Money and Politics
Money, especially credit money, is undoubtedly one of the greatest of cooperative discoveries. Without it no great specialization of labor seems possible, except under an all-inclusive state control of industry, and even here something of its nature would be necessary to maintain a check of and on consumption
Money is inconceivable without at the same time thinking in terms of a standard of value, and, surely, a basis of issue. To say that it is a “pernicious delusion that there must be something in back of money” is to utter an absurdity. Money, being a claim on wealth, must be based on something more substantial than mere promises in order to be sound, stable, or trustworthy. And this something is tangible wealth, i.e., anything of value which is not liable to quick and severe depreciation.
It is also as absurd to think that under a really sane monetary system hoarding is an evil causing hard times as to say that a man who has saved for a rainy day will suffer for it. Hoarding being merely pos[t]poned consumption, there is no warrant in reason in believing that it can fundamentally change either the production or distribution of wealth. When it is understood that the natural limit of credit money is the amount of wealth on which it is based, it is an obvious mistake to think that hoarding can curtail the amount of needed currency as long as there is any unmonetized wealth.
Another “pernicious delusion” is that the “proper increase or withdrawal of currency” can affect its value or “stabilize” it. Money is a promise to pay. If Smith has 1000 bushels of wheat and issues 100 promises each for 1 bushel against it, how can it affect the value of those promises should he issue 100 more? The value can only decrease if he over-issues, i.e., when there is not “something back of (his) money.” “Unstability” is a characteristic of a faulty monetary system.
After all, what is the money problem? It is to furnish a sound medium of exchange at a low cost. Interest has been too often proved to be an artificial phenomenon and the main cause of exploitation. It may be caused by two things, an insufficiency of money or the control of its issue in few hands. Today it is caused by both, but principally the latter. The actual labor cost of banking is probably less than one-half of one percent. All charges over this is pure interest, in other words robbery and swindle.
As far as we know, gold, more than anything else, possesses the ideal qualities of a standard of value. It is comparatively stable in value, useful, durable, easily recognizable, uniform in quality, can be subdivided without impairing its value, and has comparatively great value in small quantities. But it makes a very poor basis of issue measured in terms of gold but should have an equal opportunity with gold to serve as a basis for the issue of money.
Today we have the spectacle of those privileged individuals, the owners of gold, thru the Federal Reserve System receiving interest from 8 to 15 times their original capital. When it is understood that money interest is the main cause of business profits, the enormity of this swindle is manifest. It is vital in understanding economic processes to differentiate between the industrial and financial fields. The financial sphere is almost pure leachery. Banking interests are inevitably gobbling up and gaining control of industry.
Commentary – Eric Fleischmann:
This piece, graciously provided to me by the University of Michigan Library’s Joseph A. Labadie Collection, was originally written to and, in 1933, published in the second anarchist journal named Mother Earth. This famed anarchist journal—not to be confused with Emma Goldman’s journal of the same name—circulated among radicals in the early 1930s and was loosely associated with both the Modern School Movement and the Industrial Workers of the World. This is one of literally hundreds of pieces that Labadie wrote on the subject of money. Chord—the anonymous author found in Anarcho-Pessimism—writes that “[w]ith typical disregard for popular tastes or fashion, Labadie conceived the basic outline of his conspiratorial concept of money in the 1930’s, with its implication that the single reform that could bring most leverage into the service of individualism and freedom would be the separation of money and state!” And in this commentary for the Laurance Labadie Archival Project I would like to discuss first his theory of credit and then his relationship with the Federal Reserve System.
For Labadie, “the natural limit of credit money is the amount of wealth on which it is based” and as such “[m]oney, being a claim on wealth, must be based on something more substantial than mere promises in order to be sound, stable, or trustworthy. And this something is tangible wealth, i.e., anything of value which is not liable to quick and severe depreciation.” This stands in contrast to Kevin Carson’s understanding of credit in The Desktop Regulatory State, where he discusses the idea of a mutual credit-clearing system whereby businesses “spend money into existence by incurring debits for the purchase of goods within the system, and then earning credits to offset the debits by selling their own services within the system. The currency functions as a sort of IOU by which a participant monetizes the value of her future production.” Comparing these two mutualistic considerations of credit leads to the observation that: the former holds credit up as primarily a tool of exchange through ‘stock’ ownership, whereas the latter sees credit as first and foremost a mechanism for ‘flows’ of goods and services. Whose model of credit is correct? Perhaps only a truly free market will tell.
But following this belief in decentralized credit money, Labadie is necessarily opposed to central banking such as the FRS. And opposition to the Fed is a mainstay of North American libertarian politics, with the Libertarian Party platform consistently including “the abolition of the Federal Reserve System, Federal Deposit Insurance Corporation, the National Banking System, and all similar interventions.” However, Labadie’s critique of “those privileged individuals, the owners of gold, thru the Federal Reserve System receiving interest from 8 to 15 times their original capital” comes almost 40 years before David Nolan founded the Libertarian Party in response to Nixon’s end of the partial gold standard that began the same year Labadie wrote this piece. In fact, Labadie writes this piece around 20 years before Dean Russell proposed that classical liberals abandon the public title of liberal and argued that “those of us who love liberty trade-mark and reserve for our own [should] use the good and honorable word ‘libertarian.’” Having been born 15 years before the Federal Reserve Act of 1913 set the U.S. on the seemingly permanent course toward contemporary centralized banking, Labadie experienced first hand the destruction that such a system wrought, especially during the Great Depression. This gives special credence to the perspectives he presents and a greater context to reading analyses such as these for contemporary libertarians on both the right and the left.