Mutualism (economic theory)

This article is about the economic theory. For the biological term, see mutualism.

Mutualism is a political and economic anarchist school of thought largely associated with Pierre-Joseph Proudhon that envisioned a society where each person might possess a means of production either individually or collectively, with trade occuring through what they believed to be an ethical form of bargaining where each party sought only an equivalent amount of labor for what they were offering in trade; integral to the scheme was the establishment of a mutual credit bank which would lend to producers at a minimal rate interest only high enough cover the costs of administration. Mutualism is based on a labor theory of value which holds that when labor or its product is sold, it ought to receive in exchange, goods or services embodying "the amount of labor necessary to produce an article of exactly similar and equal utility" (receiving anything less is considered exploitation, theft of labor, or "usury"). Mutualists believe that a natural economic consequence of a truly free labor market is income to individuals being received proportionally to the amount of labor they exert. Mutualists oppose the idea of individuals receiving an income through loans, investments, and rent, as they believe these individuals are not laboring. They hold that if state intervention ceased, these types of incomes would disappear.

Insofar as they ensure the workers right to the full product of their labor, mutualists support markets and private property in the product of labor. However, they argue for conditional titles to land, whose private ownership is legitimate only so long as it remains in use or occupation (which Proudhon called "possession.") Proudhon's Mutualism reluctantly supports labor-owned cooperative firms and associations "only in those cases where it is not possible for the public to rely on private industry," preferring a society of individual entrepreneurs. As for capital goods (man-made, non-land, "means of production"), mutualist opinions differ on whether they are private "possession" (i.e. individuals required to be using them in order to retain titles) or private property.

Some commentators distinguish between the nineteenth century American individualist anarchists and mutualists, suggesting that mutualists are more concerned with association. Because of this, some see mutualism as being situated somewhere between individualism and collectivism. Proudhon himself described the "liberty" which he pursued as "the synthesis of communism and property."

Mutualists, following Proudhon, originally considered themselves to be libertarian socialists. However, "some mutualists have abandoned the labor theory of value, and prefer to avoid the term "socialist." But they still retain some cultural attitudes, for the most part, that set them off from the libertarian right." Mutualists have distinguished themselves from state socialism, and don't advocate social control over the means of production. Benjamin Tucker said of Proudhon, that "though opposed to socializing the ownership of capital, [Proudhon] aimed nevertheless to socialize its effects by making its use beneficial to all instead of a means of impoverishing the many to enrich the few...by subjecting capital to the natural law of competition, thus bringing the price of its own use down to cost."

History

Mutualism, as a term, has seen a variety of related uses. Charles Fourier first used the French term "mutualisme" in 1822, although the reference was not to an economic system. The first use of the noun "mutualist" was in the New-Harmony Gazette by an American Owenite in 1826. In the early 1830s, a labor organization in Lyons, France, called themselves the "Mutuellists." In What Is Mutualism?. Proudhon was involved with the Lyons mutualists and later adopted the this name to describe his own teachings. Clarence Lee Swartz gives his own account of the origin of the term, claiming that "[t]he word "mutualism" seems to have been first used by John Gray, an English writer, in 1832." When Gray's 1825 Lecture on Human Happiness was first published in the United States in 1826, the publishers appended the Preamble and constitution of the Friendly Association for Mutual Interests, located at Valley Forge. 1826 also saw the publication of the Constitution of the Friendly Association for Mutual Interests at Kendal, Ohio. By 1846, Pierre Joseph Proudhon was speaking of "mutualité" in his writings, and he used the term "mutuellisme," at least as early as 1848, in his "Programme Révolutionnaire." William B. Greene, in 1850, used the term "mutualism" to describe a mutual credit system similar to that of Proudhon. In 1850, the American newspaper The Spirit of the Age, edited by William Henry Channing, published proposals for a "mutualist township" by Joshua King Ingalls and Albert Brisbane, together with works by Proudhon, Greene, Pierre Leroux, and others.

Mutualism has been associated with two types of currency reform. Labor notes were first discussed in Owenite circles and received their first practical test in 1827 in the Time Store of former New Harmony member and individualist anarchist Josiah Warren. Mutual banking aimed at the monetization of all forms of wealth and the extension of free credit. It is most closely associated with William B. Greene, but Greene drew from the work of Proudhon, Edward Kellogg, and William Beck, as well as from the land bank tradition. Mutualism can in many ways be considered "the original anarchy," since Proudhon was the first to identify himself as an anarchist. Though mutualism is generally associated with anarchism, it is not necessarily anarchist.

Nineteenth century mutualists considered themselves libertarian socialists. While still oriented towards cooperation, mutualists favor free market solutions, believing that most inequalities are the result of preferential conditions created by government intervention. Mutualism is something of a middle way between classical economics and socialism, with some characteristics of both.^[2] Modern-day Mutualist Anarchist Kevin Carson, considers anarchist mutualism to be "free market socialism."

Mutualist thoughts on capitalism

The "cost principle" or "cost the limit of price"

Main article: Cost the limit of price

Mutualists argue that most of the economic problems associated with capitalism each amount to a violation of the cost principle, or as Josiah Warren interchangeably said, "Cost the limit of price." It was inspired by the labor theory of value, popularized, though not invented, by Adam Smith in 1776 — Proudhon mentions Smith as an inspiration. The labor theory of value holds that the actual price of a thing (or the "true cost") is the amount of labor that was undertaken to produce it. Proudhon and Warren, working without association or apparent knowledge of each other, accepting this axiom, drew from this the conclusion that it is therefore unethical to charge higher labor cost for a thing than the amount of labor that was undertaken to produce it (see: long run normal profits). In Warren's terms, cost should be the "limit of price," with "cost" referring to the amount of labor required to produce a good or service. Anyone who sells goods should charge no more than the cost to himself of acquiring these goods. Proudhon also held that the "real value of products was determined by labour time, and that all kinds of labour should be regarded as equally effective in the value-creating process, and he advocated therefore equality of wages and salaries."

As far as determining payment for goods, they should pay for those goods with an equivalent amount of labor lest they violate the cost principle. In terms of employment, an employer should not be paid unless he labors and, if he labors less than an employee, then he should be paid less than that employee. Therefore, if the cost principle is followed, profit to an employer through the labor of others is not possible — everyone receives the "full produce" of his own labor and receives no produce of the labor of another unless he pays with an equivalent amount of labor. Warren says that this is in contrast to "Value the limit of price" where the maximum price of a good or service is the value the seller arbitrarily places on what he is selling (or the most that someone else is willing to pay) rather than how much labor it costs him to produce and provide it.

Many later mutualists argued that free competition would naturally push prices towards cost. Instead of a normative principle for individual transactions, the cost principle was a long-run tendency that would occur naturally as a result of the elimination of government regulation of the market economy.

Property

Pierre Joseph Proudhon was one of the most famous philosophers to have articulated thoughts on the nature of property. He is known for claiming that "property is theft," but is less known for the claims that "property is impossible," and "property is liberty." According to Colin Ward, Proudhon did not see a contradiction between these slogans. This was because Proudhon distinguished between what he considered to be two distinct forms of property often bound up in the single label. To the mutualist, this is the distinction between property created by coercion and property created by labor. Property is theft "when it is related to a landowner or capitalist whose ownership is derived from conquest or exploitation and [is] only maintained through the state, property laws, police, and an army". Property is freedom for "the peasant or artisan family [who have] a natural right to a home, land [they may] cultivate, [...] to tools of a trade", and the fruits of that cultivation - but not to ownership or control of the lands and lives of others. The former is considered illegitimate property, the latter legitimate property.

Proudhon argued that property in the product of labor is essential to liberty, while property that strayed from "possession" ("occupancy and use") was the basis for tyranny and would lead a society to destroy itself. The conception of entitlement property as a destructive force and illegitimate institution can be seen in this quote by Proudhon,

Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a natural right, this natural right is not social, but anti-social. Property and society are utterly irreconcilable institutions. It is as impossible to associate two proprietors as to join two magnets by their opposite poles. Either society must perish, or it must destroy property. If property is a natural, absolute, imprescriptible, and inalienable right, why, in all ages, has there been so much speculation as to its origin? — for this is one of its distinguishing characteristics. The origin of a natural right! Good God! who ever inquired into the origin of the rights of liberty, security, or equality? (What is Property?)

Mutualist, Clarence Lee Swartz, says in What is Mutualism:

It is, therefore, one of the purposes of Mutualists, not only to awaken in the people the appreciation of and desire for freedom, but also to arouse in them a determination to abolish the legal restrictions now placed upon non-invasive human activities and to institute, through purely voluntary associations, such measures as will liberate all of us from the exactions of privilege and the power of concentrated capital.

Swartz also states that mutualism differs from anarcho-communism and other collectivist philosophies by its support of private property: "One of the tests of any reform movement with regard to personal liberty is this: Will the movement prohibit or abolish private property? If it does, it is an enemy of liberty. For one of the most important criteria of freedom is the right to private property in the products of ones labor. State Socialists, Communists, Syndicalists and Communist-Anarchists deny private property."

However, Proudhon warned that a society with private 'property' without equality would lead to statist-like relations between people.

"The purchaser draws boundaries, fences himself in, and says, 'This is mine; each one by himself, each one for himself.' Here, then, is a piece of land upon which, henceforth, no one has right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these multiply, and soon the people . . . will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor's door, on the edge of that property which was their birth-right; and the proprietor, watching them die, will exclaim, 'So perish idlers and vagrants.'"

Unlike capitalist private property-supporters Proudhon stressed equality, he wanted everyone to be a property-owning worker able to access capital for themselves. He stressed that in every cooperative "every worker employed in the association [must have] an undivided share in the property of the company" .

Mutualist economics

The major tenets of mutualism are free association, mutualist credit, contract (or federation/confederation), and gradualism (or dual-power). Mutualism is often described by its proponents as advocating an "anti-capitalist free market".

Contemporary mutualist author Kevin Carson holds that capitalism^[3] has been founded on "an act of robbery as massive as feudalism," and argues that capitalism could not exist in the absence of a state. He says "[i]t is state intervention that distinguishes capitalism from the free market". He does not define capitalism in the idealized sense, but says that when he talks about "capitalism" he is referring to what he calls "actually existing capitalism." He believes the term "laissez-faire capitalism" is an oxymoron because it has never existed. However, he says he has no quarrel with anarcho-capitalists who use the term "laissez-faire capitalism" and distinguish it from "actually existing capitalism." He says he has deliberately chosen to resurrect on old definition of the term. Carson argues the centralization of wealth into a class hierarchy is due to state intervention to protect the ruling class, by using a money monopoly, granting patents and subsidies to corporations, imposing discriminatory taxation, and intervening militarily to gain access to international markets. Carson’s thesis is that an authentic free market economy would not be capitalism as the separation of labor from ownership and the subordination of labor to capital would be impossible, bringing a class-less society where people could easily choose between working as a freelancer, working for a fair wage, taking part of a cooperative, or being an entrepreneur. He notes, as did Tucker before him, that a mutualist free market system would involve significantly different property rights than capitalism is based on, particularly in terms of land and intellectual property.^[4]

Free association

Mutualists argue that association is only necessary where there is an organic combination of forces. For instance, an operation that requires specialization and many different workers performing their individual tasks to complete a unified product, i.e., a factory. In this situation, workers are inherently dependent on each other -- and without association they are related as subordinate and superior, master and wage-slave.

An operation that can be performed by an individual without the help of specialized workers does not require association. Proudhon argued that peasants do not require societal form, and only feigned association for the purposes of solidarity in abolishing rents, buying clubs, etc. He recognized that their work is inherently sovereign and free. In commenting on the degree of association that is preferable Proudhon said:

"In cases in which production requires great division of labour, it is necessary to form an ASSOCIATION among the workers... because without that they would remain isolated as subordinates and superiors, and there would ensue two industrial castes of masters and wage workers, which is repugnant in a free and democratic society. But where the product can be obtained by the action of an individual or a family... there is no opportunity for association."

For Proudhon, mutualism involved creating "industrial democracy," a system where workplaces would be "handed over to democratically organised workers' associations . . . We want these associations to be models for agriculture, industry and trade, the pioneering core of that vast federation of companies and societies woven into the common cloth of the democratic social Republic." He urged "workers to form themselves into democratic societies, with equal conditions for all members, on pain of a relapse into feudalism." This would result in "Capitalistic and proprietary exploitation, stopped everywhere, the wage system abolished, equal and just exchange guaranteed." Workers would no longer sell their labour to a capitalist but rather work for themselves in co-operatives.

As Robert Graham notes, "Proudhon's market socialism is indissolubly linked to his notions of industry democracy and workers' self-management." K. Steven Vincent notes in his in-depth analysis of this aspect of Proudhon's ideas that "Proudhon consistently advanced a program of industrial democracy which would return control and direction of the economy to the workers." For Proudhon, "strong workers' associations . . . would enable the workers to determine jointly by election how the enterprise was to be directed and operated on a day-to-day basis."

Mutual credit

Main article: Mutual credit

Mutualists argue that free banking should be taken back by the people to establish systems of free credit. They contend that banks have a monopoly on credit, just as capitalists have a monopoly on land. Banks are essentially creating money by lending out deposits that do not actually belong to them, then charging interest on the difference. Mutualists argue that by establishing a democratically run mutual bank or credit union, it would be possible to issue free credit so that money could be created for the benefit of the participants rather than for the benefit of the bankers. Individualist anarchists noted for their detailed views on mutualist banking include Proudhon, William B. Greene, and Lysander Spooner.

Some modern forms of mutual credit are LETS and the Ripple monetary system project.

Proudhon proposed a government-imposed income tax to fund his mutual banking scheme, with some tax brackets reaching as high as 33 1/3 percent and 50 percent, which was turned down by the legislature. This income tax Proudhon proposed to fund his bank was to be levied on rents, interest, debts, and salaries. Specifically, Proudhon's proposed law would have required all capitalists and stockholders to disburse one sixth of their income to their tenants and debtors and another sixth of their income to the national treasury in order to provide funding for the bank.This scheme was vehemently object to by others in the legislature, including Frédéric Bastiat; the reason given for the income tax's rejection was that it would result in economic ruin and that it violated "the right of property." In his debates with Bastiat and [[M. The, Proudhon did once propose funding a national bank with a voluntary tax of 1%. Proudhon also argued for the abolition of all taxes.

Contract and federation

Mutualism holds that producers should exchange their goods at cost-value using systems of "contract." While Proudhon's early definitions of cost-value were based on fixed assumptions about the value of labor-hours, he later redefined cost-value to include other factors such as the intensity of labor, the nature of the work involved, etc. He also expanded his notions of "contract" into expanded notions of "federation." As Proudhon argued,

"I have shown the contractor, at the birth of industry, negotiating on equal terms with his comrades, who have since become his workmen. It is plain, in fact, that this original equality was bound to disappear through the advantageous position of the master and the dependent position of the wage-workers. In vain does the law assure the right of each to enterprise . . . When an establishment has had leisure to develop itself, enlarge its foundations, ballast itself with capital, and assure itself a body of patrons, what can a workman do against a power so superior?"

Gradualism and dual-power

Beneath the governmental machinery, in the shadow of political institutions, out of the sight of statemen and priests, society is producing its own organism, slowly and silently; and constructing a new order, the expression of its vitality and autonomy...

Proudhon noted that the shock of the French Revolution failed the people, and was instead interested in a federation of worker cooperations that could use mutualist credit to gradually expand and take control of industry. This is similar to economic models based on worker cooperatives today, such as the Mondragón Cooperative Corporation in Spain and NoBAWC in San Francisco.

Mutualism today

Kevin Carson is a contemporary mutualist and author of Studies in Mutualist Political Economy. Contemporary mutualists are among those involved in the Alliance of the Libertarian Left and in the Voluntary Cooperation Movement.

Social economy, some fair trade movements and some free software projects such as Debian and Linux Users Groups follow a similar spirit, focussing on mutual aid, decentralization and free association (see Small "a" anarchism).

Criticisms

One area of disagreement between mutualists and anarchist communists stems from Proudhon's advocacy of money to compensate individuals for their labor. Peter Kropotkin, like other anarchist communists, advocated the abolition of wage labour and questioned, "how can this new form of wages, the labor note, be sanctioned by those who admit that houses, fields, mills are no longer private property, that they belong to the commune or the nation?" According to George Woodcock, Kropotkin believed that a wage system in any form, whether "administered by Banks of the People or by workers' associations through labor cheques is a form of compulsion."

Collectivist anarchist Michael Bakunin was an adamant critic of Proudhonian mutualism as well, stating, "How ridiculous are the ideas of the individualists of... the Proudhonian mutualists who conceive society as the result of the free contract of individuals absolutely independent of one another and entering into mutual relations only because of the convention drawn up among men. As if these men had dropped from the skies, bringing with them speech, will, original thought, and as if they were alien to anything of the earth, that is, anything having social origin."

Criticism from pro-market sectors has been common as well. Laissez-faire capitalist George Reisman charges that mutualism supports exploitation when it does not recognize a right of an individual to protect land that he has mixed his labor with if he happens to not be using it. Reisman sees the seizure of such land as the theft of the product of labor and has said that "Mutualism claims to opposed the exploitation of labor, i.e. the theft of any part of its product. But when it comes to labor that has been mixed with land, it turns a blind eye out foursquare on the side of the exploiter."

Notes and references

Notes

1. ^ "Involved with radical politics and in his contact with the Marxists, he [Proudhon] soon rejected their doctrine, seeking rather a middle way between socialist theories and classical economics." - Irving Horowitz, The Anarchists, 1964, Dell Publishing
2. ^ Some critics object to the use of the term capitalism in reference to historical or actually existing economic arrangements, which they term mixed economies. They reserve the term for the abstract ideal or future possibility of a genuinely free market. This sort of free-market capitalism may closely follow Carson's free-market anti-capitalism in its practical details except for the fact that Carson does not recognize a right of an individual to protect land that he has transformed through labor or purchased to be protected when he is not using it. Carson, like other mutualists, only recognize occupancy and use as the standard for retaining legitimate control over something. According to Carson, "For mutualists, occupancy and use is the only legitimate standard for establishing ownership of land, regardless of how many times it has changed hands. An existing owner may transfer ownership by sale or gift; but the new owner may establish legitimate title to the land only by his own occupancy and use. A change in occupancy will amount to a change in ownership. Absentee landlord rent, and exclusion of homesteaders from vacant land by an absentee landlord, are both considered illegitimate by mutualists. The actual occupant is considered the owner of a tract of land, and any attempt to collect rent by a self-styled landlord is regarded as a violent invasion of the possessor's absolute right of property. (p. 200. of Carson's "Mutualist Political Economy."
3. ^ See The Iron Fist Behind The Invisible Hand.
4. ^ "For mutualists, occupancy and use is the only legitimate standard for establishing ownership of land, regardless of how many times it has changed hands. According the mutualist Kevin Carson "A change in occupancy will amount to a change in ownership." An existing owner may transfer ownership by sale or gift; but the new owner may establish legitimate title to the land only by his own occupancy and use. A change in occupancy will amount to a change in ownership. Absentee landlord rent, and exclusion of homesteaders from vacant land by an absentee landlord, are both considered illegitimate by mutualists. The actual occupant is considered the owner of a tract of land, and any attempt to collect rent by a self-styled landlord is regarded as a violent invasion of the possessor's absolute right of property. (p. 200. of Carson's "Mutualist Political Economy." (editor's emphasis)

See also

• Agorism
• Cincinnati Time Store
• Consumers' cooperative
• Individualist anarchism
• Labor theory of property
• Left-libertarianism
• Libertarian socialism
• Socialist economics
• Utopia (anarchist community)
• Worker cooperative
• Workplace democracy
• Workers' self-management

Persons

• Kevin Carson
• Joe Hill
• Pierre-Joseph Proudhon
• Clarence Lee Swartz

External links

• Mutualist.org, Mutualist web site
• Mutualist Blog: Free Market Anti-Capitalism, a weblog written by Kevin Carson
• Mutualism from The Conquest of Power, by Albert Weisbord
• Plan of the Cincinnati Labor for Labor Store by Josiah Warren
• Proudhon and Anarchism by Larry Gambone - contains a discussion on Proudhonist mutualism
• Mutual Banking by William B. Greene
• Studies in Mutualist Political Economy by Kevin Carson
• What is Mutualism? by Clarence Lee Swartz (1927) - A classic text on Mutualism
• Mutual Aid: A Factor of Evolution Peter Kropotkin 1902
• Anarchist-Mutualism by John William Lloyd, a criticism
• Journal of Libertarian Studies Vol. 20 Num. 1. This issue is devoted to Kevin Carson's Studies in Mutualist Political Economy. It includes critiques and Carson's rejoinders.
• Mutualism: A Philosophy for Thieves by George Reisman.