Occupy Wall Street (OWS) is exploding like a force of nature into the streets and around the globe. Libertarians are deeply conflicted in their responses to the protest because the movement’s message is deeply flawed and often cacophonous. But one of the voices rising from the pavement is that of libertarian-leaning Chris Savvinidis, whose entire message can be summed up in three words: “End the Fed.” Or, it can be expressed more eloquently, as Savvinidis does himself in a YouTube video that is going viral.
Savvinidis proclaims,
A whole continent wide cannot control a federal government with a banking system that prints money like it’s paper. You can’t even call it money anymore. Gold is money. Silver is money. Green dollars are not money. They’re using inflation as a hidden tax to [explitive] the people. Prices go up. Do your wages go up? No. My wages didn’t go up. But prices went up, gas goes up, milk goes up, trades go up. How am I supposed to live? And this is all because our government prints too much money, starts too much wars, so they can sell their tanks, their guns, their missiles. That’s all America exports is guns, missiles, and tanks. That’s it. We need to bring production back to America. End the Federal Reserve.
Within OWS there is now a submovement called Occupy the Fed. On October 7, hundreds of people marched from the Financial District of New York City to the Federal Reserve Bank, chanting “End the Fed, Occupy the Fed.” One news source reported,
Many “free market” activists have been spending time at Occupy Wall Street protests talking about the dangers of allowing a private corporation to centrally plan the U.S. economy. They use government to socialize their investment losses while privatizing their profits offshore to avoid taxes.
My hands will be aching and numb before I stop applauding these protesters. But in the spirit of constructive criticism, I suggest they flesh out their message to include a libertarian theme that is rarely explored by today’s movement: the right of every individual to issue his own currency. The theme is too complicated to explain on a poster or to shout through a megaphone to a mulling crowd; thus, it is inappropriate for a march or protest. But in the articles and video commentaries that are beginning to surround Occupy the Fed, the movement would be well advised to stress the positive free-market alternative to what is now a negative government monopoly.
Restoring the Theme of Private Currencies
American libertarianism was dramatically different in the 19th century than it is today. A key difference is economic theory. The 19th-century radicals have been justly criticized for their economic weaknesses but little has been written about their strengths. One strong point: they placed a heavy and almost primal emphasis on the right of every individual to create their own currency and to circulate it to all willing takers. It was a natural right. The quintessential individualist-anarchist Lysander Spooner stated in his work “Constitutional Law Relative to Credit, Currency and Banking” (1864),
To issue bills of credit, that is promissory notes, is a natural right.… The right of banking, or of contracting debts by giving promissory notes for the payment of money is as much a natural right as that of manufacturing cotton.
Any discussion of American libertarianism’s 19th-century economic policies must begin with a caveat and explanation. Radical individualists like Benjamin Tucker, editor of the influential periodical Liberty (1881–1908), are sometimes called “cranks.” Overwhelmingly, such libertarians rejected capitalistic practices like the charging of interest or rent. Instead, they embraced a labor theory of value. First and foremost, however, they advocated a “society by contract” and explicitly refused to prohibit contracts with which they disagreed. In short, they would not have imposed their economic views through law. Thus, interest and rent would have existed in a society of their making and, presumably, it would have spread due to market forces.
Although it sounds bizarre to modern ears, the 19th-century libertarians believed “capitalism” would be swept away by the “free market.” Thus, the prospectus of Ezra Heywood’s labor journal The Word (1872–1890,1892–1893) read, in part, “The Word favors the abolition of speculative income … [n]ot by restrictive methods, but through freedom and reciprocity.”
As long as 19th-century libertarians championed contract and the free market above all else — and they consistently did — the impact of their economic errors would be minimal. Murray Rothbard once described the predictable outcome:
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.
But, again, there was one economic issue on which the 19th-century movement was superb: namely, the right of every human being to issue his own money.
Today, this focus is reflected in ventures like Bitcoin, a privately maintained digital-currency-exchange system. And, certainly, pivotal theorists like Rothbard argued for private currencies, denominating his own theoretical money in “Rothbards.” But few voices within modern libertarianism single out “private currency” as an issue central to human freedom. Even hard-money zealots usually push for a return to the gold standard rather than the elimination of legal-tender laws and a return to private currencies.
By contrast, Tucker argued that nothing was more important to freedom than destroying the monopolies created and maintained by the state. The most destructive monopoly and, therefore, the most important to destroy was legal tender and the banking system. He wrote,
It [Liberty] believes that the first point of attack should be the power of legally privileged capital to increase without work. And as the monopoly of the issue of money is the chief bulwark of this power, turns its heaviest guns upon that.
Tucker viewed monopoly banking as his bête noire.
His focus came directly from the three prominent libertarians whom Tucker considered to be mentors: Lysander Spooner, William B. Greene, and Josiah Warren. Their push for private currency must be understood in the historical context. The private issuance of currency and coins was a common practice in the late 18th and early 19th centuries. Many private issues were considered far more reliable than state ones. For example, during the Civil War, it was common for payment of monetary obligations to be specified in Bechtler gold — a private mint — rather than in Union or Confederate currencies.
Two specific events sculpted the approach of individualist anarchists to the banking monopoly and private currency. James J. Martin commented on one of them:
Few instances in American history have created as much curiosity concerning economic and financial matters among amateurs and members of the general citizenry as the panic of 1837.… Banking abuses came under concentrated scrutiny and gave rise to many proposed radical remedies.
The other event was the Civil War, in which the North used the Legal Tender Acts and the National Banking Act of 1863 to finance its side of the conflict. Through these measures, Congress guaranteed the notes of authorized bankers and legally protected them from liability for debt. The act also established a national tax of 10 percent for all money not authorized by Congress.
The 19th-century libertarians responded to these events, fresh with the knowledge that private currency not only could work but had been working well for several decades. All three (Spooner, Greene, Warren) championed private money. An overview of their views on currency offers a window into the 19th-century mindset on private currencies.
Lysander Spooner
The natural right to privately issue currency was of primary importance to the quintessential individualist-anarchist Lysander Spooner. Private currency was necessary to ensure justice to labor; therefore private currency was viewed as a workingman’s issue, as the rights of labor against entrenched privilege. In his pamphlet “Poverty: its Illegal Causes and Legal Cure” (1846), Spooner argued that men deserve the full fruits of their labor and the most likely way this could happen would be by each man becoming his own employer — that is, to work for himself in some direct manner. But to be a “self-employer” usually required access to the capital necessary to buy tools and otherwise establish a business. For many, monopoly banks charged prohibitive interest rates that shut them out of the very possibility of self-employment.
Even low interest rates, if fixed by law, denied credit to some laborers. For example, if the loan sought by a laborer seemed risky to a lender, then a fixed low rate kept that lender from charging higher interest to offset the risk. Thus, any control on credit and interest rates — even those that allegedly protected the laborer — actually disadvantaged workingmen. Putting credit under the control of a banking elite killed the ability of the poor to rise out of poverty.
Spooner’s solution was not merely the removal of restraints but to allow each individual to access capital through the issue of private currency. Spooner proposed a parallel banking structure in which currency would be an “invested dollar” rather than a “specie dollar.” That is, the dollar would be backed by “property of a fixed and permanent nature” such as a house or set of tools instead of being backed by gold or silver.
Spooner explained what he meant by an invested dollar in “A New System of Paper Currency” (1861):
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.
vIn defending his unusual currency, Spooner attempted to demystify money by likening it to any other commodity in the market place. It was not a unique or mysterious good that required government to produce.
Perhaps we may conclude that money is simply property that is cut up, or divided, into such pieces or parcels as are convenient and acceptable to be given and received in exchange for other property; and that any man who has any property whatever that can be cut up, or divided, into such pieces of parcels, has a perfect legal and moral right thus to cut it up, and then freely offer it in the market in competition with all other money, and in exchange for any other commodity, that may there be offered in competition with, or in exchange for, it.
But what of government’s claim to produce the only legal tender? Spooner answered,
Government has constitutionally no more right to forbid men’s selling an invested dollar than it has to forbid the selling of a specie dollar. It has constitutionally no more power to forbid the sale of a single dollar, invested in a farm, than it has to forbid the sale of the whole farm.
William B. Greene
The individualist anarchist William Batchelder Greene is best known for his book Mutual Banking (1850) in which he promoted free banking along the lines proposed by the French radical Pierre-Joseph Proudhon.
Greene viewed monopoly banks as agents of capitalism — what we would call state capitalism today. In his book Equality (1849), Greene wrote,
Now the banks have everything in their hands. They make great issues, and money becomes plenty;… all other commodities become dear. Then the capitalist sells what he has to sell, while prices are high. The banks draw in their issues, and money becomes scarce … all other commodities become cheap. The community becomes distressed for money, individuals are forced to sell property to raise money — and to sell at a loss on account of the state of the market: then the capitalist buys what he desires.
Like Spooner, Greene viewed a monopoly on banking or currency as an assault on the workingman and the main mechanism through which American feudalism was maintained. Government-privileged banks were “nothing but conspiracies and combinations to defraud the public.”
Greene’s solution? A free “mutual bank” would issue currency to those who pledge mortgages in the amount of one-half of the property’s value. (In fact, Greene claimed that “anything that might be sold under the hammer may be made the basis for the issue of mutual money.”) All members of the bank would enter a contract to accept such currency and no loans would be made to nonmembers. To prevent inflation, the mutual money would be tied to and track the value of a silver dollar. Interest charged would be sufficient to cover the operating costs of the bank, including wages, and no more.
Like Spooner, Greene also considered decentralized banking to be a direct challenge to state authority. In a later edition of Mutual Banking, he wrote,
Mutualism operates, by its very nature, to render political government, founded on arbitrary force, superfluous; that is, it operates … by substituting self-government instead of government.
Josiah Warren
Josiah Warren, the first American anarchist, was a hands-on activist who tested his principles by putting them into action. One of those principles was “cost is the limit of price,” which directly expressed the labor theory of value. By “cost is the limit of price,” Warren meant that profit should be based on the amount of time and labor that went into an exchange. Profit beyond the amount of time or labor constituted a form of theft facilitated by “the money monopoly” — that is, the state’s monopoly on the issuance of currency.
Warren’s solution was a unique type of private currency based on time. He tested the practicality of his solution. On May 18, 1827, in Cincinnati, Ohio, Warren opened what he called a “Time Store” and stocked it with staples, such as flour. Warren posted a bill for public view, stating what each good had cost him and adding a 7 percent fee for overhead expenses such as shipping. This posted bill constituted the cost of the goods. Where Warren made his profit was in requiring customers to pay him 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.
This was before groceries were prepackaged or preweighed and at a time when it was customary to bargain with the shopkeeper. In fact, one of Warren’s innovations was simply the act of posting prices for goods. One of the advantages of the system was that people were far less inclined to bargain at length over prices because they were paying for the shopkeeper’s time.
Warren explained the process:
A clock was in plain sight to measure the time of the tender in delivering the goods which was considered one-half of the labor, and purchasing, etc. the other half.
The customer would pay the retail price of the goods in traditional money and then compensate Warren for the price of his time with a labor note that promised to give back an equivalent amount of time in the buyer’s occupation. Thus, the system was a monetized form of barter. A plumber would give a labor note that committed him to “x” hours of plumbing work. If Warren did not need plumbing, he could trade that note for another one representing labor he did need. The historian James J. Martin dubbed the Time Store, “the first scientific experiment in cooperative economy in modern history.”
A thriving barter community arose, with people coming from a hundred miles away to avail themselves of Warren’s low prices. Having proven his theory, however, Warren closed the store.
Conclusion
The foregoing merely scratches the surface of the deep commitment 19th-century libertarians had to private currency. Many more important theorists deserve mention, from Stephen Pearl Andrews (The Labor Dollar) to Alfred B. Westrup (Citizen’s Money), from Charles A. Dana (Proudhon and His Bank of the People) to A.H. Stephenson and G.F. Stephens (Money and Currency).
It is a mistake to dismiss the currency theories of 19th-century libertarians because they include a labor theory of value. As long as the default position of individualists was the primacy of contracts — and it always was — then the free market would have inexorably established interest and hard currency.
It is equally mistaken to dismiss them because they sound antiquated or impractical to modern ears. No one knows which forms of private currency will work in our society; experimentation and some failures are guaranteed. As long as the currencies are free market, however, only those who issue and accept them will bear the brunt of a failed experiment.
End the Fed would do well to offer a positive alternative to government money that is based in both history and theory: private currencies. Twenty-first-century libertarianism would do well to learn from the 19th century on this subject.
