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This article is about the economic theory. For the biological term, see Mutualism.

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Mutualism is an economic theory or system, largely associated with Pierre-Joseph Proudhon, based on a labor theory of value which holds that in extreme laissez-faire, market competition will cause the market values (prices) of commodities and services to align with the amount of labor embodied in those things. Specifically, mutualism is the political and economic theory that:

1. when labor or its product is sold, it ought to receive in exchange, an equal amount of labor or a product that required the same amount of labor to produce (receiving anything less is considered exploitation, theft of labor, or "usury"). Use of money denominated in labor hours (labor notes) was advocated by Proudhon to facilitate "labor for labor" trade.
2. labor is the only source of value, thus receiving an income from any source other than labor or from trade of labor's product is wrong (mutualists argue that rent and interest are such sources of income),
3. support for free markets,
4. support of private property in the product of labor in the full sense of a right to dispose of it as one wishes and a right to prevent others from taking or using it, except they do not support it for labor-transformed land, and instead support titles to land only as long as it remains in use or occupation (which Proudhon called "possession.")

As for capital goods ("means of production"), mutualist opinions differ on whether they are possession property or private property.

There is a difference between individualist anarchists and mutualists. Mutualists are more concerned with association than individualists. Voltairine de Cleyre distinguishes Josiah Warren and Benjamin Tucker as being individualists rather than mutualists, speculating that that they chose individualism because they had no experience with large-scale industrialism. She says "The Mutualists had; consequently, their leanings toward a greater Communism."

History

Mutualism, as a term, has seen a variety of related uses. Charles Fourier first used the French term "mutualisme" in 1822, although the reference was not to an economic system. The first use of the noun "mutualist" was in the New-Harmony Gazette by an American Owenite in 1826. In the early 1830s, a labor organization in Lyons, France, called themselves the "Mutuellists." By 1846, Pierre Joseph Proudhon was speaking of "mutualité" in his writings. William B. Greene, in 1850, used the term "mutualism" to describe a system that was similar to that of Proudhon, who later adopted "mutualisme" to describe his economic philosophy as well.

Mutualism has been associated with two types of currency reform. Labor notes were first discussed in Owenite circles, but received their first practical test in 1827 in the Time Store of individualist anarchist Josiah Warren. Mutual banking aimed at the monetization of all forms of wealth and the extension of free credit. It is most closely associated with William B. Greene, but Greene drew from the work of Proudhon, as well as from the land bank tradition. Mutualism can in many ways be considered "the original anarchy," since Proudhon was the first to identify himself as an anarchist. Though mutualism is generally associated with anarchism, it is not necessarily anarchist. One statist form of mutualism was promoted by Wilhelm Weitling.

Nineteenth century mutualists considered themselves libertarian socialists. While still oriented towards cooperativism, mutualists favor free market solutions, believing that most inequalities are the result of preferential conditions created by government intervention. Mutualism is something of a middle way between classical economics and socialism, with some characteristics of both. Modern-day Mutualist Anarchist Kevin Carson, considers anarchist mutualism to be "free market socialism".

Mutualist thoughts on capitalism

The "cost principle" or "cost the limit of price"

Mutualists argue that most of the economic problems associated with capitalism come back to a violation of the cost principle, or as Josiah Warren interchangeably said, "Cost the limit of price." It was inspired by the labor theory of value, popularized, though not invented, by Adam Smith in 1776 — Proudhon mentions Smith as an inspiration. The labor theory of value holds that the actual price of a thing (or the "true cost") is the amount of labor that was undertaken to produce it. Proudhon and Warren, working without association or apparent knowledge of each other, accepting this axiom, drew from this the conclusion that it is therefore unethical to charge higher price for a thing than the amount of labor that was undertaken to produce it. In Warren's terms, cost should be the "limit of price." Anyone who sells goods should charge no more than the cost to himself of acquiring these goods.

As far as determining payment for goods, they should pay for those goods with an equivalent amount of labor lest they violate the cost principle. In terms of employment, an employer should not be paid unless he labors and, if he labors less than an employee, then he should be paid less than that employee. Therefore, if the cost principle is followed, profit to an employer through the labor of others is not possible — everyone receives the "full produce" of his own labor and receives no produce of the labor of another unless he pays with an equivalent amount of labor. Warren says that this is in contrast to "Value the limit of price" where the only limit to price is the highest amount someone is willing to pay for a thing based on his own subjective valuation (see subjective theory of value).

Property

Pierre Joseph Proudhon was one of the most famous philosophers to have articulated thoughts on the nature of property. He is known for exclaiming "property is theft," but is less known for also exclaiming "property is freedom," and "property is impossible." According to Colin Ward, Proudhon did not see a contradiction between these slogans. This was because Proudhon distinguished between what he considered to be two distinct forms of property often bound up in the single label. To the mutualist, this is the distinction between property created by coercion and property created by labor. Property is theft "when it is related to a landowner or capitalist whose ownership is derived from conquest or exploitation and only maintained through the state, property laws, police, and an army". Property is freedom for "the peasant or artisan family a natural right to a home, land cultivate, to tools of a trade", and the fruits of that cultivation - but not to ownership or control of the lands and lives of others. The former is considered illegitimate property, the latter legitimate property.

Proudhon argued that property in the product of labor is essential to liberty, while property that strayed from "possession" ("occupancy and use") was the basis for tyranny and would lead a society to destroy itself. The conception of entitlement property as a destructive force and illegitimate institution can be seen in this quote by Proudhon,

Then if we are associated for the sake of liberty, equality, and security, we are not associated for the sake of property; then if property is a natural right, this natural right is not social, but anti-social. Property and society are utterly irreconcilable institutions. It is as impossible to associate two proprietors as to join two magnets by their opposite poles. Either society must perish, or it must destroy property. If property is a natural, absolute, imprescriptible, and inalienable right, why, in all ages, has there been so much speculation as to its origin? — for this is one of its distinguishing characteristics. The origin of a natural right! Good God! who ever inquired into the origin of the rights of liberty, security, or equality? (What is Property?)

Mutualist, Clarence Lee Swartz, says in What is Mutualism:

It is, therefore, one of the purposes of Mutualists, not only to awaken in the people the appreciation of and desire for freedom, but also to arouse in them a determination to abolish the legal restrictions now placed upon non-invasive human activities and to institute, through purely voluntary associations, such measures as will liberate all of us from the exactions of privilege and the power of concentrated capital.

Swartz also states that mutualism differs from anarcho-communism and other collectivist philosophies by its support of private property: "One of the tests of any reform movement with regard to personal liberty is this: Will the movement prohibit or abolish private property? If it does, it is an enemy of liberty. For one of the most important criteria of freedom is the right to private property in the products of ones labor. State Socialists, Communists, Syndicalists and Communist-Anarchists deny private property."

However, Proudhon warned that a society with private 'property' without equality would lead to statist-like relations between people.

"The purchaser draws boundaries, fences himself in, and says, 'This is mine; each one by himself, each one for himself.' Here, then, is a piece of land upon which, henceforth, no one has right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these multiply, and soon the people . . . will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor's door, on the edge of that property which was their birth-right; and the proprietor, watching them die, will exclaim, 'So perish idlers and vagrants.'"

Unlike capitalist private property-supporters Proudhon stressed equality, he wanted everyone to be a private owner.

Mutualist economics

The major tenets of mutualism are free association, mutualist credit, contract (or federation), and gradualism (or dual-power). Mutualism is often described by its proponents as advocating an "anti-capitalist free market".

Contemporary mutualist author Kevin Carson holds that capitalism is founded on "an act of robbery as massive as feudalism," and argues that capitalism could not exist in the absence of a state. However, it must be noted that he uses an unconventional definition of capitalism. He says "t is state intervention that distinguishes capitalism from the free market", whereas Merriam-Webster's Third New International Dictionary, Unabridged, defines capitalism as "an economic system characterized by private or corporation ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly in a free market." Carson argues the centralization of wealth into a class hierarchy is due to state intervention to protect the ruling class, by using a money monopoly, granting patents and subsidies to corporations, imposing discriminatory taxation, and intervening militarily to gain access to international markets. Carson’s thesis is that an authentic free market economy would not be capitalism as the separation of labor from ownership and the subordination of labor to capital would be impossible, bringing a class-less society where people could easily choose between working as a freelancer, working for a fair wage, taking part of a cooperative, or being an entrepreneur. He notes, as did Tucker before him, that a mutualist free market system would involve significantly different property rights than capitalism is based on, particularly in terms of land and intellectual property.

Free association

Mutualists argue that association is only necessary where there is an organic combination of forces. For instance, an operation that requires specialization and many different workers performing their individual tasks to complete a unified product, i.e., a factory. In this situation, workers are inherently dependent on each other -- and without association they are related as subordinate and superior, master and wage-slave.

An operation that can be performed by an individual without the help of specialized workers does not require association. Proudhon argued that peasants do not require societal form, and only feigned association for the purposes of solidarity in abolishing rents, buying clubs, etc. He recognized that their work is inherently sovereign and free. In commenting on the degree of association that is preferable Proudhon said:

"In cases in which production requires great division of labour, it is necessary to form an ASSOCIATION among the workers... because without that they would remain isolated as subordinates and superiors, and there would ensue two industrial castes of masters and wage workers, which is repugnant in a free and democratic society. But where the product can be obtained by the action of an individual or a family... there is no opportunity for association."

For Proudhon, mutualism involved creating "industrial democracy," a system where workplaces would be "handed over to democratically organised workers' associations . . . We want these associations to be models for agriculture, industry and trade, the pioneering core of that vast federation of companies and societies woven into the common cloth of the democratic social Republic." He urged "workers to form themselves into democratic societies, with equal conditions for all members, on pain of a relapse into feudalism." This would result in "Capitalistic and proprietary exploitation, stopped everywhere, the wage system abolished, equal and just exchange guaranteed." Workers would no longer sell their labour to a capitalist but rather work for themselves in co-operatives.

As Robert Graham notes, "Proudhon's market socialism is indissolubly linked to his notions of industry democracy and workers' self-management." K. Steven Vincent notes in his in-depth analysis of this aspect of Proudhon's ideas that "Proudhon consistently advanced a program of industrial democracy which would return control and direction of the economy to the workers." For Proudhon, "strong workers' associations . . . would enable the workers to determine jointly by election how the enterprise was to be directed and operated on a day-to-day basis."

Mutual credit

Mutualists argue that free banking should be taken back by the people to establish systems of free credit. They contend that banks have a monopoly on credit, just as capitalists have a monopoly on land. Banks are essentially creating money by lending out deposits that do not actually belong to them, then charging interest on the difference. Mutualists argue that by establishing a democratically run mutual bank or credit union, it would be possible to issue free credit so that money could be created for the benefit of the participants rather than for the benefit of the bankers. Individualist anarchists noted for their detailed views on mutualist banking include Proudhon, William B. Greene, and Lysander Spooner.

Some modern forms of mutual credit are LETS and the Ripple monetary system project.

Contract / Federation

Mutualism holds that producers should exchange their goods at cost-value using systems of "contract." While Proudhon's early definitions of cost-value were based on fixed assumptions about the value of labor-hours, he later redefined cost-value to include other factors such as the intensity of labor, the nature of the work involved, etc. He also expanded his notions of "contract" into expanded notions of "federation." It is possible that these ideas, more fully developed, could strongly resemble participatory economics today.

Gradualism / Dual-power

Beneath the governmental machinery, in the shadow of political institutions, out of the sight of statemen and priests, society is producing its own organism, slowly and silently; and constructing a new order, the expression of its vitality and autonomy...

Proudhon noted that the shock of the French Revolution failed the people, and was instead interested in a federation of worker cooperations that could use mutualist credit to gradually expand and take control of industry. This is similar to economic models based on worker cooperatives today, such as the Mondragón Cooperative Corporation in Spain and NoBAWC in San Francisco.

Mutualism today

Kevin Carson is a contemporary mutualist and author of Studies in Mutualist Political Economy.

Social economy, some fair trade movements and some free software projects such as Debian and Linux Users Groups follow a similar spirit, focussing on mutual aid, decentralization and free association (see Small "a" anarchism).

Notes and references

Notes

1. "Involved with radical politics and in his contact with the Marxists, he soon rejected their doctrine, seeking rather a middle way between socialist theories and classical economics." - Irving Horowitz, The Anarchists, 1964, Dell Publishing
2. See The Iron First Behind The Invisible Hand.

References

1. Swartz, Clarence Lee. What is Mutualism? VI. Land and Rent
2. Woodcock, George. Anarchism: A History of Libertarian Ideas and Movements, Broadview Press, 2004, p. 20
3. de Cleyre, Voltairine. Loving Freedom
4. Charles Fourier, Traité (1822), cited in Arthur E. Bestor, Jr., "The Evolution of the Socialist Vocabulary", Journal of the History of Ideas, Vol. 9, No. 3 (Jun., 1948), 259-302.
5. New-Harmony Gazette, I, 301-02 (14 June 1826) cited in Arthur E. Bestor, Jr., "The Evolution of the Socialist Vocabulary", Journal of the History of Ideas, Vol. 9, No. 3 (Jun., 1948), 259-302.
6. A Mutualist FAQ: A.4. Are Mutualists Socialists?
7. Libertarian Socialism by Paul E. Gagnon
8. Proudhon, Pierre-Joseph. What is Property? p. 118
9. Carson, Kevin. Mutualist Political Economy, Preface
10. Some background about the name: What is mutualism?
11. Guerin, Daniel (ed.) No Gods, No Masters, AK Press, vol. 1, p. 62
12. The General Idea of the Revolution, Pluto Press, p. 277 and p. 281
13. "Introduction", General Idea of the Revolution, p. xxxii
14. Pierre-Joseph Proudhon and the Rise of French Republican Socialism, Oxford University Press, Oxford, 1984, p. 230 and p. 156
15. Proudhon, General Idea of the Revolution in the Nineteenth Century. Translated by John Beverly Robinson. New York: Haskell House Publishers, Ltd., 1923, 1969 . p 243.

See also

• Cincinnati Time Store
• Utopia (anarchist community)
• Individualist anarchism
• Socialist economics
• Labor theory of property

External links

• Mutualist.org, Mutualist web site
• Mutualist Blog: Free Market Anti-Capitalism, a weblog written by Kevin Carson
• Mutualism from The Conquest of Power, by Albert Weisbord
• Plan of the Cincinnati Labor for Labor Store by Josiah Warren
• Proudhon and Anarchism by Larry Gambone - contains a discussion on Proudhonist mutualism
• Mutual Banking by William B. Greene
• Studies in Mutualist Political Economy by Kevin Carson
• What is Mutualism? by Clarence Lee Swartz (1927) - A classic text on Mutualism
• Mutual Aid: A Factor of Evolution Peter Kropotkin 1902
• Anarchist-Mutualism by John William Lloyd, a criticism`
• Journal of Libertarian Studies Vol. 20 Num. 1. This issue is devoted to Kevin Carson's Studies in Mutualist Political Economy. It includes critiques and Carson's rejoinders.
• Mutualism: A Philosophy for Thieves by George Reisman.

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• Economic ideologies
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