VIII. Emancipation of Credit

Having shown that the voluntary organization of mutual credit is fully practicable; that the medium of exchange would thus be shorn of the difficulties which prevent labor from freely capitalizing products; that the various “banks” thus organized, private or associative, to exercise social functions, by a system of mutual clearance would indefinitely extend credit; that all the difficulties now so easy to conjecture would be solved as they were respectively recognized : – we may now proceed to claim for it the following beneficent results:

1. LABOR THE STANDARD OF VALUE. In demonetizing gold and silver, thus depriving them of the royalty they now exercise among commodities, it would destroy their use as standards of value and leave labor expended, the cost of production, the regulator of value. Value being determined by the proportional relation between products, this relation would no longer be sought in a fluctuating standard but measured by the extent and degree of labor expended and thus establish equity in exchange. Nor need there be a conventional standard agreed upon, for free competition would itself lead to equitable relations by and through experience and equality of opportunities, establishing a just rate measured by the intensity and skill of the exertion and degree of repugnance overcome. The agreement being voluntary, every banking company would find their own interest enhanced through competition in finding and acting upon what might be called this natural value. Prices, like everything else following the line of least resistance, in the absence of artificial conduits would naturally flow into equitable relation with cost of labor, thus giving to exertion its full reward. Inflation of credit could not be greater than the increase of surplus wealth deemed acceptable as security, and no such increase of circulating medium, therefore, could affect prices disastrously, or otherwise, below the standard of labor value, for it would measure it as the thermometer does heat. Nor could contraction raise prices, for in currency as in everything else under freedom supply would follow demand.

2. CESSATION OF INTEREST. It would remove the cause for usury without destroying incentive to production. In taking from capital its ill-gotten usufruct of labor the impetus to the production of wealth, in which all classes would be equally benefited and with no artificial limit to its scope and development, would remain because individual initiative would have greater freedom and fuller opportunities. But under our present boasted “incentives” we find individuality narcotized by divorcing capital from labor, accompanied with exhibitions of paternal care. And this would naturally result without calling in authority to accomplish what it, from its very essence, has always been averse to entertain – liberty. The necessity for exertion remaining, opportunity open to gratify wants and means to capitalize wealth, or even day’s labor, together with increased leisure and the more perfect development of individual aptitudes, is sufficient ground for the firm conviction that the extension of freedom into economic relations would not cause mankind to deteriorate into barbarism as our economic apologists for militancy affect to believe. To thus except Economics from the universally beneficent effect of greater freedom is to impugn evolution itself.

All wealth would in a just sense be available as capital when desired; and freedom prevailing no more could receive acceptance as security than would guarantee such. Every portion of this wealth converted by credit to reproductive purpose would be employed without exploiting one of those who give to products their real value, for labor and capital would be united, the reverse sides of the came exertion.

3. EMANCIPATION OF LABOR. The industrial type of social life could then realize its ideal, wherein plasticity excludes rigidity and order be founded on progress; than [sic] only would industrial emancipation become a fact. The producer would no longer be repressed by the fluctuating demand of a speculative market, nor beguiled by twilight schemes of occupancy of land without access to means for use, but be benefited by every new appliance which tended to reduce the exhaustiveness of toil. The opportunities for labor would increase as its wealth-producing qualities became more equitably shared, and ability to increase it receive no damper from fear that the fruits of exertion would be swallowed up by some device of privilege. In the incentive given to production emulation would be incited, ambition aroused, higher desires created and every element of individuality called into healthful exercise rather than repressed. Economics would no longer assert with Roscher that

“The condition of workmen can be continued good or materially improved only on condition that their number increase less rapidly than the capital destined for its wages.”

Nor follow it with the remark:

“Much especially depends upon their foresight and self-control as regards bringing children into the world. Without this latter virtue even the favorable circumstances would be soon trifled away!”

On the contrary, the toiler instead of remaining a hireling in the industrial forces, would not only have every manly faculty aroused, but every opportunity given through increased demand and fuller reward to rise to independence. While free land has been posited as the first element, because land is the source of all wealth, it is now evident that access to vacant land alone would not emancipate labor. As in the realm of biology the higher we rise in the scale of being the more complex functions become, so in Economics we find social functions much more complex in exchange than in land tenure. Waiving discussion whether abolition should precede from the simple to the complex to facilitate normal growth, it may be easily shown, if not already seen, that the monopoly of exchange involving the whole domain of distribution has a much more depressing influence upon the realization of the industrial type than land monopoly. Monopoly of credit carries with it privileged capital, extortion of interest, the struggle for profits, the greater part of the necessity for taxation and the prime cause for labor exploitation. With abolition of privilege here the desire to monopolize land would be curtailed. Bonanza estates are valueless to their holders save as restriction of access to capital drives needy labor to sell itself thereon. Even if emancipation here had no reflex action upon land holding, inability now possessed by capital to exploit would render land held for other than useful purposes a most undesirable investment. The difference is as great as between broad daylight and hazy twilight.

Social wealth and prosperity would then be attained, and by the only way it ever can be, by the wealth and prosperity of the individuals who together constitute society. The “Dismal Science” would no longer compute averages to show that in the prosperity of some an average well-being results, but in the incentive given to exertion, in the ever-widening circle of wants that freedom can alone call forth, betake itself to computations on the possibilities of a civilization founded on “ the greatest good to” ALL, instead of being the philosophy of speculation upon human misfortune and misery, and the art of expounding existing temporary relations as natural laws.

Finally, in the words of Col. Greene:

“The existing bank reproduces the aristocratic organizations; it has its Spartan element of privileged stockholders, its Laconian element of obsequious speculators, etc., on the outside a multitude of Helots who are excluded from its advantages. Answer us, reader: If we were able at this time to bring forward the existing banking system as a new thing, and should recommend its adoption, would you not laugh in our face and characterize our proposition ridiculous? Yet the existing system has an actual and practical being in spite of all its imperfections; nay, more, it is the ruling element of the present civilization of the Christian world; it has substituted itself, or is now substituting itself, in the place of monarchies and nobilities. Who is the noble of the present day, if not a man who lends on interest? Who is the emperor if not Rothschild? Now, if the present system of banking is capable of existence, how much more capable of actual existence is the system of mutual banking? Mutual banking combines all the good elements of the method now in operation, and is capable of securing a thousand benefits which the present method cannot compass, and is, moreover, free from its disadvantages! ”