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B. Tucker's Big Four: The Money Monopoly
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B. Tucker‘s Big Four: The Money Monopoly.

In every system of class exploitation, a ruling class controls access to the means of production in order to extract tribute from labor. The landlord monopoly, which we examined in the last section, is one example of this principle. And until the nineteenth century, the control of land was probably the single most important form of privilege by which labor was forced to accept less than its product as a wage. But in industrial capitalism, arguably, the importance of landlordism has been surpassed in importance by the money monopoly. Under that latter form of privilege, the state's licensing of banks, capitalization requirements, and other market entry barriers enable banks to charge a monopoly price for loans in the form of usurious interest rates. Thus, labor's access to capital is restricted, and labor is forced to pay tribute in the form of artificially high interest rates.

Individualist anarchists like William Greene58 and Benjamin Tucker viewed the money monopoly as central to the capitalist system of privilege. As Tucker pointed out, the capitalist bank, in the case of a secured "loan," does not in fact lend anything. The banker "invests little or no capital of his own, and therefore, lends none to his customers, since the security which they furnish him constitutes the capital upon which he operates...."59 What the banker actually does is perform the simple service of making the "borrower's" property available in a liquid form. And because of the state's laws, which restrict the performance of this "service" to those with enough available capital to meet its capitalization requirements, he is able to charge a usurious price for it.

The process of obtaining a banking charter from the government, either federal or state, was described by Karl Hess and David Morris in Neighborhood Power:

First, one gets a certificate which gives permission to raise capital for the bank and outlines what conditions need to be met in order to receive a charter. Step two is getting the charter after having met the conditions. The conditions are numerous, but the most important one is that a given amount of deposit capital must be raised in a specific period of time. In order to get permission to raise capital a group must prove that there is a reason to have another bank, that it can serve a necessary function, and that it has a viable chance of succeeding.60

In a genuinely free banking market, any voluntary grouping of individuals could form a cooperative bank and issue mutual bank notes against any form of collateral they chose, with acceptance of these notes as tender being a condition of membership. Tucker and Greene usually treated land as the most likely form of collateral, but at one point Greene speculated that a mutual bank might choose to honor not only marketable property as collateral, but the "pledging ... [of] future production."61 But assuming that the mutual bank limited itself to rendering liquid the property of its members, there would be, strictly speaking, "no borrowing at all":

The so-called borrower would simply so change the face of his own title as to make it recognizable by the world at large, and at no other expense than the mere cost of the alteration. That is to say, the man having capital or good credit, who... should go to a... bank... and procure a certain amount of its notes by the ordinary process of mortgaging property or getting endorsed commercial paper discounted, would only exchange his own personal credit... for the bank's credit, known and receivable for products delivered throughout the State, or the nation, or perhaps the world. And for this convenience the bank would charge him only the labor-cost of its service in effecting the exchange of credits, instead of the ruinous rates of discount by which, under the present system of monopoly, privileged banks tax the producers of unprivileged property out of house and home.62

Were the property owned by the working class freed up for mobilization as capital by such means, and the producers allowed to organize their own credit without hindrance, the resources at their disposal would be enormous. As Alexander Cairncross observed, "the American worker has at his disposal a larger stock of capital at home than in the factory where he is employed...."63

Abundant cheap credit would drastically alter the balance of power between capital and labor, and returns on labor would replace returns on capital as the dominant form of economic activity. According to Robinson,

Upon the monopoly rate of interest for money that is... forced upon us by law, is based the whole system of interest upon capital, that permeates all modern business.

With free banking, interest upon bonds of all kinds and dividends upon stock would fall to the minimum bank interest charge. The so-called rent of houses... would fall to the cost of maintenance and replacement.

All that part of the product which is now taken by interest would belong to the producer. Capital, however... defined, would practically cease to exist as an income producing fund, for the simple reason that if money, wherewith to buy capital, could be obtained for one-half of one per cent, capital itself could command no higher price.64

And the result would be a drastically improved bargaining position for tenants and workers against the owners of land and capital. According to Gary Elkin, Tucker's free market anarchism carried certain inherent libertarian socialist implications:

It's important to note that because 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 buy and own companies collectively.65

Given the worker's improved bargaining position, "capitalists' ability to extract surplus value from the labor of employees would be eliminated or at least greatly reduced."66 As compensation for labor approached value-added, returns on capital were driven down by market competition, and the value of corporate stock consequently plummeted, the worker would become a de facto co-owner of his workplace, even if the company remained nominally stockholder-owned.

Near-zero interest rates would increase the independence of labor in all sorts of interesting ways. For one thing, anyone with a twenty-year mortgage at 8% now could, in the absence of usury, pay it off in ten years. Most people in their 30s would own their houses free and clear. Between this and the nonexistence of high-interest credit card debt, two of the greatest sources of anxiety to keep one's job at any cost would disappear. In addition, many workers would have large savings ("go to hell money"). Significant numbers would retire in their forties or fifties, cut back to part-time, or start businesses; with jobs competing for workers, the effect on bargaining power would be revolutionary.

Under industrial capitalism, Tucker argued, the money monopoly reinforced the monopoly of land and capital. Site rent, as such, depended mainly on the enforcement of absentee land titles. The availability of all vacant land for homesteading would cause ground rent, as such to fall to zero through competition. But in built-up areas, the value of improvements and buildings outweighed that of the site itself. And the availability of interest-free credit would, likewise by competition, would cause house rent to fall to zero. Nobody would pay rent on a house when he could get the wherewithal, interest free, to build one of his own. And by the same token, nobody would accept significantly less than his labor product in return for the use of the means of production, when he and his fellow workers could mobilize the interest-free capital to buy their own. "In this situation," as Gary Elkin wrote, "it would be absurd for workers to pay someone else (i.e. a capitalist) more for the use of tools and equipment than a fee equal to their depreciation and maintenance costs plus the cost of the taxes (if any) and utilities involved in housing them."67

In addition to all this, central banking systems perform an additional service to the interests of capital. First of all, a major requirement of finance capitalists is to avoid inflation, in order to allow predictable returns on investment. This is ostensibly the primary purpose of the Federal Reserve and other central banks. But at least as important is the role of the central banks in promoting what they consider a "natural" level of unemployment--until the 1990s around six per cent. The reason is that when unemployment goes much below this figure, labor becomes increasingly uppity and presses for better pay and working conditions and more autonomy. Workers are willing to take a lot less crap off the boss when they know they can find a job at least as good the next day. On the other hand, nothing is so effective in "getting your mind right" as the knowledge that people are lined up to take your job.

The Clinton "prosperity" was a seeming exception to this principle. As unemployment threatened to drop below the four per cent mark, a minority of the Federal Reserve agitated to raise interest rates and take off the "inflationary" pressure by throwing a few million workers on the street. But as Greenspan testified before the Senate Banking Committee, the situation was unique. Given the degree of job insecurity in the high-tech economy, there was "[a]typical restraint on compensation increases." In 1996, even with a tight labor market, 46% of workers at large firms were fearful of layoffs--compared to only 25% in 1991, when unemployment was much higher.

The reluctance of workers to leave their jobs to seek other employment as the labor market tightened has provided further evidence of such concern, as has the tendency toward longer labor union contracts. For many decades, contracts rarely exceeded three years. Today, one can point to five- and six-year contracts--contracts that are commonly characterized by an emphasis on job security and that involve only modest wage increases. The low level of work stoppages of recent years also attests to concern about job security.68

Thus the willingness of workers during the Clinton "boom" to trade off smaller increases in wages for greater job security seems to be reasonably well documented. For the bosses, the high-tech economy is the next best thing to high unemployment for keeping our minds right. "Fighting inflation" translates operationally to increasing job insecurity and making workers less likely to strike or to look for new jobs.