463 lines
23 KiB
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463 lines
23 KiB
Plaintext
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non serviam #11
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Contents: Editor's Word
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Ken Knudson: A Critique of Communism and
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The Individualist Alternative (serial: 11)
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***********************************************************************
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Editor's Word
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_____________
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Ken Knudson's article is coming to and end. This is the second part
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of the chapter on Mutualism. The next and last chapter is his "after-
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word to communist-anarchist readers." And so, his article is complete.
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For those who wish, the full article is available by ftp from
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uglymouse.css.itd.umich.edu
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together with the current and back issues of non serviam and some other
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material relevant to Stirner. The files are stored in
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/pub/Politics/Non.Serviam.
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Paul Southworth (pauls@umich.edu) is responsible for the ftp site. If
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you have trouble retrieving files, he is the man to write to.
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Svein Olav
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____________________________________________________________________
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Ken Knudson:
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A Critique of Communism
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and
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The Individualist Alternative
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(continued)
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* * * * * *
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Given the advantages of the division of labour, what is
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to be the method by which man exchanges his products?
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Primitive man devised the barter system for this purpose.
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But it wasn't long before the limitations of this system
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became apparent:
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"Let Peter own a horse; let James own a cow and a pig; let
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James's cow and pig, taken together, be worth precisely as
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much as Peter's horse; let Peter and James desire to make an
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exchange; now, what shall prevent them from making the
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exchange by direct barter? Again, let Peter own the horse;
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let James own the cow; and let John own the pig. Peter
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cannot exchange his horse for the cow, because he would lose
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by the transaction; neither - and for the same reason - can
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he exchange it for the pig. The division of the horse would
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result in the destruction of its value. The hide, it is
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true, possesses an intrinsic value; and a dead horse makes
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excellent manure for a grapevine; nevertheless, the division
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of a horse results in the destruction of its value as a
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living animal. But if Peter barters his horse with Paul for
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an equivalent in wheat, what shall prevent him from so
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dividing his wheat as to qualify himself to offer to James
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an equivalent for his cow and to John an equivalent for his
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pig? If Peter trades thus with James and John the
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transaction is still barter, though the wheat serves as
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currency and obviates the difficulty in making change."
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[101]
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Thus currency (i.e, money) was born. Many things have
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served as money throughout the ages: slaves, gunpowder, and
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- 50 -
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even human skulls, to name but a few. The New Hebrides used
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feathers for their money and in Ethiopia salt circulated as
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the currency for centuries. But by far the most popular
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medium of exchange became the precious metals, gold and
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silver. There were several reasons for this: (1) Unlike
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feathers or skulls, they have intrinsic value as metals.
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(2) They are sufficiently rare as to impose difficulty in
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producing them and sufficiently common as to make it not
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impossible to do so. (3) Their value fluctuates relatively
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little with the passing of time. Even large strikes - such
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as those in California and Alaska - failed to devalue gold
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to any appreciable extent. (4) They are particularly sturdy
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commodities, loosing relatively little due to the wear and
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tear of circulation. (5) They are easily divisible into
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fractional parts to facilitate small purchases. For these
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and other reasons, gold and silver became universally
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recognised as standards of value. Certain quantities of
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these metals became the units by which man measured the
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worth of an object. For example, the pound sterling, lira,
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and ruble were originally terms for metallic weight while
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the drachma means literally a handful.
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As long as these metals served purely as just another
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commodity to be bartered - albeit a very useful commodity -
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there was no inherent advantage in possessing these metals
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as such. It was not until governments declared them the sole
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LEGAL medium of exchange that gold and silver became
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intrinsically oppressive. Governments, by monetising gold
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and silver automatically demonetised every other item of
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capital.* It is this monopoly which has been the chief
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obstacle in preventing men from obtaining the product of
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their labour and which permitted the few men who controlled
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the money supply to roll up such large fortunes at the
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expense of labour.
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As long as the monetary structure was directly tied to
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gold and silver, the volume of money was limited by the
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amount of gold and silver available for coinage. It is for
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this reason that paper money - backed by "hard money" - came
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into being. The paper money was simply a promise "to pay the
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bearer on demand" its equivalent in specie (i.e. gold or
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--------------------
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* A natural question arises here: "That may have been
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true up until 40 years ago, but haven't governments since
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abandoned the gold standard?" The answer is no. As long as
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the United States government promises to buy and sell gold
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at $35 an ounce and as long as the International Monetary
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Fund (which stabilises the exchange rates) is based on gold
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and U.S. dollars, the world remains on the gold standard.
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- 51 -
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silver). Hence the words "note" and "bill," which imply
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debt. Governments were at first reluctant to issue paper
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money. But the scarcity of money in an increasingly
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commercial world soon forced them to recant. The men of
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wealth, well aware of the threat that "easy money" posed to
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their "hard money," insisted that such money be based solely
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on the wealth they already possessed. Governments readily
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fell into line. In the United States, from 1866, anyone
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issuing circulating notes was slapped with a tax of 10%
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until it was completely outlawed in 1936. The British
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government was even more severe; it gave the Bank of England
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monopoly rights to issue "bank notes" as early as 1844.
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[102]
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When a man is forced to barter his products for money,
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in order to have money to barter for such other products
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that he might want, he is put at a disadvantage which the
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capitalist is all too ready to exploit. William B. Greene
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was one of the first to observe this fact:
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"Society established gold and silver as a circulating
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medium, in order that exchanges of commodities might be
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FACILITATED; but society made a mistake in so doing; for by
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this very act it gave to a certain class of men the power of
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saying what exchanges shall, and what exchanges shall not,
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be FACILITATED by means of this very circulating medium. The
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monopolisers of the precious metals have an undue power over
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the community; they can say whether money shall, or shall
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not, be permitted to exercise its legitimate functions.
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These men have a VETO on the action of money, and therefore
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on exchanges of commodity; and they will not take off their
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VETO until they have received usury, or, as it is more
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politely termed, interest on their money. Here is the great
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objection to the present currency. Behold the manner in
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which the absurdity inherent in a specie currency - or, what
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is still worse, in a currency of paper based upon specie -
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manifests itself in actual operation! The mediating value
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which society hoped would facilitate exchanges becomes an
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absolute marketable commodity, itself transcending all reach
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of mediation. The great natural difficulty which originally
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stood in the way of exchanges is now the private property of
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a class, and this class cultivates this difficulty, and make
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money out of it, even as a farmer cultivates his farm and
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makes money by his labour. But there is a difference between
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the farmer and the usurer; for the farmer benefits the
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community as well as himself, while every dollar made by the
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usurer is a dollar taken from the pocket of some other
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individual, since the usurer cultivates nothing but an
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actual obstruction." [103]
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- 52 -
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The legitimate purpose of money is to facilitate
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exchange. As Greene shows, specie - or money based on specie
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- accomplishes this purpose, but only at a terrible price to
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the user. The solution to the problem is to devise a money
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which has no value as a COMMODITY, only as a circulating
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medium. This money should also be available in such quantity
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as not to hamper any exchanges which may be desired. The
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organ for creating such a currency Greene called a "mutual
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bank."*
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Before considering the operations of a mutual bank, I'd
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like to look at how an ordinary bank functions. Let us say
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that Mr Brown, who owns a farm worth a few thousand pounds,
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needs 500 pounds to buy seed and equipment for the coming
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year. Not having that kind of money on hand, he goes to the
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bank to borrow it. The bank readily agrees - on the
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condition that at the end of the year Brown not only pays
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back the 500 pounds borrowed, but also 50 pounds which they
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call "interest." Farmer Brown has no choice; he needs MONEY
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because that is all the seed dealer will accept as "legal
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tender." So he agrees to the conditions set down by the
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bank. After a year of hard work, and with a bit of luck from
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the weather, he harvests his crops and exchanges (i.e.
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"sells") his produce - for money. He takes 550 pounds to the
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bank and cancels his debt. The net result of all this is
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that some banker is 50 pounds richer for doing a minimal
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amount of work (perhaps a few hours of bookkeeping) at no
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risk to himself (the farm was collateral), while Mr Brown is
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50 pounds out of pocket.
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Now let's see where Greene's idea leads us. A group of
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people get together and decide to set up a mutual bank. The
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bank will issue notes which all members of the bank agree to
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accept as "money." Taking the above example, Mr Brown could
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get five hundred of these notes by mortgaging his farm and
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discounting with the bank a mortgage note for that sum. With
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the notes, he buys his seed from Smith and some tools from
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Jones. Smith and Jones in turn exchange some of these newly
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acquired notes for some things they need. And so on until
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the end of the year when Brown exchanges his farm produce
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and receives for them - mutual bank notes. Does all this
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sound familiar? It should, for up until now, from all
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outward appearances, there has been no difference between
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our mutual bank and an ordinary specie bank. But it's here,
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* Proudhon's bank, "la banque du peuple," is
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essentially the same. For a detailed account of the
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workings of each bank see Greene's "Mutual Banking" and
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Proudhon's "Solution of the Social Problem" and "Revolution
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in the Nineteenth Century."
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- 53 -
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however, that the change comes in. Mr Brown goes to the
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mutual bank with his notes and gives the bank 500 of them
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plus ONE OR TWO extra to help pay for the operating expenses
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of the bank over the past year. The bank cancels his
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mortgage and Mr Brown walks away thinking how nice it is to
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be a member of such a wonderful bank.
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Now notice that it was never mentioned that Smith and
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Jones were members of the bank. They may have been, but it
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wasn't necessary. Smith, the seed dealer, might not belong
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to the bank and yet be willing to accept its notes. He's in
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business, after all, and if the only money Brown has is
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mutual money, that's all right with him - as long as he can
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get rid of it when HE wants to buy something. And of course
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he can because he knows there are other members of the bank
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pledged to receiving these notes. Besides, Brown will need
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at least 500 of them eventually to pay off his mortgage. So
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Smith accepts the money, and he too profits from this novel
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scheme. In fact, the only one who seems to be any the worse
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is the poor usurous banker. But I'm afraid he will just have
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to find himself an honest job and work for his living like
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everyone else.
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John Stuart Mill defined capital as "wealth
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appropriated to reproductive employment." In our example
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above, farmer Brown's 500 pounds is capital since he intends
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to use it for creating new wealth. But Mr Brown can use his
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capital in any number of ways: he may decide to use it to
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buy seeds for planting corn; or he may decide that his
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ground is better suited for growing wheat, or he may decide
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to invest in a new tractor. This 500 pounds, then, is liquid
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capital or, as Greene called it, disengaged capital. When Mr
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Brown buys his seeds and tools, these things are still
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designed for "reproductive employment," and are therefore
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still capital. But what kind of capital? Evidently, frozen
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or engaged capital. He then plants his seeds and harvests
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his crops with the aid of his new tractor. The produce he
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grows is no longer capital because it is no longer capable
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of being "appropriated to reproductive employment." What is
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it, then? Evidently, it is product. Mr Brown then takes his
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goods to town and sells them at market value for somewhat
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more than the 500 pounds he originally started out with.
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This "profit" is entirely due to his labour as a farmer (and
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perhaps to some extent his skill as a salesman). The money
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he receives for his goods become, once again, liquid
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capital. So we have came full circle: liquid capital
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becomes frozen capital; frozen capital becomes product;
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product becomes liquid capital. And the cycle starts all
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over again.
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A society is prosperous when money flows freely - that
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- 54 -
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is when each man is able to easily convert his product into
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liquid capital. A society is unprosperous when money is
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tight - that is, when exchange is difficult to effect.
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Mutual banking makes as much money available as is
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necessary. When a man needs money he simply goes to his
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friendly mutual bank, mortgages some property, and receives
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the notes of the bank in return. What this system does is to
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allow a man to circulate his CREDIT. Whoever goes to a
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mutual bank and mortgages some of his property will always
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receive money, for a mutual bank can issue money to any
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extent. This money will always be good because it is all
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based on actual property which, if necessary, could be sold
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to pay off bad debts. The mutual bank, of course, would
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never give PERSONAL credit, for to do so would give the
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notes an element of risk and render them unstable. But what
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about the man with no property to pledge? Greene answered
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this question as follows:
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"If we knew of a plan whereby, through an act of the
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legislature, every member of the community might be made
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rich, we would destroy this petition and draw up another
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embodying that plan. Meanwhile, we affirm that no system
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was ever devised so beneficial to the poor as the system of
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mutual banking; for if a man having nothing to offer in
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pledge, has a friend who is a property holder and that
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friend is willing to furnish security for him, he can borrow
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money at the mutual bank at a rate of 1% interest a year;
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whereas, if he should borrow at the existing banks, he would
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be obliged to pay 6%. Again as mutual banking will make
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money exceedingly plenty, it will cause a rise in the rate
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of wages, thus benefiting the man who has no property but
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his bodily strength; and it will not cause a proportionate
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increase in the price of the necessaries of life: for the
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price of provisions, etc., depends on supply and demand; and
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mutual banking operates, not directly on supply and demand,
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but to the diminution of the rate of interest on the medium
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of exchange. But certain mechanics and farmers say, `We
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borrow no money, and therefore pay no interest. How, then
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does this thing concern us?' Harken, my friends! let us
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reason together. I have an impression on my mind that it is
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precisely the class who have no dealings with the banks, and
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derive no advantages from them, that ultimately pay all the
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interest money that is paid. When a manufacturer borrows
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money to carry on his business, he counts the interest he
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pays as a part of his expenses, and therefore adds the
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amount of interest to the price of his goods. The consumer
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who buys the goods pays the interest when he pays for the
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goods; and who is the consumer, if not the mechanic and the
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farmer? If a manufacturer could borrow money at 1%, he could
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afford to undersell all his competitors, to the manifest
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advantage of the farmer and mechanic. The manufacturer would
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- 55 -
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neither gain nor lose; the farmer and mechanic, who have no
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dealings with the bank, would gain the whole difference; and
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the bank - which, were it not for the competition of the
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mutual bank, would have loaned the money at 6% interest -
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would lose the whole difference. It is the indirect relation
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of the bank to the farmer and mechanic, and not its direct
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relation to the manufacturer and merchant, that enables it
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to make money." [104]
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Mutual banking, by broadening the currency base, makes
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money plentiful. The resulting stimulus to business would
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create an unprecedented demand for labour - a demand which
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would always be in excess of the supply. Then, as Benjamin
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Tucker observed:
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"When two labourers are after one employer, wages fall, but
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when two employers are after one labourer, wages rise.
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Labour will then be in a position to dictate its wages, and
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will thus secure its natural wage, its entire product. Thus
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the same blow that strikes interest down will send wages up.
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But this is not all. Down will go profits also. For
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merchants, instead of buying at high prices on credit, will
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borrow money of the banks at less than one percent, buy at
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low prices for cash, and correspondingly reduce the prices
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of their goods to their customers. And with the rest will go
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house-rent. For no one who can borrow capital at one percent
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with which to build a house of his own will consent to pay
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rent to a landlord at a higher rate than that." [105]
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Unlike the "boom and bust" cycles we now experience
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under the present system, mutualism would know nothing but
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"boom." For the present "busts" come when the economy is
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"overheated" and when there is so-called "overproduction."
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As long as most of humanity lead lives of abject poverty, we
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can never speak realistically of "over-production." And as
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long as each hungry belly comes with a pair of hands,
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mutualism will be there to give those hands work to fill
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that belly.
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-----
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REFERENCES
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101. William B. Greene, "Mutual Banking," from Proudhon's
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"Solution of the Social Problem," ed. Henry Cohen (New York:
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Vanguard Press, 1927), p. 177.
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102. "Money," "Encyclopaedia Britannica," 1965, vol. XV, p.
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703.
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103. Greene, op. cit., p. 180.
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104. Ibid., pp. 196-7.
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105. Tucker, "Instead of a Book" p. 12, Reprinted from
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"Liberty," March 10, 1888.
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____________________________________________________________________
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***********************************************************************
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* *
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* "It is a vulgar mistake to think that *
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* most people in Eastern Europe are miserable." *
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* *
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* -- Paul Samuelson in 1987, *
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* Nobel Laureate in Economics *
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* *
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***********************************************************************
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