Economics of Liberty

The following purports to be a clear and concise outline of libertarian economic theory. Liberty means to be free from as well as free to do. To be free means to be independent—not forced interdependence. Independence implies exclusion, hence a libertarian economy will involve property rights. Free exchange may be made by barter, with money, or through credit. A free economy then, due to the inconveniences of barter, will almost necessarily be a money economy, undoubtedly a credit-money economy.

1. Theorem: If every individual, either alone or voluntarily organized into a group, has an opportunity to produce what he wishes and how he wishes, and to trade when, where, and on whatever terms he chooses, products and service will exchange virtually in proportion to the arduousness required in their production.

2. Proof: For as water seeks its level, competition compels one to charge for his services and products no more than what others are willing to do it for. Men gravitate to those activities giving the greatest return, and competition is normally most keen in the remuneration industries, thus always tending toward equilibrium and equality which, as they are approached, causes competition to become less intense or at least balanced among all productive influences.

3. The price system means that one must pay for what he receives. Operating under free competition, the price system (free enterprise and free market)—

a. leaves all productive enterprise open to anyone wishing to work at them,
b. permits experiment and innovation but only as the cost of experimentors and innovators, except in case of fruitful results when c. cost of experimentation and entrepreneur risk becomes a temporary element of price,
d. adjusts division of labor by putting the right man in the right place,
e. promotes individual initiative and responsibility,
f. eliminates inefficient production,
g. adjusts supply with demand—production with consumption needs,
h. continually reduces cost of production hence raising living standards,
i. stimulates progress
j. abolishes exploitation by making price equal cost of production
k. is the most democratic method of cooperation known and the only economy operating without bureaucracy

4. Obstacles to production and exchange are of two kinds: natural, and law created or artificial

A. Natural and unavoidable obstacles are of two sorts:

• a. Subjective, those due to idiosyncrasies of individuals such as inclination, knowledge, and ability.
• b. Objective, due to difficulty of extraction, cultivation, or manufacture,—sometimes of locality, climate—natural forces to be overcome.

B. Artificial obstacles are of two sorts:

• a. Hindrances to production, such as monopolistic ownership and control of:
  • Natural resources, as mines, oil fields, advantageous sites—Land.
  • Capital in production processes as exclusive rights as patents.
• b. Interferences with trade, such as:
  • Tariffs.
  • Monopolistic control (lack of free competition) of the issue of money and credit.

5. To understand the nature of human exploitation (as practiced to-day) one should know that remuneration for removing the obstacles to production is equivalent to the “value” or social estimate of the importance of such service.

A. One way to remove such obstacles is by production itself.

B. The other way is for privileged persons to permit the use of facilities which the law has enacted as special rights. Examples:

• a. permission to use land (natural resources) for Rent.
• b. permission to use productive processes for patent Royalties.
• c. permission to use one’s credit as an instrument of exchange for interest.
• d. permission to trade for Tariff revenue (also causing profit through high prices).
• e. The above mentioned legal frauds sanctioned and upheld by the State and supported by the forcible collection of Taxes.

(N. B.) all these methods of getting wealth without working for it are caused by arbitrary restrictions of opportunity and denials of competition, and the result—abject poverty on the one hand, superfluous riches on the other, concentration of control, and depressions or industrial stagnation.

6. Economic liberty demands the removal or disregarding of the privileges causing artificial hindrances to production and exchange. This means revolutionizing our concepts of what property should consist.

7. Given economic liberty:

A. No man could become inordinately rich, because:

• a. It would be practically a physical impossibility.
• b. It would become a psychological improbability that a man would even desire more than his needs when insecurity is obviated by making economic opportunity free and equitable.

B. Only a fool or an incompetent would remain in need when opportunity to produce were open to him.

Commentary – Eric Fleischmann:

Alongside Labadie’s “Anarchism Applied to Economics,” his “Economics of Liberty” is one of the clearest and most precise expositions of mutualism that I have ever read, and so it is just amazing to reproduce it here for the Laurance Labadie Archival Project. Likely published at some point in the early to mid-1940s by the International Anarchist Group of Detroit in combination with his “Reflections on Socio-Economic Evolution,” then reproduced in the first issue of Mark A. Sullivan’s The Storm in 1976 and Laurance Labadie: Selected Essays by Ralph Myers Publisher in 1978, and recently made available via The Anarchist Library, Labadie approaches this piece with the precision of a machine. In no more than a few sentences per section, he outlines by bullet point the essential economic analyses and premises that would lead to a non-capitalist, non-communist, non-statist, laissez faire society.

He begins, as many economists do, with the origin story of barter—the narrative that money emerged as a utilitarian expedient against the inefficiencies of direct barter—and then moves on to explain the inevitability of money for any efficient and decentralized society. Money presents the possibility of organizing large numbers of people across great distances without the use of force, with all wealth originating from freed production and voluntary exchange. In contrast to the communist critique of money, his anti-capitalism does not argue that money (not to be conflated with the money monopoly) is fundamentally a weapon of our exploitation via profit, rent, interest, and taxation/tariff, Labadie seems to hold that money, when minted and (mis)used by state capitalists (particularly central bankers), can absolutely be a weapon of parasitism but, when minted and used by the general populace, is one of the most democratic mechanisms available to human beings. 

The aforementioned monetary creation myth has, however, been contested by numerous scholars, most notably anarchist and anthropologist David Graeber. For Graeber, credit and debt are the first forms of exchange to appear in almost all societies with money emerging as a feature of empire and warfare. Thus, as he writes in Debt: The First 5,000 Years, “markets are founded and usually maintained by systematic state violence.” This would seem to fly in the face of Labadie’s account of the rise of money, but in an interesting way it can actually be used to reinforce his ultimate conclusions. If credit, even credit-money, is generally an imminent tool of exchange in decentralized forms of social organizing, as Graeber argues, then the likelihood of a cooperative, worker-centric system emerging from statelessness is enhanced. This is already helped along by the price of commodities generally falling to the price of production and monopolistic property ownership rendered virtually impossible, but, as Gary Elkin writes of Benjamin Tucker’s—and consequently Labadie’s—views:

[B]ecause of Tucker’s proposal to increase the bargaining power of workers through access to mutual credit, his so-called Individualist anarchism is not only compatible with workers’ control but would in fact promote it. For if access to mutual credit were to increase the bargaining power of workers to the extent that Tucker claimed it would, they would then be able to (1) demand and get workplace democracy, and (2) pool their credit [to] buy and own companies collectively.

This not only removes a further obstacle to production in the form of a boss—“the top-down structure of the firm”—and allows, as Kevin Carson writes, for the “internaliz[ation] of all the costs and benefits of [workers’] production decisions,” but also reinforces Graeber’s broader point that “in the absence of . . . violence, [markets] . . . can even come to be seen as the very basis of freedom and autonomy.”