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After Nestor: Free Money First

Instead of a Book, By a Man Too Busy to Write One

Tucker confronts Greenbackers and other contemporaries who posed state solutions to problems caused by government.

Instead of a Book, By a Man Too Busy to Write One

Part Three: Money and Interest


Free Money.

(published in Liberty on December 13, 1884)

          To the Editor of Liberty:

The Picket Duty remarks of November 22 in regard to the importance of “free money” (with which I mainly agree) impel me to say a few words upon the subject. It is desirable, it seems to me, that Liberty should give its ideas upon that subject in a more systematic form than it has yet done (1). To be sure, it is easy for those who think to see that, if all laws in regard to money were abolished, commerce would readily provide its instruments of exchange. This might be promissory notes, or warehouse receipts, bills of lading, etc.; but, whatever it might be, the Anarchist could not doubt it would be better than that ever issued under monopoly.

Theoretically, at least, Liberty expressed the idea that any circulating medium should be made redeemable; but in what? If in gold, or in gold and silver, does it not involve the principle of a legal tender, or of a tender of “common consent?” and they do not greatly differ (2). It seems to me that the great fraud in regard to money starts just here, and vitiates all forms of finance as of trade (3). I define money to be a commodity or representative of a commodity, accepted by or forced upon the common consent, as an invariable ratio and medium of exchange. Now, since the price of all things else is variable and subject to extreme fluctuations, the dollar in exchange, and especially where the exchange is suspended as in borrowing, or buying on credit, becomes, as friend Pink suggests, a “war club” rather than a tool or instrument of commerce.

Pardon me if I inflict some technicalities upon the readers of Liberty. I would discard the use of the word value from questions of exchange, or else divide its several parts, as value in use, value in service and compensation, and value in exchange. But ratio is a much better word. I would then define the Ratio of Utility to be the proportion in which any thing or service effects useful ends, in sustaining human life or adding to human enjoyment,—a constant Ratio.

The Ratio of Service, the proportion in which different services, of the same duration in time, effect useful ends.

The Ratio of Exchange, the proportion in which one commodity or service will exchange for another service or commodity at the same time and place. This is a variable ratio, whose mean is the ratio of service.

I cannot stop now to argue the correctness of these definitions. It must be seen, unless a commodity could be found which would answer every useful purpose, and could be readily obtained by all, it could not be made a tender without inflicting a great injustice on the many. But as such commodity cannot be found, a commodity, gold, has been assumed to have an invariable value, although the most variable in value of all the metals, and about the least useful; of a limited and irregular production and widely varying demand. With the addition of silver to the standard, the great injustice to labor is only divided, not changed.

As defined above, the only invariable ratio is that of use. A pound of flour of the same quality will at all times and places satisfy the same demand for food. The hundredweight of coal will at all times and places give off the same amount of heat in combustion, etc., having no reference either to the money or labor cost. Now, since labor is the only thing which can procure or produce articles of use, that is naturally the controlling element in exchange, and the only thing that commands a stable price or furnishes a stable ratio.

Though gold is assumed as the standard of value, it is well known that for ages the “promise to pay” this has constituted mainly the currency and medium of exchange of most nations.

The method of issuing this promissory money has been a great injustice to industry, and its almost infinite extension of the usurpation of the gold-tender fraud is now robbing labor of a large share of its production by the control it gives to the usurer and speculator, who can make the rate low when produce is coming under their control, and high when it is being returned for use to the people; and can make money scarce and dear when they loan it, and plenty and cheap when they gather it in.

I think I have shown that the base of the money evil lies mainly in the monstrous assumption that the value of one of the most variable of things should be assumed to be an invariable quantity, and the standard of measurement of all other things. A gum elastic yardstick or gallon measure, or a shifting scale-beam, would suggest far more equitable dealing.

I know of but one invariable standard, and that is labor; but what is its unit? And by what method shall it be expressed? Can Liberty give us light upon this subject? (4) I have yet seen no feasible method by which credit or debt can serve safely as money, nor any honest way in which fiat money can be put in circulation. It appears to me now that, while men seek credit, they will have to pay interest, and that only by restoring opportunity to those who are now denied it by our monopolies of land, of money, and of public franchises, and so relieving them of the necessity of borrowing, can we hope to mitigate the evils of our money and trade iniquities. (5)

Credit being an incompleted exchange, in which one of the equivalents is not transferred, if we are to acknowledge it as an economic transaction, I see not why we should not accept that also where neither of the equivalents are transferred, as in produce and stock-gambling. (6) McLeod, I think, saw this dilemma, and therefore holds that the negotiable promissory note is payment for the things for which it is given. Yet, nevertheless, at maturity it will require a transfer of the counterbalancing equivalent, just the same as if a mere book account.

Credit is doubtless necessary under an inverted system of industry, finance, and trade; but I am unable to see that it has any place in an honest state of things, except to conserve value, as where one puts things in another’s care. It is vastly convenient, no doubt, for the profit-monger and speculator, as for the usurer, and without it neither could well thrive. In agreeing with the Anarchists that the State should not interfere to prevent, regulate, or enforce credit contracts, perhaps I go beyond them in excluding it from any economic recognition whatever, except as a means of conserving goods from decay and depreciation, involving always a service for which the creditor should pay.

J.K. Ingalls

(1) Liberty is published not so much to thoroughly inform its readers regarding the ideas which it advocates as to interest them to seek this thorough information through other channels. For instance, in regard to free money, there is a book—Mutual Banking, by William B. Greene—which sets forth the evils of money monopoly and the blessings of gratuitous credit in a perfectly plain and convincing way to all who will take the pains to study and understand it. Liberty can only state baldly the principles which Greene advocates and hint at some of their results. Whomsoever such statements and hints serve to interest can and will secure the book of me for a small sum. Substantially the same views, presented in different ways, are to be found in the financial writings of Lysander Spooner, Stephen Pearl Andrews, Josiah Warren, and, above all, P. J. Proudhon, whose untranslated works contain untold treasures, which I hope some day to put within the reach of English readers.

(2) Yes, it does involve one of these, but between the two there is all the difference that there is between force and freedom, authority and liberty. And where the tender is one of “common consent,” those who do not like it are at liberty to consent in common to use any other and better one that they can devise.

(3) It is difficult for me to see any fraud in promising to pay a certain thing in a certain time, or on demand, and keeping the promise. That is what we do when we issue redeemable money and afterwards redeem it. The fraud in regard to money consists not in this, but in limiting by law the security for these promises to pay to a special kind of property, limited in quantity and easily monopolizable.

(4) It is doubtful if there is anything more variable in its purchasing power than labor. The causes of this are partly natural, such as the changing conditions of production, and partly and principally artificial, such as the legal monopolies that impart fictitious values. But labor expended in certain directions is unquestionably more constant in its average results than when expended in other directions. Hence the advantage of using the commodities resulting from the former for the redemption of currency whenever redemption shall be demanded. Whether gold and silver are among these commodities is a question, not of principle, but of statistics. As a matter of fact, the holders of good redeemable money seldom ask for any other redemption than its acceptance in the market and its final cancellation by the issuer’s restoration of the securities on which it was issued. But in case any other redemption is desired, it is necessary to adopt for the purpose some commodity easily transferable and most nearly invariable in value.

(5) Does Mr. Ingalls mean that all money must be abolished? I can see no other inference from his position. For there are only two kinds of money,—commodity money and credit money. The former he certainly does not believe in, the latter he thinks fraudulent and unsafe. Are we, then, to stop exchanging the products of our labor?

(6) It is clearly the right of every man to gamble if he chooses to, and he has as good a right to make his bets on the rise and fall of grain prices as on anything else; only he must not gamble with loaded dice, or be allowed special privileges whereby he can control the price of grain. Hence, in a free and open market, these transactions where neither equivalent is transferred are legitimate enough. But they are unwise, because, apart from the winning or losing of the bet, there is no advantage to be gained from them. Transactions, on the other hand, in which only one equivalent is immediately transferred are frequently of the greatest advantage, as they enable men to get possession of tools which they immediately need, but cannot immediately pay for. Of course the promise to pay is liable to be more or less valuable at maturity than when issued, but so is the property originally transferred. The borrower is no more exempt than the lender from the variations in value. And the interests of the holder of property who neither borrows nor lends is also just as much affected by them. There is an element of chance in all property relations. So far as this is due to monopoly and privilege, we must do our best to abolish it; so far as it is natural and inevitable, we must get along with it as best we can, but not be frightened by it into discarding credit and money, the most potent instruments of association and civilization.


Free Money First.

(published in Liberty on March 27, 1886)

J. M. M’Gregor, a writer for the Detroit Labor Leaf, thinks free land the chief desideratum. And yet he acknowledges that the wage-worker can’t go from any of our manufacturing centres to the western lands, because “such a move would involve a cash outlay of a thousand dollars, which he has not got, nor can he get it.” It would seem, then, that free land, though greatly to be desired, is not as sorely needed here and now as free capital. And this same need of capital would be equally embarrassing if the eastern lands were free, for still more capital would be required to stock and work a farm than the wage-worker can command. Under our present money system he could not even get capital by putting up his farm as collateral, unless he would agree to pay a rate of interest that would eat him up in a few years. Therefore, free land is of little value to labor without free capital, while free capital would be of inestimable benefit to labor even if land should not be freed for some time to come. For with it labor could go into other industries on the spot and achieve its independence. Not free land, then, but free money is the chief desideratum. It is in the perception of this prime importance of the money question that the greenbackers, despite their utterly erroneous solution of it, show their market superiority to the State Socialists and the land nationalizationalists.

The craze to get people upon the land is one of the insanities that has dominated social reformers ever since social reform was first thought of. It is a great mistake. Of agriculture it is as true as of every other industry that there should be as few people engaged in it as possible,—that is, just enough to supply the world with all the agricultural products which it wants. The fewer farmers there are, after this point of necessary supply is reached, the more useful people there are to engage in other industries which have not yet reached this point, and to devise and work at new industries hitherto unthought of. It is altogether likely that we have too many farmers now. It is not best that any more of us should become farmers, even if every homestead could be made an Arcadia. The plough is very well in its way, and Arcadia was very well in its day. But the way of the plough is not as wide as the world, and the world has outgrown the day of Arcadia. Human life henceforth is to be, not a simple, but a complex thing. The wants and aspirations of mankind are daily multiplying. They can be satisfied only by the diversification of industry, which is the method of progress and the record of civilization. This is one of the great truths which Lysander Spooner has so long been shouting into unwilling ears. But the further diversification of industry in such a way as to benefit, no longer the few and the idle, but the many and the industrious, depends upon the control of capital by labor. And this, as Proudhon, Warren, Greene, and Spooner have shown, can be secured only by a free money system.


Stop the Main Leak First.

(published in Liberty on May 1, 1886)

In answer to my article, Free Money First, in Liberty of March 27, in which was discussed the comparative importance of the money and land questions, J. M. M’Gregor, of the Detroit Labor Leaf, says: “I grant free money first. I firmly believe free money will come first, too, though my critic and myself may be widely at variance in regard to what would constitute free money.” I mean by free money the utter absence of restriction upon the issue of all money not fraudulent. If Mr. M’Gregor believes in this, I am heartily glad. I should like to be half as sure as he is that it really is coming first. From the present temper of the people it looks to me as if nothing free would come first. They seem to be bent on trying every form of compulsion. In this current Mr. M’Gregor is far to the fore with his scheme of land taxation on the Henry George plan, and although he may believe free money will be the first in time, he clearly does not consider it first in importance. This last-mentioned priority he awards to land reform, and it was his position in that regard that my article was written to dispute.

The issue between us, thus confined, hangs upon the truth or falsity of Mr. M’Gregor’s statement that “to-day landlordism, through rent and speculation, supports more idlers than any other system of profit-robbing known to our great common-wealth.” I take it that Mr. M’Gregor, by “rent,” means ground-rent exclusively, and, by the phrase “supports more idlers,” means takes more from labor; otherwise, his statement has no pertinence to his position. For all rent except ground-rent would be almost entirely and directly abolished by free money, and the evil of rent to labor depends, not so much on the number of idlers it supports, as on the aggregate amount and quality of support it gives them, whether they be many or few in number. Mr. M’Gregor’s statement, then, amounts to this: that ground-rent takes more from labor than any other form of usury. It needs no statistics to disprove this. The principal forms of usury are interest on money, loaned or invested, profits made in buying and selling, rent of buildings of all sorts, and ground-rent. A moment’s reflection will show any one that the amount of loaned or invested capital bearing interest in this country to-day far exceeds in value the amount of land yielding rent. The item of interest alone is a much more serious burden on the people than that of ground-rent. Much less, then, does ground-rent equal interest plus profit plus rent of buildings. But to make Mr. M’Gregor’s argument really valid it must exceed all of these combined. For a true money reform, I repeat, would abolish almost entirely and directly every one of these forms of usury except ground-rent, while a true land reform would directly abolish only ground-rent. Therefore, unless labor pays more in ground-rent than in interest, profit, and rent of buildings combined, the money question is of more importance than the land question. There are countries where this is the case, but the United States is not one of them.

It should also be borne in mind that free money, in destroying the power to accumulate large fortunes in the ordinary scramble for corner-lots and other advantageous positions, and thereby have a considerable influence upon ground-rent itself.

“How can capital be free,” asks Mr. M’Gregor, “when it cannot get rid of rent?” It cannot be entirely free till it can get rid of rent; but it will be infinitely freer if it gets rid of interest, profit, and rent of buildings and still keeps ground-rent than if it gets rid of ground-rent and keeps the other forms of usury. Give us free money, the first great step to Anarchy, and we’ll attend to ground-rent afterwards.


Leland Stanford’s Land Bank.

(published in Liberty on June 7, 1890)

The introduction in congress by Leland Stanford of a bill proposing to issue one hundred millions or more of United States notes to holders of agricultural land, said notes to be secured by first mortgages on such land and to bear two per cent interest, is one of the most notable events of this time, and its significance is increased by the statement of Stanford, in his speech supporting the bill, that its provisions will probably be extended ultimately to other kinds of property. This bill is pregnant with the economics (not the politics) of Anarchism. It contains the germ of the social revolution. It provides a system of government mutual banking. If it were possible to honestly and efficiently execute its provisions, it would have only to be extended to other kinds of property and to gradually lower its rate of interest from two per cent. (an eminently safe figure to begin with) to one per cent., or one half of one per cent., or whatever figure might be found sufficient to cover the cost of operating the system, in order to steadily and surely transfer a good three-fourths of the income of idle capitalists to the pockets of the wage-workers of the country. The author of this bill is so many times a millionaire that, even if every cent of his income were to be cut off, his principal would still be sufficient to support his family for generations to come, but it is none the less true that he has proposed a measure which, with the qualifications already specified, would ultimately make his descendants either paupers or toilers instead of gigantic parasites like himself. In short, Leland Stanford has indicated the only blow (considered solely in its economic aspect) that can ever reach capitalism’s heart. From his seat in the United States Senate he has told the people of this country, in effect, that the fundamental economic teaching reiterated by Liberty from the day of its first publication is vitally true and soun[d].

Unhappily his bill is vitiated by the serious defect of governmentalism. If it had simply abolished all the restrictions and taxes on banking, and had empowered all individuals and associations to do just what its passage would empower the government to do, it would not only have been significant, but, adopted by congress, it would have been the most tremendously and beneficially effective legislative measure ever recorded on a statute book. But, as it is, it is made powerless for good by the virus of political corruption that lurks within it. The bill, if passed, would be entrusted for execution either to the existing financial cabal or to some other that would become just as bad. All the beneficent results that, as an economic measure, it is calculated to achieve would be nearly counteracted, perhaps far more than counteracted, by the cumulative evils inherent in State administration. It deprives itself, in advance, of the vitalizing power of free competition. If the experiment should be tried, the net result would probably be evil. It would fail, disastrously fail, and the failure and disaster would be falsely and stupidly attributed to its real virtue, its economic character. For perhaps another century free banking would have to bear the odium of evils generated by a form of governmental banking more or less similar to it economically. Some bad name would be affixed to the Stanford notes, and this would replace the assignat, the “wild cat,” and the “rag baby,” as a more effective scarecrow. It would be unendurably prolong the bray of those financial asses of whom the most recent typical example is furnished in the person of General M. M. Trumbull, of Chicago.

While hoping, then, that it may never pass, let us nevertheless make the most of its introduction by using it as a text in our educational work. This may be done in one way by showing its economic similarity to Anarchistic finance and by disputing the astounding claim of originality put forward by Stanford. In his Senate speech of May 23, he said: “There is no analogy between this scheme for a government of 65,000,000 people, with its boundless resources, issuing its money, secured directly by at least $2 for $1, on the best possible security that could be desired, and any other financial proposition that has ever been suggested.” If Stanford said this honestly, his words show him to be both an intellectual pioneer and a literary laggard. More familiarity with the literature of the subject would show him that he has had several predecessors in this path. Col. William B. Greene used to say of Lysander Spooner’s financial proposals that their only originality lay in the fact that he had taken out a patent on them. The only originality of Stanford lies in the fact that it is made for a government of 65,000,000 of people. For governments of other sizes the same proposal has been made before. Parallel to it in all essentials, both economically and politically, are Proudhon’s Bank of Exchange and the proposal of Hugo Bilgram. Parallel to it economically are Proudhon’s Bank of the People, Greene’s Mutual Banks, and Spooner’s real estate mortgage banks. And the financial thought that underlies it is closely paralleled in the writings of Josiah Warren, Stephen Pearl Andrews, and John Ruskin. If Stanford will sit at the feet of any of these men for a time, he will rise a wiser and more modest man.

Like most serious matters, this affair has its amusing side. It is seen in the idolization of Stanford by the Greenbackers. This shows how ignorant these men are of their own principles. Misled by the resemblance of the proposed measure to Greenbackism in some incidental respects, they hurrah themselves hoarse over the California senator, blissfully unaware that his bill is utterly subversive of the sole essential of Greenbackism,—namely, the fiat idea. The Greenbacker is distinguished from all other men in this and only in this,—that in his eyes a dollar is a dollar because the government stamps it as such. Now in Stanford’s eyes a dollar is a dollar because it is based upon and secured by a specific piece of property that will sell in the market for at least a certain number of grains of gold. Two views more antagonistic than these it would be impossible to cite. And yet the leading organs of Greenbackism apparently regard them as identical.

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