G.3 Is “anarcho”-capitalism a new form of individualist anarchism?

G.3 Is "anarcho"-capitalism a new form of individualist anarchism?

G.3 Is "anarcho"-capitalism a new form of individualist anarchism?

No. As Carole Pateman once pointed out, "[t]here has always been a strong radical individualist tradition in the USA. Its adherents have been divided between those who drew anarchist, egalitarian conclusions, and those who reduced political life to the capitalist economy writ large, to a series of exchanges between unequally situated individuals." [The Problem of Political Obligation, p. 205] What right-"libertarians" and "anarcho"-capitalists do is to confuse these two traditions, ignoring fundamental aspects of individualist anarchism in order to do so. Thus anarchist Peter Sabatini:

"in those rare moments when [Murray] Rothbard (or any other [right-wing] Libertarian) does draw upon individualist anarchism, he is always highly selective about what he pulls out. Most of the doctrine’s core principles, being decidedly anti-Libertarianism, are conveniently ignored, and so what remains is shrill anti-statism conjoined to a vacuous freedom in hackneyed defence of capitalism. In sum, the ‘anarchy’ of Libertarianism reduces to a liberal fraud." [Libertarianism: Bogus Anarchy]

As class struggle anarchist Benjamin Franks notes, individualist anarchism "has similarities with, but is not identical to, anarcho-capitalism." [Rebel Alliances, p. 44] For Colin Ward, while the "mainstream" of anarchist propaganda "has been anarchist-communism" there are "several traditions of individualist anarchism", including that associated with Max Stirner and "a remarkable series of 19th-century American figures" who "differed from free-market liberals in their absolute mistrust of American capitalism, and in their emphasis on mutualism." Ward was careful to note that by the "late 20th century the word ‘libertarian’ . . . was appropriated by a new group of American thinkers" and so "it is necessary to examine the modern individualist ‘libertarian’ response from the standpoint of the anarchist tradition." It was found to be wanting, for while Rothbard was "the most aware of the actual anarchist tradition among the anarcho-capitalist apologists" he may have been "aware of a tradition, but he is singularly unaware of the old proverb that freedom for the pike means death for the minnow." The individualist anarchists were "busy social inventors exploring the potential of autonomy." The "American ‘libertarians’ of the 20th century are academics rather than social activists, and their inventiveness seems to be limited to providing an ideology for untrammelled market capitalism." [Anarchism: A Short Introduction, pp. 2-3, p. 62, p. 67, and p. 69]

In this section we will sketch these differences between the genuine libertarian ideas of Individualist Anarchism and the bogus "anarchism" of right-"libertarian" ideology. This discussion builds upon our general critique of "anarcho"-capitalism we presented in section F. However, here we will concentrate on presenting individualist anarchist analysis of "anarcho"-capitalist positions rather than, as before, mostly social anarchist ones (although, of course, there are significant overlaps and similarities). In this way, we can show the fundamental differences between the two theories for while there are often great differences between specific individualist anarchist thinkers all share a vision of a free society distinctly at odds with the capitalism of their time as well as the "pure" system of economic textbooks and right-"libertarian" dreams (which, ironically, so often reflects the 19th century capitalism the individualist anarchists were fighting).

First it should be noted that some "anarcho"-capitalists shy away from the term, preferring such expressions as "market anarchist" or "individualist anarchist." This suggests that there is some link between their ideology and that of Tucker and his comrades. However, the founder of "anarcho"-capitalism, Murray Rothbard, refused that label for, while "strongly tempted," he could not do so because "Spooner and Tucker have in a sense pre-empted that name for their doctrine and that from that doctrine I have certain differences." Somewhat incredibly Rothbard argued that on the whole politically "these differences are minor," economically "the differences are substantial, and this means that my view of the consequences of putting our more of less common system into practice is very far from theirs." ["The Spooner-Tucker Doctrine: An Economist’s View", pp. 5-15, Journal of Libertarian Studies, vol. 20, no. 1, p. 7]

What an understatement! Individualist anarchists advocated an economic system in which there would have been very little inequality of wealth and so of power (and the accumulation of capital would have been minimal without profit, interest and rent). Removing this social and economic basis would result in substantially different political regimes. In other words, politics is not isolated from economics. As anarchist David Wieck put it, Rothbard "writes of society as though some part of it (government) can be extracted and replaced by another arrangement while other things go on as before, and he constructs a system of police and judicial power without any consideration of the influence of historical and economic context." [Anarchist Justice, p. 227]

Unsurprisingly, the political differences he highlights are significant, namely "the role of law and the jury system" and "the land question." The former difference relates to the fact that the individualist anarchists "allow[ed] each individual free-market court, and more specifically, each free-market jury, totally free rein over judicial decision." This horrified Rothbard. The reason is obvious, as it allows real people to judge the law as well as the facts, modifying the former as society changes and evolves. For Rothbard, the idea that ordinary people should have a say in the law is dismissed. Rather, "it would not be a very difficult task for Libertarian lawyers and jurists to arrive at a rational and objective code of libertarian legal principles and procedures." [Op. Cit., pp. 7-8] Of course, the fact that "lawyers" and "jurists" may have a radically different idea of what is just than those subject to their laws is not raised by Rothbard, never mind answered. While Rothbard notes that juries may defend the people against the state, the notion that they may defend the people against the authority and power of the rich is not even raised. That is why the rich have tended to oppose juries as well as popular assemblies. Unsurprisingly, as we indicated in section F.6.1, Rothbard wanted laws to be made by judges, lawyers, jurists and other "libertarian" experts rather than jury judged and driven. In other words, to exclude the general population from any say in the law and how it changes. This hardly a "minor" difference! It is like a supporter of the state saying that it is a "minor" difference if you favour a dictatorship rather than a democratically elected government. As Tucker argued, "it is precisely in the tempering of the rigidity of enforcement that one of the chief excellences of Anarchism consists . . . under Anarchism all rules and laws will be little more than suggestions for the guidance of juries, and that all disputes . . . will be submitted to juries which will judge not only the facts but the law, the justice of the law, its applicability to the given circumstances, and the penalty or damage to be inflicted because of its infraction . . . under Anarchism the law . . . will be regarded as just in proportion to its flexibility, instead of now in proportion to its rigidity." [The Individualist Anarchists, pp. 160-1] In others, the law will evolve to take into account changing social circumstances and, as a consequence, public opinion on specific events and rights. Tucker’s position is fundamentally democratic and evolutionary while Rothbard’s is autocratic and fossilised.

This is particularly the case if you are proposing an economic system that is based on inequalities of wealth, power and influence and the means of accumulating more. As we note in section G.3.3, one of the few individualist anarchists that remained pointed this out and opposed Rothbard’s arguments. As such, while Rothbard may have subscribed to a system of competing defence companies like Tucker, he expected them to operate in a substantially different legal system, enforcing different (capitalist) property rights and within a radically different socio-economic system. These differences are hardly "minor". As such, to claim that "anarcho"-capitalism is simply individualist anarchism with "Austrian" economics shows an utter lack of understanding of what individualist anarchism stood and aimed for.

On the land question, Rothbard opposed the individualist position of "occupancy and use" as it "would automatically abolish all rent payments for land." Which was precisely why the individualist anarchists advocated it! In a predominantly rural economy, as was the case during most of the 19th century in America, this would result in a significant levelling of income and social power as well as bolstering the bargaining position of non-land workers by reducing the numbers forced onto the labour market (which, as we note in section F.8.5, was the rationale for the state enforcing the land monopoly in the first place). He bemoans that landlords cannot charge rent on their "justly-acquired private property" without noticing that is begging the question as anarchists deny that this is "justly-acquired" land in the first place. Unsurprisingly, Rothbard considered "the proper theory of justice in landed property can be found in John Locke", ignoring the awkward fact that the first self-proclaimed anarchist book was written precisely to refute that kind of theory and expose its anti-libertarian implications. His argument simply shows how far from anarchism his ideology is. For Rothbard, it goes without saying that the landlord’s "freedom of contract" tops the worker’s freedom to control their own work and live and, of course, their right to life. [Op. Cit., p. 8 and p. 9]

For anarchists, "the land is indispensable to our existence, consequently a common thing, consequently insusceptible of appropriation." [Proudhon, What is Property?, p. 107] Tucker looked forward to a time when capitalist property rights in land were ended and "the Anarchistic view that occupancy and use should condition and limit landholding becomes the prevailing view." This "does not simply mean the freeing of unoccupied land. It means the freeing of all land not occupied by the owner" and "tenants would not be forced to pay you rent, nor would you be allowed to seize their property. The Anarchic associations would look upon your tenants very much as they would look upon your guests." [The Individualist Anarchists, p. 159, p. 155 and p. 162] The ramifications of this position on land use are significant. At its most basic, what counts as force and coercion, and so state intervention, are fundamentally different due to the differing conceptions of property held by Tucker and Rothbard. If we apply, for example, the individualist anarchist position on land to the workplace, we would treat the workers in a factory as the rightful owners, on the basis of occupation and use; at the same time, we could treat the share owners and capitalists as aggressors for attempting to force their representatives as managers on those actually occupying and using the premises. The same applies to the landlord against the tenant farmer. Equally, the outcome of such differing property systems will be radically different — in terms of inequalities of wealth and so power (with having others working for them, it is unlikely that would-be capitalists or landlords would get rich). Rather than a "minor" difference, the question of land use fundamentally changes the nature of the society built upon it and whether it counts as genuinely libertarian or not.

Tucker was well aware of the implications of such differences. Supporting a scheme like Rothbard’s meant "departing from Anarchistic ground," it was "Archism" and, as he stressed in reply to one supporter of such property rights, it opened the door to other authoritarian positions: "Archism in one point is taking him to Archism in another. Soon, if he is logical, he will be an Archist in all respects." It was a "fundamentally foolish" position, because it "starts with a basic proposition that must be looked upon by all consistent Anarchists as obvious nonsense." "What follows from this?" asked Tucker. "Evidently that a man may go to a piece of vacant land and fence it off; that he may then go to a second piece and fence that off; then to a third, and fence that off; then to a fourth, a fifth, a hundredth, a thousandth, fencing them all off; that, unable to fence off himself as many as he wishes, he may hire other men to do the fencing for him; and that then he may stand back and bar all other men from using these lands, or admit them as tenants at such rental as he may choose to extract." It was "a theory of landed property which all Anarchists agree in viewing as a denial of equal liberty." It is "utterly inconsistent with the Anarchistic doctrine of occupancy and use as the limit of property in land." [Liberty, No. 180, p. 4 and p. 6] This was because of the dangers to liberty capitalist property rights in land implied:

"I put the right of occupancy and use above the right of contract . . . principally by my interest in the right of contract. Without such a preference the theory of occupancy and use is utterly untenable; without it . . . it would be possible for an individual to acquire, and hold simultaneously, virtual titles to innumerable parcels of land, by the merest show of labour performed thereon . . . [This would lead to] the virtual ownership of the entire world by a small fraction of its inhabitants . . . [which would see] the right of contract, if not destroyed absolutely, would surely be impaired in an intolerable degree." [Op. Cit., no. 350, p. 4]

Clearly a position which Rothbard had no sympathy for, unlike landlords. Strange, though, that Rothbard did not consider the obvious liberty destroying effects of the monopolisation of land and natural resources as "rational grounds" for opposing landlords but, then, as we noted in section F.1 when it came to private property Rothbard simply could not see its state-like qualities — even when he pointed them out himself! For Rothbard, the individualist anarchist position involved a "hobbling of land sites or of optimum use of land ownership and cultivation and such arbitrary misallocation of land injures all of society." [Rothbard, Op. Cit., p. 9] Obviously, those subject to the arbitrary authority of landlords and pay them rent are not part of "society" and it is a strange coincidence that the interests of landlords just happen to coincide so completely with that of "all of society" (including their tenants?). And it would be churlish to remind Rothbard’s readers that, as a methodological individualist, he was meant to think that there is no such thing as "society" — just individuals. And in terms of these individuals, he clearly favoured the landlords over their tenants and justifies this by appealing, like any crude collectivist, to an abstraction ("society") to which the tenants must sacrifice themselves and their liberty. Tucker would not have been impressed.

For Rothbard, the nineteenth century saw "the establishment in North America of a truly libertarian land system." [The Ethics of Liberty, p. 73] In contrast, the Individualist Anarchists attacked that land system as the "land monopoly" and looked forward to a time when "the libertarian principle to the tenure of land" was actually applied [Tucker, Liberty, no. 350, p. 5] So given the central place that "occupancy and use" lies in individualist anarchism, it was extremely patronising for Rothbard to assert that "it seems . . . a complete violation of the Spooner-Tucker ‘law of equal liberty’ to prevent the legitimate owner from selling his land to someone else." ["The Spooner-Tucker Doctrine: An Economist’s View", Op. Cit., p. 9] Particularly as Tucker had explicitly addressed this issue and indicated the logical and common sense basis for this so-called "violation" of their principles. Thus "occupancy and use" was "the libertarian principle to the tenure of land" because it stopped a class of all powerful landlords developing, ensuring a real equality of opportunity and liberty rather than the formal "liberty" associated with capitalism which, in practice, means selling your liberty to the rich.

Somewhat ironically, Rothbard bemoaned that it "seems to be a highly unfortunate trait of libertarian and quasi-libertarian groups to spend the bulk of their time and energy emphasising their most fallacious or unlibertarian points." [Op. Cit., p. 14] He pointed to the followers of Henry George and their opposition to the current land holding system and the monetary views of the individualist anarchists as examples (see section G.3.6 for a critique of Rothbard’s position on mutual banking). Of course, both groups would reply that Rothbard’s positions were, in fact, both fallacious and unlibertarian in nature. As, indeed, did Tucker decades before Rothbard proclaimed his private statism a form of "anarchism." Yarros’ critique of those who praised capitalism but ignored the state imposed restrictions that limited choice within it seems as applicable to Rothbard as it did Herbert Spencer:

"A system is voluntary when it is voluntary all round . . . not when certain transactions, regarded from certain points of view, appear voluntary. Are the circumstances which compel the labourer to accept unfair terms law-created, artificial, and subversive of equal liberty? That is the question, and an affirmative answer to it is tantamount to an admission that the present system is not voluntary in the true sense." [Liberty, no. 184, p. 2]

So while "anarcho"-capitalists like Walter Block speculate on how starving families renting their children to wealthy paedophiles is acceptable "on libertarian grounds" it is doubtful that any individualist anarchist would be so blasé about such an evil. ["Libertarianism vs. Objectivism: A Response to Peter Schwartz," pp. 39-62, Reason Papers, Vol. 26, Summer 2003, p. 20] Tucker, for example, was well aware that liberty without equality was little more than a bad joke. "If," he argued, "after the achievement of all industrial freedoms, economic rent should prove to be the cause of such inequalities in comfort that an effective majority found themselves at the point of starvation, they would undoubtedly cry, ‘Liberty be damned!’ and proceed to even up; and I think that at that stage of the game they would be great fools if they didn’t. From this it will be seen that I am no[t] . . . a stickler for absolute equal liberty under all circumstances." Needless to say, he considered this outcome as unlikely and was keen to "[t]ry freedom first." [Liberty, no. 267, p. 2 and p. 3]

The real question is why Rothbard considered this a political difference rather than an economic one. Unfortunately, he did not explain. Perhaps because of the underlying socialist perspective behind the anarchist position? Or perhaps the fact that feudalism and monarchism was based on the owner of the land being its ruler suggests a political aspect to propertarian ideology best left unexplored? Given that the idea of grounding rulership on land ownership receded during the Middle Ages, it may be unwise to note that under "anarcho"-capitalism the landlord and capitalist would, likewise, be sovereign over the land and those who used it? As we noted in section F.1, this is the conclusion that Rothbard does draw. As such, there is a political aspect to this difference, namely the difference between a libertarian social system and one rooted in authority.

Ultimately, "the expropriation of the mass of the people from the soil forms the basis of the capitalist mode of production." [Marx, Capital, vol. 1, p. 934] For there are "two ways of oppressing men: either directly by brute force, by physical violence; or indirectly by denying them the means of life and this reducing them to a state of surrender." In the second case, government is "an organised instrument to ensure that dominion and privilege will be in the hands of those who . . . have cornered all the means of life, first and foremost the land, which they make use of to keep the people in bondage and to make them work for their benefit." [Malatesta, Anarchy, p. 21] Privatising the coercive functions of said government hardly makes much difference.

As such, Rothbard was right to distance himself from the term individualist anarchism. It is a shame he did not do the same with anarchism as well!

G.3.1 Is "anarcho"-capitalism American anarchism?

Unlike Rothbard, some "anarcho"-capitalists are more than happy to proclaim themselves "individualist anarchists" and so suggest that their notions are identical, or nearly so, with the likes of Tucker, Ingalls and Labadie. As part of this, they tend to stress that individualist anarchism is uniquely American, an indigenous form of anarchism unlike social anarchism. To do so, however, means ignoring not only the many European influences on individualist anarchism itself (most notably, Proudhon) but also downplaying the realities of American capitalism which quickly made social anarchism the dominant form of Anarchism in America. Ironically, such a position is deeply contradictory as "anarcho"-capitalism itself is most heavily influenced by a European ideology, namely "Austrian" economics, which has lead its proponents to reject key aspects of the indigenous American anarchist tradition.

For example, "anarcho"-capitalist Wendy McElroy does this in a short essay provoked by the Seattle protests in 1999. After property destruction in Seattle placed American anarchists back in the media, she stated that social anarchism "is not American anarchism. Individualist anarchism, the indigenous form of the political philosophy, stands in rigorous opposition to attacking the person or property of individuals." While Canadian, her rampant American nationalism is at odds with the internationalism of the individualist anarchists and like an ideological protectionist she argued that "Left [sic!] anarchism (socialist and communist) are foreign imports that flooded the country like cheap goods during the 19th century." [Anarchism: Two Kinds] Apparently Albert and Lucy Parsons were un-Americans, as was Voltairine de Cleyre who turned from individualist to communist anarchism. And best not mention the social conditions in America which quickly made communist-anarchism predominant in the movement or that individualist anarchists like Tucker proudly proclaimed their ideas socialist!

She argued that "[m]any of these anarchists (especially those escaping Russia) introduced lamentable traits into American radicalism" such as "propaganda by deed" as well as a class analysis which "divided society into economic classes that were at war with each other." Taking the issue of "propaganda by the deed" first, it should be noted that use of violence against person or property was hardly alien to American traditions. The Boston Tea Party was just as "lamentable" an attack on "property of individuals" as the window breaking at Seattle while the revolution and revolutionary war were hardly fought using pacifist methods or respecting the "person or property of individuals" who supported imperialist Britain. Similarly, the struggle against slavery was not conducted purely by means Quakers would have supported (John Brown springs to mind), nor was (to use just one example) Shay’s rebellion. So "attacking the person or property of individuals" was hardly alien to American radicalism and so was definitely not imported by "foreign" anarchists.

Of course, anarchism in America became associated with terrorism (or "propaganda by the deed") due to the Haymarket events of 1886 and Berkman’s assassination attempt against Frick during the Homestead strike. Significantly, McElroy makes no mention of the substantial state and employer violence which provoked many anarchists to advocate violence in self-defence. For example, the great strike of 1877 saw the police open fire on strikers on July 25th, killing five and injuring many more. "For several days, meetings of workmen were broken up by the police, who again and again interfered with the rights of free speech and assembly." The Chicago Times called for the use of hand grenades against strikers and state troops were called in, killing a dozen strikers. "In two days of fighting, between 25 and 50 civilians had been killed, some 200 seriously injured, and between 300 and 400 arrested. Not a single policeman or soldier had lost his life." This context explains why many workers, including those in reformist trade unions as well as anarchist groups like the IWPA, turned to armed self-defence ("violence"). The Haymarket meeting itself was organised in response to the police firing on strikers and killing at least two. The Haymarket bomb was thrown after the police tried to break-up a peaceful meeting by force: "It is clear then that . . . it was the police and not the anarchists who were the perpetrators of the violence at the Haymarket." All but one of the deaths and most of the injuries were caused by the police firing indiscriminately in the panic after the explosion. [Paul Avrich, The Haymarket Tragedy, pp. 32-4, p. 189, p. 210, and pp. 208-9] As for Berkman’s assassination attempt, this was provoked by the employer’s Pinkerton police opening fire on strikers, killing and wounding many. [Emma Goldman, Living My Life, vol. 1, p. 86]

In other words, it was not foreign anarchists or alien ideas which associated anarchism with violence but, rather, the reality of American capitalism. As historian Eugenia C. Delamotte puts it, "the view that anarchism stood for violence . . . spread rapidly in the mainstream press from the 1870s" because of "the use of violence against strikers and demonstrators in the labour agitation that marked these decades — struggles for the eight-hour day, better wages, and the right to unionise, for example. Police, militia, and private security guards harassed, intimidated, bludgeoned, and shot workers routinely in conflicts that were just as routinely portrayed in the media as worker violence rather than state violence; labour activists were also subject to brutal attacks, threats of lynching, and many other forms of physical assault and intimidation . . . the question of how to respond to such violence became a critical issue in the 1870s, with the upswelling of labour agitation and attempts to suppress it violently." [Gates of Freedom, pp. 51-2]

Joseph Labadie, it should be noted, thought the "Beastly police" got what they deserved at Haymarket as they had attempted to break up a peaceful public meeting and such people should "go at the peril of their lives. If it is necessary to use dynamite to protect the rights of free meeting, free press and free speech, then the sooner we learn its manufacture and use . . . the better it will be for the toilers of the world." The radical paper he was involved in, the Labor Leaf, had previously argued that "should trouble come, the capitalists will use the regular army and militia to shoot down those who are not satisfied. It won’t be so if the people are equally ready." Even reformist unions were arming themselves to protect themselves, with many workers applauding their attempts to organise union militias. As one worker put it: "With union men well armed and accustomed to military tactics, we could keep Pinkerton’s men at a distance . . . Employers would think twice, too, before they attempted to use troops against us . . . Every union ought to have its company of sharpshooters." [quoted by Richard Jules Oestreicher, Solidarity and Fragmentation, p. 200 and p. 135]

While the violent rhetoric of the Chicago anarchists was used at their trial and is remembered (in part because enemies of anarchism take great glee in repeating it), the state and employer violence which provoked it has been forgotten or ignored. Unless this is mentioned, a seriously distorted picture of both communist-anarchism and capitalism are created. It is significant, of course, that while the words of the Martyrs are taken as evidence of anarchism’s violent nature, the actual violence (up to and including murder) against strikers by state and private police apparently tells us nothing about the nature of the state or capitalist system (Ward Churchill presents an excellent summary of such activities in his article "From the Pinkertons to the PATRIOT Act: The Trajectory of Political Policing in the United States, 1870 to the Present" [CR: The New Centennial Review, Vol. 4, No. 1, pp. 1-72]).

So, as can be seen, McElroy distorts the context of anarchist violence by utterly ignoring the far worse capitalist violence which provoked it. Like more obvious statists, she demonises the resistance to the oppressed while ignoring that of the oppressor. Equally, it should also be noted Tucker rejected violent methods to end class oppression not out of principle, but rather strategy as there "was no doubt in his mind as to the righteousness of resistance to oppression by recourse to violence, but his concern now was with its expedience . . . he was absolutely convinced that the desired social revolution would be possible only through the utility of peaceful propaganda and passive resistance." [James J. Martin, Men Against the State, p. 225] For Tucker "as long as freedom of speech and of the press is not struck down, there should be no resort to physical force in the struggle against oppression." [quoted by Morgan Edwards, "Neither Bombs Nor Ballots: Liberty & the Strategy of Anarchism", pp. 65-91, Benjamin R. Tucker and the Champions of Liberty, Coughlin, Hamilton and Sullivan (eds.), p. 67] Nor should we forget that Spooner’s rhetoric could be as blood-thirsty as Johann Most’s at times and that American individualist anarchist Dyer Lum was an advocate of insurrection.

As far as class analysis goes, which allegedly "divided society into economic classes that were at war with each other", it can be seen that the "left" anarchists were simply acknowledging the reality of the situation — as did, it must be stressed, the individualist anarchists. As we noted in section G.1, the individualist anarchists were well aware that there was a class war going on, one in which the capitalist class used the state to ensure its position (the individualist anarchist "knows very well that the present State is an historical development, that it is simply the tool of the property-owning class; he knows that primitive accumulation began through robbery bold and daring, and that the freebooters then organised the State in its present form for their own self-preservation." [A.H. Simpson, The Individualist Anarchists, p. 92]). Thus workers had a right to a genuinely free market for "[i]f the man with labour to sell has not this free market, then his liberty is violated and his property virtually taken from him. Now, such a market has constantly been denied . . . to labourers of the entire civilised world. And the men who have denied it are . . . Capitalists . . . [who] have placed and kept on the statute-books all sorts of prohibitions and taxes designed to limit and effective in limiting the number of bidders for the labour of those who have labour to sell." [Instead of a Book, p. 454] For Joshua King Ingalls, "[i]n any question as between the worker and the holder of privilege, [the state] is certain to throw itself into the scale with the latter, for it is itself the source of privilege, the creator of class rule." [quoted by Bowman N. Hall, "Joshua K. Ingalls, American Individualist: Land Reformer, Opponent of Henry George and Advocate of Land Leasing, Now an Established Mode," pp. 383-96, American Journal of Economics and Sociology, Vol. 39, No. 4, p. 292] Ultimately, the state was "a police force to regulate the people in the interests of the plutocracy." [Ingalls, quoted by Martin, Op. Cit., p. 152]

Discussing Henry Frick, manager of the Homestead steelworkers who was shot by Berkman for using violence against striking workers, Tucker noted that Frick did not "aspire, as I do, to live in a society of mutually helpful equals" but rather it was "his determination to live in luxury produced by the toil and suffering of men whose necks are under his heel. He has deliberately chosen to live on terms of hostility with the greater part of the human race." While opposing Berkman’s act, Tucker believed that he was "a man with whom I have much in common, — much more at any rate than with such a man as Frick." Berkman "would like to live on terms of equality with his fellows, doing his share of work for not more than his share of pay." [The Individualist Anarchists, pp. 307-8] Clearly, Tucker was well aware of the class struggle and why, while not supporting such actions, violence occurred when fighting it.

As Victor Yarros summarised, for the individualist anarchists the "State is the servant of the robbers, and it exists chiefly to prevent the expropriation of the robbers and the restoration of a free and fair field for legitimate competition and wholesome, effective voluntary cooperation." ["Philosophical Anarchism: Its Rise, Decline, and Eclipse", pp. 470-483, The American Journal of Sociology, vol. 41, no. 4, p. 475] For "anarcho"-capitalists, the state exploits all classes subject to it (perhaps the rich most, by means of taxation to fund welfare programmes and legal support for union rights and strikes).

So when McElroy states that, "Individualist anarchism rejects the State because it is the institutionalisation of force against peaceful individuals", she is only partly correct. While it may be true for "anarcho"-capitalism, it fails to note that for the individualist anarchists the modern state was the institutionalisation of force by the capitalist class to deny the working class a free market. The individualist anarchists, in other words, like social anarchists also rejected the state because it imposed certain class monopolies and class legislation which ensured the exploitation of labour by capital — a significant omission on McElroy’s part. "Can it be soberly pretended for a moment that the State . . . is purely a defensive institution?" asked Tucker. "Surely not . . . you will find that a good nine-tenths of existing legislation serves . . . either to prescribe the individual’s personal habits, or, worse still, to create and sustain commercial, industrial, financial, and proprietary monopolies which deprive labour of a large part of the reward that it would receive in a perfectly free market." [Tucker, Instead of a Book, pp. 25-6] In fact:

"As long as a portion of the products of labour are appropriated for the payment of fat salaries to useless officials and big dividends to idle stockholders, labour is entitled to consider itself defrauded, and all just men will sympathise with its protest." [Tucker, Liberty, no. 19, p. 1]

It goes without saying that almost all "anarcho"-capitalists follow Rothbard in being totally opposed to labour unions, strikes and other forms of working class protest. As such, the individualist anarchists, just as much as the "left" anarchists McElroy is so keen to disassociate them from, argued that "[t]hose who made a profit from buying or selling were class criminals and their customers or employees were class victims. It did not matter if the exchanges were voluntary ones. Thus, left anarchists hated the free market as deeply as they hated the State." [McElroy, Op. Cit.] Yet, as any individualist anarchist of the time would have told her, the "free market" did not exist because the capitalist class used the state to oppress the working class and reduce the options available to choose from so allowing the exploitation of labour to occur. Class analysis, in other words, was not limited to "foreign" anarchism, nor was the notion that making a profit was a form of exploitation (usury). As Tucker continually stressed: "Liberty will abolish interest; it will abolish profit; it will abolish monopolistic rent; it will abolish taxation; it will abolish the exploitation of labour." [The Individualist Anarchists, p. 157]

It should also be noted that the "left" anarchist opposition to the individualist anarchist "free market" is due to an analysis which argues that it will not, in fact, result in the anarchist aim of ending exploitation nor will it maximise individual freedom (see section G.4). We do not "hate" the free market, rather we love individual liberty and seek the best kind of society to ensure free people. By concentrating on markets being free, "anarcho"-capitalism ensures that it is wilfully blind to the freedom-destroying similarities between capitalist property and the state (as we discussed in section F.1). An analysis which many individualist anarchists recognised, with the likes of Dyer Lum seeing that replacing the authority of the state with that of the boss was no great improvement in terms of freedom and so advocating co-operative workplaces to abolish wage slavery. Equally, in terms of land ownership the individualist anarchists opposed any voluntary exchanges which violated "occupancy and use" and so they, so, "hated the free market as deeply as they hated the State." Or, more correctly, they recognised that voluntary exchanges can result in concentrations of wealth and so power which made a mockery of individual freedom. In other words, that while the market may be free the individuals within it would not be.

McElroy partly admits this, saying that "the two schools of anarchism had enough in common to shake hands when they first met. To some degree, they spoke a mutual language. For example, they both reviled the State and denounced capitalism. But, by the latter, individualist anarchists meant ‘state-capitalism’ the alliance of government and business." Yet this "alliance of government and business" has been the only kind of capitalism that has ever existed. They were well aware that such an alliance made the capitalist system what it was, i.e., a system based on the exploitation of labour. William Bailie, in an article entitled "The Rule of the Monopolists" simply repeated the standard socialist analysis of the state when he talked about the "gigantic monopolies, which control not only our industry, but all the machinery of the State, — legislative, judicial, executive, — together with school, college, press, and pulpit." Thus the "preponderance in the number of injunctions against striking, boycotting, and agitating, compared with the number against locking-out, blacklisting, and the employment of armed mercenaries." The courts could not ensure justice because of the "subserviency of the judiciary to the capitalist class . . . and the nature of the reward in store for the accommodating judge." Government "is the instrument by means of which the monopolist maintains his supremacy" as the law-makers "enact what he desires; the judiciary interprets his will; the executive is his submissive agent; the military arm exists in reality to defend his country, protect his property, and suppress his enemies, the workers on strike." Ultimately, "when the producer no longer obeys the State, his economic master will have lost his power." [Liberty, no. 368, p. 4 and p. 5] Little wonder, then, that the individualist anarchists thought that the end of the state and the class monopolies it enforces would produce a radically different society rather than one essentially similar to the current one but without taxes. Their support for the "free market" implied the end of capitalism and its replacement with a new social system, one which would end the exploitation of labour.

She herself admits, in a roundabout way, that "anarcho"-capitalism is significantly different from individualist anarchism. "The schism between the two forms of anarchism has deepened with time," she asserts. This was "[l]argely due to the path breaking work of Murray Rothbard" and so, unlike genuine individualist anarchism, the new "individualist anarchism" (i.e., "anarcho"-capitalism) "is no longer inherently suspicious of profit-making practices, such as charging interest. Indeed, it embraces the free market as the voluntary vehicle of economic exchange" (does this mean that the old version of it did not, in fact, embrace "the free market" after all?) This is because it "draws increasingly upon the work of Austrian economists such as Mises and Hayek" and so "it draws increasingly farther away from left anarchism" and, she fails to note, the likes of Warren and Tucker. As such, it would be churlish to note that "Austrian" economics was even more of a "foreign import" much at odds with American anarchist traditions as communist anarchism, but we will! After all, Rothbard’s support of usury (interest, rent and profit) would be unlikely to find much support from someone who looked forward to the development of "an attitude of hostility to usury, in any form, which will ultimately cause any person who charges more than cost for any product to be regarded very much as we now regard a pickpocket." [Tucker, The Individualist Anarchists, p. 155] Nor, as noted above, would Rothbard’s support for an "Archist" (capitalist) land ownership system have won him anything but dismissal nor would his judge, jurist and lawyer driven political system have been seen as anything other than rule by the few rather than rule by none.

Ultimately, it is a case of influences and the kind of socio-political analysis and aims they inspire. Unsurprisingly, the main influences in individualist anarchism came from social movements and protests. Thus poverty-stricken farmers and labour unions seeking monetary and land reform to ease their position and subservience to capital all plainly played their part in shaping the theory, as did the Single-Tax ideas of Henry George and the radical critiques of capitalism provided by Proudhon and Marx. In contrast, "anarcho"-capitalism’s major (indeed, predominant) influence is "Austrian" economists, an ideology developed (in part) to provide intellectual support against such movements and their proposals for reform. As we will discuss in the next section, this explains the quite fundamental differences between the two systems for all the attempts of "anarcho"-capitalists to appropriate the legacy of the likes of Tucker.

G.3.2 What are the differences between "anarcho"-capitalism and individualist anarchism?

The key differences between individualist anarchism and "anarcho"-capitalism derive from the fact the former were socialists while the latter embrace capitalism with unqualified enthusiasm. Unsurprisingly, this leans to radically different analyses, conclusions and strategies. It also expresses itself in the vision of the free society expected from their respective systems. Such differences, we stress, all ultimately flow from fact that the individualist anarchists were/are socialists while the likes of Rothbard are wholeheartedly supporters of capitalism.

As scholar Frank H. Brooks notes, "the individualist anarchists hoped to achieve socialism by removing the obstacles to individual liberty in the economic realm." This involved making equality of opportunity a reality rather than mere rhetoric by ending capitalist property rights in land and ensuring access to credit to set-up in business for themselves. So while supporting a market economy "they were also advocates of socialism and critics of industrial capitalism, positions that make them less useful as ideological tools of a resurgent capitalism." [The Individualist Anarchists, p. 111] Perhaps unsurprisingly, most right-"libertarians" get round this problem by hiding or downplaying this awkward fact. Yet it remains essential for understanding both individualist anarchism and why "anarcho"-capitalism is not a form of anarchism.

Unlike both individualist and social anarchists, "anarcho"-capitalists support capitalism (a "pure" free market type, which has never existed although it has been approximated occasionally as in 19th century America). This means that they totally reject the ideas of anarchists with regards to property and economic analysis. For example, like all supporters of capitalists they consider rent, profit and interest as valid incomes. In contrast, all Anarchists consider these as exploitation and agree with Tucker when he argued that "[w]hoever contributes to production is alone entitled. What has no rights that who is bound to respect. What is a thing. Who is a person. Things have no claims; they exist only to be claimed. The possession of a right cannot be predicted of dead material, but only a living person." [quoted by Wm. Gary Kline, The Individualist Anarchists, p. 73]

This, we must note, is the fundamental critique of the capitalist theory that capital is productive. In and of themselves, fixed costs do not create value. Rather, value is created depends on how investments are developed and used once in place and because of this the Individualist Anarchists, like other anarchists, considered non-labour derived income as usury, unlike "anarcho"-capitalists. Similarly, anarchists reject the notion of capitalist property rights in favour of possession (including the full fruits of one’s labour). For example, anarchists reject private ownership of land in favour of a "occupancy and use" regime. In this we follow Proudhon’s What is Property? and argue that "property is theft" as well as "despotism". Rothbard, as noted in the section F.1, rejected this perspective.

As these ideas are an essential part of anarchist politics, they cannot be removed without seriously damaging the rest of the theory. This can be seen from Tucker’s comments that "Liberty insists. . . [on] the abolition of the State and the abolition of usury; on no more government of man by man, and no more exploitation of man by man." [quoted by Eunice Schuster, Native American Anarchism, p. 140] Tucker indicates here that anarchism has specific economic and political ideas, that it opposes capitalism along with the state. Therefore anarchism was never purely a "political" concept, but always combined an opposition to oppression with an opposition to exploitation. The social anarchists made exactly the same point. Which means that when Tucker argued that "Liberty insists on Socialism. . . — true Socialism, Anarchistic Socialism: the prevalence on earth of Liberty, Equality, and Solidarity" he knew exactly what he was saying and meant it wholeheartedly. [Instead of a Book, p. 363] So because "anarcho"-capitalists embrace capitalism and reject socialism, they cannot be considered anarchists or part of the anarchist tradition.

There are, of course, overlaps between individualist anarchism and "anarcho"-capitalism, just as there are overlaps between it and Marxism (and social anarchism, of course). However, just as a similar analysis of capitalism does not make individualist anarchists Marxists, so apparent similarities between individualist anarchism and "anarcho"-capitalism does not make the former a forerunner of the latter. For example, both schools support the idea of "free markets." Yet the question of markets is fundamentally second to the issue of property rights, for what is exchanged on the market is dependent on what is considered legitimate property. In this, as Rothbard noted, individualist anarchists and "anarcho"-capitalists differ and different property rights produce different market structures and dynamics. This means that capitalism is not the only economy with markets and so support for markets cannot be equated with support for capitalism. Equally, opposition to markets is not the defining characteristic of socialism. As such, it is possible to be a market socialist (and many socialists are) as "markets" and "property" do not equate to capitalism as we proved in sections G.1.1 and G.1.2 respectively.

One apparent area of overlap between individualist anarchism and "anarcho"-capitalism is the issue of wage labour. As we noted in section G.1.3, unlike social anarchists, some individualist anarchists were not consistently against it. However, this similarity is more apparent than real as the individualist anarchists were opposed to exploitation and argued (unlike "anarcho"-capitalism) that in their system workers bargaining powers would be raised to such a level that their wages would equal the full product of their labour and so it would not be an exploitative arrangement. Needless to say, social anarchists think this is unlikely to be the case and, as we discuss in section G.4.1, individualist anarchist support for wage labour is in contradiction to many of the stated basic principles of the individualist anarchists themselves. In particular, wage labour violates "occupancy and use" as well as having more than a passing similarity to the state.

However, these problems can be solved by consistently applying the principles of individualist anarchism, unlike "anarcho"-capitalism, and that is why it is a real (if inconsistent) school of anarchism. Moreover, the social context these ideas were developed in and would have been applied ensure that these contradictions would have been minimised. If they had been applied, a genuine anarchist society of self-employed workers would, in all likelihood, have been created (at least at first, whether the market would increase inequalities is a moot point between anarchists). Thus we find Tucker criticising Henry George by noting that he was "enough of an economist to be very well aware that, whether it has land or not, labour which can get no capital — that is, which is oppressed by capital — cannot, without accepting the alternative of starvation, refuse to reproduce capital for the capitalists." Abolition of the money monopoly will increase wages, so allowing workers to "steadily lay up money, with which he can buy tools to compete with his employer or to till his bit of land with comfort and advantage. In short, he will be an independent man, receiving what he produces or an equivalent thereof. How to make this the lot of all men is the labour question. Free land will not solve it. Free money, supplemented by free land, will." [Liberty, no. 99, p. 4 and p. 5] Sadly, Rothbard failed to reach George’s level of understanding (at least as regards his beloved capitalism).

Which brings us another source of disagreement, namely on the effects of state intervention and what to do about it. As noted, during the rise of capitalism the bourgeoisie were not shy in urging state intervention against the masses. Unsurprisingly, working class people generally took an anti-state position during this period. The individualist anarchists were part of that tradition, opposing what Marx termed "primitive accumulation" in favour of the pre-capitalist forms of property and society it was destroying.

However, when capitalism found its feet and could do without such obvious intervention, the possibility of an "anti-state" capitalism could arise. Such a possibility became a definite once the state started to intervene in ways which, while benefiting the system as a whole, came into conflict with the property and power of individual members of the capitalist and landlord class. Thus social legislation which attempted to restrict the negative effects of unbridled exploitation and oppression on workers and the environment were having on the economy were the source of much outrage in certain bourgeois circles:

"Quite independently of these tendencies [of individualist anarchism] . . . the anti-socialist bourgeoisie (which is also anti-statist, being hostile to any social intervention on the part of the State to protect the victims of exploitation — in the matter of working hours, hygienic working conditions and so on), and the greed of unlimited exploitation, had stirred up in England a certain agitation in favour of pseudo-individualism, an unrestrained exploitation. To this end, they enlisted the services of a mercenary pseudo-literature . . . which played with doctrinaire and fanatical ideas in order to project a species of ‘individualism’ that was absolutely sterile, and a species of ‘non-interventionism’ that would let a man die of hunger rather than offend his dignity." [Max Nettlau, A Short History of Anarchism, p. 39]

This perspective can be seen when Tucker denounced Herbert Spencer as a champion of the capitalistic class for his vocal attacks on social legislation which claimed to benefit working class people but staying strangely silent on the laws passed to benefit (usually indirectly) capital and the rich. "Anarcho"-capitalism is part of that tradition, the tradition associated with a capitalism which no longer needs obvious state intervention as enough wealth has been accumulated to keep workers under control by means of market power.

In other words, there are substantial differences between the victims of a thief trying to stop being robbed and be left alone to enjoy their property and the successful thief doing the same! Individualist Anarchist’s were aware of this. For example, Victor Yarros stressed this key difference between individualist anarchism and the proto-"libertarian" capitalists of "voluntaryism":

"[Auberon Herbert] believes in allowing people to retain all their possessions, no matter how unjustly and basely acquired, while getting them, so to speak, to swear off stealing and usurping and to promise to behave well in the future. We, on the other hand, while insisting on the principle of private property, in wealth honestly obtained under the reign of liberty, do not think it either unjust or unwise to dispossess the landlords who have monopolised natural wealth by force and fraud. We hold that the poor and disinherited toilers would be justified in expropriating, not alone the landlords, who notoriously have no equitable titles to their lands, but all the financial lords and rulers, all the millionaires and very wealthy individuals. . . . Almost all possessors of great wealth enjoy neither what they nor their ancestors rightfully acquired (and if Mr. Herbert wishes to challenge the correctness of this statement, we are ready to go with him into a full discussion of the subject). . .

"If he holds that the landlords are justly entitled to their lands, let him make a defence of the landlords or an attack on our unjust proposal." [quoted by Carl Watner, "The English Individualists As They Appear In Liberty," pp. 191-211, Benjamin R. Tucker and the Champions of Liberty, Coughlin, Hamilton and Sullivan (eds.), pp. 199-200]

It could be argued, in reply, that some "anarcho"-capitalists do argue that stolen property should be returned to its rightful owners and, as a result, do sometimes argue for land reform (namely, the seizing of land by peasants from their feudal landlords). However, this position is, at best, a pale shadow of the individualist anarchist position or, at worse, simply rhetoric. As leading "anarcho"-capitalist Walter Block pointed out:

"While this aspect of libertarian theory sounds very radical, in practice it is less so. This is because the claimant always needs proof. Possession is nine tenths of the law, and to overcome the presumption that property is now in the hands of its rightful owners required that an evidentiary burden by overcome. The further back in history was the initial act of aggression (not only because written evidence is less likely to be available), the less likely it is that there can be proof of it." [Op. Cit., pp. 54-5]

Somewhat ironically, Block appears to support land reform in Third World countries in spite of the fact that the native peoples have no evidence to show that they are the rightful owners of the land they work. Nor does he bother himself to wonder about the wider social impact of such theft, namely in the capital that was funded using it. If the land was stolen, then so were its products and so was any capital bought with the profits made from such goods. But, as he says, this aspect of right-"libertarian" ideology "sounds very radical" but "in practice it is less so." Apparently, theft is property! Not to mention that nine tenths of property is currently possessed (that is, used) not by its "rightful owners" but rather those who by economic necessity have to work for them. This is a situation the law was designed to protect, including (apparently) a so-called "libertarian" one.

This wider impact is key. As we indicated in section F.8, state coercion (particularly in the form of the land monopoly) was essential in the development of capitalism. By restricting access to land, working class people had little option but to seek work from landlords and capitalists. Thus the stolen land ensured that workers were exploited by the landlord and the capitalist and so the exploitation of the land monopoly was spread throughout the economy, with the resulting exploited labour being used to ensure that capital accumulated. For Rothbard, unlike the individualist anarchists, the land monopoly had limited impact and can be considered separately from the rise of capitalism:

"the emergence of wage-labour was an enormous boon for many thousands of poor workers and saved them from starvation. If there is no wage labour, as there was not in most production before the Industrial Revolution, then each worker must have enough money to purchase his own capital and tools. One of the great things about the emergence of the factory system and wage labour is that poor workers did not have to purchase their own capital equipment; this could be left to the capitalists." [Konkin on Libertarian Strategy]

Except, of course, before the industrial revolution almost all workers did, in fact, have their own capital and tools. The rise of capitalism was based on the exclusion of working people from the land by means of the land monopoly. Farmers were barred, by the state, from utilising the land of the aristocracy while their access to the commons was stripped from them by the imposition of capitalist property rights by the state. Thus Rothbard is right, in a sense. The emergence of wage-labour was based on the fact that workers had to purchase access to the land from those who monopolised it by means of state action — which was precisely what the individualist anarchists opposed. Wage labour, after all, first developed on the land not with the rise of the factory system. Even Rothbard, we hope, would not have been so crass as to say that landlordism was an enormous boon for those poor workers as it saved them from starvation for, after all, one of the great things about landlordism is that poor workers did not have to purchase their own land; that could be left to the landlords.

The landless workers, therefore, had little option but to seek work from those who monopolised the land. Over time, increasing numbers found work in industry where employers happily took advantage of the effects of the land monopoly to extract as much work for as little pay as possible. The profits of both landlord and capitalist exploitation were then used to accumulate capital, reducing the bargaining power of the landless workers even more as it became increasingly difficult to set-up in business due to natural barriers to competition. It should also be stressed that once forced onto the labour market, the proletariat found itself subjected to numerous state laws which prevented their free association (for example, the banning of unions and strikes as conspiracies) as well as their ability to purchase their own capital and tools. Needless to say, the individualist anarchists recognised this and considered the ability of workers to be able to purchase their own capital and tools as an essential reform and, consequently, fought against the money monopoly. They reasoned, quite rightly, that this was a system of class privilege designed to keep workers in a position of dependency on the landlords and capitalists, which (in turn) allowed exploitation to occur. This was also the position of many workers, who rather than consider capitalism a boon, organised to defend their freedom and to resist exploitation — and the state complied with the wishes of the capitalists and broke that resistance.

Significantly, Tucker and other individualist anarchists saw state intervention as a result of capital manipulating legislation to gain an advantage on the so-called free market which allowed them to exploit labour and, as such, it benefited the whole capitalist class ("If, then, the capitalist, by abolishing the free market, compels other men to procure their tools and advantages of him on less favourable terms than they could get before, while it may be better for them to come to his terms than to go without the capital, does he not deduct from their earnings?" [Tucker, Liberty, no. 109, p. 4]). Rothbard, at best, acknowledges that some sections of big business benefit from the current system and so fails to have a comprehensive understanding of the dynamics of capitalism as a system (rather as an ideology). This lack of understanding of capitalism as a historic and dynamic system rooted in class rule and economic power is important in evaluating "anarcho"-capitalist claims to anarchism.

Then there is the issue of strategy, with Rothbard insisting on "political action," namely voting for the Libertarian Party. "I see no other conceivable strategy for the achievement of liberty than political action," he stated. Like Marxists, voting was seen as the means of achieving the abolition of the state, as "a militant and abolitionist" Libertarian Party "in control of Congress could wipe out all the [non-‘libertarian’] laws overnight . . . No other strategy for liberty can work." [Op. Cit.] The individualist anarchists, like other anarchists, rejected such arguments as incompatible with genuine libertarian principles. As Tucker put it, voting could not be libertarian as it would make the voter "an accomplice in aggression." [The Individualist Anarchists, p. 305]

Rothbard’s position indicates an interesting paradox. Rothbard wholeheartedly supported "political action" as the only means of achieving the end of the state. Marxists (when not excommunicating anarchism from the socialist movement) often argue that they agree with the anarchists on the ends (abolition of the state) but only differ on the means (i.e., political action over direct action). Obviously, no one calls Marx an anarchist and this is precisely because he aimed to use political action to achieve the abolition of the state. Yet, for some reason, Rothbard’s identical position on tactics makes some call him an anarchist. So, given Rothbard’s argument that the state must be seized first by a political party by means of "political action" in order to achieve his end, the question must be raised why he is considered an anarchist at all. Marx and Engels, like Lenin, all made identical arguments against anarchism, namely that political action was essential so that the Socialist Party could seize state power and implement the necessary changes to ensure that the state withered away. No one has ever considered them anarchists in spite of the common aim of ending the state yet many consider Rothbard to be an anarchist despite advocating the same methods as the Marxists. As we noted in section F.8, a better term for "anarcho"-capitalism could be "Marxist-capitalism" and Rothbard’s argument for "political action" confirms that suggestion.

Needless to say, other strategies favoured by many individualists anarchists were rejected by "anarcho"-capitalists. Unlike Tucker, Lum and others, Rothbard was totally opposed to trade unions and strikes, viewing unions as coercive institutions which could not survive under genuine capitalism (given the powers of property owners and the inequalities of such a society, he may well have been right in thinking workers would be unable to successfully defend their basic freedoms against their masters but that is another issue). The individualist anarchists were far more supportive. Henry Cohen, for example, considered the union as a "voluntary association formed for the mutual benefit of its members, using the boycott and other passive weapons in its fight against capitalism and the State." This was "very near the Anarchist idea." Some individualists were more critical of unions than others. One, A.H. Simpson, argued that the trade unions "are as despotic and arbitrary as any other organisation, and no more Anarchistic than the Pullman or Carnegie companies." In other words, the unions were to be opposed because they were like capitalist corporations! [The Individualist Anarchists, p. 285 and p. 288] For Tucker, as we note in section G.5, unions were "a movement for self-government on the part of the people" and it was "in supplanting" the state "by an intelligent and self-governing socialism that the trades unions develop their chief significance." [Liberty, no. 22, p. 3]

So the claims that "anarcho"-capitalism is a new form of individualist anarchism can only be done on the basis of completely ignoring the actual history of capitalism as well as ignoring the history, social context, arguments, aims and spirit of individualist anarchism. This is only convincing if the actual ideas and aims of individualist anarchism are unknown or ignored and focus is placed on certain words used (like "markets" and "property") rather than the specific meanings provided to them by its supporters. Sadly, this extremely superficial analysis is all too common — particularly in academic circles and, of course, in right-"libertarian" ones.

Finally, it may be objected that "anarcho"-capitalism is a diverse, if small, collection of individuals and some of them are closer to individualist anarchism than others. Which is, of course, true (just as some Marxists are closer to social anarchism than others). A few of them do reject the notion that hundreds of years of state-capitalist intervention has had little impact on the evolution of the economy and argue that a genuinely free economy would see the end of the current form of property rights and non-labour income as well as self-employment and co-operatives becoming the dominant form of workplace organisation (the latter depends on the former, of course, for without the necessary social preconditions a preference for self-employment will remain precisely that). As Individualist Anarchist Shawn Wilbur put it, there is a difference between those "anarcho"-capitalists who are ideologues for capitalism first and foremost and the minority who are closer to traditional anarchist aspirations. If the latter manage to jettison the baggage they have inherited from "Austrian" economics as well as the likes of Murray Rothbard and realise that they are, in fact, free market socialists and not in favour of capitalism then few anarchists would hold their past against them any more than they would a state socialist or left-liberal who realised the error of their ways. Until they do, though, few anarchists would accept them as anarchists.

G.3.3 What about "anarcho"-capitalists’ support of "defence associations"?

It would be fair to say that "anarcho"-capitalist interest in individualist anarchism rests on their argument that, to quote Tucker, "defense is a service, like any other service", and that such a service could and should be provided by private agencies paid for like any other commodity on the market. [Liberty, no. 104, p. 4] Therefore:

"Anarchism means no government, but it does not mean no laws and no coercion. This may seem paradoxical, but the paradox vanishes when the Anarchist definition of government is kept in view. Anarchists oppose government, not because they disbelieve in punishment of crime and resistance to aggression, but because they disbelieve in compulsory protection. Protection and taxation without consent is itself invasion; hence Anarchism favours a system of voluntary taxation and protection." [Op. Cit., no. 212, p. 2]

While most of the rest of the theory is ignored or dismissed as being the product of "bad" economics, this position is considered the key link between the two schools of thought. However, it is not enough to say that both the individualist anarchists and "anarcho"-capitalists support a market in protection, you need to look at what forms of property are being defended and the kind of society within which it is done. Change the social context, change the kinds of property which are being defended and you change the nature of the society in question. In other words, defending capitalist property rights within an unequal society is radically different in terms of individual liberty than defending socialistic property rights within an equal society — just as a market economy based on artisan, peasant and co-operative production is fundamentally different to one based on huge corporations and the bulk of the population being wage slaves. Only the most superficial analysis would suggest that they are the same and label both as being "capitalist" in nature.

It should, therefore, not be forgotten that the individualist anarchists advocated a system rooted in individual possession of land and tools plus the free exchange of the products of labour between self-employed people or wage workers who receive the full equivalent of their product. This means that they supported the idea of a market in "defence associations" to ensure that the fruits of an individual’s labour would not be stolen by others. Again, the social context of individualist anarchism — namely, an egalitarian economy without exploitation of labour (see section G.3.4) — is crucial for understanding these proposals. However, as in their treatment of Tucker’s support for contract theory, "anarcho"-capitalists remove the individualist anarchists’ ideas about free-market defence associations and courts from the social context in which they were proposed, using those ideas in an attempt to turn the individualists into defenders of capitalism.

As indicated in section G.1.4, the social context in question was one in which an economy of artisans and peasant farmers was being replaced by a state-backed capitalism. This context is crucial for understanding the idea of the "defence associations" that Tucker suggested. For what he proposed was clearly not the defence of capitalist property relations. This can be seen, for example, in his comments on land use. Thus:

"’The land for the people’ . . . means the protection by . . . voluntary associations for the maintenance of justice . . . of all people who desire to cultivate land in possession of whatever land they personally cultivate . . . and the positive refusal of the protecting power to lend its aid to the collection of any rent, whatsoever." [Instead of a Book, p. 299]

There is no mention here of protecting capitalist farming, i.e. employing wage labour; rather, there is explicit mention that only land being used for personal cultivation — thus without employing wage labour — would be defended. In other words, the defence association would defend "occupancy and use" (which is a clear break with capitalist property rights) and not the domination of the landlord over society or those who use the land the landlord claims to own. This means that certain contracts were not considered valid within individualist anarchism even if they were voluntarily agreed to by the parties involved and so would not be enforceable by the "defence associations." As Tucker put it:

"A man cannot be allowed, merely by putting labour, to the limit of his capacity and beyond the limit of his personal use, into material of which there is a limited supply and the use of which is essential to the existence of other men, to withhold that material from other men’s use; and any contract based upon or involving such withholding is lacking in sanctity or legitimacy as a contract to deliver stolen goods." [Liberty, No. 321, p. 4]

Refusal to pay rent on land is a key aspect of Tucker’s thought, and it is significant that he explicitly rejects the idea that a defence association can be used to collect it. In addition, as a means towards anarchy, Tucker suggests "inducing the people to steadily refuse the payment of rent and taxes." [Instead of a Book, p. 299] It is hard to imagine that a landowner influenced by Murray Rothbard or David Friedman would support such an arrangement or a "defence association" that supported it. As such, the individualist anarchist system would impose restrictions on the market from an "anarcho"-capitalist perspective. Equally, from an individualist anarchist perspective, "anarcho"-capitalism would be enforcing a key class monopoly by force and so would simply be another kind of state. As Tucker put it in reply to the proto-right-"libertarian" Auberon Herbert:

"It is true that Anarchists . . . do, in a sense, propose to get rid of ground-rent by force. That is to say, if landlords should try to evict occupants, the Anarchists advise the occupants to combine to maintain their ground by force . . . But it is also true that the Individualists . . . propose to get rid of theft by force . . . The Anarchists justify the use of machinery (local juries, etc.) to adjust the property question involved in rent just as the Individualists justify similar machinery to adjust the property question involved in theft." [Op. Cit., no. 172, p. 7]

It comes as no surprise to discover that Tucker translated Proudhon’s What is Property? and subscribed to its conclusion that "property is theft"!

This opposition to the "land monopoly" was, like all the various economic proposals made by the individualist anarchists, designed to eliminate the vast differences in wealth accruing from the "usury" of industrial capitalists, bankers, and landlords. For example, Josiah Warren "proposed like Robert Owen an exchange of notes based on labour time . . . He wanted to establish an ‘equitable commerce’ in which all goods are exchanged for their cost of production . . . In this way profit and interest would be eradicated and a highly egalitarian order would emerge." [Peter Marshall, Demanding the Impossible, p. 385] Given that the Warrenites considered that both workers and managers would receive equal payment for equal hours worked (the manager may, in fact earn less if it were concluded that their work was less unpleasant than that done on the shopfloor), the end of a parasitic class of wealthy capitalists was inevitable.

In the case of Benjamin Tucker, he was a firm adherent of socialist economic analysis, believing that a free market and interest-free credit would reduce prices to the cost of production and increase demand for labour to the point where workers would receive the full value of their labour. In addition, recognising that gold was a rare commodity, he rejected a gold-backed money supply in favour of a land-backed one, as land with "permanent improvements on" it is "an excellent basis for currency." [Instead of a Book, p. 198] Given that much of the population at the time worked on their own land, such a money system would have ensured easy credit secured by land. Mutualism replaced the gold standard (which, by its very nature would produce an oligarchy of banks) with money backed by other, more available, commodities.

Such a system, the individualist anarchists argued, would be unlikely to reproduce the massive inequalities of wealth associated with capitalism and have a dynamic utterly different to that system. They did not consider the state as some alien body grafted onto capitalism which could be removed and replaced with "defence associations" leaving the rest of society more or less the same. Rather, they saw the state as being an essential aspect of capitalism, defending key class monopolies and restricting freedom for the working class. By abolishing the state, they automatically abolished these class monopolies and so capitalism. In other words, they had political and economic goals and ignoring the second cannot help but produce different results. As Voltairine de Cleyre put it in her individualist days, Anarchism "means not only the denial of authority, not only a new economy, but a revision of the principles of morality. It means the development of the individual as well as the assertion of the individual." [The Voltairine de Cleyre Reader, p. 9]

Right-"libertarians" reject all of this, the social context of Tucker’s ideas on "defence associations." They do not aim for a "new economy", but simply the existing one without a public state. They have no critique of capitalist property rights nor any understanding of how such rights can produce economic power and limit individual freedom. In fact, they attack what they consider the "bad economics" of the individualists without realising it is precisely these "bad" (i.e. anti-capitalist) economics which will minimise, if not totally eliminate, any potential threat to freedom associated with "defence associations." Without the accumulations of wealth inevitable when workers’ do not receive the full product of their labour, it is unlikely that a "defence association" would act like the private police forces American capitalists utilised to break unions and strikes both in Tucker’s time and now. Unless this social context exists, any defence associations will soon become mini-states, serving to enrich the elite few by protecting the usury they gain from, and their power and control (i.e. government) over, those who toil. In other words, the "defence associations" of Tucker and Spooner would not be private states, enforcing the power of capitalists and landlords upon wage workers. Instead, they would be like insurance companies, protecting possessions against theft (as opposed to protecting capitalist theft from the dispossessed as would be the case in "anarcho"-capitalism — an important difference lost on the private staters). Where social anarchists disagree with individualist anarchists is on whether a market system will actually produce such equality, particularly one without workers’ self-management replacing the authority inherent in the capitalist-labourer social relationship. As we discuss in section G.4, without the equality and the egalitarian relationships of co-operative and artisan production there would be a tendency for capitalism and private statism to erode anarchy.

In addition, the emphasis given by Tucker and Lysander Spooner to the place of juries in a free society is equally important for understanding how their ideas about defence associations fit into a non-capitalist scheme. For by emphasising the importance of trial by jury, they knock an important leg from under the private statism associated with "anarcho"-capitalism. Unlike a wealthy judge, a jury made up mainly of fellow workers would be more inclined to give verdicts in favour of workers struggling against bosses or of peasants being forced off their land by immoral, but legal, means. As Lysander Spooner argued in 1852: "If a jury have not the right to judge between the government and those who disobey its laws, and resist its oppressions, the government is absolute, and the people, legally speaking, are slaves. Like many other slaves they may have sufficient courage and strength to keep their masters somewhat in check; but they are nevertheless known to the law only as slaves." [Trial by Jury] It is hardly surprising that Rothbard rejects this in favour of a legal system determined and interpreted by lawyers, judges and jurists. Indeed, as we noted in section F.6.1, Rothbard explicitly rejected the idea that juries should be able to judge the law as well as the facts of a case under his system. Spooner would have had no problem recognising that replacing government imposed laws with those made by judges, jurists and lawyers would hardly change the situation much. Nor would he have been too surprised at the results of a free market in laws in a society with substantial inequalities in income and wealth.

Individualist Anarchist Laurance Labadie, the son of Tucker associate Joseph Labadie, argued in response to Rothbard as follows:

"Mere common sense would suggest that any court would be influenced by experience; and any free-market court or judge would in the very nature of things have some precedents guiding them in their instructions to a jury. But since no case is exactly the same, a jury would have considerable say about the heinousness of the offence in each case, realising that circumstances alter cases, and prescribing penalty accordingly. This appeared to Spooner and Tucker to be a more flexible and equitable administration of justice possible or feasible, human beings being what they are . . .

"But when Mr. Rothbard quibbles about the jurisprudential ideas of Spooner and Tucker, and at the same time upholds presumably in his courts the very economic evils which are at bottom the very reason for human contention and conflict, he would seem to be a man who chokes at a gnat while swallowing a camel." [quoted by Mildred J. Loomis and Mark A. Sullivan, "Laurance Labadie: Keeper Of The Flame", pp. 116-30, Benjamin R. Tucker and the Champions of Liberty, Coughlin, Hamilton and Sullivan (eds.), p. 124]

As we argued in detail in section F.6, a market for "defence associations" within an unequal system based on extensive wage labour would simply be a system of private states, enforcing the authority of the property owner over those who use but do not own their property. Such an outcome can only be avoided within an egalitarian society where wage-labour is minimised, if not abolished totally, in favour of self-employment (whether individually or co-operatively). In other words, the kind of social context which the individualist anarchists explicitly or implicitly assumed and aimed for. By focusing selectively on a few individualist proposals taken out of their social context, Rothbard and other "anarcho"-capitalists have turned the libertarianism of the individualist anarchists into yet another ideological weapon in the hands of (private) statism and capitalism.

When faced with the actual visions of a good society proposed by such people as Tucker and Spooner, "anarcho"-capitalists tend to dismiss them as irrelevant. They argue that it does not matter what Tucker or Spooner thought would emerge from the application of their system, it is the fact they advocated the "free market", "private property" and "defence associations" that counts. In response anarchists note three things. Firstly, individualist anarchists generally held radically different concepts of what a "free market" and "private property" would be in their system and so the tasks of any "defence association" would be radically different. As such, anarchists argue that "anarcho"-capitalists simply look at the words people use rather than what they meant by them and the social context in which they are used. Secondly, it seems a strange form of support to rubbish the desired goals of people you claim to follow. If someone claimed to be a Marxist while, at the same time, arguing that Marx was wrong about socialism people would be justified in questioning their use of that label. Thirdly, and most importantly, no one advocates a means which would not result in their desired ends. If Tucker and Spooner did not think their system would result in their goals they would have either changed their goals or changed their method. As noted in section G.1.1, Tucker explicitly argued that concentrations of wealth under capitalism had reached such levels that his system of free competition would not end it. Clearly, then, outcomes were important to individualist anarchists.

The lack of commonality can also be seen from the right-"libertarian" response to Kevin Carson’s excellent Studies in Mutualist Political Economy, an impressive modern restatement of the ideas of Tucker and other individualist anarchists. Leading "anarcho"-capitalist Walter Block dismissed "Marxists like Carson" and labelled him "a supposed anarchist" who on many issues "is out there, way, way out there in some sort of Marxist never-never land." ["Kevin Carson as Dr. Jeryll and Mr. Hyde", pp. 35-46, Journal of Libertarian Studies, vol. 20, no. 1, p. 40, p. 43 and p. 45] Another right-"libertarian", George Reisman, concurred stating that for the most part "Carson is a Marxist", while arguing that "the ‘individualist’ anarchist shows himself to be quite the collectivist, attributing to the average person qualities of independent thought and judgement that are found only in exceptional individuals." Carson’s "views on the nature of ownership give full support to the conception of anarchy . . . as being nothing but chaos." Overall, "Carson is essentially a Marxist and his book filled with ignorant Marxist diatribes against capitalism." ["Freedom is Slavery: Laissez-Faire capitalism is government intervention", pp. 47-86, Op. Cit., p. 47, p. 55, p. 61 and p. 84] Needless to say, all the issues which Block and Geisman take umbridge at can be found in the works of individualist anarchists like Tucker (Carson’s excellent dissection of these remarkably ignorant diatribes is well worth reading ["Carson’s Rejoinders", pp. 97-136, Op. Cit.]).

So the notion that a joint support for a market in "defence services" can allow the social and theoretical differences between "anarcho"-capitalism and individualist anarchism to be ignored is just nonsense. This can best be seen from the fate of any individualist anarchist defence association within "anarcho"-capitalism. As it would not subscribe to Rothbard’s preferred system of property rights it would be in violation of the "general libertarian law code" drawn up and implemented by right-"libertarian" jurists, judges and lawyers. This would, by definition, make such an association "outlaw" when it defended tenants against attempts to extract rents from them or to evict them from the land or buildings they used but did not own. As it is a judge-run system, no jury would be able to judge the law as well as the crime, so isolating the capitalist and landlord class from popular opposition. Thus the ironic situation arises that the "Benjamin Tucker defence association" would be declared an outlaw organisation under "anarcho"-capitalism and driven out of business (i.e., destroyed) as it broke the land monopoly which the law monopoly enforces. Even more ironically, such an organisation would survive in an communist anarchist society (assuming it could find enough demand to make it worthwhile).

If the world had had the misfortune of having "anarcho"-capitalism imposed on it in the nineteenth century, individualist anarchists like Warren, Tucker, Labadie, Ingalls and Lum would have joined Proudhon, Bakunin, Kropotkin, Parsons and Goldman in prison for practising "occupancy and use" in direct violation of the "general libertarian law code." That it was private police, private courts and private prisons which were enforcing such a regime would not have been considered that much of an improvement.

Unsurprisingly, Victor Yarros explicitly distanced himself from those who "want liberty to still further crush and oppress the people; liberty to enjoy their plunder without fear of the State’s interfering with them . . . liberty to summarily deal with impudent tenants who refuse to pay tribute for the privilege of living and working on the soil." [Liberty, no. 102, p. 4] He would have had little problem recognising "anarcho"-capitalism as being a supporter of "that particular kind of freedom which the bourgeoisie favours, and which is championed by the bourgeoisie’s loyal servants, [but] will never prove fascinating to the disinherited and oppressed." [Op. Cit., no. 93, p. 4]

G.3.4 Why is individualist anarchist support for equality important?

Another another key difference between genuine individualist anarchism and "anarcho"-capitalism is the former’s support for equality and the latter’s a lack of concern for it.

In stark contrast to anarchists of all schools, inequality is not seen to be a problem with "anarcho"-capitalists (see section F.3). However, it is a truism that not all "traders" are equally subject to the market (i.e., have the same market power). In many cases, a few have sufficient control of resources to influence or determine price and in such cases, all others must submit to those terms or not buy the commodity. When the commodity is labour power, even this option is lacking — workers have to accept a job in order to live. As we argued in section C.9, workers are usually at a disadvantage on the labour market when compared to capitalists, and this forces them to sell their liberty in return for making profits for others. These profits increase inequality in society as the property owners receive the surplus value their workers produce. This increases inequality further, consolidating market power and so weakens the bargaining position of workers further, ensuring that even the freest competition possible could not eliminate class power and society (something Tucker eventually recognised as occurring with the development of trusts within capitalism — see section G.1.1).

By removing the underlying commitment to abolish non-labour income, any "anarchist" capitalist society would have vast differences in wealth and so power. Instead of government imposed monopolies in land, money and so on, the economic power flowing from private property and capital would ensure that the majority remained in (to use Spooner’s words) "the condition of servants" (see sections F.2 and F.3.1 for more on this). The Individualist Anarchists were aware of this danger and so supported economic ideas that opposed usury (i.e. rent, profit and interest) and ensured the worker the full value of her labour. While not all of them called these ideas "socialist" it is clear that these ideas are socialist in nature and in aim (similarly, not all the Individualist Anarchists called themselves anarchists but their ideas are clearly anarchist in nature and in aim). This combination of the political and economic is essential as they mutually reinforce each other. Without the economic ideas, the political ideas would be meaningless as inequality would make a mockery of them. As Spooner argued, inequality lead to many social evils:

"Extremes of difference, in their pecuniary circumstances, divide society into castes; set up barriers to personal acquaintance; prevent or suppress sympathy; give to different individuals a widely different experience, and thus become the fertile source of alienation, contempt, envy, hatred, and wrong. But give to each man all the fruits of his own labour, and a comparative equality with others in his pecuniary condition, and caste is broken down; education is given more equally to all; and the object is promoted of placing each on a social level with all: of introducing each to the acquaintance of all; and of giving to each the greatest amount of that experience, which, being common to all, enables him to sympathise with all, and insures to himself the sympathy of all. And thus the social virtues of mankind would be greatly increased." [Poverty: Its Illegal Causes and Legal Cure, pp. 46-7]

Because of the evil effects of inequality on freedom, both social and individualist anarchists desire to create an environment in which circumstances would not drive people to sell their liberty to others at a disadvantage. In other words, they desired an equalisation of market power by opposing interest, rent and profit and capitalist definitions of private property. Kline summarises this by saying "the American [individualist] anarchists exposed the tension existing in liberal thought between private property and the ideal of equal access. The Individual Anarchists were, at least, aware that existing conditions were far from ideal, that the system itself working against the majority of individuals in their efforts to attain its promises. Lack of capital, the means to creation and accumulation of wealth, usually doomed a labourer to a life of exploitation. This the anarchists knew and they abhorred such a system." [The Individualist Anarchists: A critique of liberalism, p. 102]

This desire for bargaining equality is reflected in their economic ideas and by removing these underlying economic ideas of the individualist anarchists, "anarcho"-capitalism makes a mockery of any ideas they do appropriate. Essentially, the Individualist Anarchists agreed with Rousseau that in order to prevent extreme inequality of fortunes you deprive people of the means to accumulate in the first place and not take away wealth from the rich. An important point which "anarcho"-capitalism fails to understand or appreciate.

The Individualist Anarchists assumed that exploitation of labour would be non-existent in their system, so a general equality would prevail and so economic power would not undermine liberty. Remove this underlying assumption, assume that profits could be made and capital accumulated, assume that land can be monopolised by landlords (as the "anarcho"-capitalists do) and a radically different society is produced. One in which economic power means that the vast majority have to sell themselves to get access to the means of life and are exploited by those who own them in the process. A condition of "free markets" may exist, but as Tucker argued in 1911, it would not be anarchism. The deus ex machina of invisible hands takes a beating in the age of monopolies.

So we must stress that the social situation is important as it shows how apparently superficially similar arguments can have radically different aims and results depending on who suggests them and in what circumstances. Hence the importance of individualist anarchist support for equality. Without it, genuine freedom would not exist for the many and "anarchy" would simply be private statism enforcing rule by the rich.

G.3.5 Would individualist anarchists have accepted "Austrian" economics?

One of the great myths perpetrated by "anarcho"-capitalists is the notion that "anarcho"-capitalism is simply individualist anarchism plus "Austrian" economics. Nothing could be further from the truth, as is clear once the individualist anarchist positions on capitalist property rights, exploitation and equality are understood. Combine this with their vision of a free society as well as the social and political environment they were part of and the ridiculous nature of such claims become obvious.

At its most basic, Individualist anarchism was rooted in socialist economic analysis as would be expected of a self-proclaimed socialist theory and movement. The "anarcho"-capitalists, in a roundabout way, recognise this with Rothbard dismissing the economic fallacies of individualist anarchism in favour of "Austrian" economics. "There is," he stated, "in the body of thought known as ‘Austrian economics,’ a scientific [sic!] explanation of the workings of the free market . . . which individualist anarchists could easily incorporate into their so political and social Weltanshauung. But to do this, they must throw out the worthless excess baggage of money-crankism and reconsider the nature and justification of the economic categories of interest, rent and profit." Yet Rothbard’s assertion is nonsense, given that the individualist anarchists were well aware of various justifications for exploitation expounded by the defenders of capitalism and rejected everyone. He himself noted that the "individualist anarchists were exposed to critiques of their economic fallacies; but, unfortunately, the lesson, despite the weakness of Tucker’s replies, did not take." ["The Spooner-Tucker Doctrine: An Economist’s View", Op. Cit., p. 14] As such, it seems like extremely wishful thinking that the likes of Tucker would have rushed to embrace an economic ideology whose basic aim has always been to refute the claims of socialism and defend capitalism from attacks on it.

Nor can it be suggested that the individualist anarchists were ignorant of the developments within bourgeois economics which the "Austrian" school was part of. Both Tucker and Yarros, for example, attacked marginal productivity theory as advocated by John B. Clark. [Liberty, no. 305] Tucker critiqued another anarchist for once being an "Anarchistic socialist, standing squarely upon the principles of Liberty and Equity" but then "abandon[ing] Equity by repudiating the Socialistic theory of value and adopting one which differs but little, if any, from that held by the ordinary economist." [Op. Cit., no. 80, p. 4] So the likes of Tucker were well aware of the so-called marginalist revolution and rejected it.

Somewhat ironically, a key founder of "Austrian" economics was quoted favourably in Liberty but only with regards to his devastating critique of existing theories of interest and profit. Hugo Bilgram asked a defender of interest whether he had "ever read Volume 1 of Böhm-Bawerk’s ‘Capital and Interest’" for in this volume "the fructification theory is . . . completely refuted." Bilgram, needless to say, did not support Böhm-Bawerk’s defence of usury, instead arguing that restrictions in the amount of money forced people to pay for its use and "[t]his, and nothing else, [causes] the interest accruing to capital, regarding which the modern economists are doing their utmost to find a theory that will not expose the system of industrial piracy of today." He did not exclude Böhm-Bawerk’s theory from his conclusion that "since every one of these pet theories is based on some fallacy, [economists] cannot agree upon any one." The abolition of the money monopoly will "abolish the power of capital to appropriate a net profit." [Op. Cit., no. 282, p. 11] Tucker himself noted that Böhm-Bawerk "has refuted all these ancient apologies for interest — productivity of capital, abstinence, etc." [Op. Cit., no. 287, p. 5] Liberty also published a synopsis of Francis Tandy’s Voluntary Socialism, whose chapter 6 was "devoted to an analysis of value according to the marginal utility value of Böhm-Bawerk. It also deals with the Marxian theory of surplus value, showing that all our economic ills are due to the existence of that surplus value." [Op. Cit., no. 334, p. 5] Clearly, then, the individualist anarchists were aware of the "Austrian" tradition and only embraced its critique of previous defences of non-labour incomes.

We have already critiqued the "time preference" justification for interest in section C.2.7 so will not go into it in much detail here. Rothbard argued that it "should be remembered by radicals that, if they wanted to, all workers could refuse to work for wages and instead form their own producers’ co-operatives and wait for years for their pay until the products are sold to the consumers; the fact that they do not do so, shows the enormous advantage of the capital investment, wage-paying system as a means of allowing workers to earn money far in advance of the sale of their products." And how, Professor Rothbard, are these workers to live during the years they wait until their products are sold? The reason why workers do not work for themselves has nothing to do with "time preference" but their lack of resources, their class position. Showing how capitalist ideology clouds the mind, Rothbard asserted that interest ("in the shape of ‘long-run’ profit") would still exist in a "world in which everyone invested his own money and nobody loaned or borrowed." [Op. Cit., p. 12] Presumably, this means that the self-employed worker who invests her own money into her own farm pays herself interest payments just as her labour income is, presumably, the "profits" from which this "interest" payment is deducted along with the "rent" for access to the land she owns!

So it seems extremely unlikely that the individualist anarchists would have considered "Austrian" economics as anything other than an attempt to justify exploitation and capitalism, like the other theories they spent so much time refuting. They would quickly have noted that "time preference", like the "waiting"/"abstinence" justifications for interest, is based on taking the current class system for granted and ignoring the economic pressures which shape individual decisions. In Tucker’s words (when he critiqued Henry George’s argument that interest is related to time) "increase which is purely the work of time bears a price only because of monopoly." The notion that "time" produced profit or interest was one Tucker was well aware of, and refuted on many occasions. He argued that it was class monopoly, restrictions on banking, which caused interest and "where there is no monopoly there will be little or no interest." If someone "is to be rewarded for his mere time, what will reward him save [another]’s labour? There is no escape from this dilemma. The proposition that the man who for time spent in idleness receives the product of time employed in labour is a parasite upon the body industrial is one which . . . [its supporters] can never successfully dispute with men who understand the rudiments of political economy." [Liberty, no. 109, p. 4 and p. 5] For Joshua King Ingalls, "abstinence" (or the ability to "wait," as it was renamed in the late nineteenth century) was "a term with which our cowardly moral scientists and political economists attempt to conjure up a spirit that will justify the greed of our land and money systems; by a casuistry similar to that which once would have justified human slavery." ["Labor, Wages, And Capital. Division Of Profits Scientifically Considered," Brittan’s Quarterly Journal, I (1873), pp. 66-79]

What of the economic justification for that other great evil for individualist anarchists, rent? Rothbard attacked Adam Smith’s comment that landlords were monopolists who demanded rent for nature’s produce and liked to reap what they never sowed. As he put it, Smith showed "no hint of recognition here that the landlord performs the vital function of allocating the land to its most productive use." [An Austrian Perspective on the History of Economic Thought, vol. 1, p. 456] Yet, as Smith was well aware, it is the farmer who has to feed himself and pay rent who decides how best to use the land, not the landlord. All the landlord does is decide whether to throw the farmer off the land when a more profitable business opportunity arrives (as in, say, the Highland clearances) or that it is more "productive" to export food while local people starve (as in, say, the great Irish famine). It was precisely this kind of arbitrary power which the individualist anarchists opposed. As John Beverley Robinson put it, the "land owner gives nothing whatever, but permission to you to live and work on his land. He does not give his product in exchange 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!" [Patterns of Anarchy, p. 271]

Significantly, while Rothbard attacked Henry George’s scheme for land nationalisation as being a tax on property owners and stopping rent playing the role "Austrian" economic theory assigns it, the individualist anarchists opposed it because, at best, it would not end landlordism or, at worse, turn the state into the only landlord. In an unequal society, leasing land from the state "would greatly enhance the power of capitalism to engross the control of the land, since it would relieve it of the necessity of applying large amounts in purchasing land which it could secure the same control of by lease . . . It would greatly augment and promote the reign of the capitalism and displace the independent worker who now cultivates his own acres, but who would be then unable to compete with organised capital . . . and would be compelled to give up his holding and sink into the ranks of the proletariat." [Joshua King Ingalls, Bowman N. Hall, "Joshua K. Ingalls, American Individualist: Land Reformer, Opponent of Henry George and Advocate of Land Leasing, Now an Established Mode", pp. 383-96, American Journal of Economics and Sociology, Vol. 39, No. 4, p. 394]

Given Tucker’s opposition to rent, interest and profit it should go without saying that he rejected the neo-classical and "Austrian" notion that a workers’ wages equalled the "marginal product," i.e. its contribution to the production process (see section C.2 for a critique of this position). Basing himself on the socialist critique of classical economics developed by Proudhon and Marx, he argued that non-labour income was usury and would be driven to zero in a genuinely free market. As such, any notion that Tucker thought that workers in a "free market" are paid according to their marginal product is simply wrong and any claim otherwise shows a utter ignorance of the subject matter. Individualist anarchists like Tucker strongly believed that a truly free (i.e. non-capitalist) market would ensure that the worker would receive the "full product" of his or her labour. Nevertheless, in order to claim Tucker as a proto-"anarcho"-capitalist, "anarcho"-capitalists may argue that capitalism pays the "market price" of labour power, and that this price does reflect the "full product" (or value) of the worker’s labour. As Tucker was a socialist, we doubt that he would have agreed with the "anarcho"-capitalist argument that market price of labour reflected the value it produced. He, like the other individualist anarchists, was well aware that labour produces the "surplus value" which was appropriated in the name of interest, rent and profit. In other words, he very forcibly rejected the idea that the market price of labour reflects the value of that labour, considering "the natural wage of labour is its product" and "that this wage, or product, is the only just source of income." [Instead of a Book, p. 6]

Liberty also favourably quoted a supporter of the silver coinage, General Francis A. Walker, and his arguments in favour of ending the gold standard. It praised his argument as "far more sound and rational than that of the supercilious, narrow, bigoted monomentallists." Walker attacked those "economists of the a priori school, who treat all things industrial as if they were in a state of flux, ready to be poured indifferently into any kind of mould or pattern." These economists "are always on hand with the answer that industrial society will ‘readjust’ itself to the new conditions" and "it would not matter if wages were at any time unduly depressed by combinations of employers, inasmuch as the excess of profits resulting would infallibly become capital, and as such, constitute an additional demand for labour . . . It has been the teaching of the economists of this sort which has so deeply discredited political economy with the labouring men on the one hand, and with practical business men on the other." The "greatest part of the evil of a diminishing money supply is wrought through the discouragement of enterprise." [Liberty, no. 287, p. 11] Given that the "Austrian" school takes the a priori methodology to ridiculous extremes and is always on hand to defend "excess of profits", "combinations of employers" and the gold standard we can surmise Tucker’s reaction to Rothbard’s pet economic ideology.

Somewhat ironically, given Rothbard’s attempts to inflict bourgeois economics along with lots of other capitalist ideology onto individualist anarchism, Kropotkin noted that supporters of "individualist anarchism . . . soon realise that the individualisation they so highly praise is not attainable by individual efforts, and . . . [some] abandon the ranks of the anarchists, and are driven into the liberal individualism of the classical economists." [Anarchism, p. 297] "Anarcho"-capitalists confuse the ending place of ex-anarchists with their starting point. As can be seen from their attempt to co-opt the likes of Spooner and Tucker, this confusion only appears persuasive by ignoring the bulk of their ideas as well as rewriting the history of anarchism.

So it can, we think, be safe to assume that Tucker and other individualist anarchists would have little problem in refuting Rothbard’s economic fallacies as well as his goldbug notions (which seem to be the money monopoly in another form) and support for the land monopoly. Significantly, modern individualist anarchists like Kevin Carson have felt no need to embrace "Austrian" economics and retain their socialist analysis while, at the same time, making telling criticisms of Rothbard’s favourite economic ideology and the apologetics for "actually existing" capitalism its supporters too often indulge in (Carson calls this "vulgar libertarianism", wherein right-"libertarians" forget that the current economy is far from their stated ideal when it is a case of defending corporations or the wealthy).

G.3.6 Would mutual banking simply cause inflation?

One of the arguments against Individualist and mutualist anarchism, and mutual banking in general, is that it would just produce accelerating inflation. The argument is that by providing credit without interest, more and more money would be pumped into the economy. This would lead to more and more money chasing a given set of goods, so leading to price rises and inflation.

Rothbard, for example, dismissed individualist anarchist ideas on mutual banking as being "totally fallacious monetary views." He based his critique on "Austrian" economics and its notion of "time preference" (see section C.2.7 for a critique of this position). Mutual banking would artificially lower the interest rate by generating credit, Rothbard argued, with the new money only benefiting those who initially get it. This process "exploits" those further down the line in the form accelerating inflation. As more and more money was be pumped into the economy, it would lead to more and more money chasing a given set of goods, so leading to price rises and inflation. To prove this, Rothbard repeated Hume’s argument that "if everybody magically woke up one morning with the quantity of money in his possession doubled" then prices would simply double. ["The Spooner-Tucker Doctrine: An Economist’s View", Journal of Libertarian Studies, vol. 20, no. 1, p. 14 and p. 10]

However, Rothbard is assuming that the amount of goods and services are fixed. This is just wrong and shows a real lack of understanding of how money works in a real economy. This is shown by the lack of agency in his example, the money just "appears" by magic (perhaps by means of a laissez-fairy?). Milton Friedman made the same mistake, although he used the more up to date example of government helicopters dropping bank notes. As post-Keynesian economist Nicholas Kaldor pointed out with regards to Friedman’s position, the "transmission mechanism from money to income remained a ‘black box’ — he could not explain it, and he did not attempt to explain it either. When it came to the question of how the authorities increase the supply of bank notes in circulation he answered that they are scattered over populated areas by means of a helicopter — though he did not go into the ultimate consequences of such an aerial Santa Claus." [The Scourge of Monetarism, p. 28]

Friedman’s and Rothbard’s analysis betrays a lack of understanding of economics and money. This is unsurprising as it comes to us via neo-classical economics. In neo-classical economics inflation is always a monetary phenomena — too much money chasing too few goods. Milton Friedman’s Monetarism was the logical conclusion of this perspective and although "Austrian" economics is extremely critical of Monetarism it does, however, share many of the same assumptions and fallacies (as Hayek’s one-time follower Nicholas Kaldor noted, key parts of Friedman’s doctrine are "closely reminiscent of the Austrian school of the twenties and the early thirties" although it "misses some of the subtleties of the Hayekian transmission mechanism and of the money-induced distortions in the ‘structure of production.’" [The Essential Kaldor, pp. 476-7]). We can reject this argument on numerous points.

Firstly, the claim that inflation is always and everywhere a monetary phenomena has been empirically refuted — often using Friedman’s own data and attempts to apply his dogma in real life. As we noted in section C.8.3, the growth of the money supply and inflation have no fixed relationship, with money supply increasing while inflation falls. As such, "the claim that inflation is always and everywhere caused by increases in the money supply, and that the rate of inflation bears a stable, predictable relationship to increases in the money supply is ridiculous." [Paul Ormerod, The Death of Economics, p. 96] This means that the assumption that increasing the money supply by generating credit will always simply result in inflation cannot be supported by the empirical evidence we have. As Kaldor stressed, the "the ‘first-round effects’ of the helicopter operation could be anything, depending on where the scatter occurred . . . there is no reason to suppose that the ultimate effect on the amount of money in circulation or on incomes would bear any close relation to the initial injections." [The Scourge of Monetarism, p. 29]

Secondly, even if we ignore the empirical record (as "Austrian" economics tends to do when faced with inconvenient facts) the "logical" argument used to explain the theory that increases in money will increase prices is flawed. Defenders of this argument usually present mental exercises to prove their case (as in Hume and Friedman). Needless to say, such an argument is spurious in the extreme simply because money does not enter the economy in this fashion. It is generated to meet specific demands for money and is so, generally, used productively. In other words, money creation is a function of the demand for credit, which is a function of the needs of the economy (i.e. it is endogenous) and not determined by the central bank injecting it into the system (i.e. it is not exogenous). And this indicates why the argument that mutual banking would produce inflation is flawed. It does not take into account the fact that money will be used to generate new goods and services.

As leading Post-Keynesian economist Paul Davidson argued, the notion that "inflation is always and everywhere a monetary phenomenon" (to use Friedman’s expression) is "ultimately based on the old homily that inflation is merely ‘too many dollars chasing too few goods.’" Davidson notes that "[t]his ‘too many dollars cliché is usually illustrated by employing a two-island parable. Imagine a hypothetical island where the only available goods are 10 apples and the money supply consists of, say, 10 $1 bills. If all the dollars are used to purchase the apples, the price per apple will be $1. For comparison, assume that on a second island there are 20 $1 bills and only 10 apples. All other things being equal, the price will be $2 per apple. Ergo, inflation occurs whenever the money supply is excessive relative to the available goods." The similarities with Rothbard’s argument are clear. So are its flaws as "no explanation is given as to why the money supply was greater on the second island. Nor is it admitted that, if the increase in the money supply is associated with entrepreneurs borrowing ‘real bills’ from banks to finance an increase in payrolls necessary to harvest, say, 30 additional apples so that the $20 chases 40 apples, then the price will be only $0.50 per apple. If a case of ‘real bills’ finance occurs, then an increase in the money supply is not associated with higher prices but with greater output." [Controversies in Post Keynesian Economics, p. 100] Davidson is unknowingly echoing Tucker ("It is the especial claim of free banking that it will increase production . . . If free banking were only a picayanish attempt to distribute more equitably the small amount of wealth now produced, I would not waste a moment’s energy on it." [Liberty, no. 193, p. 3]).

This, in reply to the claims of neo-classical economics, indicates why mutual banking would not increase inflation. Like the neo-classical position, Rothbard’s viewpoint is static in nature and does not understand how a real economy works. Needless to say, he (like Friedman) did not discuss how the new money gets into circulation. Perhaps, like Hume, it was a case of the money fairy (laissez-fairy?) placing the money into people’s wallets. Maybe it was a case, like Friedman, of government (black?) helicopters dropping it from the skies. Rothbard did not expound on the mechanism by which money would be created or placed into circulation, rather it just appears one day out of the blue and starts chasing a given amount of goods. However, the individualist anarchists and mutualists did not think in such bizarre (typically, economist) ways. Rather than think that mutual banks would hand out cash willy-nilly to passing strangers, they realistically considered the role of the banks to be one of evaluating useful investment opportunities (i.e., ones which would be likely to succeed). As such, the role of credit would be to increase the number of goods and services in circulation along with money, so ensuring that inflation is not generated (assuming that it is caused by the money supply, of course). As one Individualist Anarchist put it, "[i]n the absence of such restrictions [on money and credit], imagine the rapid growth of wealth, and the equity in its distribution, that would result." [John Beverley Robinson, The Individualist Anarchists, p. 144] Thus Tucker:

"A is a farmer owning a farm. He mortgages his farm to a bank for $1,000, giving the bank a mortgage note for that sum and receiving in exchange the bank’s notes for the same sum, which are secured by the mortgage. With the bank-notes A buys farming tools off B. The next day B uses the notes to buy off C the materials used in the manufacture of tools. The day after, C in turn pays them to D in exchange for something he needs. At the end of a year, after a constant succession of exchanges, the notes are in the hands of Z, a dealer in farm produce. He pays them to A, who gives in return $1,000 worth of farm products which he has raised during the year. Then A carries the notes to the bank, receives in exchange for them his mortgage note, and the bank cancels the mortgage. Now, in this whole circle of transactions, has there been any lending of capital? If so, who was the lender? If not, who is entitled to interest?" [Instead of a Book, p. 198]

Obviously, in a real economy, as Rothbard admits "inflation of the money supply takes place a step at a time and that the first beneficiaries, the people who get the new money first, gain at the expense of the people unfortunate enough to come last in line." This process is "plunder and exploitation" as the "prices of things they [those last in line] have to buy shooting up before the new injection [of money] filters down to them." [Op. Cit., p. 11] Yet this expansion of the initial example, again, assumes that there is no increase in goods and services in the economy, that the "first beneficiaries" do nothing with the money bar simply buying more of the existing goods and services. It further assumes that this existing supply of goods and services is unchangeable, that firms do not have inventories of goods and sufficient slack to meet unexpected increases in demand. In reality, of course, a mutual bank would be funding productive investments and any firm will respond to increasing demand by increasing production as their inventories start to decline. In effect, Rothbard’s analysis is just as static and unrealistic as the notion of money suddenly appearing overnight in people’s wallets. Perhaps unsurprisingly Rothbard compared the credit generation of banks to the act of counterfeiters so showing his utter lack of awareness of how banks work in a credit-money (i.e., real) economy.

The "Austrian" theory of the business cycle is rooted in the notion that banks artificially lower the rate of interest by providing more credit than their savings and specie reverses warrant. Even in terms of pure logic, such an analysis is flawed as it cannot reasonably be asserted that all "malinvestment" is caused by credit expansion as capitalists and investors make unwise decisions all the time, irrespective of the supply of credit. Thus it is simply false to assert, as Rothbard did, that the "process of inflation, as carried out in the real [sic!] world" is based on "new money" entering the market by means of "the loan market" but "this fall is strictly temporary, and the market soon restores the rate to its proper level." A crash, according to Rothbard, is the process of restoring the rate of interest to its "proper" level yet a crash can occur even if the interest rate is at that rate, assuming that the banks can discover this equilibrium rate and have an incentive to do so (as we discussed in section C.8 both are unlikely). Ultimately, credit expansion fails under capitalism because it runs into the contradictions within the capitalist economy, the need for capitalists, financiers and landlords to make profits via exploiting labour. As interest rates increase, capitalists have to service their rising debts putting pressure on their profit margins and so raising the number of bankruptcies. In an economy without non-labour income, the individualist anarchists argued, this process is undercut if not eliminated.

So expanding this from the world of fictional government helicopters and money fairies, we can see why Rothbard is wrong. Mutual banks operate on the basis of providing loans to people to set up or expand business, either as individuals or as co-operatives. When they provide a loan, in other words, they increase the amount of goods and services in the economy. Similarly, they do not simply increase the money supply to reduce interest rates. Rather, they reduce interest rates to increase the demand for money in order to increase the productive activity in an economy. By producing new goods and services, inflation is kept at bay. Would increased demand for goods by the new firms create inflation? Only if every firm was operating at maximum output, which would be a highly unlikely occurrence in reality (unlike in economic textbooks).

So what, then does case inflation? Inflation, rather than being the result of monetary factors, is, in fact, a result of profit levels and the dynamic of the class struggle. In this most anarchists agree with post-Keynesian economics which views inflation as "a symptom of an on-going struggle over income distribution by the exertion of market power." [Paul Davidson, Op. Cit., p. 102] As workers’ market power increases via fuller employment, their organisation, militancy and solidarity increases so eroding profits as workers keep more of the value they produce. Capitalists try and maintain their profits by rising prices, thus generating inflation (i.e. general price rises). Rather than accept the judgement of market forces in the form of lower profits, capitalists use their control over industry and market power of their firms to maintain their profit levels at the expense of the consumer (i.e., the workers and their families).

In this sense, mutual banks could contribute to inflation — by reducing unemployment by providing the credit needed for workers to start their own businesses and co-operatives, workers’ power would increase and so reduce the power of managers to extract more work for a given wage and give workers a better economic environment to ask for better wages and conditions. This was, it should be stressed, a key reason why the individualist anarchists supported mutual banking:

"people who are now deterred from going into business by the ruinously high rates which they must pay for capital with which to start and carry on business will find their difficulties removed . . . This facility of acquiring capital will give an unheard of impetus to business, and consequently create an unprecedented demand for labour — a demand which will always be in excess of the supply, directly to the contrary of the present condition of the labour market . . . Labour will then be in a position to dictate its wages." [Tucker, The Individualist Anarchists, pp. 84-5]

And, it must also be stressed, this was a key reason why the capitalist class turned against Keynesian full employment policies in the 1970s (see section C.8.3). Lower interest rates and demand management by the state lead precisely to the outcome predicted by the likes of Tucker, namely an increase in working class power in the labour market as a result of a lowering of unemployment to unprecedented levels. This, however, lead to rising prices as capitalists tried to maintain their profits by passing on wage increases rather than take the cut in profits indicated by economic forces. This could also occur if mutual banking took off and, in this sense, mutual banking could produce inflation. However, such an argument against the scheme requires the neo-classical and "Austrian" economist to acknowledge that capitalism cannot produce full employment and that the labour market must always be skewed in favour of the capitalist to keep it working, to maintain the inequality of bargaining power between worker and capitalist. In other words, that capitalism needs unemployment to exist and so cannot produce an efficient and humane allocation of resources.

By supplying working people with money which is used to create productive co-operatives and demand for their products, mutual banks increase the amount of goods and services in circulation as they increase the money supply. Combined with the elimination of profit, rent and interest, inflationary pressures are effectively undercut (it makes much more sense to talk of a interest/rent/profits-prices spiral rather than a wages-prices spiral when discussing inflation). Only in the context of the ridiculous examples presented by neo-classical and "Austrian" economics does increasing the money supply result in rising inflation. Indeed, the "sound economic" view, in which if the various money-substitutes are in a fixed and constant proportion to "real money" (i.e. gold or silver) then inflation would not exist, ignores the history of money and the nature of the banking system. It overlooks the fact that the emergence of bank notes, fractional reserve banking and credit was a spontaneous process, not planned or imposed by the state, but rather came from the profit needs of capitalist banks which, in turn, reflected the real needs of the economy ("The truth is that, as the exchanges of the world increased, and the time came when there was not enough gold and silver to effect these exchanges, so . . . people had to resort to paper promises." [John Beverley Robinson, Op. Cit., p. 139]). What was imposed by the state, however, was the imposition of legal tender, the use of specie and a money monopoly ("attempt after attempt has been made to introduce credit money outside of government and national bank channels, and the promptness of the suppression has always been proportional to the success of the attempt." [Tucker, Liberty, no. 193, p. 3]).

Given that the money supply is endogenous in nature, any attempt to control the money supply will fail. Rather than control the money supply, which would be impossible, the state would have to use interest rates. To reduce the demand for money, interest rates would be raised higher and higher, causing a deep recession as business cannot maintain their debt payments and go bankrupt. This would cause unemployment to rise, weakening workers’ bargaining power and skewing the economy back towards the bosses and profits — so making working people pay for capitalism’s crisis. Which, essentially, is what the Thatcher and Reagan governments did in the early 1980s. Finding it impossible to control the money supply, they raised interest rates to dampen down the demand for credit, which provoked a deep recession. Faced with massive unemployment, workers’ market power decreased and their bosses increased, causing a shift in power and income towards capital.

So, obviously, in a capitalist economy the increasing of credit is a source of instability. While not causing the business cycle, it does increase its magnitude. As the boom gathers strength, banks want to make money and increase credit by lowering interest rates below what they should be to match savings. Capitalists rush to invest, so soaking up some of the unemployment which always marks capitalism. The lack of unemployment as a disciplinary tool is why the boom turns to bust, not the increased investment. Given that in a mutualist system, profits, interest and rent do not exist then erosion of profits which marks the top of a boom would not be applicable. If prices drop, then labour income drops. Thus a mutualist society need not fear inflation. As Kaldor argued with regard to the current system, "under a ‘credit-money’ system . . . unwanted or excess amounts of money could never come into existence; it is the increase in the value of transactions . . . which calls forth an increase in the ‘money supply’ (whether in the form of bank balances or notes in circulation) as a result of the net increase in the value of working capital at the various stages of production and distribution." [Op. Cit., p. 46] The gold standard cannot do what a well-run credit-currency can do, namely tailor the money supply to the economy’s demand for money. The problem in the nineteenth century was that a capitalist credit-money economy was built upon a commodity-money base, with predictably bad results.

Would this be any different under Rothbard’s system? Probably not. For Rothbard, each bank would have 100% reserve of gold with a law passed that defined fractional reserve banking as fraud. How would this affect mutual banks? Rothbard argued that attempts to create mutual banks or other non-gold based banking systems would be allowed under his system. Yet, how does this fit into his repeated call for a 100% gold standard for banks? Why would a mutual bank be excluded from a law on banking? Is there a difference between a mutual bank issuing credit on the basis of a secured loan rather than gold and a normal bank doing so? Needless to say, Rothbard never did address the fact that the customers of the banks know that they practised fractional reserve banking and still did business with them. Nor did he wonder why no enterprising banker exploited a market niche by advertising a 100% reserve policy. He simply assumed that the general public subscribed to his gold-bug prejudices and so would not frequent mutual banks. As for other banks, the full might of the law would be used to stop them practising the same policies and freedoms he allowed for mutual ones. So rather than give people the freedom to choose whether to save with a fractional reserve bank or not, Rothbard simply outlawed that option. Would a regime inspired by Rothbard’s goldbug dogmas really allow mutual banks to operate when it refuses other banks the freedom to issue credit and money on the same basis? It seems illogical for that to be the case and so would such a regime not, in fact, simply be a new form of the money monopoly Tucker and his colleagues spent so much time combating? One thing is sure, though, even a 100% gold standard will not stop credit expansion as firms and banks would find ways around the law and it is doubtful that private defence firms would be in a position to enforce it.

Once we understand the absurd examples used to refute mutual banking plus the real reasons for inflation (i.e., "a symptom of a struggle over the distribution of income." [Davidson, Op. Cit., p. 89]) and how credit-money actually works, it becomes clear that the case against mutual banking is far from clear. Somewhat ironically, the post-Keynesian school of economics provides a firm understanding of how a real credit system works compared to Rothbard’s logical deductions from imaginary events based on propositions which are, at root, identical with Walrasian general equilibrium theory (an analysis "Austrians" tend to dismiss). It may be ironic, but not unsurprising as Keynes praised Proudhon’s follower Silvio Gesell in The General Theory (also see Dudley Dillard’s essay "Keynes and Proudhon" [The Journal of Economic History, vol. 2, No. 1, pp. 63-76]). Libertarian Marxist Paul Mattick noted Keynes debt to Proudhon, and although Keynes did not subscribe to Proudhon’s desire to use free credit to fund "independent producers and workers’ syndicates" as a means create an economic system "without exploitation" he did share the Frenchman’s "attack upon the payment of interest" and wish to see the end of the rentier. [Marx and Keynes, p. 5 and p. 6]

Undoubtedly, given the "Austrian" hatred of Keynes and his economics (inspired, in part, by the defeat inflicted on Hayek’s business cycle theory in the 1930s by the Keynesians) this will simply confirm their opinion that the Individualist Anarchists did not have a sound economic analysis! As Rothbard noted, the individualist anarchist position was "simply pushing to its logical conclusion a fallacy adopted widely by preclassical and by current Keynesian writers." [Op. Cit., p. 10] However, Keynes was trying to analyse the economy as it is rather than deducing logically desired conclusions from the appropriate assumptions needed to confirm the prejudices of the assumer (like Rothbard). In this, he did share the same method if not exactly the same conclusions as the Individualist Anarchists and Mutualists.

Needless to say, social anarchists do not agree that mutual banking can reform capitalism away. As we discuss in section G.4, this is due to many factors, including the natural barriers to competition capital accumulation creates. However, this critique is based on the real economy and does not reflect Rothbard’s abstract theorising based on pre-scientific methodology. While other anarchists may reject certain aspects of Tucker’s ideas on money, we are well aware, as one commentator noted, that his "position regarding the State and money monopoly derived from his Socialist convictions" where socialism "referred to an intent to fundamentally reorganise the societal systems so as to return the full product of labour to the labourers." [Don Werkheiser, "Benjamin R. Tucker: Champion of Free Money", pp. 212-221, Benjamin R. Tucker and the Champions of Liberty, Coughlin, Hamilton and Sullivan (eds.), p. 212]

One reply on “G.3 Is “anarcho”-capitalism a new form of individualist anarchism?”

After reading about 3/4 of
After reading about 3/4 of this article, the TLDR is that the individualist anarchist school essentially died out, leaving pro-capitalist vultures like McElroy and her ‘anarcho’ capitalist pals to eat away at its poor dead corpse while simply co-opting its name to defend the very ideas it once radically opposed. The article does a great job showing that ‘anarcho’ capitalism is not an evolution of the individualist anarchist school.

The bit about defense firms operating under radically different property rules was quite good.

-cheers

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