Benjamin Tucker American Mutualist: Mutual Banking Part 3 and Final Conclusion Part 4
By Nicholas Evans
In the previous article Benjamin Tucker Part 2: Brief Introduction to the Freedoms in the Individualist Society, it was noted Tucker’s society would have government (in whatever shape or form), but the government would exist through voluntary taxation and without economic exploitation. Therefore Tucker advocated a society of voluntary taxation of government and with employers that pay their employees the full value of their labor (their natural wage), land owners owning land that only they occupy, non-exploitive landlords that are paid only for the work they do on the land they own, and interest charged at one percent or by Mutual Banks for their customers. The one percent of the mutual bank is charged to cover the cost of overhead and wages at the mutual bank. Regarding Tucker’s overall society James Martin states:
"The abolition of compulsory taxation would mean the abolition of the state as well, Tucker asserted, and the form of society succeeding it would be on the line of a voluntary defensive institution... There were two methods of government...The other was the anarchist method of 'leadership', inducing the individual to the 'goal of an ideal civilization' through persuasion and 'attraction'...Two aims of anarchist activity, the abolition of compulsory taxation and the abolition of legally-protected money and land monopolies, form the main theme of his critical writing..." 1.
In this article is a brief introduction to William Greene’s mutual banking theory which Tucker supported. James Martin states that Greene’s mutual banking “…resulted in one of the few real additions to Warrenite mutualism.” 2.
Greene was involved in Unitarian ministry and Transcendentalism*, was a military officer, and Individualist Mutualist. 3. **
Greene with his Libertarian Mutualism believed a bank had only one reason to exist and that reason is for being a place where borrowers and lenders can come together. 4. He believed because banks did not follow the labor theory of value hence banks were charging much higher rates of interest to the loss of the customers. Greene noted “On the side of the bank there is a small army, well equipped, well officered, and well disciplined; on the side of the community, there is a large undisciplined crowd, without arms, and without leaders.” 5.
Governments have helped the banks charge high interest through legislation. The exchangeable value of a commodity is determined by both its utility (usefulness) as well as its scarcity. However after government legislation regarding banks as gold and silver as the only legal tender allowed “…those who managed to obtain a monopoly of the supply of these metals to similarly control the business of the area using them as the sole legal tender, and thereby secure a premium for their use by all others engaged in commerce.” 6.
Greene believed high interest rates charged from banks kept many people in poverty as they were forced to work for others and be paid less than the full value of their labor because they could not afford the high interest rates to go into business for themselves or create co-operatives . 7.
What is the solution according to Greene?
Greene’s solution was the Mutual Bank.
Any person could become a member of the bank by pledging mortgages to the bank on actual property where he stated bills of exchange amounting to one-half of the total value of the mortgaged property would be issued. No money would be loaned to persons not people not members of the banking company. All members of the bank would enter into a voluntary agreement to accept paper money of the bank in all payments when presented by fellow members. Members could be released from their pledge when their mortgage had been redeemed and a declaration stating perpetual non-redemption in specie (coin money) of the bills of the bank. *** 8.
Greene suggested that 10,000 people sign up before starting the mutual bank. This Greene believed would insure a feeling of security with the mutual bank members because all could inspect the books and therefore observe see on what basis all others were having money issued. In addition, with 10,000 local people as members people would be able to use the mutual money in everyday local life in member stores, hotels, theaters, shops, restaurants ect, ect. 9.
The mutual bank is a producer bank. Its currency was non-interest-bearing. The monetization of commodities other than gold and silver (though Tucker mentioned people could use gold or silver if they wished) would enable a person with only his work skills to easily borrow capital to engage in productive work and thus create capital goods of their own. 10.
Greene’s Mutual Banks were not like the “Wildcat money” because the wildcat money were based on specie that did not exist because they were not backed by any actual existing commodities. Mutual bank money on the other hand, is not redeemable in specie but in actual existing commodities. Mutual money is issued against actual values and is utilized by all who insured it and the mutual money has no effect upon the precious metals than upon any other commodities. 11.
Like Proudhon, Greene encouraged co-operatives and democratically run business. Greene encouraged Associated Workshops, Protective Union Stores, and his Mutual Banks which he called the “…Triple Formula of Mutualism.” 12. This triple formula is similar to Proudhon’s Agro-Industrial Federation. 13. in the belief that the Associated Workshops, Protective Union Stores and the Mutual Banks would protect from companies interested in entering the market with the intent of creating usury (un-worked income). Greene believed the mutual bank was best adapted to the local community level. In times of economic troubles, the mutual money would prove to protect against inflationary or deflationary pressures as the local town cannot fail disastrously because they have real property backed by their money literally in the local community. 14
Like Tucker, Greene believed people should be free to live any way they wished. 15.
He believed Mutual Banking would eventually lead to a free mutualist society:
“Mutualism operates, by its very nature, to render political government, founded on arbitrary force, superfluous; that is, it operates to the decentralization of political power, and to the transformation of the State by substituting self-government instead of government ab extra.” 16.
Benjamin Tucker American Mutualist: Final Conclusion Part 4
As noted in Part 3 Benjamin Tucker advocated for a society with voluntary taxation for government and private businesses would exist with either self-employed individuals, non-exploitive employers who pay their employees the full product of their labor, as well as land-owners who own only the land they live on, non-exploitive land lords**** and interest at low rates to cover only the cost and wages of running a mutual bank. The mutual banks would offer low interest to insure anyone who can work would be able to become self-employed as an alternative option to employers who pay their employees less than the full value of their labor. Given this option employers would be looking for employees and therefore raise the wage to the full product or the natural wage. Tucker followed the Labor Theory of Value and opposed unearned income which is why he is a market socialist or Mutualist. In other words, Tucker wanted voluntary taxation with equality of opportunity on the competitive market.
As stated by James Martin:
"The abolition of compulsory taxation would mean the abolition of the state as well, Tucker asserted, and the form of society succeeding it would be on the line of a voluntary defensive institution... There were two methods of government...The other was the anarchist method of 'leadership', inducing the individual to the 'goal of an ideal civilization' through persuasion and 'attraction'...Two aims of anarchist activity, the abolition of compulsory taxation and the abolition of legally-protected money and land monopolies, form the main theme of his critical writing..." 17. People who do not accept the Individualist Society can move to another society that more fits their preferences and they will have an easier time to move because they will be paid their full value of their labor.
Proudhon, an influence on Tucker and his contract theory (See Tucker’s Instead of a Book) stated in the Epilogue of his General Idea of Revolution in the Nineteenth Century (1923):
“Will you join the compact, and form a part of their society?
Do you promise to respect the honor, the liberty and the property of your brothers?
Do you promise never to appropriate for yourself by violence, nor by fraud, nor by usury, nor by interest, the products or possessions of another?
Do you promise never to lie nor deceive in commerce, or in any part of your transactions?
You are free to accept or refuse.”
The society by contact through voluntary taxation and non-exploitive wage labor on a free market with equality of opportunity was Tucker’s goal.
How can the Individualist society of Tucker be created?
Mutual banking may no longer be able to have the intended impact it once could have potentially had. Tucker later stated in his 1926 post script:
“…Today the way is not so clear. The four monopolies, unhindered, have made possible the modern development of the trust, and the trust is now a monster which I fear, even the freest banking, could it be instituted, would be unable to destroy. ... If this be true, then monopoly, which can be controlled permanently only for economic forces, has passed for the moment beyond their reach, and must be grappled with for a time solely by forces political or revolutionary. Until measures of forcible confiscation, through the State or in defiance of it, shall have abolished the concentrations that monopoly has created, the economic solution proposed by Anarchism and outlined in the forgoing pages – and there is no other solution... [It] will remain a thing to be taught to the rising generation, that conditions may be favorable to its application after the great leveling. But education is a slow process, and may not come too quickly. Anarchists who endeavor to hasten it by joining in the propaganda of State Socialism or revolution make a sad mistake indeed. They help to so force the march of events that the people will not have time to find out, by the study of their experience, that their troubles have been due to the rejection of competition...” 18.
So gradual peaceful change through education is the main key to creating an Individualist Mutualist society according to Tucker.
While peaceful gradual education is key, creating Individualist mutual banks and Individualist run businesses can still be helpful. Although we are living in a system without equality of opportunity on the market, another small way to help to create the Individualist Libertarian***** society is by creating mutual banks or by applying the Individualist way of operating a business (any type of business) by having everyone in the company (both employers and employees) vote on wages of both the wages of the employees and the wages of the employers. The jobs within the company that are the most stressful mentally or physically would be paid the most. This is the Labor Theory of Value or the 'Cost Principle' (which includes the mental and physical stress) of the theory of Josiah Warren. The only difference between the individualist model with employers and co-ops (ie Proudhon) is in the Individualist anarchist model the employers are not voted in or out like in the model of Proudhon. In either model there is no surplus value because the wage is decided by how difficult the work is and only people who work (add value) are paid and the employees being the majority in the company decide their wages themselves through voting (rather than letting the market do it with equality of opportunity on the market if they were in an individualist anarchist market which we are not at this time of 2017) are by both the employer and employees voting on wages and by both actually doing their work they are being paid for; they have equality of opportunity to decide their whole wages depending on the physical and mental intensity and thus receive their entire product. Also encouraging the Individualist Anarchist attitudes of freedom, tolerance, and respect for all others views are what someone can do to help create an Individualist society based on Tucker, Warren, and Andrews views.
*This author finds the Christian and Transcendentalism beliefs of Greene as well as the methods of the Sedona Method more helpful over Tucker’s egoism. While most interested in the Individualist Libertarians, this author also likes all forms of libertarianism (ie. Proudhon, Bakunin, Kropotkin)
**Lysander Spooner previously stated the free money decentralist views in his Constitutional /law Relative to Credit, Currency and Banking in 1843. Spooner is a Libertarian Mutualist because although he supported absentee landlords (see: Spooner. The Law of Intellectual Property. 1855. “The principle of property is directly the reverse of this. The principle of property is, that the owner of a thing has absolute dominion over it, whether he have it in actual possession or not, and whether he himself wish to use it or not; that no one has a right to take possession of it, or use it, without his consent; and that he has a perfect right to withhold both the possession and use of it from others, from no other motive than to induce them, or make it necessary for them, to buy it, or rent it, and pay him an equivalent for it, or for its use,…” From section XI Objection Eleventh) he opposed economic exploitation in the workplace and unlike Tucker who preferred employers who pay their employees their full value or natural wage on the market, Spooner preferred co-operative businesses. It is Spooner’s opposition to economic exploitation as the reason why Spooner along with Greene were invited to the International Workingman’s Association. (See: Woodcock, George. Anarchism: A History of Libertarian Ideas and Movements. Pg. 460. Available at: https://libcom.org/files/Woodcock
,%20George%20-%20Anarchism,%20A%20Histo...) Economic exploitation in the workplace is when an employer pays their employees a wage less than the full value of their labor on the competitive market. Capitalism is a market system that does not factor the labor into the cost of the product. Economic exploitation follows the labor theory of value theory which factors labor (mental and physical) into the price of a product. Spooner, Tucker, Greene and the other Individualists followed the Labor Theory of Value which is why they are market socialists. (see: Capital Volume 1 by Marx) The full price of a product is the natural wage which is the average going rate for a job on the market that includes the physical and mental labor into the price of the wage or product. Economic exploitation happens when employees are paid less than the going rate on the market. However the Labor Theory of Value can only work in large scale if there is equal opportunity on the market by means of Mutual Banks or if everyone owned a house because people would settle for lower wages simply to survive on a market without equality of opportunity and hence not receive their natural wage.
***In today’s society and especially in the future it may be more efficient to use cashless ways of payment through things like debit cards to represent different types of money from different banks (ie. Government backed money, mutual money ect. ect.).
****Tucker agreed with Josiah Warren on equitable non-exploitive landlord rent though Tucker did not call non-exploitive rent 'rent' but sale. Warren states “The equitable rent of either would be the wear, insurance, ect., and the labor of making contracts and receiving the rents, all of which are different items of cost.” Warren, Josiah. Equitable Commerce. ULAN Press. USA 2017. Pp 46. By ‘cost’ Warren means the physical and mental labor along with the material costs in addition to the average going rate on the market are all factored into price. Tucker states that he considers the term rent to mean usury or unearned income by a landlord. However if a landlord worked on their own land, then the tenant pays the landlord (a money amount covering the physical and mental labor as well as material costs according to the work done by the landlord) due to the damage and wear the tenant does on the land owned by the landlord that was worked on by the landlord then that is non-exploitive and thus not rent but sale. Tucker states: "If Edgeworth performs preparatory labor on a cotton field, the result of which would remain intact if the field lay idle, and that result is damaged by a tenant, the tenant ought to pay him for it on the basis of reward defined above...the transaction, nevertheless, is in the nature of a sale, and not a payment for a loan. Every sale is an exchange of labor, and the tenant simply pays money representing his own labor for the result of Edgeworth's labor which he (the tenant) has destroyed in appropriating it to his own use. If the tenant does not damage the result of Edgeworth's preparatory labor, then,.... this money, paid over and above all damage, if it does not bring equivalent ownership, is payment for use, usury, and in my terminology, rent... The difference between us is just this. Edgeworth says that from tenant to landlord there is payment for damage, and this is just rent; and there is payment for use, and this is unjust rent. I say there is payment for damage, and this is indemnification or sale, and is just; and there is payment for use, and that is rent, and is unjust." Tucker, Benjamin. Instead of A Book. Forgotten Books. 2012. Pg 303.
***** With the exception of the Individualists Libertarians like Tucker, Warren, and Andrews the vast majority of Libertarians want a society of democratically run businesses or workplaces. Please see works by Greene, Proudhon, Bakunin, and Kropotkin. Tucker and the other individualists are still libertarians due to their belief in the labor theory of value which is a preference for a society free from economic exploitation. Most all libertarians want a society free of the state and democratic control of the workplace with the exception of Tucker and other individualists who want voluntary taxation and non-exploitive wage labor. Libertarianism that I am referring too is the original term dating back to the 1800’s. Please see Iain Mackay’s excellent AFAQ Blog. 150 Years of Libertarian. Anarchist Writers: AFAQ’s Blog (12/11/2008) Retrieved Nov 2, 2017 from: http://anarchism.pageabode.com/afaq/150-years-of-libertarian
The AFAQ has been regarded as “…very comprehensive…” by Graham, Paul; Hoffman, John. Introduction to Political Ideologies London: Pearson/Longman. (2006) pp 109
1. James J. Martin. Men Against the State. Ralph Myles Publisher Inc., Colorado Springs. 1970. Pg.216-218
2. Ibid. 126
4. Ibid. 128
5. Ibid. 128
6. Ibid. 129
7. Please see: Mutual Banking 1850 Edition by William Greene. (Although Greene opposed wage he did believe it was necessary for landless bank members to have non-exploitive wage labor as a transition period until they can get enough money to buy land of their own to pledge to the mutual banks in order to become self-employed or join co-operatives)
8. James J. Martin. Men Against the State. Ralph Myles Publisher Inc., Colorado Springs. 1970. Pg. 131
9. Ibid. 131
10. Ibid. 132
11. Ibid. 132
12. Ibid. 135
13. Proudhon, Pierre Joseph. Translated by Richard Vernon. The Principle of Federation. University of Toronto Press. Canada. 1979.
14. James J. Martin. Men Against the State. Ralph Myles Publisher Inc., Colorado Springs. 1970. Pg. 135
15. Ibid. 135
16. Ibid. 133
17. Ibid. 216-218
18. Please see the post script at: https://archive.org/details/statesocialisman00tuck