The Demise of Mutualism

Since I last blogged about my defense of mutualism, I changed my mind and began to oppose mutualism. At first impression, mutualism appears compatible with libertarianism. Mutualists, for instance, do not oppose employment, and support the free market. Also, contrary to common conceptions, mutualists do not even oppose rent and interest, as they only predict that in an anarchic society, rent and interest will fall near zero. Even though these positions held by mutualists seem consistent to the libertarian philosophy, the mutualistic theory, however, has flaws that contradicts the ethics and strategy of libertarianism. My justifications for opposing mutualism include their theory of prices, egalitarianism, Luddite ideology, gradualism, and syndicalism. Although their advocacy for the labor theory of value seems small, this, however, has potential repercussions that undermine the philosophy of libertarianism.

First of all, we will define mutualism. Mutualists support an occupancy and use theory of land. That means, as long as an individual currently uses or possesses land, he has the right to control it. However, once as he gives up using or occupuying land, he does not have the right to control it anymore. Thus, this will make land available for other individuals to use.

This occupancy and use theory of land may seem difficult to implement in a stateless society, but arbitrators can do this job by resolving disputes over occupancy and use. Hence, supporters of mutualism would argue that individuals can voluntarily join a mutualist society with the mutualistic occupancy and use laws, thus not interfering with other societies. Thus, a mutualist society and an anarcho-capitalist society can coexist, because they each respect voluntary associations.

Pierre-Joseph Proudhon first developed this theory based on the free market, and he called it mutualism. Proudhon, while supporting the free market in general, opposes the ownership of the means of production, and suggests the occupancy and use theories. Benjamin Tucker, who followed Proudhon's footsteps, begun to diverge from some of Proudhon's ideas. While Proudhon sees employment as exploitative, Spooner and Tucker did not see it that way.

Knowledge Problems

Mutualists are utilitarianists that are not tolerant of some kinds of property rights. Although they highly respect property rights, they are highly intolerant of property that is supposibly "stolen" by capitalists. They claim that they have the right reclaim the "stolen" property. Mutualists want to take over a factory by killing the boss and so they can then "homestead" the factory for all the workers to control.

There are many examples showing there violent behavior: On the Mutualist.org site, there is a statement: "Our ultimate vision is of a society in which the economy is organized around free market exchange between producers, and production is carried out mainly by self-employed artisans and farmers, small producers' cooperatives, worker-controlled large enterprises, and consumers' cooperatives. To the extent that wage labor still exists (which is likely, if we do not coercively suppress it), the removal of statist privileges will result in the worker's natural wage, as Benjamin Tucker put it, being his full product."

Murray Rothbard has written an article about how violent anarcho-communist were about taking over factories. Mutualists are the same, and they claim that they factory is "stolen" property and so they have to right to kill the owner for defense.

However, this raises serious problems. Once all the workers took over the factory, the workers might not have the knowledge to operate nor repair it. Also, the democratic-rule would be unmangeable due to lack of knowledge and also other problems such as the free rider problem. This unmangeability would undermine competition between other firms, which would cause ineffiency and utimately reduce their standard of living.

If they disagree with the current conditions, then why voluntary cooperatives already exist? If they believe that coorperative controlled communes would pay them more, then they should be widely recognized. Coorperatives do not exist in our current society because the workers get paid less than non-collective firm due to their inefficiency. Therefore, the workers are still better off working in a non-collective firm because they get paid more from increased efficiency.

But today's workers are impovished due to corruption such as licenses and regulations, not ineffiency in some firms, intrinsically.

It seems that their belief of "homesteading" the factory is based on their economic ignorance.

Interest and Rent

Proudhon and Tucker, however, claim that interest rates exist due to the money monopoly, and rent exists due to the ownership of land. They believed that once the state deregulated the printing of money, and once ownership of land has replaced with the occupancy and use theory, interest and rent will fall to zero. Thus, the mutualists also oppose profit earned interest and rent.

Spooner actively supports interest and argues that lending restrictions causes poverty.

However, Benjamin Tucker, in his essay titled State Socialism and Anarchism, he shattered the myth that mutualists oppose interest:

For, say Proudhon and Warren, if the business of banking were made free to all, more and more persons would enter into it until the competition should become sharp enough to reduce the price of lending money to the labor cost, which statistics show to be less than three-fourths of once per cent.

Tucker said that interest will fall to three-fourths of one percent, not to zero. In an anarchic society, interest rates will indeed fall, since the missing lending restrictions and greater wealth, in the absence of the state, will lead to a lower interest rate.

However, Tucker viewed that the interest rates will equal approximately three-fourths of one percent, not because of inherent interest, but due to the labor costs of operating the interest loans:

... credits of the customers and a charge therefor of less than one per cent., not as interest for the use of capital, but as pay for the labor of running the banks.

As a corollary, Tucker deduced since interest will fall, profits will also fall:

Thus the same blow that strikes interest down will send wages up. But this is not all. Down will go profits also. For merchants, instead of buying at high prices on credit, will borrow money of the banks at less than one per cent., buy at low prices for cash, and correspondingly reduce the prices of their goods to their customers.

The interest and rent theories of mutualism does, however, contradict with Rothbardian anarchism. The mutualists think that the amount of labor from the lending service determines its rates, but the Austrian theory states that the cumulative time preferences of each lender and borrower determines the rates.

In our Defense of Mutualism, we mentioned that these errors do not seem as significant detriments to libertarianism. We now, however, changed our position and will discuss about how these meager errors will produce significant consequences.

The Labor

The mutualists hold a prediction that the labor paid will eventually fall proportionally to the labor, in an anarchic society. Benjamin Tucker noted:

The abolition of this monopoly would result in a great reduction in the prices of all articles taxed, and this saving to the laborers who consume these articles would be another step toward securing to the laborer his natural wage, his entire product.

Thus, this confirms that they do not wish to "aggressively implement" the labor theory of value, but they think that the wages will natually fall toward approximately to the amont of labor exerted.

This interpretation of the labor theory of value appears as an approximation of the long-term effects of the marginal theory of value. The greater competition in an anarchic society will let workers receive wages approximately to the labor they exerted.

Flawed economic understanding

However, their advocacy of the labor theory of value over the marginal theory of value presents a problem. Since the mutualists do not understand the marginal theory of value and thus do not understand how the free price mechanism works, they confuse the "economic calculation problem" with assymetrical information. Mutualists misinterpret the economic calculation problem, since understanding the economic calculation problem requires prior knowledge of the marginal theory of value.

Mutualists use their misinterpretation of the "economic calculation problem" as a criticism of corporations. However, the economic calculation problem, as properly understood, does not apply to corporations, though mutualists say it does. The economic calculation problem only applies to the overall allocation of goods in a price system. Corporations have assymetrical information, not the "economic calculation problem." Replacing every occurance of the word "economic calculation problem" with "assymetrical information" in this article would make it correct.

Dismissing the marginal theory of value would greately undermine the mutualist movement. For example, since they oppose the marginal theory of value, mutualists may support syndicalism as a means of achieving a free society, as they try to modify wage rates according to the amount of labor.

The Syndicalism

Many mutualists advocate syndicalism or anarcho-syndicalism as a means of achieving a free society. Kevin Carson and Brad Spangler even support coercive unions.  

Voluntary unions, also have disadvantages. While voluntary unions may raise wage rates for the members, it will decrease the wage rates for the non-members. Even if every worker in every industry joined the same exact union, the economy does not have enough money pay every worker high wages. Therefore, it will cause unemployment if every worker joined the union. Many workers will thus decide to leave the union, and receive lower wages, due to threat of unemployment.

The Gradualism

Many mutualists, including Benjamin Tucker and Kevin Carson, showed signs of their advocacy of a gradualist strategy for achieving liberty. Roderick T. Long, Charles Johnson, Brad Spangler, and many of the "thick libertarians" advocate a gradualist strategy, and have mutualist sympathies.

Tucker, in his State Socialism and Anarchism essay, advocated Proudhon's gradualist idea of abolishing the tariff monopoly after abolishing the money monopoly:

Proudhon admitted, however, that to abolish this monopoly before abolishing the money monopoly would be a cruel and disastrous police, first, because the evil of scarcity of money, created by the money monopoly, would be intensified by the flow of money out of the country which would be involved in an excess of imports over exports, and, second, because that fraction of the laborers of the country which is now employed in the protected industries would be turned adrift to face starvation without the benefit of the insatiable demand for labor which a competitive money system would create.

While Kevin Carson, also, sees taxation as theft, he still supports welfare funded by a temporary progressive tax, as a means to achieve a free society, because he believes the labor theory of value and opposes the marginal theory.

The Egalitarianism and Primitivism

The mutualists see workers as having the same preferences, and see that education level does not affect wages relative to the amount of labor exerted. Mutualists thus have an egalitarian idea that all individuals have the same preferences and can have the same education. However, as Rothbard claims, this undermines the individuality of the human and undermines the division of labor.

Their ardent alliance with the so-called "green anarchists" implies a Luddite view of technology. The "green anarchists," a less extreme form of "anarcho"-primitivism, opposes the supposed "overpopulation" and opposes innovation.

The Bureaucracy

The mutualists, by no doubt, have an accurate view that bureaucracies will decrease efficiency due to mismanagement. The employment of managers and workers, especially predominant in the modern corporation, obviously has increased overhead and communication costs, and agency problems.  

In the corporation, it has several levels of hierarchy. Beginning with the shareholders, they democratically vote for the board of directors. This enables the directors to strategically make decisions for the corporation's policy, while having a limited liability barrier between the shareholders and the directors. The limited liability barrier gives the board of directors an incentive take more risky decisions than the shareholders. They board of directors, then, employ chief executive officer, who strategically manages the corporation's policies. The chief executive officer may hire a president for the daily management for his strategic decisions. The president, may, in turn, hire several vice presidents, who work in more specialized functions, such as marketing, legal compliance, and finance. The vice presidents, in turn, hire senior managers, who follows the decrees set by the vice presidents. The senior managers hire middle-level managers, who work in more specialized areas, such as hiring and firing workers and their supervisors. At the bottom of the hierarchy, the supervisors do not hire or fire the workers, but only obey the commands from the middle-level managers.

We will list the corporate hierarchy: shareholders > board of directors > CEO > president > vice president > senior manager > middle-level manager > supervisor > worker

This hierarchy has a total of nine levels. On each level, the principle-agency cost exists. So in a total of nine levels, the agency costs have propagated into a very large agency cost.

Some useful bureaucracies, such as arbitration, may exist in an anarchic society. The subscribers of an arbitrator have to follow the arbitrator's decisions, which seem authoritarian. Though dispute resolution by a third party has significant communication problems, arbitrators may exist in a free society so that individuals have a third party to resolve disputes.

Conclusion

However, as some may wonder Tucker never identified himself as a mutualist. He still follow the philosophy of Proudhon, so we have some reason to identify them as mutualists. Spooner, however, differs. He never appeared to have influence from Proudhon, and Spooner explicitly supports interest and rent, and advocate the abolishment of lending and rent restrictions. The differences between Proudhon and Tucker demonstrate mutualism as an evolving philosophy. Mutualists do not hold constant positions. For instance, some mutualists, such as Proudhon, thinks that rent and interest will fall to zero. Some Tuckerite anarchists think these will fall near zero.

Rothbardian anarchists should not support mutualism, as this equates package-dealing Rothbardian anarchism with incompatible mutualistic positions. The mutualistic advocacy of syndicalism also undermines the libertarian strategy.