We Are All Agorists Now
by Grant A. Mincy
Transfer of Power
Arguably the most powerful person in the United States (even rivaling the POTUS), Ben S. Bernanke, has left the Federal Reserve. Since 2006 he has sought to make the economy his marionette. Fed policies, under his direction, worked to manage a collapsed housing market, busted mortgage industry and the 2008 global financial crisis – a manufactured crisis of the command and control mentality over the “free” market. Bernanke engineered perhaps the largest redistribution of wealth in American (if not world) history with massive bailouts given to the financial sector – money stolen from the labor of millions and given to the “too big to fail” economic elite. Aside from the initial 700 billion dollar bailout, a Federal Reserve audit revealed the central bank provided a whopping 16 trillion in secret aid to support the corporate state apparatus. Bernanke has released his reign, transferring power to the first woman in United States history to head the Fed: Janet Yellen.
Yellen was confirmed by the United States Senate on January 6, 2014, further committing Washington to even more Keynesian policies from the central bank. As a Fed official, Yellen was a great advocate of keeping interest rates artificially close to zero, increased government spending, and the controversial Quantitive Easing measures sought by the Fed to direct the American economy. Her rise to power will continue to favor the corporate state, even with rumors of economic growth.
There have been numerous libertarian/Libertarian arguments against the central bank. It is not my wish to re-invent the wheel. Most of these arguments, however, stem from the political right – most notably Ron Paul and even greater arguments from his mentor, Murray Rothbard. There is surprisingly little noise from the traditional left – the libertarian or market left - about the central bank, however. Even the famous American leftist and anarcho-syndicalist/libertarian-socialist Noam Chomsky supports central banking. Rather than re-invent the wheel, with this essay I hope to add to the small but sound left-libertarian opposition to the Federal Reserve.
A Brief History of Central Banking in the United States
Alexander Hamilton, the first Secretary of the Treasury, was among the first American politicians to argue for, and help develop, a central bank. Hamilton thought it would be irresponsible to place much democratic or economic control in the hands of the American populace. Hamilton and other federalists believed the country should be ruled by the economic ruling class – the elite, the educated and the privileged. Federalist John Jay put it as bluntly as possible: “Those who own the country ought to govern it.” Hamilton and company favored a strong national government, a broad interpretation of the constitution and put national unity above individualism and states rights. Their economic model, of course, was centrally planned with strict regulation of state economies. From this mindset the first central bank was born in 1791.
Hamilton’s bank, the First Bank of the United States, was kept out of the public arena and operated as a private financial institution. Hamilton’s main argument for the First Bank was that it would help repay the new nations war debt (Morgan 2012). Throughout its existence, however, the bank was met with popular backlash. Objections to the Federal Reserve today echo what was argued against the First Bank: It served moneyed interests (northern corporations), was a threat to property rights and restricted real economic growth (Morgan 2012). Some politicians of the time, notably Thomas Jefferson and James Madison, argued the bank was unconstitutional, that only congress, not a private bank, had the power to tax and print money. In 1811 the Bank was deconstructed as congress voted not to renew its charter (Morgan 2012).
In 1812 the United States found itself in the midst of another war and more national debt. To deal with a growing financial crisis, Congress voted to charter the (larger) Second Bank of the United States. The Second Bank, at the moment of inception, was poorly managed (Scur 1960). A year and a half after it opened it almost collapsed, and would have, if not for Langdon Cheves. Cheves was the second president of the new central bank and effectively administered its operations. Still, popular sentiment about such a powerful, private institution raised concerns about the Second Banks existence (Scur 1960). This sentiment, and Andrew Jackson’s political clout, would ultimately dissolve this Second Bank in 1836.
The United States was free of central banking until yet another major war erupted. The Civil War, and the need to pay for it, again began the quest for a National Bank. In 1863 the “national banking system” (not a central bank) was developed (MFED 2013). The new banking system, with a national charter, dictated that banks had to issue government-printed bills for their own notes, these notes had to be backed by federal bonds – the war effort was funded (Sylla 1969). In 1865, as the war waged on between the industrialized North and the agricultural South, state bank notes were taxed out of existence – a uniform national currency was established in the United States for the first time (MFED 2013).
With the civil war financed and “won” by the Union, and with a uniform currency, the United States experienced a bank panic in every decade afterward (MFED 2013), ah,”The Gilded Age.” Economic panic began in 1873 due to runs on the free banking system. A “run” occurs when a large number of customers pull their money from banks (MFED 2013). The runs would lead to more and more folks withdrawing their money, causing a system wide economic panic. With the depression of 1893, the Spanish-American War of 1898 and the deep recession of 1907, banking moguls and the United States Government again sought the establishment of a central bank (Sylla 1969), as opposed to letting the market equilibrate.
What followed was a series of Congressional acts that led to the establishment of the Federal Reserve Bank. The Aldrich-Vreeland Act of 1908 established the National Monetary Commission, charged with managing the nations finances, which called for government intervention in the economy, via currency development, during times of financial crisis (MFED 2013). The election of Democrat Woodrow Wilson brought with it the Federal Reserve Act of 1913, and American involvement in World War I. The Federal Reserve System was designed to be a government (not public) institution. The new central banking system was to work closely with the United States Treasury.
What followed the establishment of the Federal Reserve, after WWI, was the roaring twenties, further industrialization, the Great Depression, World War II, The New Deal, the rise of Keynesianism, explicit fiat currency, multiple recessions, the Korean War, the Vietnam War, multiple military interventions overseas, neoliberalism, the rise, fall and decay of the middle class, booms and busts, economic bubbles, artificial scarcity, artificial abundance and much more. In the wake of such history, the Federal Reserve has operated independently of the political process (MFED 2013). The Fed has become an independent centralized bank that is utilized to manage, and some would argue control, the United States economy.
The history of central banking is wrought with military conflict and depressed markets. States have long ignored moral objections to war, but economic restrictions have often halted violence. The printing press, however, allows governments to side step these restrictions. The century of the Fed has been a century of perpetual warfare. As Randolph Bourne wrote, shortly after the creation of the Federal Reserve, “war is the health of the state.” Central banking, Keynesian policies, and states are indeed dependent on jingoism and war. For in war governments flourish – allegiance to state blossoms, class struggle is stilled, spending keeps flowing, and worst of all, human beings, millions of us, die. Liberty is fundamentally opposed to this aggression, as noted here, by Anthony Gregory.
Sadly, as attributed to Nixon: “We are all Keynesians now.“
Liberty and the “Progressive Era”
United States history, like all history, can be defined as a race between social power and state power. It is outside the realm of this essay to describe all of the liberation movements that, in some context, sought the liberty of the true market form. Rather than try I will focus on the Progressive Era, which birthed the Federal Reserve.
The end of the Gilded Age was a period of great turmoil. It was good for business, the political class and those with a monopoly on capital, but the working class, people of color, women, political feminists, labor organizers, etc, realized they could not count on the national government to take their concerns, rights or liberty seriously. The Progressive Era did begin the Age of Reform, but this reform was not enacted to elevate the populace. Instead, reform was used to quiet popular uprisings, democratic social movements, and civil liberties – it was not intended to make fundamental changes to the established order (Zinn 2003).
The era has been termed “Progressive” because of the sheer number of laws that were passed. Upton Sinclair‘s “The Jungle” sparked a labor movement that accomplished passing the Meat Inspection Act, social movements engaged the system to pass the Hepburn Act which supported labor in railroads and pipelines (Zinn 2003), to name just a couple. Particular to the Federal Reserve, Woodrow Wilson’s presidency established the Federal Trade Commission and the Central Bank(s) itself. This was polished as progressive reform to control the growth of monopolies and to regulate the country’s money and banking system. Neither happened, in fact, power and influence of Wall Street only began to grow amidst giant surges of patriotism due to rising conflicts overseas. As noted by Emma Goldman (on patriotism and allegiance to government):
But when the smoke was over, the dead buried, and the cost of the war came back to the people in an increase in the price of commodities and rent-that is, when we sobered up from our patriotic spree-it suddenly dawned on us … that the lives, blood, and money of the American people were used to protect the interests of the American capitalists.
Due to the work of early American libertarians such as Josiah Warren, Benjamin Tucker, Voltairine de Cleyre, Emma Goldman and others, movements developed that questioned the concentration of power. The labor movement began picking up steam and the marginalized voices in society were becoming amplified. It is true that working people benefited from some of the reforms of the Progressive Era – but the reforms protected the political and economic class from working people, giving just enough to stem off a major rebellion (Zinn 2003). A middle class cushion was manufactured to stem off class conflict as Howard Zinn (2003) explains:
Fundamental conditions did not change, however, for the vast majority of tenant farmers, factory workers, slum dwellers, miners, farm laborers, working men and women, black and white. Robert Wiebe sees in the Progressive movement an attempt by the system to adjust to changing conditions in order to achieve more stability. ‘Through rules with impersonal sanctions, it sought continuity and predictability in a world of endless change. It assigned far greater power to government . .. and it encouraged the centralization of authority.’ Harold Faulkner concluded that this new emphasis on strong government was for the benefit of ‘the most powerful economic groups.’
With the help of the Federal Reserve, Wall Street was able to take firm control of the political system. The market, as it existed, was not able to disperse protests at the grassroots level (Zinn 2003). The economic ruling class championed these reforms, to stabilize the state capitalist system in a time of uncertainty (Zinn 2003). These reforms gave rise to the corporation state that exists today. As noted by individualist anarchist Benjamin Tucker: “Laissez Faire was very good sauce for the goose, labor, but was very poor sauce for the gander, capital.”
Social power is still racing against state power.
The Liberated Market
Enter, Janet Yellen, a grand proponent of quantitative easing in a depressed economy. The Federal Reserve, under her leadership, will continue to serve the politically connected and do very little for the average American. Even Andrew Huszar, an ex-Fed official, in a piece for the Wall Street journal described the programs Yellen champions as the “greatest backdoor Wall Street bailout of all time.”
For all the discussion in the United States today about the proper function and role of our federal government, how to manage the economy, how to battle poverty, how to create jobs and so on and so on, what seems to be missing from national discussion is the true beauty of markets. A banking system, or piece of economic legislation, cannot fix the economy.
Economic systems are developed by the spontaneous order of society. The market is a product of inclined labor, derived from the dreams, aspirations, desires, passions and activities of free people. The market encompasses our places of exchange, but also the rest of human labor – social movements, federations, institutions, decision-making and all of human activity. This behavior cannot be managed from a centralized authority. The work of human beings, our inclined, creative labor, cannot be directed – it can only be realized in liberty. The liberated market mechanism is the only cure for our past, current and future ills.
Today, in the era of too big to fail, it is corporate monopolies and financial institutions that benefit from the public. As George W. Bush said: “I have abandoned free market principles to save the free market.” What he meant was: “I have again exploited the middle and working classes to serve our economic ruling class.” While Bernanke, with the power of the Federal Reserve, was redistributing wealth to the upper tiers of society, organized people, from a diverse history of social movements, began developing the tools for market liberation.
The true market form, how people engage their labor, exists outside of the state. The market left speaks of exchange and labor in human terms. The liberated market allows for economic, social and environmental justice. Liberation champions a society that allows the free flow of information, science and progress, democratic values, and the fruits of labor so these principles can spread without restriction. The liberated market allows us to determine how great we can be. The liberated, free(d) market allows plans by the many, not by the few – it renders Yellen, Bernanke and all bureaucrats of the political class obsolete.
With booms and big busts, giant bubbles, manipulation of the market, a giant national debt and a decaying dollar accompanying promises in future spending, a full economic collapse of the United States government is a very real possibility (see Thomas L. Knapp: Government Spending: Two Steps Sideways, One Half-Step Back). This is scary, we all live here, we all have families here, we all have bills to pay and mouths to feed. Our way of life, however, is not at the mercy of the Federal Reserve or a conglomerate of folks in Washington. Though this realization is indeed scary, it should also be exciting. The market will finally have a chance to equilibrate. As witnessed in Detroit, free people can accomplish much with very little – and free people are already working on the solutions.
If we are to be serious about living in a peaceful and prosperous society, then we must also be serious about competing forms of currency, competing markets and the abandonment of the command and control mentality. Perhaps the Keynesians are right and government spending is the only way to prevent the collapse of state capitalism. What’s ignored by fans of the printing press is that state capitalism is unsustainable. If we all march off to battle there will be full employment, but nothing to eat. The only way out is the liberated market. In the words of Kevin Carson: “In the end we’ve got to find some way off the hamster wheel.“
Instead, may we work together and exchange services to co-ordinate and cultivate markets. The emergence of peer to peer currency, like Bitcoin, and the rise of voluntary exchange are sources of hope. The more we work around traditional power structures, the more we advance social power in our all too important race against the corporate state.
The creative labor of human beings will build markets, mutual aid, relief, decent societies and finally peace. We can and will build a real and lasting peace that will make life on Earth worth living — a peace for every child of humanity. Free human beings will no longer die for governments and/or capital. The greatest moment in human civilization is within our grasp. It is time we reach out and attain liberty.
As Yellen continues, perhaps even enhances, the disastrous policies of the Fed, may we find solace and peace in the liberated market. May we soon, in liberty, say triumphantly: “We are all Agorists now.”
Chandavarkar, Anand G. Keynes and Central Banking. Indian Economic Review / Volume XX, No.2
Federal Reserve Bank of Minneapolis. (2013) A History of Central Banking in the United States. http://www.minneapolisfed.org/community_education/student/centralbankhistory/bank.cfm
Morgan, H. Wayne. (1956) The Origins and Establishment of the First Bank of the United States. Business History Review / Volume 30 / Issue 04 / December 1956, pp 472-492
Zinn, Howard (2003). A People’s History of the United States: The Socialist Challenge. Harper Perennial.