The following essay, which appeared in The Independent, Sept. 10, 1896 (p. 9), is a particularly nice presentation of Benjamin R. Tucker’s views during the heyday of Liberty. Tucker hardly spoke for all anarchists, of course, or even all individualist anarchists. His statements on the “standard of value” question reflect his own side of an argument that was at that point still raging through the pages of anarchist papers, including his own.
The Anarchist View of Money.
BY BENJAMIN R. TUCKER.
Editor of “Liberty.”
I am asked by THE. INDEPENDENT to give my views on the financial question. At the outset, therefore, I must give my definition of the term “money.”
Col. William B. Greene, the author of “Mutual Banking” (which represents my views on finance perhaps more thoroughly than any other work), was accustomed to say that “that is money which does the work of the tool, money”; and the work of the tool, money, is that of mediating exchange. Anything, therefore, that is used as a medium of exchange is money to the extent that it is so used.
Of course there is a narrower sense in which you can use the term “money,” and in which the economists generally use it—that of a standard of value. And in discussing the financial question it is necessary to keep these two ideas in mind, and properly distinguish between them; and yet, at the same time, it is almost absolutely necessary to use this term “money” for both of them. So that in one sentence I might speak of “money,” having in mind only the standard of value, and in another sentence I might speak of “money,” having in mind the entire circulating medium.
I think the great evil of all our financial systems has been in the legal restriction of the monetary function— i. e., the function of serving us currency, or a basis of currency—to some one or two commodities. And, in accordance with this idea, I think that true financial reform consists in the extension of the monetary function —i. e., the function of serving as a basis of currency—to all forms of wealth that have a sufficiently stable market value. I mean to say that we should have entire freedom of banking, individuals and associations being as free to start banks of issue as to manufacture hats.
The notes of banks issued under such a system would be secured by the actual property put up by the borrowers as collateral, and the credit of these banks among the public would be guaranteed by the standing of the bank in the chain of banks of which it was a part, through the Clearing House and other financial devices characteristic of modern times.
It might be said right here that there is nothing in this scheme that militates against the theory of a standard of value. Indeed, without a standard of value money is unthinkable. The question of what constitutes the best standard is a subsidiary question; but whatever is chosen as a standard, that standard simply constitutes a unit of value in terms of which bank notes will be issued against the property pledged. The standard must be fixed by common agreement. There must be no law to prevent another chain of banks from adopting a separate standard if they prefer and find it convenient to do so; and, undoubtedly, the necessities of commerce would lead to a common agreement among all the banks. The very fact that there were different standards and that they would be cumbersome would compel all banks that wanted to deal with one another to adopt a common standard.
It would not be necessary to have an elaborate bank-note reporter to keep track of the standing of the banks and the property on which they were founded, because there would be but a few systems of banks in operation through the country—a few chains of financial institutions; and, even if all the systems did not unite in some common method by which all the notes should be printed on paper coming from a single source, and exactly alike in appearance, why, each system, at any rate, would have to have its own, and, as a result, there would be no more different kinds of money in principal use than there are now. We have today the Treasury note, the greenback, the National bank note, the silver certificate, the gold dollar, the silver dollar, etc. Under such a system as we propose there would be no more kinds of money in active and extensive use than there are now.
The principal defect of our present financial system is that one or two species of property are endowed with the sole privilege of serving as a basis of currency which results in a scarcity of money at an enormous rate of interest. Under the financial system that we advocate I believe interest will be abolished—i. e., it will reduce the rate of interest to the mere cost of banking, which statistics show to be less than one-half of one per cent.
Many of our opponents are not familiar with our position in regard to interest. It is true that what men 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 I have not yet had answered. 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 circle of transactions, has there been any lending of capital? If so, who was the lender? If not, who is entitled to any interest?
As to the question of gold and silver as between the two leading political parties, I think that the single standard is more scientific, from the standpoint of pure financial principle, than the double standard. But I do not think, however that the adoption of the somewhat unscientific double standard would lead to all the horrors that the single-standard men say it would. The claim of the silver men that gold was enhanced in value and silver lowered in value by the demonetization of silver is a perfectly sound one. And if silver were to be remonetized the result would be that gold would somewhat fall in value, silver would considerably rise in value, the value of the current dollar would be somewhat less than at present, and prices would be somewhat higher, but by no means double what they are now. There would be an impetus given to business for a time, and wages. while not rising as rapidly as prices at first would in consequence of the increased volume of business, rise in the end more than prices. But, even then the benefit would be limited and temporary. Before the demonetization of silver we had a money monopoly, because the function of serving as a basis of currency was confined to two commodities. The demonetization Act confined it still further to one commodity, which made the stringency and the pressure on the people more severe than before. To go back now and remonetize silver would lessen that stringency but would still preserve the old monopoly of a less stringent character that was in vogue when the two standards were in use.
I think if Mr. McKinley were elected President his experience with the financial question would be very much the same as Mr. Cleveland’s.
I might say right here that the whole error in the reasoning of such of the gold men as are honest lies in the failure to understand the fact that the monetary function is a useful function, and that any product that is endowed with it exclusively thereby gets a value in addition to its commodity value: that, as long as money monopoly exists the commodities exclusively endowed with the monopoly enjoy an artificial value which does not belong to them as mere products. For this reason it is absurd to say, as for instance Secretary Morton says, that Government cannot create an artificial value in silver. He asks: “If the silver dollar containing only 53 cents’ worth of bullion can be made to float at a parity with the gold dollar, why cannot a silver watch be made by statute just as valuable as a gold watch?” The answer to that is that it can. It the Government were to be so foolish as to enact and enforce a law forbidding watches and spoons, and cups, and forks and all similar articles to be made out of any material but silver, the value of all the forbidden materials would fall, and the value of silver would manifestly rise. Therefore, it is in the power of the Government to give silver an artificial value. And in the same way, if the Government enacts and enforces a law that only one commodity shall serve as a basis of currency then the prohibited commodities fall and the single privileged commodity rises. The failure to recognize this is the central error in the minds of the gold men.
These views that I have here given were first propounded by Proudhon, recognized as the first avowed anarchist, and were first defended in his country by Col. William B. Greene, of Boston, and Charles A. Dana, the editor of the New York Sun, whose articles in favor thereof have recently been published in pamphlet form.
The anarchists, in this as in all other political campaigns, are mere lookers-on. In the matter of real indorsement of the platforms they see little more to commend in one than in the other. The expression in the Democratic platform upon the right of trial by jury, as opposed to government by injunction, is about the only plank in either of the platforms which they approve. In all economic measures proposed by Republicans, Democrats or Populists, the element of authority and paternalism is uppermost. None of them accord with that principle of equal liberty which is the central idea of anarchism.
The anarchists desire that all the affairs of men should be managed by individuals or voluntary associations, and that the State should be abolished. There are class monopolies that now prevail to which we are specially opposed—to wit, the money monopoly, the land monopoly, the tariff monopoly, and the patent monopoly.
The money monopoly consists in the privilege given by the Government to certain individuals, or to individuals holding certain kinds of property, of issuing the circulating medium. The land monopoly consists in the enforcement by Government of land titles which do not rest upon personal occupancy and use. The tariff monopoly consists in fostering production at high prices and under unfavorable conditions, by visiting with the penalty of taxation those who patronize production at low prices and under favorable conditions. The patent monopoly consists in protecting inventors and authors against competition for a period long enough to enable them to extort from the people a reward enormously in excess of the labor measure of their services—in other words, in giving certain people a right of property for a term of years in laws and facts of nature, and thereby the power to exclude others from the use of this natural wealth, which should be open to all.
New York City.