HB 163 .P97 R6 Copy 1 Liberty ,!Hs*(5tfer!Siw;';i;;;(;n' tohitv Beverley Robinson Economics of Liberty by John Beverley Robinson Herman Kuehn 31 Prince Street Minneapolis 1916 ^-^^' maetb <^ 1 *rhis book is intended to be a brief and clear statement of ^he system of social organization first enunciated by the illustrious Proudhon a century ago. His works, although of unparalleled brilliance, are so voluminous that it is often difficult to extract his meaning from the mass of controversy that envelopes the fundamental thoughts. If any are persuaded by these pages of the efficacy of liberty to accomplish social order, justice and prosperity, it w^ill sufficiently gratify The Author. Contents Society 7 Definitions 19 The Economic Organism 23 Free Exchange 33 Value 40 Equality 52 Privilege 57 Land Ownership 67 The Money Privilege 75 Taxation 88 Special Privileges 93 Liberty 98 Appendix 1 108 Appendix II 113 SOCIETY T^HAT is Society? Everybody nowadays is talking or writ- ing about Society — society in the abstract — general human society. Social service, the social uplift — all the phrases, half discredited in ad- vance by the fluency with which they drop from our lips — ^what do these really mean? Wise professors of sociology treat of "the housing of the poor," "the problem of the un- employed," devise futile formulas, and pile up mountains of barren statistics, while no one in recent times has uttered even an outline of a theory as to the essential constitution of that Society of which Sociology, by its very name, proclaims itself the science. We habitually regard the headless, formless chaos of absurdities in human relations, in the midst of which we live, as Society, but we are without an intellectual norm to guide us: we have evolved as yet no concept with which to rationalize the observed facts. Or, if such a norm has been proclaimed in the past, it has not been shouted in the ears of the people so that they must hear it. It has fallen out of sight and hearing, and must be reproclaimed in words intelligible and unmis- takable, until it gains acceptance. For, without such a norm, all our painstak- ing researches into facts are fruitless ; as were the researches of alchemy before chemistry (7) 8 ECONOMICS OF LIBERTY with its scales and atomic theories rationalized it. Some generalized conception, at the least some working hypothesis, is essential, before the dry statistics, that we so laboriously gather, can have any meaning or lead to any conclusion. Let us try to clarify our thoughts, and to build up some clear, crystalline conception. In the first place, what do we mean by a society in the little? Societies abound today — societies for the propagation of this and the prohibition of that — all sorts of societies, and for all sorts of purposes. What then is a society? A society is evidently a combination of two or more persons in order to unite their efforts toward achieving a common end: evidently also such a combination must be entirely voluntary on the part of those who combine. It is possible to secure combined effort with- out the assent of them whose efforts are com- bined. When a white man, armed with a re- peating rifle, compels a band of unarmed sav- ages to obtain ivory for him, he combines their efforts indeed, but we call such a combination slavery, not association. For every association it is essential that the efforts of the associated should be exerted voluntarily; and such a voluntary association it is that constitutes a society. If two men ask a third to show them the way, and he willingly accompanies them, they are associated: if, being two to one, they SOCIETY 9 use their superior force to drag him along, as- sociation ceases, and we have tyranny or authority on the part of the two, and subjuga- tion or slavery on the part of the recalcitrant. For any society to deserve the name, two conditions must prevail: 1. A common end to be achieved or a com- mon desire to be gratified. 2. Voluntary union of effort on the part of the associated. So that Society in general of the people of a city, or of a country, or of the world, in order to be properly called a society, must dis- play these two characteristics. If we find that it does not comply with these conditions, we must call it by some other name than Society. If we find that it recognizes these condi- tions in part, but not completely, we can only say that it is an incomplete or undeveloped society. Such undeveloped societies are the various forms of combination that we find throughout the world today under the name of governments. A voluntary agreement is called a contract. It is essential to the validity of a contract that it should be voluntary, that it should express the true desires of the parties at the time of making the contract, and that neither party should have been under restraint or compul- sion — that there should have been what the lawyers call "a meeting of the minds" of the parties. 10 ECONOMICS OF LIBERTY So much so, that a contract is at once abro- gated, if it can be shown that such meeting of minds did not really occur. In almost all private relations these volun- tary agreements or contracts are recognized by modern governments. The whole struc- ture of modern commerce is built upon them; and through them the various doings of our daily lives are conducted. Yet in very many private relations and in all public relations voluntary contracts are not admitted, and we are compelled to act as an emperor or king or congress dictates. Just as far as we are com- pelled to yield to authority, just so far we are incompletely associated. In the past,^he province of authority has been far wider than it is today, and the realm of contract correspondingly narrowed. The time was when almost all the acts of the in- dividual were regulated by his status in the community without regard to his wishes. The farther back we go in history, the more com- plete domination by authority do we find. The Egyptian of ancient times, whether peasant or noble, was the absolute property of the mon- arch, his duties and responsibilities defined by his status, and little or not at all by contract. The classical republics, while granting some liberty to the citizen, were based on slavery. The serf of the Middle Ages was a part of the plant: he belonged to his farm, as much as the barns and ploughs and horses, and was bought and sold with it. SOCIETY 11 The absolutism of kings prevailed down to the American Revolution, and still prevails in Russia and Germany. Constitutional govern- ment has triumphed in the rest of Europe, in the United States and in most of the countries of South America only within a little more than a century. But even constitutional government is still the rule of authority, as clearly as the rule of an autocrat, although not to so great a degree. In a republic, and still more in a democracy, at least a majority of the people is supposed to acquiesce in the measures of the govern- ment; while an autocrat may issue orders against the desires of everybody else: he is held in check only by fear of provoking a revolt. But while the majority in a democracy may voluntarily unite their action, the minority does not join with them voluntarily; it is vir- tually compelled to acquiesce, however much against its wishes. Such association as we have, even at its highest, is still the rule of force or authority, as it has been since the earliest ages. By the definition then of Society that we at first laid down, that a perfect society must be a voluntary agreement on the part of all the associated, a completely social condition has not yet been attained : we are still only partly socialized. It is not sufficient that we secure "the greatest good of the greatest number." No 12 ECONOMICS OF LIBERTY matter how great a number of people may agree to unite for a common end; no matter how small a number may dissent; if the minority is coerced by the majority into ac- quiescence, the condition is not social but anti- social. It is only when each individual is free to withhold acquiescence, that a completely social condition is attained. Society, in its full meaning, has not yet been reached. We are but approaching the time when it will be established. Almost all the theories and generalizations that have been laboriously worked out by the economists in relation to our present incomplete society, have no application to a perfect form of asso- ciation. As for the common end in view, it has al- ways been, in the authoritative societies of the past and present, in one word — war. Man, although a gregarious animal, and amicable toward the members of his immediate clan, is a predatory animal toward other clans, doing his fighting in packs, and the military societies of the past were organized quite as much for conquest as for defense. Up to the sixteenth century, conquest was regarded as the proper occupation of princes, as noted by the astute Machiavelli. Whether conquering or con- quered, men enjoyed, and still enjoy, the ex- citement of fighting. But a time came when war ceased to be the chief occupation of life. Commerce and in- SOCIETY 13 dustry grew. A taste for the good things of life developed. Tyranny may be the only practicable form of organization for war, but commerce and industry require peace and free- dom. So it has gone on down to our day: commerce and industry daily increasing, until they have become the leading activity of life; war pushed into the background, as an occa- sional diversion only instead of a continual joy as it used to be. Reluctantly, indeed, do we abjure fighting. Not until we are forced to do so, can we bring ourselves to renounce the delight in battle. We still glow with the warmth of loyalty to the flag. Yet we are not ready to give up all the comforts of civilization for the sake of war. It must be one or the other, either peaceful in- dustry and comfort, or war and deprivation. Nothing more strikingly indicates our prog- ress toward industrialism than the opposition to war that has grown up within a generation. Not only among the working classes, but by the ruling class is war denounced. Hundreds of thousands of working men are banded to- gether against war, and peace societies every- where are springing up. The establishment of the Hague tribunal is a sign of the trend of the times. Most of our social ills today are caused by the failure of the social organization to keep pace with the rapid development of industry. 14 ECONOMICS OF LIBERTY Industry and Commerce, Siamese twins, so closely united that they cannot be separated, are today the supreme interest of the world ; yet they are continually held back by a form of social organization suited to a quite different condition, that is to the condition of universal war that formerly prevailed. Not until we have entirely done away with the present form of social organization, abolished the remnants of authority that still survive, and substituted the reign of liberty, that is to say, of free con- tract, can industrialism grow to its full stature. War requires authority ; trade requires liberty. And it is for this reason, too, that all the projects for social amelioration that are based upon authority are predestined to failure ; from the mild land taxation scheme of Henry George to the complete military organization of in- dustry contemplated by the thoroughly author- itarian wing of Socialism. They are trying to carve the features of the future with a bayonet instead of a chisel ! Industry needs not authority but freedom of contract, in its widest and most far-reaching sense; and liberty can come, not through authority, but through the denial of authority. Many now are strongly attracted by the Social- istic theories of the day ; they are repelled only by the cast iron regulations that seem to be involved. We are about to demonstrate a Socialism based upon a wider liberty than has ever yet prevailed. SOCIETY 15 But some will say: Liberty? What do you mean? Have we not liberty already? Are we not all free to vote for any man we may choose? If we want any particular liberty, can we not vote for a man who is pledged to give it to us? What more of liberty can you ask? To which the answer is double : the practical and theoretical. The practical answer is: Look about you and see for yourself whither this boasted free democracy has brought us. Look at the mining camps of Michigan, of West Virginia and Col- orado. Read the stories told in the newspapers every day of the shooting of the miners by the soldiers. Not the miners drawn up in array, "in sunlit battle's light," but the huts and tents where they live, with their wives and babies in them, raked by machine guns. Look at our hell prisons, with half a million men shut up in them! Oh, yes, quite legally, of course ! Or, to take less harrying sights, look at trade, the world over, continually in a state of de- pression. Industry, struggling to free itself from the unseen bands that bind it, and to produce more and more, is held down and throttled by some invisible monster. Men, whose most earnest desire is to work, are un- able to find an opportunity. And not only the crowd of unfortunates who are thrown on the street, who are called tramps by the more fortunate, and who according to the popular delusion, will not work, but the vaster crowd 16 ECONOMICS OF LIBERTY of men who are still able to maintain a footing against the current, who are gradually forced to take lower wages, who are often out of work for months at a time, who can barely keep their heads above the water. Look at our cities, each owned by a handful of rich men, and nominally governed by a horde of politicians, selected from the worst, and responsible only to the rich clique that controls their leaders. Look at it; and say whether this democracy that we have set up is really so admirable an arrangement as we per- suade ourselves to think it is. The theoretical answer is this: Democracy, in principle is based upon authority quite as much as monarchy; and a free social organ- ization is incompatible with either monarchy of democracy. Consider for a moment. Every society or association must have funds for carrying on its work. Every association except government obtains these funds by voluntary contributions from its members. Upon ceasing to pay dues, membership terminates. No society can force anybody to pay his contributions. But with governments it is different. They live, not by voluntary contributions, but on forced contributions called taxes. Each gov- ernment asserts dominion over a certain terri- tory, and compels the payment of contribu- tions by all who live upon that territory. That is why government of any description does not deserve the name of a society. Membership SOCIETY 17 in a society is voluntary: membership in a government is compulsory. That is the radical distinction. In order to become a social organization, government must become commercialized; that is, it must cease to be government. It must sell its services to those who choose to pay for them, and not try to force them upon those who do not want them. And that is what the fully developed social organization will be — voluntary and not compulsory — society and not government. Some will regard such a proposition as too visionary to merit consideration. It is quite natural that they should so regard it at first glance. It was thus that flying machines were regarded before they became an accomplished fact. It was thus that the telegraph and the steamship and the locomotive were regarded, as the dreams of visionaries. Yet invention after invention has become realized, until now the attitude of incredulity has changed, and it is hard to suggest any ex- travagance in the physical realm that is not calmly accepted as a possibility. We have gone on inventing physical improvements, until our industrial development has far outstripped our social institutions. It is time for us to devote some inventive thought to the social organiza- tion, to make it fit in with the industrial ex- pansion, and to that end, no theory should be rashly rejected. 18 ECONOMICS OF LIBERTY We are compelled to postulate such a vol- untary society as we have outlined, because the relations of men under a spontaneous or voluntary form of association can be definitely formulated; while under an arbitrary form of organization — and authority is essentially ar- bitrary — their relations cannot be formulated. Postulating, then, such a society, and assum- ing that the society of the future must be industrial and not military, we are about to investigate the industrial relations that will necessarily follow— the economics of a state of freedom. DEFINITIONS 1. Economics is the science that formulates the commercial relations of men. npHE early treatises prefixed the epithet "poHtical," and spoke of economics as polit- ical economy. The reason for this was that their main object was to elucidate the commer- cial relations among nations under existing conditions, rather than among the individuals that compose a community, as well as among communities, under rational conditions. And ever since, economists have been content to explain things as they are, making no attempt to suggest any improvement. Their inventive faculty has become atrophied: they investigate minute details of what they are pleased to call practical problems; never concerning them- selves with general theories at all. In the sense in which we shall use it, the term economics is applicable to the simplest commercial transactions among individuals, as well as to those that take place among nations; indeed, very much more to those among individuals, because pure economics takes no note of the boundaries that separate nations, and because, after all, the transactions among nations are but the sum of a multitude of transactions among individuals. 2. Commerce is the exchange of services among human beings. (19) 20 ECONOMICS OF LIBERTY In the usual sense, commerce applies rather to the transfer of the material results of human labor. We now extend it, so that the terms may include the direct exchange of services for services, as when a lawyer draws up a deed to pay the doctor's bill; or of material prod- ucts for services, as when the farmer offers the minister a barrel of apples as a marriage fee. Other things than services or the products of labor may be exchanged. Permission to labor on a certain piece of land may be granted, in return for a portion of the product ; but such permission, not being a product of labor, the transaction is not a commercial exchange. So again, at various times, sovereigns have granted certain privileges as monopolies to favorites, or to those who would pay for them, just as at present patent privileges are con- ferred; but neither the royal patent, nor that of a democratic government is a labor prod- uct, and consequently neither is in the realm of commerce. 3. Product denotes the result of labor. Whether material or immaterial — ^the advice that is produced by the doctor as well as the potatoes that are produced by the farmer, the music or picture which are the singer's or painter's products, as well as the fish or coal which are the products of the fisherman or miner— all are included in the term "product." 4. Commodities are material products. DEFINITIONS 21 Thus, the potatoes, fish and coal are com- modities: the doctor's advice and the singer's song, while equally products, are not com- modities. 5. Labor comprises all human activities that result in an exchangeable product. The functions of the pirate, of the soldier, of the government functionary, from bookkeeper to cabinet minister, are not labor, economically speaking, however laborious, in common dis- course, may be their occupation. That it may be discussed by economics, the product of labor must be exchangeable. We may therefore revise our first definition of economics, and say, in more technical phrase : 6. Economics is the science that formu- lates the exchange of labor products. The three terms, labor, exchange and prod- uct are inseparably connected. That only is labor which results in an exchangeable prod- uct. That only is a product which is the re- sult of labor and which is exchangeable. That only is exchange which contemplates a trans- fer of the products of labor. However laboriously this book may be written, it is not an economic quantity if no publisher will publish it. The unpaid in- vestigations of the devotee of science, the hardships of the polar explorer, invaluable as their achievements may be, are not labor in the economic sense. So, too, with the large 22 ECONOMICS OF LIBERTY amount of work that is done gratis by societies and committees, with no material return. A man may be occupied every waking minute, and wear out his life with hard work, yet never perform a single act of economic labor, nor ever put forth an exchangeable product. THE ECONOMIC ORGANISM CO great is the complexity o£ modern indus- try, so innumerable are the branches into which it subdivides, so minute the subdivi- sions and so involved their connections, that it seems almost hopeless to reduce the whole to anything approaching order. Nevertheless some partial and imperfect classification may be made. All industry may be arranged under three or four general heads. First, what has been called extraction, that is to say, gathering the original supplies of nature, as is done by the miner, the fisherman, the hunter. Next to these are the arts of cultivation, whereby the natural product of plants and animals is much increased; which easily di- vides itself into two branches, the one devoted to the cultivation of animal, the other of vege- table products — grazing and farming. After these comes the division of manufac- ture, which deals with materials obtained from the natural state by the extractors or by the cultivators, and classifiable in three grand divi- sions : clothing, the first need of humanity after food; shelter, which succeeds clothing; and tools, which accompany every art at all stages, and might almost rank as the first need of humanity. To these we may add transporta- tion. (23) 24 ECONOMICS OF LIBERTY Finally, there is the class that embraces those whose personal services are all that is given; no material product in any form being the result of their activities. This class com- prises doctors, teachers, actors, ministers, business managers and the like. Each of these classes is susceptible of subdi- vision into minor groups, and these again into the various individual occupations of which they are composed. It is possible therefore to arrange the industrial divisions in tabular form after the manner of a genealogical chart, and an attempt at such a partial tabulation is shown on the opposite page. Industry is thus seen to include the simplest activities, as well as the most complex; the sole condition being that the product shall be desired by others for their gratification and therefore be exchangeable. The word product is applied alike to all the varied results of industry. A pail of water is the product of him who carries it from the spring, or pumps it from a well. A hatful of berries is the product of him who gathers them, if found growing wild, or of him who plants, prunes and waters them, if they are the results of cultivation. A calf is the product of him who has captured it in a wild state, or of him who has housed and fed the mother cow. They who suppose that the increase of the cultivated field or flock is a natural increase, rewarding the owner beyond the amount of THE ECONOMIC ORGANISM 25 Tabulated Classification of Industrial Occupations Extractors Cultivators ° i Manufacturers Hunters Vegetable gatherers Mineral gatherers f Graziers Farmers Tool maker; Builders Clothiers Carriers Animal hunters Fur hunters Feather hunters Fishermen I Lumber ) Turpentine ') India rubber ( Truffles Miners Quarrymen Well diggers Cattle Sheep Horses Ostriches Food supply Foresters Silk growers Machinery Masons Carpenters Plumbers Weavers Tailors Milliners { Pearl divers Whalers Coal Oil ( Pi Precious stones Grain Vegetables Fruit Professional Business men Teachers Entertainers Doctors Managers Clerks Salesmen i Actors Ministers Singers Jugglers Surgeons Dentists Veterinarians 26 ECONOMICS OF LIBERTY labor involved in the care of either, will find that the facts indicate the contrary; namely, that the price of the increase is in proportion to its average cost in labor, and exceeds it only by the minimum that constitutes the wages of the seller, approximating that of the aver- age daily wages in other occupations. Thus, again, a fish is the product of him who has hooked it. If it is carried ashore and sold by another person, it is the product of the fisherman and the marketman jointly. If it is turned over by the latter to a third, to be preserved on ice for an occasion when it may be sold, it becomes the joint product of all three, transportation and preservation be- ing as truly acts of production as the hooking itself of the fish. And the fish is the product not only of these, but of the man who has cut the ice dur- ing the winter previous, and of him who has stored it in the interval, and of the boatbuilder that furnished the fisherman with his boat, and the lumberman that cut the timbers for it, and the man that made the nails to fasten the timbers together, and the miners that dug the iron and coal wherewith the nails were fashioned, in an endless network of ramifica- tions. The sole condition of human activities that is necessary to reckon them as labor in the economic sense, is that their product shall be exchangeable. By this test the services of the devoted physician are labor, as truly as those THE ECONOMIC ORGANISM 27 of a blacksmith or coal trimmer; because others will give him of their products in return. In a state of society in which each man must do all the various kinds of work necessary for his existence, without exchanging his services for those of others, economic conditions do not exist. Such a state perhaps never prevails in completeness at this day: approximations to it are found among primitive tribes and in primitive communities. In my youth I have often conversed with a farmer, at that time an old man of eighty years or more, who delighted in telling of the mode of life in his youth, on an isolated farm, which was the same for all other farms of that day. Everything used by the family was pro- duced by its members — ^food, clothing, build- ings, even tools of forged iron. Wool and flax were grown, spun, woven, cut and sewed into garments, and leather was tanned from the hides of slaughtered cattle. The only outside worker was the cobbler, who visited each farm on his annual rounds, making shoes for the family, from leather furnished from their own stock, to last for the ensuing year. In such a society, there is but the germ of an economic organization. It is only when tasks are divided, and exchange of services is general, that the organization of an economic society begins. We have spoken of the complexity of sub- division that soon follows the earliest organi- 28 ECONOMICS OF LIBERTY zation of labor — a complexity so involved in a fully developed economic society that it seems at first glance impossible to unravel or explain, like a huge machine, with its innumer- able wheels and belts and cams, all moving in opposite directions and at various rates of speed, and each of which must fulfil its func- tions smoothly, from the great fly-wheel to the tiniest spring. In order to reach any clearness of concep- tion, it becomes necessary in economic demonstrations to suppose hypothetical so- cieties, consisting of a limited number of in- dividuals, sometimes as small as two or three, and never beyond the easy grasp of the mind, among whom certain relations may be shown to be inevitable. Such hypothetical groups correspond to the diagrams used in geometry, or to the symbolism of algebra, presenting fundamental facts in such brief and compact form that their relations can be determined by mere inspection. The validity of such a method of demon- stration is based upon the definition of com- merce that we have laid down, as the exchange of services among men. The principles that govern a transaction between two individuals, or among a hundred, are the same that rule when a thousand or a hundred thousand are involved. Some such device is indeed essential, if we are to reach any conclusions at all, in the face of the rush and roar of modern commerce; as THE ECONOMIC ORGANISM 29 the geometricians diagram of the curve of wave motion clears up problems of hydraulics that could never be solved by merely watching the dash and swirl of the tumbling breakers. We are now in a position to approach the series of formulas that together constitute economic science. Proposition I, All production leaves a surplus. Conceive the primitive producer laboring alone. At first almost his whole time is oc- cupied in searching for roots and berries and in the hunt. He must soon find leisure in which to build his hut: the hut, being in ex- cess of the bare living which he had gained be- fore, is a surplus, which remains in the posses- sion of the producer, not only augmenting his comfort, but increasing his power of further production. Then each day sees an additional increase in his possessions : Clothing is made, a horse is captured, a corral is built. With a mount, the chase becomes easy, and surplus time is left for the first planting of seed. Soon the crop gives an assurance in advance of a living for a season, and there is still more time left for the production of a further surplus. The continually increasing surplus, each day larger than on the preceding, because it is the purpose and the result of each surplus to facilitate further production, this growing sur- 30 ECONOMICS OF LIBERTY plus grows with still greater rapidity with the beginning of associated effort. Division of labor, by which each one does that which he can do best; commerce, by which he exchanges his product for those of others; tools and machinery, by which the product is increased a hundred or a thousand fold, with no increase in labor ; all these unite to make the product of the civilized man incred- ibly greater than that of his primitive brother. It is not easy to realize this, on account of disturbing factors that affect the results. At first glance, the modern laborer appears to be but little better off than his savage prede- cessor. A dark room in a tenement is not so much to be preferred to a tent in the open; nor is the fare of the modern worker very much better than that of the more advanced barbarous tribes — let us say of the Pueblo Indians. The reason is that by legal methods which we have consecrated, the surplus does not be- long to him who produces it; but is diverted from his possession, and put into the hands of others. From this point of view, the fact that an enormous and ever-increasing surplus is pro- duced needs no demonstration. The vast stores of wealth which we see before our eyes accumulating daily, at an ever-increasing rate, in the hands of a few, are the surplus product of labor, which would bring abundance and ease to all, if it were not snatched from them THE ECONOMIC ORGANISM 31 by means so obscure that it needs all our at- tention to explore them. Proposition II, Capital is the surplus of production. The economists have always staggered when they attempted to define Capital, be- cause they failed to reduce the conception to its elements, and tried to make a definition which should include the artificial disturbing forces which distort capital from its natural forms. Accordingly they have tried to divide prod- ucts into those which were consumed and those which were used for further production, into fixed capital and floating capital, and so on. No such distinction is necessary. The food that a man eats, the house in which he lives, the carpet on his floor, the clothes on his back, are as certainly used in furthering production, although indirectly, as are his tools, his machinery, his factory or the coal in his boiler-room. The exertion of the higher faculties de- pends, to a very large extent, upon surround- ings of comfort, even of luxury. An astron- omer, or a musician, or a painter, or an in- ventor, could accomplish little if he were housed in a fireless tent; for, besides the dis- comfort that numbs the faculties, there is no 32 ECONOMICS OF LIBERTY place for permanent accumulation, no furni- ture wherein to keep books or instruments, no objects of art wherewith to stimulate the mind. Thus, our domestic and personal posses- sions, and even the food that we eat, are as clearly essential for further production, al- though indirectly, as are the various appli- ances which are directly used. FREE EXCHANGE "DY free exchange is meant such exchange of services as will occur among men each of whom is guided in his actions solely by his own judgment of his own interest, subject only to the material limitations of the world in which he lives, but not restrained by the will of other men. This seems a roundabout way of saying a simple thing; but it is really the whole ques- tion of freedom that is involved, not only in exchange, but in all relations ; and the state- ment is meant to cover the carping of them who are wont to say, "None of us is free; we are all limited by circumstances; we are all slaves to our passions . . . and so on" when- ever any question of free or not free is raised. It is not deprivation from lack of ability or opportunity that is intended. When the rising tide threatens to surround us, we do not complain that we are deprived of liberty because we are compelled to run, to escape being cut off and drowned. Nor do we say that we are enslaved if we find that it is impossible to raise bananas in a northern climate, because the season is not long enough to ripen them. On the contrary, it is precisely the freedom to adapt our actions to circumstances that we call freedom; and it is only when we are re- strained from doing so by the will of another (33) 34 ECONOMICS OF LIBERTY human being like ourselves that we call it slavery. Such a state of freedom has never existed in the past, and does not nov^ exist ; yet toward it, through all the centuries, the world has been moving, and is now, perhaps, in sight of the goal. We still labor, subject to the will of him who permits us to labor, but does nothing himself — the landlord. We still exchange, subject to the will of him who permits us to exchange^ — the banker; but we have escaped from the conditions of chattel slavery and of feudal serfdom of the past. Postulating such a condition of freedom, the mode in which ex- changes must occur is self-evident. In the relation of master and slave, it is im- possible to predict what exchange of services will take place. The slave is forced to give as much service as the master chooses to exact; while the master, in return, gives as little as it may please him — a hickory shirt and trousers a year, with corn meal, pork and molasses for food, or as much more liberally as he may prefer. The exchange, however, can- not be predicted ; it is entirely arbitrary — a matter of the proprietor's choice. So again, if two men were exchanging peas for potatoes, the transaction would be carried out on terms that each esteemed fair, if both were free; but if a third party stood by, em- powered to take all that he could seize, by force or fraud, of both peas and potatoes, the trans- FREE EXCHANGE 35 action would terminate differently, and in a way that could not be predicted. Proposition III, In a state of freedom, products are ex- changed for equal products. For, in the absence of compelling causes, no man would accept less of the product of an- other in exchange for a certain amount of his own product than could be produced by him- self with an equal amount of exertion. "Give me two bushels of your carrots, and I will give you two bushels of my potatoes,'* says a farmer. "That will not do at all," re- plies his neighbor, "if I had planted potatoes, I could have raised three bushels of them as easily as two of my carrots. I will trade only on those terms — two of my carrots for three of your potatoes." "Come and help me catch some fish; you shall row the boat, and I will hold the line, and of every four fish that we catch, you shall have one." "Why only one?" replies his friend; "why not equal shares?" "Because I am so much more skilful than you that I deserve the larger share." "Granted that you are the most skilful with line and hook; but what would your skill avail you without some one to row? You could not catch any fish at all from the dock." "I know that I could not," replies the first, "but any one can row, while it takes a 36 ECONOMICS OF LIBERTY clever man to fish." "No, I will row only for an equal share of fish." And, as an oarsman is necessary for a fisherman who would fish from a boat, the equal agreement is made.* It is only by reducing transactions to these simplest conditions that the essential equality of services becomes manifest. In both these examples the conditions are simple and equal for both parties. In more complicated transac- tions, the equality is not self-evident; espe- cially as our ideas are distorted by the prevail- ing system, which is based on an artificial inequality. But in a state of freedom, the rougher kinds of work would exchange on equal terms with the gentler, because the product of the rough work is as necessary as that of the gentle work. It is true that if hodcarriers were paid as much as merchants all sorts of evils might ensue. They might acquire ideas entirely "be- yond their station"; their children might be educated as well as those of the merchant him- self; and no one can tell what other catas- trophes might not happen. On further reflection, it would appear that perhaps an educated hodcarrier might not be such a bad thing after all. There are many college-bred athletes who would make excel- lent hodcarriers; and there is no reason why a well-bred hodcarrier should not be an agree- able companion for any other well-bred person. * See Appendix I. FREE EXCHANGE 37 Proposition IV. "The product of labor in exchange is meas- ured by the time required for its production. This proposition, which is obscure when ap- plied to the exchange of material products, is self-evident when applied to direct exchange of services. If two men, seeing the advantages of work- ing together, one being a farmer, the other a carpenter, agree to aid each other alternately, the carpenter working for the farmer on one day, and the farmer for the carpenter on the next, the exchange is necessarily made on the basis of equal time of service. No man in his senses, and free from the complicated causes that now compel him to work for a minimum, would agree to work two days for another, in return for each day that the other worked for him. In the case of the fisherman above instanced the agreement is necessarily for an equal share of the product, the time devoted by both the oarsman and the angler being the same. It is only in these simplest cases, however, that the necessity of time measure can be traced ; and it is upon these primary examples, especially of the direct exchange of services, that the elementary truth of the proposition must rest. The great variety in the nature of occupations makes a direct comparison impos- sible in the more involved cases. 38 ECONOMICS OF LIBERTY A surgeon, for example, is not expected to be performing operations during all his waking hours. The time required for reading and study, attendance at clinics, and repose after the excessive strain of a surgeon's task, make the actual time measurement of his work very brief, in comparison with the whole working day. In the same way, an opera singer is not ex- pected to sing every day for eight hours con- tinuously; nor could she under any system of equality. Practice, rehearsal and rest are all a part of her services, which appear to be per- formed in a brief evening hour. So again, a teacher is expected to do actual teaching for but a portion of the day, the nerv- ous tension during that time being excessive. What it really reduces itself to is not the exchange of hour for hour, or day for day, of service, but of lifetime for lifetime. Owing to the far from free conditions at the present time, we often see a very different state of affairs today; some of the most ex- hausting and life-destroying trades being among the worst paid. This, however, is pos- sible only by the partial enslavement of the laborer. Instinctively, even at the present time, men appeal to the standard of a lifetime of work unconsciously, and without any clear appre- hension of its full meaning. Often we hear, in reply to a suggestion that the price for cer- tain services is too high, the statement : "Well, FREE EXCHANGE 39 I do not make more than a fair living," urged in justification. And the commercial rejoinder, "What do I care for your living or dying, if I can find somebody else who will do it cheaper?" com- monly supposed to be the irrefutable and ir- remediable ultimatum, is shown to be possible only under abnormal conditions, and the justi- fication of the worker to be the really scientific attitude. VALUE 'T^HE word "value" is generally used in two entirely different senses, and as a result, confusion occurs in discussions in which value is involved. In the first place, value refers to the utility of the valued object and we say that we value it in proportion to our need of it, that is, to its usefulness or necessity to us. Bread, for instance, is of great value, as it is essential to support life, and so with other food. Clothing, shelter and fuel are all neces- sary for life, and are all very valuable, in con- sequence of their prime necessity. In the second place, value refers to the money price paid for the thing, and not to its utility at all, as when we speak of the value of a twenty-thousand-dollar diamond necklace, which is of no utility, still less a necessity of life. Not only are the ideas denoted by the word value different, they are really opposite. It is not the most costly things that are most nec- essary to life, but, on the contrary, the cheap- est. Water, bread, oatmeal, potatoes, salt, are among the cheapest commodities, yet what is more essential for life than these? Meat and coal, although costing about three times what they would if they were not monopolized, are still not expensive compared with unnecessary things. (40) VALUE 41 A seat at the opera may cost the price of a ton of coal, yet the latter is a necessity, the former only an adornment of life. Everywhere we find the unnecessary and superfluous is the most costly, in direct proportion to its futility and superfluity; and the essentials of life cheap, in proportion to their necessity. We must find some general conception of value that will unite in itself and harmonize these two antithetical ideas. Proposition V, Value is the proportionate relation of prod- ucts in exchange. Imagine a community, self-contained, con- sisting of a hundred producers, divided as shown in the tabulation (see Table I, at the end of the book). In the first column we have the representa- tive occupations, and the number of members of the community that are engaged in each. In the second column is the average product of each, assumed as an entirely arbitrary figure, and not in the least as a representa- tion of the facts, as it is only the proportional and not the actual relations that we wish to investigate. Now, it is evident that each member will have his whole product, except such portion as he may retain for his own use, to exchange for proportional amounts of the products of the 42 ECONOMICS OF LIBERTY others; and that he will require an average amount of one hundredth of the total product in each branch of production, making the total share of each equal to the one hundredth part of the whole product, and all the shares equal to each other. It is true that the needs of each will vary. Some, who have been provided with a house, will not need another until the first is worn out. Others will want more of transportation and less of tools. Others, still again, will need more medical treatment, at the sacrifice of a portion of other things. Production will also vary. Some from in- ability, some from sheer laziness, some from a philosophical scorn for superfluities, will pro- duce less than others, and will be content with a less return. Nevertheless, each having a cer- tain average amount of product to exchange, the average of the exchanges must result as the table indicates ; that is, in an average equal share of the total product for each producer. This is evident from consideration of the simple conditions shown in the first four columns; column III being the total annual product of each occupation, and column IV the average share of each member, that is, the amounts in column III divided by 100. In column V are the amounts of products that will exchange for each other, the exchange being supposed to be conducted by barter. It is clear that if the entire amount of the product of one individual will exchange for the entire VALUE 43 amount of that of another, that is, if 100 bushels of grain exchange for 12 cows, the same proportion must prevail when any one commodity is used as a unit. Thus, taking one bushel of farmer's product as the unit, it will exchange for .12 of a cow, or .30 of a book, or 2 miles of transportation, and so on with the other items. It is this exchangeability for a certain and definite proportion of other commodities that constitutes value in use, or utility, as we may more briefly call it, as opposed to value in ex- change, or simply, price. This second aspect of value is shown in column VI. Here the money prices of the various items are calculated in the usual way, the price of a bushel of grain being taken as the unit. If, in column V, a bushel of grain exchanges for .12 of a cow, a whole cow will exchange for 8.33 bushels, or $8.33. After making all the calculations of prices, we compare them with the figures in column V, and find that they are reciprocals, and may be obtained from each other by simple inver- sion. The total relative quantities of products re- quired by the community, as shown in column I, or the proportional exchange quantities, as shown in column V, are the mathematical measures of the utility of products; the pro- portional amount of money required to pur- chase a unit of each product, as shown in 44 ECONOMICS OF LIBERTY column VI, are the prices, which are neces- sarily reciprocals. The general reciprocity between value in use, or utility, and value in exchange, or price, which we have noted; by which the most necessary products are the cheapest, and the comparatively unnecessary the dearest — this general reciprocity is thus seen to be not merely general but specific. Their reciprocal nature is more distinctly shown by a special instance, as shown in the tabulation. Suppose that one of the toolmakers changes his occupation, and makes the search for diamonds his special business. The product of the diamond seeker will be the equivalent of the 15 tools before produced by him. Assum- ing that he finds only one diamond a year, each member of the community will be entitled to the one hundredth part of a diamond (column IV), and the price of one hundredth of a diamond will be one bushel of wheat, or 100 bushels of wheat for one diamond— two and a half years' provision of food, the fundamental need of life, for one useless gewgaw! This result , which is denounced by the moralist because he does not understand it, is seen to be the inevitable result of the division of labor in proportion to the need for the prod- uct. The greater the importance of any prod- uct, the more members of the community must devote themselves to its production, and the VALUE 45 larger will be the quantity that can be, and that must be, exchanged for other products. Value, then — absolute value — ^including both utility and price, is seen to be a proportion. It is the proportionate relation of the amounts of products required by the needs of the com- munity. Value, regarded as utility, is measured by these proportional amounts in gross, as in column II, or by the equivalent proportional amounts in exchange, measured as fractions or multiples of any one product, as in column V. Value, regarded as price, is the same pro- portion differently phrased, as in column VI, in which the proportional amount of a unit of each product is given, compared with a unit product. Thus the antithesis between value in use and value in exchange is merged in the larger meaning of the word value, which includes both, as opposite faces of the same fact. All this is in contravention of the usual economical dictum, that value is essentially arbitrary, and that it is determined solely by supply and demand. Demand and supply do indeed determine value, but not in any arbitrary or fanciful fashion. If the farmers' crop were only half the usual amount, its value would necessarily double; and if a book failed to meet the ex- pected demand, the stock of it would fall in value. Such fluctuations in supply and de- mand, with corresponding fluctuations in value. 46 ECONOMICS OF LIBERTY are continually at work, but under a com- pletely organized industrial system they would not be wide and violent, as they are at present. Even at the present time, when privileges and monopolies of all kinds upset the course of free exchange, something of the effect of pro- portionality upon price is observable. The most powerful monopoly cannot raise the price of a commodity beyond a certain limit. The coal combination, while it may force the price of coal to ten dollars a ton, in- stead of three dollars, as it might perhaps be under free exchange, finds a point beyond which it cannot press its demands. It cannot possibly charge ten thousand dollars a ton, nor one thousand, nor a hundred, nor even twenty. It must sell at some approximation to the normal price, as determined by the relative amount of coal required. In column VII are shown the average amounts of each product that each member must receive as income or consumption, or, what is the same thing, must disburse as ex- penditure. These amounts are found by multiplying the proportional shares in column IV by the prices in column VI. We observe, with some aston- ishment, that these amounts are directly pro- portional to the number of members that de- vote themselves to the various occupations in column I. This remarkable equation leads to the con- clusion that what really is determined by de- VALUE 47 mand and supply is the number of producers that shall devote themselves to each branch of production. That settled, the value, whether utility or price, is settled also; and is not sub- ject to sudden or excessive fluctuations. To make this clearer, suppose that, owing to the increased efficiency of the tools produced by the toolmakers, the product of the tailors was doubled. Manifestly, if this were to oc- cur without some further adjustment of the economic relations, the surplus product of the tailors could not be sold. The real outcome would be that fewer mem- bers would devote themselves to tailoring. If the tailors' efficiency were doubled, only half the number would be required to produce all the clothes that the community could wear; that is, four instead of eight, leaving the other four free to devote themselves to producing additional luxuries. The results are shown in the lower two lines of the tabulation in Table I. In place of 8 tailors producing 20 suits each, 4 would produce 40 suits each, but the same total amount — 160 suits. This would give each member of the community 1.60 suits for his annual supply, an amount just equal, by hypo- thesis, to the demand. Yet, in the face of this equality, the price could be only half of what it had been before — $2.50 per suit instead of $5.00 — leaving an equal amount to exchange for the additional luxuries, which the 4 released tailors would devote themselves to producing. 48 ECONOMICS OF LIBERTY The clear conclusion is that by reducing the proportionate number of the members of a community which is required for the produc- tion of a certain product, the price of the prod- uct is reduced also, although the demand for it and the supply of it remain unchanged. This conclusion is supported by the ob- served facts. We continually find commodities cheapened by the invention of machinery for their manufacture, making their production by a smaller number of individuals possible, al- though the supply and demand remain sub- stantially unchanged. These results are often obscured by an additional premium paid to the holder of the patent privilege, or by some trade combination to keep the price up. An instance may be seen in the manufacture of shoes. By improvements in machinery, and still more in organization, shoes have been re- duced to half their price in the past, with im- provement in the quality; the proportionate number of shoes worn being, no doubt, some- what greater, but by no means in proportion to the reduction in price. We may set down these conclusions in the form of propositions. Proposition VI, Tfte average share of each producer is equal to the total product divided hy the number of producers. VALUE 49 Proposition VIL The average expenditure of income of each producer is in direct proportion to the num- ber of producers of each product. It is to be especially noted that, in a condi- tion of freedom, the price of labor is identical with the product of labor. The reward of labor is its whole product; not, as at present, a part, and often a very small part, of its product. The cheapening of any product by improve- ments in the methods of production does not diminish the income of its producer. He will indeed at first cut down the price, in order to secure increased sales ; and the reduction must be to just that point at which the increased sales give him a larger income. Others who produce the same product must adopt the same improvements, if they are still to compete in price; and they will do so just so far as they are compelled, by finding a portion of their product remaining on their hands unsold; the larger amount sold by their competitors being sufficient to satisfy all demands. This will continue until some of the pro- ducers of the commodity in question, being the last to adopt improvements, will find them- selves unable to make a living; the larger amount produced by their competitors being sufficient to satisfy all demands; and they will be forced to take up some new branch of pro- duction. 50 ECONOMICS OF LIBERTY At the same time a fund is provided ready for them in their new occupation. The benefit of the improvement is spread over the entire community by the lower price at which all the members can now obtain the product in question. The surplus remains in the hands of each member, ready to reward those who have entered upon the production of some new product, to satisfy a want hitherto unprovided for. There is no limit to this process. The new wants and tastes and desires of mankind that arise after their first needs are satisfied are lit- erally limitless; and the same progress that leaves an unexchanged balance in their hands that may be exchanged for new luxuries, at the same time sets free a proportionate body of producers, ready to produce the new luxuries. The reward of the producers grows as the products of their labor cheapen. That is, the more things are produced the larger is the quantity of each that can be exchanged for others, and the cheaper are all products ; while at the same time, and with the same exertion, the producer receives a larger variety and an increased total amount of products. Thus we reach : Proposition VIIL The reward of labor rises as the prices ot products fall. This is as it should be. Clearly, if every- body is producing more products and a greater VALUE 51 variety of products, everybody's reward, meas- ured in products, will be greater, while the products themselves will be cheaper. The cheaper things are the dearer labor will be under free exchange ; instead of, as now, the price of labor being lower when the price of things is lower. The present state of affairs is indeed an intolerable economic absurdity, which prevails, and can prevail, only when the laborer is partially reduced to slavery. If he were completely reduced to slavery, his body would have a market price ; and it is only because he is partially reduced to slavery that his labor now has a market price, rising and falling with the market prices of other com- modities. It is in this way, too, that our first proposi- tion, that all production leaves a surplus, is exhibited in the organized community. The greater production, which is the necessary re- sult of invention, immediately results in a low- ering of prices, and the freeing of a portion of the producers for the production of new and before unthought of refinements. At the same time, a proportional amount of products is freed, for the compensation of the workers who would otherwise be thrown out of work. EQUALITY n^HE dream of the ages, the equality of all men, financially as well as politically, is then no dream, but a cold mathematical fact ; to which the hypothesis of free production and exchange necessarily leads. It is true that neither free production nor free exchange yet exists; nevertheless all the tendencies of the progress of the world are to- ward such a condition of freedom. In time, and in no very great time, it must be attained, unless some such setback should again occur as occurred at the fall of the Roman civiliza- tion. That such a setback should come seems impossible to our present sight ; it is well there- fore that we prepare our hearts and minds for what our great-grandchildren may see, if our grandchildren do not. For the present system of misery and super- fluity; of want for most and destitution for many, that a few may have too much; of the insolence of wealth and the cringing of pov- erty ; of satiety and ennui on the one hand, and the gulf opening at their feet on the other — this modern civilization, which it is heresy to hint is imperfect, is almost worked out; has almost reached the impossible stage, when in- stitutions fall of their own weight, with no hand raised to overthrow them. Yet there are some who cannot see the lan- tern held by Progress to light their path; to (52) EQUALITY 53 whom the present reign of unreason and in- equality appears to be final ; to whom the sug- gestion of equality as the foundation of the coming civilization will seem the prospect of hell rather than of heaven. "What," they will shriek, "do you mean to reduce all men to a dead level; to apotheosize dull sameness and monotonous uniformity; to lower the brilliant, the intellectual, the vir- tuous, to the same plane with the stupid, the idle, the vicious ! Do you want to build your civic halls and churches with their domes and steeples on the ground and their foundations in the air? It is a pretty world of topsyturvy- dom that you propose !" Where fear rules, reason is silent. Is it indeed true that equality in wealth is such a terrible thing? Is it to be apprehended that such equality means a dead level of mediocrity — a triumph of incapacity? Not in the least. It is only to the disordered imagination that these green and yellow bogies present themselves. The smallest consideration will show, what is today so conspicuously the fact, that inequal- ity of fortune, as it now exists, obscures, and at times entirely conceals, the distinction that mental or physical skill or strength would otherwise secure. It is the glitter of wealth that is at the foundation of our social distinc- tions, and of most of the recognition that we give to the individual. 54 ECONOMICS OF LIBERTY Take away this inequality; let wealth reach the approximate level that it must some day reach; and the money estimate of a man van- ishes, and his real worth is for the first time made the basis of our esteem for him. After all, what is there so terrible in the idea that a coalheaver should be a companion in- tellectually for a professor? Are there not many professors of powerful physique who would really prefer an outdoor life of physical activity? Are there not many handworkers who, in everything but polish, are fully the equals of many of the professional class? Difficult as it may be for us to admit it, there is no reason why, with equality of reward, all kinds of manual labor should not deserve and receive equal social esteem with professional occupations. Even now among the wealthy there are many whose manners should exclude them from well-bred society; yet all these things come with an increase in the reward of labor. The first generation may be an impossible set of barbarians outwardly, but inwardly they have all the capabilities of the most polished circles. The next generation will acquire such knowledge as may be obtained from schooling ; and in the third, at least the beginning will be attained of that combination of self-respect and gentle manners that we call good breeding. One of the most polished men that I have known was the son of a washerwoman; an- EQUALITY 55 other, a bricklayer's son, became a Greek scholar and a poet. The most frequent excuse for inequality of reward is that inequality of fortune must exist as long as the inequality of talents or abilities is so great. A statement of the case which appears plausible, and indeed is irrefragable under the present form of society, in which labor is bought and sold like cheese. With freedom of production and exchange, a little consideration will show that inequality of abilities is an essential condition for equality of incomes. At present, the market for labor follows the same rule as the market for commodities; the most necessary, and therefore most abundant, labor is the cheapest, the rare and luxurious is the most costly. The bricklayer and the butcher are paid but little, while such luxuries as a bank president come high. But, under freedom, labor ceases to be a com- modity. The bricklayer is as necessary to the architect as the architect is to the bricklayer — more so, indeed, as forty bricklayers are needed for one architect. Relying on his value, and enabled by freedom to find a full demand for his services, the bricklayer will esteem his labor as equal to that of the architect, and will ex- change only on equal terms. It is true that the routine occupations, such as digging, tending a machine, and the like, require neither special education nor excep- tional gifts. On the other hand, such routine 56 ECONOMICS OF LIBERTY occupations are peculiarly irksome, especially to men of exceptional gifts. But both the men of exceptional gifts and the work that requires them are rare ; while the ordinary men and the ordinary jobs are abundant. If every man wanted to be captain, there would be no sailors ; yet that is no reason why the sailors should go on short rations. If all men were equally capable and all de- sirous of doing the same thing, society could not exist. It is because each man is different from all others that the infinite division and subdivision of occupations becomes possible, which is the foundation of an industrial society. It is not to be supposed that the equality of a developed social organization will be an abso- lute, cast iron, precise, mathematical equality of income. There will always be minor differ- ences from various causes. Some will prefer to work less, and to receive less. Differences in natural ability that are not covered by dif- ferences of calling will still exist. But the differences will be moderate and temporary, with as powerful a tendency, active all the time, toward equality, as there is now toward in- equality. PRIVILEGE TT is time for us to consider the disturbing forces, to which allusion has been made, which prevent the free action of industry and the substantial equality of fortunes, that in the absence of these forces would prevail. Conceive that in the typical community tabulated in Table I, a certain number of the members, ceasing themselves to produce, were empowered to take from each of the remaining members a portion of his product. Such power over the persons or products of men is called privilege; and such privileges have always existed in the past and still exist, in mitigated, but not less powerful forms. Just what the privileges are by which this is accomplished, we need not now dwell upon. At present our business is with the operation of privilege in general — abstract privilege — the power of one to command the services of an- other without compensation. In order to show the working of privilege, let us construct another table (see Table II. at the end of the book), showing the same community of 100 persons, with the results that occur when they are deprived of a certain part of their products. We deal here only with the total number of members; not with the separate branches shown in the previous table. (57) 58 ECONOMICS OF LIBERTY The first line in this new tabulation shows the natural equal distribution of products, where privilege does not exist. The total product, symbolized by 100, is divided equally among 100 persons, giving to each a share de- noted by 1. If we suppose that ten per cent of the mem- bers, ceasing themselves to produce, are privi- leged to take from each of the remaining pro- ducing members twenty per cent of his product, an entirely new and unanticipated state of af- fairs supervenes. Each of the privileged class will receive a portion in excess of that received by any of the producers, denoted by 1.80. With this ex- cess, for which indeed there is no other use, privilege will be enabled to support a certain additional number of the producers as personal servitors. Thus the proportion of the privileged grows rapidly ; as these personal servitors, thus enlisted in the service of privilege, become at once a part of the privileged class, by virtue of their new allegiance. Privilege appoints one a policeman, to keep order in the ranks of the workers, and to pre- vent them from exhausting their productive powers in idle quarrels, or from doing or say- ing anything questioning established privi- leges. Another is appointed a judge, another a law- yer, whose functions are to erect a body of rules favorable to privilege. PRIVILEGE 59 Yet others will be priests and ministers, whose business it is to encourage reverence for privilege, and to foster a code of morals having no relation to the real requirements for justice, but composed of conventional rules calculated for the support of the existing order. Others, again, will be made teachers and professors, to inculcate in the young respect for authority and submission to privilege. Finally there will be still others, called soldiers, armed, adorned and adulated, ready at com- mand to kill those who may attack privilege. These, together with their masters, the hold- ers of privileges, constitute the privileged order in our present society, and constitute also the nonproductive class; for, no matter how hard individuals belonging to it may work, nor how satisfactory their efforts may be to their mas- ters, they produce nothing exchangeable, and their functions would be superfluous in the absence of privilege. No doubt, in the most perfect society, there would be differences to be composed and limi- tations of liberty to be defined, but between the arbitrator, earning an income equal to the rest, and maintaining his vocation by the justice of his decisions, and the present semidivine crea- ture, with his court paraphernalia and pres- tige, the difference is generic. So also is that between the military arma- ment of privilege and the theoretically possible, but practically hardly necessary fighter for liberty. 60 ECONOMICS OF LIBERTY Table II shows the relation between the por- tion of the product which is taken by the con- tinually growing nonproducing class, and that which remains for the producers. At first, we suppose that only ten per cent of the membership belongs to the nonproduc- ing class, and that twenty per cent of the prod- uct is taken. This will leave 90 producers, and the total product will be 90. Of this, by the hypothesis, the nonproducers are to receive 20 per cent, which is 18; the rest, 72, remaining for the producers. Thus, although the total product has been reduced only 10 per cent, the share of the producers has been cut down 28 per cent. In the same way, as privilege gradually in- creases its encroachments, the total product continues to diminish, as shown in the succeed- ing lines in the table, because more and more producers are withdrawn from production ; and the share that the remaining producers receive diminishes still faster, as the ratio of the part taken by privilege increases. In column VII, the share of each producer diminishes in arithmetical progression, from .80 to .60, .40, .20. In column VIII the part taken by each nonproducer also diminishes, though its relative increase is very great; the diminution running from 1.80 to 1.60, 1.40, 1.20, in an increasing ratio to the share of the pro- ducer. This increasing ratio between the parts taken by the producer and nonproducer is shown in PRIVILEGE 61 column IX, changing at first by a fraction, then at one step doubling, and with another leaping out into infinity. The table represents a theoretical condition which is never completely realized, in which the rate of production remains constant. In all progressive societies, mechanical in- ventions have so vastly increased the amount of individual production, as to far more than counterbalance the depletion of the ranks of the producers by privilege; so that the individual product, instead of remaining constant, should increase in rapid progression, to represent at all adequately the state of modern society. Such is the condition shown in the revised table. (Table III, at the back of the book.) Here the individual product at each succes- sive stage, as shown in column III, is assumed to be double that of the previous period, in- stead of a constant amount. Just what the increase really is would be impossible to deter- mine; nor does it matter, as it is a general principle that we seek, and not a special case. As might be expected, the actual shares of both producers and nonproducers are enorm- ously increased by the rapid growth of pro- ductive capacity. This increases as 1, 2, 4, 8, in column III, and the total amounts, in column IV, would be proportionately great, were it not for the diminishing number of producers, although, at first, the diminution is not rapid enough to overcome the advantage gained by the growth of productive power. 62 ECONOMICS OF LIBERTY The combined result of this increase in prod- uct and decrease in the number of producers is shown in column IV, which represents the total product, and increases by strides, yet not so fast as the rate of individual production, being 100, 180, 320, 560, compared with 1, 2, 4, 8, in column III. Now of these total amounts the producers will receive, at any period, a share represented by a certain percentage of the product, dimin- ishing more rapidly than the numbers of the producers. From the 100 per cent which is received when privilege takes no portion, it will decline to 80, 60, 40 per cent, as in column V, while the number of producers declines to 90, 80, 70, and so on. In spite of the extremely rapid increase of the factors in column IV, the products of these by the diminishing rates of percentage in col- umn V show a maximum at the fourth step, thence falling to zero, even more rapidly than they had increased. The last step, in which privilege takes the whole product, is manifestly impossible, as something, however little, must be left for the workers to live upon. The returns to the privileged nonproducer grow fast, as shown in column VIII, almost doubling in each of the first two steps from 3.60 to 6.40, and from 6.40 to 11.20; but at the same time the returns to the worker also in- crease from 1.60 to 2.40 and 3.20. At this point, however, the returns to the worker reach PRIVILEGE 63 a maximum, while those to the nonproducer continue to increase. This explains how it is that the workers may be in an apparently flourishing condition, as it is often pointed out that they now are, while ruin is nevertheless impending. It is true that the producers now enjoy many comforts and luxuries which formerly they could not obtain; but when it is argued that they should therefore demand nothing more, this demonstration confounds the conclusion. It shows that society has now reached or is approaching the maximum stage, represented in column V by a total share of 224 for the producers ; and that if the portion taken by the privileged is increased beyond this, even by a small advance, the catastrophe will be universal and overwhelming. The curves illustrating these conclusions are shown on the next page. Recurring to Table II, a very different state of affairs is shown to prevail when the rate of production is constant. The rate of deduction by privilege both from the number of the pro- ducers and from their product is the same in both cases; yet the portion divided among the producers, as shown in column V, does not exhibit the culmination to a maximum and swift decline afterward that occurs when pro- duction increases rapidly. On the contrary, the maximum is at the be- ginning, whence it steadily declines, and may be arrested at any stage by the cessation of 64 ECONOMICS OF LIBERTY Curves Showing Comparative Portions of Product Received by Producer and Non-producer 3iJ 1 1 1 1 1 1 j j 1 j 4 ktn. f y '^f / / / iS nxz f/ Ay ,.^ .^ J-- k^ •1 ^^y -■s .^F- ■§ •^.6 l^^roduc^"^ -3.a ~ ^.2, y^ ,.,ro^^^c*^^ 't^3_^_^— — ■'^^ ^\ i-^ y^^ri^ Te \ T \ PRIVILEGE 65 the exactions of privilege. Such seems to have been the history of the Oriental nations. Privilege is as rampant there as it is here ; yet as the rate of production is substantially con- stant, and is not accelerated by labor-saving inventions as it is in the Occident, there is no growth in the reward of the workers, and no impending sudden decline. The maximum point, between the third and fourth ordinates in the diagram on the next page, is the revolution point. Up to that time, in progressive societies, the producers have enjoyed an increasing share, although small in comparison with the amount taken from them. They have accordingly been tolerably satisfied, realizing their condition to be somewhat im- proved. Taking advantage of this, the privileged class endeavors to secure a still greater por- tion, believing the producers to be prosperous, and not aware of the inevitable descent. The producers, feeling rather than understanding that they are face to face with ruin, resist, in a way that privilege does not in the least com- prehend. Such a point our civilization appears to be reaching. Wealth abounds; splendor sparkles every- where ; it is the golden age returned. One step more, and the crash is at hand ! It must be borne in mind that the foregoing discussion aims at elucidating general princi- 66 ECONOMICS OF LIBERTY pies, by postulating a theoretical society of simple organization, in which no producer has any benefit from privilege, and none of the privileged takes any part in production. Our present society is complicated beyond the possibility of formulation, for the reason that privilege is widely, although very un- equally, distributed, while few of the privileged take no part in production. Hitherto we have spoken of privilege in the abstract ; we are now to consider the most im- portant forms of privilege, as it exists at pres- ent, through which the products of labor are taken from the producers. LAND OWNERSHIP TN a commercial society there are two gen- eral divisions of activity, production and ex- change. Corresponding to these there are two forms of privilege by which all industry is controlled ; land ownership, which controls production, and the money privilege, which controls ex- change. Our business now is with the first of these, namely, the privilege of land ownership. The word land, in its economic sense, is used in a far wider significance than in its usual colloquial meaning. Land, in the economic sense, means all natural opportunities for labor to exert itself. Labor, in order to produce, must have ma- terial whereupon to work, a place to stand while working, a place to lie while sleeping. The farmer uses land directly; the cobbler and actor both directly and indirectly. Both cobbler and actor must have a place to live and a place to work, and for these they use land directly; the cobbler, in addition, must have leather, which ultimately comes from the soil ; and both cobbler and actor must have food, which also comes from the soil; and for these they are dependent upon the land indirectly. Even water is land, economically speaking. Opportunities to produce are presented by waterfalls for power and by rivers for irriga- tion, by lakes and oceans for fisheries, and by (67) 68 ECONOMICS OF LIBERTY all navigable waters for transportation. Al- though the high seas are free to all, after they are once launched upon them, yet the sailor must have land whence to embark and whereon to disembark. If the whole earth were owned by one man, it would mean that he would have absolute power, in law, to prevent all the rest from working or even existing upon it. He could put up his signs, "Trespassers not allowed," and there would 'Be nothing for it but to emi- grate to another planet. Or if the earth were owned by a hundred million men, it would leave the remaining nine hundred million equally subject to the sover- eign will of the land owners. And that is precisely the state of affairs that prevails today. The population of the earth is estimated at something like fifteen hundred millions. Of these how many are land own- ers? We can only guess. One in ten? Surely not as many as that. One in a hundred? Per- haps one in a hundred. That would be fifteen millions who own the earth and hold the lives of the remaining fourteen hundred and eighty- five millions in their hands. For the owner of the land controls every- thing and everybody upon it; and if these fif- teen million land owners were to order the rest off their land, where could they go? To the high road perhaps, where they might walk until they starved, leaving the land owners the sole inhabitants. LAND OWNERSHIP 69 But the game of the land owners is not to order people off the earth. Far from it ! What they want is that as many people as possible should live and labor upon the earth — their earth — on condition that they give the land owners a large part of their product, in the form of Rent. Rent is the part of the product taken by the land owners from the producers for permitting the producers to go to work. But, you may say, I have no interest in land rent. I am a clerk, working for $16.00 a week. I do not use land. What have I to do with the land question? Your employer is perhaps a merchant, who pays $20,000 a year for his warehouse. If it is in New York City, at least $10,000 of that will be for ground rent. He employs half a dozen bookkeepers, and as many salesmen and porters, possibly twenty in all. If he paid no ground rent there would be $500 apiece avail- able to raise the wages of all hands. Have you, indeed, no interest in rent? And how much do you pay for board? And of her expenses, what part does your boarding- house keeper pay for ground rent? And the dealer from whom you buy your clothes — what ground rent does he pay? On every side you are bled by Rent. And what does the land owner give in re- turn? Remember, we are not speaking of buildings, but of the land only upon which the buildings stand. 70 ECONOMICS OF LIBERTY The land owner gives nothing whatever, but permission to you to live and work on his land. He does not give his product in ex- change for yours. He did not produce the land. He obtained a title at law to it; that is, a privilege to keep everybody off his land until they paid him his price. He is well called the lord of the land — ^the landlord! Even if the merchant has bought his ware- house outright, so that he pays no rent directly, he still pays rent indirectly, through the pur- chase price paid to the previous owner. Directly or indirectly everybody must pay rent to the owners of the soil. Either in the form of annual or monthly payments, or in the form of a price paid for purchase, everybody must pay for a place to live upon and a place to work upon. But, you will say, men must be secure in the possession of the products of their labor; and how can they be secure unless they own their land? There are two kinds of land ownership, pro- prietorship or property, by which the owner is absolute lord of the land, to use it or to hold it out of use, as it may please him; and posses- sion,* by which he is secure in the tenure of land which he uses and occupies, but has no claim upon it at all if he ceases to use it. He * Strictly, it is incorrect to call possession owner- ship. The word is used to convey the idea that se- curity in possession may be attained without abso- lute ownership. LAND OWNERSHIP 71 cannot hold it out of use, and prevent others from using it. For the secure possession of his crops or buildings or other products, he needs nothing but the possession of the land which he uses. For instance, in the mining regions, vast areas of mining land are held out of use by the mining companies, which own all the land about. How long, do you think, would these terrible strikes in Colorado and Michigan and West Virginia have lasted, if the miners had been free to go to work and open up new mines on the unused land? Not an hour! Not a minute ! All that is necessary to do away with Rent is to do away with absolute property in land; to make all land that is not in use free to any- body to enter upon it and use it. Nor will any temporizing measure short of this suffice. Great as were the services of Henry George in familiarizing people with the destructive nature of our present system of land tenure, his single tax scheme cannot be regarded as a remedy. For the reason that, if rent must be paid, it is no particular relief to pay it to the govern- ment in the form of a tax, rather than to pay it to an individual in the form of rent. If the coal miners of West Virginia were free to go to work and open up new mines on any unused land, it would immediately relieve the situation; but if they first had to pay a government tax, almost equal to the rental 72 ECONOMICS OF LIBERTY value, they would be as badly off as ever; the land would be as inaccessible as ever. No, the only real remedy is a change of heart, through which land using will be recognized as proper and legitimate, but land holding will be regarded as robbery and piracy. Economists distinguish two forms of rent, what is called economic rent and monopolistic rent. Economic rent is the difference in produc- tiveness of different localities. Thus, of two mines, one of which was richer in ore than the other, the additional product of the richer mine would constitute the economic rent of it. Monopoly rent is the price demanded by the owner of the soil, whether as a lump purchase price or as the usual periodical rental pay- ments, regardless of its productiveness.* It is monopoly rent that results in vacant land. By making all unused and unoccupied land free for anybody to use, monopoly rent would disappear, and monopoly price, the speculative price at which vacant land is held, which is equivalent to rent, which is, in fact, monopoly rent capitalized, could no longer exist. But economic rent — - the advantage that might inhere in any particular piece of land, from greater fertility of soil or superiority in situation— this economic rent would still re- * See Appendix II. LAND OWNERSHIP 73 main. With this difference, however, that the greater product would inure to the profit of the users of the land, not of some so-called land owner. The tendency of economic rent is always to reduce itself to a minimum; because the in- herent advantages of land are variable. That is, a disadvantage for one sort of use is often an advantage for another. On the shores of Lake Michigan are certain barren, sandy tracts, until recently regarded as almost worthless for any use. It has been found that they are peculiarly suited for grow- ing peas ; and now large quantities of peas are produced upon them, and the price of land there has risen tenfold. The difference in natural advantages upon which economic rent is based, are like the dif- ferences in natural ability of the workers ; they are differences in kind rather than in degree. The stupid, stolid worker may be better fitted for certain kinds of work than one of more in- telligent, nervous organization. The swamp may not grow wheat; but may be admirably suited to cranberries. The differences in product caused by differ- ences in personal qualities and differences in the qualities of the land both tend toward a minimum, and eventually toward extinction. Proprietorship in land, upon which monopoly rent, and its equivalent, speculative price, are based, is quite different. It is wholly an arti- ficial privilege, which all the powers of govern- 74 ECONOMICS OF LIBERTY ment, and of our privilege born law, are ex- erted to uphold. The rent of monopoly, so far from being an addition to the product of the worker, is a de- duction from it, entirely to the advantage of the landlord, and continually tending toward a maximum, as the land becomes more and more completely monopolized. Both government and law exist, as any law- yer can tell you, to protect property, that is, proprietorship in land among other forms of property. Without force, that is, government, proprietorship in land would cease ; and, on the other hand, without proprietorship there would be no function for force government, and it would lapse into a more perfect form of social organization. A free association would uphold the pro- ducer in the possession of land for use ; and all efforts to restore the land to the people must include, as a necessary condition, the extinc- tion of the governmental form of organization and the erection of free society. THE MONEY PRIVILEGE QOMETIMES, instead of purchasing a com- modity out and out, people want to buy only the use of it, for a longer or shorter period. The price paid for such temporary use is com- monly called hire. A horse and buggy hired from a livery stable, a room at a hotel hired for the night, a house or apartment hired by the month or year, are instances. In precisely the same way money is often hired, and the hire paid for the use of it is called Interest. In the past, when gold and silver were the only money, the hire of gold and silver was on the same footing as that of any other com- modity. . Large sums were paid for the use of money, because the available amount of gold and silver was far less than was needed to carry on the commercial transactions of the times. From its nature, money is peculiarly adapted for hire. Gold and silver money is something that nobody wants for itself, but only for the purchase of other things. It is used only when it is expended. It is true that it may be kept, and melted down and made into watch cases and jewelry; but then it ceases to be money and becomes a commodity of a different sort. As money, its use is needed only tem- porarily. (75) 76 ECONOMICS OF LIBERTY The merchant who needed to replenish his stock of goods, could do it with the money that he hired, as well as if he had owned it; and when the goods had been sold, he could pay it back to the lender, together with the price paid for its hire^ — the Interest. As long as gold and silver were the only money in use, such money was lent by the money lender, just as horses were lent by the livery stable keeper; and the large prices ex- acted as interest were possible only because of the natural restriction of the supply of gold and silver. Modern money is an entirely different affair. Modern money is almost altogether credit money. Gold is used to a certain extent; but the great bulk of the money in use is not gold but promissory notes, called bank notes — paper money, in short. These bank notes are promises to pay on demand, like the ordinary promissory notes of individuals, with this difference that the law requires individual promissory notes to be endorsed by each holder, while it permits the bank notes to pass from hand to hand with- out endorsement. This power of passing from hand to hand without endorsement constitutes the bank notes currency, while the notes of individuals are not currency. In addition, the notes of the individual are for irregular, fractional and usually large sums, while those of the bank are for regular, integral and comparatively small sums. THE MONEY PRIVILEGE 77 The business of a bank is to lend money; which amounts, nowadays, to lending credit. All the credit notes — the ordinary bank notes — in circulation were originally borrowed from some bank. "You are living on borrowed money," says a man to his friend. "Not at all; this money in my pocket is my own ; it is not borrowed," answers his friend. "You may not have bor- rowed it," is the reply, "but somebody origin- ally borrowed it, without doubt." And with perfect truth, for there is no way to obtain bank notes but from a bank, and the bank does not give them away, but lends them. In this way, the charge that the bank makes for the use of its notes— the interest — is a continual and universal tax upon all the members of the community. Not an old woman that buys a paper of pins, without yielding a part of the price to the banks as interest! (For the sake of simplicity, I make no men- tion of minor matters, such as United States certificates. What I state is substantially true of the great bulk of the currency.) The mechanism by which these current notes are obtained from the bank is this: A merchant sells a bill of goods to a retail dealer. The retail dealer does not pay currency for them; he gives his promissory note, payable in sixty or ninety days. This note the whole- sale dealer takes to his bank, and the bank gives him credit on its books for the amount 78 ECONOMICS OF LIBERTY of the note, less the bank's profit in the form of a discount. The merchant is then entitled to draw checks against this credit, in payment of his own debts, for stock, for rent, for em- ployees' wages. Many of these debts are set- tled by check; others, such as employees' wages, require currency. The bank will not discount the merchant's note, unless it is sure of his solvency; so that what the bank really does is to certify to the merchant's solvency, and issue its own current notes, in place of the individual promissory note that it receives. The service that the bank thus performs is indispensable, the only question is as to the amount of payment that it receives for its services. Nominally the rate of discount is the cur- rent rate of interest — four, five or six per cent — practically it is much more. And for this reason : Almost all checks ulti- mately are paid in currency. The check given by the merchant for his stock goes to the manufacturer, who ultimately must have cur- rency to pay his employees ; and so with other checks that he may give — almost all mean cur- rency sooner or later. Now this currency is spent for groceries, meat, clothing and all the needs of life; and is immediately redeposited in some bank by the grocer, butcher or clothier, and used again by the bank to discount some other merchant's note. Thus the same currency is lent by the THE MONEY PRIVILEGE 79 bank over and over again, so that the interest, in the form of discount, is doubled and tripled and often quintupled or more. And that is why banking is such a profitable business. The reason why the banks are able to make such large profits, on what, after all, is the simple and safe business of certifying to the solvency of a man whose solvency is assured, is that the amount of current notes is limited by a series of governmental restrictions. In the first place, there is the legal tender law, that all debts must be paid in gold. This includes the current notes of the bank, which are supposed to be redeemable at any moment in gold. Every bank is required to carry a certain amount of gold for the redemption of its notes. The amount of gold that the bank carries is far from sufficient to redeem all its notes, but the reserve, as it is called, must not fall below a certain minimum. As this minimum is approached, the bank restricts its loans, and raises its rate of dis- count. In times of stress, when currency is much needed, the bank may refuse to make any loans, thereby precipitating one of the commercial panics that so frequently occur. The newspapers are in the habit of attributing such panics to a foolish and unreasonable "loss of confidence." It is natural that a merchant whose notes have hitherto been freely dis- counted, should "lose confidence" when dis- count is refused. His warehouse may be overflowing with valuable merchandise, his 80 ECONOMICS OF LIBERTY assets far in excess of his liabilities, yet he may be forced into bankruptcy, simply because the gold reserve of the bank is low. In the second place, there are various laws of the different States and of the United States, arbitrarily prohibiting the manufacture and loan of current notes by anybody but a lawfully organized bank; with penalties rang- ing from fine to imprisonment. By the Fed- eral law the fine takes the form of a ten per cent tax upon the notes circulated, which acts as a complete prohibition. Were it not for these restrictive and pro- hibitory laws which support the money privi- lege or banking monopoly, it would be easy to start competitive banks; and, with free com- petition, the charge for money lent would be brought down to a minimum, as in other kinds of lending business. A livery stable keeper, for instance, must charge enough to pay for feed, care, cleaning and all incidental expenses, and for the replace- ment of his horses and vehicles as they wear out; and in addition his personal income or wages. Under free conditions, the same would occur in banking. If people were as free to establish banks and lend currency as they are now to establish livery stables and lend horses, competition among banks would reduce the rate of interest to the minimum necessary to cover expenses THE MONEY PRIVILEGE 81 and to give them who were employed in the business an equitable wage. This minimum interest charge, it has been calculated, would be about one-half or three- quarters of one per cent, instead of the present ruinous and exorbitant charge of fifteen or twenty per cent. Upon the monopoly rate of interest for money that is thus forced upon us by law, is based the whole system of interest upon capi- tal, that permeates all modern business. With free banking, interest upon bonds of all kinds and dividends upon stock would fall to the minimum bank interest charge. The so-called rent of houses and other improve- ments would fall to the cost of maintenance and replacement. All that part of the product which is now taken by Interest would belong to the pro- ducer. Capital, however capital may be de- fined, would practically cease to exist as an income producing fund, for the simple reason that if money, wherewith to buy capital, could be obtained for one-half of one per cent, capital itself could command no higher price. If the laws restricting the issue of currency were done away with, such a state of affairs would easily be brought about by voluntary associations. Banks could and would be established, not, as now, by a handful of stockholders for their own profit, but by associations of business men for their convenience and advantage. 82 ECONOMICS OF LIBERTY These men would pledge their assets to sup- port the credit of the bank, and would accept the current notes of the bank in exchange for their own notes, paying only the trifling per- centage required to defray the cost of carrying on the bank. Anybody outside the association could ob- tain a loan by pledging his possessions to the amount of the loan, plus an allowance for deterioration, according to the nature of the commodity pledged, plus an allowance for risk. The notes of the bank would be redeemable, not in gold, but in any valuable commodity. Gold would no longer be the basis of the cir- culating paper currency; but all commodities would be available as a basis, that is, as se- curity. Thus, financial crises would be impossible. At present, financial crises occur, chiefly be- cause the paper currency is redeemable in gold only. There is never enough gold to redeem all the currency in circulation. Accordingly, when the supply of gold runs short, the secur- ity behind the notes is diminished, the loaning of notes is restricted or suspended, and the panic follows. Paper currency has hitherto been regarded with suspicion, as insecure. Whenever any measures are proposed looking toward the re- lief of the people by increasing the volume of the present governmentally controlled cur- rency, the newspapers enlarge upon the dan- gers of an inflated paper currency. THE MONEY PRIVILEGE 83 And with justice, as long as the redemption of the currency is possible with only a single commodity — gold. But it is only under this condition that a paper currency is insecure. When not only gold but all commodities are available for the redemption of the paper currency, its volume is limited only by the value of all the wealth of the country, and it can never become in- secure up to this limit. There is another purpose served by gold under our present arrangements, in addition to its service as a basis or security, that is as a measure of value. Referring again to Table I, at the back, it is evident that any one of the products therein mentioned might be used as a measure of the proportions or values of the others. In our discussions we have used the bushel of grain, but any other might have been used. If gold had been listed among our typical products, gold also might have been used. Just which commodity shall be so used, de- pends chiefly upon its comparative invaria- bility in value. Hitherto gold has been used, ostensibly upon the ground that it varied less in value than any other commodity, although really, age-long custom has had a powerful influence upon the choice of gold. There appears to be much doubt whether the value of gold is as invariable as it has been supposed to be. Jevons, a most conservative economist, asserts that wheat is more stable 84 ECONOMICS OF LIBERTY in value than gold; and, in recent years, the great increase in the cost of commodities gen- erally has been plausibly interpreted as really a decline in the value of gold, owing to an enormously increased production. Whatever commodity might be used as a measure of value, or as a unit of price, a phrase that seems preferable, it is evident that it could not be absolutely invariable. Some fluctuations must occur, however small. Nev- ertheless, although an invariable standard is unattainable, some standard is absolutely in- dispensable. What the standard will be under free condi- tions it is impossible to predict. Experiment and experience are needed to decide the mat- ter. It is not impossible that more than one standard or measure may be used ; a statement that seems an absurdity on the face of it; yet the desirability and feasibility of a multiple standard, even under present conditions, is warmly defended by the well-known economist, Irving Fisher. If such a multiple standard is feasible now, it would become much more so under free con- ditions, when speculative fluctuations would be largely eliminated, and all values would tend toward a stable and normal relation. All business men will realize the impetus to exchange, and indirectly to production, that such a change in the money system would give. THE MONEY PRIVILEGE 85 The possibility of obtaining credit upon con- vertible assets of any kind will almost put an end to bankruptcy. For the reason that in most cases of bankruptcy, there are abundant assets to cover all claims, and the bankruptcy is, so to speak, merely fictitious, brought about by the impossibility of obtaining currency or credit. Credit would become much more stable. The retailer, instead of giving his time note to the wholesaler, would give it to his local bank, which would be perfectly acquainted with his standing and solvency, and he would receive the bank's current notes in exchange for it, with which to pay the wholesaler. In the end, the use of time notes between indi- viduals would be superseded by the use of currency for all exchanges; and time notes would be used only between the individual and the bank. The dangers of an inflated paper currency, upon which arguments against such an exten- sion of the credit system are often founded, are real enough when the only basis for re- demption is gold; because, with the relative diminution of the stock of gold, the paper cur- rency becomes less redeemable. But when the currency is redeemable, not in gold alone, but in all kinds of products, the variation in the stock of gold can have no ef- fect upon it. Production, too, would be incredibly in- creased. Free land is of little avail to him who 86 ECONOMICS OF LIBERTY has not implements wherewith to work, nor subsistence until his product can be produced and sold. With money available at the cost of its pro- duction, a man who had even no assets, but of good reputation, could get endorsements that would enable him to obtain currency where- with to make a start, upon the strength of his future prospects, just as now the farmer ob- tains money or credit upon the strength of his yet unharvested crop. Nor need there be any fear of a destructive convulsion to trade caused by the introduction of free money. A convulsion would undoubtedly occur, if the change were sudden and general. But with the gradual establishment of free banks, each one compelled to maintain its credit in order to do business at all, no convulsion could occur. Gradually such free banks would associate, in order to support each other's credit, and, in the end, they would displace the present banks and inaugurate the new system, without any serious disturbance. Nothing prevents the establishment of free banks but the governmental restrictions al- ready recounted. There is little prospect that these restrictions will be relaxed, because in all nations, the bankers are the real power be- hind the government, and compel the main- tenance of the restrictions that give them their devouring monopoly. THE MONEY PRIVILEGE 87 Such partial experiments as have been pos- sible in the past, have proved abundantly suc- cessful. The Massachusetts Land Bank, during Colonial times, prospered, and brought pros- perity to the community, until it was forcibly suppressed by special act of Parliament. The People's Bank, founded by Proudhon in the latter days of the French Revolution, flourished and grew, until it was forcibly sup- pressed by Bonaparte. TAXATION n^HIRD in our entirheration, although primary in its nature, among the methods of obtain- ing a portion of the products of the community, without taking part in production, the oldest and simplest is taking what is desired by force. This, when done by the upper classes, is called taxation. In the monarchical military organizations of the past, the character of this privilege is easily seen. The tax was levied in the name of the king or war leader, to whom the natural subservience of human nature spontaneously rendered submission. It was the king's army, the king's people, the king's taxes; and he who questioned the propriety of the royal prerogative of taking from his people without return or accounting, was reckoned, and felt himself to be, a crim- inal, guilty of the highest crime of disloyalty. Such is still the attitude of the generality. To evade the customs tax, to "swear off" the income tax, is still felt by most people to be the immoral avoidance of a just claim, even though they permit themselves to be guilty of these delinquencies. Although the form of society has been much modified, the industrial having begun to sup- plant the military, the nature of taxation re- mains the same. It is still the taking of other people's possessions without their agreement, (88) TAXATION 89 even if with their tacit consent ; that is to say, no opportunity is offered by which the pay- ment may be withheld, on the ground that the services offered in return are not worth the amount demanded, or are not wanted at all, as would be done in ordinary mercantile trans- actions. It is often said by reformers that govern- ment should be conducted upon business prin- ciples. This is impossible, because business rests upon doing its work well in return for what is freely given in payment ; whereas gov- ernment demands and takes its income, whether its work is well done or not, and whether it is wanted or not. The distinction is ineffaceable. The officials of a governmental organization, whether autocratic, constitutional or demo- cratic, are in the position of those of a corpora- tion of which the chief expenses are the sal- aries of the officials and employees, and the income is obtained by forcible levies. It is impossible that an income so obtained should be expended as carefully and economic- ally, and as much in the interest of those who pay it, as if it had to be obtained by offering a fair equivalent to taxpayers, and convincing them that the proposed bargain was to their advantage, leaving them free to accept or de- cline at their pleasure. For this reason denunciation of govern- mental corruption is entirely futile, indeed, 90 ECONOMICS OF LIBERTY laughable to them who have once clearly com- prehended the true state of affairs. The functions fulfilled by government today are chiefly of a commercial character, yet the service given is remunerated, not by bargain and sale, but by forcible levy. It is inevitable that officials should use this force-collected income to secure their own continuance in office by conferring valuable privileges upon their supporters, who, in turn, use every effort to strengthen the government. The fact of this co-operation is well known. Everybody knows that behind each political party stands a group of rich men, and that their influence over the votes which are to elect the officials is given in return for the continuance of the privileges by which their wealth has been created. This power of taking money from the indi- vidual without his consent, is the fundamental privilege upon which all the others are based, and by which they are licensed. It stands upon no logical ground, but is the royal pre- rogative — the will of the prince — in the lan- guage of former days. It will perhaps be thought that a tax im- posed by a representative assembly loses the character of a forcible levy, and becomes prac- tically a mercantile transaction. Brief con- sideration will show that this is not the case. Although the severity of taxation by an auto- crat is much mitigated by constitutionalism, the principle remains the same. Taxes are no TAXATION 91 longer imposed by leasing the collection to a pacha or proconsul, and letting him plunder unchecked. Modern governments have learned the importance of keeping the goose in good health, that it may lay more golden eggs. But the vote is useless against taxation. Whichever party wins, taxes go on, and must go on. It is not possible to vote for a repre- sentative who will oppose taxation, for it is from taxation that he gets his bread and butter. The essence of economic exchange is the freedom of both parties to withhold consent to a bargain. Even if it could be shown that the equivalent given were fully equal to the assessment levied, it would still lack the free- dom of choice of the individual to permit it to be ranked as a commercial transaction. The total amount of taxation in the United States, including Federal, State, city, town, village, school and all other taxes, has been calculated at something like $2,500,000,000. With a population of about 100,000,000 this amounts to about $25 per head, or $125 per family. Great as is this forced deduction from the products of the workers, the damage inflicted by taxation indirectly is still greater. First must be placed that caused by taxes upon im- ports. These restrict freedom of exchange in two ways ; by limiting or preventing trade be- tween the nations which impose them, and by fostering monopolies among producers. 92 ECONOMICS OF LIBERTY When nations give up the last remnants of the military state of the past and become fully commercialized, these tariffs will be abolished, and production and exchange incalculably stimulated. SPECIAL PRIVILEGES HTAXATION, Land ownership, Money re- striction — these we have described as the general tools by which products are taken from the producer by the privileged. Besides these, there are special privileges granted to favored supporters by the clique of politicians called government, that, for the time being, holds the power of taxation. First among these is the tariff on imports, to which we have alluded. Although primarily a form of taxation, a tax upon imported goods is incidentally a spe- cial benefit to certain individuals, and is often raised, for their advantage, to a point above that which would afford the largest revenue to the tax collecting power. There is a certain point beyond which the rate of a tariff cannot be raised, without caus- ing a diminution in imports more than suffi- cient to counteract the increased rate. So that the point of maximum revenue is not the high- est rate, but at some point below that, at which the amount of imports multiplied by the rate of the tax gives the maximum product. When a tariff is raised beyond this point, in addition to its character as a tax, it assumes another aspect as a special privilege, permit- ting the producers of the commodity that is taxed to charge a higher price than could be (93) 94 ECONOMICS OF LIBERTY obtained if foreign goods were to be had in competition with it. Another form of special privilege is that con- ferred by patents and copyrights. As in the case of the land privilege, the ef- fects of this are not, at first, conspicuous. Just as, at first, while population is sparse and all land is cheap, the power of the landlord is not felt, so, at first, the profits to the inventor or author seem wholly beneficent. Later experience shows that the advantages to the inventor or author are usually small, but that to the holder of important patents, the privilege becomes the basis of excessive monopoly charges, as in the case of the tele- phone patents; while the copyright becomes the foundation of wealthy publishing houses, giving comparatively little advantage to author. It is observed, too, that it is always the people who control the money wherewith an invention or a book is produced, who reap the great profit. Except in the case of novels of large sale, or of inventions of wide utility, and where the inventor or author unites the shrewdness of a money-maker with the genius of a creator — a rare combination — the money gain to the originator is seldom more than a fraction of the profit that the moneyed pur- chaser of the privilege is able to win. Less extensive in profit producing power, but falling in the same class of privileges granted to a favored few, is the whole system SPECIAL PRIVILEGES 95 of licenses and permits for the exercise of in- dustry, from the street peddler's permit, for which he must pay five dollars, to the doctor's and lawyer's diplomas, ostensibly intended to exclude the incompetent, but really to limit the number and uphold the fees, of the profes- sions. These rank among the minor privileges, but there is one form of special privilege which will compare in magnitude with the greater general privileges — the public franchises that are granted to all sorts of concerns. Often these are united with the land own- ing privilege in some form, as in the case of the franchises granted to railroads, which in- clude a title to the land covered by the right of way; but, in some cases, the franchise in- cludes no such title, as in the case of city rail- roads, or elevated or underground lines, which are merely special privileges to run vehicles on certain streets. So large, however, have become the in- terests of these railroads, and other franchise holding companies, that in political influence they stand alongside the holders of the money privilege and the beneficiaries of the tariff. Special privileges are so clearly artificial that no argument is needed to prove the fact; while general privileges, because they are gen- eral, and are supposed to apply to all members of the community, conceal their character as privileges, and an entirely new standpoint and 96 ECONOMICS OF LIBERTY a complete revision of preconceived ideas are required to penetrate their true nature. Hence also, at periods of popular question- ing, as at present, it is always the special privileges that are the first objects of attack. Down with the monopolists! is the cry; but only the specially favored are meant; while the general privileges beneath — Taxation, Rent, and Interest — are permitted to pass in peace. It is hard to arrive at the exact amount taken by privilege : some rough approximation may be made. The total taxation in the United States is placed, as has been stated, at about $2,500,000,- 000. The interest on securities Wall Street places at about $1,000,000,000 annually. All other in- terests — on mortgages upon improvements, on notes, and the rent that is paid for build- ings and other improvements — will be under the mark if we take it at twice that amount, say $2,000,000,000. Ground rent proper, and interest upon mort- gages upon land cannot be much less. Thus we have: Taxation $2,500,000,000. Interest 3,000,000,000. Rent 2,000,000,000. Total $7,500,000,000. SPECIAL PRIVILEGES 97 Which, with a population of about 100,000,- 000, makes $75 per head, for each man, woman and baby ; or, taking an average family at five persons, $375 per family. And this where the average income per family is less than $600. LIBERTY '\A^E have seen that privilege, in its various forms, is the engine by which industry is deprived of a large part of its product; and that, in order to permit the producer to retain his v^^hole product, it is necessary that privilege should be abolished. When privilege is abolished, and the worker retains all that he produces, then will come the powerful trend toward equality of material revv^ard for labor that will produce substantial financial and social equality, instead of the mere political equality that now exists. To bring about equality, it is unnecessary to use any artificial means for the distribution of products : it is only necessary to give free play to the natural forces that govern production and exchange. And with equality will come fraternity: no longer the rich trampling on the poor; no longer prosperity for one, only at the price of impoverishment for the other; no longer the petty social strife for precedence. Distinction and honor will be awarded to personal merit; as, even now, we honor an Agassiz, a Darwin, a Tolstoi and a Curie — names that will survive when all the famous financiers of the day are forgotten, or pilloried with those of buccaneers and assassins. When the fathers of the American Republic had abolished titles of nobility, with primo- (98) LIBERTY 99 geniture and entail, by which the land was given to the few; when they had established the rule of the majority and representative as- semblies ; they thought that they had abolished privilege. The event shows that they had not. Democ- racy has had its day; and has proved its total inability to abolish or even to control privilege. On the contrary, in this democratic country, privilege grows and overruns all limits, grasp- ing everything in sight, ignoring all claims of reason and humanity, far beyond anything it has attempted under the old monarchical sys- tems of Europe. Behind each political party stands a group of rich men, who have been made rich by privi- lege, which secretly controls all political ac- tion. The great land owners — the railroads, and mining companies and oil companies — and, still more, the banking clique, which holds the money privilege, joined with the great manu- facturers — the steel mills and woolen mills and cotton mills— which fatten on the tariff — all these have their representatives in every State legislature and in the Federal Congress, who see to it that no legislation is enacted hostile to their interests and privileges. Without the permission of these men, not a candidate for office, from village constable to President, can be nominated, let alone elected. And if, by chance, a Liberal or Socialistic can- didate slips past, he finds himself able to ac- complish only petty reforms; he dares not. 100 ECONOMICS OF LIBERTY even if he were able, to strike at the founda- tions of privilege. We boast that the majority can control, if it choose, through the ballot. Practically this is impossible. No man can give the time that is necessary to acquaint himself with the merits of the innumerable candidates, and have time left for carrying on his daily busi- ness. Often, too, it happens that the candidate of neither party is satisfactory, when voting for either becomes a farce. Besides this, representative government is an impossibility in itself. No one man can represent another; still less can he represent a constituency of hundreds or thousands. He cannot know their collective interests, still less their individual interests. The result is that he devotes himself to what he does know — his own interests. Thus the political control falls into the hands of men who make it their sole business — men who either hold office or hope to hold office or expect, in some indirect way, to profit by the results of elections. Some of these develop into political leaders or "bosses", who are in touch with the rich clique behind the scenes, that puts up the money needed for mass meet- ings, processions, campaign literature and all the legitimate expenses of an election, as well as the illegitimate expenses, terminating in direct bribery of both voters and of elected officials and representatives. LIBERTY 101 All attempts to establish a collectivist Social- istic scheme of society by governmental methods, are predestined to failure: they are sure to become mired in the slough of politics. For the same reason, all the palliatives that from time to time are advanced — minority representation, direct primaries, the referen- dum, the initiative and the recall — all are nuga- tory, and can give no permanent relief. People cannot devote the necessary time to public affairs, if they are to attend properly to their private affairs. We are urged to be "good citizens," to take part in ward primaries, to vote at elections. It is impossible. Even at the elections of private clubs, as long as all runs smoothly, hardly one in ten of the members votes. If the management is not satisfactory, resigna- tions pour in. But from the governmental club there is no possibility of resigning: we are forced to pay our dues, whether we like it or not. Apart from such comparatively petty prac- tical difficulties, the fundamental theoretical difficulty remains, that government, in all its forms, is based upon privilege — ^the privilege of taxation — and therefore cannot abolish privilege. Even if we grant that all reforms are ac- complished, that government has successfully overthrown the land privilege and the money privilege, we shall find that, in overthrowing 102 ECONOMICS OF LIBERTY these, we have but fortified the governmental privilege. No governmental system of currency reform has ever been proposed that did not involve the monopoly of money by the government itself. No scheme of land reform, not even the single tax proposition, can be carried out, with- out some plan for seizing abandoned land and again renting it ; which means that government would become the supreme landlord. Privilege can never overthrow privilege. We are compelled, therefore, to discard all governmental, that is to say, compulsory, modes of organization, in our search for some way of abolishing privilege. Privilege, by its very nature, means restric- tion. A privilege to do certain things cannot be granted to one, without prohibiting or re- stricting others from doing the same thing. What we seek to do away with, therefore, is not privilege directly, but the restriction upon action of some, that results in privilege to others. You cannot grant to one man the privilege of holding land out of use, without prohibit- ing others from using the land so held. You cannot grant to one man the privilege of offer- ing current promissory notes, without pro- hibiting others from a similar act. LIBERTY 103 We are in search, then, of a system of social organization that shall prevent any one from restricting the acts of others; that shall insure to all freedom of individual action and freedom of contract with others, so that nothing shall be prohibited between individuals to which both parties consent. Such freedom of action is what we mean when we speak of personal liberty ; and in seek- ing a social organization that shall insure free- dom of action, v/e seek for one that will uphold liberty. Some form of social organization to defend liberty seems to be essential; otherwise the liberty of each individual would be at the mercy of any one stronger than he, or of any group of two or more who might unite to in- vade his liberty. Moreover it is impossible for a man living with others to enjoy such absolute liberty as he might exercise, if he were the sole inhabitant of the world : he must make some concessions to harmonize his actions with those of others. Evidently the liberty that is to be defended is not the liberty to kill or rob. What, then, are the limits of liberty in social life? What actions are to be permitted, and what prohibited? How can we prohibit anything, without thereby erecting privilege? All actions may be classified under two heads, as non-invasive and invasive actions. Invasive actions are such as restrict liberty of action on the part of others : noninvasive 104 ECONOMICS OF LIBERTY actions are those which accomplish no such restriction. To kill a man is to invade his liberty of ac- tion, as it completely cuts him off from the possibility of any action. To rob him invades his liberty, as it deprives him of the power of doing what he wants to do with his product. The robbery and murder on a grand scale, that are done by privilege, are equally invasive of liberty. Privilege, indeed, is invasive action. Evidently the actions to be prohibited are the invasive actions ; and the actions to be per- mitted and defended are the noninvasive actions. Complete individual liberty in social life means liberty to do anything that is not inva- sive of the liberty of others. As phrased by Herbert Spencer, in Social Statics, liberty means "that each shall do whatever it may please him to do, provided he infringes not the equal liberty of others." The social organization of the future, then, will be an organization to defend liberty. It must begin by offering its services, not by imposing them. The funds for its support it must obtain, not by taxation, but by volun- tary subscription. It must offer to defend your liberty if you choose to pay for it ; not compel you to be defended, whether you want to or not. LIBERTY 105 One case where this was done under present conditions happened to come under my obser- vation. A small suburban settlement, too small to have even a village government, was ex- posed to the frequent depredations of burglars. An enterprising member established a private police force, and offered to protect houses from burglars for a moderate charge. Many sub- scribed, and their houses were carefully watched, while nonsubscribers took their chances. It is needless to say that if a burg- lary had occurred in one of the subscribers' houses, the subscriptions would have fallen off rapidly. Under such a system, you pay for what you get, and you get what you pay for; or, if you don't get it, you don't pay for it. Objections innumerable may be urged by people who are incapable of grasping broad principles. Demands for a clear description of the future society in all its details, with in- formation as to how it is to be brought about, will be made by others. It is impossible to prophesy the future in particulars; still more impossible to foretell just how the change will come about ; but there seems to be no serious reason why such a voluntary system should not be extended to all public affairs. Courts would become arbitrators, with no power to enforce their decrees, save when the local Liberty Defence League might be called upon. 106 ECONOMICS OF LIBERTY Roads could be maintained by road building societies, local and general. Lighthouses by boards of trade and ship owners' societies. Railroads, in the absence of dividends, would be in the hands of only such stockholders as had some personal interest in their manage- ment; or would revert entirely to the em- ployees organized to carry them on. Freedom of land for use would be asserted and maintained and freedom in the issuing of currency as well. With the incubus of Privilege removed, pro- ducers would retain all their product. Wealth and poverty, and the ignorance and crime that poverty begets, would disappear. A new world would dawn upon us, where industry and com- fort would be for all, and where joy and glad- ness would take the place of care and misery. Just how this is to come about, no one can tell. Possibly thinking people, seeing the ad- vantages, may increase in numbers sufficiently to refuse to pay rent and taxes, and to force from government the liberty to organize a free banking system. More probably things will go on as they are, until a crash comes. The present system, pushed to its extreme, will fall in ruin. Hun- dreds of thousands of impoverished wretches V7ill besiege the soup houses, and beg for shelter in the churches. Business will be pros- trate. Banks will fail by the hundreds. Stocks will pay infinitesimal dividends. Bonds will fail to yield interest. The "reptile press", as LIBERTY 107 John Swinton used to call it, will attribute everything to ''lack of confidence". Then a few of those who know will establish banks, which the government will be powerless to prohibit. Land, fallen into worthlessness as a rent producing power, will lie open for use. Gradually the new society will build itself up, upon the pile of carcasses left by the expiring civilization. In whatever way it may come, may it come quickly. APPENDIX I. The equalization in the exchange of products, which is represented as resulting from the chaffering of two individuals, is, in a developed society, accomplished by competition. This word "competition" is a scarecrow to many who see clearly enough that the only solution to the industrial problem lies in the retention by the producer of his whole prod- uct; but who deem it necessary, in order to reach that end, that some superior power should control all sources of production, and deal out the products to the workers in some fixed proportion. These are called "coUectiv- ists" ; and they think that it is possible to form such an organization, which shall be free from the defects inherent in government. It is not surprising that they shy at the word "competition", for by "competition" they picture to themselves nothing but the present ghastly struggle of worker against worker, to avoid being pushed into the abyss. At present, not only the nonproducing classes are held by privilege as its servitors, receiving what pay privilege chooses to grant, but all who work for wages are reduced to the same condition. They receive from privilege, not their whole product, but a mere fraction of it, so that the term "wage slaves" is not a rhetor- ical embellishment, but a precise statement of an economic fact. (108) APPENDIX I 109 When privilege finds it impossible to sell its product, because the producers, who should be also the purchasers, are without the means wherewith to buy, instead of raising their pay to give them power to buy and thus extend the market, privilege cuts down their pay still lower and restricts production to suit the di- minished sales. Worse than all, privilege casts out thousands of workers to rot on the street — ^workers who would be both producers and consumers if they were permitted by privilege. It is to avoid this hell of being out of work that causes the present scramble of so-called competition. It is competition to be permitted to work ; and no one who has experienced the frightful sensation of not being able to find employment will think "hell" too strong to describe it. Men who are out of work are desperate, and will work for a bare pittance to avoid starva- tion, excepting always an intelligent minority, who refuse to work for almost nothing, and deliberately embrace a life of idleness and beg- gary, whom privilege stigmatizes as "profes- sional tramps." The others, who are also out of work, but who will work for a minimum, privilege highly esteems as a means of reducing still further by their competition the amount that it must pay its slaves. Privilege regards "the army of the unemployed" as a providential provision to keep down what privilege calls the cost of 110 ECONOMICS OF LIBERTY labor; and willingly doles out small charities to keep them from total starvation. Among the employers and mercantile clas- ses competition is the same cutthroat struggle to be permitted to work. The storekeeper or manufacturer who cannot obtain money or credit from the bank, because he cannot pay the amount demanded by privilege, is forced into bankruptcy, forced to close up his business and begin life anew; perhaps forced into the ranks of the wage workers, if indeed he is not left quite stranded and hopeless among the unemployed. Little wonder that the mere word "com- petition" arouses shuddering terror and angry protest ! The competition that determines exchange prices in a state of freedom is an entirely dif- ferent matter. It is not a mad stampede to escape destruction but the rational effort of men who are already well provided for to im- prove their condition. By the opening up of the sources of pro- duction, and by the freeing of exchange from the shackles in which it is now held, there will result abundant employment for everybody. The army of the unemployed will vanish. There will be more work to be done than there are men to do it. Nobody will lack work nor fear starvation. When everybody is employed, and each is able to dictate the terms of his employment, because work vAll be crying for men, not men APPENDIX I 111 for work, although the word "competition" re- mains the same, the condition that it denotes will be completely changed. It is a pity that some other word could not be invented to de- scribe it. It will be a struggle, not of man against man to get employment, but of each to find the sort of work for which he is best suited, sure, mean- while, of a good living, even though the work that he is doing does not quite suit him. The struggle will be, not to produce the poor- est possible work, in order to lower the price and force a sale, but to do the best work pos- sible, at a price which tends continually toward a normal fixed price, notwithstanding small fluctuations. The struggle will be for the men and the land to adapt themselves to each other, so that the varying qualities of land and the varying qualities of men will become fitted together to produce various products in greatest abund- ance. Thus competition, in its new sense, becomes the most perfect spontaneous cooperation ; not the quasi-military cooperation of compulsion, but the natural cooperation of free choice, for a reward equal to the whole product, deter- mined by the inevitable working of economic relations. By competition, in this quite different sense, the price is spontaneously reduced to the cost of production, the cost being the expense for material, overhead charges and all other ex- 112 ECONOMICS OF LIBERTY penses, plus the wages, in the economic sens^ of the producer, which continucdly tend t equality. Such competition as this, where the p: ducer is not in continual peril of his life, whc life is secure anyway, and the desire to exc is the only stimulus, is the economic equivalt of that spirit of emulation toward which o lectivists have pointed as their ideal. APPENDIX II. Economic rent is said to be inherent in the advantage obtained by the producer who oc- cupies a superior site — superior in fertility, accessibility or otherwise. It is admitted that the market price is fixed by the cost of production under the most ad- verse circumstances. Thus a farmer whose farm was ten miles distant from the market would have to add the cost of transportation for ten miles to the price of his product. One whose farm was only one mile distant would have a proportionally less amount to pay for transportation; but he could obtain the same price as the more distant one. The additional amount above the cost thus obtained by the occupant of the nearer site is held to be the economic rent. This is the celebrated Ricardian theory of rent; and, at first sight, it appears to be irre- futable. I am strongly inclined to think that the theory is erroneous; that it is, in homely phrase, putting the cart before the horse. It is commonly said that the most valuable land brings the highest rent, that less valuable land brings less rent, that the amount of rent that can be obtained is in direct proportion to the value of the land, and immediately results from it. Ordinarily no one would dispute this proposition. (113) 114 ECONOMICS OF LIBERTY An opposite view, however, may be taken. Instead of saying that the most valuable land brings the most rent because it is the most valuable, we may turn it about and say that the most valuable land is the most valuable because it brings the most rent. This seems to be the same thing : it is really quite different. In carrying on their various works of pro- duction, men do not all want the same piece of land, nor even similar pieces. The farmer would have no use for a city lot for productive purposes at all. Under the present system he could indeed by his power of monopolistic holding obtain a price from somebody who could use it; but, without this power, such a lot would be quite useless to him for produc- tive purposes. On the other hand, his farm of forty acres would be equally useless to a professional man, say a physician. And neither the farm nor the lot would be of any use to a deep sea fisher- man. People require different quantities of land and different localities, according to the char- acter of the industry in which they engage. For some mere desk room in an office is all that they need: for others, many acres are necessary. But the desk-room man can do nothing with the acres; while the acres man would be just as much at a loss to carry on his business with only desk room. Now the monopoly of all land makes it pos- sible for the holders of land to demand a cer- APPENDIX II 115 tain average amount from all who work on the land, that is, from everybody, whether the par- ticular land each one needs be much or little. And this appears to be the reason why city land is commonly reckoned to be more valu- able than land in the country. City workers do not need much land in their pursuits — would not be able to use it if they had it. But mon- opoly takes an average equal share from each, and the rent of a grocer store on a twenty-five by a hundred foot lot may equal or exceed that for a large farm. So that land of small area, upon which many people can work, permits the exaction of a higher rent by monopoly, and is therefore ac- counted more valuable. When the elevator, and its offspring, the tall office building, were invented, permitting workers to be piled up twenty stories high, in- stead of five as before, the amount of rent that could be extracted from each of them remained the same, but the amount that could be ob- tained per square foot of ground was propor- tionally increased, and the land became by just so much more valuable. A mine is more valuable than the fields about it, because hundreds of workers can pro- duce in a limited area. From each one rent is exacted, not directly, it is true, but by the re- duction in wages that miners suffer. In a state of freedom, when land ceased to *^ be monopolized, all this would cease. The producer would use as much or as little land 116 ECONOMICS OF LIBERTY as might be required by his vocation ; and land would no longer have any value, because no rent could be deducted from the product of the workers. It is necessary for the production of all the varied products of civilization, that there should be different kinds of land, some arable, some mineral, some waterpowers, some towns and villages. For each variety of each differ- ent kind of product, minor differences in land are needed; and, in the end, by a continual process of adjustment, each piece of land would be used for the purpose for which it was best fitted. Differences in the natural qualities of land bear a close analogy to differences in the natural ability of persons. So far from being a cause of inequality in income, such differ- ences, whether in the land or the individual, are essential for equality. An equality not doled out as an equal wage by a quasi-military government, but a powerful tendency to sub- stantial natural equality, as the sea tends to a level surface, in spite of the waves that con- tinually vary temporarily its placidity. # > ♦ ' VIII. k of Each Price of Total Product VI. III. multiplied by V. j .00 =$39 00 3900 bu. =$3900.00 .33= 13 00 156 cows = 1300.00 .00= 9 00 18 houses = 900.00 .00= 8. 00 160 suits = 800.00 .66= 12 00 180 tools = 1200.00 .33= 3 00 90 books = 300.00 .50= 14 00 2800 miles = 1400.00 .66= 2 $100 00 .00 12 open = 200.00 Total, $10000.00 .00= $1 .00 1 diam. = $100.00 2.50 =$4 00 160 suits = $400.00 5.00= 4 .00 801uxur. = 400.00 TABLE I. Showing Exchange Relation in a Community of 100 Members. Occupation Annual Product of Each Individual Total Annual Product Share of Each Member of Commjjnity Exchangeability in Terms of Other Products Money Amount of Income of Each Member Price of Total Product I. multiplied by II, III. divided by 100 II. dividedby 100 IV. multiplied by VI. III. multiplied by V. 39 farmers 13 graziers 9 carpenters 8 tailors 12 toolmakers 3 printers 14 carriers 2 doctors 100 members 100 bu. grain 12 cows 2 houses 20 suits 15 tools 30 books 200 miles of transportation 6 operations 3900 bushels 156 cows 18 houses 160 suits 180 tools 90 books 2800 miles of transportation 12 operations 28 9 . bushels 1 . 56 cows . 18 house 1 . 60 suits 1 80 tools .90 book miles 12 operation busiel 12 cow .02 house 20 suit 15 too 30 booi miUs .06 operation 1 bushel 1 cow 1 house 1 suit 1 tool 1 book 1 mile 1 operation $1.00 8 33 50 00 5 00 6.66 3.33 .50 39. bushels ® $1 00 =$39.00 1 56 cows @ 8 33 = 13 00 18 house @ 50 00 = 9.00 1 .60 suits @ 5 00 = 8.00 1.80 tools @ 6.66= 12.00 . 90 book @ 3 33 = 3 00 28. miles @ 50= 14.00 .12 operation @ 16 66= 2.00 Total, $100 00 3900 bu. =$3900.00 156 cows = 1300 00 18 houses = 900 00 160 suits =: 800.00 180 tools = 1200.00 90 books = 300.00 2800 miles - 1 4 00 00 12 opcr. = 200.00 Total, $10000 00 SPECIAL INSTANCE (See Page 44) 1 diamond seeker 1 diamond 1 diamond . 01 diamond . 01 diamond 1 diamond = $100 00 . 01 diamond @$100.00= $1 00 1 diam. - $100.00 SPECIAL INSTANCE (See page 47) 4 tailors 4 luxury producers 40 suits 20 luxuries 160 suits 80 luxuries 1.60 suits . 80 luxury . 40 suit 20 luxury 1 suit 1 luxury = $2.50 5.00 1 . 60 suits .80 luxury @ $2.50 =$4.00 @ 5.00= 4.00 160 suits 80 luxur. - $400.00 - 400 . 00 f. i V :onstant ni. VIII, IX. f are of -ach >ducer Taken by Each Non-producer Ratio of Shares of Producer and Non-producer 1 .80 .60 .40 = .20 = 0. 18 — = 1 . 80 10 32 — = 1.60 20 42 — = 1 . 40 30 48 — = 1.20 40 50 — = 1.00 50 1 to 1 to 2.25 1 to 2 . 66 1 to 3 . 50 1 to 6 . 99 1 to infinity TABLE II. Showing the Division of Products ■when privilege takes an increasing portion while the individual product remains constant I. II. III. IV. V. VI. VII. VIII. IX. Number of Producers Number of Non-producers Product of Each Producer Annually Total Annual Product Part Divided Among Producers Part Divided Among Non-producers Share of Each Producer Taken by Each Non-producer Ratio of Shares of Producer and Non-producer No part taken by priv- ilege 100 1 100 100 1 1 to 10% non-producers 20% of product taken 90 10 1 90 80% of 90=72 20%, of 90 = 18 72 — = 80 90 18 — = 1 80 10 1 to 2.25 20% non-producers 40% of product taken 80 20 1 80 60% of 80=48 40% of 80=32 48 — = .60 80 32 — = 1 60 20 1 to 2 66 30% non-producers 60% of product taken 70 30 1 70 40% of 70=28 60% of 70=42 28 — = .40 70 42 — = 1 40 30 1 to 3 . 50 40% non-producers 80 % of product taken 60 40 1 60 20% of 60 = 12 80% of 60=48 12 — = .20 60 48 — = 1.20 40 I to 6 . 99 50% non-producers 100% of product taken 50 50 1 50 0% of 50= 100% of 50=50 — = 0. 50 50 — = 1.00 50 1 to infinity TABLE III. Showing the Division of Products when privilege takes an increasing portion and when production increases rapidly I. II. III. IV. V. VI. VII. VIII. IX. Number of Producers Number of Non-producers Product of Each Producer Annually Total Annual Product Part Divided Among Producers Part Divided Among Non-producers Share of Each Producer Taken by Each Non-producer Ratio of Shares of Producer and Non-producer No part taken by privilege 100 1 100 100 1 1 to 10% non-producers 20% of product taken 90 10 2 180 80% of 180 = 144 20% of 180= 36 144 = 1 . 60 90 36 10 = 3.60 1 to 2 25 20% non-producers 40% of product taken 80 20 4 320 60% of 320=192 40% of 320 = 128 192 = 2.40 80 128 20 = 6.40 1 to 2.66 30% non-producers 60 % of product taken 70 30 8 560 40% of 560=224 60% of 560=336 224 = 3.20 70 336 30 = 11.20 1 to 3 50 40% non-producers 80 % of product taken 60 40 16 960 20% of 960 = 192 80% of 960=768 192 = 3.20 60 768 40 = 19.20 1 to 6 00 50% non-producers 100% of product taken 50 50 32 1600 0% of 1600= 100 %ofl600 = 1600 — = 50 1600 50 = 32.00 1 to infinity i