Economics

ECONO'MICS 1-·.MONEY. AND ·INTEREST CAPITAL, PROFITS, AND 'INTEREST In the' study '0£ the economic question, .the first fhingthatmust .engage.ourattentionisiwhythe wor~er, fails, to get .allof. the product <if his •labor. ¥ol U1l1esbavebeen, written by economists of various schools in discussion of the .prohlem" most of them muddling' about in the mire of their own misconceptions. , But tneedito~of Liberty went straightto the heart of the tna~ter and quickly found the answer: ttSQMEBODY gets the surplus wealth that .labor produces and does.· not consume. Who isth~ Somebody?" Such is the prQble1l1recently posited in the editorial columns of •the New York Tr1J,th'. Substantially the same •question has been asked a great. many times' before, but,. as might have been expected~ this .new. f()rm of putting. it has created. no small hubbub. T.ruth'scolumns are full of it; other journals are taking it up; clubs, are organizing to discuss it; the people are thinking about it; stude:pts are pondering oVer ~it. For' it is a most mornentous question. .A correct answer ~o it is unquestion ably the ·:first step in the settlement of the appalling problem' of.)poverty, intemperance, .ignorance, and -crime. Truth,. 'in selecting it 'as a subject on which to harp and hammer"from d~y to. day, shows itself a level-he~ded, far-sighted newspaper.

But, 11l1portantas it is, it is by no means a difficult question to, one ,who really considers.it before giving an answer, though the. variety and absurdity ,.0£ •ne~rly, all the replies ,thus far vollilnteered certainly tend to give an opposite impression. 87 Css INDIVIDUAL LIBERTY What are the ways by which men gain possession of prop erty? Not many. Let us name them: work, gift, discovery, gaming, the various forms of illegal robbery by force or fraud, usury. Can men obtain wealth by any other than one or more of these methods? Clearly, no.. Whoever the Somebody may be, then, he must accumulate his riches in one of these ways. We will find him by the process of elimination. Is the Somebody the laborer? No; at least riot as laborer; otherwise the question were absurd. Its premises exclude him. He gains a bare subsistence by his work; no more. We are searching for his surplus product. He has it not.

Is the Somebody the beggar, the invalid, the cripple, the discoverer, the gambler, the highway robber, the burglar, the defaulter, the pickpocket, or the common swindler? None of these, to any extent worth mentioning. The aggregate of wealth absorbed by these classes of our population com pared with the vast mass produced is a mere drop in the ocean, unworthy of consideration in studying a fundamental prob lem of political economy. These people get some wealth, it is true; enough, probably for their own purposes: but labor can spare them the whole of it, and never know the difference. Then we have found him. Only the usurer remaining, he must be the Somebody whom we are looking for; he, and none other. But who is the usurer, and whence comes his power? There are three forms of usury; interest on money, rent of land and houses, and profit in exchange. Whoever is in receipt of any of these is a usurer. And who is not? Scarcely anyone. The banker is a usurer; the manufacturer is a usurer; the merchant isa usurer; thelandlotd is a usurer; and the workingman who puts his savings, if he has any, out at interest, or takes rent for his house or lot, if he owns one, or exchanges his labor for more than an equivalent,-he too is a usurer. The sin of usury is one' under which all are concluded, and for which' all are responsible. But all do not benefit by it. The vast majority suffer. Only the chief usurers ac cumulate: in agricultural and thickly-settled countries, the landlords; in industrial and commercial countries, the bankers.

Those are the Somebodies who swallow up the surplus wealth. And where do the Somebodies get their power? From monopoly. Here, as usual, the State is the chief of ·sinners. Usury rests on two great monopolies,-the monopoly of land INDIVID U AL LIBERTY 89 and the monopoly of credit. Were it not for these, itwould disappear. Ground-rent exists only because the State stands by to collect it and to protect land-titles rooted in force or fralld. •Otherwise .. the land would. be free. to all, .and no one· could .control. more than he .used. Interest. and house-rent e:gist. only. because. the State grants' to a certain class of individuals. and corporations the exclusive privilege of using itscredit·d'~nd theirs as a basis for the issuance of circulating curre,ncy.. ·Otherwise credit would be :tree to all,.· and· Inoney:J brought under the law of. competition,. would be issued at ~ost. Interest and rent gone, competition would leave little or no ·chance •for. profit. in exchange except in .business pro':' tected by tariff or patent laws. And there again the State has'but to step aside to cause the last vestige of usury to disappear.

, •The. usurer is the Somebody, and the State is his protector. I Usufyis the serpent gnawing at labor's vitals, and only liberty can detach and· kill it. •Give laborers their liberty, and t4eywill keeptheir wealth. As for the Somebody, he, stripped o£h,is power to steal, must either join their ranks .or starve. _Mr. J. M. L. B.abcock,of B.oston, at that time a Greenbacker . but later becoming a thorough-going op ponent of interest~wrote in the columns of Liberty in defense ofb~th interest and profits. Mr. Tucker theteforehad to set him right: lttWHATEVER contributes to production is. entitled to. an equitable share in the distriblltion!" Wrong! Whoever con ,tributes to production is alone so entitled. What.has no rights that Whois bound to respect. What is •. a· thing. WhoiR a. 'person. Things have no claims; they -exist only to be claimed. The possession of a right •cannot be predicated of de·ad material t but only of a living person.•.uIn the production of a .loaf of btead,the plough performs an important service, and equitably comes in for a share of theloaf." Absurd!. A plough c~nnot own bread, and, if it could, would be unable to .eat it.

A plough is a What, one of those things above mentioned, to which no rights. are attrihutable. Oh! but. we see. «Suppose one man. . spends .his •life in 90 INDIVIDU AL LIBERTY making ploughs to be used by others who sow and harvest wheat. If he furnishes his ploughs only on condition that they be returned to him in as good state as when taken away, how is he to get his bread?" It is the maker of the plough, then, and not the plough itself, that is entitled to a reward? What has given place to Who. Well, we'll not quarrel over that. The maker of the plough certainly is entitled to pay for his work. Full pay, paid once; no more. That pay is the plough itself, or its equivalent in other marketable products, said equivalent· being measured by the amount of labor em ployed in their production. But if he lends his plough and gets only his plough back, how is he to get his bread? asks Mr. Babcock, much concerned. Ask us an easy one, if you please. We give this one up. But why should he lend his plough? Why does he not sell it to the farmer, and use the proceeds to buy bread of the baker? See, Mr. Babcock? If the lender of the plough ((receives nothing more than his plough again, he receives nothing for the product of his own labor, and is on the way to starvation." Well, if the fool will not sell his plough, let him starve. Who cares? It's his own fault. How can he expect to receive anything for the product of his own labor if he refuses to permanently part with it? Does Mr. Babcock propose to steadily add to this product at the t.xpense of some laborer, and meanwhile allow this idler, who has only made a plough, to loaf on in luxury, for the balance of his life, on the strength of· his one achieve ment? Certainly not, when our friend understands himself.

And then he will say with us that the slice of bread which the plough-lender should receive can be neither large nor small, hut must be nothing. We refer Mr. Babcock to one of his favorite authors, John Ruskin [in ((Letters to British Workmen," under the heading,. ccThe Position of William"], who argues this very point on Mr. Babcock's own ground, except that he illustrates his position by a plane instead of a plough. Mr. Babcock replies by denying the similarity, saying that Ruskinccconcludes that the case he examines is one of sale and purchase." Let us see. Ruskin is examining a story told by Bastiat in illustration and defence of usury. After print ing Bastiat's version of it, he abridges it thus, stripping away all mystifying clauses: INDIVID.UAL LIBERTY 91 ttJames makes a plane, lends it to William on 1st of Janu ary for a y~ar.William gives him a plank for the loan of it, wears.it out, and makes another. for James, which he gives him· .on•. 3ISt Dece,mber.· On 1St January he again. borrqws t•..h.••••.•..•.e..•.•.....•.....n••••e....•w.•.•.•o..••n.e,." .an.•.•~d••••.•th••e.,•• a.r,.ra.n...g.e.m.,ent is r•. e•• p .• e.at.e••..d...•.C.O.n••..ti.nu.o.u.·.. 81.

Y . _.The position of •illi_am,,therefore, is that he makes a plane every 3 1St of De ember; lends it to. James till the next day~ and pays James a lank annually lor the privilege of lending It.<tohimotl th~t evening." Substitute in the foregoing Hplough" for ((plane," and uloaf" or.uslice" for Hplank," and the·. story differs in .no essential point from Mr. Babcock's.· .How monstrously' unjust the transaction. is can be plainly seen. Ruskin next shows ,hoW' this unjust transaction may be changed into a just 'one: ((If James did not lend the. plane to William, he could only get his gain' of, a.' plank by working with .it himself and wear ingitouthimself. Wh~nhe had worn it out at the end of the year, he would, therefore, h~ve to make another for himself.. .William, .working with it instead, .gets the advan tage .instead, ·..which he. must, therefore, •pay James his plank for; and return toJames what James would, if he had not lent his. plane, then have had-not anew plane, but the worn-out One. Jarnesmust make a. new-oile £orhimself, as he would havehacl to do if no William had existed; .and if .William likes to borrow it again for another plank, all is fair. That is to say, clearing the. story of it~. nonsense,.that James makes a plane aIlnuaIlyand sells it to William forits proper price, which, in kind, i$ a new plank/' ltis this tatter transaction,· wholly different from theJormer> that .Ruskin pronounces a «sale," having «nothing whatever to .dowi th principal or with interest." And yet, according to Mr. Babcock, «the .. case he examines [Bastiat's, of course] isoneo£. sale and purchase."

It is an•• error. common with the economists to .assume that all/increase of capital decreases the rate of interest and that nothing else can materially de~rease it. .The. facts are just the contrary .• The rate of interest may, and often does, de crease when the ..amount of capital has not increased; the amount of capital may. increase without decreasing the 'ra te ofinterest, which may in fact increase at the same time; and 92 IND I VIDU AL LIBERTY so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sine qua non of the universalization of wealth. Suppose, for instance, that the banking business of a nation is conducted by a system of banks chartered and regulated by the government, these banks issuing paper money ba~ed on specie, dollar for dollar. If now a certain number of these banks, by combining to buy up the national legislature, should secure the exclusive privilege of issuing two paper 'dollars for each specie dollar in their vaults, could they not afford to, and would they not in fact, materially reduce their rate of dis count? Would not the competing banks be forced to reduce their rate in consequence? And would not this reduction lower the rate of interest throughout the nation? Undoubt edly; and yet the amount of capital in the country remains the same as before.

Suppose, further, that during the following year, in conse' quence of the stimulus given to business and production by this decrease in the rate of interest and also because of unusually favorable natural conditions, a great increase of wealth occurs. If then the banks of the nation, holding from the governrnent a monopoly of the power to issue money, should combine to contract the volume of the currency, could they not, and would they not, raise the rate of interest there by? Undoubtedly; and yet the amount of capital in the country is greater than it ever was before. But suppose, on the other hand, that all these banks, chartered and regulated by the government and issuing money dollar for dollar, had finally been allowed to issue paper be yond their capital based on the credit and guaranteed capital of their customers; that their circulation, thus doubly se cured, had become so popular that people preferred to pay their debts in coin instead of bank-notes, thus, causing coin to flow into the vaults of the banks and add to their reserve; that this additon had enabled them to add further to their circulation, until, by a continuation of the process, it at last ainounted to eight times their original capital; that by levy ing a high rate of interest on this they had bled the people nigh unto death; that then the government had stepped in and said to the banks: cC·When you began, you received an annual interest of six per cent. on your capital; you now receive INDIVIDUAL LIBERTY' 93 nearly that rate on a circulation eight times your capital based<l'eally on the people'scredit;.therefore atone-eighth ,0£ the original rate' your annual pr9fit w~uld be as great. as £otm~r1y;· henceforth .•your rate ofl.discount must· not exceed thl'ee-fourthsof one percent)' Had all this happened (and with .the. exception of the Jastcondition of the •..hypothesis si11lilarcases have frequently happened), what would. have been the result? The· reduction of the rate of discount to the b~nk'g·••service, ,-nd.·the results therefrom ,-s'!lbove de..

$crihed, are precisely what would happeni£ the whole business of banking .shoulq be' thrown' open to free competition. Another' error is the assumption •that .ttin the last analysis the .. possessor,of capital 'has acquired it by a willingness' to work harder than his fellows and to sacrifice his love.' of spending all h~ produces that he may have the ,aid of capital to increase his power of production.": This is one of. the most devilish of the many infernal lies .for which the economists have •to answer. It is indeed true that the possessorof capital may, in rare cases, have acquired it by the method stated, though even then he could· not be excused .fol;' .making the capital so acquired a leech upon his fellow-men. But ninety-nine times in a hundred the' modern possessor of. any large amount· of capital. has acquired it, not Uby a willingness.to work harde.r than his fellows," but by a shrewdness in getting possessionof a m.onopoly which makes it needless for him. to do any 'real work at all; not by a willingness ttto sacrifice his love of spel1dingall he ·produces," .but by a cleverness in prQ curing from the governrn.enta privilege by which he is able to spend in wanton, luxury half of what a large number of other· me.nproduce. The chief. privilege to which we refer ,is that of selling the people's credit for a price.

Again, it. is an error to suppose that .• to confine the term money to· coin and to call all other ,money cU1rrencywouid simplify matters, ,when in realityjt is the insistence upon this false distinction.· that is the prevailing cause' of mystifi cation. If the idea of the royalty of gold and. silver could be once knocked •. out of the people's .heads" and they could once~nderstand that no, particular kind of· merchandise is created'by nature .formQnetary purposes, they would settle this question in a trice. Some personsseem to think that Josiah Warren..based··his notes on corn. Nothing of the kind. War94 I N D I V I D U ALL I B E R T Y ren simply took corn as his standard, but made labor and all its products his basis. His labor notes were rarely redeemed in corn. If he had made corn his exclusive basis, there would be no distinction in principle between him and the specie men. Perhaps the central point in his monetary theory was his denial of the idea that any. one product of labor can properly be made the only basis of money. A charge that this system, which recognized cost as the only ground of price, even contemplated a promise to pay anything tcfor value received," he would deem the climax of insult to his memory.