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Jun 22, 2015

Henry Meulen, Forefather of Free Banking

Henry Meulen was an individualist anarchist and an early proponent of free banking.

Though few today are aware of his many valuable contributions to the libertarian heritage, Henry Meulen was a skillful advocate of the philosophy of liberty and an innovative, yet underappreciated, economic theorist. Throughout his life, Meulen was a prominent figure in Britain’s libertarian advocacy organizations. He was particularly involved in the Personal Rights Association, founded originally in 1871 (under the more cumbersome name the Vigilance Association for the Defence of Personal Rights) to oppose compulsory vaccination and vagrancy laws that disproportionately targeted sex workers.1 Members and allies of the Association included such notable libertarians as Joseph Hiam Levy and Wordsworth Donisthorpe, the latter of whom was also active in the more well-known Liberty and Property Defence League. Meulen eventually took up the editorship of the Association’s periodical The Individualist (successor to the Personal Rights Journal), becoming its longest-serving editor and continuing in the role until his death in 1978. Many in Meulen’s circle of British libertarians also contributed to Liberty, the American journal of what its founder and editor, Benjamin R. Tucker, alternately called scientific or philosophical anarchism. Tucker became Meulen’s most important intellectual influence, and the two entered into a correspondence. Armed with Tucker’s individualistic ideas, Meulen wrote and published extensively on political and economic issues, his work appearing in a wide variety of publications, including The Economist. In addition, he served as secretary of the Banking and Currency Reform League, founded by his frequent collaborator, the inventor and reformer Arthur Kitson, with the goal of championing “the repeal of the Bank Charter Act and such laws as now interfere with freedom of banking.” It is this promotion of the cause of free banking for which Meulen is best remembered. During the First World War, he wrote a detailed study of free banking, Industrial Justice Through Banking Reform: An Outline of a Policy of Individualism, published in London, in 1917 (a later, updated edition bears the simpler title Free Banking).

In his book, Meulen maintains that “[i]ndividualism is not identical with anti-socialism,” and attempts to show that a policy of unbridled laissez-faire would realize socialism’s general goal of a “just reward” for the worker, accomplished through a shift of bargaining power away from employers. For individualist anarchists like Meulen, this shift was the promised result of a more competitive market environment; privileges once removed, open access to land and capital goods ensured, employers would have to compete for workers, whose living costs would fall just as their potential employment opportunities multiplied. Today’s libertarians are likely to question those of Meulen’s conjectures that anticipate the total disappearance of, for example, interest on credit and ground rent. Meulen shared the individualist anarchist view of property ownership developed by, among others, Pierre-Joseph Proudhon and Joshua King Ingalls, that, in Meulen’s words, “ground rent is a form of usury, the payment of which is a charge upon industry without equivalent labour.”2 The law of equal liberty, they argued, placed certain upper limits on the amount of property in land that one could justly acquire, limits to be established by actual possession and use. What such a standard would mean as a matter of practice is less than clear; the individualist anarchists left the contours of their standard indeterminate, perhaps purposely so, in order to allow its spontaneous development in communities of free people. What is clearer is that the anarchists advanced this standard as a means of implementing the general libertarian principle of equal freedom and equal rights, a standard contravened by land monopoly, legal protection of titles not based on labor-mixing in the classic Lockean sense.

In 1917, when Industrial Justice was published, the word “socialism” embraced a much broader range of meanings, many radical libertarians tending to favor it over the equally ambiguous “capitalism,” approving applications of which had not yet commenced among champions of a free market economy. Nineteenth-century uses of “capitalist” or “capitalism” (a form that emerged later) were overwhelmingly negative, associated with critiques of industrial monopolism from both individualist free traders and collectivists. Free trade liberals and individualist anarchists such as Meulen opted for more explicit language, phrases like “free trade” and “laissez-faire” that more clearly signaled their principled opposition to all forms of protectionism and grants of special privilege. As the definition of the word “socialism” (as well as the movement itself) solidified during his life, converging more definitively on statist, interventionist ideas, Meulen was clear in his commitment to free market libertarianism. In Washington, DC’s The American Anti-Socialist, he wrote that the “fundamental fallacy of Socialism is…its assumption that the present social inequity results from the play of the forces of free competition.”3 He neither denied that “social inequity” existed nor glibly waved away well-founded objections to the status quo as attacks on free enterprise itself. Following in the principled and radical footsteps of his chief influence, Benjamin Tucker, he explained clearly the difference between genuine free market competition and the state capitalist system that prevailed. The choice between state capitalism and socialism, he argued, was a false one, a true individualism offering an alternative that would actually liberate and empower working people—rather than simply erecting further restrictions, compound existing problems.

In setting forth his free banking ideas, Meulen contended that an increase in the supply of cheap credit would solve the problem of the “general glut,” the uneconomical over-production and under-consumption of consumer goods, and that competitive free banking would generate such a salutary increase in supply. Thus were state restrictions on the private issue of bank notes as currency responsible for “unemployment, over-competition among wage-earners and consequent low wages.” Taking on the state banking proposals of the Fabian Society’s Edward R. Pease in a 1913 issue of The New Freewoman, Meulen argued, “Political jobbery, over-issue, and fraud are outstanding features of the history of State banking.” Earlier radical free bankers such as William B. Greene and Benjamin Tucker, among others, had argued along similar lines, their mutualist system—influenced by the French anarchist Pierre-Joseph Proudhon—envisioning nearly interest-free private credit. In their 1987 paper, “The Development of the New Monetary Economics,” economists Tyler Cowen and Randall Kroszner identify Meulen’s work on free banking as an early forerunner of New Monetary Economics. NME emphasizes the importance and consequences of “[l]egal restrictions on private intermediation,” and argues that money’s functions as a unit of account and as a tool for payment do not necessarily need to be performed together by one object. The authors argue that Meulen’s vehement opposition to metal-based currencies and the economic precariousness attending them, as well as his theories about “the separation of monetary functions,” should be understood as a significant precursor to many of the ideas associated with NME. Cowen and Kroszner furthermore note Meulen’s early public choice critiques of state intervention in the financial system, his worries about leaving money and banking “vulnerable to political manipulation.” In contrast, competitive market dynamics, given the space to operate freely, would more than suffice to protect consumers and to preempt hazardous speculative bubbles and economic depressions. Meulen believed that in a free market system, the centrality and use of gold would see a gradual decrease, competition encouraging economization of the metal to the point where a bank is regarded as an “integrity valuer, pure and simply.” With reliability and integrity incentivized, more business will be transacted in mutual, contractual promises, which Meulen saw as a hallmark of “an advanced state of society.”4 More than Tucker or even Greene, Meulen expounded a comprehensive system of free banking and answered objections from “orthodox economists.” Contemporary free banking advocate and expert Kevin Dowd has commended Meulen’s “unduly neglected” work, in particular his pioneering work on “the potential of option clauses to deal with problems of illiquidity.” Meulen contended, as do today’s free bankers, that a decentralized, competitive system of banking would offer a stability unknown to central banking systems of all kinds, that free market financial products and contractual provisions were capable of hedging risk and allocating resources safely and efficiently.

In the first half of the twentieth century, Meulen’s variety of individualist anarchism faded from view, unable to gain traction as a movement in the way it had when Tucker’s Liberty was its focal point. The modern libertarian movement had not yet materialized—at least not until the twilight of Meulen’s life. The anarchist movement proper had hardened in its commitments to communism and the concomitant execration of free markets, forgetting figures like Meulen and Tucker. That the anarchist movement should disclaim these individualists so completely is revealing, especially since, as Eunice Minette Schuster tells us, Tucker “won the attention and sympathetic interest of the American public more than any other anarchist in the history of the United States.” Today, the libertarian movement is the obvious home for admirers of the individualist anarchists, even if many of their economic ideas—particularly the problematic acceptance of classical labor/cost theories of value—are now outdated or unfashionable. Writing in the 1970s, anarchist historian James J. Martin named The Individualist, still edited by Meulen, as “probably the only organ in the world advocating monetary ideas close to those of the Proudhon-Tucker-[Laurance] Labadie sort.” But despite contemporary economists’ disagreements with Meulen, contemporary libertarians have continued to emphasize the importance of money and banking in their cases for a free market system, and libertarians can continue to learn from his work. Like Tucker and so many other visionary libertarians, Meulen’s attitude about the prospects for liberty grew gloomy, unenthusiastic about efforts at reform, his disenchantment even bordering on misanthropy. In a letter to the Friedrich Nietzsche biographer Maximilian Mügge, Meulen writes, “I find myself singularly disinclined for reformish things these days. The fact is I don’t like my fellow man as much as I did.…It seems to me more important to protect myself from my fellow man than to seek to help him….” We might forgive Meulen his despairing attitude. After all, he had lived through two world wars and during a century that saw the rejection of his individualistic ideas, much of the world subjugated to murderous, authoritarian socialism. He might have a buoyant mood today, statist and socialist ideas of all kinds having repeatedly proven themselves politically and economically disastrous. Now, when politicians and bureaucrats want to sell the citizenry these invalidated ideas, they must at least profess to believe in individual rights, free markets, and private property.


  1. For more on the history of the Association and its founding, see Carl Watner’s paper, “The English Individualists as They Appear in Liberty.”
  2. In his essay “Individualist Anarchism,” Meulen writes, “Anarchists would recognise only use ownership: a man should be protected in the possession of only such land as he was personally using in the manner recognized by his neighbors.”
  3. Similarly, in a 1912 number of The Freewoman, in his article “In Vindication of Competition,” Meulen writes, “I deny emphatically that the present congested system of swollen trusts and underpaid wage-earners results from unrestricted freedom of contract or free competition; on the contrary, the industrial evil is due to State interference with the free development of that essential mechanism of exchange, the credit system.”
  4. Tyler Cowen and Randall Kroszner, “The Development of the New Monetary Economics.” Journal of Political Economy, Vol. 95, No. 3 (Jun., 1987), p. 585.