Utopia: The Successful Libertarian Market Socialist Economy

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 “I found I could exchange my labor for theirs…I borrowed twenty six dollars to commence my business with, and paid all that and had thirty dollars left.  I now have a house and lot…I feel now that I am a whole individual…,”[ii][1] wrote EG Cubberley, a resident of Utopia.  Utopia was a successful voluntary market socialist community based on the principles of Josiah Warren.[iii]  Warren’s views were a form of a labor theory of value and operated free from profit, interest, and rent* in a community of free individuals that could live as they wished on a voluntary basis.[iv]  At around 1850 Warren’s theories were put to the test on a tract of land a mile from the site of the Claremont Phalanx on the bank of the Ohio River.[v]

This tract of land was to be the future village known as Trialville or Utopia, and it operated on voluntary market socialist terms.[vi]  “The outcome of Warren’s theory of value…” stated Bailie “…was to place him squarely in line with the cardinal doctrine of all other schools of modern socialism.  He believed that labor was robbed through rent, interest, and profit…”[vii]  His aim, Bailie states, was the same as socialists who preferred a society free from unearned income.[viii]  The views that Warren held are essentially the analysis of Capitalism that other major socialists such as Marx and Proudhon held.[ix]  According to Warren’s labor theory of value, and also according to the labor theory of value of Marx and Proudhon, profit exists only through Capitalism.**  Capitalism is a market system where employers pay their employees a wage less than the general value of what they produce.[x]  The money the employer keeps that would have been the employees’ if the employees were paid enough to buy back what they created is the profit.  Therefore market socialism is a system of self employed individuals, democratic businesses, and employers that pay their employees enough to buy back the general value they produce.[xi]  The extra money they make from their businesses would be considered income rather then profit.  The residents of Utopia, following Warren’s labor theory of value, based the value of  their products on how much labor went into producing a good.  Corn was adopted as a medium of exchange at a rate of 20 pounds to the hour as an alternative to actual labor.[xii]  Other products were used for the medium of exchange depending on the state of the community economy, technical learning, and machine production.[xiii]  Prices of individual goods included wheat at six hours to the bushel, milk at ten minutes per quart, eggs at twenty minutes per dozen, shoes varied between three and nine hours depending on quality, etc.[xiv]  The value and prices were expected to change depending on new production methods that were introduced.  The economy of Utopia worked, noted Martin, and it was illuminating.[xv]  The success of Utopia also included being free of rent.

In Utopia, people owned only the land they lived upon.  Land ownership by landlords that receive pay from tenants is considered rent.[xvi]  As with Marx and Proudhon, Warren considered rent a form of unearned income.[xvii]  For this reason, each member of the village owned up to two lots at most.  The system of ownership was set up so the rights of each person and their land in the community were respected.  Differences of opinion, the responsibility of every individual and how each individual used their own individual land were encouraged, particularly with the mature members of the village.[xviii]  In this way, individuals were able to build and own houses and businesses through their own work.  Four families became the original core of the town.  By exchanging labor, they built satisfactory homes.  At a later point, nearly two dozen families occupied the site in their own houses in the voluntary village, while also having successfully built stores and small mills to support and upgrade all the professional trades in their community.[xix]  Yet profit and rent are not the only way to make unearned income according to the views held by Warren and the other major socialists.

Utopia operated by a voluntary system of a labor theory of value in a free community.  Interest beyond expenses is considered a form of unearned income in Marx’s and Proudhon’s, and  therefore Warren’s, labor theory of value.[xx]  An example of interest operating only as the cost of covering expenses in Warren’s system can be observed in an account between a store keeper using Warren’s methods and a borrower.  A stranger had borrowed thirteen dollars from the store keeper.  “The money was lent—the note and security taken.”[xxi]  In two weeks the stranger returned laying down thirteen dollars.  The stranger noted the borrowing of the money saved him and his family from so much loss and distress and he wanted to compensate the keeper in proportion to the benefits he received.  “ I am ready to pay you any premium you choose to ask.”  The stranger paid ten cents to cover the cost of interest expense since it took around ten minutes of actual work for the lender to lend and receive the money.[xxii]  This principle of paying interest only for the cost of expenses, was the principle that was carried out in Utopia.[xxiii]  The views of Warren and his theory of a free market socialist society continued to be successful, long after Warren left.[xxiv]

The village of Utopia was a libertarian Market Socialist society that worked when applied in practice.  Warren later visited the village and he radiated with optimism.  “It is not the display that the little group of buildings makes to the eye…but knowing the means by which these…have been acquired, and seeing that there the subject of Equity has had eight years and six months deep study and practical trial, and that from the beginning… the subject had lost nothing with those who first took hold of it…but had gained…from year to year…”[xxv]  As Martin notes, the village based on the labor exchange was without a doubt an outstanding example of decentralist social and economic principles in actual operating situations.[xxvi]  And unlike Marx and his big government way of socialism, Warren’s market socialism was like Proudhon’s market socialism, based on voluntary and therefore libertarian views.  Utopia was “…a community without a formal government; it also persevered without the presence of a patriarch and escaped the general fate which fell to those whose fortunes were inextricably interwoven with those of a dominant leader.”[xxvii]  Yet there was order.  As a result, meetings by villagers tended to be for leisure only.  “We have had a few meetings, but they were for friendly conversation, for music, dancing or some other social and pleasant pastime…”[xxviii]  Utopia, like many communities with alternative theories, was tested for its practicality in the real world.  It was proven that Warren’s ideas of individual freedom, his labor theory of value and a libertarian market socialist society free from profit, interest, and rent was applicable in a real economy.***

*A socialist community can exist with landlords.  It is called Feudal Socialism.  Please see Section 3, part 1 A  in The Communist Manifesto by Marx.

**Capitalism is only one type of market system.  There are other types of market systems.  (e.g., Market Socialism)  As the economist Stanford notes: “But capitalism is not the only economic system which relies on markets.  Pre-capitalist economies also had markets-where producers could sell excess supplies of agricultural goods or handicrafts, and where exotic commodities (like spices or fabrics) from far-off lands could be purchased.  Most forms of socialism also rely heavily on markets to distribute end products and even, in some cases, to organize investment and production.  So markets are not unique to capitalism, and there is nothing inherently capitalist about a market.”  Stanford, Jim.  Economics for Everyone: A Short Guide to the Economics of Capitalism.  (Ann Arbor, MI: Pluto Press,  2008)  p 36

Sometimes individuals, even scholars, mistake Warren as a Capitalist because he supported markets.  And as radical Capitalist Rothbard noted, “We must therefore conclude that we are not anarchists, and that those who call us anarchists are not on firm etymological ground, and are being completely unhistorical…” Rothbard, Murray N.  “Are Libertarians ‘Anarchists’?”  Ludwig von Mises Institute re-print 2008 (original mid-1950’s in the unpublished article “Faith and Freedom” under the name Aubrey Herbert.)  Rothbard is using the term ‘Libertarian’ differently then I use it and how it is used in this article.

I am using the term Libertarian as it was used in 1858 in New York by French Anarchist Joseph Déjacque, has been used since, to mean a free society with equality of opportunity.  Also please see: McKay, Iain.  An Anarchist FAQ.  (Oakland: AK Press, 2008)  The FAQ has been regarded as “…very comprehensive…” in Graham, Paul & Hoffman, John.  Introduction to Political Ideologies.  (London: Pearson/Longman, 2006) p 109; and as an “exemplar of the principles…” of community governance by Harvard resident fellow Joseph Reagle in: Why the Internet is Good: Community Governance That Works Well.  (Cambridge, MA: Berkman Center for Internet and Society at Harvard University, 1998) .

As Martin notes, all the Individualists preferred to live free from profit.  Martin.  Men Against the State.  (1970) p 209n.

***Warren’s views were later modified by Greene, who suggested a Mutual Bank and currency based on a commodity standard of value, but also allowing for the monetization of all durable wealth.  These views were to work with the more advanced industrial forms of society.

In an industrial society where wealth can be made in very large amounts, it might be helpful if followers of Warren’s economic theory adopt a community controlled organization to regulate large companies and their wealth in order to prevent market power.  Market power can come about as over time a successful company becomes very wealthy, therefore being able to afford new machinery and hire many employees.  Smaller businesses may not be able to compete with the large company with its machinery and products.  Most people would not be able to enter into the market to compete with the large company, and therefore believe they have no choice but to work for the large company.  Most people would therefore not have equality of opportunity as they must always work for someone else involuntarily, hence would appear not to be free (i.e., work or starve).

The large successful company would also gain control over the local market as no one else would believe they could compete with them.  The large company would then be able to generally set prices they would want on the market because of lack of most competition and therefore hold market power.  Proudhon had a solution to this through regulation of the market by the local communities.  Please see Proudhon’s Principle of Federation.  As Proudhon notes below, “The advocates of mutualism are as familiar as anyone with the laws of supply and demand and they will be careful not to infringe them.  Detailed and frequently reviewed statistics, precise information about needs and living standards, an honest breakdown of cost prices, the foreseeing of all eventualities, the fixing after amicable discussion of a maximum and minimum profit margin, taking into account the risks involved, the organization of regulating societies: these things, roughly speaking, constitute all the measures by means of which they hope to regulate the market.”  Edwards, Stewart (Editor).  Selected Writings of P-J Proudhon.  (Garden City, New York: Anchor Books, 1969) p 70.

Bibliography:

Bailie, William.  Josiah Warren.  (Brooklyn, New York: Herbert C Roseman,1971)

Martin, James J.  Men Against the State.  (Colorado Springs: Ralph Myles Publisher, 1970)

Marx, Karl.  Capital Vol 1.  (England: Penguin Classics (reprint), 1990)

Marx, Karl.  Capital Vol 3.  (England: Penguin Classics (reprint), 1991)

Proudhon, Pierre-Joseph.  General Idea of the Revolution in the Nineteenth Century.  (New York: Cosmo Classics, 2007)

Proudhon, Pierre-Joseph.  What is Property?  (New York: Cosmo Classics, 2007)