repeat, would abolish almost entirely and directly every one of these forms of usury except ground-rent, while a true land reform would directly abolish only ground-rent. Therefore, unless labor pays more in ground-rent than in interest, profit, and rent of buildings combined, the money question is of more importance than the land question. There are countries where this is the case, but the United States is not one of them.

It should also be borne in mind that free money, in destroying the power to accumulate large fortunes in the ordinary industries of life, will put a very powerful check upon the scramble for corner-lots and other advantageous positions, and thereby have a considerable influence upon ground-rent itself.

"How can capital be free," asks Mr. M'Gregor, "when it cannot get rid of rent?" It cannot be entirely free till it can get rid of rent; but it will be infinitely freer if it gets rid of interest, profit, and rent of buildings and still keeps ground-rent than if it gets rid of ground-rent and keeps the other forms of usury. Give us free money, the first great step to Anarchy, and we'll attend to ground-rent afterwards.



[Liberty, June 28, 1884.]

The persistent way in which Greenbackers dodge argument on the money question is very tiresome to a reasoning mortal. Let an Anarchist give a Greenbacker his idea of a good currency in the issue of which no government has any part, and it is ten to one that he will answer: "Oh, that's not money. It isn't legal tender. Money is that thing which the supreme law of the land declares to be legal tender for debts in the country where that law is supreme."

Brick Pomeroy made such an answer to Stephen Pearl Andrews recently, and appeared to think that he had said something final. Now, in the first place, this definition is not correct, for that is money which performs the functions of money, no matter who issues it. But even if it were correct, of what earthly consequence could it be? Names are nothing. Who cares whether the Anarchistic currency be called money or something else? Would it make exchange easy? Would it make production active? Would it measure prices accurately? Would it distribute wealth honestly? Those are the questions to be asked concerning it; not whether it meets the arbitrary definition adopted by a given school. A system of finance capable of supplying a currency satisfying the above requirements is a solution of what is generally known as the money question; and Greenbackers may as well quit now as later trying to bind people to this fact by paltry quibbling with words.

But after thus rebuking Brick Pomeroy's evasion of Mr. Andrews, something needs to be said in amendment of Mr. Andrews's position as stated by him in an admirable article on "The Nature of Money," published in the New York Truth Seeker of March 8, 1884. Mr. Andrews divides the properties of money into essentials, incidentals, and accidentals. The essential properties of money, he says,—those in the absence of which it is not money whatever else it may have, and in the possession of which it is money whatever else it may lack,—are those of measuring mutual estimates in an exchange, recording a commercial transaction, and inspiring confidence in a promise which it makes. All other properties of money Mr. Andrews considers either incidental or accidental, and among the accidental properties he mentions the security or "collateral" which may back up and guarantee money.

Now as an analysis made for the purpose of arriving at a definition, this is entirely right. No exception can be taken to it. But it is seriously to be feared that nearly every person who reads it will infer that, because security or "collateral" is an accidental feature of money, it is an unimportant and well-nigh useless one. And that is where the reader will make a great mistake. It is true that money is money, with or without security, but it cannot be a perfect or reliable money in the absence of security; nay, it cannot be a money worth considering in this age. The advance from barter to unsecured money is a much shorter and less important step logically than that from unsecured money to secured money. The rude vessel in which 'primitive men first managed to float upon the water very likely had all the essentials of a boat, but it was much nearer to no boat at all than it was to the stanch, swift, and sumptuous Cunarder that now speeds its way across the Atlantic in a week. It was a boat, sure enough; but not a boat in which a very timid or even moderately cautious man would care to risk his life in more than five feet of water beyond swimming distance from the shore. It had all the essentials, but it lacked a great many accidentals. Among them, for instance, a compass. A compass is not an essential of a boat, but it is an essential of satisfactory navigation. So security is not an essential of money, but it is an essential of steady production and stable commerce. A boat without a compass is almost sure to strike upon the rocks. Likewise money without security is almost sure to precipitate the people using it into general bankruptcy. When products can be had for the writing of promises and the idea gels abroad that such promises are good money whether kept or not, the promisors are very likely to stop producing; and, if the process goes on long enough, it will be found at the end that there are plenty of promises with which to buy, but that there is nothing left to be bought, and that it will require an infinite number of promises to buy an infinitesimal amount of nothing. If, however, people find that their promises will not be accepted unless accompanied by evidence of an intention and ability to keep them, and if this evidence is kept definitely before all through some system of organized credit, the promisors will actively bestir themselves to create the means of keeping their promises; and the free circulation of these promises, far from checking production, will vastly stimulate it, the result being, not bankruptcy, but universal wealth. A money thus secured is fit for civilized people. Any other money, though it have all the essentials, belongs to barbarians, and is hardly fit to buy the Indian's dug-out.




[Liberty, June 7, 1890.]

The introduction in congress by Leland Stanford of a bill proposing to issue one hundred millions or more of United States notes to holders of agricultural land, said notes to be secured by first mortgages on such land and to bear two per cent. interest, is one of the most notable events of this time, and its significance is increased by the statement of Stanford, in his speech supporting the bill, that its provisions will probably be extended ultimately to other kinds of property. This bill is pregnant with the economics (not the politics) of Anarchism. It contains the germ of the social revolution. It provides a system of governmental mutual banking. If it were possible to honestly and efficiently execute its provisions, it would have only to be extended to other kinds of property and to gradually lower its rate of interest from two per cent. (an eminently safe figure to begin with) to one per cent., or one half of one per cent., or whatever figure might be found sufficient to cover the cost of operating the system, in order to steadily and surely transfer a good three-fourths of the income of idle capitalists to the pockets of the wage-workers of the country. The author of this bill is so many times a millionaire that, even if every cent of his income were to be cut off, his principal would still be sufficient to support his family for generations to come, but it is none the less true that he has proposed a measure which, with the qualifications already specified, would ultimately make his descendants either paupers or toilers instead of gigantic parasites like himself. In short, Leland Stanford has indicated the only blow (considered solely in its economic aspect) that can ever reach capitalism's heart. From his seat in the United States Senate he has told the people of this country, in effect, that the fundamental economic teaching reiterated by Liberty from the day of its first publication is vitally true and sound.

Unhappily his bill is vitiated by the serious defect of governmentalism. If it had simply abolished all the restrictions and taxes on banking, and had empowered all individuals and associations to do just what its passage would empower the government to do, it would not only have been significant, but, adopted by congress, it would have been the most tremendously and beneficially effective legislative measure ever recorded on a statute book. But, as it is, it is made powerless for good by the virus of political corruption that lurks within it. The bill, if passed, would be entrusted for execution either to the existing financial cabal or to some other that would become just as bad. All the beneficent results that, as an economic measure, it is calculated to achieve would be nearly counteracted, perhaps far more than counteracted, by the cumulative evils inherent in State administration. It deprives itself, in advance, of the vitalizing power of free competition. If the experiment should be tried, the net result would probably be evil. It would fail, disastrously fail, and the failure and disaster would be falsely and stupidly attributed to its real virtue, its economic character. For perhaps another century free banking would have to bear the odium of the evils generated by a form of governmental banking more or less similar to it economically. Some bad name would be affixed to the Stanford notes, and this would replace the assignat, the "wild cat," and the "rag baby," as a more effective scarecrow. It would unendurably prolong the bray of those financial asses of whom the most recent typical example is furnished in the person of General M. M. Trumbull, of Chicago.[7]

While hoping, then, that it may never pass, let us nevertheless make the most of its introduction by using it as a text in our educational work. This may be done in one way by showing its economic similarity to Anarchistic finance and by disputing the astounding claim of originality put forward by Stanford. In his Senate speech of May 23, he said: "There is no analogy between this scheme for a government of 65,000,000 people, with its boundless resources, issuing its money, secured directly by at least $2 for $1, on the best possible security that could be desired, and any other financial proposition that has ever been suggested." If Stanford said this honestly, his words show him to be both an intellectual pioneer and a literary laggard. More familiarity with the literature of the subject would show him that he has had several predecessors in this path. Col. William B. Greene used to say of Lysander Spooner's financial proposals that their only originality lay in the fact that he had taken out a patent on them. The only originality of Stanford's lies in the fact that it is made for a government of 65,000,000 of people. For governments of other sizes the same proposal has been made before. Parallel to it in all essentials, both economically and politically, are Proudhon's Bank of Exchange and the proposal of Hugo Bilgram. Parallel to it economically are Proudhon's Bank of the People, Greene's Mutual Banks, and Spooner's real estate mortgage banks. And the financial thought that underlies it is closely paralleled in the writings of Josiah Warren, Stephen Pearl Andrews, and John Ruskin. If Stanford will sit at the feet of any of these men for a time, he will rise a wiser and more modest man.

Like most serious matters, this affair has its amusing side. It is seen in the idolization of Stanford by the Greenbackers. This shows how ignorant these men are of their own principles. Misled by the resemblance of the proposed measure to Greenbackism in some incidental respects, they hurrah themselves hoarse over the California senator, blissfully unaware that his bill is utterly subversive of the sole essential of Greenbackism,—namely, the fiat idea. The Greenbacker is distinguished from all other men in this and only in this,—that in his eyes a dollar is a dollar because the government stamps it as such. Now in Stanford's eyes a dollar is a dollar because it is based upon and secured by a specific piece of property that will sell in the market for at least a certain number of grains of gold. Two views more antagonistic than these it would be impossible to cite. And yet the leading organs of Greenbackism apparently regard them as identical.



[Liberty, July 16, 1887.]

In a long reply to Edward Atkinson's recent address before the Boston Labor Lyceum, Henry George's Standard impairs the effect of much sound and effective criticism by the following careless statement:

Mr. Atkinson does not even know the nature of his own business. He told his audience that his "regular work is to stop the cotton and woollen mills from being burned up." This is a grave blunder. Fire insurance companies are engaged in distributing losses by fire among the insured. As a statistician he knows that statistics show that in New Hampshire, when that State was boycotted by the insurance companies, the number of fires was reduced by thirty per cent. He does not save buildings from fire.

This is a gross slander of one of the most admirable institutions in America,—none the less admirable in essence because it happens in this instance to exist for the benefit of the capitalists. Mr. George unwarrantably assumes that Mr. Atkinson is engaged in an insurance business of the every-day sort. This is far from true. He is the president of an insurance company doing business on a principle which, if it should be adopted in the banking business, would do more to abolish poverty than all the nostrums imagine'd or imaginable, including the taxation of land values. This principle is the mutualistic, or cost, principle.

Some time ago a number of mill-owners decided that they would pay no more profits to insurance companies, inasmuch as they could insure themselves much more advantageously. So they formed a company of their own, into the treasury of which each mill pays annually a sum proportional to the amount for which it wishes to insure, receiving it back at the end of the year minus its proportion of the year's losses by fire paid by the company and of the cost of maintaining the company. It is obvious that by the adoption of this plan the mills would have saved largely, even if fires had continued to occur in them as frequently as before. But this is not all. By mutual agreement the mills place themselves, so far as protection against fire is concerned, under the supervision of the insurance company, which keeps inspectors to see that each mill avails itself of all the best means of preventing and extinguishing fire, and uses the utmost care in the matter. As a consequence the number of fires and the aggregate damage caused thereby has been reduced in a degree that would scarcely be credited; the cost of insurance to these mills is now next to nothing, and this cost might be reduced still further by cutting down an enormous salary paid to Mr. Atkinson for services which not a few persons more industrious and capable than he are ready to perform for less money. Mr. Atkinson's insurance company, then, does save buildings from fire, and Mr. George's statement that it does not is as reckless as anything that Mr. Atkinson ever said to prove that the laboring man is an inhabitant of Paradise.

Moreover, it is the height of stupidity for any champion of labor to slur this insurance company, for it contains in germ the solution of the labor question. When workingmen and business men shall be allowed to organize their credit as these mill-owners have organized their insurance, the former will pay no more tribute to the credit-monger than the latter pay to the insurance-monger, and the one class will be as safe from bankruptcy as the other is from fire. Yet Mr. Atkinson, whose daily life should keep this truth perpetually before his mind, pretends that the laborer can achieve the social revolution by living on beef-bones and using water-gas as fuel. Can any one think him sincere?




[Liberty, January 10, 1891.]

The great central principle of Anarchistic economics—namely, the dethronement of gold and silver from their position of command over all other wealth by the destruction of their monopoly currency privilege—is rapidly forging to the front. The Farmers' Alliance sub-treasury scheme, unscientific and clumsy as it is, is a glance in this direction. The importance of Senator Stanford's land bill, more scientific and workable, but incomplete, and vicious because governmental, has already been emphasized in these columns. But most notable of all is the recent revolution in the financial attitude of Edward Atkinson, the most orthodox and cock-sure of American economists, who now swells with his voice the growing demand for a direct representation of all wealth in the currency.

In a series of articles in Bradstreet's and in an address before the Boston Boot and Shoe Club, this old-time foe of all paper money not based on specie; this man who, fifteen or twenty years ago, stood up in the town hall of Brookline in a set debate with Col. Wm. B. Greene to combat the central principle of Mutual Banking; this boor, who has never lost an opportunity of insulting Anarchism and Anarchists,—now comes forward to save the country with an elaborate financial scheme which he offers as original with himself, but which has really been Anarchistic thunder these many years, was first put forward in essence by Proudhon, the father of Anarchism, and was championed by Atkinson's old antagonist, Col. Wm. B. Greene, to the end of his life. Of course, all the papers are talking about it, and, on the principle that "everything goes" that comes from the great Atkinson, most of them give it a warm welcome, though precious few of them understand what it means. Those which probably do understand, like the New York Evening Post, content themselves for the present with a mild protest, reserving their heavier fire to be used in case the plan should seem likely to gain acceptance.

The proposal is briefly this: that the national banks of the country shall be divided into several districts, each district having a certain city as a banking centre; that any bank may deposit with the clearing-house securities satisfactory to the clearing-house committee, and receive from the clearing-house certificates in the form of bank-notes of small denominations, to the extent of seventy-five per cent. of the value of the securities; that these notes shall bear the bank's promise to pay on the back, and shall be redeemable on demand at the bank in legal-tender money, and, in case of failure on the bank's part to so redeem them, they shall be redeemable at the clearing-house; and that this new circulating medium shall be exempt from the ten per cent. tax imposed upon State bank circulation.

Of course a scheme like this would not work the economic revolution which Anarchism expects from free banking. It does not destroy the monopoly of the right to bank; it retains the control of the currency in the hands of a cabal; it undertakes the redemption of the currency in legal-tender money, regardless of the fact that, if any large proportion of the country's wealth should become directly represented in the currency, there would not be sufficient legal-tender money to redeem it. It is dangerous in its feature of centralizing responsibility instead of localizing it, and it is defective in less important respects. I call attention to it and welcome it, because here for the first time Proudhon's doctrine of the republicanization of specie is soberly championed by a recognized economst. This fact alone makes it an important sign of the times.

I am surprised that its importance has not been fully appreciated by the Galveston News, which journal alone among the great dailies of the country is an exponent of rational finance. Its editor, in noticing Atkinson's scheme, instead of pointing out its introduction of a revolutionary principle, remarks that "the one infallible way to reach the ideal of a sound system of organized credit is to reach the ideal of a population correspondingly sound in character and intellect." This philistine utterance I hardly expected from such a quarter. It is undoubtedly true that a considerable degree of character and intellect is necessary to the successful organization of credit. But this truth is now a truism. There is another truth, not a truism, for the inculcation of which there is pressing need,—that credit, once organized, will do as much to develop character and intellect as the development of character and intellect ever did to organize credit. It was this truth, and the important bearing that the monetization of all wealth would have upon it, that I expected to see emphasized by the Galveston News in its comments upon Atkinson's proposal. I hoped and still hope, to hear it rejoice with Liberty that the man whose solutions of the labor problem have consisted mainly of nine-dollar suits and ten-cent meals and patent ovens has at last broached a measure that, instead of being beneath contempt, is worthy of profound consideration.




[Liberty, August 9, 1884.]

To the Editor of Liberty:

In Liberty of June 28 you refer to a writer in the Essex Statesman, of whom you say that he "gets down to bottom truth" on the tariff question by averring that "Free Money" and "Free Trade" are corollaries of each other.

Every Greenbacker (I am one) of brains perceived this simple (I might say axiomatic) doctrine the moment he thought at all on it.

Monopoly of money is through interest; monopoly of trade is through taxing (tariffs) : so, if you would overthrow all monopoly, you have only to secure currency unloaded with interest, and their doom is recorded.

There is no more rational reformer in existence than the "Greenbacker" who is a Greenbacker in the only rational sense of the word,—that is, a believer in "a non-interest-bearing currency."

It is amusing, this prating of "secured money"! Liberty ought to see that a currency "based" on any "security" other than its inherent function and non-discountableness would rob those who used it.

If the whole community co-operate in its issue and use, and "fix" no limit to its quantity or use, such currency would be perfect as to all qualities, and rob none; and such money is "full legal tender" under any name you choose to label it.

As I have taught this doctrine for more than ten years, I hope you will give a corner to this brief "brick" in Liberty.

E. H. Benton.

Wells Mills (Geere), Neb., July, 1884.

I have given Mr. Benton his "corner," and I think he will have difficulty in getting out of it. Let me suppose a case for him. A is a farmer, and owns a farm worth five thousand dollars. B keeps a bank of issue, and is known far and wide as a cautious and honest business man. C, D, E, etc., down to Z are each engaged in some one of the various pursuits of civilized life. A needs ready money. He mortgages his farm to B, and receives in return B's notes, in various denominations, to the amount of five thousand dollars, for which B charges A this transaction's just proportion of the expenses of running the bank, which would be a little less than one-half of one per cent. With these notes A buys various products which he needs of C, D, E, etc., down to Z, who in turn with the same notes buy products of each other, and in course of time come back to A with them to buy his farm produce. A, thus regaining possession of B's notes, returns them to B, who then cancels his mortgage on A's farm. All these parties, from A to Z, have been using for the performance of innumerable, transactions B's notes based on A's farm,—that is, a currency based on some security "other than its inherent function and non-discountableness." They were able to perform them only because they all knew that the notes were thus secured. A knew it because he gave the mortgage; B knew it because he took the mortgage; C, D, E, etc., down to Z knew it because they knew that B never issued notes unless they were secured in this or some similar way. Now, Liberty is ready to see, as Mr. Benton says it ought to see, that any or all of these parties have been robbed by the use of this money when Mr. Benton shall demonstrate it by valid fact and argument. Until then he must stay in his corner.

A word as to the phrase "legal tender." That only is legal tender which the government prescribes as valid for the discharge of debt. Any currency not so prescribed is not legal tender, no matter how universal its use or how unlimited its issue, and to label it so is a confusion of terms.

Another word as to the term "Greenbacker." He is a Greenbacker who subscribes to the platform of the Greenback party. The cardinal principle of that platform is that the government shall monopolize the manufacture of money, and that any one who, in rebellion against that sacred prerogative, may presume to issue currency on his own account shall therefor be taxed, or fined, or imprisoned, or hanged, or drawn and quartered, or submitted to any other punishment or torture which the government, in pursuit and exercise of its good pleasure, may see fit to impose upon him. Unless Mr. Benton believes in that, he is not a Greenbacker, and I am sure I am not, although, with Mr. Benton, I believe in a non-interest-bearing currency.




[Liberty, December1, 1888.]

To the Editor of Liberty:

I understand that the monopoly of money should be broken, and this would leave all persons who possessed property free to issue solvent notes thereon, the competition between them so reducing the rate of interest that it would enable would-be business people to borrow on advantageous terms. Now, to my mind this would do no good unless the new order of benefited business persons adopted the "Cost principle" in production and distribution, in order to break down the present bad arrangements in society that is composed of workers on one side and idlers and unproductive or useless persons on the other side.

If the cost principle was not in view, the result to my mind of "plentiful money" would only lead to a short briskness of trade and a speedy breakdown,—much speedier than now.

Neither do I think (in the absence of applying the cost principle) that competition among bankers would bring the issue down to cost through the sheer force of competition, because people would cease to go into the banking business if it did not yield the normal rate of interest on capital.

In conclusion, I must say I believe in the "Cost principle," and yet as an Anarchist there seems something arbitrary in it. It is the reconciliation of "Cost" and competition that my mind cannot yet grasp.

Yours faithfully, {{gap}10em}}Frank A. Matthews.

The Cost principle cannot fail to seem arbitrary to one who does not see that it can only be realized through economic processes that go into operation the moment liberty is allowed in finance. To see this it is necessary to understand the principles of mutual banking, which Mr. Matthews has not attentively studied. If he had, he would know that the establishment of a mutual bank does not require the investment of capital, inasmuch as the customers of the bank furnish all the capital upon which the bank's notes are based, and that therefore the rate of discount charged by the bank for the service of exchanging its notes for those of its customers is governed, under competition, by the cost of that service, and not by the rate of interest that capital commands. The relation is just the contrary of Mr. Matthews's supposition. It is the rate of interest on capital that is governed by the bank's rate of discount, for capitalists will not be able to lend their capital at interest when people can get money at the bank without interest with which to buy capital outright. It is this effect of free and mutual banking upon the rate of interest on capital that insures, or rather constitutes, the realization of the Cost principle by economic processes. For the moment interest and rent are eliminated as elements of price, and brisk competition is assured by the ease of getting capital, profits fall to the level of the manufacturer's or merchant's proper wage. It is well, as Mr. Matthews says, to have the Cost principle in view; for it is doubtless true that the ease with which society travels the path of progress is largely governed by the clearness with which it foresees it. But, foresight or no foresight, it "gets there just the same." The only foresight absolutely necessary to progress is foresight of the fact that liberty is its single essential condition.




[Liberty, September 20, 1884.]

While the principle of equal representation of all available values by the notes of the Exchange Bank is what I have advocated these thirty years, I do not perceive how, in generalizing the system, as Proudhon would do (I refer to the paragraphs translated by Greene), we are to avoid the chances of forgery on the one side, and on the other of fraudulent issues by the officers of the Bank.

Such a Bank, moreover, is equivalent to a general insurance policy on the property of a country, and the true value of its notes must depend on security against conflagrations and other catastrophes affecting real estate as well as "personal property."

I hope that the first essays will be local and limited. I think the commercial activity of modern civilization dangerously, if not fatally, exaggerated and disproportioned to production. The Railroad is a revolver in the hands of a maniac, who has just about sense enough to shoot himself. Even were we not, in our blind passion for rapid and facile transportation, hanging ourselves by the slip-noose of monopoly, the impulse which railroads give to and towards city life, coming, as it has, before the establishment of a conservative scavenger system, by which the cream of soils would be restored to them, rapidly drains and wastes terra-solar vitality, and suffices soon to render America a desert. The feasible check to this "galloping consumption" lies in localizing the circuits of production with manipulation and consumption in cooperative associations. The smaller the area in which such self-sufficing circuit is effected, the greater the economy of force in transportation.

Men and Gods are too extense;
Could you slacken and condense?

I suppose you see the correlation of this idea with that of the safety of Exchange Bank notes, as in a locally restricted commerce frauds could and would be promptly detected, and therefore would be seldom attempted.


Proudhon was accustomed to present his views of the way in which credit may be organized in two forms,—his Bank of Exchange and his Bank of the People. The latter was his real ideal; the former he advocated whenever he wished to avoid the necessity of combating the objections of the governmentalists. The Bank of Exchange was to be simply the Bank of France transformed on the mutual principle. It is easy to see that the precautions against forgery and over-issue now used by the Bank of France would be equally valid after the transformation. But in the case of the Bank of the People, which involves the introduction of free competition into the banking business, these evils will have to be otherwise guarded against. The various ways of doing this are secondary considerations, having nothing to do with the principles of finance; and human ingenuity, which has heretofore conquered much greater obstacles, will undoubtedly prove equal to the emergency. The more reputable banks would soon become distinguished from the others by some sort of voluntary organization and mutual inspection necessary to their own protection. The credit of all such as declined to submit to thorough examination by experts at any moment or to keep their books open for public inspection would be ruined, and these would receive no patronage. Probably also the better banks would combine in the use of a uniform banknote paper difficult to counterfeit, which would be guarded most carefully and distributed to the various banks only so far as they could furnish security for it. In fact, any number of checks can be devised by experts that would secure the currency against all attempts at adulteration. There is little doubt that the first essays will be, as "Edgeworth" hopes, "local and limited." But I do not think the money so produced will be nearly as safe as that which will result when the system has become widespread and its various branches organized in such a way that the best means of protection may be utilized at small expense.



[Liberty, July 16, 1887.]

Van Buren Denslow, discussing in the Truth Seeker the comparative rewards of labor and capital, points out that the present wage system divides profits almost evenly between the two, instancing the railways of Illinois, which pay annually in salaries and wages $81,936,170, and to capital, which Mr. Denslow defines as the "labor previously done in constructing and equipping the roads," $81,720,265. Then he remarks: "No system of intentional profit-sharing is more equal than this, provided we assent to the principle that a day's work already done and embodied in the form of capital is as well entitled to compensation for its use as a day's work not yet done, which we call labor." Exactly. But the principle referred to is the very thing which we Socialists deny, and until Mr. Denslow can meet and vanquish us on that point, he will in vain attempt to defend the existing, or any other form of profit-sharing. The Socialists' assert that "a day's work embodied in the form of capital" has already been fully rewarded by the ownership of that capital; that, if the owner lends it to another to use and the user damages it, destroys it, or consumes any part of it, the owner is entitled to have this damage, destruction, or consumption made good; and that, if the owner receives from the user any surplus beyond the return of his capital intact, his day's work is paid for a second time.

Perhaps Mr. Denslow will tell us, as we have so often been told before, that this day's work should be paid for a second and a third and a hundredth and a millionth time, because the capital which it produced and in which it is embodied increased the productivity of future labor. The fact that it did cause such an increase we grant; but that labor, where there is freedom, is or should be paid in proportion to its usefulness we deny. All useful qualities exist in nature, either actively or potentially, and their benefits, under freedom, are distributed by the natural law of free exchange among mankind. The laborer who brings any particular useful quality into action is paid according to the labor he has expended, but gets only his share, in common with all mankind, of the special usefulness of this product. It is true that the usefulness of his product has a tendency to enhance its price; but this tendency is immediately offset, wherever competition is possible,—and as long as thete is a money monopoly there is no freedom of competition in any industry requiring capital,—by the rush of other laborers to create this product, which lasts until the price falls back to the normal wages of labor. Hence it is evident that the owner of the capital embodying the day's work above referred to cannot get his work paid for even a second, time by selling his capital. Why, then, should he be able to get it paid for a second time and an infinite number of times by repeatedly lending his capital? Unless Mr. Denslow can give us some reason, he will have to admit that all profit-sharing is a humbug, and that the entire net product of industry should fall into the hands of labor not previously embodied in the form of capital,—in other words, that wages should entirely absorb profits.




[Liberty, June 19, 1886.]

The Knights of Labor Convention at Cleveland voted to petition Congress for the passage of an act which embodies in a very crude way the all-important principle that all property having due stability of value should be available as a basis of currency. The act provides for the establishment of loan offices in every county in the United States, which, under the administration of cashiers and tellers appointed by the Secretary of the Treasury, shall issue legal tender money, redeemable on demand in gold coin or its equivalent in lawful money of the United States, lending it at three per cent, a year to all who offer satisfactory security.

The Knights have got hold of a great idea here,—one which has in it more potency for the emancipation of labor than any other; but see now how they vitiate it and render it impracticable and worthless by their political and arbitrary methods of attempting its realization!

One section of the act, by forbidding all individuals or associations to issue money, makes a government monopoly of the banking business,—an outrageous denial of liberty!

Another section, instead of leaving the rate of discount to be governed by cost to which, were it not for the monopoly, competition would reduce it, arbitrarily fixes it at three per cent., thus recognizing labor's worst foe, usury. As three per cent. represents the average annual increase of wealth,—that is, the difference between the annual production and the annual consumption,—this section means that what ought to be labor's annual savings, and would be if usury did not abstract them from labor's pockets, shall be turned into the government treasury to be squandered as Congress and corrupt officials may see fit.

Another section establishes a uniform usury law for the entire country, providing that any person who shall lend money at any other rate than three per cent, shall forfeit to the borrower both principal and interest. Legislators have heretofore been satisfied to limit the rate of interest in one direction; but this limits it in both, subjecting the lender at two per cent. to the same forfeit that the lender at four must suffer.

This piece of tyranny, however, as well as numerous others in the act, are thrown entirely into the shade by a section providing that any person convicted of offering for sale gold and silver coin of the United States "shall forfeit as a fine his entire estate, goods, money, and property, or may be imprisoned at hard labor for fifty years, or suffer both fine and imprisonment, and in addition forever forfeit the right of citizenship in the United States." What an opportunity for Recorder Smythe, should this offence ever come within his jurisdiction! His insane lust for cruelty, which lamented its inability to hang John Most for making an incendiary speech, might find greater gratification under this statute. Imagine him addressing the prisoner at the bar:

"John Jones, a jury of your peers has found you guilty of a most heinous crime. You have presumed to offer in the market-place and subject to sacrilege of barter our sacred cart-wheel, the emblem of civilization, the silver dollar of the United States. It is evident that you are a member of the dangerous classes. You are probably the greatest scoundrel that ever disgraced the face of the earth. It is a great pity that our too merciful law will not permit me to burn you at the stake. But as it will not, I must be contented, in the interest of law, order, and society, to go to the extreme verge of the latitude allowed me. Therefore, I impose upon you a fine equal to your entire estate, I sentence you to imprisonment at hard labor for fifty years, and I strip you forever of the right to vote me out of office."

A beautiful organization, these Knights of Labor, for an Anarchist to belong to!



The outcry against middlemen is senseless. As E. H. Heywood puts it, "Middlemen are as important as end men." And they are as truly producers. Distribution is a part of production. Nothing is wholly produced until it is ready for use, and nothing is ready for use until it has reached the place where it is to be used. Whoever brings it to that place is a producer, and as such entitled to charge for his work. The trouble with middlemen is that they charge consumers not only for their work, but for the use of their invested capital. As it is, they are useful members of society. Eliminate usury from their methods, and they will become respectable members also.—Liberty, October 1, 1881.


Those who would have the usurer rewarded for rendering a service always find it convenient to forget that the usurer's victims would not need his service were it not that the laws made at his bidding prevent them from serving themselves.—Liberty, October 15, 1881.


Of the absolute correctness of the principle, and advisability of the policy, of free trade there can be no reasonable doubt; but it must be thorough-going free trade,—no such half-way arrangement as that which the so-called "free traders" would have us adopt. David A. Wells, Professor Perry, and all the economists of the Manchester school are fond of clamoring for "free trade"; but an examination of their position always shows them the most ardent advocates of monopoly in the manufacture of money,—the bitterest opponents of free trade in credit. They agree and insist that it is nothing less than tyranny for the government to clip a large slice out of the foreign product which any one choses to import, but are unable to detect any violation of freedom in the exclusive license given by the government to a conspiracy of note-shaving corporations called national banks, which are enabled by this monopoly to clip anywhere from three to fifteen per cent. out of the credit which the people are compelled to buy of them. Such "free trade" as this is the most palpable sham to any one who really looks into it. It makes gold a privileged product, the king of commodities. And as long as this royal of gold exists, the protectionists who make so much of the theory of the "balance of trade" will occupy an invulnerable position. While gold is king, the nation which absorbs it—that is, the nation whose exports largely exceed its imports—will surely govern the world. But dethrone this worst of despots, and that country will be the most powerful which succeeds to the largest extent in getting rid of its gold in exchange for products more useful. In other words, the republicanization of specie must precede the freedom of trade.—Liberty, March 18, 1892.


Some nincompoop, writing to the Detroit Spectator in opposition to cheap money, says: "If low interest insured high wages, during times of business depression wages would be high, for then interest reaches its minimum." Another man unable to see below the surface of things and distinguish association from causation! The friends of cheap money do not claim that low interest insures high wages. What they claim is that free competition in currency-issuing and the consequent activity of capital insure both low interest and high wages. They do not deny that low interest sometimes results from other causes and unaccompanied by any increase in wages. When the money monopolists through their privilege have bled the producers nearly all they can, hard times set in, business becomes very insecure, no one dares to venture in new directions or proceed much further in old directions, there is no demand for capital, and therefore interest falls; but, there being a decrease in the volume of business, wages fall also. Suppose, now, that great leveller, bankruptcy, steps in to wipe out all existing claims, and economic life begins over again under a system of free banking. What happens then? All capital is at once made available by the abundance of the currency, and the supply is so great that interest is kept very low; but confidence being restored and the way being clear for all sorts of new enterprises, there is also a great demand for capital, and the consequent increase in the volume of business causes wages to rise to a very high point. When people are afraid to borrow, interest is low and wages are low; when people are anxious to borrow, but can find only a very little available capital in the market, interest is high and wages are low; when people are both anxious to borrow and can readily do so, interest is low and wages are high, the only exception being that, when from some special cause labor is extraordinarily productive (as was the case in the early days of California), interest temporarily is high also.—Liberty, November 22, 1884.

"To produce wealth in the shape of coal," says Henry George, "nothing is needed but a bed of coal and a man." Yes, one thing else is needed,—a pick-axe. This neglect of the pick-axe and of the means of obtaining it is a vital flaw in Mr. George's economy. It leads him to say that "what hinders the production of wealth is not the lack of money to pay wages with, but the inability of men who are willing to work to obtain access to natural opportunities." That this lack of access, in the proportion that it exists, is a hinderance to production is indisputable, but in this country it is but a molehill in labor's path compared with the mountain that confronts labor in consequence of the lack of money. In fact, the lack of access is largely due to the lack of money.—Liberty, July 30, 1887.


In disposing with his usual cleverness of the economists' apologies for interest G. Bernard Shaw takes a position upon the money question not at all in harmony with the State Socialism toward which he usually inclines. He would be taken, in fact, for a first-class Anarchist. Speaking of the tax which the banker who has a monopoly levies upon all commerce, he says: "Only by the freedom of other financiers to adopt his system and tempt his customers by offering to share the advantage with them, can that advantage eventually be distributed throughout the community." Only, observe. No other method will do it. Government monopoly will not do it. Nothing but laissez-faire, free competition, free money, in short, as far as it goes, pure Anarchism, can abolish interest on money. When Mr. Shaw shall apply this principle in all directions, he and Liberty will stand on the same platform.—Liberty, September 24, 1887.

It is a common saying of George, McGlynn, Redpath, and their allies that they, as distinguished from the State Socialists, want less government instead of more, and that it is no part of the function of government to interfere with production and distribution except to the extent of assuming control of the bounties of nature and of such industries as are naturally and necessarily monopolies,—that is, such as are, in the nature of things, beyond the reach of competition's influence. In the latter category they place the conduct of railroads and telegraphs and the issue of money. Now, inasmuch as it takes an enormous capital to build a railroad, and as strips of land three thousand miles long by thirty feet wide are not to be picked up every day, I can see some shadow of justification for the claim that railroads are necessarily exempt to a marked extent from competition, although I do not think on that account that it will be necessary to hand them over to the government in order to secure their benefits for the people. Still, if I were to accept Mr. George's premise that industries which are necessarily monopolies should be managed by the State, I might possibly conclude that railroads and some other enterprises belong under that head. But how his premise is related to the issue of money I do not understand at all. That the issue of money is at present a monopoly I admit and insist, but it is such only because the State has laid violent hands upon it, either to hold for itself or to farm out as a privilege. If left free, there is nothing in its nature that necessarily exempts it from competition. It takes little or no capital to start a bank of issue whose operations may become worldwide, and, if a thousand banks should prove necessary to the prevention of exorbitant rates, it is as feasible to have them as to have one. Why, then, is the issue of money necessarily a monopoly, and as such to be entrusted exclusively to the State? I have asked Mr. George a great many questions in the last half-dozen years, not one of which has he ever condescended to answer. Therefore I scarcely dare hope that he will vouchsafe the important information which I now beg of him.—Liberty, October 8, 1887.


The different uses of the word "free" lead to many misunderstandings. For instance, a writer in the Denver Arbitrator gives the preference to free trade and free land over free money and free transportation on the ground that the former are "natural rights" while the latter are "privileges that can be conferred only by society." Here free money is evidently taken to mean the supply of money to the people free of cost by some external power. But it no more means that than free rum means the supply of rum free of cost. It means freedom to manufacture money and offer it in the market, and is a part of free trade itself. One may look upon free money and free trade as privileges, or as rights, or as simple equalities recognized by contract; that is a matter of ethics and politics. But whichever way one views them, he must view both alike, for economically they are the same in principle. There is no possible justification for calling one a right and the other a privilege, and giving a preference to. one or the other on the basis of that distinction.—Liberty, September 29, 1888.


"A right theory of the functions of money," writes Robert Ellis Thompson in the Irish World, "is of the first necessity for understanding the controversy between protection and free trade." This is an important truth, first expressed, I think, by Proudhon. It is precisely because Mr. Thompson does not understand the money question that he is a protectionist. Supposing that State control of money is a foregone conclusion, he sees as a logical result of this false premise that the State must also control the balance of trade. That his premise may be doubted does not seem to have occurred to him. "The most extreme free trader," he says, "opposes free trade in money." Evidently he is unaware that the extremity of free trade is not to be found in the New York Evening Post. The Anarchists are the extreme free traders; and they, to a man, favor free trade in money,—most of them, in fact, recognizing it as a necessary condition of free trade in products. For, as Mr. Thompson truly says, it is "the height of folly for a country to exchange industrial power for industrial products." In the absence of a tariff, the tendency would be to just that sort of exchange, provided the State should continue to deprive all products, save one or two, of the monetary function, and therefore of industrial power. Mr. Thompson, supposing this restriction of the monetary function to be necessary and wise, clings very sensibly to the tariff. He would have the State hem in industrial power and bar out industrial products. Of two wrongs he tries to make a right. The simpler way, involving no wrong at all, is to give industrial power to industrial products by endowing them with the monetary function, and then strike down all commercial barriers whatsoever.—Liberty, February 2, 1889.

  1. It should be stated that a few years after the date of this discussion Mr. Babcock abandoned the position here taken, became a thorough-going opponent of interest, and has remained such ever since.
  2. It is interesting to note that "Basis," abandoning later the theory of interest maintained by him in the above article, took the initiative in the formation of a society for the abolition of interest, and now considers such abolition essential to the solution of the social problem.
  3. Nevertheless, to everybody but the issuer, representative money is capital to all intents and purposes, because it will procure capital. But to the issuer it is not capital, because he issues it against security belonging not to himself but to the borrower, would not be able to issue it were it not for such security, and therefore parts with nothing in issuing it. Now the idea that money is capital does not sustain the position of "Basis," unless it be taken to mean that money is capital to the issuer.
  4. This paragraph on the surface seems contradictory of the position taken on a previous page in answer to "Basis." And in form and terms it does contradict it. But a careful reading of both passages, in connection with the accompanying explanatory sentences, will show that there is no inconsistency between them.
  5. Division of labor originates in people making something they do not themselves want. It is further facilitated by selling this for one special commodity which is not directly wanted.
  6. Egoism later saw its error, and recognized the necessity of a standard of value.
  7. At the time when this was written General Trumbull had just been guilty, and not for the first time, of stupidly confusing mutual money with fiat money, and as his ignorance of the difference between them was utterly without excuse and yet was given voice in that tone of superiority which ignorance is wont to assume, it seemed proper to administer this rebuke, which, though conceded to be just by some of General Trumbull's best friends, was considered by others unduly severe. The writer is not behind these last in his admiration of General Trumbull as a man and a thinker. As a publicist he is usually and unusually witty and wise; only when discussing finance does he utter absurdities that justify the epithet above applied.