The Immorality of Coercion: Monetarism Edition

by Ross Kenyon

The question of whether money could exist in the absence of state control is simply answered: if there is demand for a product someone will supply it. This statement does not rest upon the fact that the product in question is a tool of indirect exchange. All that matters is that it is a good and it is desired, and as a result of this someone can and will supply this demand in a profitable and competitive manner if it is possible to do so. If individuals are not facing barriers to industry-entry or ‘legal’ monopolies, entrepreneurs will seek to profitably venture their capital in the marketplace. Seeking not to squander their investment, they will attempt to be successful in their chosen industry by providing the best value they can for the least cost. Those who are most able to execute this task will provide the consumer with a widely-accepted and valued currency without any of the ethical problems that statist solutions provide.

Whenever asked any of the multitudes of economic and political queries such as “how would free economic actors without the state build roads, enforce contracts, provide personal defense and protection of private property,” as well as countless other valid concerns, it is often best to avoid becoming bogged down in the details of individual markets. While the details of free banking, private mints, and the logistics, incentives, and practical considerations of the practice are interesting and valuable topics of exploration, the most crucial facet of this subject is the moral question: is statist monetarism a legitimate way to solve the complexities, volatilities, and potential liabilities of a free market in tools of indirect exchange?
Dispute over the nature of property is one of the most fundamental concerns in ethical theory, and subsequently, political philosophy. The mainstream state capitalist paradigm of ownership maintains that one purchases available land from the state and develops it in accordance to the regulations of that state, and all of the productive capabilities of that property after taxes reside exclusively with the owner. After this initial ownership has been established the right to gift, trade, or otherwise contract the property while in compliance with the web of regulations is retained with the sovereignty of the individual, whom holds a state-granted claim to the produce of that property.

Even if the state did not exist and could not therefore maintain the legitimacy of private property rights for individuals they would naturally arise due to the inherent scarcity of resources. There is only so much excellent farming land, and those who farm and utilize that land maintain a legitimate claim to its use. Latecomers seeking a claim to the same land would have to use violence to force the original occupant off of the land and in effect, would be stealing the prior owner’s past by stealing the time and labor the original owner had invested by improving the land with irrigation, domiciles, fences, etc.
Further illustrating the natural existence of private property due to scarcity is the idea that only one person can eat an apple. Whenever someone eats a piece of food they are validating private property by implying that they will consume a scarce resource and as a result, the apple will not be available for use by other individuals in the community. Private property may be seen as the right of exclusion of others from scarce resources which have been justly acquired by using one’s labor to bring undeveloped and unproductively used potential into economic standing.

Even radical socialists and collectivists such as the Industrial Workers of the World and Eugene Debs would concede private property, stating that “if the worker is not entitled to all he produces, then what share is anybody else entitled to?” The only rightful owner of wealth is the person who brought it into existence through their labor, unless they have made other contractual agreements. If it is clear that the producer of wealth maintains the only genuine claim over the use of that wealth then it does not follow that anyone else can justifiably claim a portion of it because of need or want because services are imposed upon the owner without their consent due to geographical location.

Once the concept of private property has become established individuals will justifiably and righteously, but often inconsistently defend the right to their property. It is common to see protestors opposing taxes that support things they find morally abhorrent or wasteful but still support the right to tax for ends that the individual supports. Most people never oppose the idea the private property is an inviolate part of natural law from which emanates the immorality of all taxation, a thinly veiled attempt to legitimize theft.

Indisputably, theft of any sort violates the sovereign individual’s inherent and natural right to property that emanates both from self-ownership and the economic fact of scarcity, and is thus immoral. If inflation is not thought of as theft then this debate will remain toothless and befuddled. When the stewards of the money supply at the Federal Reserve print money they are devaluing, or stealing the value of every single dollar in existence. Ron Paul elaborates, stating that “if the supply of Mickey Mantle baseball cards were suddenly to increase a millionfold, each individual card would become almost valueless. The same principle applies to money: the more the Fed creates, the less value each individual monetary unit possesses.” Ron Paul and Murray Rothbard both correctly view inflation as a tax and, moreover, as a particularly vile tax because it operates in such a sneaky and underhanded way that most people do not understand why their savings is evaporating and why their money will buy less and less as time goes on.

Politicians can only tax people so much before they rise up in opposition. Realizing this, controlling the money supply and devaluing the dollar is a way of covertly funding programs which citizens would not voluntarily choose to fund, otherwise politicians would do it openly and honestly. Rothbard gives the example of a king clipping “his” domain’s coins in order to steal part of the precious metal and then enforcing a law under which the subjects were forced to trade using the devalued currency. Rather than taxing them outright, this tactic avoids the conversation with citizens that all politicians facing reelection dread having: the necessity of greater taxation to fund government operations.

Worse still, inflation disproportionately hurts the poor and middle classes as their savings are pilfered, the loot given to the politically well-established and the national elite. “Inflation… confers no general social benefit; instead, it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race--to see who can get the new money earliest.” Inflation does not affect all goods and all economic actors simultaneously. When new money is created through central banking private banks, government contractors, and other favored groups are often the first to receive this money. The economy has not adjusted to the new amount of currency in the marketplace yet, so the bankers and other lucky recipients spend “their” newly minted money while the prices are still at their old levels, thus receiving a disproportionate amount of goods to the value they are representing to an unadjusted market. As the money is spent and filters through the economy prices begin to reflect the devalued nature of the currency and prices rise as a result. The last people to receive the new money are wage-earners at the bottom of the economic ladder. Senator Daniel Webster stated that “of all the contrivances for cheating the laboring classes of mankind, none has been found more effectual than that which deludes them with paper money.”

Counterfeiting is immoral because the counterfeiters are trading no value for value and defrauding their trading partners. There exists no significant ethical difference between mugging someone in an alley and slowly stealing the value of one’s money through the travesty of inflation, but at least the mugger does not simultaneously pretend to be one’s friend.
From a praxeological perspective, all rational economic actors seek to store or gain value and mitigate losses. Through legal tender laws actors are punished for sensibly being wary of fiat currency through disincentives such as high sales and capital gains taxes on precious metals and are forced to accept payment in Federal Reserve notes. Ron Paul recently introduced the Free Competition in Currency Act of 2009. Allowing competition on the marketplace for currency would promote sounder money and would solve the ethical implications of inflation, coercion, and central banking simply because a monetary firm on the free market would go out of business by promoting inflationary policies and would operate exclusively through voluntary association. However, bills such as Congressman Paul’s can never be allowed by the establishment to become law as they threaten the entire racket of monetarism as it stands.

If individual consumers consciously choose to store their wealth in fiat or unbacked currency such as Federal Reserve notes, it is completely within the moral prerogative of the libertarian to allow them to do so. The central rule of anti-authoritarian philosophies is a respect for individuals to lead one’s life as one pleases so long as it doesn’t aggress against others. Propertarian anti-authoritarian philosophies include justly acquired property within the ethical inviolate in what has been called many things but is most commonly referred to as the Non-Aggression Principle. Under this principle it is immoral to prevent nonaggressive individuals from living freely unhindered by tradition, other individuals, culture, or the state. However, legal tender laws and currency issued by central banks cheat the market and economically and coercively encourage (via gunpoint courtesy of the state) the preference of state currency at the expense of competing and sound currencies in the free market.

If one accepts that it is morally wrong to coerce persons when they are not aggressing against the person or property of others, it is thus transitively wrong to coerce them by means of legal tender. Under legal tender laws, voluntary and consensual exchanges and associations are harmed, and often prevented from being legitimately created. Contractual agreements between consenting individuals authorizing payment in alternative mediums are taxed and effectively discouraged by the state in an unethical manner inconsistent with the ethics of individual negative liberty.
The state claims a legitimate and moral monopoly for the privilege of violating these negative rights, the freedom to be left alone, for most of society’s problems. This idea is universal, and although sound money is a central element of a healthy and sane society, (as well as any governments existing amongst them) it is in no way, shape or form limited to money.
When people use the state to solve social problems such as providing affordable healthcare, transporting people, maintaining a reliable tool of indirect exchange, etc. the last concern on everyone’s mind is a rational examination of moral philosophy.

It is commonly forgotten, ignored, or never noticed that the state has no tool for good or evil except violence. This is an absolutist and extreme position, but it is true. Here is a small illustration:

1. Congress decides on a tax for a cause one individual finds immoral.
2. This individual refuses to pay for the real or perceived immorality.
3. A subpoena for the individual to show up in court for defiance of the tax is delivered.
4. The individual refuses to bow to the authority of the state and does not come.
5. Men with guns, called the police, show up at the individual’s house to force the individual into compliance.
6. If this individual continues to resist, an even more overt display of violence will be forthcoming.

Using violence and coercion as a means to provide a stable currency is unethical independent of the results. Pointing guns at people to make them use a certain medium of exchange is a tactic of criminals and not of legitimate businessmen and women.

The answer does not involve returning to a gold standard and/or bimetallism. There is a third way between commodity-backed currency and fiat money through the state. It doesn’t have to be forced-at-gunpoint irredeemable paper money or forced-at-gunpoint specie. We should allow individuals the freedom of “choosing the medium of exchange that suits them best and most reliably performs the function of money.” Some people may foolishly choose to invest their wealth in fiat money, but there will always be those who follow the pied piper and his friend the snake oil salesman. Anyone with a lick of sense will refuse to accept unbacked currency for a trade, but it is the moral position to allow the individual the choice and the responsibility of making decisions for oneself.

Debate in America over the Federal Reserve has mostly been limited to tight vs. loose credit expansion. Except for a few of the more fringe politicians and economists, the existence of fiat currency and government regulation of that currency is widely accepted. Many people, especially those of a vaguely leftist persuasion, are lulled into a false sense of security by the idea of the omnibenevolent government regulating “exploitative” and “volatile” swings of free markets (which are not really all that free, despite what cable news may say) in order to protect the helpless and hapless consumer from the machinations of the cigar chomping fat cats. They mean well, but they miss the moral argument and the consequential benefits of a deregulated currency market.

Ultimately, it isn’t about how money would exist independent of government or whether money could be manipulated into economic paradise for all or how a completely free market would handle the infinitum of hard practical questions on all matters from minutiae to the universal. There exists no legitimate authority to force others to use one currency over another. To steal for political and economic purposes through an apparatus such as the Federal Reserve clearly violates both the Non-Aggression Principle and common morality. Ron Paul has said that “there can’t be a more immoral system of money than one based on a banking monopoly that can counterfeit money in secret with no oversight and protection of the people.” Negative freedom is a moral principle which is completely incompatible with monopolistic and statist monetarism. If we desire a free, ethical, and voluntaristic society, monetarism is to be stringently opposed at every turn through moral objection to coercion and theft.