       G.3 Is "anarcho"-capitalism a new form of individualist anarchism?

   No. As Carole Pateman once pointed out, "[t]here has always been a
   strong radical individualist tradition in the USA. Its adherents have
   been divided between those who drew anarchist, egalitarian conclusions,
   and those who reduced political life to the capitalist economy writ
   large, to a series of exchanges between unequally situated
   individuals." [The Problem of Political Obligation, p. 205] What
   right-"libertarians" and "anarcho"-capitalists do is to confuse these
   two traditions, ignoring fundamental aspects of individualist anarchism
   in order to do so. Thus anarchist Peter Sabatini:

     "in those rare moments when [Murray] Rothbard (or any other
     [right-wing] Libertarian) does draw upon individualist anarchism, he
     is always highly selective about what he pulls out. Most of the
     doctrine's core principles, being decidedly anti-Libertarianism, are
     conveniently ignored, and so what remains is shrill anti-statism
     conjoined to a vacuous freedom in hackneyed defence of capitalism.
     In sum, the 'anarchy' of Libertarianism reduces to a liberal fraud."
     [Libertarianism: Bogus Anarchy]

   As class struggle anarchist Benjamin Franks notes individualist
   anarchism "has similarities with, but is not identical to,
   anarcho-capitalism." [Rebel Alliances, p. 44] For Colin Ward, while the
   "mainstream" of anarchist propaganda "has been anarchist-communism"
   there are "several traditions of individualist anarchism", including
   that associated with Max Stirner and "a remarkable series of
   19th-century American figures" who "differed from free-market liberals
   in their absolute mistrust of American capitalism, and in their
   emphasis on mutualism." Ward was careful to note that by the "late 20th
   century the word 'libertarian' . . . was appropriated by a new group of
   American thinkers" and so "it is necessary to examine the modern
   individualist 'libertarian' response from the standpoint of the
   anarchist tradition." It was found to be wanting, for while Rothbard
   was "the most aware of the actual anarchist tradition among the
   anarcho-capitalist apologists" he may have been "aware of a tradition,
   but he is singularly unaware of the old proverb that freedom for the
   pike means death for the minnow." The individualist anarchists were
   "busy social inventors exploring the potential of autonomy." The
   "American 'libertarians' of the 20th century are academics rather than
   social activists, and their inventiveness seems to be limited to
   providing an ideology for untrammelled market capitalism." [Anarchism:
   A Short Introduction, pp. 2-3, p. 62, p. 67, and p. 69]

   In this section we will sketch these differences between the genuine
   libertarian ideas of Individualist Anarchism and the bogus "anarchism"
   of right-"libertarian" ideology. This discussion builds upon our
   general critique of "anarcho"-capitalism we presented in [1]section F.
   However, here we will concentrate on presenting individualist anarchist
   analysis of "anarcho"-capitalist positions rather than, as before,
   mostly social anarchist ones (although, of course, there are
   significant overlaps and similarities). In this way, we can show the
   fundamental differences between the two theories for while there are
   often great differences between specific individualist anarchist
   thinkers all share a vision of a free society distinctly at odds with
   the capitalism of their time as well as the "pure" system of economic
   textbooks and right-"libertarian" dreams (which, ironically, so often
   reflects the 19th century capitalism the individualist anarchists were
   fighting).

   First it should be noted that some "anarcho"-capitalists shy away from
   the term, preferring such expressions as "market anarchist" or
   "individualist anarchist." This suggests that there is some link
   between their ideology and that of Tucker and his comrades. However,
   the founder of "anarcho"-capitalism, Murray Rothbard, refused that
   label for, while "strongly tempted," he could not do so because
   "Spooner and Tucker have in a sense pre-empted that name for their
   doctrine and that from that doctrine I have certain differences."
   Somewhat incredibly Rothbard argued that on the whole politically
   "these differences are minor," economically "the differences are
   substantial, and this means that my view of the consequences of putting
   our more of less common system into practice is very far from theirs."
   ["The Spooner-Tucker Doctrine: An Economist's View", pp. 5-15, Journal
   of Libertarian Studies, vol. 20, no. 1, p. 7]

   What an understatement! Individualist anarchists advocated an economic
   system in which there would have been very little inequality of wealth
   and so of power (and the accumulation of capital would have been
   minimal without profit, interest and rent). Removing this social and
   economic basis would result in substantially different political
   regimes. In other words, politics is not isolated from economics. As
   anarchist David Wieck put it, Rothbard "writes of society as though
   some part of it (government) can be extracted and replaced by another
   arrangement while other things go on before, and he constructs a system
   of police and judicial power without any consideration of the influence
   of historical and economic context." [Anarchist Justice, p. 227]

   Unsurprisingly, the political differences he highlights are
   significant, namely "the role of law and the jury system" and "the land
   question." The former difference relates to the fact that the
   individualist anarchists "allow[ed] each individual free-market court,
   and more specifically, each free-market jury, totally free rein over
   judicial decision." This horrified Rothbard. The reason is obvious, as
   it allows real people to judge the law as well as the facts, modifying
   the former as society changes and evolves. For Rothbard, the idea that
   ordinary people should have a say in the law is dismissed. Rather, "it
   would not be a very difficult task for Libertarian lawyers and jurists
   to arrive at a rational and objective code of libertarian legal
   principles and procedures." [Op. Cit., pp. 7-8] Of course, the fact
   that "lawyers" and "jurists" may have a radically different idea of
   what is just than those subject to their laws is not raised by
   Rothbard, never mind answered. While Rothbard notes that juries may
   defend the people against the state, the notion that they may defend
   the people against the authority and power of the rich is not even
   raised. That is why the rich have tended to oppose juries as well as
   popular assemblies. Unsurprisingly, as we indicated in [2]section
   F.6.1, Rothbard wanted laws to be made by judges, lawyers, jurists and
   other "libertarian" experts rather than jury judged and driven. In
   other words, to exclude the general population from any say in the law
   and how it changes. This hardly a "minor" difference! It is like a
   supporter of the state saying that it is a "minor" difference if you
   favour a dictatorship rather than a democratically elected government.
   As Tucker argued, "it is precisely in the tempering of the rigidity of
   enforcement that one of the chief excellences of Anarchism consists . .
   . under Anarchism all rules and laws will be little more than
   suggestions for the guidance of juries, and that all disputes . . .
   will be submitted to juries which will judge not only the facts but the
   law, the justice of the law, its applicability to the given
   circumstances, and the penalty or damage to be inflicted because of its
   infraction . . . under Anarchism the law . . . will be regarded as just
   in proportion to its flexibility, instead of now in proportion to its
   rigidity." [The Individualist Anarchists, pp. 160-1] In others, the law
   will evolve to take into account changing social circumstances and, as
   a consequence, public opinion on specific events and rights. Tucker's
   position is fundamentally democratic and evolutionary while Rothbard's
   is autocratic and fossilised.

   This is particularly the case if you are proposing an economic system
   which is based on inequalities of wealth, power and influence and the
   means of accumulating more. As we note in [3]section G.3.3, one of
   individualist anarchists that remained pointed this out and opposed
   Rothbard's arguments. As such, while Rothbard may have subscribed to a
   system of competing defence companies like Tucker, he expected them to
   operate in a substantially different legal system, enforcing different
   (capitalist) property rights and within a radically different
   socio-economic system. These differences are hardly "minor". As such,
   to claim that "anarcho"-capitalism is simply individualist anarchism
   with "Austrian" economics shows an utter lack of understanding of what
   individualist anarchism stood and aimed for.

   On the land question, Rothbard opposed the individualist position of
   "occupancy and use" as it "would automatically abolish all rent
   payments for land." Which was precisely why the individualist
   anarchists advocated it! In a predominantly rural economy, as was the
   case during most of the 19th century in America, this would result in a
   significant levelling of income and social power as well as bolstering
   the bargaining position of non-land workers by reducing the numbers
   forced onto the labour market (which, as we note in [4]section F.8.5,
   was the rationale for the state enforcing the land monopoly in the
   first place). He bemoans that landlords cannot charge rent on their
   "justly-acquired private property" without noticing that is begging the
   question as anarchists deny that this is "justly-acquired" land in the
   first place. Unsurprising, Rothbard considered "the proper theory of
   justice in landed property can be found in John Locke", ignoring the
   awkward fact that the first self-proclaimed anarchist book was written
   precisely to refute that kind of theory and expose its anti-libertarian
   implications. His argument simply shows how far from anarchism his
   ideology is. For Rothbard, it goes without saying that the landlord's
   "freedom of contract" tops the worker's freedom to control their own
   work and live and, of course, their right to life. [Op. Cit., p. 8 and
   p. 9]

   For anarchists, "the land is indispensable to our existence,
   consequently a common thing, consequently insusceptible of
   appropriation." [Proudhon, What is Property?, p. 107] Tucker looked
   forward to a time when capitalist property rights in land were ended
   and "the Anarchistic view that occupancy and use should condition and
   limit landholding becomes the prevailing view." This "does not simply
   mean the freeing of unoccupied land. It means the freeing of all land
   not occupied by the owner" and "tenants would not be forced to pay you
   rent, nor would you be allowed to seize their property. The Anarchic
   associations would look upon your tenants very much as they would look
   upon your guests." [The Individualist Anarchists, p. 159, p. 155 and p.
   162] The ramifications of this position on land use are significant. At
   its most basic, what counts as force and coercion, and so state
   intervention, are fundamentally different due to the differing
   conceptions of property held by Tucker and Rothbard. If we apply, for
   example, the individualist anarchist position on land to the workplace,
   we would treat the workers in a factory as the rightful owners, on the
   basis of occupation and use; at the same time, we could treat the share
   owners and capitalists as aggressors for attempting to force their
   representatives as managers on those actually occupying and using the
   premises. The same applies to the landlord against the tenant farmer.
   Equally, the outcome of such differing property systems will be
   radically different -- in terms of inequalities of wealth and so power
   (with having others working for them, it is unlikely that would-be
   capitalists or landlords would get rich). Rather than a "minor"
   difference, the question of land use fundamentally changes the nature
   of the society built upon it and whether it counts as genuinely
   libertarian or not.

   Tucke was well aware of the implications of such differences.
   Supporting a scheme like Rothbard's meant "departing from Anarchistic
   ground," it was "Archism" and, as he stressed in reply to one supporter
   of such property rights, it opened the door to other authoritarian
   positions: "Archism in one point is taking him to Archism is another.
   Soon, if he is logical, he will be an Archist in all respects." It was
   a "fundamentally foolish" position, because it "starts with a basic
   proposition that must be looked upon by all consistent Anarchists as
   obvious nonsense." "What follows from this?" asked Tucker. "Evidently
   that a man may go to a piece of vacant land and fence it off; that he
   may then go to a second piece and fence that off; then to a third, and
   fence that off; then to a fourth, a fifth, a hundredth, a thousandth,
   fencing them all off; that, unable to fence off himself as many as he
   wishes, he may hire other men to do the fencing for him; and that then
   he may stand back and bar all other men from using these lands, or
   admit them as tenants at such rental as he may choose to extract." It
   was "a theory of landed property which all Anarchists agree in viewing
   as a denial of equal liberty." It is "utterly inconsistent with the
   Anarchistic doctrine of occupancy and use as the limit of property in
   land." [Liberty, No. 180, p. 4 and p. 6] This was because of the
   dangers to liberty capitalist property rights in land implied:

     "I put the right of occupancy and use above the right of contract .
     . . principally by my interest in the right of contract. Without
     such a preference the theory of occupancy and use is utterly
     untenable; without it . . . it would be possible for an individual
     to acquire, and hold simultaneously, virtual titles to innumerable
     parcels of land, by the merest show of labour performed thereon . .
     . [This would lead to] the virtual ownership of the entire world by
     a small fraction of its inhabitants . . . [which would see] the
     right of contract, if not destroyed absolutely, would surely be
     impaired in an intolerable degree." [Op. Cit., no. 350, p. 4]

   Clearly a position which Rothbard had no sympathy for, unlike
   landlords. Strange, though, that Rothbard did not consider the obvious
   liberty destroying effects of the monopolisation of land and natural
   resources as "rational grounds" for opposing landlords but, then, as we
   noted in [5]section F.1 when it came to private property Rothbard
   simply could not see its state-like qualities -- even when he pointed
   them out himself! For Rothbard, the individualist anarchist position
   involved a "hobbling of land sites or of optimum use of land ownership
   and cultivation and such arbitrary misallocation of land injures all of
   society." [Rothbard, Op. Cit., p. 9] Obviously, those subject to the
   arbitrary authority of landlords and pay them rent are not part of
   "society" and it is a strange coincidence that the interests of
   landlords just happen to coincide so completely with that of "all of
   society" (including their tenants?). And it would be churlish to remind
   Rothbard's readers that, as a methodological individualist, he was
   meant to think that there is no such thing as "society" -- just
   individuals. And in terms of these individuals, he clearly favoured the
   landlords over their tenants and justifies this by appealing, like any
   crude collectivist, to an abstraction ("society") to which the tenants
   must sacrifice themselves and their liberty. Tucker would not have been
   impressed.

   For Rothbard, the nineteenth century saw "the establishment in North
   America of a truly libertarian land system." [The Ethics of Liberty, p.
   73] In contrast, the Individualist Anarchists attacked that land system
   as the "land monopoly" and looked forward to a time when "the
   libertarian principle to the tenure of land" was actually applied
   [Tucker, Liberty, no. 350, p. 5] So given the central place that
   "occupancy and use" lies in individualist anarchism, it was extremely
   patronising for Rothbard to assert that "it seems . . . a complete
   violation of the Spooner-Tucker 'law of equal liberty' to prevent the
   legitimate owner from selling his land to someone else." ["The
   Spooner-Tucker Doctrine: An Economist's View", Op. Cit., p. 9]
   Particularly as Tucker had explicitly addressed this issue and
   indicated the logical and common sense basis for this so-called
   "violation" of their principles. Thus "occupancy and use" was "the
   libertarian principle to the tenure of land" because it stopped a class
   of all powerful landlords developing, ensuring a real equality of
   opportunity and liberty rather than the formal "liberty" associated
   with capitalism which, in practice, means selling your liberty to the
   rich.

   Somewhat ironically, Rothbard bemoaned that it "seems to be a highly
   unfortunate trait of libertarian and quasi-libertarian groups to spend
   the bulk of their time and energy emphasising their most fallacious or
   unlibertarian points." [Op. Cit., p. 14] He pointed to the followers of
   Henry George and their opposition to the current land holding system
   and the monetary views of the individualist anarchists as examples (see
   [6]section G.3.6 for a critique of Rothbard's position on mutual
   banking). Of course, both groups would reply that Rothbard's positions
   were, in fact, both fallacious and unlibertarian in nature. As, indeed,
   did Tucker decades before Rothbard proclaimed his private statism a
   form of "anarchism." Yarros' critique of those who praised capitalism
   but ignored the state imposed restrictions that limited choice within
   it seems as applicable to Rothbard as it did Herbert Spencer:

     "A system is voluntary when it is voluntary all round . . . not when
     certain transactions, regarded from certain points of view, appear
     Voluntary. Are the circumstances which compel the labourer to accept
     unfair terms law-created, artificial, and subversive of equal
     liberty? That is the question, and an affirmative answer to it is
     tantamount to an admission that the present system is not voluntary
     in the true sense." [Liberty, no. 184, p. 2]

   So while "anarcho"-capitalists like Walter Block speculate on how
   starving families renting their children to wealthy paedophiles is
   acceptable "on libertarian grounds" it is doubtful that any
   individualist anarchist would be so blas about such an evil.
   ["Libertarianism vs. Objectivism: A Response to Peter Schwartz," pp.
   39-62, Reason Papers, Vol. 26, Summer 2003, p. 20] Tucker, for example,
   was well aware that liberty without equality was little more than a bad
   joke. "If," he argued, "after the achievement of all industrial
   freedoms, economic rent should prove to be the cause of such
   inequalities in comfort that an effective majority found themselves at
   the point of starvation, they would undoubtedly cry, 'Liberty be
   damned!' and proceed to even up; and I think that at that stage of the
   game they would be great fools if they didn't. From this it will be
   seen that I am no[t] . . . a stickler for absolute equal liberty under
   all circumstances." Needless to say, he considered this outcome as
   unlikely and was keen to "[t]ry freedom first." [Liberty, no. 267, p. 2
   and p. 3]

   The real question is why Rothbard considered this a political
   difference rather than an economic one. Unfortunately, he did not
   explain. Perhaps because of the underlying socialist perspective behind
   the anarchist position? Or perhaps the fact that feudalism and
   monarchism was based on the owner of the land being its ruler suggests
   a political aspect to propertarian ideology best left unexplored? Given
   that the idea of grounding rulership on land ownership receded during
   the Middle Ages, it may be unwise to note that under
   "anarcho"-capitalism the landlord and capitalist would, likewise, be
   sovereign over the land and those who used it? As we noted in
   [7]section F.1, this is the conclusion that Rothbard does draw. As
   such, there is a political aspect to this difference, namely the
   difference between a libertarian social system and one rooted in
   authority.

   Ultimately, "the expropriation of the mass of the people from the soil
   forms the basis of the capitalist mode of production." [Marx, Capital,
   vol. 1, p. 934] For there are "two ways of oppressing men: either
   directly by brute force, by physical violence; or indirectly by denying
   them the means of life and this reducing them to a state of surrender."
   In the second case, government is "an organised instrument to ensure
   that dominion and privilege will be in the hands of those who . . .
   have cornered all the means of life, first and foremost the land, which
   they make use of to keep the people in bondage and to make them work
   for their benefit." [Malatesta, Anarchy, p. 21] Privatising the
   coercive functions of said government hardly makes much difference.

   As such, Rothbard was right to distance himself from the term
   individualist anarchism. It is a shame he did not do the same with
   anarchism as well!

G.3.1 Is "anarcho"-capitalism American anarchism?

   Unlike Rothbard, some "anarcho"-capitalists are more than happy to
   proclaim themselves "individualist anarchists" and so suggest that
   their notions are identical, or nearly so, with the likes of Tucker,
   Ingalls and Labadie. As part of this, they tend to stress that
   individualist anarchism is uniquely American, an indigenous form of
   anarchism unlike social anarchism. To do so, however, means ignoring
   not only the many European influences on individualist anarchism itself
   (most notably, Proudhon) but also downplaying the realities of American
   capitalism which quickly made social anarchism the dominant form of
   Anarchism in America. Ironically, such a position is deeply
   contradictory as "anarcho"-capitalism itself is most heavily influenced
   by a European ideology, namely "Austrian" economics, which has lead its
   proponents to reject key aspects of the indigenous American anarchist
   tradition.

   For example, "anarcho"-capitalist Wendy McElroy does this in a short
   essay provoked by the Seattle protests in 1999. While Canadian, her
   rampant American nationalism is at odds with the internationalism of
   the individualist anarchists, stating that after property destruction
   in Seattle which placed American anarchists back in the media social
   anarchism "is not American anarchism. Individualist anarchism, the
   indigenous form of the political philosophy, stands in rigorous
   opposition to attacking the person or property of individuals." Like an
   ideological protectionist, she argued that "Left [sic!] anarchism
   (socialist and communist) are foreign imports that flooded the country
   like cheap goods during the 19th century." [Anarchism: Two Kinds]
   Apparently Albert and Lucy Parsons were un-Americans, as was Voltairine
   de Cleyre who turned from individualist to communist anarchism. And
   best not mention the social conditions in America which quickly made
   communist-anarchism predominant in the movement or that individualist
   anarchists like Tucker proudly proclaimed their ideas socialist!

   She argued that "[m]any of these anarchists (especially those escaping
   Russia) introduced lamentable traits into American radicalism" such as
   "propaganda by deed" as well as a class analysis which "divided society
   into economic classes that were at war with each other." Taking the
   issue of "propaganda by the deed" first, it should be noted that use of
   violence against person or property was hardly alien to American
   traditions. The Boston Tea Party was just as "lamentable" an attack on
   "property of individuals" as the window breaking at Seattle while the
   revolution and revolutionary war were hardly fought using pacifist
   methods or respecting the "person or property of individuals" who
   supported imperialist Britain. Similarly, the struggle against slavery
   was not conducted purely by means Quakers would have supported (John
   Brown springs to mind), nor was (to use just one example) Shay's
   rebellion. So "attacking the person or property of individuals" was
   hardly alien to American radicalism and so was definitely not imported
   by "foreign" anarchists.

   Of course, anarchism in American became associated with terrorism (or
   "propaganda by the deed") due to the Haymarket events of 1886 and
   Berkman's assassination attempt against Frick during the Homestead
   strike. Significantly, McElroy makes no mention of the substantial
   state and employer violence which provoked many anarchists to advocate
   violence in self-defence. For example, the great strike of 1877 saw the
   police opened fire on strikers on July 25th, killing five and injuring
   many more. "For several days, meetings of workmen were broken up by the
   police, who again and again interfered with the rights of free speech
   and assembly." The Chicago Times called for the use of hand grenades
   against strikers and state troops were called in, killing a dozen
   strikers. "In two days of fighting, between 25 and 50 civilians had
   been killed, some 200 seriously injured, and between 300 and 400
   arrested. Not a single policeman or soldier had lost his life." This
   context explains why many workers, including those in reformist trade
   unions as well as anarchist groups like the IWPA, turned to armed
   self-defence ("violence"). The Haymarket meeting itself was organised
   in response to the police firing on strikers and killing at least two.
   The Haymarket bomb was thrown after the police tried to break-up a
   peaceful meeting by force: "It is clear then that . . . it was the
   police and not the anarchists who were the perpetrators of the violence
   at the Haymarket." All but one of the deaths and most of the injuries
   were caused by the police firing indiscriminately in the panic after
   the explosion. [Paul Avrich, The Maymarket Tragedy, pp. 32-4, p. 189,
   p. 210, and pp. 208-9] As for Berkman's assassination attempt, this was
   provoked by the employer's Pinkerton police opening fire on strikers,
   killing and wounding many. [Emma Goldman, Living My Life, vol. 1, p.
   86]

   In other words, it was not foreign anarchists or alien ideas which
   associated anarchism with violence but, rather, the reality of American
   capitalism. As historian Eugenia C. Delamotte puts it, "the view that
   anarchism stood for violence . . . spread rapidly in the mainstream
   press from the 1870s" because of "the use of violence against strikers
   and demonstrators in the labour agitation that marked these decades --
   struggles for the eight-hour day, better wages, and the right to
   unionise, for example. Police, militia, and private security guards
   harassed, intimidated, bludgeoned, and shot workers routinely in
   conflicts that were just as routinely portrayed in the media as worker
   violence rather than state violence; labour activists were also subject
   to brutal attacks, threats of lynching, and many other forms of
   physical assault and intimidation . . . the question of how to respond
   to such violence became a critical issue in the 1870s, with the
   upswelling of labour agitation and attempts to suppress it violently."
   [Voltairine de Cleyre and the Revolution of the Mind, pp. 51-2]

   Joseph Labadie, it should be noted, thought the "Beastly police" got
   what they deserved at Haymarket as they had attempted to break up a
   peaceful public meeting and such people should "go at the peril of
   their lives. If it is necessary to use dynamite to protect the rights
   of free meeting, free press and free speech, then the sooner we learn
   its manufacture and use . . . the better it will be for the toilers of
   the world." The radical paper he was involved in, the Labor Leaf, had
   previously argued that "should trouble come, the capitalists will use
   the regular army and militia to shoot down those who are not satisfied.
   It won't be so if the people are equally ready." Even reformist unions
   were arming themselves to protect themselves, with many workers
   applauding their attempts to organise union militias. As worker put it,
   "[w]ith union men well armed and accustomed to military tactics, we
   could keep Pinkerton's men at a distance . . . Employers would think
   twice, too, before they attempted to use troops against us . . . Every
   union ought to have its company of sharpshooters." [quoted by Richard
   Jules Oestreicher, Solidarity and Fragmentation, p. 200 and p. 135]

   While the violent rhetoric of the Chicago anarchists was used at their
   trial and is remembered (in part because enemies of anarchism take
   great glee in repeating it), the state and employer violence which
   provoked it has been forgotten or ignored. Unless this is mentioned, a
   seriously distorted picture of both communist-anarchism and capitalism
   are created. It is significant, of course, that while the words of the
   Martyrs are taken as evidence of anarchism's violent nature, the actual
   violence (up to and including murder) against strikers by state and
   private police apparently tells us nothing about the nature of the
   state or capitalist system (Ward Churchill presents an excellent
   summary such activities in his article "From the Pinkertons to the
   PATRIOT Act: The Trajectory of Political Policing in the United States,
   1870 to the Present" [CR: The New Centennial Review, Vol. 4, No. 1, pp.
   1-72]).

   So, as can be seen, McElroy distorts the context of anarchist violence
   by utterly ignoring the far worse capitalist violence which provoked
   it. Like more obvious statists, she demonises the resistance to the
   oppressed while ignoring that of the oppressor. Equally, it should also
   be noted Tucker rejected violent methods to end class oppression not
   out of principle, but rather strategy as there "was no doubt in his
   mind as to the righteousness of resistance to oppression by recourse to
   violence, but his concern now was with its expedience . . . he was
   absolutely convinced that the desired social revolution would be
   possible only through the utility of peaceful propaganda and passive
   resistance." [James J. Martin, Men Against the State, p. 225] For
   Tucker "as long as freedom of speech and of the press is not struck
   down, there should be no resort to physical force in the struggle
   against oppression." [quoted by Morgan Edwards, "Neither Bombs Nor
   Ballots: Liberty & the Strategy of Anarchism", pp. 65-91, Benjamin R.
   Tucker and the Champions of Liberty, Coughlin, Hamilton and Sullivan
   (eds.), p. 67] Nor should we forget that Spooner's rhetoric could be as
   blood-thirsty as Johann Most's at times and that American individualist
   anarchist Dyer Lum was an advocate of insurrection.

   As far as class analysis does, which "divided society into economic
   classes that were at war with each other", it can be seen that the
   "left" anarchists were simply acknowledging the reality of the
   situation -- as did, it must be stressed, the individualist anarchists.
   As we noted in [8]section G.1, the individualist anarchists were well
   aware that there was a class war going on, one in which the capitalist
   class used the state to ensure its position (the individualist
   anarchist "knows very well that the present State is an historical
   development, that it is simply the tool of the property-owning class;
   he knows that primitive accumulation began through robbery bold and
   daring, and that the freebooters then organised the State in its
   present form for their own self-preservation." [A.H. Simpson, The
   Individualist Anarchists, p. 92]). Thus workers had a right to a
   genuinely free market for "[i]f the man with labour to sell has not
   this free market, then his liberty is violated and his property
   virtually taken from him. Now, such a market has constantly been denied
   . . . to labourers of the entire civilised world. And the men who have
   denied it are . . . Capitalists . . . [who] have placed and kept on the
   statue-books all sorts of prohibitions and taxes designed to limit and
   effective in limiting the number of bidders for the labour of those who
   have labour to sell." [Instead of a Book, p. 454] For Joshua King
   Ingalls, "[i]n any question as between the worker and the holder of
   privilege, [the state] is certain to throw itself into the scale with
   the latter, for it is itself the source of privilege, the creator of
   class rule." [quoted by Bowman N. Hall, "Joshua K. Ingalls, American
   Individualist: Land Reformer, Opponent of Henry George and Advocate of
   Land Leasing, Now an Established Mode," pp. 383-96, American Journal of
   Economics and Sociology, Vol. 39, No. 4, p. 292] Ultimately, the state
   was "a police force to regulate the people in the interests of the
   plutocracy." [Ingalls, quoted by Martin, Op. Cit., p. 152]

   Discussing Henry Frick, manager of the Homestead steelworkers who was
   shot by Berkman for using violence against striking workers, Tucker
   noted that Frick did not "aspire, as I do, to live in a society of
   mutually helpful equals" but rather it was "his determination to live
   in luxury produced by the toil and suffering of men whose necks are
   under his heel. He has deliberately chosen to live on terms of
   hostility with the greater part of the human race." While opposing
   Berkman's act, Tucker believed that he was "a man with whom I have much
   in common, -- much more at any rate than with such a man as Frick."
   Berkman "would like to live on terms of equality with his fellows,
   doing his share of work for not more than his share of pay." [The
   Individualist Anarchists, pp. 307-8] Clearly, Tucker was well aware of
   the class struggle and why, while not supporting such actions, violence
   occurred when fighting it.

   As Victor Yarros summarised, for the individualist anarchists the
   "State is the servant of the robbers, and it exists chiefly to prevent
   the expropriation of the robbers and the restoration of a free and fair
   field for legitimate competition and wholesome, effective voluntary
   cooperation." ["Philosophical Anarchism: Its Rise, Decline, and
   Eclipse", pp. 470-483, The American Journal of Sociology, vol. 41, no.
   4, p. 475] For "anarcho"-capitalists, the state exploits all classes
   subject to it (perhaps the rich most, by means of taxation to fund
   welfare programmes and legal support for union rights and strikes).

   So when McElroy states that, "Individualist anarchism rejects the State
   because it is the institutionalisation of force against peaceful
   individuals", she is only partly correct. While it may be true for
   "anarcho"-capitalism, it fails to note that for the individualist
   anarchists the modern state was the institutionalisation of force by
   the capitalist class to deny the working class a free market. The
   individualist anarchists, in other words, like social anarchists also
   rejected the state because it imposed certain class monopolies and
   class legislation which ensured the exploitation of labour by capital
   -- a significant omission on McElroy's part. "Can it be soberly
   pretended for a moment that the State . . . is purely a defensive
   institution?" asked Tucker. "Surely not . . . you will find that a good
   nine-tenths of existing legislation serves . . . either to prescribe
   the individual's personal habits, or, worse still, to create and
   sustain commercial, industrial, financial, and proprietary monopolies
   which deprive labour of a large part of the reward that it would
   receive in a perfectly free market." [Tucker, Instead of a Book, pp.
   25-6] In fact:

     "As long as a portion of the products of labour are appropriated for
     the payment of fat salaries to useless officials and big dividends
     to idle stockholders, labour is entitled to consider itself
     defrauded, and all just men will sympathise with its protest."
     [Tucker, Liberty, no. 19, p. 1]

   It goes without saying that almost all "anarcho"-capitalists follow
   Rothbard in being totally opposed to labour unions, strikes and other
   forms of working class protest. As such, the individualist anarchists,
   just as much as the "left" anarchists McElroy is so keen to
   disassociate them from, argued that "[t]hose who made a profit from
   buying or selling were class criminals and their customers or employees
   were class victims. It did not matter if the exchanges were voluntary
   ones. Thus, left anarchists hated the free market as deeply as they
   hated the State." [McElroy, Op. Cit.] Yet, as any individualist
   anarchist of the time would have told her, the "free market" did not
   exist because the capitalist class used the state to oppress the
   working class and reduce the options available to choose from so
   allowing the exploitation of labour to occur. Class analysis, in other
   words, was not limited to "foreign" anarchism, nor was the notion that
   making a profit was a form of exploitation (usury). As Tucker
   continually stressed: "Liberty will abolish interest; it will abolish
   profit; it will abolish monopolistic rent; it will abolish taxation; it
   will abolish the exploitation of labour." [The Individualist
   Anarchists, p. 157]

   It should also be noted that the "left" anarchist opposition to the
   individualist anarchist "free market" is due to an analysis which
   argues that it will not, in fact, result in the anarchist aim of ending
   exploitation nor will it maximise individual freedom (see [9]section
   G.4). We do not "hate" the free market, rather we love individual
   liberty and seek the best kind of society to ensure free people. By
   concentrating on markets being free, "anarcho"-capitalism ensures that
   it is wilfully blind to the freedom-destroying similarities between
   capitalist property and the state (as we discussed in [10]section F.1).
   An analysis which many individualist anarchists recognised, with the
   likes of Dyer Lum seeing that replacing the authority of the state with
   that of the boss was no great improvement in terms of freedom and so
   advocating co-operative workplaces to abolish wage slavery. Equally, in
   terms of land ownership the individualist anarchists opposed any
   voluntary exchanges which violated "occupancy and use" and so they, so,
   "hated the free market as deeply as they hated the State." Or, more
   correctly, they recognised that voluntary exchanges can result in
   concentrations of wealth and so power which made a mockery of
   individual freedom. In other words, that while the market may be free
   the individuals within it would not be.

   McElroy partly admits this, saying that "the two schools of anarchism
   had enough in common to shake hands when they first met. To some
   degree, they spoke a mutual language. For example, they both reviled
   the State and denounced capitalism. But, by the latter, individualist
   anarchists meant 'state-capitalism' the alliance of government and
   business." Yet this "alliance of government and business" has been the
   only kind of capitalism that has ever existed. They were well aware
   that such an alliance made the capitalist system what it was, i.e., a
   system based on the exploitation of labour. William Bailie, in an
   article entitled "The Rule of the Monopolists" simply repeated the
   standard socialist analysis of the state when he talked about the
   "gigantic monopolies, which control not only our industry, but all the
   machinery of the State, -- legislative, judicial, executive, --
   together with school, college, press, and pulpit." Thus the
   "preponderance in the number of injunctions against striking,
   boycotting, and agitating, compared with the number against
   locking-out, blacklisting, and the employment of armed mercenaries."
   The courts could not ensure justice because of the "subserviency of the
   judiciary to the capitalist class . . . and the nature of the reward in
   store for the accommodating judge." Government "is the instrument by
   means of which the monopolist maintains his supremacy" as the
   law-makers "enact what he desires; the judiciary interprets his will;
   the executive is his submissive agent; the military arm exists in
   reality to defend his country, protect his property, and suppress his
   enemies, the workers on strike." Ultimately, "when the producer no
   longer obeys the State, his economic master will have lost his power."
   [Liberty, no. 368, p. 4 and p. 5] Little wonder, then, that the
   individualist anarchists thought that the end of the state and the
   class monopolies it enforces would produce a radically different
   society rather than one essentially similar to the current one but
   without taxes. Their support for the "free market" implied the end of
   capitalism and its replacement with a new social system, one which
   would end the exploitation of labour.

   She herself admits, in a roundabout way, that "anarcho"-capitalism is
   significantly different that individualist anarchism. "The schism
   between the two forms of anarchism has deepened with time," she
   asserts. This was "[l]argely due to the path breaking work of Murray
   Rothbard" and so, unlike genuine individualist anarchism, the new
   "individualist anarchism" (i.e., "anarcho"-capitalism) "is no longer
   inherently suspicious of profit-making practices, such as charging
   interest. Indeed, it embraces the free market as the voluntary vehicle
   of economic exchange" (does this mean that the old version of it did
   not, in fact, embrace "the free market" after all?) This is because it
   "draws increasingly upon the work of Austrian economists such as Mises
   and Hayek" and so "it draws increasingly farther away from left
   anarchism" and, she fails to note, the likes of Warren and Tucker. As
   such, it would be churlish to note that "Austrian" economics was even
   more of a "foreign import" much at odds with American anarchist
   traditions as communist anarchism, but we will! After all, Rothbard's
   support of usury (interest, rent and profit) would be unlikely to find
   much support from someone who looked forward to the development of "an
   attitude of hostility to usury, in any form, which will ultimately
   cause any person who charges more than cost for any product to be
   regarded very much as we now regard a pickpocket." [Tucker, The
   Individualist Anarchists, p. 155] Nor, as noted above, would Rothbard's
   support for an "Archist" (capitalist) land ownership system have won
   him anything but dismissal nor would his judge, jurist and lawyer
   driven political system have been seen as anything other than rule by
   the few rather than rule by none.

   Ultimately, it is a case of influences and the kind of socio-political
   analysis and aims it inspires. Unsurprisingly, the main influences in
   individualist anarchism came from social movements and protests. Thus
   poverty-stricken farmers and labour unions seeking monetary and land
   reform to ease their position and subservience to capital all plainly
   played their part in shaping the theory, as did the Single-Tax ideas of
   Henry George and the radical critiques of capitalism provided by
   Proudhon and Marx. In contrast, "anarcho"-capitalism's major (indeed,
   predominant) influence is "Austrian" economists, an ideology developed
   (in part) to provide intellectual support against such movements and
   their proposals for reform. As we will discuss in the [11]next section,
   this explains the quite fundamental differences between the two systems
   for all the attempts of "anarcho"-capitalists to appropriate the legacy
   of the likes of Tucker.

G.3.2 What are the differences between "anarcho"-capitalism and individualist
anarchism?

   The key differences between individualist anarchism and
   "anarcho"-capitalism derive from the fact the former were socialists
   while the latter embrace capitalism with unqualified enthusiasm.
   Unsurprisingly, this leans to radically different analyses, conclusions
   and strategies. It also expresses itself in the vision of the free
   society expected from their respective systems. Such differences, we
   stress, all ultimately flow from fact that the individualist anarchists
   were/are socialists while the likes of Rothbard are wholeheartedly
   supporters of capitalism.

   As scholar Frank H. Brooks notes, "the individualist anarchists hoped
   to achieve socialism by removing the obstacles to individual liberty in
   the economic realm." This involved making equality of opportunity a
   reality rather than mere rhetoric by ending capitalist property rights
   in land and ensuring access to credit to set-up in business for
   themselves. So while supporting a market economy "they were also
   advocates of socialism and critics of industrial capitalism, positions
   that make them less useful as ideological tools of a resurgent
   capitalism." [The Individualist Anarchists, p. 111] Perhaps
   unsurprisingly, most right-"libertarians" get round this problem by
   hiding or downplaying this awkward fact. Yet it remains essential for
   understanding both individualist anarchism and why "anarcho"-capitalism
   is not a form of anarchism.

   Unlike both individualist and social anarchists, "anarcho"-capitalists
   support capitalism (a "pure" free market type, which has never existed
   although it has been approximated occasionally as in 19th century
   America). This means that they totally reject the ideas of anarchists
   with regards to property and economic analysis. For example, like all
   supporters of capitalists they consider rent, profit and interest as
   valid incomes. In contrast, all Anarchists consider these as
   exploitation and agree with the Tucker when he argued that "[w]hoever
   contributes to production is alone entitled. What has no rights that
   who is bound to respect. What is a thing. Who is a person. Things have
   no claims; they exist only to be claimed. The possession of a right
   cannot be predicted of dead material, but only a living person."
   [quoted by Wm. Gary Kline, The Individualist Anarchists, p. 73]

   This, we must note, is the fundamental critique of the capitalist
   theory that capital is productive. In and of themselves, fixed costs do
   not create value. Rather value is creation depends on how investments
   are developed and used once in place. Because of this the Individualist
   Anarchists, like other anarchists, considered non-labour derived income
   as usury, unlike "anarcho"-capitalists. Similarly, anarchists reject
   the notion of capitalist property rights in favour of possession
   (including the full fruits of one's labour). For example, anarchists
   reject private ownership of land in favour of a "occupancy and use"
   regime. In this we follow Proudhon's What is Property? and argue that
   "property is theft" as well as "despotism". Rothbard, as noted in the
   [12]section F.1, rejected this perspective.

   As these ideas are an essential part of anarchist politics, they cannot
   be removed without seriously damaging the rest of the theory. This can
   be seen from Tucker's comments that "Liberty insists. . . [on] the
   abolition of the State and the abolition of usury; on no more
   government of man by man, and no more exploitation of man by man."
   [quoted by Eunice Schuster, Native American Anarchism, p. 140] Tucker
   indicates here that anarchism has specific economic and political
   ideas, that it opposes capitalism along with the state. Therefore
   anarchism was never purely a "political" concept, but always combined
   an opposition to oppression with an opposition to exploitation. The
   social anarchists made exactly the same point. Which means that when
   Tucker argued that "Liberty insists on Socialism. . . -- true
   Socialism, Anarchistic Socialism: the prevalence on earth of Liberty,
   Equality, and Solidarity" he knew exactly what he was saying and meant
   it wholeheartedly. [Instead of a Book, p. 363] So because
   "anarcho"-capitalists embrace capitalism and reject socialism, they
   cannot be considered anarchists or part of the anarchist tradition.

   There are, of course, overlaps between individualist anarchism and
   "anarcho"-capitalism, just as there are overlaps between it and Marxism
   (and social anarchism, of course). However, just as a similar analysis
   of capitalism does not make individualist anarchists Marxists, so
   apparent similarities between individualist anarchism and
   "anarcho"-capitalism does not make the former a forerunner of the
   latter. For example, both schools support the idea of "free markets."
   Yet the question of markets is fundamentally second to the issue of
   property rights for what is exchanged on the market is dependent on
   what is considered legitimate property. In this, as Rothbard noted,
   individualist anarchists and "anarcho"-capitalists differ and different
   property rights produce different market structures and dynamics. This
   means that capitalism is not the only economy with markets and so
   support for markets cannot be equated with support for capitalism.
   Equally, opposition to markets is not the defining characteristic of
   socialism. As such, it is possible to be a market socialist (and many
   socialist are) as "markets" and "property" do not equate to capitalism
   as we proved in sections [13]G.1.1 and [14]G.1.2 respectively.

   One apparent area of overlap between individualist anarchism and
   "anarcho"-capitalism is the issue of wage labour. As we noted in
   [15]section G.1.3, unlike social anarchists, some individualist
   anarchists were not consistently against it. However, this similarity
   is more apparent than real as the individualist anarchists were opposed
   to exploitation and argued (unlike "anarcho"-capitalism) that in their
   system workers bargaining powers would be raised to such a level that
   their wages would equal the full product of their labour and so it
   would not be an exploitative arrangement. Needless to say, social
   anarchists think this is unlikely to be the case and, as we discuss in
   [16]section G.4.1, individualist anarchist support for wage labour is
   in contradiction to many of the stated basic principles of the
   individualist anarchists themselves. In particular, wage labour
   violates "occupancy and use" as well as having more than a passing
   similarity to the state.

   However, these problems can be solved by consistently applying the
   principles of individualist anarchism, unlike "anarcho"-capitalism, and
   that is why it is a real (if inconsistent) school of anarchism.
   Moreover, the social context these ideas were developed in and would
   have been applied ensure that these contradictions would have been
   minimised. If they had been applied, a genuine anarchist society of
   self-employed workers would, in all likelihood, have been created (at
   least at first, whether the market would increase inequalities is a
   moot point between anarchists). Thus we find Tucker criticising Henry
   George by noting that he was "enough of an economist to be very well
   aware that, whether it has land or not, labour which can get no capital
   -- that is, which is oppressed by capital -- cannot, without accepting
   the alternative of starvation, refuse to reproduce capital for the
   capitalists." Abolition of the money monopoly will increase wages, so
   allowing workers to "steadily lay up money, with which he can buy tools
   to compete with his employer or to till his bit of land with comfort
   and advantage. In short, he will be an independent man, receiving what
   he produces or an equivalent thereof. How to make this the lot of all
   men is the labour question. Free land will not solve it. Free money,
   supplemented by free land, will." [Liberty, no. 99 , p. 4 and p. 5]
   Sadly, Rothbard failed to reach George's level of understanding (at
   least as regards his beloved capitalism).

   Which brings us another source of disagreement, namely on the effects
   of state intervention and what to do about it. As noted, during the
   rise of capitalism the bourgeoisie were not shy in urging state
   intervention against the masses. Unsurprisingly, working class people
   generally took an anti-state position during this period. The
   individualist anarchists were part of that tradition, opposing what
   Marx termed "primitive accumulation" in favour of the pre-capitalist
   forms of property and society it was destroying.

   However, when capitalism found its feet and could do without such
   obvious intervention, the possibility of an "anti-state" capitalism
   could arise. Such a possibility became a definite once the state
   started to intervene in ways which, while benefiting the system as a
   whole, came into conflict with the property and power of individual
   members of the capitalist and landlord class. Thus social legislation
   which attempted to restrict the negative effects of unbridled
   exploitation and oppression on workers and the environment were having
   on the economy were the source of much outrage in certain bourgeois
   circles:

     "Quite independently of these tendencies [of individualist
     anarchism] . . . the anti-state bourgeoisie (which is also
     anti-statist, being hostile to any social intervention on the part
     of the State to protect the victims of exploitation -- in the matter
     of working hours, hygienic working conditions and so on), and the
     greed of unlimited exploitation, had stirred up in England a certain
     agitation in favour of pseudo-individualism, an unrestrained
     exploitation. To this end, they enlisted the services of a mercenary
     pseudo-literature . . . which played with doctrinaire and fanatical
     ideas in order to project a species of 'individualism' that was
     absolutely sterile, and a species of 'non-interventionism' that
     would let a man die of hunger rather than offend his dignity." [Max
     Nettlau, A Short History of Anarchism, p. 39]

   This perspective can be seen when Tucker denounced Herbert Spencer as a
   champion of the capitalistic class for his vocal attacks on social
   legislation which claimed to benefit working class people but staying
   strangely silent on the laws passed to benefit (usually indirectly)
   capital and the rich. "Anarcho"-capitalism is part of that tradition,
   the tradition associated with a capitalism which no longer needs
   obvious state intervention as enough wealth as been accumulated to keep
   workers under control by means of market power.

   In other words, there is substantial differences between the victims of
   a thief trying to stop being robbed and be left alone to enjoy their
   property and the successful thief doing the same! Individualist
   Anarchist's were aware of this. For example, Victor Yarros stressed
   this key difference between individualist anarchism and the
   proto-"libertarian" capitalists of "voluntaryism":

     "[Auberon Herbert] believes in allowing people to retain all their
     possessions, no matter how unjustly and basely acquired, while
     getting them, so to speak, to swear off stealing and usurping and to
     promise to behave well in the future. We, on the other hand, while
     insisting on the principle of private property, in wealth honestly
     obtained under the reign of liberty, do not think it either unjust
     or unwise to dispossess the landlords who have monopolised natural
     wealth by force and fraud. We hold that the poor and disinherited
     toilers would be justified in expropriating, not alone the
     landlords, who notoriously have no equitable titles to their lands,
     but all the financial lords and rulers, all the millionaires and
     very wealthy individuals. . . . Almost all possessors of great
     wealth enjoy neither what they nor their ancestors rightfully
     acquired (and if Mr. Herbert wishes to challenge the correctness of
     this statement, we are ready to go with him into a full discussion
     of the subject). . . .

     "If he holds that the landlords are justly entitled to their lands,
     let him make a defence of the landlords or an attack on our unjust
     proposal."
     [quoted by Carl Watner, "The English Individualists As They Appear
     In Liberty," pp. 191-211, Benjamin R. Tucker and the Champions of
     Liberty, Coughlin, Hamilton and Sullivan (eds.), pp. 199-200]

   It could be argued, in reply, that some "anarcho"-capitalists do argue
   that stolen property should be returned to its rightful owners and, as
   a result, do sometimes argue for land reform (namely, the seizing of
   land by peasants from their feudal landlords). However, this position
   is, at best, a pale shadow of the individualist anarchist position or,
   at worse, simply rhetoric. As leading "anarcho"-capitalist Walter Block
   pointed out:

     "While this aspect of libertarian theory sounds very radical, in
     practice it is less so. This is because the claimant always needs
     proof. Possession is nine tenths of the law, and to overcome the
     presumption that property is now in the hands of its rightful owners
     required that an evidentiary burden by overcome. The further back in
     history was the initial act of aggression (not only because written
     evidence is less likely to be available), the less likely it is that
     there can be proof of it." [Op. Cit., pp. 54-5]

   Somewhat ironically, Block appears to support land reform in Third
   World countries in spite of the fact that the native peoples have no
   evidence to show that they are the rightful owners of the land they
   work. Nor does he bother himself to wonder about the wider social
   impact of such theft, namely in the capital that was funded using it.
   If the land was stolen, then so was its products and so was any capital
   bought with the profits made from such goods. But, as he says, this
   aspect of right-"libertarian" ideology "sounds very radical" but "in
   practice it is less so." Apparently, theft is property! Not to mention
   that nine tenths of property is currently possessed (i.e., used) not by
   its "rightful owners" but rather those who by economic necessity have
   to work for them. This is a situation the law was designed to protect,
   including (apparently) a so-called "libertarian" one.

   This wider impact is key. As we indicated in [17]section F.8, state
   coercion (particularly in the form of the land monopoly) was essential
   in the development of capitalism. By restricting access to land,
   working class people had little option but to seek work from landlords
   and capitalists. Thus the stolen land ensured that workers were
   exploited by the landlord and the capitalist and so the exploitation of
   the land monopoly was spread throughout the economy, with the resulting
   exploited labour being used to ensure that capital accumulated. For
   Rothbard, unlike the individualist anarchists, the land monopoly had
   limited impact and can be considered separately from the rise of
   capitalism:

     "the emergence of wage-labour was an enormous boon for many
     thousands of poor workers and saved them from starvation. If there
     is no wage labour, as there was not in most production before the
     Industrial Revolution, then each worker must have enough money to
     purchase his own capital and tools. One of the great things about
     the emergence of the factory system and wage labour is that poor
     workers did not have to purchase their own capital equipment; this
     could be left to the capitalists." [Konkin on Libertarian Strategy]

   Except, of course, before the industrial revolution almost all workers
   did, in fact, have their own capital and tools. The rise of capitalism
   was based on what the exclusion of working people from the land by
   means of the land monopoly. Farmers were barred, by the state, from
   utilising the land of the aristocracy while their access to the commons
   was stripped from them by the imposition of capitalist property rights
   by the state. Thus Rothbard is right, in a sense. The emergence of
   wage-labour was based on the fact that workers had to purchase access
   to the land from those who monopolised it by means of state action --
   which was precisely what the individualist anarchists opposed. Wage
   labour, after all, first developed on the land not with the rise of the
   factory system. Even Rothbard, we hope, would not have been so crass as
   to say that landlordism was an enormous boon for those poor workers as
   it saved them from starvation for, after all, one of the great things
   about landlordism is that poor workers did not have to purchase their
   own land; that could be left to the landlords.

   The landless workers, therefore, had little option but to seek work
   from those who monopolised the land. Over time, increasing numbers
   found work in industry where employers happily took advantage of the
   effects of the land monopoly to extract as much work for as little pay
   as possible. The profits of both landlord and capitalist exploitation
   were then used to accumulate capital, reducing the bargaining power of
   the landless workers even more as it became increasingly difficult to
   set-up in business due to natural barriers to competition. It should
   also be stressed that once forced onto the labour market, the
   proletariat found itself subjected to numerous state laws which
   prevented their free association (for example, the banning of unions
   and strikes as conspiracies) as well as their ability to purchase their
   own capital and tools. Needless to say, the individualist anarchists
   recognised this and considered the ability of workers to be able to
   purchase their own capital and tools as an essential reform and,
   consequently, fought against the money monopoly. They reasoned, quite
   rightly, that this was a system of class privilege designed to keep
   workers in a position of dependency on the landlords and capitalists,
   which (in turn) allowed exploitation to occur. This was also the
   position of many workers, who rather than consider capitalism a boon,
   organised to defend their freedom and to resist exploitation -- and the
   state complied with the wishes of the capitalists and broke that
   resistance.

   Significantly, Tucker and other individualist anarchists saw state
   intervention has a result of capital manipulating legislation to gain
   an advantage on the so-called free market which allowed them to exploit
   labour and, as such, it benefited the whole capitalist class ("If,
   then, the capitalist, by abolishing the free market, compels other men
   to procure their tools and advantages of him on less favourable terms
   than they could get before, while it may be better for them to come to
   his terms than to go without the capital, does he not deduct from their
   earnings?" [Tucker, Liberty, no. 109, p. 4]). Rothbard, at best,
   acknowledges that some sections of big business benefit from the
   current system and so fails to have a comprehensive understanding of
   the dynamics of capitalism as a system (rather as an ideology). This
   lack of understanding of capitalism as a historic and dynamic system
   rooted in class rule and economic power is important in evaluating
   "anarcho"-capitalist claims to anarchism.

   Then there is the issue of strategy, with Rothbard insisting on
   "political action," namely voting for the Libertarian Party (or least
   non-"libertarian" party). "I see no other conceivable strategy for the
   achievement of liberty than political action," he stated. Like
   Marxists, voting was seen as the means of achieving the abolition of
   the state, as "a militant and abolitionist [Libertarian Party] in
   control of Congress could wipe out all the [non-'libertarian'] laws
   overnight . . . No other strategy for liberty can work." [Op. Cit.] The
   individualist anarchists, like other anarchists, rejected such
   arguments as incompatible with genuine libertarian principles. As
   Tucker put it, voting could not be libertarian as it would make the
   voter "an accomplice in aggression." [The Individualist Anarchists, p.
   305]

   Rothbard's position indicates an interesting paradox. Rothbard
   wholeheartedly supported "political action" as the only means of
   achieving the end of the state. Marxists (when not excommunicating
   anarchism from the socialist movement) often argue that they agree with
   the anarchists on the ends (abolition of the state) but only differed
   on the means (i.e., political action over direct action). Obviously, no
   one calls Marx an anarchist and this is precisely because he aimed to
   use political action to achieve the abolition of the state. Yet, for
   some reason, Rothbard's identical position on tactics makes some call
   him an anarchist. So, given Rothbard's argument that the state must be
   seized first by a political party by means of "political action" in
   order to achieve his end, the question must be raised why he is
   considered an anarchist at all. Marx and Engels, like Lenin, all made
   identical arguments against anarchism, namely that political action was
   essential so that the Socialist Party could seize state power and
   implement the necessary changes to ensure that the state withered away.
   No one has ever considered them anarchists in spite of the common aim
   of ending the state yet many consider Rothbard to be an anarchist
   despite advocating the same methods as the Marxists. As we noted in
   [18]section F.8, a better term for "anarcho"-capitalism could be
   "Marxist-capitalism" and Rothbard's argument for "political action"
   confirms that suggestion.

   Needless to say, other strategies favoured by many individualists
   anarchists were rejected by "anarcho"-capitalists. Unlike Tucker, Lum
   and others, Rothbard was totally opposed to trade unions and strikes,
   viewing unions as coercive institutions which could not survive under
   genuine capitalism (given the powers of property owners and the
   inequalities of such a society, he may well have been right in thinking
   workers would be unable to successfully defend their basic freedoms
   against their masters but that is another issue). The individualist
   anarchists were far more supportive. Henry Cohen, for example,
   considered the union as a "voluntary association formed for the mutual
   benefit of its members, using the boycott and other passive weapons in
   its fight against capitalism and the State." This was "very near the
   Anarchist idea." Some individualists were more critical of unions than
   others. One, A.H. Simpson, argued that the trade unions "are as
   despotic and arbitrary as any other organisation, and no more
   Anarchistic than the Pullman or Carnegie companies." In other words,
   the unions were to be opposed because they were like capitalist
   corporations! [The Individualist Anarchists, p. 285 and p. 288] For
   Tucker, as we note in [19]section G.5, unions were "a movement for
   self-government on the part of the people" and it was "in supplanting"
   the state "by an intelligent and self-governing socialism that the
   trades unions develop their chief significance." [Liberty, no. 22, p.
   3]

   So the claims that "anarcho"-capitalism is a new form of individualist
   anarchism can only be done on the basis of completely ignoring the
   actual history of capitalism as well as ignoring the history, social
   context, arguments, aims and spirit of individualist anarchism. This is
   only convincing if the actual ideas and aims of individualist anarchism
   are unknown or ignored and focus is placed on certain words used (like
   "markets" and "property") rather than the specific meanings provided to
   them by its supporters. Sadly, this extremely superficial analysis is
   all too common -- particularly in academic circles and, of course, in
   right-"libertarian" ones.

   Finally, it may be objected that "anarcho"-capitalism is a diverse, if
   small, collection of individuals and some of them are closer to
   individualist anarchism than others. Which is, of course, true (just as
   some Marxists are closer to social anarchism than others). A few of
   them do reject the notion than hundreds of years of state-capitalist
   intervention has had little impact on the evolution of the economy and
   argue that a genuinely free economy would see the end of the current
   form of property rights and non-labour income as well as the
   self-employment and co-operatives becoming the dominant form of
   workplace organisation (the latter depends on the former, of course,
   for without the necessary social preconditions a preference for
   self-employment will remain precisely that). As Individualist Anarchist
   Shawn Wilbur put, there is a difference between those
   "anarcho"-capitalists who are ideologues for capitalism first and
   foremost and the minority who are closer to traditional anarchist
   aspirations. If the latter manage to jettison the baggage they have
   inherited from "Austrian" economics as well as the likes of Murray
   Rothbard and realise that they are, in fact, free market socialists and
   not in favour of capitalism then few anarchists would hold their past
   against them any more than they would a state socialist or left-liberal
   who realised the error of their ways. Until they do, though, few
   anarchists would accept them as anarchists.

G.3.3 What about "anarcho"-capitalists' support of "defence associations"?

   It would be fair to say that "anarcho"-capitalist interest in
   individualist anarchism rests on their argument that, to quote Tucker,
   "defense is a service, like any other service", and that such a service
   could and should be provided by private agencies paid for like any
   other commodity on the market. [Liberty, no. 104, p. 4] Therefore:

     "Anarchism means no government, but it does not mean no laws and no
     coercion. This may seem paradoxical, but the paradox vanishes when
     the Anarchist definition of government is kept in view. Anarchists
     oppose government, not because they disbelieve in punishment of
     crime and resistance to aggression, but because they disbelieve in
     compulsory protection. Protection and taxation without consent is
     itself invasion; hence Anarchism favours a system of voluntary
     taxation and protection." [Op. Cit., no. 212, p. 2]

   While most of the rest of the theory is ignored or dismissed as being
   the product of "bad" economics, this position is considered the key
   link between the two schools of thought. However, it is not enough to
   say that both the individualist anarchists and "anarcho"-capitalists
   support a market in protection, you need to look at what forms of
   property are being defended and the kind of society within which it is
   done. Change the social context, change the kinds of property which are
   being defended and you change the nature of the society in question. In
   other words, defending capitalist property rights within an unequal
   society is radically different in terms of individual liberty than
   defending socialistic property rights within an equal society -- just
   as a market economy based on artisan, peasant and co-operative
   production is fundamentally different to one based on huge corporations
   and the bulk of the population being wage slaves. Only the most
   superficial analysis would suggest that they are the same and label
   both as being "capitalist" in nature.

   It should, therefore, not be forgotten that the individualist
   anarchists advocated a system rooted in individual possession of land
   and tools plus the free exchange of the products of labour between
   self-employed people or wage workers who receive the full equivalent of
   their product. This means that they supported the idea of a market in
   "defence associations" to ensure that the fruits of an individual's
   labour would not be stolen by others. Again, the social context of
   individualist anarchism -- namely, an egalitarian economy without
   exploitation of labour (see [20]section G.3.4) -- is crucial for
   understanding these proposals. However, as in their treatment of
   Tucker's support for contract theory, "anarcho"-capitalists remove the
   individualist anarchists' ideas about free-market defence associations
   and courts from the social context in which they were proposed, using
   those ideas in an attempt to turn the individualists into defenders of
   capitalism.

   As indicated in [21]section G.1.4, the social context in question was
   one in which an economy of artisans and peasant farmers was being
   replaced by a state-backed capitalism. This context is crucial for
   understanding the idea of the "defence associations" that Tucker
   suggested. For what he proposed was clearly not the defence of
   capitalist property relations. This can be seen, for example, in his
   comments on land use. Thus:

     "'The land for the people' . . . means the protection by . . .
     voluntary associations for the maintenance of justice . . . of all
     people who desire to cultivate land in possession of whatever land
     they personally cultivate . . . and the positive refusal of the
     protecting power to lend its aid to the collection of any rent,
     whatsoever." [Instead of a Book, p. 299]

   There is no mention here of protecting capitalist farming, i.e.
   employing wage labour; rather, there is explicit mention that only land
   being used for personal cultivation -- thus without employing wage
   labour -- would be defended. In other words, the defence association
   would defend "occupancy and use" (which is a clear break with
   capitalist property rights) and not the domination of the landlord over
   society or those who use the land the landlord claims to own. This
   means that certain contracts were not considered valid within
   individualist anarchism even if they were voluntarily agreed to by the
   parties involved and so would not be enforceable by the "defence
   associations." As Tucker put it:

     "A man cannot be allowed, merely by putting labour, to the limit of
     his capacity and beyond the limit of his personal use, into material
     of which there is a limited supply and the use of which is essential
     to the existence of other men, to withhold that material from other
     men's use; and any contract based upon or involving such withholding
     is lacking in sanctity or legitimacy as a contract to deliver stolen
     goods." [Liberty, No. 321, p. 4]

   Refusal to pay rent on land is a key aspect of Tucker's thought, and it
   is significant that he explicitly rejects the idea that a defence
   association can be used to collect it. In addition, as a means towards
   anarchy, Tucker suggests "inducing the people to steadily refuse the
   payment of rent and taxes." [Instead of a Book, p. 299] It is hard to
   imagine that a landowner influenced by Murray Rothbard or David
   Friedman would support such an arrangement or a "defence association"
   that supported it. As such, the individualist anarchist system would
   impose restrictions on the market from an "anarcho"-capitalist
   perspective. Equally, from an individualist anarchist perspective,
   "anarcho"-capitalism would be enforcing a key class monopoly by force
   and so would simply be another kind of state. As Tucker put it in reply
   to the proto-right-"libertarian" Auberon Herbert:

     "It is true that Anarchists . . . do, in a sense, propose to get rid
     of ground-rent by force. That is to say, if landlords should try to
     evict occupants, the Anarchists advice the occupants to combine to
     maintain their ground by force . . . But it is also true that the
     Individualists . . . propose to get rid of theft by force . . . The
     Anarchists justify the use of machinery (local juries, etc.) to
     adjust the property question involved in rent just as the
     Individualists justify similar machinery to adjust the property
     question involved in theft." [Op. Cit., no. 172, p. 7]

   It comes as no surprise to discover that Tucker translated Proudhon's
   What is Property? and subscribed to its conclusion that "property is
   robbery"!

   This opposition to the "land monopoly" was, like all the various
   economic proposals made by the individualist anarchists, designed to
   eliminate the vast differences in wealth accruing from the "usury" of
   industrial capitalists, bankers, and landlords. For example, Josiah
   Warren "proposed like Robert Owen an exchange of notes based on labour
   time . . . He wanted to establish an 'equitable commerce' in which all
   goods are exchanged for their cost of production . . . In this way
   profit and interest would be eradicated and a highly egalitarian order
   would emerge." [Peter Marshall, Demanding the Impossible, p. 385] Given
   that the Warrenites considered that both workers and managers would
   receive equal payment for equal hours worked (the manager may, in fact
   earn less if it were concluded that their work was less unpleasant than
   that done on the shopfloor), the end of a parasitic class of wealthy
   capitalists was inevitable.

   In the case of Benjamin Tucker, he was a firm adherent of socialist
   economic analysis, believing that a free market and interest-free
   credit would reduce prices to the cost of production and increase
   demand for labour to the point where workers would receive the full
   value of their labour. In addition, recognising that gold was a rare
   commodity, he rejected a gold-backed money supply in favour of a
   land-backed one, as land with "permanent improvements on" it is "an
   excellent basis for currency." [Instead of a Book, p. 198] Given that
   much of the population at the time worked on their own land, such a
   money system would have ensured easy credit secured by land. Mutualism
   replaced the gold standard (which, by its very nature would produce an
   oligarchy of banks) with money backed by other, more available,
   commodities.

   Such a system, the individualist anarchists argued, would be unlikely
   to reproduce the massive inequalities of wealth associated with
   capitalism and have a dynamic utterly different to that system. They
   did not consider the state as some alien body grafted onto capitalism
   which could be removed and replaced with "defence associations" leaving
   the rest of society more or less the same. Rather, they saw the state
   as being an essential aspect of capitalism, defending key class
   monopolies and restricting freedom for the working class. By abolishing
   the state, they automatically abolished these class monopolies and so
   capitalism. In other words, they had political and economic goals and
   ignoring the second cannot help but produce different results. As
   Voltairine de Cleyre put it in her individualist days, Anarchism "means
   not only the denial of authority, not only a new economy, but a
   revision of the principles of morality. It means the development of the
   individual as well as the assertion of the individual." [The Voltairine
   de Cleyre Reader, p. 9]

   Right-"libertarians" reject all of this, the social context of Tucker's
   ideas on "defence associations." They do not aim for a "new economy",
   but simply the existing one without a public state. They have no
   critique of capitalist property rights nor any understanding of how
   such rights can produce economic power and limit individual freedom. In
   fact, they attack what they consider the "bad economics" of the
   individualists without realising it is precisely these "bad" (i.e.
   anti-capitalist) economics which will minimise, if not totally
   eliminate, any potential threat to freedom associated with "defence
   associations." Without the accumulations of wealth inevitable when
   workers' do not receive the full product of their labour, it is
   unlikely that a "defence association" would act like the private police
   forces American capitalists utilised to break unions and strikes both
   in Tucker's time and now. Unless this social context exists, any
   defence associations will soon become mini-states, serving to enrich
   the elite few by protecting the usury they gain from, and their power
   and control (i.e. government) over, those who toil. In other words, the
   "defence associations" of Tucker and Spooner would not be private
   states, enforcing the power of capitalists and landlords upon wage
   workers. Instead, they would be like insurance companies, protecting
   possessions against theft (as opposed to protecting capitalist theft
   from the dispossessed as would be the case in "anarcho"-capitalism --
   an important difference lost on the private staters). Where social
   anarchists disagree with individualist anarchists is on whether a
   market system will actually produce such equality, particularly one
   without workers' self-management replacing the authority inherent in
   the capitalist-labourer social relationship. As we discuss in
   [22]section G.4, without the equality and the egalitarian relationships
   of co-operative and artisan production there would be a tendency for
   capitalism and private statism to erode anarchy.

   In addition, the emphasis given by Tucker and Lysander Spooner to the
   place of juries in a free society is equally important for
   understanding how their ideas about defence associations fit into a
   non-capitalist scheme. For by emphasising the importance of trial by
   jury, they knock an important leg from under the private statism
   associated with "anarcho"-capitalism. Unlike a wealthy judge, a jury
   made up mainly of fellow workers would be more inclined to give
   verdicts in favour of workers struggling against bosses or of peasants
   being forced off their land by immoral, but legal, means. As Lysander
   Spooner argued in 1852, "[i]f a jury have not the right to judge
   between the government and those who disobey its laws, and resist its
   oppressions, the government is absolute, and the people, legally
   speaking, are slaves. Like many other slaves they may have sufficient
   courage and strength to keep their masters somewhat in check; but they
   are nevertheless known to the law only as slaves." [Trial by Jury] It
   is hardly surprising that Rothbard rejects this in favour of a legal
   system determined and interpreted by lawyers, judges and jurists.
   Indeed, as we noted in [23]section F.6.1, Rothbard explicitly rejected
   the idea that juries should be able to judge the law as well as the
   facts of a case under his system. Spooner would have had no problem
   recognising that replacing government imposed laws with those made by
   judges, jurists and lawyers would hardly change the situation much. Nor
   would he have been too surprised at the results of a free market in
   laws in a society with substantial inequalities in income and wealth.

   Individualist Anarchist Laurance Labadie, the son of Tucker associate
   Joseph Labadie, argued in response to Rothbard as follows:

     "Mere common sense would suggest that any court would be influenced
     by experience; and any free-market court or judge would in the very
     nature of things have some precedents guiding them in their
     instructions to a jury. But since no case is exactly the same, a
     jury would have considerable say about the heinousness of the
     offence in each case, realising that circumstances alter cases, and
     prescribing penalty accordingly. This appeared to Spooner and Tucker
     to be a more flexible and equitable administration of justice
     possible or feasible, human beings being what they are . . .

     "But when Mr. Rothbard quibbles about the jurisprudential ideas of
     Spooner and Tucker, and at the same time upholds presumably in his
     courts the very economic evils which are at bottom the very reason
     for human contention and conflict, he would seem to be a man who
     chokes at a gnat while swallowing a camel."
     [quoted by Mildred J. Loomis and Mark A. Sullivan, "Laurance
     Labadie: Keeper Of The Flame", pp. 116-30, Benjamin R. Tucker and
     the Champions of Liberty, Coughlin, Hamilton and Sullivan (eds.), p.
     124]

   As we argued in detail in [24]section F.6, a market for "defence
   associations" within an unequal system based on extensive wage labour
   would simply be a system of private states, enforcing the authority of
   the property owner over those who use but do not own their property.
   Such an outcome can only be avoided within an egalitarian society where
   wage-labour is minimised, if not abolished totally, in favour of
   self-employment (whether individually or co-operatively). In other
   words, the kind of social context which the individualist anarchists
   explicitly or implicitly assumed and aimed for. By focusing selectively
   on a few individualist proposals taken out of their social context,
   Rothbard and other "anarcho"-capitalists have turned the libertarianism
   of the individualist anarchists into yet another ideological weapon in
   the hands of (private) statism and capitalism.

   When faced with the actual visions of a good society proposed by such
   people as Tucker and Spooner, "anarcho"-capitalists tend to dismiss
   them as irrelevant. They argue that it does not matter what Tucker or
   Spooner thought would emerge from the application of their system, it
   is the fact they advocated the "free market", "private property" and
   "defence associations" that counts. In response anarchists note three
   things. Firstly, individualist anarchists generally held radically
   different concepts of what a "free market" and "private property" would
   be in their system and so the tasks of any "defence association" would
   be radically different. As such, anarchists argue that
   "anarcho"-capitalists simply look at the words people use rather than
   what they meant by them and the social context in which they are used.
   Secondly, it seems a strange form of support to rubbish the desired
   goals of people you claim to follow. If someone claimed to be a Marxist
   while, at the same time, arguing that Marx was wrong about socialism
   people would be justified in questioning their use of that label.
   Thirdly, and most importantly, no one advocates a means which would not
   result in their desired ends. If Tucker and Spooner did not think their
   system would result in their goals they would have either changed their
   goals or changed their method. As noted in [25]section G.1.1, Tucker
   explicitly argued that concentrations of wealth under capitalism had
   reached such levels that his system of free competition would not end
   it. Clearly, then, outcomes were important to individualist anarchists.

   The lack of commonality can also be seen from the right-"libertarian"
   response to Kevin Carson's excellent Studies in Mutualist Political
   Economy, an impressive modern restatement of the ideas of Tucker and
   other individualist anarchists. Leading "anarcho"-capitalist Walter
   Block dismissed "Marxists like Carson" and labelled him "a supposed
   anarchist" who on many issues "is out there, way, way out there in some
   sort of Marxist never-never land." ["Kevin Carson as Dr. Jeryll and Mr.
   Hyde", pp. 35-46, Journal of Libertarian Studies, vol. 20, no. 1, p.
   40, p. 43 and p. 45] Another right-"libertarian", George Reisman,
   concurred stated that for the most part "Carson is a Marxist", while
   arguing that "the 'individualist' anarchist shows himself to be quite
   the collectivist, attributing to the average person qualities of
   independent thought and judgement that are found only in exceptional
   individuals." Carson's "views on the nature of ownership give full
   support to the conception of anarchy . . . as being nothing but chaos."
   Overall, "Carson is essentially a Marxist and his book filled with
   ignorant Marxist diatribes against capitalism." ["Freedom is Slavery:
   Laissez-Faire capitalism is government intervention", Op. Cit., pp.
   47-86, p. 47, p. 55, p. 61 and p. 84] Needless to say, all the issues
   which Block and Geisman take umbridge at can be found in the works of
   individualist anarchists like Tucker (Carson's excellent dissection of
   these remarkably ignorant diatribes is well worth reading ["Carson's
   Rejoinders", pp. 97-136, Op. Cit.]).

   So the notion that a joint support for a market in "defence services"
   can allow the social and theoretical differences between
   "anarcho"-capitalism and individualist anarchism to be ignored is just
   nonsense. This can best be seen from the fate of any individualist
   anarchist defence association within "anarcho"-capitalism. As it would
   not subscribe to Rothbard's preferred system of property rights it
   would be in violation of the "general libertarian law code" drawn up
   and implemented by right-"libertarian" jurists, judges and lawyers.
   This would, by definition, make such an association "outlaw" when it
   defended tenants against attempts to extract rents from them or to
   evict them from the land or buildings they used but did not own. As it
   is a judge-run system, no jury would be able to judge the law as well
   as the crime, so isolating the capitalist and landlord class from
   popular opposition. Thus the ironic situation arises that the "Benjamin
   Tucker defence association" would be declared an outlaw organisation
   under "anarcho"-capitalism and driven out of business (i.e., destroyed)
   as it broke the land monopoly which the law monopoly enforces. Even
   more ironically, such an organisation would survive in an communist
   anarchist society (assuming it could find enough demand to make it
   worthwhile).

   If the world had had the misfortune of having "anarcho"-capitalism
   imposed on it in the nineteenth century, individualist anarchists like
   Warren, Tucker, Labadie, Ingalls and Lum would have joined Proudhon,
   Bakunin, Kropotkin, Parsons and Goldman in prison for practising
   "occupancy and use" in direct violation of the "general libertarian law
   code." That it was private police, private courts and private prisons
   which were enforcing such a regime would not have been considered that
   much of an improvement.

   Unsurprisingly, Victor Yarros explicitly distanced himself from those
   "want liberty to still further crush and oppress the people; liberty to
   enjoy their plunder without fear of the State's interfering with them .
   . . liberty to summarily deal with impudent tenants who refuse to pay
   tribute for the privilege of living and working on the soil." [Liberty,
   no. 102, p. 4] He would have had little problem recognising
   "anarcho"-capitalism as being a supporter of "that particular kind of
   freedom which the bourgeoisie favours, and which is championed by the
   bourgeoisie's loyal servants, [but] will never prove fascinating to the
   disinherited and oppressed." [Op. Cit., no. 93, p. 4]

G.3.4 Why is individualist anarchist support for equality important?

   Another another key difference between genuine individualist anarchism
   and "anarcho"-capitalism is the former's support for equality and the
   latter's a lack of concern for it.

   In stark contrast to anarchists of all schools, inequality is not seen
   to be a problem with "anarcho"-capitalists (see [26]section F.3).
   However, it is a truism that not all "traders" are equally subject to
   the market (i.e., have the same market power). In many cases, a few
   have sufficient control of resources to influence or determine price
   and in such cases, all others must submit to those terms or not buy the
   commodity. When the commodity is labour power, even this option is
   lacking -- workers have to accept a job in order to live. As we argued
   in [27]section C.9, workers are usually at a disadvantage on the labour
   market when compared to capitalists, and this forces them to sell their
   liberty in return for making profits for others. These profits increase
   inequality in society as the property owners receive the surplus value
   their workers produce. This increases inequality further, consolidating
   market power and so weakens the bargaining position of workers further,
   ensuring that even the freest competition possible could not eliminate
   class power and society (something Tucker eventually recognised as
   occurring with the development of trusts within capitalism -- see
   [28]section G.1.1).

   By removing the underlying commitment to abolish non-labour income, any
   "anarchist" capitalist society would have vast differences in wealth
   and so power. Instead of a government imposed monopolies in land, money
   and so on, the economic power flowing from private property and capital
   would ensure that the majority remained in (to use Spooner's words)
   "the condition of servants" (see sections [29]F.2 and [30]F.3.1 for
   more on this). The Individualist Anarchists were aware of this danger
   and so supported economic ideas that opposed usury (i.e. rent, profit
   and interest) and ensured the worker the full value of her labour.
   While not all of them called these ideas "socialist" it is clear that
   these ideas are socialist in nature and in aim (similarly, not all the
   Individualist Anarchists called themselves anarchists but their ideas
   are clearly anarchist in nature and in aim). This combination of the
   political and economic is essential as they mutually reinforce each
   other. Without the economic ideas, the political ideas would be
   meaningless as inequality would make a mockery of them. As Spooner
   argued, inequality lead to many social evils:

     "Extremes of difference, in their pecuniary circumstances, divide
     society into castes; set up barriers to personal acquaintance;
     prevent or suppress sympathy; give to different individuals a widely
     different experience, and thus become the fertile source of
     alienation, contempt, envy, hatred, and wrong. But give to each man
     all the fruits of his own labour, and a comparative equality with
     others in his pecuniary condition, and caste is broken down;
     education is given more equally to all; and the object is promoted
     of placing each on a social level with all: of introducing each to
     the acquaintance of all; and of giving to each the greatest amount
     of that experience, which, being common to all, enables him to
     sympathise with all, and insures to himself the sympathy of all. And
     thus the social virtues of mankind would be greatly increased."
     [Poverty: Its Illegal Causes and Legal Cure, pp. 46-7]

   Because of the evil effects of inequality on freedom, both social and
   individualist anarchists desire to create an environment in which
   circumstances would not drive people to sell their liberty to others at
   a disadvantage. In other words, they desired an equalisation of market
   power by opposing interest, rent and profit and capitalist definitions
   of private property. Kline summarises this by saying "the American
   [individualist] anarchists exposed the tension existing in liberal
   thought between private property and the ideal of equal access. The
   Individual Anarchists were, at least, aware that existing conditions
   were far from ideal, that the system itself working against the
   majority of individuals in their efforts to attain its promises. Lack
   of capital, the means to creation and accumulation of wealth, usually
   doomed a labourer to a life of exploitation. This the anarchists knew
   and they abhorred such a system." [The Individualist Anarchists: A
   critique of liberalism, p. 102]

   And this desire for bargaining equality is reflected in their economic
   ideas and by removing these underlying economic ideas of the
   individualist anarchists, "anarcho"-capitalism makes a mockery of any
   ideas they do appropriate. Essentially, the Individualist Anarchists
   agreed with Rousseau that in order to prevent extreme inequality of
   fortunes you deprive people of the means to accumulate in the first
   place and not take away wealth from the rich. An important point which
   "anarcho"-capitalism fails to understand or appreciate.

   The Individualist Anarchists assumed that exploitation of labour would
   be non-existent in their system, so a general equality would prevail
   and so economic power would not undermine liberty. Remove this
   underlying assumption, assume that profits could be made and capital
   accumulated, assume that land can be monopolised by landlords (as the
   "anarcho"-capitalists do) and a radically different society is
   produced. One in which economic power means that the vast majority have
   to sell themselves to get access to the means of life and are exploited
   by those who own them in the process. A condition of "free markets" may
   exist, but as Tucker argued in 1911, it would not be anarchism. The
   deus ex machina of invisible hands takes a beating in the age of
   monopolies.

   So we must stress that the social situation is important as it shows
   how apparently superficially similar arguments can have radically
   different aims and results depending on who suggests them and in what
   circumstances. Hence the importance of individualist anarchist support
   for equality. Without it, genuine freedom would not exist for the many
   and "anarchy" would simply be private statism enforcing rule by the
   rich.

G.3.5 Would individualist anarchists have accepted "Austrian" economics?

   One of the great myths perpetrated by "anarcho"-capitalists is the
   notion that "anarcho"-capitalism is simply individualist anarchism plus
   "Austrian" economics. Nothing could be further from the truth, as is
   clear once the individualist anarchist positions on capitalist property
   rights, exploitation and equality are understood. Combine this with
   their vision of a free society as well as the social and political
   environment they were part of and the ridiculous nature of such claims
   become obvious.

   At its most basic, Individualist anarchism was rooted in socialist
   economic analysis as would be expected of a self-proclaimed socialist
   theory and movement. The "anarcho"-capitalists, in a roundabout way,
   recognise this with Rothbard dismissing the economic fallacies of
   individualist anarchism in favour of "Austrian" economics. "There is,"
   he stated, "in the body of thought known as 'Austrian economics,' a
   scientific [sic!] explanation of the workings of the free market . . .
   which individualist anarchists could easily incorporate into their so
   political and social Weltanshauung. But to do this, they must throw out
   the worthless excess baggage of money-crankism and reconsider the
   nature and justification of the economic categories of interest, rent
   and profit." Yet Rothbard's assertion is nonsense, given that the
   individualist anarchists were well aware of various justifications for
   exploitation expounded by the defenders of capitalism and rejected
   everyone. He himself noted that the "individualist anarchists were
   exposed to critiques of their economic fallacies; but, unfortunately,
   the lesson, despite the weakness of Tucker's replies, did not take."
   ["The Spooner-Tucker Doctrine: An Economist's View", Op. Cit., p. 14]
   As such, it seems like extremely wishful thinking that the likes of
   Tucker would have rushed to embrace an economic ideology whose basic
   aim has always been to refute the claims of socialism and defend
   capitalism from attacks on it.

   Nor can it be suggested that the individualist anarchists were ignorant
   of the developments within bourgeois economics which the "Austrian"
   school was part of. Both Tucker and Yarros, for example, attacked
   marginal productivity theory as advocated by John B. Clark. [Liberty,
   no. 305] Tucker critiqued another anarchist for once being an
   "Anarchistic socialist, standing squarely upon the principles of
   Liberty and Equity" but then "abandon[ing] Equity by repudiating the
   Socialistic theory of value and adopting one which differs but little,
   if any, from that held by the ordinary economist." [Op. Cit., no. 80,
   p. 4] So the likes of Tucker were well aware of the so-called
   marginalist revolution and rejected it.

   Somewhat ironically, a key founders of "Austrian" economics was quoted
   favourably in Liberty but only with regards to his devastating critique
   of existing theories of interest and profit. Hugo Bilgram asked a
   defender of interest whether he had "ever read Volume 1 of
   Bhm-Bawerk's 'Capital and Interest'" for in this volume "the
   fructification theory is . . . completely refuted." Bilgram, needless
   to say, did not support Bhm-Bawerk's defence of usury, instead arguing
   that restrictions in the amount of money forced people to pay for its
   use and "[t]his, and nothing else, [causes] the interest accruing to
   capital, regarding which the modern economists are doing their utmost
   to find a theory that will not expose the system of industrial piracy
   of today." He did not exclude Bhm-Bawerk's theory from his conclusion
   that "since every one of these pet theories is based on some fallacy,
   [economists] cannot agree upon any one." The abolition of the money
   monopoly will "abolish the power of capital to appropriate a net
   profit." [Op. Cit., no. 282, p. 11] Tucker himself noted that
   Bhm-Bawerk "has refuted all these ancient apologies for interest --
   productivity of capital, abstinence, etc." [Op. Cit., no. 287, p. 5]
   Liberty also published a synopsis of Francis Tandy's Voluntary
   Socialism, whose chapter 6 was "devoted to an analysis of value
   according to the marginal utility value of Bhm-Bawerk. It also deals
   with the Marxian theory of surplus value, showing that all our economic
   ills are due to the existence of that surplus value." [Op. Cit., no.
   334, p. 5] Clearly, then, the individualist anarchists were aware of
   the "Austrian" tradition and only embraced its critique of previous
   defences of non-labour incomes.

   We have already critiqued the "time preference" justification for
   interest in [31]section C.2.7 so will not go into it in much detail
   here. Rothbard argued that it "should be remembered by radicals that,
   if they wanted to, all workers could refuse to work for wages and
   instead form their own producers' co-operatives and wait for years for
   their pay until the producers are sold to the consumers; the fact that
   they do not do so, shows the enormous advantage of the capital
   investment, wage-paying system as a means of allowing workers to earn
   money far in advance of the sale of their products." And how, Professor
   Rothbard, are these workers to live during the years they wait until
   their products are sold? The reason why workers do not work for
   themselves has nothing to do with "time preference" but their lack of
   resources, their class position. Showing how capitalist ideology clouds
   the mind, Rothbard asserted that interest ("in the shape of 'long-run'
   profit") would still exist in a "world in which everyone invested his
   own money and nobody loaned or borrowed." [Op. Cit., p. 12] Presumably,
   this means that the self-employed worker who invests her own money into
   her own farm pays herself interest payments just as her labour income
   is, presumably, the "profits" from which this "interest" payment is
   deducted along with the "rent" for access to the land she owns!

   So it seems extremely unlikely that the individualist anarchists would
   have considered "Austrian" economics as anything other than an attempt
   to justify exploitation and capitalism, like the other theories they
   spent so much time refuting. They would quickly have noted that "time
   preference", like the "waiting"/"abstinence" justifications for
   interest, is based on taking the current class system for granted and
   ignoring the economic pressures which shape individual decisions. In
   Tucker's words (when he critiqued Henry George's argument that interest
   is related to time) "increase which is purely the work of time bears a
   price only because of monopoly." The notion that "time" produced profit
   or interest was one Tucker was well aware of, and refuted on many
   occasions. He argued that it was class monopoly, restrictions on
   banking, which caused interest and "where there is no monopoly there
   will be little or no interest." If someone "is to be rewarded for his
   mere time, what will reward him save [another]'s labour? There is no
   escape from this dilemma. The proposition that the man who for time
   spent in idleness receives the product of time employed in labour is a
   parasite upon the body industrial is one which . . . [its supporters]
   can never successfully dispute with men who understand the rudiments of
   political economy." [Liberty, no. 109, p. 4 and p. 5] For Joshua King
   Ingalls, "abstinence" (or the ability to "wait," as it was renamed in
   the late nineteenth century) was "a term with which our cowardly moral
   scientists and political economists attempt to conjure up a spirit that
   will justify the greed of our land and money systems; by a casuistry
   similar to that which once would have justified human slavery."
   ["Labor, Wages, And Capital. Division Of Profits Scientifically
   Considered," Brittan's Quarterly Journal, I (1873), pp. 66-79]

   What of the economic justification for that other great evil for
   individualist anarchists, rent? Rothbard attacked Adam Smith comment
   that landlords were monopolists who demanded rent for nature's produce
   and like to reap where they never sowed. As he put it, Smith showed "no
   hint of recognition here that the landlord performs the vital function
   of allocating the land to its most productive use." [An Austrian
   Perspective on the History of Economic Thought, vol. 1, p. 456] Yet, as
   Smith was well aware, it is the farmer who has to feed himself and pay
   rent who decides how best to use the land, not the landlord. All the
   landlord does is decide whether to throw the farmer off the land when a
   more profitable business opportunity arrives (as in, say, during the
   Highland clearances) or that it is more "productive" to export food
   while local people starve (as in, say, the great Irish famine). It was
   precisely this kind of arbitrary power which the individualist
   anarchists opposed. As John Beverley Robinson put it, the "land owner
   gives nothing whatever, but permission to you to live and work on his
   land. He does not give his product in exchange for yours. He did not
   produce the land. He obtained a title at law to it; that is, a
   privilege to keep everybody off his land until they paid him his price.
   He is well called the lord of the land -- the landlord!" [Patterns of
   Anarchy, p. 271]

   Significantly, while Rothbard attacked Henry George's scheme for land
   nationalisation as being a tax on property owners and stopping rent
   playing the role "Austrian" economic theory assigns it, the
   individualist anarchists opposed it because, at best, it would not end
   landlordism or, at worse, turn the state into the only landlord. In an
   unequal society, leasing land from the state "would greatly enhance the
   power of capitalism to engross the control of the land, since it would
   relieve it of the necessity of applying large amounts in purchasing
   land which it could secure the same control of by lease . . . It would
   greatly augment and promote the reign of the capitalism and displace
   the independent worker who now cultivates his own acres, but who would
   be then unable to compete with organised capital . . . and would be
   compelled to give up his holding and sink into the ranks of the
   proletariat." [Joshua King Ingalls, Bowman N. Hall, "Joshua K. Ingalls,
   American Individualist: Land Reformer, Opponent of Henry George and
   Advocate of Land Leasing, Now an Established Mode", pp. 383-96,
   American Journal of Economics and Sociology, Vol. 39, No. 4, p. 394]

   Given Tucker's opposition to rent, interest and profit is should go
   without saying that he rejected the neo-classical and "Austrian" notion
   that a workers' wages equalled the "marginal product," i.e. its
   contribution to the production process (see [32]section C.2 for a
   critique of this position). Basing himself on the socialist critique of
   classical economics developed by Proudhon and Marx, he argued that
   non-labour income was usury and would be driven to zero in a genuinely
   free market. As such, any notion that Tucker thought that workers in a
   "free market" are paid according to their marginal product is simply
   wrong and any claim otherwise shows a utter ignorance of the subject
   matter. Individualist anarchists like Tucker strongly believed that a
   truly free (i.e. non-capitalist) market would ensure that the worker
   would receive the "full product" of his or her labour. Nevertheless, in
   order to claim Tucker as a proto-"anarcho"-capitalist,
   "anarcho"-capitalists may argue that capitalism pays the "market price"
   of labour power, and that this price does reflect the "full product"
   (or value) of the worker's labour. As Tucker was a socialist, we doubt
   that he would have agreed with the "anarcho"-capitalist argument that
   market price of labour reflected the value it produced. He, like the
   other individualist anarchists, was well aware that labour produces the
   "surplus value" which was appropriated in the name of interest, rent
   and profit. In other words, he very forcibly rejected the idea that the
   market price of labour reflects the value of that labour, considering
   "the natural wage of labour is its product" and "that this wage, or
   product, is the only just source of income." [Instead of a Book, p. 6]

   Liberty also favourably quoted a supporter of the silver coinage,
   General Francis A. Walker, and his arguments in favour of ending the
   gold standard. It praised his argument as "far more sound and rational
   than that of the supercilios, narrow, bigoted monomentallists." Walker
   attacked those "economists of the a priori school, who treat all things
   industrial as if they were in a state of flux, ready to be poured
   indifferently into any kind of mould or pattern." These economists "are
   always on hand with the answer that industrial society will 'readjust'
   itself to the new conditions" and "it would not matter if wages were at
   any time unduly depressed by combinations of employers, inasmuch as the
   excess of profits resulting would infallibly become capital, and as
   such, constitute an additional demand for labour . . . It has been the
   teaching of the economists of this sort which has so deeply discredited
   political economy with the labouring men on the one hand, and with
   practical business men on the other." The "greatest part of the evil of
   a diminishing money supply is wrought through the discouragement of
   enterprise." [Liberty, no. 287, p. 11] Given that the "Austrian" school
   takes the a priori methodology to ridiculous extremes and is always on
   hand to defend "excess of profits", "combinations of employers" and the
   gold standard we can surmise Tucker's reaction to Rothbard's pet
   economic ideology.

   Somewhat ironically, give Rothbard's attempts to inflict bourgeois
   economics along with lots of other capitalist ideology onto
   individualist anarchism, Kropotkin noted that supporters of
   "individualist anarchism . . . soon realise that the individualisation
   they so highly praise is not attainable by individual efforts, and . .
   . [some] abandon the ranks of the anarchists, and are driven into the
   liberal individualism of the classical economists." [Anarchism, p. 297]
   "Anarcho"-capitalists confuse the ending place of ex-anarchists with
   their starting point. As can be seen from their attempt to co-opt the
   likes of Spooner and Tucker, this confusion only appears persuasive by
   ignoring the bulk of their ideas as well as rewriting the history of
   anarchism.

   So it can, we think, be save to assume that Tucker and other
   individualist anarchists would have little problem in refuting
   Rothbard's economic fallacies as well as his goldbug notions (which
   seem to be a form of the money monopoly in another form) and support
   for the land monopoly. Significantly, modern individualist anarchists
   like Kevin Carson have felt no need to embrace "Austrian" economics and
   retain their socialist analysis while, at the same time, making telling
   criticisms of Rothbard's favourite economic ideology and the
   apologetics for "actually existing" capitalism its supporters too often
   indulge in (Carson calls this "vulgar libertarianism", wherein
   right-"libertarians" forget that the current economuy is far from their
   stated ideal when it is a case of defending corporations or the
   wealthy).

G.3.6 Would mutual banking simply cause inflation?

   One of the arguments against Individualist and mutualist anarchism, and
   mutual banking in general, is that it would just produce accelerating
   inflation. The argument is that by providing credit without interest,
   more and more money would be pumped into the economy. This would lead
   to more and more money chasing a given set of goods, so leading to
   price rises and inflation.

   Rothbard, for example, dismissed individualist anarchist ideas on
   mutual banking as being "totally fallacious monetary views." He based
   his critique on "Austrian" economics and its notion of "time
   preference" (see [33]section C.2.7 for a critique of this position).
   Mutual banking would artificially lower the interest rate by generating
   credit, Rothbard argued, with the new money only benefiting those who
   initially get it. This process "exploits" those further down the line
   in the form accelerating inflation. As more and more money was be
   pumped into the economy, it would lead to more and more money chasing a
   given set of goods, so leading to price rises and inflation. To prove
   this, Rothbard repeated Hume's argument that "if everybody magically
   woke up one morning with the quantity of money in his possession
   doubled" then prices would simply doubled. ["The Spooner-Tucker
   Doctrine: An Economist's View", Journal of Libertarian Studies, vol.
   20, no. 1, p. 14 and p. 10]

   However, Rothbard is assuming that the amount of goods and services are
   fixed. This is just wrong and shows a real lack of understanding of how
   money works in a real economy. This is shown by the lack of agency in
   his example, the money just "appears" by magic (perhaps by means of a
   laissez-fairy?). Milton Friedman made the same mistake, although he
   used the more up to date example of government helicopters dropping
   bank notes. As post-Keynesian economist Nicholas Kaldor pointed out
   with regards to Friedman's position, the "transmission mechanism from
   money to income remained a 'black box' -- he could not explain it, and
   he did not attempt to explain it either. When it came to the question
   of how the authorities increase the supply of bank notes in circulation
   he answered that they are scattered over populated areas by means of a
   helicopter -- though he did not go into the ultimate consequences of
   such an aerial Santa Claus." [The Scourge of Monetarism, p. 28]

   Friedman's and Rothbard's analysis betrays a lack of understanding of
   economics and money. This is unsurprising as it comes to us via
   neo-classical economics. In neo-classical economics inflation is always
   a monetary phenomena -- too much money chasing too few goods. Milton
   Friedman's Monetarism was the logical conclusion of this perspective
   and although "Austrian" economics is extremely critical of Monetarism
   it does, however, share many of the same assumptions and fallacies (as
   Hayek's one-time follower Nicholas Kaldor noted, key parts of
   Friedman's doctrine are "closely reminiscent of the Austrian school of
   the twenties and the early thirties" although it "misses some of the
   subtleties of the Hayekian transmission mechanism and of the
   money-induced distortions in the 'structure of production.'" [The
   Essential Kaldor, pp. 476-7]). We can reject this argument on numerous
   points.

   Firstly, the claim that inflation is always and everywhere a monetary
   phenomena has been empirically refuted -- often using Friedman's own
   data and attempts to apply his dogma in real life. As we noted in
   [34]section C.8.3, the growth of the money supply and inflation have no
   fixed relationship, with money supply increasing while inflation
   falling. As such, "the claim that inflation is always and everywhere
   caused by increases in the money supply, and that the rate of inflation
   bears a stable, predictable relationship to increases in the money
   supply is ridiculous." [Paul Ormerod, The Death of Economics, p. 96]
   This means that the assumption that increasing the money supply by
   generating credit will always simply result in inflation cannot be
   supported by the empirical evidence we have. As Kaldor stressed, the
   "the 'first-round effects' of the helicopter operation could be
   anything, depending on where the scatter occurred . . . there is no
   reason to suppose that the ultimate effect on the amount of money in
   circulation or on incomes would bear any close relation to the initial
   injections." [The Scourge of Monetarism, p. 29]

   Secondly, even if we ignore the empirical record (as "Austrian"
   economics tends to do when faced with inconvenient facts) the "logical"
   argument used to explain the theory that increases in money will
   increase prices is flawed. Defenders of this argument usually present
   mental exercises to prove their case (as in Hume and Friedman).
   Needless to say, such an argument is spurious in the extreme simply
   because money does not enter the economy in this fashion. It is
   generated to meet specific demands for money and is so, generally, used
   productively. In other words, money creation is a function of the
   demand for credit, which is a function of the needs of the economy
   (i.e. it is endogenous) and not determined by the central bank
   injecting it into the system (i.e. it is not exogenous). And this
   indicates why the argument that mutual banking would produce inflation
   is flawed. It does not take into account the fact that money will be
   used to generate new goods and services.

   As leading Post-Keynesian economist Paul Davidson argued, the notion
   that "inflation is always and everywhere a monetary phenomenon" (to use
   Friedman's expression) is "ultimately based on the old homily that
   inflation is merely 'too many dollars chasing too few goods.'" Davidson
   notes that "[t]his 'too many dollars clich is usually illustrated by
   employing a two-island parable. Imagine a hypothetical island where the
   only available goods are 10 apples and the money supply consists of,
   say, 10 $1 bills. If all the dollars are used to purchase the apples,
   the price per apple will be $1. For comparison, assume that on a second
   island there are 20 $1 bills and only 10 apples. All other things being
   equal, the price will be $2 per apple. Ergo, inflation occurs whenever
   the money supply is excessive relative to the available goods." The
   similarities with Rothbard's argument are clear. So are its flaws as
   "no explanation is given as to why the money supply was greater on the
   second island. Nor is it admitted that, if the increase in the money
   supply is associated with entrepreneurs borrowing 'real bills' from
   banks to finance an increase in payrolls necessary to harvest, say, 30
   additional apples so that the $20 chases 40 apples, then the price will
   be only $0.50 per apple. If a case of 'real bills' finance occurs, then
   an increase in the money supply is not associated with higher prices
   but with greater output." [Controversies in Post Keynesian Economics,
   p. 100] Davidson is unknowingly echoing Tucker ("It is the especial
   claim of free banking that it will increase production . . . If free
   banking were only a picayanish attempt to distribute more equitably the
   small amount of wealth now produced, I would not waste a moment's
   energy on it." [Liberty, no. 193, p. 3]).

   This, in reply to the claims of neo-classical economics, indicates why
   mutual banking would not increase inflation. Like the neo-classical
   position, Rothbard's viewpoint is static in nature and does not
   understand how a real economy works. Needless to say, he (like
   Friedman) did not discuss how the new money gets into circulation.
   Perhaps, like Hume, it was a case of the money fairy (laissez-fairy?)
   placing the money into people's wallets. Maybe it was a case, like
   Friedman, of government (black?) helicopters dropping it from the
   skies. Rothbard did not expound on the mechanism by which money would
   be created or placed into circulation, rather it just appears one day
   out of the blue and starts chasing a given amount of goods. However,
   the individualist anarchists and mutualists did not think in such
   bizarre (typically, economist) ways. Rather than think that mutual
   banks would hand out cash willy-nilly to passing strangers, they
   realistically considered the role of the banks to be one of evaluating
   useful investment opportunities (i.e., ones which would be likely to
   succeed). As such, the role of credit would be to increase the number
   of goods and services in circulation along with money, so ensuring that
   inflation is not generated (assuming that it is caused by the money
   supply, of course). As one Individualist Anarchist put it, "[i]n the
   absence of such restrictions [on money and credit], imagine the rapid
   growth of wealth, and the equity in its distribution, that would
   result." [John Beverley Robinson, The Individualist Anarchists, p. 144]
   Thus Tucker:

     "A is a farmer owning a farm. He mortgages his farm to a bank for
     $1,000, giving the bank a mortgage note for that sum and receiving
     in exchange the bank's notes for the same sum, which are secured by
     the mortgage. With the bank-notes A buys farming tools of B. The
     next day B uses the notes to buy of C the materials used in the
     manufacture of tools. The day after, C in turn pays them to D in
     exchange for something he needs. At the end of a year, after a
     constant succession of exchanges, the notes are in the hands of Z, a
     dealer in farm produce. He pays them to A, who gives in return
     $1,000 worth of farm products which he has raised during the year.
     Then A carries the notes to the bank, receives in exchange for them
     his mortgage note, and the bank cancels the mortgage. Now, in this
     whole circle of transactions, has there been any lending of capital?
     If so, who was the lender? If not, who is entitled to interest?"
     [Instead of a Book, p. 198]

   Obviously, in a real economy, as Rothbard admits "inflation of the
   money supply takes place a step at a time and that the first
   beneficiaries, the people who get the new money first, gain at the
   expense of the people unfortunate enough to come last in line." This
   process is "plunder and exploitation" as the "prices of things they
   [those last in line] have to buy shooting up before the new injection
   [of money] filters down to them." [Op. Cit., p. 11] Yet this expansion
   of the initial example, again, assumes that there is no increase in
   goods and services in the economy, that the "first beneficiaries" do
   nothing with the money bar simply buying more of the existing goods and
   services. It further assumes that this existing supply of goods and
   services is unchangeable, that firms do not have inventories of goods
   and sufficient slack to meet unexpected increases in demand. In
   reality, of course, a mutual bank would be funding productive
   investments and any firm will respond to increasing demand by
   increasing production as their inventories start to decline. In effect,
   Rothbard's analysis is just as static and unrealistic as the notion of
   money suddenly appearing overnight in people's wallets. Perhaps
   unsurprisingly Rothbard compared the credit generation of banks to the
   act of counterfeiters so showing his utter lack of awareness of how
   banks work in a credit-money (i.e., real) economy.

   The "Austrian" theory of the business cycle is rooted in the notion
   that banks artificially lower the rate of interest by providing more
   credit than their savings and specie reverses warrant. Even in terms of
   pure logic, such an analysis is flawed as it cannot reasonably be
   asserted that all "malinvestment" is caused by credit expansion as
   capitalists and investors make unwise decisions all the time,
   irrespective of the supply of credit. Thus it is simply false to
   assert, as Rothbard did, that the "process of inflation, as carried out
   in the real [sic!] world" is based on "new money" entered the market by
   means of "the loan market" but "this fall is strictly temporary, and
   the market soon restores the rate to its proper level." A crash,
   according to Rothbard, is the process of restoring the rate of interest
   to its "proper" level yet a crash can occur even if the interest rate
   is at that rate, assuming that the banks can discover this equilibrium
   rate and have an incentive to do so (as we discussed in [35]section C.8
   both are unlikely). Ultimately, credit expansion fails under capitalism
   because it runs into the contradictions within the capitalist economy,
   the need for capitalists, financiers and landlords to make profits via
   exploiting labour. As interest rates increase, capitalists have to
   service their rising debts putting pressure on their profit margins and
   so raising the number of bankruptcies. In an economy without non-labour
   income, the individualist anarchists argued, this process is undercut
   if not eliminated.

   So expanding this from the world of fictional government helicopters
   and money fairies, we can see why Rothbard is wrong. Mutual banks
   operate on the basis of providing loans to people to set up or expand
   business, either as individuals or as co-operatives. When they provide
   a loan, in other words, they increase the amount of goods and services
   in the economy. Similarly, they do not simply increase the money supply
   to reduce interest rates. Rather, they reduce interest rates to
   increase the demand for money in order to increase the productive
   activity in an economy. By producing new goods and services, inflation
   is kept at bay. Would increased demand for goods by the new firms
   create inflation? Only if every firm was operating at maximum output,
   which would be a highly unlikely occurrence in reality (unlike in
   economic textbooks).

   So what, then does case inflation? Inflation, rather than being the
   result of monetary factors, is, in fact, a result of profit levels and
   the dynamic of the class struggle. In this most anarchists agree with
   post-Keynesian economics which views inflation as "a symptom of an
   on-going struggle over income distribution by the exertion of market
   power." [Paul Davidson, Op. Cit., p. 102] As workers' market power
   increases via fuller employment, their organisation, militancy and
   solidarity increases so eroding profits as workers keep more of the
   value they produce. Capitalists try and maintain their profits by
   rising prices, thus generating inflation (i.e. general price rises).
   Rather than accept the judgement of market forces in the form of lower
   profits, capitalists use their control over industry and market power
   of their firms to maintain their profit levels at the expense of the
   consumer (i.e., the workers and their families).

   In this sense, mutual banks could contribute to inflation -- by
   reducing unemployment by providing the credit needed for workers to
   start their own businesses and co-operatives, workers' power would
   increase and so reduce the power of managers to extract more work for a
   given wage and give workers a better economic environment to ask for
   better wages and conditions. This was, it should be stressed, a key
   reason why the individualist anarchists supported mutual banking:

     "people who are now deterred from going into business by the
     ruinously high rates which they must pay for capital with which to
     start and carry on business will find their difficulties removed . .
     . This facility of acquiring capital will give an unheard of impetus
     to business, and consequently create an unprecedented demand for
     labour -- a demand which will always be in excess of the supply,
     directly to the contrary of the present condition of the labour
     market . . . Labour will then be in a position to dictate its
     wages." [Tucker, The Individualist Anarchists, pp. 84-5]

   And, it must also be stressed, this was a key reason why the capitalist
   class turned against Keynesian full employment policies in the 1970s
   (see [36]section C.8.3). Lower interest rates and demand management by
   the state lead precisely to the outcome predicted by the likes of
   Tucker, namely an increase in working class power in the labour market
   as a result of a lowering of unemployment to unprecedented levels.
   This, however, lead to rising prices as capitalists tried to maintain
   their profits by passing on wage increases rather than take the cut in
   profits indicated by economic forces. This could also occur if mutual
   banking took off and, in this sense, mutual banking could produce
   inflation. However, such an argument against the scheme requires the
   neo-classical and "Austrian" economist to acknowledge that capitalism
   cannot produce full employment and that the labour market must always
   be skewed in favour of the capitalist to keep it working, to maintain
   the inequality of bargaining power between worker and capitalist. In
   other words, that capitalism needs unemployment to exist and so cannot
   produce an efficient and humane allocation of resources.

   By supplying working people with money which is used to create
   productive co-operatives and demand for their products, mutual banks
   increase the amount of goods and services in circulation as it
   increases the money supply. Combined with the elimination of profit,
   rent and interest, inflationary pressures are effectively undercut (it
   makes much more sense to talk of a interest/rent/profits-prices spiral
   rather than a wages-prices spiral when discussing inflation). Only in
   the context of the ridiculous examples presented by neo-classical and
   "Austrian" economics does increasing the money supply result in rising
   inflation. Indeed, the "sound economic" view, in which if the various
   money-substitutes are in a fixed and constant proportion to "real
   money" (i.e. gold or silver) then inflation would not exist, ignores
   the history of money and the nature of the banking system. It overlooks
   the fact that the emergence of bank notes, fractional reserve banking
   and credit was a spontaneous process, not planned or imposed by the
   state, but rather came from the profit needs of capitalist banks which,
   in turn, reflected the real needs of the economy ("The truth is that,
   as the exchanges of the world increased, and the time came when there
   was not enough gold and silver to effect these exchanges, so . . .
   people had to resort to paper promises." [John Beverley Robinson, Op.
   Cit., p. 139]). What was imposed by the state, however, was the
   imposition of legal tender, the use of specie and a money monopoly
   ("attempt after attempt has been made to introduce credit money outside
   of government and national bank channels, and the promptness of the
   suppression has always been proportional to the success of the
   attempt." [Tucker, Liberty, no. 193, p. 3]).

   Given that the money supply is endogenous in nature, any attempt to
   control the money supply will fail. Rather than control the money
   supply, which would be impossible, the state would have to use interest
   rates. To reduce the demand for money, interest rates would be raised
   higher and higher, causing a deep recession as business cannot maintain
   their debt payments and go bankrupt. This would cause unemployment to
   rise, weakening workers' bargaining power and skewing the economy back
   towards the bosses and profits -- so making working people pay for
   capitalism's crisis. Which, essentially, is what the Thatcher and
   Reagan governments did in the early 1980s. Finding it impossible to
   control the money supply, they raised interest rates to dampen down the
   demand for credit, which provoked a deep recession. Faced with massive
   unemployment, workers' market power decreased and their bosses
   increased, causing a shift in power and income towards capital.

   So, obviously, in a capitalist economy the increasing of credit is a
   source of instability. While not causing the business cycle, it does
   increase its magnitude. As the boom gathers strength, banks want to
   make money and increase credit by lowering interest rates below what
   they should be to match savings. Capitalists rush to invest, so soaking
   up some of the unemployment which always marks capitalism. The lack of
   unemployment as a disciplinary tool is why the boom turns to bust, not
   the increased investment. Given that in a mutualist system, profits,
   interest and rent do not exist then erosion of profits which marks the
   top of a boom would not be applicable. If prices drop, then labour
   income drops. Thus a mutualist society need not fear inflation. As
   Kaldor argued with regard to the current system, "under a
   'credit-money' system . . . unwanted or excess amounts of money could
   never come into existence; it is the increase in the value of
   transactions . . . which calls forth an increase in the 'money supply'
   (whether in the form of bank balances or notes in circulation) as a
   result of the net increase in the value of working capital at the
   various stages of production and distribution." [Op. Cit., p. 46] The
   gold standard cannot do what a well-run credit-currency can do, namely
   tailor the money supply to the economy's demand for money. The problem
   in the nineteenth century was that a capitalist credit-money economy
   was built upon a commodity-money base, with predictably bad results.

   Would this be any different under Rothbard's system? Probably not. For
   Rothbard, each bank would have 100% reserve of gold with a law passed
   that defined fractional reserve banking as fraud. How would this affect
   mutual banks? Rothbard argued that attempts to create mutual banks or
   other non-gold based banking systems would be allowed under his system.
   Yet, how does this fit into his repeated call for a 100% gold standard
   for banks? Why would a mutual bank be excluded from a law on banking?
   Is there a difference between a mutual bank issuing credit on the basis
   of a secured loan rather than gold and a normal bank doing so? Needless
   to say, Rothbard never did address the fact that the customers of the
   banks know that they practised fractional reserve banking and still did
   business with them. Nor did he wonder why no enterprising banker
   exploited a market niche by advertising a 100% reserve policy. He
   simply assumed that the general public subscribed to his gold-bug
   prejudices and so would not frequent mutual banks. As for other banks,
   the full might of the law would be used to stop them practising the
   same policies and freedoms he allowed for mutual ones. So rather than
   give people the freedom to choose whether to save with a fractional
   reserve bank or not, Rothbard simply outlawed that option. Would a
   regime inspired by Rothbard's goldbug dogmas really allow mutual banks
   to operate when it refuses other banks the freedom to issue credit and
   money on the same basis? It seems illogical for that to be the case and
   so would such a regime not, in fact, simply be a new form of the money
   monopoly Tucker and his colleagues spent so much time combating? One
   thing is sure, though, even a 100% gold standard will not stop credit
   expansion as firms and banks would find ways around the law and it is
   doubtful that private defence firms would be in a position to enforce
   it.

   Once we understand the absurd examples used to refute mutual banking
   plus the real reasons for inflation (i.e., "a symptom of a struggle
   over the distribution of income." [Davidson, Op. Cit., p. 89]) and how
   credit-money actually works, it becomes clear that the case against
   mutual banking is far from clear. Somewhat ironically, the
   post-Keynesian school of economics provides a firm understanding of how
   a real credit system works compared to Rothbard's logical deductions
   from imaginary events based on propositions which are, at root,
   identical with Walrasian general equilibrium theory (an analysis
   "Austrians" tend to dismiss). It may be ironic, but not unsurprising as
   Keynes praised Proudhon's follower Silvio Gesell in The General Theory
   (also see Dudley Dillard's essay "Keynes and Proudhon" [The Journal of
   Economic History, vol. 2, No. 1, pp. 63-76]). Libertarian Marxist Paul
   Mattick noted Keynes debt to Proudhon, and although Keynes did not
   subscribe to Proudhon's desire to use free credit to fund "independent
   producers and workers' syndicates" as a means create an economic system
   "without exploitation" he did share the Frenchman's "attack upon the
   payment of interest" and wish to see the end of the rentier. [Marx and
   Keynes, p. 5 and p. 6]

   Undoubtedly, given the "Austrian" hatred of Keynes and his economics
   (inspired, in part, by the defeat inflicted on Hayek's business cycle
   theory in the 1930s by the Keynesians) this will simply confirm their
   opinion that the Individualist Anarchists did not have a sound economic
   analysis! As Rothbard noted, the individualist anarchist position was
   "simply pushing to its logical conclusion a fallacy adopted widely by
   preclassical and by current Keynesian writers." [Op. Cit., p. 10]
   However, Keynes was trying to analyse the economy as it is rather than
   deducing logically desired conclusions from the appropriate assumptions
   needed to confirm the prejudices of the assumer (like Rothbard). In
   this, he did share the same method if not exactly the same conclusions
   as the Individualist Anarchists and Mutualists.

   Needless to say, social anarchists do not agree that mutual banking can
   reform capitalism away. As we discuss in [37]section G.4, this is due
   to many factors, including the nature barriers to competition capital
   accumulation creates. However, this critique is based on the real
   economy and does not reflect Rothbard's abstract theorising based on
   pre-scientific methodology. While other anarchists may reject certain
   aspects of Tucker's ideas on money, we are well aware, as one
   commentator noted, that his "position regarding the State and money
   monopoly derived from his Socialist convictions" where socialism
   "referred to an intent to fundamentally reorganise the societal systems
   so as to return the full product of labour to the labourers." [Don
   Werkheiser, "Benjamin R. Tucker: Champion of Free Money", pp. 212-221,
   Benjamin R. Tucker and the Champions of Liberty, Coughlin, Hamilton and
   Sullivan (eds.), p. 212]

References

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