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not the saving instinct which prevented. He did not throw the skin away, because he saw that he could apply it so as to satisfy some desire. He did not make a mitten of it, because he saw that he could get more good of it in another way. Similarly bows superseded slings, and guns, bows, not because men were stingy, but because they were ingenious. The whole notion of saving is a relic of the mercantile fallacy; exchange enriches the seller at the expense of the buyer. It is refuted by the same argument. The buyer is a seller. Exchange enriches both. You are right in saying that inflation of the currency will not abolish interest, but I can tell you what will: withdrawing the protection of Government from monopolies. The cause of interest is speculation with a view to getting a monopoly. If a tailor and farmer exchange their products, both gain, but there is no interest, only wages. If they find it convenient to deposit their products with a middle-man, still his commission is only wages. But if the middle-man preceives that the production of clothes is running ahead of the production of food, he can gain (at the cost of the tailor), by buying large quantities of food and paying interest to the farmer, or to a lender who furnishes him money. In the warfare of speculation which ensues ninety-five per cent of the speculators are ruined - eaten by the remaining five per cent, who finally do secure a monopoly. As wealth increases the battle grows fiercer; till now we have on all hands complaints of over-production and combination to create the poverty necessary to profits. The contemporaries of Swift or Crolsglass would have roared with laughter at the suggestion that men could be idle and hungry because there was too much wealth. The nineteenth century is not so much stupider than the eighteenth or the fifteenth that it will go on swallowing such humbug by the name of science. They will soon find out that redundant wealth should result in communism, and must do so the moment governments cease to protect thieves. C. L. JAMES.

In reply to the first criticism that the admission that governments are great robbers is inconsistent with the assertion that they have sprung from the necessity of protecting the lives and property of citizens - it is sufficient to remark that there is no inconsistency whatever in the statements. As to whether or not there is any incompatibility between the two tasks-robbery and protection - it is sufficient to observe that they are both performed by present complex governments. In saying that the need of protection is really the necessity from which governments have sprung, my statement may have been a little rash. Perfectly conclusive evidence on that head is not to be expected, and men may have combined, or may have been coerced into co-operation, for the purpose of aggression, before they had combined for protection.

At any rate, the need of protection, principally against foreigners, is a fact now, and has been a fact throughout that time of which records exist, and it is, therefore, a pardonable hyperbole, if, indeed, at all figurative, to speak of this as the necessity from which government has sprung.

It is a little amusing to be called to task for talking Anarchy without knowing it; at first blush it would appear to the uninitiated a grateful discovery to a professed Anarchist that his sound views are prevailing in quarters where they are expressly repelled. But the peculiar agitation of Mr. James is not so surprising when taken in connection with his absurd contention that Communism would result from Anarchy. Anarchy may be a very bad thing, but it is not so bad as that.

The possession of private property, personally held, and selfishly and exclusively enjoyed, is, perhaps, the most fundamental of social necessities. It is, indeed, pre social ; it is, simply, organic. Neither has it anything under the sun to do with the question of POLITICS. So Mr. James's annoyance was, perhaps, due not so much to finding us talking Anarchy without knowing it, as to observing that although we talked very fair Anarchy for poor, muttony bourgeois, we did not, wittingly, or unwittingly, talk communistic nonsense, that is, neither prose nor poetry.

Mr. James's reasoning to show that capital is not the result of saving has the merit of ingenuity and originality. If one asks why water accumulates in a reservoir, and is told that it is caused by the dam, he may, of course, retort that the dam is not the cause, but rather gravity, which makes water seek a lower level; but he would hardly contend that the dam acts to prevent the water from accumulating. Now, in the case of wealth, of which capital is a part,

that part which is applied to reproduction, it is perfectly evident that there can be no accumulation unless there has first been production; but it is equally evident that there can be no accumulation if the wealth is consumed as fast as it is produced.

In the case instanced by Mr. James it does not necessarily follow that there would be less demand for shoes if all shoemakers gave up the use of tobacco. Some of those now engaged in producing tobacco would produce

other things to exchange for shoes. It is not likely that the world would be richer if falconry had continued to the present time, though that would have afforded lucrative employment for many persons who would have needed shoes, food, and other things. We do, to be sure, find those nations and individuals most sparing in consumption whose production is least; but the saving may not be the cause of the small amount of production. It may be just the other way. Probably few individuals and no nations produce as much wealth as they could produce if their desires were greater. It is conceivable that a nation may be content to consume little, and that in consequence it produces comparatively little. But this is beside the question. Nations find it of the utmost importance that not all of what is produced each year shall be consumed within the year, but that part be saved to aid further production. In this country, according to Mr. Edward Atkinson, about ten per cent of the annual production is saved. Now suppose that the annual production were one half greater, but that only five per cent were saved: the country would be growing in wealth only three fourths as fast as at present. The difference would be even greater, owing to the part which the wealth that is saved plays in assisting further production.

It is perfectly true that invention and industry create capital. It does not at first seem probable that the instinct of saving would induce a savage to make a sling rather than a mitten out of a rabbit skin. But suppose him to be in need of the mitten, and to have thought, "If I make a sling I shall be able to kill two other rabbits and make two mittens." Here is the feeling which leads men to save, to defer a present gratification for a greater future gratification. The process of thought is not so very different from that gone through by a savage who has killed an animal and, after having eaten half of it, says, to himself, "I should enjoy eating the other half, but very likely I shall need it more to-morrow or next day than I need it now, therefore, I will save it." The importance of the inspiration, the perception, that by the aid of a sling a stone can be thrown with more force than by hand, is not to be underrated; but invention usually implies labor, mental and physical, labor not directly applied to satisfying immediate wants, and so

implies preferring a future to a present gratification, and this is the feeling which prompts saving. The refutation of the mercantile theory is complete. The buyer is also a seller And so an inventor is an accumulator. A producer is also a consumer. In order to become rich a nation must produce more. than it comsumes, that is, must save a part of what it produces. Where is the fallacy?


It would be a sufficient reply to Liberty's criticism of the trivial article on Interest at page 201 of TO-DAY, that the article was neither written by the editor nor intended by the writer as a commentary on the anarchist view of interest. It might be encouraging to Liberty that its theory should be described as "the most popular fallacy upon the subject"; but I am surprised, on the whole, that this characterization of the fallacy did not warn the editor against taking that shaft to his own bosom. Although I do not agree with him, that, under freedom, capital would cease to be lent at interest, I am perfectly prepared to try that means for this and for every other end- as he well knows. If he will reflect upon the so-called debate - save the mark! upon the silver question in the United States Senate then in progress of consuming the people's hard-earned money at the rate of $10,600 a day (I believe), the editor will read the article on interest in a new light.

For what is the substantial proposition of those who believe that interest can be lowered by the issue of Treasury notes while the monopoly of banking continues? Surely it needs no great reflection to see that the amount of currency, as of other things, required by a given people, with given habits, and in a given industrial state, is a limited quanity, although absolutely indeterminate under the existing restrictions of banking. If money shall be figuratively called a medium of exchange, the industrial state may be fitly symbolized as a receptacle containing this floating, but now, perhaps, artificially immobilized, medium. And the substantial proposition of the inflationists may then be described as the belief that a vessel of a given capacity can be made to contain a greater quantity of fluid, say, by simply turning on the faucet and letting the unfathomable waste of Congressional ignorance escape into it. Now, under free

dom, the demand for a greater quantity of money, arising from whatever cause (interest?), would correspond to an expansion of the industrial magazine, and the vast reservoir of human ingenuity, unpolluted by muddy Congressional ignorance, would supply the demand. If in any particular case interest was the cause of this demand, what more do you ask? then the supply would lower interest. You must be a very unreasonable man, sir, to require that one should not only assent to your demand as to the tendency of free banking, and, therefore, as to the course which should now be pursued, but to require in addition that one should share your illusion that free banking would abolish the lending of capital, and, therefore, interest.

As to the effect that the presence of a sufficient amount of money has on the abundance of capital, you are already answered as well as may be. Evidently money is a necessary element in the existing industrial plexus, and increase of capital is dependent upon the supply of a sufficient amount of money. I do not know myself what the state of the case may be, but at present I can see no antecedent reason for doubting that an increase of capital might occur simultaneously with the contraction of the money in circulation. Certainly this might occur when the amount of money in existence was diminished; though this raises the question as to when money is money · so to speak. A great deal of gold and silver, a great deal of paper might be stamped in dollars and cents by competent persons, without, perhaps, being thereby converted into money. Such portions of metal or of paper might be regarded as a sort of potential money, but that view would be open to the objection that nearly everything else may be regarded as potential money. And it might not be utterly impertinent to inquire in that case how potential the alleged potential money was, even though the first thing suggested by the inquiry should be an atrocious pun.

So I fancy that it is difficult if not impossible to define with an approach to clearness and accuracy just what the relation between the abundance of money and the abundance of capital may be. In one sense the amount of money may be regarded as increased when the existing mass of recognized money circulates more rapidly. This, it would

appear, should coincide with activity of production; but that there is any necessary relation between increased production and the segregation of capital is far from evident. In general it may be so, but perhaps the increased product, requiring and actually using for its exchange an increased amount of money in the above sense, may all be consumed. If all is not consumed, if some becomes capital, still a quantitative relation between the increment of capital and the increase of money is hardly discernible.

In view of Liberty's statement that currency facilitates distribution of wealth, that it thereby increases the "effective" demand for wealth, that it thereby increases the production of wealth, that this increases the abundance of capital, and finally, that this increase in the abundance of capital tends indefinitely to reduce the rate of interest, and in view of the question I am thereupon invited to answer, I think that I must pause to look over this treacherous ground. Here is the question put to me, and said to be a poser":


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 that 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 any interest? I call upon the editor of TO-DAY to answer this queston. It is needless to assure him that it is vital.

Here we have a tolerably simple problem. The factors involved are comparatively few: money, wealth, capital, interest, - only four factors; and if banking be added, meaning by that the mechanical details, the prevailing good faith, etc., we shall still have only five factors to consider. If the factors were expressed algebraically we should require only five symbols. Nearly all unsolved problems are more complex than this. The unknown quantity is the rate of interest—say x.

Let us look the matter over calmly and methodically, and find an equation if possible. Nothing but quantities are under consideration, and it is humiliating to be stumped at the very outset, plucked, as it were, at the Little Go. The amount of money — that's a; the amount of wealth that's b; the amount of capital that's c, and the unknown amount is the interest, x, all of which is quite orthodox, for that is the function of algebra. As to banking, we may think that over and, having found the quantitative factor, we can introduce that in a separate equation. So here goes for the tripos! (Shade of Miss Fawcett !-but I forget, she is still, Dei gratia, in the flesh; well then, shade of Newton, or shade of Laplace, of Kepler, of Ptolemy, Proctor, Homer, Herodotus, Euripides, Anybody, only Somebody- I have it: Blaine ! come to my aid-parcus deorum cultor et infrequens).

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No one will deny that my offer is liberallet a man fix the equation to suit himself and then solve it for him!

It may appear puerile to attempt to solve a social problem by algebra, and if any one is disposed to take this view I will not gainsay him. But see our friend Liberty! After positively asserting that the chain of causation is from currency to wealth, from wealth to capital, and from capital to interest, he wants us to drop out the connecting links and jump at once from currency to interest! Let there be no doubt about this performance. I will quote in extenso what the editor says in criti

cism of the statement in TO-DAY that the amount of currency has no effect [direct?] upon the abundance of capital:

"This paragraph though introduced with a rather nonchalant air, seems to have been the objective point of the entire article. All the rest was apparently written to furnish an occasion for voicing the excessively silly notion that the amount of currency can have no effect upon the abundance of capital.' As I have already said, to show how silly it is, it is only necessary to slightly change the wording of the phrase. Let it be stated thus: 'The abolition of currency can have no effect upon the abundance of capital.' Of course, if the former statement is true, the latter follows. But the latter is manijestly absurd, and hence the former is false. To affirm it is to affirm that currency does not facilitate the distribution of wealth; for if it does, then it increases the effective demand for wealth, and hence the production of wealth, and hence the abundance of capital. It is true that an increase in the abundance of capital does not always lower the rate of interest.' An extra horse attached to a heavy load does not always move the load. If the load is heavy enough, two extra horses will be required to move it. But it is always the tendency of the first extra horse to move it, whether he succeeds or not. In the same way, increase of capital always tends to lower interest up to the time when interest disappears entirely. But though increased capital lowers interest and increased currency increases capital, increased currency also acts directly in lowering interest before it has increased the amount of capital."

And then comes the question I am engaged in answering, am I not? Here we are in the thick of the skirmish. What though it were granted - which it is not that increased capital tends indefinitely to lower interest, and what though it were granted — which it is that free banking would lower interest? To jump from here to the conclusion that free banking alone would tend to reduce interest to the vanishing point is a saltation worthy of Harlequin himself. The distinction which should be drawn is obvious. If there is a monopoly of money as a medium of exchange, and if such money is necessary to exchange and to borrowing, both of which necessities may be tentatively admitted, then the current rate of interest contains what I may call, in violation alike of the lexicon and of etymology, a monopolistic factor which would tend to disappear, and shortly would vanish, under free banking. Besides this, it may be granted - nay, emphatically asserted, as individualists do assert that the bulk of currency may be restricted by the monopoly,

and thus act as a check on the production of wealth and the segregation of capital; so that, both directly and indirectly, free banking would tend to lower interest. But neither the absolute nor relative abundance of either capital or money is the only factor in interest. When I am asked what the other elements are, as I presently shall be asked, I will take some little time in replying; for the question is quite beside the real issue between anarchists and those who hold that there is a sphere within which Government may act advantageously. All that can be said positively is, that the relative abundance of money is one of the elements in interest,one which is certainly disturbed to the advantage of a few and the detriment of many by Government interference. The same is true of every other act of Government interference, except of the enforcement of justice between man and man.

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Liberty's question still hangs in the air. In that hypothetical case of the farmer, the banker, the succession of artizans, and the produce commission merchant - this last a very accommodating man, to return A's very notes to him in season for the mortgage- the question is, Has there been any lending of capital? Now really, do you remember what Lewis Caroll says about the effect of trying to give two answers in one breath? There occurs an impediment of articulation. If I should try to say Yes and No at once, I should probably say Yo or SNO; and thus make the editor of Liberty happy by adding one to the list of the victims to his "poser." But I shall not be able to gratify him in this case, however strongly I may desire to provide him with innocent amusement.

Let us draw near to the scene of conflict. So many have fallen before this terrible engine of war that the ground is certainly unsafe. What have we here? A Crupp gun, a Howitzer - or is it only an antiquated Mittrailleuse? Would that we were Prussians! But it may not be; we are nothing but harmless Individualists, bound to show our colors, unable to conceal the fact that we are utterly unable to see what all this fighting has to do with point at issue- the function of government. Still, we are told that the fight is raging Labor, Capital, Monopoly, Poverty, Proletarii, Latifundiproscriptores, the whole cohort of Sylla, modernized Fabians in the middle. How many legions did he plant on

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sequestered soil? Were they all patrician? if so, whence the scramble? Yet Sylla did not come before Roman greatness, but after. Let that pass; we have stood by and viewed the conflict from afar. So Mr. Yarros tells us as he takes us by the shoulder, for all the world like that last abortion of government the policeman and warns us to move on. Down into the battle, thou sluggard and vagabond! first get a full belly, then talk of liberty; a very wild exhortation indeed, but effective, no doubt, as it ever has been from the time when Ulysses' companions listened, down to the present day. Not quite consistent either with the notion that order shall be the offspring of liberty; for this path would lead to liberty first, follow what may. Again I say, let that pass. We, it seems, have been mere skirmishers, stragglers, campfollowers forsooth, and now we are admonished to get into line and take our taste of cold lead. The first bolt is this "poser about capital and interest. There is a sousentendu promise that, after being bowled over by that, we may presently be further buffeted about to our heart's content, if not indeed devoured at once by the Sphinx itself.

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We say that the result of non-interference will be good, about the only evidence of which, it must be confessed, is the evil of interference; but this shall not avail to save our skins. We must not rest content with that, we must be driven to admit that wealth and happiness lie just at the back door of government, and if we can only break through they shall be ours. So is the end of the rainbow and the boy's bag of gold just at the back door; and the drifting wind carries bow and bag away day after day.

But the question, the question.

When the farmer has mortgaged his land to the banker and has borrowed the banker's notes in convenient denominations, has he borrowed capital? You see, we have descended into that arena covered with the blood and bones of so many victims, and have already done some buffeting on our own account. The first persons to be unceremoniously brushed aside - just as we were pushed into the fight are B, C, D, and the rest of the alphabet. After a while we may let them be dragged in again to see what stuff they are made of; but for the present they must "get out of this." What hope the editor cherished when he invited us to inspect these puppets

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