What is Mutualism?
by Clarence Lee Swartz
In collaboration with The Mutualist Associates (1927)
- What about the Big Trusts?
- Forms of Economic Organization
- The Constitution of Price
- Patents and Copyright
- Price Without Privilege (Tariffs, Franchises. Etc.)
- Semi-Public Service Enterprises Under Mutualism
Inflation and deflation being things of the past under Mutualism, with credit instruments amply secured and with free exchange in operation, panics, carrying industrial waste and ruin in their wake, will disappear entirely. The economic world needs this stabilization, this freedom from constantly recurring economic depressions which work havoc with industry, labor, and agriculture. It is safe to say that, even in normal times, the so-called profits in competitive industries and farming often are no more than equitable, wages or the full value of their labor, while in a good many cases they are much less than that. Organized skilled labor, though by no means fully compensated, is frequently closer to an equitable wage.
Just to be an employer does not mean necessarily to make a profit. The popular notion held by many workers and reformers that the boss, the employer, is the gouger and exploiter, is superficial and inaccurate. The owner of a plant or farm may be an exploiter, and again he may be one of the exploited himself. Nine out of ten business enterprises are sooner or later forced into bankruptcy. And this type of entrepreneur will certainly welcome an amelioration of his lot through stabilization and cheapening of the means of exchange through the establishment of the Mutual Bank. It must be remembered that the Raiffeisen banks in Germany, the cooperative credit banks in France, the Moscow Narodny Bank. before it was taken over by the Communists, the cooperative banks in the American Colonies even in their semi-capitalistic form, have been the saviors of hundreds of thousands of farmers and small business men who would have fallen by the wayside under the knout of the money lender.
Granted that Mutualism would be an advantage to productive enterprises as far as they did not rest on special privilege, how would it benefit the worker? The abolition of interest alone will give such an unprecedented impetus to new enterprises that production will go begging for help; the demand for labor will be larger than the supply, This will at once raise wages to a degree that will closely approximate the full product. Instead of being employees at the mercy of the employer, the workers will be rather like partners offering their services in return for their full earnings. Where credit is available at cost, a man will get equitable recompense, or go into business for himself or with others.
Furthermore, in contrast with the usual occurrence under the present system, a raise in wages will not be followed by a rise in prices of commodities. On the contrary, it has been shown that production will receive an enormous impetus. Instead of working with a constant loss of from thirty to sixty per cent of capacity, as at the present time (see Waste in Industry, issued by the Federated Engineering Societies of the United States), production will proceed nearly at top speed. And the more commodities are produced, the larger is the quantity of the various products that can be exchanged for each other and the cheaper will all products be. If production doubles, prices are cut in half, not only of commodities for daily use, but, even more important, of tools, the means of production. In other words, an increase in quantity of goods produced under Mutualism means lower prices, while labor itself will receive a more and more equitable compensation. And any additional perfection of productive processes will in a short time redound to the benefit of all those who do productive work, instead of enriching a protected few to the exclusion of the rest.
To speak more concretely, present industry works only half time. Ten per cent of the workers are idle all of the time and in times of depression many more. King C. Gillette, in The People's Corporation, estimates the number of speculators and general non-producers at over three million in this country. Furthermore, many who are working have insufficient capital and must use inadequate machines, tools and appliances. On the other hand, under Mutualism, free banking will bring the price of capital to zero, and will stimulate industry to full time production. This will approximately double the present output.
Employing the ten per cent of the workers who are at present idle all the time, transferring the non-productive workers into productive industry, furnishing the capital needed, to make all labor more efficient, with free land, free exchange of goods and of ideas, and finally cutting out the "lag, leak and friction" of the present wasteful system - all this will increase production about four times, at a conservative estimate. According to economists, productivity has really increased from fifty to a hundred times since the advent of the machine age. Whatever the increase may become, all of it will go to those who do productive work or give exchangeable service.
Regarding that part of production which has had undue advantage over its competitors and the public on account of its control of credit, that advantage simply will be gone. When we add to that the loss of tariff protection and of patent and copyright monopolies, plus abolition of absentee ownership of land and natural resources, there will be nothing to do for these pampered enterprises but to compete on an equal basis with the rest.
In 1920, there were 290,000 manufacturing establishments in the United States, with a capital of over $ 20,000,000,000, and employing over nine million people. Three and six-tenths per cent of the above establishments employed one-half of these workers and turned out two-thirds of the product. The output of every one of these concerns was more than $ 1,000,000 annually. After subtracting the three and six-tenths per cent from the total number of plants, there are still about 280,000 concerns which are now producing the other half of the total output. With the four great monopolies gone, these plants will be able to double, treble, or quadruple their output as shown above. In other words, they can turn out the whole product of the United States, and more. The big plants could be left out altogether and would hardly be missed. There is no power in these large concerns to crush their opponents when their special privileges are abolished.
Take, for example, the largest of the big corporations, the United States Steel Corporation. Its history will be instructive. It was formed in 1901 by a combination of several hundred smaller companies. The physical value of the property put into the company was probably $ 200,000,000 and included mines, smelters, mills, and railroads. There was issued in payment for the holdings of these companies over a billion dollars' worth of stocks and bonds, a fivefold watering of the stock ! The Carnegie company at that time had an actual physical value of $ 34,000,000, and received $ 490.000,000 worth of securities in return, a modest increase of 1500 per cent! And all this in one day, with no actual value having been added. This gigantic concern now owns one-half the steel plants of this country and hundreds of thousands of acres of the richest coal and iron lands. It is protected by the government with a high tariff.
When the tariff privilege was created in Henry Clay's time, that statesman said that a thirty-five per cent tariff would be ample to protect the infant industries which needed coddling. When the United States Steel Corporation had become a colossus, it was shameless enough to ask for forty-five per cent tariff - and got it.
Now note what happened to this giant that was enjoying privileges on every side. In 1902, a year after the Steel Trust was formed, its common stock sold at $ 25 a share. In 1905, no dividend was paid, and this stock went down to $ 8.43 a share! Here we see the one vulnerable spot, the Achilles heel of these inflated corporations; the passing of one year's dividend reduced the price of shares to one-third of their value in this immense concern that was supposed to be all powerful. If the lack of dividends, for one year only, has such disastrous results, what would happen if dividends stopped entirely? Why, the mere prospect would immediately deflate the artificial value of the concern. It would squeeze all the water out of watered stock.
In the transition, purely economic forces are seen to be at work. No force is necessary; no expropriation. However ill-gotten any present gains may have been, they may be kept. But the stockholders will have to work their plants themselves, if they want to get anything out of them. The land, the mines, all the resources of nature upon which no work has been expended by human hands, will be free to the first actual users. It will be of no avail to point out that the government has given titles to the former owners for that part of the earth with the promise to protect them. Anyone who uses and occupies land will be protected in its possession more securely than ever. But he will not be able to exact tribute from others for the permission to use natural resources.
After this discussion of how Mutualism will affect laborers, business men, and corporations, the question arises, toward what particular form of economic organization will Mutualism tend?
Though the predominant type will, probably, be the free association or cooperative, production will show all the various forms of organization that have been developed and found useful by mankind. There will be anything from the extreme individualism of the hermit rancher to the extreme collectivism of the Dukhobors; from the single independent producer to the plant with hundreds of employees; from the individual who distributes his own products, to the cooperative with millions of members. All forms of economic life will be represented, in so far as they can stand up under the free competition of other forms.
The exact opposite of competition is monopoly. Monopoly, or privilege, eliminates competition, or at least puts it at a serious disadvantage. How can there be free competition when the government allows certain agents to monopolize money, unused land, patents, franchises, to the disadvantage of the rest? Competition, to be what the word implies, demands absence of restriction in its operation. Wherever restriction enters as a factor, when privilege exists on one side, competition is limited on the other.
Man is an egoistic as well as a social animal. He knows that in combining he can accomplish more than alone. Such association allows division of labor, it permits each man to select the work for which he is best fitted. The more mankind progresses, the more dependent are individuals upon one another, and the more mutual or reciprocal will be their relations. Slipping a club (monopoly) into the hands of privileged individuals, to the disadvantage of the rest, partly destroys this reciprocity and creates enmity, class hatred, revolutions. It explains why, at the present time, there is not more real coordination and cooperation in society. Real cooperation is fully possible only under equitable conditions. The relations between privilege and its victims cannot be equitable for the same reason that relations between master and slave are not equitable.
But, in spite of the fact that most people are very social animals, there still will be among them the extreme individualist, the one who is different. He is the curious, the adventurous, the experimenter, the nonconformist. Under Mutualism his experiments in new paths will be entirely free and untrammeled, so that society will get the full benefit of the results of his method of trial and error.
Multiformity is the salt of life, and multiformity of organization will exist where there is absence of invasive compulsion.
In spite of its obvious defects, the present system, as pointed out before, is a going concern. As a matter of fact, about ninety per cent of all economic activity is even now reciprocal, although not Mutualistic. Business relations are mostly a matter of trust, credit, and free contract (vitiated, it is true, by the poison of monopoly, as pointed out in chapter I). Were this not so, business relations would be impossible. There is an immense amount of worthwhile activity in the present economic structure. With the removal of the restraints, legalistic advantages and monopolistic privileges the activities of modern life will develop magnificently.
Under Mutualism, the exchange of commodities and services will take place at virtual cost level, which has been expressed by Josiah Warren as: "Cost the limit of price." The realization of this principle means the abolition of exploitation. The laborer's wages will buy back his product or its equivalent, for prices of commodities will approximate the cost level in a free market and with unrestricted competition. Any momentary advantage due to improved methods of manufacturing will in a short time be reduced by the pressure of new competition. Thus the advantages of greater productivity will redound to the benefit of producers as a whole. For instance, if a given commodity can be produced in half the time through improvements, it will sell for half the former price, after free competition has come into play as the chief leveler of prices.
How is price determined? Through bargaining in the open market. This is contrary to the notion of Socialists. They claim that value or price should be determined beforehand by the time that has gone into a product.
Nevertheless, under free exchange, value or price is constituted in the market after the goods get there. It is then only that it can be found out how many bushels of rye will exchange for a suit of clothes, or how many loaves of bread for a pair of shoes or a pound of nails. Then and thus only can their respective values be learned. These values will not always be constant. There are disturbing factors in connection with new improvements, changes of population, crop failures, etc. Values will fluctuate to some degree, and they will be slightly unequal and variable. But, under normal conditions of supply and demand, the average price of commodities will constantly tend to approximate the average cost of commodities; and, under free exchange, competition will quickly readjust the occasional disparities between supply and demand.
Mutualists believe that the development of industrial society has effectively demonstrated the fact that anybody can be useful in a productive way. Industrial engineering is able to make use of all human types. Ford has demonstrated it time and again. Division of labor does demand variety of human inclinations and capacities. Furthermore, can it be said that a one-legged man is at a disadvantage against a two-legged one when all the labor of both consists in drilling holes into an iron casting, while being seated on a stool? Under primitive conditions, such as personal combat, agricultural pursuit and the like, the one-legged man would certainly be handicapped. But modern machinery tends more and more to obliterate personal skill or special capacity. With increasing mechanization and standardization of processes, the skilled mechanic is replaced by the specially trained but otherwise indifferent worker.
So there is the spectacle of the activities of men becoming more and more diversified and yet, with the use of machinery, coming closer and closer together in point of productivity; and equal or similar productivity will be reflected in equal or similar compensation. No doubt there always will be minor fluctuations in earning capacity due to superior qualities, as in the case of a skilled surgeon, a talented singer, a gifted artist, or a poet of genius. Also exceptional executive ability, inventive genius, engineering training, or the performance of a particularly distasteful activity, may be rewarded more highly. It will depend always on the supply of available competitors; and it can safely be left to the self-interest of men in general to prompt them to see to it that the opportunity for larger remuneration or shorter working time is taken advantage of if there is enough in it to make it worth while.
These economic relations under Mutualism have been discussed at some length in order to demonstrate how easily and equitably matters will adjust themselves if left to the natural trend of Economic forces. Commodities will then be produced to be exchanged for other commodities, for the satisfaction of human needs. This is very different from the present situation where the interference of privilege produces such an absurd muddle. The conclusion may be drawn that all that is necessary to supply the needs of society as a whole in the best possible way is simply this: "Laissez-faire." But not laissez-faire in the sense of "letting things slide and the devil take the hindmost," but rather in the sense of letting each one do what he wants to or thinks best, as long as he remains non-invasive. When the producer is the owner of his product and there is a free market where he can exchange his goods for others necessary to him, it will be a matter of course for every human being to produce things for which there is a call. For only then will he be in a position to accomplish the purpose of his economic activity, which is precisely to satisfy his own needs to the fullest extent with a minimum of effort. His own self-interest is intimately bound up with his service to society. Thus we see that, under freedom, so called morality is self-regulative, inherent in the system.
Copyright and patent laws compel society to pay a monopoly price to an individual or his assigns for a number of years for the permission to use ideas which he claims have originated with him. But all individual action (including thinking) is original, regardless of any question of priority. However, that does not mean that it could have taken place without a very definite background. The scope and intensity of this background are more important than the mind of the inventor. For, with a certain background provided, a large number of individuals will develop and arrive at very similar ideas almost simultaneously; while, without such background, these particular ideas might not be conceived by one individual in a million.
Modern psychology is performing a priceless service in exposing and eliminating many antiquated conceptions about the working of the human mind and by demonstrating the relative importance and nature of the stimuli calling forth mental and physical responses. Ideas (inventions) cannot possibly arise out of a void. On the contrary, they are merely minor or major culminations in an interminable chain of stimuli and responses without the precedence of which they themselves could have no existence in the mind. An inventor can in truth call but an infinitesimal part of his idea his very own. And, even this bit of the performance may have been done already by someone, somewhere, unknown to him, or may be repeated any time, unwittingly, by others. What presumption, then, to attempt to levy a tax upon all mankind for so minute a contribution to the world of ideas as any single individual can possibly make! Measuring with the same stick his indebtedness to mankind as a whole for the host of ideas upon which he drew, and without the existence of which he might not even be alive, even the most ingenious inventor would find that all the royalties and tribute he might collect from one generation of men could at best pay but a small fraction of the debt which he owed to the generations of men who had preceded him.
The granting of a patent or copyright to one individual denies the freedom of all other individuals to utilize the same facts, or to develop from them the same or similar ideas, and to employ such new ideas for their private gain. And such a prohibition violates the law of equal liberty, no matter whether its duration is intended merely for a year or for all eternity, except that in the latter case the injustice would be so apparent that its own enormity would smother its observance. Let us suppose that perpetual patent and copyright had existed from the beginning of civilization and that all inventors had claimed their "rights." In that case there would be royalties on the wheels, the saw, the knife, the axe, the plow, various processes in every manufacture of money, paper, fire, glass, hinges, springs, locks, shoes, ink, the alphabet, musical notation, numbers, arithmetic, bookkeeping, etc., etc. In fact, progress would have been retarded so much that many of these things would not be utilized to the fullest extent even today.
But there is another serious objection to patents. Many readers will perhaps consider it the most important and most valid objection. It is the fact that the holder of important patents (who is usually not the inventor himself; the latter is usually disposed of quickly, with but a fraction of the expected royalties and with no voice in the application of the invention) will not only he able to exact such high monopoly payments as to come within a small margin of eating up all the benefits made possible through the use of the patent, but that he will also be able to dominate and monopolize entire industries, by the simple expedient of threatening to withhold the use of his patent unless his wishes are agreed to. Much of the power of the trusts would be gone, if their monopoly rights to various patents were no longer protected by the State. Competition would have freer play, and prices on those commodities whose efficient production depends on the use of existing patents would drop beyond all expectation. The general quality of goods would improve and the people at large would reap the benefits. It would be hard to estimate how many valuable patents have in the past been bought up merely to be destroyed or suppressed, since their adoption would have made obsolete and worthless certain large plants and costly equipment or big stocks of goods manufactured on the old principle.
As to the author, it is not contended that he should not be compensated at all for his efforts and for putting his talents or his genius to use for the benefit of other individuals. The author of a book has always the power to enforce his normal right of ownership by requiring that his book be published by subscription, a method which is not so infrequently resorted to even under legal copyright. The journalist is usually paid outright and does not depend on, nor expect, his compensation to consist of royalties.
A writer who made authorship a profession would be compensated for the extensive free publication of his earlier works by the increased demand for future contributions from his pen, which he would be able to hold as private property until his publishers, or the general public, had agreed to pay his price for them.
As to the contention that non-recognition of property in ideas would leave us without a literature, it is sufficient to point out that glorious literatures existed and flourished thousands of years before copyright was dreamed of, and that Shakespeare himself wrote his works more than a century prior to the enactment of the first copyright law. As George Bernard Shaw has well said, the cry for copyright is the cry of men who are not satisfied with being paid for the work once, but insist on being paid twice, thrice, and a dozen times over.
Most critics of the present system dwell on the unfair distribution of products, but this is of relatively small importance. While distribution is admitted to be grossly inequitable, its reduction to exact equality would help very little, as defenders of capitalism quite correctly point out. The basic defect in our present system is that it hampers production. While modern machinery and methods: have made possible a productivity fifty times that of hand labor, the worker is not very much better off than the poverty-stricken wight of Burns' time. Compared with what could be produced if privileges did not interfere with economics, the present system is poor and most inefficient. If the problem were no more than the distribution of this meager amount, it would mean very little benefit to each individual. As demonstrated in the preceding pages, the advantage of economic liberty will be that industry will work at full capacity, instead of at only a fraction of it, and to bring about equitable distribution of that is worth the effort.
In a different sense, the process of the distribution of goods is merely an extension of production. The product of the sheep-man is the wool; to the spinning factory this is raw material, which is worked up and sold, as yarn, to the knitting mill; the yarn is manufactured into wearing apparel, which in turn is sold to the stores; the storekeeper puts them on his shelves, and the goods are still in the process of production until they are sold to and worn by the final customer. Every time the partly finished product is transported, another step in the production is accomplished. Distribution is a vital part of production.
While the medieval world was provided for practically by local production in the village or town, requiring comparatively little distributive machinery, modern production is an entirely different thing, necessitating a vast distributive organization. A great variety of goods is exchanged on a large scale between distant parts of the globe. And the interesting fact about this capitalistic distributive machinery of today is that it functions largely on a voluntary basis, that its essence is: contracts between the units concerned, not laws and statutes handed down by a coercive power.
Trains of different railway systems of different countries meet one another, pull one another's freight cars and passenger coaches; they meet steamers, and these meet other steamers, trains, airships, trucks, rickshaws, negro and coolie carriers, and what not - by voluntary agreement and free contract. The only disturbing elements are the various governments, granting monopolies, interposing customs barriers, tariffs, battleships, forts, and once in a while a bloody war that destroys for a few years those amicable social and commercial relations established between producers the world over. And within each country, the same disastrous effects of government-granted monopolies are seen in the distributive industry as were noted previously in the discussion of industry as a whole.
Mutualism makes no prescription as to the form of distributive agencies. All forms will be possible, and the freedom to experiment will bring to the fore those forms that are the best for the particular persons and the particular situation. The various voluntary cooperative distributing societies of the present day are pointing the way to what can be done on a large scale even now. What distinguishes their mode of action from the capitalistic system of distribution is that the ultimate consumer, instead of being filched at every possible turn, shall receive his goods at cost plus handling charge. The tendency is to give service at cost; and, if a great number of cooperators realized that the same principle should and can be established in the furnishing of credit, they would make even greater progress than they have made so far.
The chain stores, to all appearances a modern capitalist invention, had their origin in the European co-operatives. Selling goods at retail today is a very different thing from what it was when the cooperative movement began in England in 1847. The workers of that time were in a condition of abject poverty. They bought the poorest goods, in painfully small quantities. Besides, the goods were adulterated, and the purchaser was swindled by short weight. This fourfold disadvantage the cooperators sought to overcome, and from the humblest beginning they built up a system of stores that came into successful competition with the gouging merchants. They at first had their single store, then branches in the same city, Rochdale, then stores in other cities; they started their own bakeries, and, with a growing market, their other manufacturing establishments. This is still the way they start and grow. No new productive plant is opened until there is a strong enough demand from the distributive units for the product. This is a development toward elimination of the middleman, and it is highly probable that the distribution of the future will be more and more directly from the factory to the consumer.
The high development of capitalistic chain stores in the United States presents quite a problem to consumers' cooperatives, These stores are selling at a margin of profit that makes it difficult for a small store to compete with them. The development seems to point in the direction of eliminating the retail store in the future to a very large extent; if not altogether, to such an extent that it will be superseded by, or become merely the distributing agent of the factory, mill, or shop where the goods are produced. Eighty years ago, the housewife was a spinner weaver, brewer, baker, and laundress. But she has abandoned one after another of these occupations, some fully and some partially, and perhaps in time they are all destined to go. The rest of the kitchen work may follow. Whether it will be done in a central kitchen for a hundred families at a time, or by bringing the food to the home already cooked at mealtime, or by any of various other schemes, will depend entirely on the demand from a large enough number of people.
Every woman and man in the street has a general idea that the reason it is so hard to make both ends meet is because prices are too high. And prices are too high - especially the prices of the food and clothes and shoes and furniture that everybody eats and wears and uses. One of the most widespread factors of high prices is the special privilege of gouging the consumer offered so generously by the government to industrial capitalists through the tariff.
The word "tariff" is itself a symbol of piracy. It comes from the Arabic word for account or record and is said to have drifted into the Spanish and French languages and thence to English, as the term used for the accounting required of merchant ships by the pirates of the North African coast and the Eastern Mediterranean. The "tariff" became the tribute paid to avoid seizure. It has continued to be pirates' tribute throughout its use, even by the most respectable governments.
Mutualists are free traders because they believe in freedom, and not, like the Democratic party, because they must have a political campaign issue; or like the Single Taxers, because they believe in collecting all taxes from the land alone. They are against the tariff tax for the same reason that they are against all other taxes - namely, that all compulsory taxation contravenes the principle of equal liberty; and for the further reason that all the services and activities for which taxes are now collected could be more efficiently and more cheaply performed through individual enterprise and voluntary association.
The merest tyro in the study of political economy knows that the general effect of a tariff on imports is to raise the price, not only of the article actually imported, but also of all such articles produced inside the tariff barrier. Normally, the domestic producer may add to the price of his product the actual duty that the importer must pay, and can pocket that as his extra profit. Only when the production cost of the foreign article is so low that it can be delivered inside the barrier, duty paid, at a price no higher than the domestic producer would have to charge if there were no duty, can the latter be prevented from exacting his super-profit.
However, since tariffs are never imposed strictly and flatly, for revenue only, and since the main object of such impost - in the United States, at any rate - has been the protection of certain home industries, care is scrupulously taken to place the duty at such a point that the privileged ones reap the benefit. No one, nowadays, has the effrontery to pretend that any one but the consumer pays the duty. Consequently, every fraction of a cent that is exacted by the customs collector is reflected promptly and equally in the price of the taxed commodity, whether it be the imported or the domestic article. Not only that, but the general tendency is to pyramid the prices of tariff-protected articles through the fact that a profit is charged upon the tariff at every exchange, each middleman through whose hands it passes taking his toll. What the effect on prices would be were the tariff completely abolished is easily pictured when all the factors controlling production costs in the various foreign countries are taken into consideration.
Now, the tariff tax, like all the compulsorily levied exactions of government, is a direct violation of the principles of Mutualism; and it is especially obnoxious because it makes no pretence at being equitable. It is one of the four major privileges which enable the beneficiaries thereof to exact tribute from the unprotected and unprivileged citizen. It is one of the mothers of monopoly, and many great trusts would find it impossible to wax fat without it.
If one buys an ordinary union suit, more than one-third of its price is there by reason of the tariff placed on foreign imports of union suits. Most union suits bought are American made, so that the government itself did not get the tariff revenue, but the manufacturer of the union suit did. A fractional part he may have passed along to his workers as wages, but most of it he pocketed.
In addition to this original profit to the manufacturer there are compounded profits all along the line of distribution. On a $ 3.00 union suit the jobber pays the $ 1.00 tariff profit and changes 20 per cent on that. The wholesaler pays the $ 1.20 and will add another 20 per cent; and so it goes down the line - profit made in every case on the cost and on the tariff surcharge permitted. And finally the dealer charges the customer an extra $ 1.75 or $ 2.00 above what would be charged if the tariff were not acting to continually inflate prices.
There is a tariff charge in practically everything that one eats and wears, and it must be remembered that in every case the original tariff charge is compounded over and over as the goods are bought and sold. The same thing that has been said of union suits applies to sugar and to furniture, to safety razors and to men's suitings.
The minimum tariff charged upon dutiable goods (most of the things in the household) is about 30 per cent and has been so under both Democratic and Republican administrations for fifty years. With the additions of compounded profit, the total paid easily amounts to 50 per cent of the original and proper cost. With its removal, prices would immediately fall to their proper internationally competitive level. This, together with the vast increase in production effected under Mutualism, would mean that the problem of making both ends meet would be solved.
We recognize, however, that a premature removal of the tariff would give this country an unfavorable trade balance. An extended period of free trade in the United States would have a tendency to drain the gold into such countries as England and Germany, which, with their low-priced labor, could flood this country with their cheaper products, thus causing (under the present monopolistic system of credit) a scarcity of money here and forcing this country to borrow the gold back again and pay interest for its use. The laborers in the unprotected industries, though gaining by the reduction of prices when the tariff was taken off, would have to face the competition of the laborers thrown out of employment in the industries which were formerly protected, again depressing wages to a lower level. So, while Mutualists fully comprehend the outrageous boosting of prices by the tariff, they would not favor its general removal unless coupled with the inauguration of that free trade in banking which would make money and work abundant.
We may be sure that wherever we find legalized monopoly there is exploitation of the consumer. The tariff exhibits it very clearly, but no less certain is the exploitation effected by franchise holders. It is worked like this: An enterprising attorney without clients has had time to get together a number of business men and raise the money for a local power plant. The business men have in turn induced politicians to grant a franchise. Immediately the franchise is granted it has been calculated to be worth something in good will. And the good will in turn has been charged for as part of the capital on which a profit had to be made. The State itself has been compelled to curb some of the exorbitant charges made possible through franchise of public utilities, little recognizing that the franchise itself is the cause of exploitation. But can the great enterprises necessary to the public service of our complex industrial civilization be developed and maintained without protective franchises and even government subsidy? They cannot pay a monopolistic profit without protection, but Mutualists are quite sure they can give service without it, and, more, that, through the pressure of competition, they will do so.
Public utility corporations operating under exclusive franchises are not subject to direct competition. The rates they may charge for their services are usually fixed by the commissions or the legislative bodies granting the franchises. These rates are based on the prevailing rate of interest, and at present generally are seven per cent or more on valuations, which, through inclusion of capitalized franchises, good will and going concern value, are usually vastly greater than the cost of the physical property upon which the rates are collected. The Mutual Bank, by reducing interest to zero through the monetization of available wealth, would force rates to conformity to the new conditions, or answer to an aroused public opinion. The public utility corporations thus would be shorn of their power to pilfer, and would eventually be transformed into organizations rendering service at cost.
Frequently, Mutualists are asked how they propose to run railroads, large steamship lines, build communal sewers, streets, water systems and the like. To a European, accustomed to having the railroads run by his government, it seems nearly incomprehensible that such a public necessity could be run privately. Yet railroads are run by private concerns in many countries, including the United States. The fact that they fleece the public is due to causes other than the fact that they are privately owned. It is due to the government-delegated monopoly of franchise, coupled with those of land, money, and patents
Under Mutualism, competition will hold the charges of railroads down to approximate cost. For instance: suppose that an association of shippers decided to build a road from New York to the West Coast, giving service at cost to its members. The mere threat would have a wholesome effect on the existing railroads. But if that does not help, then a new road will be built; and, the control of credit being no longer in the hands of the financiers, there will be no difficulty in getting the necessary credit through the Mutual Bank. The old roads will be compelled to meet the situation.
An interesting experience with the railroads could be seen in Germany in 1925-1926. Under the Dawes plan, the government roads are practically taken over by a private corporation, under a trusteeship, the government acting merely as one of the many stockholders. Travelers in Germany commented particularly on the changed attitude of the railway officials in regard to the treatment of passengers. The tendency of public functionaries everywhere, including Soviet Russia, is to become dictatorial and overbearing toward the public, and Germany was the El Dorado for this, on account of its many socialist ventures in government. After the transfer, the road developed an interest in treating its customers decently, as does any private concern, since they are the source of its income and very existence. In other words, having the main backbone of governmental enterprises taken away - namely, the right to make up a deficit by compulsory taxation - the railroads had to do business like any other human undertaking, on the strength of its service to the consumer.
Throughout its life the Post-Office, the greatest single governmental service in the United States, has shrunk away from competition with private enterprise. There seems to be ground for the claims of its early opponents that it was originally established to reward the politically deserving and to make it possible to whip up the vote in the back-country in times of need. At any rate, we know that when it was established there was in existence a pretty effective system of interconnected private post routes that were gradually crushed by governmental disfavor and legislative restriction. Ever since that time, any virile competitor has been crushed - never by competition but always by restrictive and confiscatory laws.
When, in 1844, Lysander Spooner threatened to put the government post-office out of business through his private competitive system, the Congress hurriedly cut letter post rates a third, and then in panic cut them again in half - making up the operating deficit by a new set of tariff exactions. Finding that this enterprising Yankee still threatened to give a better service at lower cost, Congress outlawed the private transport of letter mail. Through threat of prosecution, Spooner was compelled to quit, but his activity had, in a year, cut the postal charges of the country to one third of the former amount.
For almost a half century the Wells-Fargo Express Company beat the government in open competition as a carrier of letters throughout the whole Western United States. At first the private company gave the better deal both as to cost and service. Even though, later, the government confiscated part of the company's receipts through compelling it to pay full postage though a government employee never touched a letter it carried, it continued to hold much of its postal business for years, until it was gradually overcome by heavily-subsidized rural routes.
Quite recently enterprising lads in the larger cities proved themselves able to take from the government the business of handling letter mail between office buildings. That too, has been stamped out by governmental decree and, although one is still permitted to send a note by messenger, this greatest American Socialist institution now has a clear field - and its prices are beginning to rise. With this experience behind us can anyone be fearful of private and competitive postal services?
While it may be quite patent to most people, there are some who cannot visualize how streets and high-ways will be built by any other agency than that of government. Most persons can only imagine profit organizations on the one hand, or compulsory organizations, such as governments, on the other, as agencies for carrying on the business of society. Once they get the idea that non-profit organizations can take over those functions without gouging the public and also without enslaving the people, it is easy to show them how more involved problems can be taken care of. For this purpose, we may point to the various automobile clubs in this country, and take as an example the Automobile Club of Southern California.
This non-profit organization was started in 1900 by a few motorists with the object of mutual protection, the promotion of good highways, and the collection and dissemination of reliable road information. According to a recent pamphlet, more than 120,000 road signs have been erected and are being maintained by this club. It furnishes insurance to members without a profit; it employs experienced detectives to foil car theft and recover stolen automobiles; and the highway patrol service is different from the patrol of the county speed cop; it is a boon to the motorist instead of a bane. It is courtesy extended to motorists in distress, whether members or non-members, and includes mechanical first aid, towing to the nearest garage, changing of tires, furnishing of gasoline or oil at cost, giving free information, removing of glass from the highways, disentangling traffic jams, posting temporary signs, in short, aiding instead of harassing the motorist.
Why are all these activities recounted? Because they show, in the first place, a non-profit organization at work at the present time; secondly, because they prove that such organizations may be public spirited and extend benefits to others who do not pay for them; and, thirdly, because here is an organization that might serve as a nucleus for a road league of the future.
In Russia, the Cooperative Societies are engaged in road building and in organizing and conducting postal service.
In the United States, we may assume that when the time comes, for the question to be solved, an association will be formed in any given district consisting of the Automobile Club, the Citizens' Road; League, the Chamber of Commerce, the local Improvement Club, the Motor Express Association, etc.
Anyone who has acquired the mental habit of demanding paternalism without having given much thought to self-initiative of individuals and groups under freedom will find it difficult at first to think objectively on the solution proposed here. In reality, it is nothing more than a straight business proposition for the parties interested, and on a scale not any larger than many other undertakings of today, handled without the help of force. If roads are built by business organizations, it goes without saying that corruption, which is always connected with similar undertakings of governmental authorities, will be absent.
In a similar way it will be possible to handle other semi-public enterprises, such as sewers, water supplies, power plants, organization of traffic on the streets and in the air, or radio broadcasting; that is, through the organization of the interested.
Take traffic, for instance. This is admittedly not a police, but an engineering problem. The road league would build the streets with an eye to preventing congestion and dangerous crossings. The automobile club would have its officers directing traffic and calling people's attention to the observance of necessary rules, personally and through educational campaigns.
If it is kept in mind that in former times there were a great many activities that were supposed to be possible only under the leadership of authority or coercive regulation which are now left with better results to the free contractual arrangements between individuals, it is easier to see that men are capable of learning to do by voluntary association in the future much that now seems difficult without the strong arm of government. The guilds of the Middle Ages prescribed very minutely and narrowly the status of the producers, preventing development by their inelastic laws, which were thought to be all for the best. The Church, after hundreds of years, has finally learned to realize the fact that men will not forever be coddled and hedged in by precepts and restrictions that have nothing but compulsion behind them. The human race is getting along famously with a greater amount of liberty in those matters, and the removal of restrictions has always developed and will always develop the ability to do without them.