Herman Kuehn, "The Problem of Worry" (1901)








There came to me one day an earnest, intelligent, industrious man tormented by his worries. He wanted me to tell him what caused “hard times” and panics; and whether it was not in the power of the industrial classes to do something to avert them. In a series of letters I unfolded to my questioner a plan of Industrial and Commercial Credit Cooperation.
These letters, just as they were written, have been collected, forming this booklet.
The author is persuaded that no scheme for the amelioration of misery, however beautiful the ideal animating it, no program for the regeneration of society or the elevation of the individual, can find a common-sense lodgment, as long as we tolerate royalty as expressed in money monopoly, land grants, or governmental special privilege of any kind.
Man is capable of producing all things needful for his material welfare. The earth yields her harvest from field, stream, mine and forest. Nature fails not; yet is a large proportion of the human family miserable because of interference between man and his access to nature.
Abolish all royalties, and the way is clear for every man who wills to work to win a competency. There has never been a time when men have not united into guilds, trades assemblies, labor unions, merchants’ organizations and manufacturers’ associations, and the like, for mutual benefit; always with meager success because always dealing with effects instead of causes.
Mutualism, scientifically operated, will succeed where all such undertakings have failed, and the benefits of success will be diffused to all men instead of to a class.
Innumerable schemes for the rehabilitation of society have been [4] proposed, but always the establishment of these has involved change in the governmental structure, requiring a majority voting population. Majorities have frequently been secured for measures that seemed to promise larger freedom; subsequent experience proving governmental agencies inadequate, majorities had again to be enlisted to reconstruct these undertakings, or to repeal what was found unhelpful, disappointing or disastrous; every step relying on the support of majorities.
The business of co-operative credit associations requires no majorities. A few people in any community who will organize their credit will have so potent a commercial advantage that competitors will see the advantage of becoming cooperators. The plan is a modern application of the principles underlying the Mosaic republic; a method whereby the teachings of the Jewish carpenter of Nazareth may be rescued from the inanity to which theology has relegated them, and made the basis of a commerce fit for free and honest men.
The working people supply the credit underlying and maintaining every enterprise, however great. In the term “working people” I do not mean merely the “hewers of wood and drawers of water.” The designers of great enterprises and small; the organizers of industrial forces; all who in any mode or degree aid effectively in the production, transportation and exchange of useful things, a truly producers as the miner, farmer, lumberman and builder. Society cannot afford to withhold from any such what they earn as producers. Society cannot afford to pay any of them what they may claim under any of the guises of usury.
When the producing classes learn that it is their own credit which makes great enterprises possible, and will find the way to organize their credit, no useful commercial or industrial undertaking will be too large for them to conduct successfully.
No scheme of co-operation, however, can, or deserves to succeed which will not promote the well-being of each member. Scientific mutualism demands no sacrifices, requires no martyrs, and will not undertake to benefit the community at the expense of the individual. Individual growth, individual happiness—the exaltation of the Ego—these are the essence of any co-operative plan deserving to succeed.
Worry comes from fear, and in the economy of nature there is no place for fear. Whatsoever makes us afraid is superimposed upon us by artificial and preventable agencies. Our poverty is the result of our acceptance of what these agencies put upon us.
The author, who can be addressed in care of the publisher, invites correspondence either by way of criticism, advocacy or encouragement.
YOU are as much concerned in the scheme of co-operation proposed in these letters as any other person.
What are YOU going to do about it?


This work was written, and is published, for the purpose of demonstrating that our acceptance of authority is the only reason for the existence of interest and other forms of usury; that usury is a block to commercial prosperity, social tranquility and individual well-being; and that this hamper upon civilization will find no place in human affairs when we no longer choose to be exploited.
This book is not for sale. If it seems good to you here is an opportunity to help to the extent of your inclination to get out a larger edition.
Subscriptions for this purpose should be sent to the Publisher. Each remittance will be suitably acknowledged, and the name of the donor enrolled as a pioneer in this purposeful Twentieth Century movement. A list of subscribers will be printed in connection with the second edition, unless the donor makes request to the contrary.
With your subscription you are invited to send us the addresses of all to whom you desire copies of the book to be sent.
If the solution of the Problem of Worry offered by this little work comes to you as the revelation of a great truth, you will feel impelled to help its spread.

The Problem of Worry:


Dear Friend:
I have no doubt that the study of metaphysics is interesting, and I do not reproach you for pursuing it; but I attribute your evident inability to see through the delusion which surrounds the vital question of usury to your absorption in what our mutual friend Labadie would term “the chase of the uncatchable.”
Industrial freedom, and the prosperity thereto incident, will give us the leisure to follow the speculations you have lately been indulging; and I do not belittle their uses even now; but may it not be that they destroy your sense of proportion—your capacity for estimating values?
You ask me: What is Money? What is Interest, and how may it be abolished?
I will not undertake to cover the whole scope of this tripartite question in one letter. For the present I will give you my definition of Money.
Money is wealth or any symbol of wealth in such form as to assure its holder that it is readily exchangeable for wealth seeking exchange.
As such it supplants barter; an awkward and restrictive means of exchanging wealth.
It is, therefore, a labor-saving device. It is a species of Book-keeping, or, if you like, a substitute for keeping accounts.
A credit balance on the ledger of a debtor (or shall we say the inscription which concedes or asserts such a balance, though that is straining for precision which I do not again, in my letters to you mean to indulge) is also a symbol of wealth, but is not money because it lacks the ready recognition which gives the quality of currency.
If the debtor change the form of credit balance by issuing in its stead a demand note in favor of his creditor, the note is also a symbol of wealth, but it is not money unless the maker is in such generally recognized credit as will compel the assurance that the obligation will be met on demand. Such notes [8] could only in rare instances and in sparsely settled communities be classed as money.
Now if the debtor go to his bank, and by the pledge of credit, based either on the very wealth for which he owes the creditor, or other wealth, or any satisfactory combination of wealth, or of wealth and credit, exchange his note for the note of the bank, and with the bank’s note, instead of his own, discharge the debt, then he has paid his creditor in money. This may not be the best form of money, for the bank its may not be sufficiently well known beyond a restricted radius to make its notes readily exchangeable.
Within a limited circle, however, all wealth exchangers will unhesitatingly accept these symbols, being assured from the knowledge of the management of the bank that the symbol could not have appeared in circulation unless the Thing for which the symbol stands were of sufficient value to redeem and cancel the symbol in due course of exchange.
What, now, will be required to give to these bank notes the quality that will make them the best form of money?
Such an assurance as will be recognized wherever the note be tendered in exchange, that the Thing back of the symbol is adequate to redeem the symbol.
In the word assurance we may find a key to a method.


Dear Friend:
The principles of assurance, or Insurance, have been applied in many directions, and where a scientific basis has been established and maintained the results have been universally satisfactory.
Insurance is an undertaking to average risk, distribute the force of calamity, hardship, disaster and the like; it serves to distribute the cost of benefits enjoyed as well as of burden to be borne.
I will spare you a dissertation on Insurance, its genesis and development, directing attention only to the fact that what failures have occurred have been due to some deviation from a scientific determination of the law of average, or transgression of common honesty; which is equivalent to saying that failure follows a violation of scientific Mutuality.
We need only to apply the principle of Mutualism to the Insurance of Credits in order to secure the best form of money.
Producers of wealth, if untrammeled by vexatious, costly and meddlesome governmental restraints, would form cooperative societies for the purpose of facilitating exchanges by supplying an acceptable medium of exchange. In lieu of capital such societies would need only the agreement of the cooperators to accept the society’s tokens. The agreement between the cooperators would embrace stipulations as to the margin of issue (or loans) in proportion to the value of the wealth pledged. These local associations would be mutual insurance societies to insure the credits of borrowing members.
Strictly speaking the borrowing member assures his own credit by the pledge of exchangeable wealth. It is the province of the local association to give effect to his assurance by affording it a wider scope; that is to say, by extending to him the power to monetize his credit—a quality which his unaided individual credit lacks.
The local association, by the issue of its notes exchanges its credit for the secured credit of the borrowing member.
These notes are money, but not the best form of money, because they do not compel recognition beyond the radii in which the skill and probity of the management of the local institution is known.
What is now necessary, in order to make these notes the best kind of “money” is to extend the mutualistic principle into a broader sphere of operation. Just as the local society exchanges its better known credit for the lesser known credit of the individual member, so a great general cooperative institution composed of many or all of the local societies would exchange its widely recognized credit for the credit of the smaller associations.
The notes of the local institution, not possessing all the best attributes of money, would not circulate widely; hence, instead of issuing to the borrower its own notes, the society would issue the notes of the General Cooperative Credit Union (to suggest a name for the institution). This general institution would supply the bills to the smaller cooperative bodies, and such bills would, in the nature of things, supplant every other form of circulating medium.
A friend to whom I once outlined this scheme conceded that such bills would doubtless circulate, yet that they would not be money, but merely policies in convenient denominations insuring the holder that somewhere there exists wealth in sufficient and convenient volume to redeem and cancel the policy. I see no reason to quarrel with my friend on the point he makes. If he prefers to call my scheme of circulating credit-policies by any other name than money where’s the harm? The important thing is that these “policies” will make all other forms of money (define money as you will) useless and obsolete. I say this is important because it will mean the abolition of usury for the use of credit.
At this point I expect to be asked whether it would not cost somewhat to conduct these mutual credit-insurance institutions, and if the borrowers of the circulating medium would not be obliged to pay this cost; and if this payment would not be interest
Certainly the beneficiaries of the institutions would be obliged to pay for maintaining them, but this cost, instead of being interest, would be an expense in lieu of interest. Still, I will not insist on this distinction for the moment, contenting myself at this point by calling to your attention the fact under the present system the borrower must pay all the expenses and the usury charge besides, while under the plan I advocate the measure of “Interest” would be cost of transacting the business only.
The cost of transacting the business would include the expenses of management of the local and general credit societies, the actual cost of engraving, printing and shipping currency tokens (call them bills, notes, policies or money—it is all the same) and an insurance premium for risk. Skilled management of the primary banks would tend to minimize element of risk to the point of elimination, for the general society would discontinue its facilities to branches that exhibited lack of judgment and skill in determining the margin of values against which issues may be safely extended. I contend that this risk would be inconsiderable even in the early stages of the operation of the system, inasmuch as each local association would, as a rule, select its most cautious men on its boards of supervision.
“A new broom sweeps clean” is an old maxim. All banks are careful in the earlier period of their work. Recklessness develops when success has made the management too daring. Back of this daring is the incentive of greater gains than conservatism will yield. But in our cooperative association, in which the only form of gain will be the actual requital for good work, the incentive which animates usury-earners be lacking.


Dear Friend:
Your latest letter does not surprise me. Having read Henry George on Interest, and believing him infallible, you are pressed with the notion that there is a normal rate” below which interest cannot fall.
A writer on the subject once gave an illustration something after this fashion:
Mrs. A. and Mrs. B. are friends and neighbors. Each prides herself on her ability to bake good bread. Fresh bread is a daily feature of the menu of each household, occupying the time, effort and attention of each good housewife daily. At length they discover and put into practice a cooperative scheme, each baking on alternate days, enough for both families. Mrs. A., having baked the first day, expects from Mrs. B. the next day an equal quantity of equally good bread. How many rolls, or buns, or cookies will represent a “normal rate” of interest? In the estimation of these good neighbors the normal rate of interest is zero. Each has secured, by cooperation, more leisure and convenience than she enjoyed before.
Nor do you surprise me by your declaration “that it is manifest that if capital does not draw interest then the accumulation of capital will be discouraged, and men will produce less.” On further consideration you will conclude that the production of wealth is more likely to be stimulated than discouraged by the abolition of interest; for if the capitalist producer finds that he cannot compel non-capitalist producers to yield him a part of their product, he will, in order to make good that lack have to work harder and produce more. If, however, you mean something which you do not explicitly state, that if the non-capitalist producer is relieved from the burden of interest he will need to produce less, and that therefore he will produce less, society would experience no harm by reason of such a phenomenon. But as the desires of man increase with his capacity to gratify them, it is not likely that production would wane from any such cause as that of lightening the labor of the toiler.
Let us examine Henry George’s position on interest, and undertake to discover the fallacy you have absorbed from that author.
In Progress and Poverty he tells us that if all wealth consisted of such things as tools and the inert matter of the universe, and if all production consisted of working up this inert matter into different shapes, then interest would be but the robber of industry, and could not long exist.
“But all wealth,” he continues, “is not of the nature of tools, or money, which have no reproductive power; nor is all production merely the turning into other forms of this inert matter of the universe.”
He then adverts to increase in the value of wine, of the storing of honey by bees, or the growth of cattle, and here he thinks he has discovered a natural justification for interest. Let us quote him:
“Now what gives the increase in these cases is something which, though it generally requires labor to utilize, is yet distinct and separable from labor—the active power of nature; the principle of growth, of reproduction, which everywhere characterizes all the forms of that mysterious thing or condition which we call life. And it seems to me that it is this which is the cause of interest, or the increase of capital over and above that due to labor. There are, so to speak, in the movements which make up the everlasting flux of nature, certain vital currents, which will, if we use them, aid us with a force independent of our own efforts, in turning matter into the forms we desire—that is to say, into Wealth.”
George’s fallacy concerning interest has its origin in his failure to discern that interest on any form of wealth flows to the owner of that wealth because he could exchange his wealth for money, and money commands interest because it is a needful tool always in demand beyond the willingness of those who monopolize it, and control its issue, to supply it. If this be true, and I do not mean to leave the matter in the bare stage of mere assertion, as you shall see presently, then it follows that free trade will banish interest from the field of economies and relegate it to the domain of robbery, which is its proper sphere. If interest be indeed a natural condition, then it is just, and if it be just and at the same time a denial of trade, then is free trade unjust and unnatural.
George cites the familiar illustration of the loan of plane, from Bastiat. I quote him:
“One carpenter James at the expense of ten days’ labor, makes himself a plane, which will last in use for 290 of the 300 working days of the year. William, another carpenter, proposes to borrow the plane for a Year, offering: to give back at the end of that time, when the plane will be worn out, a new plane equally good. James objects to lending the plane on these terms, urging that if he merely get back a plane he will have nothing to compensate him for the loss of the advantage which the use of the plane during the year would give him. William admits this, and agrees not merely to return a plane, but to give James a new plank in addition. He lends the new plane again and again, until finally it passes into the hands of his son, ‘who still continues to lend it,’ receiving a plank each time This plank, which represents interest, is said to be a natural and equitable remuneration, as by giving it in return for the use of the plane, William retains the power which exists in the tool to increase the productiveness of labor, and is no worse off than he would have been had he not borrowed the plane, while James obtains no more than he would have had if he had retained and used the plane instead of lending it. Is this really so? It will be observed that it is not affirmed that James could make a plank and William could not, for that would be to be make the plank the reward of superior skill. It is only that James had abstained from consuming the result of his labor until he had accumulated it in the form of the plane—which is the essential idea of capital. Now if James had not lent the plane he could have used it 290 days, when it would have been worn out, and he would have been obliged to take the remaining ten days of the working year to make a new plane. If William had not borrowed the plane he would have taken ten days to make himself a plane, which he could have for the remaining 290 days. Thus, if we take a plank to represent the fruit of a day’s labor with the aid of a plane, at the end of the year, had no borrowing taken place, each would have stood with reference to the plane as he commenced, James with the plane and William with none, and each would have had as the result of the year’s work 290 planks. If the condition of the borrowing had been what William first proposed, the return of a new plane, the relative situation would have been secured. But when in addition to the return of a plane, a plank is given, James at the end of the year will be in a better position than if there had been no borrowing and William in a worse. Is interest, then, natural and equitable? There is nothing in this illustration to show it to be. Evidently what Bastiat (and many others) assigns as the basis of interest, ‘the power which exists in the tool to increase the productiveness of labor’ is neither in justice nor in fact the basis of interest. The fallacy which makes Bastiat’s illustration pass as conclusive with those who do not stop to analyze it is that with the loan of the plane they associate the transfer of the increased productive power which a plane gives to labor. But this is really not involved. The essential thing which James loaned to William was not the increased power which labor acquires from using planes. To suppose this we should have to suppose that the making and using of planes was a trade secret or a patent right, when the illustration would become one of monopoly, not of capital. The essential thing which James loaned to William was no the privilege of applying his labor in a more effective way, but the use of the concrete results of ten days’ labor. If the ‘power which exists in tools to increase the productiveness of labor’ were the cause of interest, then the rate of interest would increase with the march of invention, This is not so. Nor yet will I be expected to pay more interest if I borrow a fifty-dollar sewing machine than if I borrow fifty dollars’ worth of needles; if I borrow a steam engine than if I borrow a pile of bricks of equal value. Capital, like wealth, is interchangeable. It is not one thing; it is anything to that value within the circle of exchange. Nor yet does the improvement of tools add to the reproductive power of capital; it adds to the productive power of labor.”
“It is evident that if there is any reason why William at the end of the year should return to James more than an equally good plane, it does not spring, as Bastiat has it, from the increased power which the tool gives to labor; but from the element of time—the difference of a year between the lending and return of the plane. Now, if the view is confined to this illustration there is nothing to suggest how this element should operate, for a plane at the end of the year has no greater value than at the beginning. But if we substitute for the plane a calf, it is clearly to be seen that to put James in as good a position as if he had not lent, William at the end of the year must return, not a calf, but a cow.”
Why? If the calf be borrowed for food, why should the lender expect, or the borrower repay beef for veal at a ratio of “sixteen to one,” more or less? And if not borrowed for food, why should a calf be borrowed at all? Borrowing and lending, as in the illustration of the plane, is a device to which people are driven who are restrained of freedom of exchange, by patent right money—by a royalty on the circulating mediums.
George closes his treatment of the illustration of the plane as follows:
“William when he borrows a plane from James does not in that obtain the advantage of the increased efficiency of labor when using a plane for smoothing boards over what it has when smoothing them with a shell or flint. The progress of knowledge has made the advantage involved in the use of planes a common property and power of labor. What he gets from James is merely such advantage as the element of a year’s time will give to the possession of so much capital as is represented by the plane.”
George would here have scored a point for the equitable character of interest if he had shown us how it could have been possible for William to have returned James a plane “equally as good” as the one borrowed if the one returned by William did not also contain “the element of a year’s time.” The illustration postulates a plane calculated to last a year, made by James, and as good a plane made for James by William, which, being as good, must likewise last a year. So, while William enjoyed the advantage of the plane together with the element of time, he returned a plane together with the advantage of time on settling day. In order, then, to justify interest, George must have shown that the borrowed plane was a superior article, embodying some quality which the one returned, though “equally as good,” must have lacked. George’s justification of interest rests on the assumption that the element of time is the property of lenders, and that borrowers have no way of repaying in kind, and hence must pay in planks, or as the vulgar of our day and pavement would say, in “plunks.


Dear Friend:
The special sin of omission, and the one which vitiates all of George’s treatment of the subject of interest, is his failure to even so much as refer to the effect of a monopoly medium of exchange. Had he been seriously analyzing the illustration of the loan of the plane, instead of writing a dissertation justifying interest, he could not possibly have overlooked a singular oversight of which Bastiat was guilty. Let me state it: James makes and owns a plane. William offers to borrow it. Neither Bastiat nor George inquire, or have James inquire, what sort of security William offers for the safe return of a satisfactory equivalent. Yet this point brings up a phase of the inquiry as to the equitableness of interest, without the consideration of which such an inquiry is nothing but a childish performance in “composition.” If James does so unbusinesslike a thing as to lend the plane without security, we may regard the illustration as one of good neighborliness, which implies either an abnegation of interest, or else a reliance on neighborly reciprocity. If, on the other hand, William is in position to afford James suitable security, then is that security a basis of CREDIT.
For more than thirty pages of Progress and Poverty George writes of interest, never finding occasion to use the word credit at all. In his last work, “Principles of Political Economy,” he devotes many pages to the consideration of credit, but never mentions interest. I can understand his later position better than his earlier, for a discussion on credit is conceivable without the mention of the subject of interest, but no cogent analysis of the subject of interest is possible without either assenting to or combating the position that Credit is the mother of Interest. True, the father in the case is the monster Monopoly, and the offspring “takes after” the paternal progenitor. In order to produce Interest there had to be a rape of Credit by her tyrannical ravisher. To drop the metaphor, and reverting to the story of the plane, James, a manufacturer of planes, made his plane to sell. The same security which would have satisfied James would have enabled William to borrow money with which to pay for the plane.
If William and James are both members of such a cooperative society as I have elsewhere described, William will pledge his security with the society and get in exchange for his credit the insured credit certificates which the association is in position to issue by reason of its relations with the General Credit Insurance Union. With these certificates he pays James for the plane, and James uses them to buy meat from the butcher, flour from the miller, lumber, iron and other material for the making of more planes from the respective dealers in those commodities; each seller accepting a share of these certificates. After a while William gets paid for a job of work in these certificates, or their counterparts, and goes to the bank and redeems his pledged securities; and there’s an end of the transaction, and the cost of it has been William’s share of the expenses of the credit-insurance institution, and no more.
Here William, by cooperating with his fellow-producers, employs his own credit reinforced by the combined credit of the cooperative society.
Deprived of his power to employ his own credit, he is driven to buy credit of banks operating under governmental privilege. Whose credit does he buy? His own. And why, if it be his own, does he pay the bank for it? Because the bank has a monopoly of the business of the monetization of credit.
If, then, freedom to utilize the effects of organization of credit destroys interest we must conclude that either such freedom is unnatural, unjust and inexpedient; else interest is unjust, unnatural and inexpedient.
In closing this letter I want to resume the metaphor I dropped above to observe that Credit mated with Monopoly produces Interest, the robber of labor; and that Credit mated with Freedom produces Reciprocity, the enricher of the toiler.


Dear Friend:
It is quite true, as George has ably shown, that there are in nature “certain vital currents, which will, if we use them, aid us with a force independent of our own efforts, in turning matter into wealth;” and he is quite right in assuming that by reason of the interchangeability of differing forms of wealth, the general advantages of wealth are diffused. But he does not follow out the idea that animates him to advert to this phenomenon. He pursues the subject superficially, stopping the consideration at a point where it seems to justify interest.
He finds that certain forms of wealth consist of things which are practically combinations of inert matter and labor; and he finds other forms of wealth, such as wine, cattle, bees and the like, which man may own but which require but little labor to secure an increase. In this increase (which seems almost independent of labor) George thinks he discovers the cause of interest; and if his conclusion here were true, his farther contention that by reason of the interchangeability of the latter class, with the former, interest must accrue to owners of both these classes of wealth, is likewise true. But in this contention he acknowledges that whatsoever labor produces belongs to labor, while that which is the joint product, so to speak, of labor and the “vital currents” belongs in a somewhat different category. He distinctly tells us that “if all wealth consisted but of the inert matter of the universe, and production of working up this inert matter into different shapes, interest would be but the robber of industry.”
What he fails to see is that freedom of exchange—free trade to its full extent—would unquestionably bring about an equilibrium of values. This equilibrium would spontaneously tend to establish itself in accordance with the equation between utility and the labor-exertion employed in the production of the particular form of wealth to be subjected to the test of value. If, then, the producers of some forms of wealth, enjoy the friendly cooperation of the kindly “vital forces” their labor-exertion would be less than that expended on the production of forms of wealth under conditions that presented greater difficulties, and the “flux” of values would, nay must, be reflected in the interchangeability of these classes of wealth.
I have said that this equilibrium would tend to establish itself under freedom of exchange. I might say that it so tends even under restriction. The tendency is the same under either condition, but under freedom the process would be hastened; under restriction retarded.
A horse shoe is a form of wealth whose value is almost entirely due to human exertion; while a bushel of grapes belongs to the class in which the “vital currents” flow freely. Yet in an interchange of horseshoes for grapes (without person going to the trouble to figure out just what exertion has been expended) the relative value of the products is in effect determined by the “utility-labor equation,” altogether independent of the kindliness of nature in the matter of currents.
The certainty of this tendency admits of no dispute. Hence it follows that these “vital currents,” instead of being the reward of the nature-aided producer, become, through the distributing agency of value, the common property of all within the circle of exchange. George’s failure to see this accounts for his seeming to find these forces of nature the cause of interest.
In order that I may not be accused of slighting any of George’s illustrations, let us subject all of them to the solvent of free trade.
“It is true that if I put away money it will not increase. But suppose, instead, I put away wine. At the end of the year I will have an increased value, for the wine will have improved in quality.”
True the wine will have increased in value and improved in quality. What of it? Nature will have improved the quality, but the value of the wine plus the improvement of quality will, under free trade, be exactly the value of the new plus the labor-exertion employed in coopering, storing, inspecting, and such other service as has been extended, plus the premium of fire insurance. (George overlooks a decrease in quantity by reason of evaporation.)
Quality is one thing: value another. That some connoisseur may think he detects an extraordinary quality in some particular vintage and offer an abnormal price for it may be urged, but would prove nothing except that the equilibrium of values had been disturbed in that particular transaction. There are many such instances under our present system of restricted trade. Under free trade this lover of a rare vintage would not be able to pay for the wine in the fruit of some other man’s labor; and having to make requital from the product of his own exertion will incline him to restrain his inclination to “get gay” in such a deal.
“Or, supposing that in a country adapted to them, I set out bees; at the end of a year I will have more swarms of bees, and the honey which they have made.”
Just as in the illustration of the wine, we have a right to say “quality is one thing, value another, so with regard to the bees, we may say “quantity is one thing, value another.” The added number of bees, and the wealth of honey they have stored, will, on the average, be obliged to respond to the inevitable result of free trade—“cost the limit of price,” which is but another way of stating the law of equilibrium of values.
I have already referred to George’s allusion to the loan of a calf, as absurd, unless the loan be for purposes of “quick consumption, in which case the process of increase would be arrested. But in order to give him the benefit of the illustration, let us consider his declaration that if he lends me a calf I should return him a cow at the end of the year. Why should I unless I am satisfied to have my labor for my pains? If, at the end of the year I return him wealth of the value of the cow, less the remuneration for my labor in herding and generally “looking after the critter,” he will have, if conditions are such as to make for equity, just the value of the calf he loaned me—no more, no less.
George closes his chapter on “Interest and the Cause of Interest” with another cow illustration:
“If I raise a cow, the milk which she yields me, morning and evening, is not merely the reward of the labor then exerted; but interest on the capital which my labor, expended in raising her, has accumulated in the cow.”
The milk is the wages of the owner’s labor. While it is true that the cow is accumulated capital, it is also true that it is a form of capital that is subject to decay as well as to increase. With age the “beef value” of the cow tends to depreciate. If he has raised a cow from a suckling calf, and has kept her for the purpose of using her milk, it is true that each pail of milk yields more value than the exertion of the immediate labor of milking warrants; but the process of depreciation shows that in the pail of milk he must get not only the present labor of extracting milk from his “capital,” but must get some of his accumulated labor. So that when the mundane career of that cow is a sealed book, he will, under free trade, barring accidents, have received in milk, manure and membrane just about what the same labor-exertion would have brought in a free market. And there’s no place for interest in the case, unless it be by way of exercising the poet’s license.


Dear Friend:
George’s justification of interest applies only to conditions under which liberty of voluntary cooperation is restricted or abridged. George regards this abridgement as natural, though he nowhere tells us his reasons for that belief. He prefers to waive the point, counting, doubtless, on the willingness of his readers to rest content in the delusion that the supplying of a medium of exchange is a God-given right inherent in the Crown. And it is evident that he did not mistake the inclination of his readers, in the main.
Not only is the abridgement of free trade not natural, but it’s artificiality rests on artifice, on falsehood, chicanery, duplicity. It is defended on the plea (more or less veiled) that the greatest good of the greatest number is to be achieved only by denying the greatest number the privilege to secure their greatest good after their own fashion. And as long as the greatest number are to be thus befuddled, so long will interest, and every other form of usury—that is to say every scheme for the robbery of labor—be accepted as of the natural order.
If the manufacture and supply of the tool of exchange (money) is a “natural” province of the state, why not the manufacture and supply of the tools of agriculture, or any other mode of production? Where does nature draw the line?
Proponents of state management of the media of exchange clearly recognize the weakness of the plea of natural dispensation. They are well aware that if the media supplied by government be indeed the best, nothing need be feared from competition. Nature does not dread competition.
Those who derive from government monopoly the privileges which enable them to share in the rewards of production without rendering any service, together with their hirelings and dupes, assure us that voluntary cooperation will not work in the domain of banking. It is precisely for fear that it will work, and work admirably, that they dare not allow a test to be made. For while “nothing succeeds like success,” so nothing succeeds but success. No inferior medium of exchange can supplant a better. Hence we may be sure that the privileged class (aided by those who consciously or unconsciously support their pretensions) fear the competition of insured credits because of an apprehension that the latter will prove the more fit to survive.
And being more fit it must some time, near or remote, be set in motion, else they who now secure the benefits of special privilege attaching to the government monopoly medium will ultimately control all the wealth of the country; that is to say, they will have the power to take so much of the wealth produced as exceeds the lowest quantum that will sustain the producers while they create more wealth to be similarly absorbed.


Dear Friend:
To revert to George’s treatment of the subject of interest, I want to say that no other author has more ably shown the fallacy of the Productivity theory and the Abstinence theory of interest. In the fourth letter I present his arraignment Of the Productivity theory. Let me now quote his demolition of the Abstinence theory:
“Why should interest be? Interest, we are told, in all the standard works, is the reward of abstinence. But manifestly, this does not sufficiently account for it. Abstinence is not an active, but a passive quality; it is not a doing—it is simply a not doing. Abstinence in itself produces nothing. Why, then, should any part of what produced be claimed for it? If I have a sum of money which I lock up for a year I have exercised as much abstinence as though I had 1oaned it. Yet, though in the latter case I will expect it to be returned to me with an additional sum by way of interest, in the former I will have but the same sum and no increase. But the abstinence is the same. If it be said that in lending it I do the borrower a service, it may be replied that he also does me a service in keeping it safely—a service that under some conditions may be very valuable, and for which I would willingly pay rather than not have it; and a service which, as to some forms of capital, may be even more obvious than as to money. For there are many forms of capital which will not keep, but must be constantly renewed; and many which are onerous to maintain if one has no immediate use for them. So, if the accumulator of capital helps the user of capital by loaning it to him, does not the user discharge the debt in full when he hands it back? Is not the secure preservation, the maintenance, the recreation of capital, a complete offset to the use? Accumulation is the end and aim of abstinence. Abstinence can go no further, and accomplish no more, nor of itself can it even do this. If we were merely to abstain from using it, how much wealth would disappear in a year! And how little would be left at the end of two years! Hence if more is demanded for abstinence than the safe return of capital, is not labor wronged?” (Progress and Poverty, Book III. Char,. III.)
Having overthrown other theories of interest, he sets up what Dr. Boehm-Bawerk terms the Fructification theory, which is no more tenable than those he decried.
This same Dr. Eugen von Boehm-Bawerk, in his great works “Capital and Interest” and “The Positive Theory of Capital” exposed the weakness of all pre-existing theories of interest, himself to set up one somewhat more plausible, but relying for its coherence on a general acquiescence in the doctrine that interest must be because interest is.
Professor Boehm-Bawerk argues that there is a difference in value between the possession of a present good and the prospect of a similar good, the possession of which is deferred until some future time. This difference in value, he contends, interest.
Such a difference in values between present possession and the prospect of possession of a like good in the future is not to be gainsaid. But that this difference is interest is not so clear. Nor is it clear that this difference is necessarily in favor of the present good.
“A bird in the hand is worth two in the bush” is an old saying. The bird in the hand represents a present good. But the “two in the bush” present no fair analogy to the future good in such a test of relative value as that to which Prof. Boehm-Bawerk invites us; for here we have a problem of insurance, not one of interest. If the delivery of the “two in the bush” can be assured, their value will be equal to two in hand.
James returns from a successful hunt with more birds than he and his family can satisfactorily devour before the game gets “high.” William offers to relieve James of a “bird in the hand,” promising that when he goes to the bush he will repay in kind. James knows that (l) William is a marksman and a skillful hunter; (2) that game abounds in that region; (3) that William is a “square” man and a neighbor, and (4) that his own surplus of game will become worthless before long. Therefore he will eagerly avail himself of the opportunity of disposing of his “bird in the hand” for William’s promise of one bird in the bush.
While not every loanable commodity is subject to rapid decay as “the bird in the hand,” the process of deterioration of all products of labor is inexorable.
Unless I have a surplus I cannot lend. Being in a position to lend denotes that I have an accumulation beyond my present requirements. In that case I want to conserve my surplus so as to be assured of having it when, later on, I will need it. This process of conservation entails labor; and as to many forms of wealth even the sturdiest efforts will arrest decay. If, now, my neighbor will agree to return to me, at some future time, an exact equivalent of the present value of my surplus, he renders me at least as great a service, in relieving me of the labor of conservation, as I render him in lending to him.
There are combinations of circumstances under which the present value of a good exceeds the future value of a good, but in every such case lending is out of the question, for a loan is always, under normal conditions, made from surplus. Surplus implies an accumulation beyond present needs. Such an accumulation will have a greater value to its owner in the future than at present, because between his present non-using possession and his ultimate need of the good, the process of decay goes on.
However many illustrations may be adduced in support of Boehm-Bawerk’s theory of interest, their plausibility rests upon the denial of liberty at some point. Our friend, John F. Kelly, once wrote in relation to the subject:
“In order to attack the problem it is not necessary that we should understand the genesis of interest completely, nor be able to demonstrate its injustice. (James Thompson jocosely remarks somewhere that to pull up a plant by the root it is not always necessary to find the root.) If the question were the establishment of a cooperative store we would not think it necessary to demonstrate that the middleman’s profits are unjust: all we should need do would be to demonstrate that we could dispense with the middleman’s services, and save the profits. Why should the procedure be different in the establishment of a cooperative credit institution?
“We may for the moment grant to Boehm-Bawerk and the gentlemen he has so skillfully overthrown that interest on goods is legitimate: we may even go further and grant them that interest on real loans of money is legitimate; but all this granted, the important question for the organization of industry remains: Why should commercial paper in being discounted be taxed more than the necessary cost of discounting?
“Observe that this question has nothing directly to do with the ethics of interest The bank does a service in discounting. It takes its pay in the discount. The Question for the people whose paper is discounted is, can they get their paper discounted more cheaply? Assuredly they can, and they will when they get their eyes open. The bank, in discounting, professes to lend money; in reality it merely swaps its own well-known credit for the less known credit of its customer. This is true whether the bank be one of issue or merely a deposit bank. The financial strength of the bank is ultimately the strength of its customers. Proudhon long ago pointed out that the currency of a bank depended not on its capital, but on the goodness of the notes it had discounted; and that conservative economist and politician, Ives Guyot, writes even more curtly: The capital itself is simply a concession to public opinion., And again, speaking of the banks of England and France, he says: “It is true they have a comparative stability, but what does it come from? Not from their capital, not from the money they have on hand; it rests entirely on their notes and on public opinion. Accordingly it is not the public who lean on the bank as is generally supposed—it is the bank which leans on the public.”
“So far as this branch of the money question is concerned therefore, the question becomes simply whether the public which furnishes the strength to the banks will not formally constitute itself the bank and cease paying ransom for the use of its own credit.
“This reform of itself would be a great one but another step would be necessary before an entirely flexible currency could be secured. The alleged metallic basis for the credit notes would have to be completely abolished. It is at all times a humbug and a sham, and a dangerous one. As long as the basis is said to exist there will be attempts to reach it, and every such attempt means industrial disaster. With both these monetary reforms accomplished panics will be almost impossible, trade will revive steadily, competition for labor will increase and interest on goods may be left to take care of itself.”


Dear Friend:
It is very kind of you to refer to my letters as interesting and original, but let me at once disclaim all credit for having originated the views presented in them. They have been much better set forth by abler men, far better equipped to discuss such subjects, and my letters are not intended either to supplement or to supplant their work, but merely to epitomize them for you, as you have requested me to do. My idea of a General Credit Insurance Union is a modification of Col. William B Greene’s plan of Mutual Banking[1] and Westrup’s Mutual Credit System.[2] Indeed, I might simply refer you to such books as I have found helpful, instead of continuing these letters, were it not for your challenge (if I may so term it) to indicate the fallacies of Henry George; and this also has, in some measure, been done by Mr. Benj. R. Tucker in his comprehensive work “Instead of a Book.”[3]
I have called your attention to George’s omission to all reference to the subject of credit in his treatment of interest. By way of contrast, let me quote you an abstract of Proudhon’s position on that topic, made by the late Charles A Dana.[4]
“What is credit?
“It is a sort of corollary to the exchange of products, or a kind of second stage of that process. A has a bushel of wheat which he does not need and which B does, but B has nothing at present to exchange for it. A lets him have it, and receives his promise to deliver an equivalent at some future time, when he shall have produced it. Such is the operation of credit, which arose after the commencement of exchanges. Presently it assumed a new feature, which may be illustrated thus: B needs A’s bushel of wheat and has an article produced by himself, but cannot divide it so as to render an equivalent at present, and accordingly takes the wheat on credit. Thus credit is the giving of one product in consideration of the future return of another yet to be produced, or which is already produced but not on the spot, or in a condition which will allow it to be delivered. The uses and advantages of this operation are well known and need no explanation.
“All credit presupposes labor, and, if labor were to cease, credit would be impossible.
“What, then, is the legitimate source of credit? Who ought to control it? And for whose benefit should it most directly be used?
“The laboring classes.
“But, instead of credit being governed by the producers in a nation, it is always in the hands of the intermediaries, the exchangers and agents of circulation, and instead of being used to aid the workers, it is generally used to make money—i. e., to get the greatest possible amount of the products of labor for the least return, and, if possible, for none at all. And it is manifest that if the working classes could once gain possession of this great instrument, which rightly belongs to them, they might escape from the necessity of working for others, or, in other words of giving the larger part of their products for the use of capital; they might become the owner of the tools they use, become emancipated from the domination exercised over them by their agents and public servants, set up for themselves and enjoy the fruits of their industry.
“But how can they gain possession of the instrument?
“By the organization of credit, on the principle of reciprocity or mutualism. In such an organization credit is raised to the dignity of a social function managed by the community; and, as society never speculates upon its members, it will lend its credit, not as our banks do theirs, so as to make seven per cent. or more out of the borrowers, but at the actual cost of the transaction. A practical illustration of the above-named principle in a similar matter may be found in the system of mutual insurance.”


Dear Friend:
In my first Letter, defining Money, I said it was wealth or any symbol of wealth in such form as to assure its holder that it is readily exchangeable for wealth seeking exchange. This does not include metal money. For gold and silver coins, when used as money, are symbols as well as wealth. They pass current both by reason of their commodity value, and of the devices impressed upon them.
Money made of the precious metals was the best money of primitive times. The compactness of the coins and the durability of the metals from which they were made, adapted them naturally to their service as a useful medium of exchange, and their commodity value gave them the quality of assurance, by inspiring confidence in their worth.
With the growth of credit—which is, in a sense, synonymous with saying with the advance of civilization,—commerce would long since have dispensed with a form of money, which, itself a commodity, is destined to measure the value of all other commodities, but for the powers of governments. This is not mere conjecture, but is evidenced by the introduction of bank bills and commercial bills of exchange, and other devices, of various periods, some of which have proved successful despite the strength of governments seeking to hinder their adoption.
But while bank notes and bills of exchange serve to increase the volume of money, and thereby increase production and consumption, thus promoting commerce, to the extent that they are merely representatives of metal—that is, of but one group of commodities—do they fall short of being adequate to the commerce of advancing civilization.
The same may be said of bank cheques, which, to a large extent perform the office of money. Convenience of exchange is enhanced by the service they render; but these, as in the case of bank notes and bills of exchange, are restricted in their effects for good by the fact that the money for which they call is coin, or, as we say “limited commodity” money.
Anything is money which performs the functions of money, namely (to quote Stephen Pearl Andrews) “measuring mutual estimates in an exchange; recording commercial transactions, and inspiring confidence in a promise which it makes.” The precious metals certainly do this. And before the extension of commerce—before the vast improvements in intercommunication, and the minute division of labor; before the inception of what we know as “modern commerce” and the establishment of credit consequent upon this growth, when trade still meant the rendering of an equivalent at the instant of exchange, metallic money was the best money, just as the ox cart was then the best mode of conveyance.
When the larger experience, greater necessities, wider knowledge and more consummate skill and ability of producers evolved the successive improvements on the ox cart, culminating, in our day, in the railway locomotive, the ocean liner and the automobile, each step was hailed as a mark of progress, and was promptly adopted.
Yet we still remain ludicrously near to the ox cart stage in the important matter of facilitating exchanges.
Had there been powerful interests deriving special advantages from the retention of the ox cart, our carrying might still be confined to that primitive vehicle, and our sages and politicians might still be assuring us that a wise conservatism and tender care of the interests of the people protected us from the devastating ravages of the steam cars. We would be reminded that, contrary to law and order, an abandoned wretch had at one time built a steam engine, and that a just providence had properly decreed that it should blow up and kill him; very much as you have not omitted to remind me of the “wild-cat’ banking of ante-bellum days, as though there were an analogy between a currency insured by security, and a system of state banking which lacked insurance and security.
But in the matter of medium of exchange, all improvements (at least all the important ones) that have been mooted, instead of being hailed with satisfaction and adopted with eagerness, have been opposed by the mighty.
In the ox-cart days, gold and silver were declared to be royal metals. Their production was a royal prerogative.
Lawyers who like to delve into the oddities of ancient laws can cite you to numberless passages, in the statutes of older nations, dealing with the pains and penalties decreed and inflicted for infractions of the kingly right to provide “the coin of the realm,” and to debase it at will, though the books do not call the process by that name.
Among the divine rights of kings, none was so jealously guarded, none so implicitly believed to be just.
We may limit the powers of monarchy by constitutions, and curtail the privileges of aristocracy by restriction after restriction; we may set up republics on the ruin of thrones, but where the people deprive themselves of the possibilities of improvement in facilitating exchanges, by leaving that important function in the hands of the governing class, there the doctrine of the divine right of kings survives. And so it will survive after every monarchy has been supplanted by democracy, so long as the superstition that gold and silver are royal metals maintains its virility.
It might prove of historical interest to trace this superstition through the pages of history, but scarcely appropriate in a letter of this kind.
I have said that gold and silver coin was the best possible money of primitive commerce. This is true because primitive commerce was conducted by barter. The fact that coin was used as an intermediary of a trade did not make it less a transaction of barter. For, mark you, when one sells a commodity for specie he does not only sell but he also buys, and what he buys is metal. And likewise when he buys any other commodity he sells metal.
The difficulty of producing the precious metals accounts for their scarcity, and their scarcity enhances their value. This value is commodity value, which would, in the nature of things be measured by the labor-exertion expended in their production. But when these same metals become the ONLY medium for facilitating barter, they take on a new form of value which labor-exertion has not added, and for which no laborer receives requital.
And when commodity money is the only sort of money in use, it is easy to see how this “over-value” is extracted from production. When the producer of grain buys coin with his product he swaps a part of the results of his toil for the results of the toil exerted in the production of the coin and another part of his grain for this “over-value,” which is not at all the result of toil.
By this process the equilibrium of value is disturbed and the producer parts from a share of his product for no equivalent whatever. In short, he is robbed. But, it may be answered, being now the possessor of the coin he too enjoys this over-value, and can rob the next producer with whom he trades, even to the full extent of the robbery of which he was himself the victim. And so where’s the harm?
I will try to answer this question in my next letter.


Dear Friend:
The very advantages of coin as a circulating medium—its compactness and commodity function—and especially its durability—make it convenient for the purpose of hoarding. I do not here decry thrift and frugality, and, without either condemning hoarding or approving it, let me merely call your attention to one of the results that must have followed the hoarding of coin during the infancy of commerce. The accumulator soon discovered that he had, in his treasure, not alone a medium for facilitating exchanges, but, by withholding his coin he exercised the power of hindering exchanges.
He soon found that he had not only the power to secure for his coin a greater value in other commodities than the commodity value of the coin, but that he could enforce blackmail on the community which required the hoarded coin for the purposes of circulation. In other words, he could not only buy commodities with the “over-value” of his coin, but he could lend it, and compel the borrowers to pay him in commodities, or coin, the equivalent of this artificial value, as well as for its actual value.
As he could thus gather to himself, without labor, the product of the labor of others, when coin was the sole medium of exchange by reason of the voluntary acceptance of it by all traders, it will be seen how much easier became the process when at length the king decreed that coin shall be the only legal tender.
It is not necessary to trace the historic evolution from a social recognition by voluntary consent to the laws of legal tender. Since the first legal tender law was framed by royal edict there have been no changes, except in the matter of form. Essentially the ox-cart stage is still maintained.
It will be profitable here to quote from Col. William R. Greene’s treatise entitled Mutual Banking:
“The governments of the different nations have made gold and silver a legal tender in payment of debts. Does this legislation change the nature of the transactions where gold and silver are exchanged for other desirable commodities? Not at all. Does it transform the exchange into something other than barter? By no means. But the exchangeable value of any article depends upon its utility, and the difficulty of obtaining it. Now, the legislatures, by making the precious metals a legal tender enhance their utility in a remarkable manner. It is not their absolute utility indeed that is enhanced, but their relative utility in the transactions of trade. As soon as gold and silver are adopted as the legal tender, they are invested with an altogether new utility. By means of this new utility, whoever monopolizes the gold and silver of any country—and the currency is more easily monopolized than any other commodity—obtains control thenceforth over the business of that country; for no man can pay his debts without the permission of the party who monopolizes the article of legal tender. Thus, since the courts recognize nothing as money in the payment of debts except the article of legal tender, this party is enabled to levy a tax on all transactions except such as take place without the intervention of credit. When a man is obliged to barter his commodity for money, in order to have money to barter for such other commodities as he may desire, he at once becomes subject to the impositions which moneyed men know how to practice on one who wants, and must have, money for the commodity he offers for sale. When a man is called upon suddenly to raise money to pay a debt, the case is still harder. Men whose property far exceeds the amount of their debts in value—men who have much more owing to them than they owe to others—are daily distressed for the want of money; for the want of that intervening medium, which, even when it is obtained in sufficient quantity for present purposes, acts only as a mere instrument of exchange.”
Here Greene shows that those who own the money of a country are more—far more—interested in hindering than in facilitating exchanges. He proceeds to point out that the natural difficulty which originally stood in the way of effecting exchanges becomes the private property of a class. This class, instead of obviating a social difficulty are more concerned in strengthening it. They cultivate this difficulty just as a farmer cultivates his farm; but with this important difference, that while the farmer benefits the community as well as himself the usurer benefits only himself at the cost of the community. The farmer produces at least as much as he consumes. The usurer produces nothing. Hence it is evident that the farmer (and other producers as well) must produce not only enough for themselves, but also sufficient to pay usury.
Hence, to sum up the case as to interest we may say that the cause of interest is the monopoly granted by government to owners of gold, silver and government bonds to use their property as money—a right denied to owners of all other kinds of property; the measure of interest is the distress of the borrowers; and the effect of interest is robbery.


Dear Friend:
What I have said in preceding letters concerning coin is likewise true of paper money based upon coin; whether the bills be issued by government, or by banks under governmental sanction.
For in either case the normal value of all other commodities than gold and silver (or than gold alone, as is now the case under our “single gold basis”) must pay tribute to the owners of the coin.
What is needed, then, is to permit every species of property to become the basis of such circulating medium as wealth-exchangers will, under free conditions, be willing to accept.
It is at this point that the ghost of the old State Bank money is invoked, and the cry of “wild-cat” arises.
The bills of the old State Banks became depreciated wherever it was known or suspected that the bank had extant a volume of issues greater than the reserve of coin in its vaults. This happened though the bank might be—and often it happened when the bank undoubtedly was—perfectly solvent, provided the test of solvency were a business rather than a governmental test.
Such banks were required to pay their bills in coin. They might have had a large surplus of sound commercial paper, secured by valuable property, but such assets were of no avail in redeeming their bills, for coin alone was adequate for that purpose. Hence such banks presented the anomaly of being commercially solvent and governmentally bankrupt. Hampered by such compulsory conditions the banking facilities of the people were restricted; commerce was retarded, production crippled, credit dismayed, and industry paralyzed; and the disrepute which attaches to the system is well-deserved, but it does not attach to the readiness with which secured credits were facilitated, but to the enactments which made specie the legal tender.
Secured credit certificates designed, not primarily to supplant legal tender money, but to compete with it, will have all the advantages which the commercial phases of the State Banks possessed (and many that were lacking in that system) and would not be weighted down with the defects inherent in that system.
You are mistaken in assuming that in order to establish the plan I advocate government money would first have to be abolished.
All I ask is that insured credits be given an opportunity to compete with monopoly money. If, in the competition, legal tender money can “hold its own” against insured credits no one will be at all injured by the experiment. If, on the contrary, insured credits prove more satisfactory, money, as the term is now currently used, will become obsolete without requiring the formality of abolition.
To believe, in advance of the experiment, that governmental money will survive the test, is to believe that producers of wealth are willing to make free gift of something like one-half the values of their goods to those who produce nothing. This they do under present conditions, but they do it blindly, seeing no way of escape. That they will persist in doing it after their eyes shall have been opened to “the better way” is as unthinkable as that the ox-cart will supersede the locomotive engine.


Dear Friend:
You are right in assuming that the establishment of the General Cooperative Credit Union will not appeal to great capitalists, and that we cannot hope for their support; but you are wrong in thinking that we expect or need their help. Nevertheless, it would not surprise me if there were a few very rich men who, seeing in our plan a method to promote human happiness, would not be unwilling to forego the advantages of usury in order to inaugurate an era of “peace on earth, good will to men.” But we rely on no such sentimental considerations. .For however often we may hear of the worries to which the rich are subjected, and the apprehension they entertain that they might incur the ineffable disgrace of dying rich, few of them ever act upon their fears, and so whatever acquisitions we may get from the ranks of plutocracy will be but few and unsought.
Our movement is one that can readily dispense with aid of the capitalist class. We have no right to expect their help, for we would deprive them of their power. Neither need we fear their disdain, their contumely, their enmity.
Their press, their pulpit and their hired men in the universities, will deride our movement, and the legislative and judiciary branches of government will be enlisted in its overthrow. But none of these forces can prevail against our movement, once it is understood.
Every great endeavor in the past, to emancipate the toilers from the thralldom of special privilege, to the extent that it has failed, has so failed because, among other reasons, the industrial classes were deluded into the belief that persistence in the movement would precipitate a “panic,” and the poor devil who has nothing laid by does not feel able to withstand the hardships incident to being “out of a job” for weeks or months. The “panic” panic has worked, because of a recognition that the threat is ever susceptible of execution. The delusion is in the assumption that our masters have this ability to precipitate financial havoc as a natural and unavoidable privilege, instead of seeing that it is artificial and easily preventable.
The Trades Union movement has been effective in shortening the hours of labor, in spite of the intense hostility which beset it, because a lively and enlightened self-interest proved more powerful than the cant, derision, cajolery and treachery which it has had to encounter. Its success, thus far, is attributable to the strength of purposeful cooperation; its weakness to its reliance on extraneous help—that is, on help from sources outside of the cirele of cooperation; on help from politicians and plutocrats.
Mutualism in the organization of the credit of the producing classes will make short work of the “panic” scares. A financial crisis, such as we know as a panic, results from the expectation of profit which the monopolizers of the circulating medium always garner from the lowering of values following a shrinkage in the volume of the essential tool of exchange.
Threats of panic will lose their potency when their execution is no longer possible.
Emancipation, instead of presenting considerable difficulty, is as easy of accomplishment as was the harnessing of the genii to Aladdin’s service by the simple rubbing of the magic lamp.
Here is no need of organizing political parties; of appealing to our political masters; of arming for martial revolution; or of looting the House of Have.
Not a blow to be struck; not a sacrifice to be made. Simply a recognition of the fact that there is no reason why the producer should not own all he produces; and a comprehension of the sister fact that nothing but the lack of organization for the circulation of insured credits, in lieu of monopoly mobey, gives to plutocracy its power to absorb more than one-half of the wealth produced without rendering even the shadow of an equivalent.
All that is necessary is that each who is despoiled shall wish to be despoiled no more.
A mere mental process. Just the volition to own one’s own
It has been said: “Two wishes make a will.”
Let your wish be added to a like wish of others, and the will is at hand, “full panoplied, as Minerva from the brain of Jove.”
The will to organize mutual credit, representing the wish of a number of wealth producers, be the number but few at first, is the beginning of the new era. With the growth of these societies Man will grow to maturer manhood; the dignity of labor become a reality instead of the mendacious myth our masters have preached at us.


Dear Friend:
No, my friend; it is not within the scope of my scheme to demand restitution from those who have, by usury, accumulated wealth of which the rightful owner was deprived. The rightful owners of this wealth consented to their own undoing. Those who enjoy what the supine have voluntarily yielded are not to blame. Let them keep what they have, and if they want more let them join in the world’s work of producing it.
Those who now possess the preponderance of the wealth of the world have availed themselves of forces operating in their favor. They could not have so availed themselves without the acquiescence of the victims. The possessors can successfully plead “contributory negligence” on the part of the dispossessed. Ruskin once defined wealth as “the possession of the valuable by the valiant.” Let the few valiant enjoy their valuable, and let’s all become valiant.
Valiant we have not been. Else we could not so long have been restricted to the ox-cart stage of the defense of our valuables from the more valiant.
But there’s no reason why we should not now muster sufficient intrepidity to defend our own.
Unless we do, we deserve to be robbed.


Dear Friend:
Greene’s plan for the Mutual Bank, with such modification as to make it conform to Insurance rather than Banking, affords us the nucleus of a practical working method.
Let any number of persons (few or many) form a local cooperative credit union.
Each cooperator pledges himself to accept the credit insurance policies of the General Cooperative Credit Union, in exchange for services or product, at par with current money.
Any member may borrow the credit of the local union on his own note, to an amount not to exceed one-half the value of the property pledged by him, and receive the credit certificates of the General Union.
A credit insurance premium of one per cent. per annum shall be paid for the term of the loan. So much of this premium as is in excess of what is required to pay the expense of the transaction, shall be refunded to the borrower when he retires his note.
No credit certificates shall be issued to any person who has not subscribed his willingness to accept the certificates in exchange for commodities and service.
Any member, not in debt to the local or general union may withdraw from membership, by giving notice of his intention so to withdraw.
Any form of property that can be readily sold under the hammer, will be accepted as security for the issuance of credit certificates.
These local unions formed, though there be but few of them, the General Cooperative Credit Union will be instituted.
The General Union will supervise the operations of local unions. The local union will report each issue of credit policies immediately to the General Union, describing the security pledged; and the management of the local union will be guided, in the matter of margins of credit against securities, by the regulations prescribed by the general body.
The General Union will provide the credit certificates to each local union, in such amounts and such denominations, as the number of pledges to accept them shall warrant.
As none of these certificates can appear in the channels of circulation unless ample security for its redemption is deposited, we shall have here a better form of circulating medium than the money with which these credits are designed to compete.
This is, of course, but the merest outline, yet it portrays how the system may be established.


Dear Friend:
These credit certificates will, almost from the first, circulate among non-members of the organization, as well as among those pledged to receive them. There will be much opposition to them, for awhile, among those who resist every measure of progress, and who pride themselves that their prejudices come properly within the classification of conservatism. That is to be expected. But such opposition will not seriously retard the movement. Once these policies secure any considerable circulation, the producers of each community will affiliate with the local societies, and it is only a question of time when all such will have become enrolled.
You ask how all this is to benefit any except the borrowers, and as these are presumed to have (indeed must have) property to pledge, they are not the objects of your sympathetic interest.
Yet it cannot escape your observation that he who has nothing but his ability and willingness to perform useful labor is interested in any improvement in conditions that will raise wages.
And a greater plenitude of circulating medium is a condition that raises wages. For there will not be only such money as will continue to circulate, for some time at least, but the competing credit insurance policies besides; and these latter in such increasing volume as may become necessary.
I will let Greene answer further:
“But certain mechanics and farmers say: ‘We borrow no money, and therefore pay no interest. How, then, does this thing concern us? Hearken, my friends! Let us reason together. I have an impression on my mind that it is precisely the class that have no dealings with the banks, and derive no advantages from them, that ultimately pay all the interest-money that is paid. When a manufacturer borrows money to carry on his business, he counts the interest he pays as a part of his expenses, and therefore adds the amount of interest to the price of his goods. The consumer who buys the goods pays the interest when he pays for the goods; and who is the consumer if not the mechanic and the farmer? If the manufacturer could borrow money at one per cent., he could afford to undersell all his competitors to the manifest advantage of the farmer and the mechanic. The manufacturer would neither gain nor lose; the farmer and the mechanic who have no dealing with the bank would gain the whole difference and the bank—which, were it not for the competition of the Mutual Bank, would have loaned the money at six per cent interest—would lose the whole difference. It is the indirect relation of the bank to the farmer and mechanic, and not its direct relation to the manufacturer and merchant, that enables it to make money. If the farmer, mechanic and operative are not interested in the matter of banking, we know not who is.”
Now, as to your contention that making money more plentiful will decrease its purchasing power, let me say at once that I agree with you, provided we both use the word money in the currently accepted meaning of the term, namely commodity money; that is, money made of the precious metals or certificates promising to deliver such coin. For a plenitude of such money serves to indicate that, relative to other commodities, the metals, yielding to the law of supply and demand, have declined in value. And on the other hand, when there is a scarcity of such money, its purchasing power is greatly enhanced. But neither scarcity nor abundance of credit insurance policies can, in like manner, affect such standards of value as commerce may adopt. One might, with equal warrant, say that the cost of fire or life insurance is determined by the supply of the white paper on which the policies are printed.
The volume of secured credit circulation will never be greater nor less than the requirements of exchange. In this such circulation will materially differ from the circulation of money, which is not only easily restrictable, but always restricted, at times when the requirements of commerce are the most urgent.
Under the present system “money is tight” when, and cause, it is most necessary. Our certificates would always be available; they would be plentiful when needed, and would return for cancellation when the need had been served. Based on every form of exchangeable wealth, instead of merely on the precious metals, the supply would depend on the existence of all kinds of wealth, instead of on one subdivision.


Dear Friend:
I agree with you that strenuous efforts will be made to invoke Authority to prevent the fruition of the plan I have outlined. Well, what of it? It is a fight we must expect, for special privilege cannot exist, nor the robbery of the producers continue, without sanction from the legislative and judicial branches of government. Each man must determine for himself whether his best interests are subserved by upholding authority, or by the processes of voluntary cooperation.
With the birth of the General Cooperative Credit Union each will be afforded an opportunity to make his choice. His interests will prompt him to enroll himself with those who seek emancipation from the serfdom of usury. Yet, in spite of urgings of his material welfare, he may prefer to ally himself with the forces that will seek to overthrow this new force in commerce. Why should he, unless he be a beneficiary of the special privileges which our competition may threaten?
I know of no reason unless it be a superstitious reverence for the authoritarian principle.
We must reckon with those who are thus deluded. There are not so many of these now as once there were. We claim but the exercise of our right to compete, asking no favors but a free field. This can be denied us only if the numbers upholding authority are vastly greater than those espousing liberty.
The principle of authority has been potent in but one direction; to take from him who produces and bestow it on who does not produce. For ages men have suffered from this process; but they have accepted these burdens as unavoidable, a being superimposed upon us by the divine order. This superstition is a survival of the doctrine of “the divine right of kings.” To what extent it survives the future will disclose.
All that we have of civilization has been wrested by Young Liberty from tyrannous Authority; every step of progress has been gained at the expense of some long-accepted restriction.
It is a chimera indulged by many who are capable of clear thinking, but lacking energy to exercise the capability, that human association cannot be effectual unless authority be invoked as the cohesive principle. That they who profit from this phantasmal vagary are industrious to find arguments in support of it, is natural enough; yet its strongest adherents and sturdiest proponents are the victims, rather than the beneficiaries, of the system which the chimera underlies, encourages and sustains.
All in vain do we call the attention of these infatuated idolators to the inherent weakness and the signal failures of the principle they espouse. We may point out to them the benign operation of voluntary cooperation wherever fairly tried, and though we overwhelm them with instances they cling fondly to their delusion.
The contest between liberty and authority never ceases. However authority may seem to have the better of the fight, evolution remains with liberty; and the forces of progress cannot long be staid.
Macaulay has said: “The remedy for the evils of liberty is more liberty.” These evils are so many manifestations of lurking authority still at its baneful work.
What more than all else befogs the awakening devotee who would throw off the superstition under which he totters, is his inability to view human relations as they must be under freedom. He suffers from a species of mental paralysis, preventing him from projecting his intellectual vision beyond the narrow confines of a vitiated environment. He sees a depraved humanity all about him, and his instinct of dread drives him into the jaws of the very monster who is alone responsible for all the depravity of humankind.
Man is a gregarious animal, and a vain one. He must associate with his fellows, and, normally, he desires to command and retain the good opinion of his associates. He must cooperate He will compete.
Fundamentally, human association is of two kinds, voluntary cooperation and compulsory cooperation. The former of these, where pursued without the disturbing blight of compulsion, always works well. The latter never yet has worked to the advantage of society.
As between these two divergent methods of association each must squarely make his choice.


Dear Friend:
I want to deal with the following excerpt from your recent letter: “You want me to choose between authority and freedom; but what if I think freedom best in some things and authority best in others? If you ask me which is the best power, steam or mule power, I should first want to inquire the kind of job on which power is to be applied.”
Very true, and having determined which kind of power is best applicable, you would wish, I assume, to be free to select the kind of power your own judgment determined to be suitable, rather than to have the choice made for you by authority. If I be mistaken in this assumption then you are authority. Otherwise you prefer liberty.
Let us suppose that sixty per centum of the people for authority, only forty per centum being for liberty. The minority want to institute a system of insured credits to compete with monopoly money. If, in this competition, insured credits cannot survive, then this minority will have had their labor for their pains. Then why should the majority object to the test? In no other way can the efficiency of a monopoly circulating medium be better established than by this test, the survival of the more fit. If, on the other hand, insured credits should prove the acceptable tool of trade, why should authority be justified in stifling the better to retain the worse? So, if one considers authority “better in some things” why should he fear to subject his opinion to the test? The moment one proclaims himself in favor of monopolistic authority he is estopped from pleading that it is best. If were sincere in regarding it best he would not fear competition.
They fear the competition of insured credits who are convinced that it will supersede an inferior tool. This fear is entertained by the beneficiaries of usury, supported by their hirelings in pulpit, press and politics; and aided by an army of easy dupes. The former know that authority is not (else they would not fear competition) and the latter believe that authority is best because they are deluded and will believe what their masters bid them believe.
Liberty, as well as authority, will have its monopolies. But the monopolies traceable to liberty are benign, since they are the outcome of competition, having survived that test. The monopolies of authority, on the other hand, even though are “the best” can never be so esteemed until the test of competition has been applied, and being authoritarian, which excludes competition, even the successes of authority (if there were such) are tainted with the suspicion that they are not the most fit.


Dear Friend:
A republic, in order to justify the theory upon which it is founded, must be such an association as will defend the noninvasive individual against invasion. If, however, the association itself becomes an invader, the republic becomes the enemy instead of the friend of such associates as it invades. It ceases to be a republic, as I define the term.
A republic that grants special privileges whereby some of the associates are enabled, without effort, to share in the fruits of the efforts of others, violates the theory of the implied contract between the associates. As they who are injured by the robberies which special privileges engender are in the majority, and are presumed, by the fact of preponderance of numbers, to have the power to make short work of such invasion, it may be assumed that they who are thus despoiled consent to their own spoliation. And the inference is justified. But, while thus consenting, they do not realize that they consent to being victimized. For the advocates of special privileges are wily enough to know that in order to enjoy the fruits of robbery they must succeed in hoodwinking the people. This hoodwinking process is given the soothing name of protection. The majority is narcotized into acquiescence by the assurance that were it not for the philanthropic vigilance of the beneficiaries of protection (of one kind or another): all manner of disaster would befall, and all chance of prosperity be banished; By the blandishments and cajoleries of the beneficiary class has the victim class been held in meek subjection; and we have been protected against innovations which, but for this supine acceptance of false maxims and subtle sophistries, would long since have rendered it possible to maintain such a republic as would accord with the theoretical purpose of its institution.
Free men do not need protection against themselves, nor will they long tolerate meddlesome interferences with their endeavors to promote their own happiness at their own cost.
To what extent, then, we, claiming to be free and enlightened men, will tolerate interferences with our liberties to enter into competition with the claimants of monopoly privileges, is shortly to be determined by the attitude of the people toward the institution of Credit Cooperation. And the issue will indicate whether our republic is such in name only, or whether it partakes of those qualities which gave it birth: a concrete denial of Royalty, and a belief that free men require no administrative national organization except for the sole purposes of defense against invasion of the liberties of each non-invasive individual.
That is not truly a republic in which the essential prerogatives of royalty prevail. The grant of any sort of monopoly is an extension of royal favor. This is not to say that monopolies cannot exist under the ideal republic, for, as I have heretofore stated, there may be monopolies such as have become established by surviving competition, but which are, nevertheless, always subject to further competition. But these require no grants.
To quote Proudhon:
“We must destroy the royalty of gold; we must republicanize specie, by making every useful product of labor ready money. Let no one be frightened beforehand. I by no means propose to reproduce under a rejuvenated form, the old ideas of paper money, money of paper, assignats, bank-bills, etc. These representations on paper, by which men have believed themselves able to replace the absent gold, are, all of them, nothing other than a homage paid to metal—an adoration of metal, which has been always present to men’s mind, and which has always been taken by them as a measure or evaluator of products.”
This royalty—the royalty of gold—exists only by governmental sanction; and it results in a monopoly which must fall, or labor must fall into greater and greater degradation, relapsing at length into the veriest serfdom, the most hopeless and abject slavery. This is the alternative.
This form of royalty must fall; and before the cooperative power of the producers, declining longer to buy and pay for their own credit, it will fall, and with it will fall other royalties—other extensions of royal favor, or the results of them, such as rent, patents, copyrights and profits arising privilege.
The royalty of rent cannot survive the overthrow of the throne by the grace of which it is now enabled to divide the producer from his product. In his discussion with Bastiat, Proudhon says:
“If, then, interest, after having fallen in the case of money to three-fourths of one per cent.—that is, to zero, inasmuch as three-fourths of one per cent. represents only the service of the bank—should fall to zero in the case of merchandise also, by analogy of principles and facts it would soon fall to zero in the case of real estate, rent would disappear in becoming one with liquidation. Do you think, sir, that that would prevent people from living in houses and cultivating land?”
In my next letter I will endeavor to point out to you the fallacy of the theory of Rent, adopted from Ricardo by George.


Dear Friend:
What is known as Ricardo’s Law of Rent, is as follows: “The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use.”
“Rent,” to quote Henry George, “is that part of produce which accrues to the owner of land or other natural capabilities by virtue of its ownership.” I know of no better definition of rent. Rent depends on ownership of land, and ownership depends on the strength of the title under which ownership is claimed. This title, in turn, depends on the recognition or acquiescence of the community. In a community recognizing royal grants rent arises, and the measure of the exaction is determined by Ricardo’s law.
Now, to justify rent by acknowledging the force of this Ricardean excogitation, is very much as who should recognize the rightfulness of exacting a price for the air we breathe because of our admiration of the ingenuity, excellence and precision of a practical meter for measuring it.
Ricardo’s law, instead of being a law of rent, is simply a formula for determining the utmost that beneficiaries of royalty are enabled, by reason of the recognition of the community of thee rightfulness of their claims, to extort from industry.
This Ricardean meter will be rendered useless when recognition is withdrawn from royal grants.
In a community in which no titles to land were recognized except such as were claimed by actual occupiers and users, the relation of landlord and tenant would disappear, and without this relation rent could not exist. (George makes a distinction between rent actual and rent potential, but that is very much as saying that the owner of a patent right draws royalty actual if he can sell his patent, or the rights to use it, an; that he “gets” royalty potential if no one cares to buy what he has to offer. Having defined rent as that part of produce which accrues to the owner, it becomes a vicious perversion of language to speak of “rent potential” when there is no produce).
I need not dwell on the justice and naturalness of possessorship of land under occupancy and use title; nor will it be necessary to show that where no other form of title is recognized no man would profit by occupying more land than he could himself use, for it is easy to understand that no one would pay rent to another for land which he could himself hold under such a title; or, what amounts to the same thing, if he did not hold that particular land he could get plenty quite as good.
I do not deny that one parcel of land may be more advantageous than others. But this disparity does not, in actuality, correspond with the theoretical magnitude that is often claimed for it. But be it small or great, it would, under free conditions, tend to the vanishing point, with the dissolution of profits in the manner heretofore indicated.
Our mutual friend Labadie says: “This difference is nearly always to be overcome by the holders of land changing the use to which the so-called ‘poorer’ land is put. One parcel of land may be more useful for raising wheat, while the ‘poorer’ may be better adapted for the production of carrots. The value of one crop may be equal to the other, with the same expenditure of labor on each. One would be a fool to continue putting 100 of effort raising wheat that yielded but 75, when by raising carrots the yield would be 100.”
The “poorer” land contiguous to Kalamazoo, Michigan, when put to the use of raising celery, is such a case. Another is the cultivation of mint adjacent to Niles, Michigan.
Under a regime of voluntary cooperation the produce of the land, be it more or less than that yielded by the poorest land in use, would belong to the producer. Authoritarian cooperation would contend that such excess belongs to the crown, to the community, or to some other claimant who did not cooperate in the process of production.


Dear Friend:
You mistake me seriously if you think I would expect production to be carried on in agriculture by each individual owner tilling his “occupancy and use” allotment. Not so at all. Under free conditions numerous owners would avail themselves of the best tools, and they would cultivate their joint holding by cooperative effort. And the cooperation, being voluntary, would be harmonious and profitable.
Most of those who to-day consider themselves as enjoying profits will lose nothing by such a change as the elimination I propose will entail upon them. It is estimated that ninety merchants out of each hundred of them, fail in business. it is because their so-called profits have not exceeded their actual losses and expenses. If they had enjoyed real profits—the reward of their helpful efforts in the processes of distribution—instead of spurious profits—they would have received an equitable share of society’s product. And that product, instead of being curtailed on every hand by vexatious restrictions and aggravating hindrances, would have been (as under free conditions it is sure to be) so abundant that only he who will not work could ever come to want. In a free society would be none such. When you and I were boys there no tramps. Nature does not evolve a new type in forty years. The tramp is not a natural type. He is the product of artificial conditions. A system of society in which the many toil that the few may while away their time in enervating luxury must produce tramps. For unrequited labor is drudgery, and drudgery is hateful. But labor sure of its product is a joy. Such joy no “sponge,” be he tramp or millionaire, can ever know. And the tramp, as well as the millionaire, are “sponges” upon production. They are the parasites that usury breeds. Society has no need of them. Free society will have no place for them. They will disappear with the passing of royalty.
Waste no sympathy on the rich. They will become richer. All they will lose will be their fears, their cares, their anxieties, and their power to exact unearned toll. Free from the fear of want; relieved of the excruciation of their sympathies for the miserable and despairing; assured of the happiness of their children, who will have the opportunity to expand and aspire, they will rejoice, as well as the lowliest, in the common emancipation.
And the toiler. “He has nothing to lose but his chains; he has a world to gain.”


Dear Friend:
You tell me that you can now see that voluntary cooperation will, in your judgment, work better than compulsion, except in the matter of conserving land tenure. You say: “The primary rule is: Man seeks to gratify his desires with the least resistance. The strong gratify their desires by preying on the weak. The weak can resist effectively by organization only. The weak must occupy land—territory. They can defend themselves only by defending this territory. Therefore, they say, every man occupying this territory MUST participate in its defense in order that the liberty of each may be preserved.”
While it is true that organization is necessary among the victims of oppression, in order to resist it, it is no less true that organization must exist among the oppressors, for it is organization alone which establishes the relations of “strong” and “weak” in your illustration.
We are at the root of the problem of social tranquility and well-being when we have learned to distinguish between organization for defense and organization for asserting authority.
It is clear to you that organization for defense is the only escape for the despoiled. Unless the undermost have the wit and valor to volunteer for defense they will remain oppressed. Now, if I understand you, just as soon as this volunteer association has succeeded in throwing off the yoke of a compelling organization, you would have it cease to be a volunteer society and at once become a compulsive society, exactly such as that from which the rescue was accomplished. You would deny the liberty of each in order that the liberty of each may be preserved. I am not good at paradoxes; and this is one of them.
Surely it may be assumed that men valiant enough to win their liberty can conserve it by processes which victorious experience has shown them to be effective. Having been impelled by stern necessity to cooperate for their defense, shall they not be compelled to defend what they won as volunteers?
Let us suppose the defense organization should divert some of its force from the primary object of the association—defense—in order to use it for the purpose of compelling the volunteers to volunteer to enjoy what they have won. Such a diversion will deplete the defense power of the association, and the original oppressors will find the defenders unable, or less able to resist a new invasion; or a new set of rulers (a compelling class) will be exalted within the defense organization; and once the principle of authority gains a foothold, what was once a society for defense becomes an organization for compulsion. And again the strong (the governing class) will press the weak. Again the weak will organize, win another victory perhaps, and once more the superstition that volunteers must be compelled to volunteer will evolve another oppressive organization, and so ad infinitum—a silly cancelling contest—a continuous round of futility—Penelope’s task by day, its destruction by night.
Free men will have free land; free to be used by the user; not free to the “dog in the manger.” The free republic, to use the term in an ideal sense, is one that will not defend an individual in the holding of land out of use. Free men, associating for the purpose of conserving land tenures, will be at leas as well able to effect their purpose as can less free men. Such a republic must itself rest upon the good will of the associates; and it is the good will of the associates that is the essential quality of any sort of title. If this good will be exerted for a system of land-holding which will make each man secure in his holding of all he can use, the organization of cooperative associations to give effect to this good will is but a matter of detail. Hurtful tenures are now maintained by the organized acquiescence of the injured. Hence the injured are weak. Why should any fear organized good-will? “There’s nothing to be afraid of except of being afraid.”
However you may delude yourself, my good friend, into the notion that a belief in the “divine right of kings” does not abide with you, just so surely as you yield acquiescence to a land grant of any kind, you are imbued with submission to the king. You may prefer to call Authority by some other name, but you must regard that authority as empowered by the creator of matter, to allot the surface of the earth, disinheriting generations yet to come. And though you lay on your “single tax” salve never so deep, down beneath the cosmetic the poison of royalty infects you. The king gives, and the king taketh away; but it’s all in the name of the king. And cunningly as you may contrive, the king will have the better of the producer.
The persistence of land value denotes that freedom is still afar. These two things cannot co-exist. If ever the world gets so crowded that there will not be land enough “to give us all a farm” land value will arise, but liberty will take flight.
Where liberty truly prevails, the benefits of superior advantages, whether of farm or town site, will be diffused through the equilibrium of values. If an individual were holding a orchard, let us say, a site which by reason of its location would be better eligible for a railway station, a schoolhouse, or a mill, it would be to his interest as well as to that of the community, that the better use be made of it. He would move to some other location. There would be the expense of his moving; loss of time getting settled in some new location; value of improvements; loss of immovables, and the like. His neighbors, being equally benefited with himself, would not tolerate his bearing these losses, but would make good to him the cost of them. Yet all he would receive would be just wages, and not one jot for land value. He would render a service to his neighbors; they would pay him for the service, and no more. If you will divest yourself of the determination to look at such phenomena in the light of current exploitation facilities, you cannot help seeing that in a republic from which the last vestige of royalty has been dethroned, there will exist no power to exact rent, and that land values will be as inconceivable as air values.
And now I come to your last question: “Under any conditions, would not land value attach to so desirable a site as the corner of State and Madison streets, Chicago?”
No. Under present conditions it has value, because other people’s earnings can, through that form of usury we call profits, be pocketed by the beneficiary of that system of exploitation who occupies that site. In a free society, that same corner may still be eligible for the distribution of products, but as the price of these would be limited by their cost, there would be no scramble for the location. Society would not compel itself to pay for the privilege of serving itself. It does so now because it is blinded by the glamour of royalty. The torch of freedom is a kindlier light.
How this free republic would deal with vice and crime, I do no t know. But this much is certain; that no authoritarian society can deal with these as well. For the free republic will have no gigantic task such as confronts all governments today. The conditions that make for vice and crime would disappear once freedom holds sway. Society would reclaim its errant integers when these are no longer victimized.
Would it change human nature? No; but it would take the shackles off and allow human nature to work. The manifestations we see to-day, deeming them the exercise of human nature, are not such at all. We see humanity perverted by artificial conditions; cramped, restricted, disheartened. What we see of vileness is a denial of human nature. That human nature, operating spontaneously, is to be trusted, is well enough attested by the fact that in spite of chafing restrictions and irritant conditions, we see so much latent nobility and native decency in man.
Emancipated man will have what he produces. His emancipation leads to his enrichment. Just as to impoverish is to degrade, so to enrich is to ennoble; which is equivalent to saying that the abolition of involuntary poverty and of the fear of want will allow human nature to resume its norm.
A gentleman’s social club is, in a way, an illustration of the kind of organization the free republic would be. No one compelled to associate; no one compelled to pay for what he does not buy; no one compelled to remain. And free people would all be gentlefolk. They would be “gentlemen unafraid.”


Dear Friend:
Yes, I am willing to go even to the extent of proclaiming that the phenomena we know as vice will be banished from any society in which the principle of royalty has no sway.
Authority keeps the submissive poor. Poverty makes them vicious.
Parsimony and intemperance are the vices whose effects are most apparent. There are others, but let’s examine any one of them to determine whether we can see the hand of authority (we might say the cloven hoof of authority) at work. Let’s briefly put intemperance to the test.
Authority imposes a heavy tax on the manufacture of whisky. That makes the product expensive. High price of the stuff leads to adulteration.
Then authority exacts heavy and various license fees for selling the stuff. More expense, more adulteration.
These license imposts give to those who pay them a certain monopoly. Being able to get a high price these licensees are able and willing to make their places of business attractive.
The well-to-do have their clubs, and can dispense hospitalities at their own homes. The poor find in the bar-rooms a pleasant loafing-place.
I am told that a fine article of whisky costs less than ten cents the gallon to manufacture. Free from the royal imposts a gallon of serviceable liquor could be delivered at my pantry for twenty cents. There are some forty good-sized drams to the gallon. Half a cent per drink. No effusive manifestation of hospitality can be maintained on a half-cent If good whisky could be bought anywhere, openly, there would be no piquancy in getting it “on the sly.” The low price would make the drinking saloon impossible; and the “treating habit” goes when the saloon goes. But the treating habit is responsible for only a small part of the drink habit.
There’s anxiety. Have you ever been out of a job? I have. Knowing the sensation I refuse to blame a man who seeks the exhilaration of the cup that cheers under those conditions. Have you ever felt the fear of losing your job? I have. Knowing that sensation I will not reproach my unhappy brother who flies for comfort to the flowing bowl, since society has made that sort of fear not only possible, but prevalent.
Worry kills more people than war. Worry attack digestive apparatus. The normal man carries a natural artillery in his gastronomic process. He converts certain foods into alcohol. And nature gives to the normal man all the alcoholic stimulant that’s good for him.
This must be a rasping reflection to the good brothers of the prohibition church—that the best of them is a walking distillery; and that the reason he is free from a craving for strong drink is because he manufactures a plenty that he does not have to introduce through his throat. When his digestion fails and his interior economy does not precipitate as much alcohol as is good for him, he will experience a new sensation. And then he will be altogether more charitable to his worried brother
Our dear, honest, sincere brothers, who would banish the rum devil from the earth have a big job on hand—the task of remodeling nature’s plan for the assimilation of food. Why, the very enthusiasm which animates them in their resolute onslaught against the demon Alcohol is a drunkenness which results from the abundance of “moonshine” distilled inside themselves. I call it “moonshine” because it escapes the internal revenue collector.
All enthusiasm is intoxication. The exaltation you feel under the spell of beautiful music in church; the raptures of the lover, the zeal of the artist—all these are evidences that the distillery which nature has implanted in the chemical laboratory we carry around inside us, is working overtime. The stolid man is he whose interior distillery is out of repair.
Bad cookery, rapid eating, and unhygienic surroundings are some of the causes of dyspepsia. These diabolisms are incidents of poverty. When we see them among the rich they are incidents of the fear of poverty. Poverty and the fear of poverty are provocative of worry. “Care will kill a cat.”
There’s idleness. The idle poor worry and get drunk. The idle rich need excitation and get drunk. Both classes are idle because the “king” so arranges things.
You’ll never be rid of intemperance until you get rid of the last vestige of royalty.
Harshness to children and dependents; brutality to beasts; ill-temper; unsocial conduct; prostitution; lying and the whole brood of indecencies, what are these but manifestations of afraidness? Shall we ever see the last of them? Yes, when we can truly: say “The King is Dead!” without having to proclaim a successor. Then! and not until then.


Dear Friend:
I agree with your view that any improvement that may be devised to increase production, facilitate exchanges, and to promote the well-being of the individual, must eventually redound to the advantage of the land-holding class, unless the improvement shall be of such a character as will call attention to the fact that our recognition of the authoritarian principle in human association is at the basis of the problem of worry.
Escape from the clutches of the money-lord can be effected only by scientific mutualism. With the success of the Cooperative Credit Union all other forms of usury, including land-rent, will be dissolved in the new economic awakening.
Before closing this correspondence let me say that I am amply repaid for the time expended in writing to you by your recognition of the distinction between organization and authority. Your confusion was not unique. It is shared by a majority of our contemporaries. Royalty, in one form or another (whether in monarchies or republics) has so long been accepted as synonymous with administration that one must be uncharitable to cavil at that concept. If the identity were actual then a benevolent despotism would be the best form of association.
But there is no such natural identity. On the contrary, the affairs of cooperative organizations (be the cooperation conscious or spontaneous) are better administered when unhampered by rulership. The most successful financial institutions of our day are the great mutual life insurance companies. The excellence of their administration is proverbial, but no rulership is exercised over the participants. The member is not compelled to join, he may withdraw his equity and retire; he is not compelled to contribute; he is free to compete with the institution of which he has been a member; he may be a member of a number of such societies; the benefits are only for those who pay for them; and those who do not affiliate with them pay no part of the cost of their maintenance. The like is true of all our religious and social associations.
There may be as many cooperative associations as there are cooperative purposes. Every effort to cramp numbers of such associations under one rigid administration must be followed by disaster.
Bureaucracy involves aristocracy in the most meddlesome guise. Every scheme of paternalism must at length differentiate its subjects into two classes—the commonplace on the one hand, those lustful for power on the other. Cooperation that will not reduce the majority of the cooperators to the dead level of mediocrity and a small minority to the wiliness of conspirators for undue power, must leave the individual free to become a member of as many or as few associations as he shall deem expedient.
Spontaneity is a force in human association which can be stifled only at a cost that civilization cannot afford to pay. Utopia is an idle dream. As long as liberty remains an aspiration Utopia will remain an idle dream.


I hereby request to be enrolled as an associate in the

General Cooperative Credit Union

and agree, whenever, in my own judgment, my interests appear to be served thereby, to accept the credit certificates of said Union in exchange for commodities and services.
I reserve the right to discontinue my association with the Union at any time.
My membership in the Union, or in any of its local branches, is based on my understanding that no credit-certificates can find their way into circulation, unless there shall be marketable security in the control of the management, equal in value to at least two dollars for each one dollar of such certificates at any time extant.
I desire notices of meetings to be sent to me at the following address:
( Dated) --- ...... 1901.

Cut this out; sign it, and mail it to the General Cooperative Credit Union, Suite 10, No. 70 Dearborn Street, Chicago, Ill.


To the Great-Hearted and Big-Souled
Men and Women of America,
Who, Eagerly Desiring to Attest the Earnestness of
Their Inclinations to Demonstrate the Genuine-
ness of their Sympathy for the Victims Of
A Dishonest Commercial System,
have long Asked:

What’s To Be Done?

and Who are Conscious
that a Tranquil Way must be
Found to Avert a Bloody Social Cataclysm,
this Solution of
the Problem of Worry
is Hopefully and Fraternally Dedicated.




V A N I S H I N G   U S U R Y.

Lo! a cloud’s about to vanish from the day,
And a brazen wrong to crumble into clay.
Lo! the Right’s about to conquer! Clear the way!
With the Right shall many more
Enter smiling at the door.
With the giant Wrong shall fall
Many others great and small,
That for ages have held us for their prey.
Men of thought and men of action, clear the way!

Charles Mackay.

[1] Mutual Banking A Simple Plan to Abolish Interest on Money.” Price, ten cents. Benj. R. Tucker, Box 1312, New York City.
[2] “The Philosophy of Money.” by Alfred B. Westrup.
[3] “Instead of a Book;” By a Man Too Busy to Write One. Culled from the writings of Benj. R. Tucker, Editor of Liberty. Price, fifty cents. Mailed post-paid by the publisher. Benj. R. Tucker, Box 1312, New York City.
[4] “Proudhon and His Bank of the People.” A series of per articles by Charles A. Dana. Editor of the New York Sun. ten cents; Benj. R. Tucker, Publisher, Box 1312, New York City.

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