Unsurprisingly, right-libertarians combine their support for "absolute property rights" with a whole-hearted support for laissez-faire capitalism. In such a system (which they maintain, to quote Ayn Rand, is an "unknown ideal") everything would be private property and there would be few (if any) restrictions on "voluntary exchanges." "Anarcho"-capitalists are the most extreme of defenders of pure capitalism, urging that the state itself be privatised and no voluntary exchange made illegal (for example, children would be considered the property of their parents and it would be morally right to turn them into child prostitutes -- the child has the option of leaving home if they object).
As there have been no example of "pure" capitalism it is difficult to say whether their claims about are true (for a discussion of a close approximation see the section F.10.3). This section of the FAQ is an attempt to discover whether such a system would be stable or whether it would be subject to the usual booms and slumps. Before starting we should note that there is some disagreement within the right-libertarian camp itself on this subject (although instead of stability they usually refer to "equilibrium" -- which is an economics term meaning that all of a societies resources are fully utilised).
In general terms, most right-Libertarians' reject the concept of equilibrium as such and instead stress that the economy is inherently a dynamic (this is a key aspect of the Austrian school of economics). Such a position is correct, of course, as such noted socialists as Karl Marx and Michal Kalecki and capitalist economists as Keynes recognised long ago. There seems to be two main schools of thought on the nature of disequilibrium. One, inspired by von Mises, maintains that the actions of the entrepreneur/capitalist results in the market co-ordinating supply and demand and another, inspired by Joseph Schumpeter, who question whether markets co-ordinate because entrepreneurs are constantly innovating and creating new markets, products and techniques.
Of course both actions happen and we suspect that the differences in the two approaches are not important. The important thing to remember is that "anarcho"-capitalists and right-libertarians in general reject the notion of equilibrium -- but when discussing their utopia they do not actually indicate this! For example, most "anarcho"-capitalists will maintain that the existence of government (and/or unions) causes unemployment by either stopping capitalists investing in new lines of industry or forcing up the price of labour above its market clearing level (by, perhaps, restricting immigration, minimum wages, taxing profits). Thus, we are assured, the worker will be better off in "pure" capitalism because of the unprecedented demand for labour it will create. However, full employment of labour is an equilibrium in economic terms and that, remember, is impossible due to the dynamic nature of the system. When pressed, they will usually admit there will be periods of unemployment as the market adjusts or that full unemployment actually means under a certain percentage of unemployment. Thus, if you (rightly) reject the notion of equilibrium you also reject the idea of full employment and so the labour market becomes a buyers market and labour is at a massive disadvantage.
The right-libertarian case is based upon logical deduction, and the premises required to show that laissez-faire will be stable are somewhat incredible. If banks do not set the wrong interest rate, if companies do not extend too much trade credit, if workers are willing to accept (real wage related) pay cuts, if workers altruistically do not abuse their market power in a fully employed society, if interest rates provide the correct information, if capitalists predict the future relatively well, if banks and companies do not suffer from isolation paradoxes, then, perhaps, laissez-faire will be stable.
So, will laissez-faire capitalism be stable? Let us see by analysing the assumptions of right-libertarianism -- namely that there will be full employment and that a system of private banks will stop the business cycle. We will start on the banking system first (in section F.10.1) followed by the effects of the labour market on economic stability (in section F.10.2). Then we will indicate, using the example of 19th century America, that actually existing ("impure") laissez-faire was very unstable.
Explaining booms and busts by state action plays an ideological convenience as it exonerates market processes as the source of instability within capitalism. We hope to indicate in the next two sections why the business cycle is inherent in the system (see also sections C.7, C.8 and C.9).
It is claimed that the existence of the state (or, for minimal statists,
government policy) is the cause of the business cycle (recurring economic
booms and slumps). This is because the government either sets interest
rates too low or expands the money supply (usually by easing credit
restrictions and lending rates, sometimes by just printing fiat money).
This artificially increases investment as capitalists take advantage of
the artificially low interest rates. The real balance between savings and
investment is broken, leading to over-investment, a drop in the
rate of profit and so a slump (which is quite socialist in a way, as
many socialists also see over-investment as the key to understanding
the business cycle, although they obviously attribute the slump to
different causes -- namely the nature of capitalist production, not
that the credit system does not play its part -- see section
C.7).
In the words of Austrian Economist W. Duncan Reekie, "[t]he business
cycle is generated by monetary expansion and contraction . . . When
new money is printed it appears as if the supply of savings has
increased. Interest rates fall and businessmen are misled into
borrowing additional founds to finance extra investment activity . . .
This would be of no consequence if it had been the outcome of [genuine
saving] . . . -but the change was government induced. The new money
reaches factor owners in the form of wages, rent and interest . . .
the factor owners will then spend the higher money incomes in their
existing consumption:investment proportions . . . Capital goods
industries will find their expansion has been in error and malinvestments
have been inoccured." [Markets, Entrepreneurs and Liberty, pp. 68-9]
In other words, there has been "wasteful mis-investment due to government
interference with the market." [Op. Cit., p. 69] In response to this
(negative) influence in the workings of the market, it is suggested
by right-libertarians that a system of private banks should be used and
that interest rates are set by them, via market forces. In this way an
interest rate that matches the demand and supply for savings will
be reached and the business cycle will be no more. By truly privatising
the credit market, it is hoped by the business cycle will finally stop.
Unsurprisingly, this particular argument has its weak points and in this
section of the FAQ we will try to show exactly why this theory is wrong.
Let us start with Reckie's starting point. He states that the "main problem"
of the slump is "why is there suddenly a 'cluster' of business errors?
Businessmen and entrepreneurs are market experts (otherwise they would
not survive) and why should they all make mistakes simultaneously?"
[Op. Cit., p. 68] It is this "cluster" of mistakes that the Austrians'
take as evidence that the business cycle comes from outside the workings
of the market (i.e. is exogenous in nature). Reekie argues that an "error
cluster only occurs when all entrepreneurs have received the wrong signals
on potential profitability, and all have received the signals simultaneously
through government interference with the money supply." [Op. Cit., p. 74]
But is this really the case?
The simple fact is that groups of (rational) individuals can act in the
same way based on the same information and this can lead to a collective
problem. For example, we do not consider it irrational that everyone in a
building leaves it when the fire alarm goes off and that the flow of
people can cause hold-ups at exits. Neither do we think that its unusual
that traffic jams occur, after all those involved are all trying to get
to work (i.e. they are reacting to the same desire). Now, is it so
strange to think that capitalists who all see the same opportunity for
profit in a specific market decide to invest in it? Or that the aggregate
outcome of these individually rational decisions may be irrational (i.e.
cause a glut in the market)?
In other words, a "cluster" of business failures may come about because
a group of capitalists, acting in isolation, over-invest in a given
market. They react to the same information (namely super profits in
market X), arrange loans, invest and produce commodities to meet demand
in that market. However, the aggregate result of these individually
rational actions is that the aggregate supply far exceeds demand, causing
a slump in that market and, perhaps, business failures. The slump in this
market (and the potential failure of some firms) has an impact on the
companies that supplied them, the companies that are dependent on
their employees wages/demand, the banks that supplied the credit and so
forth. The accumulative impact of this slump (or failures) on the chain of
financial commitments of which they are but one link can be large and,
perhaps, push an economy into general depression. Thus the claim that
it is something external to the system that causes depression is flawed.
It could be claimed the interest rate is the problem, that it does
not accurately reflect the demand for investment or relate it to the
supply of savings. But, as we argued in section C.8, it is not at all
clear that the interest rate provides the necessary information to
capitalists. They need investment information for their specific
industry, but the interest rate is cross-industry. Thus capitalists in
market X do not know if the investment in market X is increasing and
so this lack of information can easily cause "mal-investment" as
over-investment (and so over-production) occurs. As they have no way
of knowing what the investment decisions of their competitors are
or now these decisions will affect an already unknown future, capitalists
may over-invest in certain markets and the net effects of this aggregate
mistake can expand throughout the whole economy and cause a general slump.
In other words, a cluster of business failures can be accounted for by
the workings of the market itself and not the (existence of) government.
This is one possible reason for an internally generated business cycle
but that is not the only one. Another is the role of class struggle which
we discuss in the next section and yet another is the endogenous nature
of the money supply itself. This account of money (proposed strongly by,
among others, the post-Keynesian school) argues that the money supply
is a function of the demand for credit, which itself is a function of the
level of economic activity. In other words, the banking system creates
as much money as people need and any attempt to control that creation
will cause economic problems and, perhaps, crisis (interestingly, this
analysis has strong parallels with mutualist and individualist anarchist
theories on the causes of capitalist exploitation and the business
cycle). Money, in other words, emerges from within the system and
so the right-libertarian attempt to "blame the state" is simply wrong.
Thus what is termed "credit money" (created by banks) is an essential
part of capitalism and would exist without a system of central banks.
This is because money is created from within the system, in response
to the needs of capitalists. In a word, money is endogenous and credit
money an essential part of capitalism.
Right-libertarians do not agree. Reekie argues that "[o]nce fractional
reserve banking is introduced, however, the supply of money substitutes
will include fiduciary media. The ingenuity of bankers, other financial
intermediaries and the endorsement and guaranteeing of their activities
by governments and central banks has ensured that the quantity of fiat
money is immense." [Op. Cit., p. 73]
Therefore, what "anarcho"-capitalists and other right-libertarians seem
to be actually complaining about when they argue that "state action" creates
the business cycle by creating excess money is that the state allows
bankers to meet the demand for credit by creating it. This makes sense,
for the first fallacy of this sort of claim is how could the state force
bankers to expand credit by loaning more money than they have savings.
And this seems to be the normal case within capitalism -- the central
banks accommodate bankers activity, they do not force them to do it. Alan
Holmes, a senior vice president at the New York Federal Reserve, stated
that:
It could be argued that because central banks exist, the state
creates an "environment" which bankers take advantage off. By not
being subject to "free market" pressures, bankers could be tempted to
make more loans than they would otherwise in a "pure" capitalist system
(i.e. create credit money). The question arises, would "pure" capitalism
generate sufficient market controls to stop banks loaning in excess of
available savings (i.e. eliminate the creation of credit money/fiduciary
media).
It is to this question we now turn.
As noted above, the demand for credit is generated from within the system
and the comments by Holmes reinforce this. Capitalists seek credit in order
to make money and banks create it precisely because they are also seeking
profit. What right-libertarians actually object to is the government (via
the central bank) accommodating this creation of credit. If only the
banks could be forced to maintain a savings to loans ration of one, then
the business cycle would stop. But is this likely? Could market forces
ensure that bankers pursue such a policy? We think not -- simply because
the banks are profit making institutions. As post-Keynesianist Hyman Minsky
argues, "[b]ecause bankers live in the same expectational climate as
businessmen, profit-seeking bankers will find ways of accommodating their
customers. . . Banks and bankers are not passive managers of money to
lend or to invest; they are in business to maximise profits. . ." [quoted
by L. Randall Wray, Money and Credit in Capitalist Economies, p. 85]
This is recognised by Reekie, in passing at least (he notes that "fiduciary
media could still exist if bankers offered them and clients accepted them"
[Op. Cit., p. 73]). Bankers will tend to try and accommodate their customers
and earn as much money as possible. Thus Charles P. Kindleberger comments
that monetary expansion "is systematic and endogenous rather than random
and exogenous" seem to fit far better the reality of capitalism that the
Austrian and right-libertarian viewpoint [Manias, Panics, and Crashes,
p. 59] and post-Keynesian L. Randall Wray argues that "the money supply
. . . is more obviously endogenous in the monetary systems which predate
the development of a central bank." [Op. Cit., p. 150]
In other words, the money supply cannot be directly controlled by the
central bank since it is determined by private decisions to enter into
debt commitments to finance spending. Given that money is generated
from within the system, can market forces ensure the non-expansion
of credit (i.e. that the demand for loans equals the supply of savings)?
To begin to answer this question we must note that investment is
"essentially determined by expected profitability." [Philip Arestis,
The Post-Keynesian Approach to Economics, p. 103] This means that
the actions of the banks cannot be taken in isolation from the rest
of the economy. Money, credit and banks are an essential part of
the capitalist system and they cannot be artificially isolated from
the expectations, pressures and influences of that system.
Let us assume that the banks desire to maintain a loans to savings ratio
of one and try to adjust their interest rates accordingly. Firstly,
changes in the rate of interest "produce only a very small, if any,
movement in business investment" according to empirical evidence
[Op. Cit., pp. 82-83] and that "the demand for credit is extremely
inelastic with respect to interest rates." [L. Randall Wray, Op. Cit.,
p. 245] Thus, to keep the supply of savings in line with the demand
for loans, interest rates would have to increase greatly (indeed,
trying to control the money supply by controlling the monetary bases
in this way will only lead to very big fluctuations in interest rates).
And increasing interest rates has a couple of paradoxical effects.
According to economists Joseph Stiglitz and Andrew Weiss (in "Credit
Rationing in Markets with Imperfect Knowledge", American Economic Review,
no. 71, pp. 393-410) interest rates are subject to what is called the
"lemons problem" (asymmetrical information between buyer and seller). Stiglitz
and Weiss applied the "lemons problem" to the credit market and argued
(and unknowingly repeated Adam Smith) that at a given interest rate, lenders
will earn lower return by lending to bad borrowers (because of defaults)
than to good ones. If lenders try to increase interest rates to compensate
for this risk, they may chase away good borrowers, who are unwilling to
pay a higher rate, while perversely not chasing away incompetent, criminal,
or malignantly optimistic borrowers. This means that an increase in interest
rates may actually increase the possibilities of crisis, as more loans may
end up in the hands of defaulters.
This gives banks a strong incentive to keep interest rates lower than
they otherwise could be. Moreover, "increases in interest rates make
it more difficult for economic agents to meet their debt repayments"
[Philip Arestis, Op. Cit., pp. 237-8] which means when interest rates
are raised, defaults will increase and place pressures on the banking
system. At high enough short-term interest rates, firms find it hard to
pay their interest bills, which cause/increase cash flow problems and
so "[s]harp increases in short term interest rates . . .leads to a fall
in the present value of gross profits after taxes (quasi-rents) that
capital assets are expected to earn." [Hyman Minsky, Post-Keynesian
Economic Theory, p. 45]
In addition, "production of most investment goods is undertaken on order
and requires time for completion. A rise in interest rates is not
likely to cause firms to abandon projects in the process of production
. . . This does not mean . . . that investment is completely unresponsive
to interest rates. A large increase in interest rates causes a 'present
value reversal', forcing the marginal efficiency of capital to fall
below the interest rate. If the long term interest rate is also
pushed above the marginal efficiency of capital, the project may be
abandoned." [Wray, Op. Cit., pp. 172-3] In other words, investment
takes time and there is a lag between investment decisions and actual
fixed capital investment. So if interest rates vary during this lag
period, initially profitable investments may become white elephants.
As Michal Kalecki argued, the rate of interest must be lower than the
rate of profit otherwise investment becomes pointless. The incentive for
a firm to own and operate capital is dependent on the prospective rate
of profit on that capital relative to the rate of interest at which the
firm can borrow at. The higher the interest rate, the less promising
investment becomes.
If investment is unresponsive to all but very high interest rates (as
we indicated above), then a privatised banking system will be under intense
pressure to keep rates low enough to maintain a boom (by, perhaps, creating
credit above the amount available as savings). And if it does this,
over-investment and crisis is the eventual outcome. If it does not do
this and increases interest rates then consumption and investment will
dry up as interest rates rise and the defaulters (honest and dishonest)
increase and a crisis will eventually occur.
This is because increasing interest rates may increase savings but
it also reduce consumption ("high interest rates also deter both consumers
and companies from spending, so that the domestic economy is weakened
and unemployment rises" [Paul Ormerod, The Death of Economics, p. 70]).
This means that firms can face a drop off in demand, causing them problems
and (perhaps) leading to a lack of profits, debt repayment problems and
failure. An increase in interest rates also reduces demand for investment
goods, which also can cause firms problems, increase unemployment and
so on. So an increase in interest rates (particularly a sharp rise) could
reduce consumption and investment (i.e. reduce aggregate demand) and have
a ripple effect throughout the economy which could cause a slump to occur.
In other words, interest rates and the supply and demand of savings/loans
they are meant to reflect may not necessarily move an economy towards
equilibrium (if such a concept is useful). Indeed, the workings of a
"pure" banking system without credit money may increase unemployment
as demand falls in both investment and consumption in response to
high interest rates and a general shortage of money due to lack of
(credit) money resulting from the "tight" money regime implied by
such a regime (i.e. the business cycle would still exist). This was
the case of the failed Monetarist experiments on the early 1980s when
central banks in America and Britain tried to pursue a "tight" money
policy. The "tight" money policy did not, in fact, control the money
supply. All it did do was increase interest rates and lead to a serious
financial crisis and a deep recession (as Wray notes, "the central
bank uses tight money polices to raise interest rates" [Op. Cit.,
p. 262]). This recession, we must note, also broke the backbone of
working class resistance and the unions in both countries due to the
high levels of unemployment it generated. As intended, we are sure.
Such an outcome would not surprise anarchists, as this was a key feature
of the Individualist and Mutualist Anarchists' arguments against the
"money monopoly" associated with specie money. They argued that
the "money monopoly" created a "tight" money regime which reduced
the demand for labour by restricting money and credit and so
allowed the exploitation of labour (i.e. encouraged wage labour)
and stopped the development of non-capitalist forms of production.
Thus Lysander Spooner's comments that workers need "money capital
to enable them to buy the raw materials upon which to bestow their
labour, the implements and machinery with which to labour . . . Unless
they get this capital, they must all either work at a disadvantage,
or not work at all. A very large portion of them, to save themselves
from starvation, have no alternative but to sell their labour to
others . . ." [A Letter to Grover Cleveland, p. 39] It is interesting
to note that workers did do well during the 1950s and 1960s under
a "liberal" money regime than they did under the "tighter" regimes of
the 1980s and 1990s.
We should also note that an extended period of boom will encourage banks
to make loans more freely. According to Minsky's "financial instability
model" crisis (see "The Financial Instability Hypothesis" in Post-Keynesian
Economic Theory for example) is essentially caused by risky financial
practices during periods of financial tranquillity. In other words,
"stability is destabilising." In a period of boom, banks are happy and
the increased profits from companies are flowing into their vaults.
Over time, bankers note that they can use a reserve system to increase
their income and, due to the general upward swing of the economy,
consider it safe to do so (and given that they are in competition
with other banks, they may provide loans simply because they are
afraid of losing customers to more flexible competitors). This
increases the instability within the system (as firms increase
their debts due to the flexibility of the banks) and produces the
possibility of crisis if interest rates are increased (because
the ability of business to fulfil their financial commitments
embedded in debts deteriorates).
Even if we assume that interest rates do work as predicted in
theory, it is false to maintain that there is one interest rate. This
is not the case. "Concentration of capital leads to unequal access to
investment funds, which obstructs further the possibility of smooth
transitions in industrial activity. Because of their past record of
profitability, large enterprises have higher credit ratings and easier
access to credit facilities, and they are able to put up larger collateral
for a loan." [Michael A. Bernstein, The Great Depression, p. 106] As
we noted in section C.5.1, the larger the firm, the lower the interest
rate they have to pay. Thus banks routinely lower their interest rates
to their best clients even though the future is uncertain and past
performance cannot and does not indicate future returns. Therefore
it seems a bit strange to maintain that the interest rate will bring
savings and loans into line if there are different rates being offered.
And, of course, private banks cannot affect the underlying fundamentals
that drive the economy -- like productivity, working class power and
political stability -- any more than central banks (although central
banks can influence the speed and gentleness of adjustment to a crisis).
Indeed, given a period of full employment a system of private banks may
actually speed up the coming of a slump. As we argue in the next section,
full employment results in a profits squeeze as firms face a tight labour
market (which drives up costs) and, therefore, increased workers' power
at the point of production and in their power of exit. In a central bank
system, capitalists can pass on these increasing costs to consumers and
so maintain their profit margins for longer. This option is restricted
in a private banking system as banks would be less inclined to devalue
their money. This means that firms will face a profits squeeze sooner
rather than later, which will cause a slump as firms cannot make ends
meet. As Reekie notes, inflation "can temporarily reduce employment
by postponing the time when misdirected labour will be laid off" but
as Austrian's (like Monetarists) think "inflation is a monetary
phenomenon" he does not understand the real causes of inflation
and what they imply for a "pure" capitalist system [Op. Cit., p. 67,
p. 74]. As Paul Ormerod points out "the claim that inflation is always
and everywhere purely caused by increases in the money supply, and
that there the rate of inflation bears a stable, predictable relationship
to increases in the money supply is ridiculous." And he notes that
"[i]ncreases in the rate of inflation tend to be linked to falls in
unemployment, and vice versa" which indicates its real causes --
namely in the balance of class power and in the class struggle.
[The Death of Economics, p. 96, p. 131]
Moreover, if we do take the Austrian theory of the business cycle at
face value we are drawn to conclusion that in order to finance investment
savings must be increased. But to maintain or increase the stock of
loanable savings, inequality must be increased. This is because,
unsurprisingly, rich people save a larger proportion of their income
than poor people and the proportion of profits saved are higher than
the proportion of wages. But increasing inequality (as we argued in
section F.3.1) makes a mockery of right-libertarian claims that their
system is based on freedom or justice.
This means that the preferred banking system of "anarcho"-capitalism
implies increasing, not decreasing, inequality within society. Moreover,
most firms (as we indicated in section C.5.1) fund their investments
with their own savings which would make it hard for banks to loan
these savings out as they could be withdrawn at any time. This could
have serious implications for the economy, as banks refuse to fund
new investment simply because of the uncertainty they face when
accessing if their available savings can be loaned to others (after all,
they can hardly loan out the savings of a customer who is likely to
demand them at any time). And by refusing to fund new investment, a
boom could falter and turn to slump as firms do not find the necessary
orders to keep going.
So, would market forces create "sound banking"? The answer is probably
not. The pressures on banks to make profits come into conflict with
the need to maintain their savings to loans ration (and so the
confidence of their customers). As Wray argues, "as banks are profit
seeking firms, they find ways to increase their liabilities which
don't entail increases in reserve requirements" and "[i]f banks share
the profit expectations of prospective borrowers, they can create
credit to allow [projects/investments] to proceed." [Op. Cit., p. 295,
p. 283] This can be seen from the historical record. As Kindleberger
notes, "the market will create new forms of money in periods of
boom to get around the limit" imposed on the money supply [Op. Cit.,
p. 63]. Trade credit is one way, for example. Under the Monetarist
experiments of 1980s, there was "deregulation and central bank
constraints raised interest rates and created a moral hazard --
banks made increasingly risky loans to cover rising costs of issuing
liabilities. Rising competition from nonbanks and tight money
policy forced banks to lower standards and increase rates of growth
in an attempt to 'grow their way to profitability'" [Op. Cit., p. 293]
Thus credit money ("fiduciary media") is an attempt to overcome the
scarcity of money within capitalism, particularly the scarcity of
specie money. The pressures that banks face within "actually
existing" capitalism would still be faced under "pure" capitalism.
It is likely (as Reekie acknowledges) that credit money would still
be created in response to the demands of business people (although
not at the same level as is currently the case, we imagine). The
banks, seeking profits themselves and in competition for customers,
would be caught between maintaining the value of their business
(i.e. their money) and the needs to maximise profits. As a boom
develops, banks would be tempted to introduce credit money to
maintain it as increasing the interest rate would be difficult
and potentially dangerous (for reasons we noted above). Thus, if
credit money is not forth coming (i.e. the banks stick to the
Austrian claims that loans must equal savings) then the rise in
interest rates required will generate a slump. If it is forthcoming,
then the danger of over-investment becomes increasingly likely.
All in all, the business cycle is part of capitalism and not
caused by "external" factors like the existence of government.
As Reekie notes, to Austrians "ignorance of the future is endemic"
[Op. Cit., p. 117] but you would be forgiven for thinking that this
is not the case when it comes to investment. An individual firm
cannot know whether its investment project will generate the stream
of returns necessary to meet the stream of payment commitments
undertaken to finance the project. And neither can the banks who
fund those projects. Even if a bank does not get tempted into
providing credit money in excess of savings, it cannot predict
whether other banks will do the same or whether the projects it
funds will be successful. Firms, looking for credit, may turn to
more flexible competitors (who practice reserve banking to some
degree) and the inflexible bank may see its market share and
profits decrease. After all, commercial banks "typically establish
relations with customers to reduce the uncertainty involved in
making loans. Once a bank has entered into a relationship with
a customer, it has strong incentives to meet the demands of
that customer." [Wray, Op. Cit., p. 85]
There are example of fully privatised banks. For example, in the
United States "which was without a central bank after 1837" "the
major banks in New York were in a bind between their roles as
profit seekers, which made them contributors to the instability
of credit, and as possessors of country deposits against whose
instability they had to guard." [Kindleberger, Op. Cit., p. 85]
In Scotland, the banks were unregulated between 1772 and 1845
but "the leading commercial banks accumulated the notes of lessor
ones, as the Second Bank of the United States did contemporaneously
in [the USA], ready to convert them to specie if they thought
they were getting out of line. They served, that is, as an
informal controller of the money supply. For the rest, as so
often, historical evidence runs against strong theory, as
demonstrated by the country banks in England from 1745 to 1835,
wildcat banking in Michigan in the 1830s, and the latest
experience with bank deregulation in Latin America." [Op. Cit.,
p. 82] And we should note there were a few banking "wars" during
the period of deregulation in Scotland which forced a few of the
smaller banks to fail as the bigger ones refused their money
and that there was a major bank failure in the Ayr Bank.
Kendleberger argues that central banking "arose to impose control
on the instability of credit" and did not cause the instability
which right-libertarians maintain it does. And as we note in
section F.10.3, the USA suffered massive economic instability
during its period without central banking. Thus, if credit
money is the cause of the business cycle, it is likely that
a "pure" capitalism will still suffer from it just as much as
"actually existing" capitalism (either due to high interest rates
or over-investment).
In general, as the failed Monetarist experiments of the 1980s prove,
trying to control the money supply is impossible. The demand for money
is dependent on the needs of the economy and any attempt to control
it will fail (and cause a deep depression, usually via high interest
rates). The business cycle, therefore, is an endogenous phenomenon caused
by the normal functioning of the capitalist economic system. Austrian
and right-libertarian claims that "slump flows boom, but for a totally
unnecessary reason: government inspired mal-investment" [Reekie, Op.
Cit., p. 74] are simply wrong. Over-investment does occur, but it
is not "inspired" by the government. It is "inspired" by the banks
need to make profits from loans and from businesses need for investment
funds which the banks accommodate. In other words, by the nature of
the capitalist system.
In many ways, the labour market is the one that affects capitalism the
most. The right-libertarian assumption (like that of mainstream economics)
is that markets clear and, therefore, the labour market will also clear.
As this assumption has rarely been proven to be true in actuality (i.e.
periods of full employment within capitalism are few and far between),
this leaves its supporters with a problem -- reality contradicts the
theory.
The theory predicts full employment but reality shows that this is not
the case. Since we are dealing with logical deductions from assumptions,
obviously the theory cannot be wrong and so we must identify external
factors which cause the business cycle (and so unemployment). In this
way attention is diverted away from the market and its workings --
after all, it is assumed that the capitalist market works -- and onto
something else. This "something else" has been quite a few different
things (most ridiculously, sun spots in the case of one of the founders of
marginalist economics, William Stanley Jevons). However, these days most
pro-free market capitalist economists and right-libertarians have now
decided it is the state.
In this section of the FAQ we will present a case that maintains that
the assumption that markets clear is false at least for one, unique,
market -- namely, the market for labour. As the fundamental assumption
underlying "free market" capitalism is false, the logically consistent
superstructure built upon comes crashing down. Part of the reason why
capitalism is unstable is due to the commodification of labour (i.e.
people) and the problems this creates. The state itself can have
positive and negative impacts on the economy, but removing it or
its influence will not solve the business cycle.
Why is this? Simply due to the nature of the labour market.
Anarchists have long realised that the capitalist market is based upon
inequalities and changes in power. Proudhon argued that "[t]he manufacturer
says to the labourer, 'You are as free to go elsewhere with your services
as I am to receive them. I offer you so much.' The merchant says to the
customer, 'Take it or leave it; you are master of your money, as I am
of my goods. I want so much.' Who will yield? The weaker." He, like all
anarchists, saw that domination, oppression and exploitation flow from
inequalities of market/economic power and that the "power of invasion
lies in superior strength." [What is Property?, p. 216, p. 215]
This applies with greatest force to the labour market. While mainstream
economics and right-libertarian variations of it refuse to acknowledge
that the capitalist market is a based upon hierarchy and power, anarchists
(and other socialists) do not share this opinion. And because they do
not share this understanding with anarchists, right-libertarians will
never be able to understand capitalism or its dynamics and development.
Thus, when it comes to the labour market, it is essential to remember
that the balance of power within it is the key to understanding the
business cycle. Thus the economy must be understood as a system of
power.
So how does the labour market effect capitalism? Let us consider a
growing economy, on that is coming out of a recession. Such a growing
economy stimulates demand for employment and as unemployment falls, the
costs of finding workers increase and wage and condition demands of
existing workers intensify. As the economy is growing and labour is
scare, the threat associated with the hardship of unemployment is
weakened. The share of profits is squeezed and in reaction to this
companies begin to cut costs (by reducing inventories, postponing
investment plans and laying off workers). As a result, the economy
moves into a downturn. Unemployment rises and wage demands are moderated.
Eventually, this enables the share of profits first of all to stabilise,
and then rise. Such an "interplay between profits and unemployment as
the key determinant of business cycles" is "observed in the empirical
data." [Paul Ormerod, The Death of Economics, p. 188]
Thus, as an economy approaches full employment the balance of power on
the labour market changes. The sack is no longer that great a threat
as people see that they can get a job elsewhere easily. Thus wages
and working conditions increase as companies try to get new (and
keep) existing employees and output is harder to maintain. In the
words of economist William Lazonick, labour "that is able to command
a higher price than previously because of the appearance of tighter
labour markets is, by definition, labour that is highly mobile via
the market. And labour that is highly mobile via the market is labour
whose supply of effort is difficult for managers to control in the
production process. Hence, the advent of tight labour markets generally
results in more rapidly rising average costs . . .as well as upward
shifts in the average cost curve. . ." [Business Organisation and
the Myth of the Market Economy, p. 106]
In other words, under conditions of full-employment "employers are
in danger of losing the upper hand." [Juliet B. Schor, The Overworked
American, p. 75] Schor argues that "employers have a structural advantage
in the labour market, because there are typically more candidates ready
and willing to endure this work marathon [of long hours] than jobs
for them to fill." [p. 71] Thus the labour market is usually a buyers
market, and so the sellers have to compromise. In the end, workers
adapt to this inequality of power and instead of getting what they
want, they want what they get.
But under full employment this changes. As we argued in section B.4.4
and section C.7, in such a situation it is the bosses who have to
start compromising. And they do not like it. As Schor notes, America
"has never experienced a sustained period of full employment. The
closest we have gotten is the late 1960s, when the overall unemployment
rate was under 4 percent for four years. But that experience does
more to prove the point than any other example. The trauma caused
to business by those years of a tight labour market was considerable.
Since then, there has been a powerful consensus that the nation cannot
withstand such a low rate of unemployment." [Op. Cit., pp. 75-76]
So, in other words, full employment is not good for the capitalist
system due to the power full employment provides workers. Thus
unemployment is a necessary requirement for a successful capitalist
economy and not some kind of aberration in an otherwise healthy system.
Thus "anarcho"-capitalist claims that "pure" capitalism will soon result
in permanent full employment are false. Any moves towards full employment
will result in a slump as capitalists see their profits squeezed from below
by either collective class struggle or by individual mobility in the
labour market.
This was recognised by Individualist Anarchists like Benjamin Tucker, who
argued that mutual banking would "give an unheard of impetus to business,
and consequently create an unprecedented demand for labour, -- a demand
which would always be in excess of the supply, directly contrary of the
present condition of the labour market." [The Anarchist Reader, pp.
149-150] In other words, full employment would end capitalist exploitation,
drive non-labour income to zero and ensure the worker the full value of
her labour -- in other words, end capitalism. Thus, for most (if not all)
anarchists the exploitation of labour is only possible when unemployment
exists and the supply of labour exceeds the demand for it. Any move
towards unemployment will result in a profits squeeze and either the
end of capitalism or an economic slump.
Indeed, as we argued in the last section, the extended periods of
(approximately) full employment until the 1960s had the advantage that
any profit squeeze could (in the short run anyway) be passed onto working
class people in the shape of inflation. As prices rise, labour is made
cheaper and profits margins supported. This option is restricted under
a "pure" capitalism (for reasons we discussed in the last section) and
so "pure" capitalism will be affected by full employment faster than
"impure" capitalism.
As an economy approaches full employment, "hiring new workers suddenly
becomes much more difficult. They are harder to find, cost more, and
are less experiences. Such shortages are extremely costly for a firm."
[Schor, Op. Cit., p. 75] This encourages a firm to pass on these rises
to society in the form of price rises, so creating inflation. Workers,
in turn, try to maintain their standard of living. "Every general
increase in labour costs in recent years," note J. Brecher and J.
Costello in the late 1970s, "has followed, rather than preceded, an
increase in consumer prices. Wage increases have been the result of
workers' efforts to catch up after their incomes have already been
eroded by inflation. Nor could it easily be otherwise. All a businessman
has to do to raise a price . . . [is to] make an announcement. . . Wage
rates . . . are primarily determined by contracts" and so cannot be
easily adjusted in the short term. [Common Sense for Bad Times,
p, 120]
These full employment pressures will still exist with "pure" capitalism
(and due to the nature of the banking system will not have the safety
value of inflation). This means that periodic profit squeezes will occur,
due to the nature of a tight labour market and the increased power of
workers this generates. This in turn means that a "pure" capitalism will
be subject to periods of unemployment (as we argued in section C.9)
and so still have a business cycle. This is usually acknowledged by
right-libertarians in passing, although they seem to think that this
is purely a "short-term" problem (it seems a strange "short-term"
problem that continually occurs).
But such an analysis is denied by right-libertarians. For them government
action, combined with the habit of many labour unions to obtain higher
than market wage rates for their members, creates and exacerbates mass
unemployment. This flows from the deductive logic of much capitalist
economics. The basic assumption of capitalism is that markets clear. So
if unemployment exists then it can only be because the price of labour
(wages) is too high (Austrian Economist W. Duncan Reekie argues
that unemployment will "disappear provided real wages are not
artificially high" [Markets, Entrepreneurs and Liberty, p. 72]).
Thus the assumption provokes the conclusion -- unemployment is caused
by an unclearing market as markets always clear. And the cause for
this is either the state or unions. But what if the labour market
cannot clear without seriously damaging the power and profits of
capitalists? What if unemployment is required to maximise profits
by weakening labours' bargaining position on the market and so
maximising the capitalists power? In that case unemployment is
caused by capitalism, not by forces external to it.
However, let us assume that the right-libertarian theory is correct.
Let us assume that unemployment is all the fault of the selfish unions
and that a job-seeker "who does not want to wait will always get a job
in the unhampered market economy." [von Mises, Human Action, p. 595]
Would crushing the unions reduce unemployment? Let us assume that the
unions have been crushed and government has been abolished (or, at the
very least, become a minimum state). The aim of the capitalist class is
to maximise their profits and to do this they invest in labour saving
machinery and otherwise attempt to increase productivity. But increasing
productivity means that the prices of goods fall and falling prices
mean increasing real wages. It is high real wages that, according to
right-libertarians, that cause unemployment. So as a reward for increasing
productivity, workers will have to have their money wages cut in order
to stop unemployment occurring! For this reason some employers might
refrain from cutting wages in order to avoid damage to morale - potentially
an important concern.
Moreover, wage contracts involve time -- a contract will usually agree a
certain wage for a certain period. This builds in rigidity into the market,
wages cannot be adjusted as quickly as other commodity prices. Of course,
it could be argued that reducing the period of the contract and/or allowing
the wage to be adjusted could overcome this problem. However, if we reduce
the period of the contract then workers are at a suffer disadvantage as they
will not know if they have a job tomorrow and so they will not be able to
easily plan their future (an evil situation for anyone to be in). Moreover,
even without formal contracts, wage renegotiation can be expensive. After all,
it takes time to bargain (and time is money under capitalism) and wage
cutting can involve the risk of the loss of mutual good will between
employer and employee. And would you give your boss the power to
"adjust" your wages as he/she thought was necessary? To do so would
imply an altruistic trust in others not to abuse their power.
Thus a "pure" capitalism would be constantly seeing employment
increase and decrease as productivity levels change. There exist
important reasons why the labour market need not clear which revolve
around the avoidance/delaying of wage cuts by the actions of capitalists
themselves. Thus, given a choice between cutting wages for all workers
and laying off some workers without cutting the wages of the remaining
employees, it is unsurprising that capitalists usually go for the later.
After all, the sack is an important disciplining device and firing workers
can make the remaining employees more inclined to work harder and be
more obedient.
And, of course, many employers are not inclined to hire over-qualified
workers. This is because, once the economy picks up again, their worker
has a tendency to move elsewhere and so it can cost them time and money
finding a replacement and training them. This means that involuntary
unemployment can easily occur, so reducing tendencies towards full
employment even more. In addition, one of the assumptions of the
standard marginalist economic model is one of decreasing returns
to scale. This means that as employment increases, costs rise and so
prices also rise (and so real wages fall). But in reality many industries
have increasing returns to scale, which means that as production increases
unit costs fall, prices fall and so real wages rise. Thus in such an
economy unemployment would increase simply because of the nature of
the production process!
Moreover, as we argued in-depth in section C.9, a cut in money wages is
not a neutral act. A cut in money wages means a reduction in demand for
certain industries, which may have to reduce the wages of its employees
(or fire them) to make ends meet. This could produce a accumulative
effect and actually increase unemployment rather than reduce it.
In addition, there are no "self-correcting" forces at work in the
labour market which will quickly bring employment back to full levels.
This is for a few reasons. Firstly, the supply of labour cannot be
reduced by cutting back production as in other markets. All we can
do is move to other areas and hope to find work there. Secondly, the
supply of labour can sometimes adjust to wage decreases in the
wrong direction. Low wages might drive workers to offer a greater
amount of labour (i.e. longer hours) to make up for any short
fall (or to keep their job). This is usually termed the "efficiency
wage" effect. Similarly, another family member may seek employment
in order to maintain a given standard of living. Falling wages may
cause the number of workers seeking employment to increase, causing
a full further fall in wages and so on (and this is ignoring the
effects of lowering wages on demand discussed in section C.9).
The paradox of piece work is an important example of this effect.
As Schor argues, "piece-rate workers were caught in a viscous
downward spiral of poverty and overwork. . . When rates were
low, they found themselves compelled to make up in extra output
what they were losing on each piece. But the extra output produced
glutted the market and drove rates down further." [Juliet C. Schor,
The Overworked American, p, 58]
Thus, in the face of reducing wages, the labour market may see an
accumulative move away from (rather than towards) full employment,
The right-libertarian argument is that unemployment is caused by real
wages being too high which in turn flows from the assumption that markets
clear. If there is unemployment, then the price of the commodity labour
is too high -- otherwise supply and demand would meet and the market
clear. But if, as we argued above, unemployment is essential to
discipline workers then the labour market cannot clear except for
short periods. If the labour market clears, profits are squeezed. Thus
the claim that unemployment is caused by "too high" real wages is false
(and as we argue in section C.9, cutting these wages will result in
deepening any slump and making recovery longer to come about).
In other words, the assumption that the labour market must clear
is false, as is any assumption that reducing wages will tend to push
the economy quickly back to full employment. The nature of wage labour
and the "commodity" being sold (i.e. human labour/time/liberty) ensure
that it can never be the same as others. This has important implications
for economic theory and the claims of right-libertarians, implications
that they fail to see due to their vision of labour as a commodity
like any other.
The question arises, of course, of whether, during periods of full
employment, workers could not take advantage of their market power
and gain increased workers' control, create co-operatives and so
reform away capitalism. This was the argument of the Mutualist and
Individualist anarchists and it does have its merits. However, it
is clear (see section J.5.12) that bosses hate to have their authority
reduced and so combat workers' control whenever they can. The logic
is simple, if workers increase their control within the workplace
the manager and bosses may soon be out of a job and (more importantly)
they may start to control the allocation of profits. Any increase
in working class militancy may provoke capitalists to stop/reduce
investment and credit and so create the economic environment (i.e.
increasing unemployment) necessary to undercut working class power.
In other words, a period of full unemployment is not sufficient to
reform capitalism away. Full employment (nevermind any struggle over
workers' control) will reduce profits and if profits are reduced
then firms find it hard to repay debts, fund investment and provide
profits for shareholders. This profits squeeze would be enough to
force capitalism into a slump and any attempts at gaining workers'
self-management in periods of high employment will help push it
over the edge (after all, workers' control without control over the
allocation of any surplus is distinctly phoney). Moreover, even if
we ignore the effects of full employment may not last due to problems
associated with over-investment (see section C.7.2), credit and interest
rate problems (see section F.10.1) and realisation/aggregate demand
disjoints. Full employment adds to the problems associated with the
capitalist business cycle and so, if class struggle and workers power
did not exist or cost problem, capitalism would still not be stable.
If equilibrium is a myth, then so is full employment. It seems somewhat
ironic that "anarcho"-capitalists and other right-libertarians
maintain that there will be equilibrium (full employment) in the one
market within capitalism it can never actually exist in! This is
usually quietly acknowledged by most right-libertarians, who mention
in passing that some "temporary" unemployment will exist in their
system -- but "temporary" unemployment is not full employment. Of course,
you could maintain that all unemployment is "voluntary" and get round
the problem by denying it, but that will not get us very far.
So it is all fine and well saying that "libertarian" capitalism would be
based upon the maxim "From each as they choose, to each as they are chosen."
[Robert Nozick, Anarchy, State, and Utopia, p. 160] But if the labour
market is such that workers have little option about what they "choose"
to give and fear that they will not be chosen, then they are at a
disadvantage when compared to their bosses and so "consent" to being
treated as a resource from the capitalist can make a profit from. And
so this will result in any "free" contract on the labour market favouring
one party at the expense of the other -- as can be seen from "actually
existing capitalism".
Thus any "free exchange" on the labour market will usually not reflect
the true desires of working people (and who will make all the "adjusting"
and end up wanting what they get). Only when the economy is approaching
full employment will the labour market start to reflect the true desires
of working people and their wage start to approach its full product.
And when this happens, profits are squeezed and capitalism goes into
slump and the resulting unemployment disciplines the working class and
restores profit margins. Thus full employment will be the exception
rather than the rule within capitalism (and that is a conclusion which
the historical record indicates).
In other words, in a normally working capitalist economy any labour
contracts will not create relationships based upon freedom due to
the inequalities in power between workers and capitalists. Instead,
any contracts will be based upon domination, not freedom. Which
prompts the question, how is libertarian capitalism libertarian if
it erodes the liberty of a large class of people?
Firstly, we must state that a pure laissez-faire capitalist system has
not existed. This means that any evidence we present in this section
can be dismissed by right-libertarians for precisely this fact -- it
was not "pure" enough. Of course, if they were consistent, you would
expect them to shun all historical and current examples of capitalism
or activity within capitalism, but this they do not. The logic is
simple -- if X is good, then it is permissible to use it. If X is
bad, the system is not pure enough.
However, as right-libertarians do use historical examples so shall
we. According to Murray Rothbard, there was "quasi-laissez-faire
industrialisation [in] the nineteenth century" [The Ethics of Liberty,
p. 264] and so we will use the example of nineteenth century America --
as this is usually taken as being the closest to pure laissez-faire --
in order to see if laissez-faire is stable or not.
Yes, we are well aware that 19th century USA was far from laissez-faire
-- there was a state, protectionism, government economic activity and
so on -- but as this example has been often used by right-Libertarians'
themselves (for example, Ayn Rand) we think that we can gain a lot from
looking at this imperfect approximation of "pure" capitalism (and as
we argued in section F.8, it is the "quasi" aspects of the system that
counted in industrialisation, not the laissez-faire ones).
So, was 19th century America stable? No, it most definitely was not.
Firstly, throughout that century there were a continual economic booms
and slumps. The last third of the 19th century (often considered
as a heyday of private enterprise) was a period of profound instability
and anxiety. Between 1867 and 1900 there were 8 complete business
cycles. Over these 396 months, the economy expanded during 199 months
and contracted during 197. Hardly a sign of great stability (since the
end of world war II, only about a fifth of the time has spent in periods
of recession or depression, by way of comparison). Overall, the
economy went into a slump, panic or crisis in 1807, 1817, 1828,
1834, 1837, 1854, 1857, 1873, 1882, and 1893 (in addition, 1903
and 1907 were also crisis years).
Part of this instability came from the eras banking system. "Lack of
a central banking system," writes Richard Du Boff, "until the Federal
Reserve act of 1913 made financial panics worse and business cycle
swings more severe" [Accumulation and Power, p. 177] It was in
response to this instability that the Federal Reserve system was
created; and as Doug Henwood notes "the campaign for a more rational
system of money and credit was not a movement of Wall Street vs. industry
or regional finance, but a broad movement of elite bankers and the
managers of the new corporations as well as academics and business
journalists. The emergence of the Fed was the culmination of attempts
to define a standard of value that began in the 1890s with the emergence
of the modern professionally managed corporation owned not by its managers
but dispersed public shareholders." [Wall Street, p. 93] Indeed,
the Bank of England was often forced to act as lender of last resort
to the US, which had no central bank.
In the decentralised banking system of the 19th century, during panics
thousands of banks would hoard resources, so starving the system for
liquidity precisely at the moment it was most badly needed. The creation
of trusts was one way in which capitalists tried to manage the system's
instabilities (at the expense of consumers) and the corporation was a
response to the outlawing of trusts. "By internalising lots of the
competitive system's gaps -- by bring more transactions within the same
institutional walls -- corporations greatly stabilised the economy."
[Henwood, Op. Cit., p. 94]
All during the hey-day of laissez faire we also find popular protests
against the money system used, namely specie (in particular gold), which
was considered as a hindrance to economic activity and expansion (as well
as being a tool for the rich). The Individualist Anarchists, for example,
considered the money monopoly (which included the use of specie as money)
as the means by which capitalists ensured that "the labourers . . . [are]
kept in the condition of wage labourers," and reduced "to the conditions
of servants; and subject to all such extortions as their employers . . .
may choose to practice upon them", indeed they became the "mere tools
and machines in the hands of their employers". With the end of this
monopoly, "[t]he amount of money, capable of being furnished . . .
[would assure that all would] be under no necessity to act as a servant,
or sell his or her labour to others." [Lysander Spooner, A Letter to
Grover Cleveland, p. 47, p. 39, p. 50, p. 41] In other words, a specie
based system (as desired by many "anarcho"-capitalists) was considered
a key way of maintaining wage labour and exploitation.
Interestingly, since the end of the era of the Gold Standard (and so
commodity money) popular debate, protest and concern about money has
disappeared. The debate and protest was in response to the effects of
commodity money on the economy -- with many people correctly viewing
the seriously restrictive monetary regime of the time responsible for
economic problems and crisis as well as increasing inequalities. Instead
radicals across the political spectrum urged a more flexible regime,
one that did not cause wage slavery and crisis by reducing the amount
of money in circulation when it could be used to expand production and
reduce the impact of slumps. Needless to say, the Federal Reserve system
in the USA was far from the institution these populists wanted (after all,
it is run by and for the elite interests who desired its creation).
That the laissez-faire system was so volatile and panic-ridden suggests
that "anarcho"-capitalist dreams of privatising everything, including
banking, and everything will be fine are very optimistic at best (and,
ironically, it was members of the capitalist class who lead the movement
towards state-managed capitalism in the name of "sound money").
¡°That¡¯s a big honor,¡± commented Larry. ¡°The passenger, while they were high up, threw something and hit the pilot, the seaplane went out of control, the man jumped¡ªand then cut free his parachute, cut the sack holding the emeralds, and hid in the swamp.¡± ¡°I see a light,¡± Sandy said as the airplane swung far out over the dark water. ¡°A green light, but the hydroplane wouldn¡¯t carry lights.¡± "No, no; it's a good deal, but it ain't too much. Not that it could be more, very well," he added, and he glanced furtively at the woman within, who had stretched out on the lounge with her face to the wall. Mrs. Taylor was fanning her. But though the 21st of January was to be the day of the grand attack on the Ministry, the battle was not deferred till then. Every day was a field-day, and the sinking Minister was dogged step by step, his influence weakened by repeated divisions, and his strength worn out by the display of the inevitable approach of the catastrophe. The first decided defeat that he suffered was in the election of the Chairman of Committees. The Ministerial candidate, Giles Earle, was thrown out by a majority of two hundred and forty-two to two hundred and thirty-eight, and the Opposition candidate, Dr. Lee, was hailed by a shout that rent the House. Other close divisions followed. The fall of Walpole was now certain, and he would have consulted both his dignity and comfort in resigning at once. This was the earnest advice of his friends, but he had been too long accustomed to power to yield willingly. He was oppressed with a sense of his defeats, and the insolence of enemies whom he had so long calmly looked down upon without fear. He was growing old and wanted repose, but he still clung convulsively to his authority, though he had ceased to enjoy it. "Should think they was bride and groom, if they wasn't so old." "March them right over to that shed there," said the Major, "and the Quartermaster will issue them muskets and equipments, which you can turn over again when you reach Chattanooga. Good-by. I hope you'll have a pleasant trip. Remember me to the boys of the old brigade and tell them I'll be with them before they start out for Atlanta." The train finally halted on a side-track in the outskirts of Chattanooga, under the gigantic shadow of Lookout Mountain, and in the midst of an ocean of turmoiling activity that made the eyes ache to look upon it, and awed every one, even Si and Shorty, with a sense of incomprehensible immensity. As far as they could see, in every direction, were camps, forts, intrenchments, flags, hordes of men, trains of wagons, herds of cattle, innumerable horses, countless mules, mountains of boxes, barrels and bales. Immediately around them was a wilderness of trains, with noisy locomotives and shouting men. Regiments returning from veteran furlough, or entirely new ones, were disembarking with loud cheering, which was answered from the camps on the hillsides. On the river front steamboats were whistling and clanging their bells. "Go out and git you a rebel for yourself, if you want to know about 'em," Shorty had snapped at the Orderly. "There's plenty more up there on the hill. It's full of 'em." "Drat 'em! durn 'em!" "He's dead," said Realf. Should you leave me too, O my faithless ladie!" The odds were generally on Reuben. It was felt that a certain unscrupulousness was necessary to the job, and in that Backfield had the advantage. "Young Realf wudn't hurt a fly," his champions had to acknowledge. Though the money was with Reuben, the sympathy was mostly with Realf, for the former's dealings had scarcely made him popular. He was a hard man to his customers, he never let them owe him for grain or roots or fodder; his farm-hands, when drunk, spoke of him as a monster, and a not very tender-hearted peasantry worked itself sentimental over his treatment of his children. Caro was frightened, horrified¡ªshe broke free, and scrambled to her feet. She nearly wept, and it was clear even to his muddled brain that her invitation had been merely the result of innocence more profound than that which had stimulated her shyness. Rough seaman though he was, he was touched, and managed to soothe her, for she was too bashful and frightened to be really indignant. They walked a few yards further along the path, then at her request turned back towards Odiam. Calverley reluctantly departed on his mission, cursing the interruption that prevented his enjoying the degradation of his rival, and the baron now inquired whether Holgrave had confessed himself his villein. HoME¹ú¼Ò²úÃâ·ÑÒ»¼¶Ã«¿¨Æ¬
ENTER NUMBET 0017 F.10.1 Would privatising banking make capitalism stable?
"In the real world, banks extend credit, creating deposits in the
process, and look for the reserves later. The question then becomes
one of whether and how the Federal Reserve will accommodate the demand
for reserves. In the very short run, the Federal Reserve has little or
no choice about accommodating that demand, over time, its influence
can obviously be felt." [quoted by Doug Henwood, Wall Street, p. 220]
(Although we must stress that central banks are not passive and do have
many tools for affecting the supply of money. For example, central banks
can operate "tight" money policies which can have significant impact on
an economy and, via creating high enough interest rates, the demand for
money.)
F.10.2 How does the labour market effect capitalism?
F.10.3 Was laissez-faire capitalism stable?
xudu9.com.cn
suri6.net.cn
www.sgzkw.com.cn
ptcair.com.cn
www.marxay.com.cn
tushi4.com.cn
jigan6.net.cn
shelu3.net.cn
5iabcd.com.cn
ak500.com.cn