Sometimes, instead of purchasing a commodity out and out, people want to buy only the use of it, for a longer or shorter period. The price paid for such temporary use is commonly called hire.In precisely the same way money is often hired, and the hire paid for the use of it is called Interest.In the past, when gold and silver were the only money, the hire of gold and silver was on the same footing as that of any other commodity. Large sums were paid for the use of money, because the available amount of gold and silver was far less than was needed to carry on the commercial transactions of the times.Modern money is an entirely different affair. Modern money is almost altogether credit money. Gold is used to a certain extent; but the great bulk of the money in use is not gold but promissory notes, called bank notes - paper money, in short.The business of a bank is to lend money; which amounts, nowadays, to lending credit. All the credit notes - the ordinary bank notes - in circulation were originally borrowed from some bank."You are living on borrowed money," says a man to his friend."Not at all; this money in my pocket is my own; it is not borrowed," answers his friend."You may not have borrowed it," is the reply, "but somebody originally borrowed it, without doubt."And with perfect truth, for there is no way to obtain bank notes but from a bank, and the bank does not give them away, but lends them. In this way, the charge that the bank makes for the use of its notes - the interest - is a continual and universal tax upon all the members of the community.Not an old woman that buys a paper of pins, without yielding a part of the price to the banks as interest![T]here are various laws of the different States and of the United States, arbitrarily prohibiting the manufacture and loan of current notes by anybody but a lawfully organized bank; with penalties ranging from fine to imprisonment. By the Federal law the fine takes the form of a ten per cent tax upon the notes circulated, which acts as a complete prohibition.Were it not for these restrictive and prohibitory laws which support the money privilege or banking monopoly, it would be easy to start competitive banks; and, with free competition, the charge for money lent would be brought down to a minimum, as in other kinds of lending business.A livery stable keeper, for instance, must charge enough to pay for feed, care, cleaning and all incidental expenses, and for the replacement of his horses and vehicles as they wear out; and in addition his personal income or wages. Under free conditions, the same would occur in banking. If people were as free to establish banks and lend currency as they are now to establish livery stables and lend horses, competition among banks would reduce the rate of interest to the minimum necessary to cover expenses and to give them who were employed in the business an equitable wage.All that part of the product which is now taken by Interest would belong to the producer. Capital, however capital may be 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.If the laws restricting the issue of currency were done away with, such a state of affairs would easily be brought about by voluntary associations. Banks could and would be established, not, as now, by a handful of stockholders for their own profit, but by associations of business men for their convenience and advantage. These men would pledge their assets to support the credit of the bank, and would accept the current notes of the bank in exchange for their own notes, paying only the trifling percentage required to defray the cost of carrying on the bank.Anybody outside the association could obtain a loan by pledging his possessions to the amount of the loan, plus an allowance for deterioration, according to the nature of the commodity pledged, plus an allowance for risk.The notes of the bank would be redeemable, not in gold, but in any valuable commodity. Gold would no longer be the basis of the circulating paper currency; but all commodities would be available as a basis, that is, as security.Thus, financial crises would be impossible.At present, financial crises occur, chiefly because the paper currency is redeemable in gold only. There is never enough gold to redeem all the currency in circulation. Accordingly, when the supply of gold runs short, the security behind the notes is diminished, the loaning of notes is restricted or suspended, and the panic follows.Paper currency has hitherto been regarded with suspicion, as insecure. Whenever any measures are proposed looking toward the relief of the people by increasing the volume of the present governmentally controlled currency, the newspapers enlarge upon the dangers of an inflated paper currency. And with justice, as long as the redemption of the currency is possible With only a single commodity-gold.But it is only under this condition that a paper currency is insecure. When not only gold but all commodities are available for the redemption of the paper currency, its volume is limited only by the value of all the wealth of the country, and it can never become insecure up to this limit.Just which commodity shall be so used, depends chiefly upon its comparative invariability in value. Hitherto gold has been used, ostensibly upon the ground that it varied less in value than any other commodity, although really, age-long custom has had a powerful influence upon the choice of gold. . What the standard will be under free conditions it is impossible to predict. Experiment and experience are needed to decide the matter. It is not impossible that more than one standard or measure may be used; a statement that seems an absurdity on the face of it; yet the desirability and feasibility of a multiple standard, even under present conditions, is warmly defended by the well-known economist, Irving Fisher. If such a multiple standard is feasible now, it would become much more so under free conditions, when speculative fluctuations would be largely eliminated, and all values would tend toward a stable and normal relation.All business men will realize the impetus to exchange, and indirectly to production, that such a change in the money system would give.A convulsion would undoubtedly occur, if the change were sudden and general. But with the gradual establishment of free banks, each one compelled to maintain its credit in order to do business at all, no convulsion could occur. Gradually such free banks would associate, in order to support each other's credit, and, in the end, they would displace the present banks and inaugurate the new system, without any serious disturbance. Nothing prevents the establishment of free banks but the governmental restrictions already recounted. There is little prospect that these restrictions will be relaxed, because in all nations, the bankers are the real power behind the government, and compel the maintenance of the restrictions that give them their devouring monopoly. Such partial experiments as have been possible in the past, have proved abundantly successful.The Massachusetts Land Bank, during Colonial times, prospered, and brought prosperity to the community, until it was forcibly suppressed by special act of Parliament.

Taxation



... among the methods of obtaining a portion of the products of the community, without taking part in production, the oldest and simplest is taking what is desired by force.

This, when done by the upper classes, is called taxation.

In the monarchical military organizations of the past, the character of this privilege is easily seen.

The tax was levied in the name of the king or war leader, to whom the natural subservience of human nature spontaneously rendered submission. It was the king's army, the king's people, the king's taxes; and he who questioned the propriety of the royal prerogative of taking from his people without return or accounting, was reckoned, and felt himself to be, a criminal, guilty of the highest crime of disloyalty.

Such is still the attitude of the generality. To evade the customs tax, to "swear off" the income tax, is still felt by most people to be the immoral avoidance of a just claim, even though they permit themselves to be guilty of these delinquencies.

Although the form of society has been much modified, the industrial having begun to supplant the military, the nature of taxation remains the same. It is still the taking of other people's possessions without their agreement, even if with their tacit consent; that is to say, no opportunity is offered by which the payment may be withheld, on the ground that the services offered in return are not worth the amount demanded, or are not wanted at all as would be done in ordinary mercantile transactions.



It is often said by reformers that government should be conducted upon business principles. This is impossible, because business rests upon doing its work well in return for what is freely given in payment; whereas government demands and takes its income, whether its work is well done or not, and whether it is wanted or not.

The distinction is ineffaceable.

The officials of a governmental organization, whether autocratic, constitutional or democratic, are in the position of those of a corporation of which the chief expenses are the salaries of the officials and employees, and the income is obtained by forcible levies.

It is impossible that an income so obtained should be expended as carefully and economically, and as much in the interest of those who pay it, as if it had to be obtained by offering a fair equivalent to taxpayers, and convincing them that the proposed bargain was to their advantage, leaving them free to accept or decline at their pleasure.

For this reason denunciation of governmental corruption is entirely futile, indeed, laughable to them who have once clearly comprehended the true state of affairs.



The functions fulfilled by government today are chiefly of a commercial character, yet the service given is remunerated, not by bargain and sale, but by forcible levy. It is inevitable that officials should use this force-collected income to secure their own continuance in office by conferring valuable privileges upon their supporters, who, in turn, use every effort to strengthen the government.

The fact of this co-operation is well known. Everybody knows that behind each political party stands a group of rich men, and that their influence over the votes which are to elect the officials is given in return for the continuance of the privileges by which their wealth has been created.

This power of taking money from the individual without his consent, is the fundamental privilege upon which all the others are based, and by which they are licensed. It stands upon no logical ground, but is the royal prerogative - the will of the prince - in the language of former days.



It will perhaps be thought that a tax imposed by a representative assembly loses the character of a forcible levy, and becomes practically a mercantile transaction. Brief consideration will show that this is not the case. Although the severity of taxation by an autocrat is much mitigated by constitutionalism, the principle remains the same. Taxes are no longer imposed by leasing the collection to a pacha or proconsul, and letting him plunder unchecked. Modern governments have learned the importance of keeping the goose in good health, that it may lay more golden eggs.

But the vote is useless against taxation. Whichever party wins, taxes go on, and must go on. It is not possible to vote for a representative who will oppose taxation, for it is from taxation that he gets his bread and butter.



The essence of economic exchange is the freedom of both parties to withhold consent to a bargain. Even if it could be shown that the equivalent given were fully equal to the assessment levied, it would still lack the freedom of choice of the individual to permit it to be ranked as a commercial transaction.

Great as is this forced deduction from the products of the workers, the damage inflicted by taxation indirectly is still greater. First must be placed that caused by taxes upon imports. These restrict freedom of exchange in two ways; by limiting or preventing trade between the nations which impose them, and by fostering monopolies among producers.