"The disposition of all power is to abuses, nor does it at all mend the matter that its possessors are a majority. Unrestrained political authority, though it be confided to masses, cannot be trusted without positive limitations, men in bodies being but an aggregation of the passions, weaknesses and interests of men as individuals." ~ James Fenimore Cooper
Competition and Free Market Currencies
January 30, 2008
It must be said that libertarian outreach, or at the least the mere discussion of libertarian tenets with others, is often hard and taxing. Granted, many in Western society are brainwashed (if you will) into the passive acceptance of state powers, and thus cannot help but be statist. Still, dealing with statists, or those otherwise uninitiated with libertarian values, can be frustrating.
One salient obstacle I come across is in reference to the question of free market currencies. As an amateur student of Austrian economics (I say 'amateur' since I am not academically trained in economics), I can easily recognise the distinct advantages of competing, commodity-backed currencies within a free society. Evidently, commodity-backed currencies better protect individuals against a loss of purchasing power and the effects of the business cycle. Even still, someone unfamiliar with Austrian economics or libertarian principles would not naturally see it that way. A number of detractors of the emergence of free market currencies feel that such an arrangement would be 'chaotic' in nature, and thus manifest itself as an unviable and impractical system.
When asked to substantiate, or generally provide further evidence to support their perspective, these people often refrain from presenting any rational or cogent argument. It is true that all human philosophies can be subject to logical examination. Therefore, in this piece, I would like to examine whether the claim of 'chaos,' in relation to competing free market currencies, is really such a credible one.
Chaos and the marketplace
Statists opposed to free market currencies feel that since anybody can found a commodity-backed currency within a free market system, this then leads to inevitable chaos, as differing suppliers of goods and services would be within their rights to demand payment of products in any specific currency. Such an opinion is clearly erroneous. When making this analysis, such opponents are failing to account for the presence and mechanics of the free market.
If we picture an average consumer within a free market model, then they may feel overwhelmed by carrying large amounts of differing currencies within their wallets or purses. The statist may have a point in this regard, since such a situation would be unfeasible. Still, it should be noted that the free market pattern is fundamentally based upon catering to consumer wishes, desires, needs, and wants. If producers of goods and services in a capitalist structure did not do this, then they would not prosper and possibly lose out to a competitor in the marketplace. If we look at the contemporary United States , then we can see that companies such as Wal-Mart are prospering because they adequately match the demands of customers. Shopping at Wal-Mart is often cheaper and more convenient than purchasing products at a local 'Mom and Pop' store. It has to be said, then, that consumer is king within a free market setting.
Because consumer is king, and business concerns have to tailor their goods and services to consumer wishes, companies then in a free market scenario would recognise the ease in carrying around only a few types of currency. If they did not, and insisted on payment with an obscure kind of currency, then they might lose out in the marketplace. In essence, it would be consumer demand that would force business concerns to accept a handful of prominent currencies in a free society.
Keeping in mind the points I have raised in previous paragraphs, nothing is halting communities from creating and supplying their own forms of money. In the UK , we have a large Islamic population. There would be nothing out of place in British Muslims seeking to fashion their own unique brands of currency, for use within their own communities. Some naysayers of market anarchist/voluntaryist principles feel that such a state of affairs would lead to 'ghettoisation.' In that, free association would lead to the 'closing' of communities from those unlike themselves.
Well, what really is wrong with this? Distinct groups of people creating their own currencies would represent voluntary human interaction. Naturally, the principal advantage of the concept of freedom of association is that it enables sovereign individuals to mix with others sharing similar beliefs. In general, Christians may feel more at home with other Christians. Vegans may feel more comfortable with other vegans. Some whites and blacks feel innately more akin to others of their own respective race. The significant point here is that, in accordance with our human nature, we are more inclined to associate with others more like ourselves.
It can be said, then, who are statists to force people to associate with others against their own will? I doubt even a statist would approve of such actions, if they ever were imposed on him or her. If a statist disliked smokers, for example, then they probably would not want to mix with smokers. Such a value arises from the statist's own volition and thus their right to formulate their own principles. If Muslims, or gays, or vegetarians, or all Manchester United soccer fans, wish to associate only amongst themselves, then these occurrences only arise from their respective volitions. Ultimately and fundamentally, there is no real difference between these aforementioned voluntary associations and the hypothetical statist's aversion to smokers.
In due course, one probably has to recognise that the notion of freedom of association is fundamental to being human. In our everyday actions, we can easily choose with whom to associate based on any reason. If somebody is an arch-racist or homophobe, s/he naturally may not relish mixing with others outside his or her own race or with those who were homosexual. If someone highly values good manners and etiquette, then it is reasonable to assume that they may refrain from associating with an individual who was not decent or who was uncouth. Freedom of association therefore is not merely a fabricated construct. In the realm of human interaction, it is essentially axiomatic and thus very difficult to counter.
Is the currency printing press really such an evil?
So, privately run commodity-backed currencies would constitute the money supply in a voluntary society. Still, there would not really be anything preventing private individuals creating a fiat currency (of a sort) in a free society. The basic existence and operation of such a system would not necessarily be a negative thing.
A group of private individuals would not really possess the means to force others to adopt their money system. This is unlike fiat money in our current statist paradigm, since, for example, an American citizen is compelled to use the US dollar as legal tender. Because of this reality, what really then is so reprehensible about a privately created fiat currency? As participation within it would be voluntary in nature, then its detrimental effects would not be as apparent or widespread.
Obviously, not all goods and services in the free society's economy would be subject to pricing from this private fiat money. Thus, only products that are priced in accordance with the private fiat system would be susceptible to continual price rises. This is so since the money supply in this model would not be backed by a physical amount of gold/silver located in the currency issuer's vault.
I suppose, in all fairness, that I am not the only market anarchist/voluntaryist who encounters difficulties when explaining our principles. Even still, we must be wary of attempts by statists to obfuscate our message. The 'chaotic economics' standpoint expressed and uttered by statists is just another manifestation of the will to imprison us all into the statist mental trap. With persistent education however, we can hope in eventually freeing all people in Western society from involuntary servitude to the state.