Mises Daily Articles
[Talk delivered at the Ludwig von Mises Institute, November 20, 2000.]
I want to take a very basic look at one of the traditions that underlies modern libertarianism — namely, 19th-century individualist anarchism in America.
Before doing so, however, I want to define what I mean by modern libertarianism. Namely, the body of political thought that emerged from and continues to develop through the synthesis of the best theory from four schools of thought. The synthesis was accomplished when Murray Rothbard took the radical antistatism of the individualist anarchists and wed it with Austrian economics, the foreign policy of the Old Right (isolationism), and the natural-law tradition.
Of these threads that were woven together, the least appreciated or understood is individualist anarchism. And I think one reason for this "oversight" is that, at first glance, individualist anarchism doesn't seem to share a key characteristic common to the others: that is, it doesn't seem to argue for the free market.
If there is any validity to a distinction you sometimes hear drawn between civil liberties and economic liberties — and I don't believe there is validity — then individualist anarchism seems to fall into the category of civil liberties, which sometimes becomes an afterthought attached to free-market analysis. Individualist anarchism doesn't seem to be a good fit with the other building blocks of libertarianism for the simple reason that its proponents — like most 19th-century radicals — embraced a labor theory of value and rejected capitalism.
By this, I don't mean merely that they stood against state capitalism — the alliance between government and business. They rejected actual capitalism, the making of profit through capital in practices such as charging interest on loans. And, yet, one of the points I want to drive home today is that individualist anarchism was profoundly free market and that its anticapitalism is the not the ideological barrier it is usually considered to be.
Before moving on to that point, however, I want to expand on just one reason why I believe it is very important that modern libertarianism doesn't stumble over the anticapitalism of figures such as Lysander Spooner and Benjamin Tucker and, thus, lose the value they have to offer.
My view of history — the analytical approach I use in order to make sense of events — is ideological. Murray Rothbard viewed history as an ongoing struggle between liberty and power, between what Rand would have termed "the individual" and "the collective." These days it is popular to state that people are not motivated by ideology but by utilitarian concerns. (For example, they don't vote on the grounds of right and wrong but on the grounds of self-interest.)
I've always been baffled by this argument because merely looking at the world around us would seem to refute it. Two of the most powerful forces that have shaped the reality and the history of everyone in this room are profoundly ideological — Christianity and Marxism. From these two examples alone, it seems impossible to deny the power of ideology as a force in human history.
But in viewing history as a struggle between ideologies, a lamentable thing has become clear to me: The Left is better at claiming the past than libertarians are. Much better. If you look through standard textbooks or do a brute numerical count on historical treatments or biographies, you reach the inescapable conclusion that socialism was the radical force speaking for working people against the alliance of business and government in 19th-century America. And socialism has reaped great benefits from this image — "radical prestige" and credibility being only two of them.
The problem here is that the image is false. Nineteenth-century libertarians have as much claim to be champions of the working people — and, in many cases, a far better claim — than socialists do. Consider only one figure: Moses Harman, one of my favorite figures in libertarian history. It is delivered wisdom that the socialistic Margaret Sanger was the heroine responsible for opening up birth control for women in America. (And birth control in the 19th century was considered to be a "working-class" issue for a number of reasons.) Yet Sanger herself acknowledged that her work would not have been possible without the decades of groundwork laid by Moses Harman. The socialist anarchist Emma Goldman — often credited with being a precursor to Sanger on birth control — also paid homage to Harman.
Moreover, his reputation was not confined to America. In 1907, when the playwright George Bernard Shaw was questioned about why he never visited America, he replied, and was quoted in the periodical London Opinion as saying, "The reason I do not go to America is that I am afraid of being arrested … and imprisoned like Mr. Moses Harman." Shaw went on to explain that the harsh prison sentence imposed upon a man of Harman's "advanced age" amounted to a death sentence — a death sentence imposed for expressing the same views that Shaw had aired in his play Man and Superman.
The imprisonment to which Shaw referred was part of an ongoing government persecution of Harman under the Comstock obscenity laws. The persecution lasted for decades with Harman's last imprisonment occurring when he was 75 years old. (He served hard time, breaking rocks at Joliet.) Among the "crimes" for which he was imprisoned — over and over again — was defending women's reproductive freedom on explicitly libertarian grounds: namely, that women (and men) were self-owners with a moral and natural right to control their own persons and property. In short, he was an explicit libertarian.
If you contrast the treatment of Sanger as a historical figure with that of Harman, you'll get a sense of why I believe that socialists are much better at mining the richness of history to their advantage. There are dozens of books about Sanger, her own work is still available; New York University has what is called the Margaret Sanger Papers Project; she is in halls of fame; buildings are named after her; she herself was named by Time as one of the top 100 people of the century.
Meanwhile, there is not so much as a single biography of Moses Harman. As a result, it is the Left — and not libertarians — who have acquired the invaluable cachet of being the ideology that stands for the freedom of the average man, the working man, then and now. I think the opposite is true. I think one of the saddest aspects of modern libertarianism is that it has surrendered or ignored its own history and thus surrendered its rightful claim to being the true ideology of the working class — a claim that would go a long way toward dispelling an accusation commonly hurled at libertarianism: namely, that it represents only the interests of business. There is no way to look at 19th-century individualist anarchism and sustain that accusation.
What is the 19th-century tradition known as individualist anarchism? The fundamental principle upon which it is based is what the abolitionist — the radical antislavery advocate — William Lloyd Garrison called self-ownership. (This was circa 1830.) Self-ownership refers to the moral jurisdiction that every human being, simply by being human, has over his or her own body.
Garrison argued that all secondary human characteristics — such as race — were irrelevant to the rights and duties that accrued to every human being as a result of the primary characteristic of a shared humanity. I begin with Garrison because when you mention libertarianism around the 1830s, he is the figure most people have heard of and to whom individualist anarchism is often traced. But I think a far more appropriate fountainhead for the tradition is Josiah Warren, whom the historian James J. Martin believes was the first person to adopt the label anarchist.
Josiah Warren began his radical career as a follower of the socialist and communitarian Robert Owen. Warren was one of the original participants in the famous New Harmony community that began in 1826, and he saw firsthand what was wrong with the organizing principle of socialist communities. After decades and decades of discussion by utopian planners — both in England and America — New Harmony put their theories to the test. Warren saw how quickly a practical test made their schemes deteriorate into folly. It took less than a year and a half for New Harmony to dissolve. Warren blamed the community's failure on its denial of personal-property rights, on the demand for communal property that stifled all individual initiative.
But the problems he perceived with community property went far beyond economic motivation. Warren wrote in his publication Periodical Letter,
it seemed that the difference of opinion, tastes and purposes increased just in proportion to the demand for conformity.… It appeared that it was nature's own inherent law of diversity that had conquered us … our 'united interests' were directly at war with the individualities of persons and circumstances and the instinct of self-preservation.
From Josiah Warren's disillusionment with collectivism — from his conviction that social harmony required radical individualism — the essential groundwork for an individualist-anarchist society emerged. First and foremost, it was founded on a concept captured by the phrase "sovereignty of the individual." By this, Warren meant much the same thing as Garrison did by the term self-ownership. In his work Practical Details, Warren explained his meaning:
Society must be so converted as to preserve the sovereignty of every individual inviolate. That it must avoid all combinations and connections of persons and interests, and all other arrangements which will not leave every individual at all times at liberty to dispose of his or her person, and time, and property in any manner in which his or her feelings or judgment may dictate, without involving the persons or interests of others.
But Warren contributed more than merely a rephrased statement of self-ownership. For example — and as just one example — Warren sketched out a fundamental approach to society that could be termed "methodological individualism" — a term usually associated with Ludwig von Mises. In Human Action, Mises described what he meant by the term:
First we must realize that all actions are performed by individuals. … If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of the collective whole. For a social collective has no existence and reality outside of the individual members' actions.
Warren's approach to society echoed upward through decades so that you find his protégés, like Benjamin Tucker, dismissing in Liberty, in 1888, Henry George's theory of community land ownership with words that sound Misesian:
That there is an entity known as the community which is the rightful owner of all land, Anarchists deny. I … maintain that 'the community' is a non-entity, that it has no existence, and is simply a combination of individuals having no prerogatives beyond those of the individuals themselves.
As well as developing a version of methodological individualism, Warren infused individualist anarchism with a passion for the practical. If one passion ruled Warren's political life, it was to test social theories by translating them into reality. Remember, he had seen elaborate plans that were wonderful on paper turn into nightmares when translated into reality. Warren needed to know if his theories worked. This passion for the practical was adopted by the generation that followed. To use Tucker again, he once commented,
Reform communities will … be recruited from the salt of the earth, and then their successes will not be taken as conclusive, because it will be said that their principles are applicable only among men and women well-nigh perfect. … It has no interest for me. … I care nothing for any reform that cannot be effected right here in Boston among the every day people whom I meet in the streets.
I should remind you here — or, perhaps, tell you for the first time — that this quote came at the same moment as Edward Bellamy's hugely successful Utopian novel Looking Backward. The novel captured the popular vision with which radicals viewed the future: If only their ideology could prevail, it would bring the millennium. Man's nature itself would be transformed by social factors, lambs would lie down with lions. This was a constant theme of late-19th-century radicalism. Socialists, women suffragists, temperance zealots, pietists — everyone claimed that a bright and brave new world would miraculously alter the face of the earth. This was particularly prevalent in 19th-century socialism, which formed the seed of the New Soviet Man championed by the Bolsheviks when they swept 20th-century Russia.
Meanwhile you have this remarkable statement coming out of individualist anarchism: First, that individuals shouldn't conform to society because, for one thing, society doesn't exist; only individuals do. Second, that in exploring how individuals could peacefully work in combination, all theories must withstand the test of reality. And third, that the goal was not utopia, but practical justice.
Consider the words of Victor Yarros who, for a period, coedited Liberty. He wrote,
The anarchists … work not for a perfect social state, but for a perfect political system. A perfect social state is … totally free from sin or crime or folly; a perfect political system is merely a system in which justice is observed, in which nothing is punished but crime and nobody coerced but the invader.
The key to achieving this perfect political system lay in establishing institutions that promoted justice. Which brings me to the subject of "institutional analysis," the analysis of how institutions — such as the state, the family, the free market — function. What are their purposes, their rules, their actual impacts?
And here you have the next contribution of individualist anarchism — an incredibly sophisticated and extensive institutional analysis that attempted to answer two questions: first, which institutions impede justice, and how; and second, which institutions promote justice, and how? It will surprise no one that their answer to the first question is "the state." The state is the institution that blocks justice. And it does so basically through the threat and use of force or by persuading the people of its legitimacy, persuading them that it has a right to interfere in their lives.
I'm not going to spend any time on the individualist-anarchism analysis of the state as an institution because — to the extent that people here are familiar with the tradition — the familiarity is on this point. To the extent that people have read one book in this area, it is probably Spooner's No Treason.
I'm going to focus instead on the second question: "which institutions promote justice, and how?" To this question, individualist anarchists made an astonishing response. They claimed that the institution necessary to secure justice was already present in the institution of the free market. Radicals to every side of them were saying that something new under the sun was required — the sort of institution or societal arrangement that no one had ever seen before. For example, mankind needed the anarchosyndicalist vision of industrial relations. We needed a brave new world.
In this milieu, individualist anarchists claimed instead, "No, you don't need an entirely new blueprint. What you need is to get rid of the state and to allow the free market (that already exists) to function." And the mechanism through which it would function was "the contract." Indeed, they believed so strongly in the power of contract that they called their ideal society "society by contract." And they immediately started to plan out in very concrete detail how the free-contract society would work.
The free market could satisfy not only economic goals but social ones, such as justice. For example, they provided the best discussion I've ever seen of how a private court system could arbitrate conflicts. And the discussion incorporated a large degree of economic analysis, and analysis of efficiency rather than merely appeals to common law or morality. For example, in the subissue of "trial by jury," the discussion started with the right of a man to try his own case and proceeded directly into an efficiency and cost analysis of relative methods of adjudication.
Nor did the individualist anarchists confine themselves to discussion, to theory. They wanted to test their theories out in the practical world. For instance, they established private unemployment-insurance cooperatives; these were agencies into which all members would put "x" percentage of their weekly earnings and from which members who became unemployed could draw "y" number of dollars until they regained employment. So, having sketched the political contributions of individualist anarchism — especially in their locating social justice in the free market and the use of contract — I want to move on to the reason their contributions have been largely ignored — namely, that they championed the labor theory of value.
Earlier, I mentioned that the main theme underlying individualist anarchism was the sovereignty of the individual, to use Josiah Warren's term. Warren used another term to describe the second theme or principle of individualist anarchism, which he thought derived directly from sovereignty of the individual: namely, "cost is the limit of price." And this is where the labor theory of value begins to play a prominent role in individualist anarchism.
To give you a sense of the specific approach to the labor theory of value adopted by Warren, I want to describe an experiment he conducted to test his solution to what was called "the money monopoly." That is, the state's monopoly on the issuance of currency. He tried to test his solution to state-controlled banking: namely, private currency, the right of every individual to issue his or her own money to anyone who was willing to take it. He believed that the issuance of private currency would destroy the perceived injustice of "interest."
To test this theory, Warren opened a retail store called the Time Store, from which he issued "labor dollars." In 1827, the store opened with $300 worth of groceries and dry goods that were offered at 7 percent markup from his cost in order to cover "contingent expenses." Where he made his profit was in selling his labor to customers by requiring them to pay for the time it took him to effect the transfer of goods — that time consisted of the initial purchasing of the good and then its sale. Remember, this was before groceries were prepackaged and preweighed and at a time when it was customary to bargain with the shopkeeper rather than merely to pay a posted price.
In fact, one of Warren's innovations was to post prices for goods. The customer would then pay the price of the goods in traditional money and then compensate Warren for his time with a labor note that promised to give back to him an equivalent amount of time in the buyer's occupation. If the buyer were a plumber, for example, the labor note committed him to render his services to Warren for "x" time units of plumbing work.
Warren's goal was to divorce the price of the goods from the compensation he received — in other words, to establish an economy in which his profit was based on the exchange of time and labor. And, to some degree, he succeeded. A thriving barter community arose and spread outside the radical community, with regular people coming from a hundred miles away to avail themselves of Warren's low prices. Having succeeded, however, he closed the store, because its entire purpose had been to test the theory.
Warren was far from alone — even at that early date — in stressing the need for private currency. In 1843 — which is roughly the same period — Lysander Spooner wrote a tract entitled Constitutional Law Relative to Credit, Currency and Banking. He stated, "To issue bills of credit, that is promissory notes, is a natural right. … The right of banking … is as much a natural right as that of manufacturing cotton."
It is undeniably true that the individualist anarchists accepted a labor theory of value. This meant that they rejected profit from capital in three forms in particular: interest on money, rent, and profit in exchange, all of which was called "usury." If their main political goal can be stated as "the abolition of the state," then it is no exaggeration to say that their main economic goal was "the abolition of the money monopoly." And by this term — "money monopoly" — they referred to three different but interrelated forms of monopoly: banking, interest, and the issuance of currency.
I want to focus entirely (as I have been) on the issuance of currency, which I think provides a good sense of how individualist anarchist approached all issues of "usury." Some individualist anarchists, like Benjamin Tucker, considered the right to issue private currency to be so important that he believed it alone could bring about the destruction of the state. The money monopoly was considered to be the means by which the banks sustained themselves and robbed the average man of economic opportunities. Through the act of incorporating, bankers became immune from personal obligations: they acquired the legal advantage of being able to contract while avoiding the responsibility for doing so. This was not only a money-raking scam that bankers ran on the public, it also denied credit to the working people by setting up prohibitive interest rates or criteria for acquiring credit.
The alternative banking system that Tucker embraced was what William B. Greene called "mutual money," what Spooner referred to — in his tract A New System of Paper Currency — as "the invested dollar" and what the French socialist anarchist Pierre Proudhon called "the Bank of the People." By these terms, they all referred to a currency that ordinary people could issue which would be secured by their own property. For consistency, I'll call it "mutual money." Spooner described it as follows: "The currency here proposed is not in the nature of a credit currency … it constitutes simply of bona fide certificates of Stock, which the owners have the same right to sell that they have to sell any other Stocks."
To rephrase this: When Spooner spoke of an "invested dollar" or "mutual money" rather than a "specie dollar," he meant currency that was backed by "property of a fixed and permanent nature," such as a house, rather than currency that was backed by gold or silver. He meant money that was based on a form of debt that functioned like a mortgage.
And this mutual money was crucial to the empowerment of the worker. In Poverty: Its Illegal Causes and Legal Cure, Spooner argued that men deserve the full fruits of their labor and the most likely way this would happen was for each man to become a self-employer. But to become a self-employer, most people needed access to credit on their own capital, on anything they were able to mortgage — they needed credit that banks routinely denied through monopoly.
The key question at that point becomes, what if the issuer of private currency decides to charge interest on its use? Would that practice be forcibly prohibited? The answer to this question is what separated advocates of the labor theory of value who were socialists from those who were libertarian. The socialists would have banned such practices. The individualist anarchists answered, "If a lender can find someone foolish enough to voluntarily enter into such a contract, then the contracting parties must be left to their folly." The right of contract — "society by contract" — was the higher law. The only remedies individualist anarchists would have pursued against those who charged or paid interest were education and the establishment of parallel banks and currencies that offered what they believed to be a better deal. Individualist anarchists gave primacy to the free market and the right of contract — this is what made them libertarians rather than socialists.
One of the most tragic events in libertarian history was the destruction of Tucker's offices through fire, which led to the demise of Liberty in 1908. And an important dimension of the tragedy was that debate on economics was just beginning to reopen in the pages of Liberty between the American anarchists and a group known as the British individualists.
The British individualists were the English counterparts to the Tucker circle in America, and they were — generally speaking — worse on political theory but better on economics. Among the best voices on economics — in my opinion — was J. Greevz Fisher. In a debate that erupted in 1891, he pointed out that a mutual banking system existed already to some degree in that people with were free to issue promissory notes to deliver commodities such as cotton or wheat, yet the Bank of England (the country from which he argued) had not collapsed. Moreover, he stated,
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.… What is called free trade in banking actually means only unlimited liberty to create debt. It is the erroneous labeling of debt as money which begets most of the fallacies of the currency faddists.
In a second debate that occurred in 1893, Fisher neatly summed up the problem with the individualist anarchist position,
Mr. Bilgram [the person against whom he was arguing] appears to take no notice of the argument that the rate of interest upon loans … [would still exist] under a system of barter…. Interest is the hire of commodities separated from their owner and entrusted to another person. The time of separation is a privation to one party … and a benefit to the other party.
If the discussions were to have continued, it is likely that the American anarchists would have moved more toward an Austrian view of interest and capital, just as the British individualists moved toward anarchism. With such a synthesis, modern libertarianism might have emerged decades before it did. In conclusion, as far as I can see, whatever economic differences exist between the 19th-century tradition and the current one are differences without practical consequences.
Again, with reference to the money monopoly, I'll leave it to Murray Rothbard to explain what I mean:
Suppose, for example, that I decided to print paper tickets called "two Rothbards," "ten Rothbards," etc., and then tried to use these tickets as money. In the libertarian society I would have the perfect right and freedom to do so. But the question is: who would take the tickets as "money"? Money depends on general acceptance, and general acceptance of a medium of exchange can begin only with commodities, such as gold and silver.
Rothbard summed up what he believed would be the impact of mutual money, "the anarchist society would … lead to much 'harder' money than we have now. Without the State to create the conditions and coercions for continued inflation, attempts at inflation and credit expansion could not succeed on the free market."
As long as the default position of individualist anarchism was the primacy of contracts — and it always was — then the free market would have inexorably established interest and hard currency. And that is what I mean by saying their theories were a difference with no practical significance.
To restate this: First, individualist anarchists would have allowed such practices as interests to occur between consenting parties. Second, without imposed restrictions, such practices would have occurred; indeed, they would have flourished. Third, and more speculatively, the practical bent of individualist anarchists that made them test their social theories would have led them ultimately to question and perhaps reject "the labor theory of value" when they were confronted with realities that disproved it — or when confronted a few more times by indignant British individualists who out argued them on economics. But this latter point is mere speculation.
So what is my final word on the importance of individualist anarchism? To quote Murray again,
by the mid-nineteenth century, the libertarian individualist doctrine had reached the point where its most advanced thinkers in their varying ways had begun to realize that the State was incompatible with liberty or morality. But they went only so far as to assert the right of the lone individual to opt out of the State's network. … Spooner and Tucker advanced libertarian individualism from a protest against existing evils to pointing the way to an ideal society toward which we can move.
American individualist anarchism went beyond a personal ideology or one that merely protested the state; it provided a blueprint for social freedom.