In an Individualist Mutualist market economy of Josiah Warren, Benjamin Tucker, or Stephen Pearl Andrews employers can indeed pay themselves more money than their employees for equal time worked. However, even though they can pay themselves more money than their employees for equal time worked they are still Mutualists and not Capitalists. Why is this?
This is because it is not necessarily wages as such which determines if a market is capitalist or not but if the employees are paid enough to generally to repurchase the value of their labor on the market and if the employer actually does work in the business they own. In other words Capitalism is a market system with a subjective theory of value which does not in general factor into account actual labor time and productivity into the prices of wage labor or products, so that the employees are generally not paid the full value of their labor. In a Mutualist market system or socialist market system, the employees would be paid enough to repurchase the value they produce on the market and so receive the full value of their labor. (It should be noted that the only way for the employees to have their full value reflected on the market is when there is equality of opportunity on the market. This is not possible under capitalism because workers are forced to accept low wages to survive. See Tuckers State Socialism and Anarchism.)[i]
So markets do not equate Capitalism and markets can exist in both Capitalist subjective theory of value markets (which do not factor actual labor into the wages of laborers or the price of their products) or in a Mutualist labor theory of value (which does indeed factor actual labor into the price of wage labor and products).
So when employees are paid enough to repurchase the general value they created on the market there is no economic exploitation (economic exploitation is also called surplus value). Thus, the employers are no longer capitalists due to the employer no longer being exploitive by extracting surplus value from the employees. Hence the employer becomes a worker whose wage as an employer is subject to the going rate on the market in their particular industry just like the employees. Therefore employers can indeed pay themselves more money than their employees for equal time worked if the current wage rate on the Mutualist market is determined so. The employer must actually work to earn a wage, they cannot simply own the business without doing any work. If they simply own the business without working and receive income from the business they are again extracting surplus value and would become capitalists. Surplus value means earning an income without working for it in a business.[ii]
It is important to note that the Individualist Anarchist Market Mutualism of Tucker, Warren, and Andrews, and in fact any market socialist economy that is based on the labor theory of value, must have equality of opportunity on the market.
In a capitalist economy the average going rate of a job on the market is distorted because workers are forced to accept lower wages just to survive. If the workers had the option to go into business for themselves with relative ease, most workers would not accept employers who offer low wages. Therefore wages would go up as employers would offer more to entice workers to work for them rather than the workers going into business for themselves. This way workers would be in position to dictate their own wages and the wages would reflect the true value of their occupation on the market. Employers that pay their workers less than that general value on the market for that occupation would be exploiting the worker.
The Libertarian Individualist Market Socialism (sometimes also called Individualist Mutualism) of Tucker and others made it a point to have equality of opportunity on the market. Otherwise exploit-ation on the market would still exist, as stated in the comparison between a capitalist market and individualist mutualist market mentioned above.
Tucker’s aim was to eliminate usury which is the result of unequal markets based on the subjective theory of value of Capitalism.
This usury consisted of three main forms: profit, interest, and rent which are considered forms of unearned income in the labor theory of value of Mutualism and Market Socialism.[iii]
When Tucker spoke of profits he did not mean the simple act of making money from a sale of products. Tucker meant Capitalist exploitive profits through the employer extracting surplus value from the employees. An example of this kind of profit is as follows:
In a capitalist economy the average going rate of a job on the market is distorted because workers are forced to accept lower wages just to survive. The money value that would have been the workers income if they were paid their full market value is the surplus value now pocketed by the employer. The actual value cannot be determined on a capitalist market however because workers are accepting wages just to survive. In a market where the workers’ needs are already met with equality of opportunity on the market, they can then be in a position to dictate their wages and the wages would then reflect their entire value.
The employers must actually work to receive a wage. Simply owning a business and not doing any work as an employer and making money from their employees would be another form of surplus value and exploitation. So the employer must actually work in the business they own to receive their wages in a non-exploitive manner. Of course employers do not only pay themselves wages but they also receive money from the income of the company to cover costs of running the business and overhead costs.[iv]
Non-Capitalist Profit in a very general sense is where surplus value is not made. In other words, the money left over for the employer, after the they have paid the overhead costs of running the business and have paid their employees the total general value they produced on the market at the time, is their wage. Such non-exploitive profit is considered good by the Individualist Mutualists and is a normal part of how an individualist market mutualist business operates and how the market mutualist economy functions in the Individualist Libertarian Market Socialism of Tucker, Warren, and Andrews, etc, etc.[v]
A fair market would be achieved, according to Tucker, through Mutual Banks offering cheap credit at interest less than 1 percent, which would cover only the cost of running the business of the mutual bank, ie, overhead costs, wages, etc. Therefore anyone in good standing could go into business for themselves and therefore would not offer to work for an employer that would pay them a wage less than the value they produce on the market.[vi]
Tucker opposed rent because people who do not have land or must pay for land are impoverished as a result of the land monopoly. Because people must pay others to live on the land—if they can afford it—they are more likely to spend much of their time just trying to survive, and are therefore more likely to settle for wages less than the full value of their labor on the market simply to survive and pay their basic needs in order to live. With free land or ‘occupancy and use’ as Tucker stated, land would become much easier to access and poverty would be greatly reduced.[vii]
How exactly can an individualist anarchist business model with employers and employees be applied to today’s economy?
The mutualist business can be run in the Individualist Anarchist way by having everyone in the company (both employers and employees) vote on the wages of both the employees and the employers. The jobs within the company that are the most stressful mentally or physically would be paid the most. This is the Labor Theory of Value or the ‘Cost Principle’ (which includes the mental and physical stress) of the theory of Josiah Warren.[viii]
If a business is doing poorly for whatever reason and pay cuts are needed, everyone in the company would vote on how much to cut pay. The only difference between the individualist model with employers and co-ops (ie, Proudhon) is that in the Individualist anarchist model the employers are not voted in or out like in the model of Proudhon. In either model there is no surplus value because the wage is decided by how difficult the work is and only people who work (add value) are paid. The employees, being the majority in the company, decide their wages themselves through voting (rather than letting the market do it with equality of opportunity on the market if they were in an individualist anarchist market). And by both the employer and employees voting on wages and by both actually doing the work they are being paid for, they have equality of opportunity to decide their whole wages depending on the physical and mental intensity of their work, thus receiving their entire product.*
*It is my opinion that the Individualist Anarchist JK Ingalls had the correct idea in his belief that land should be of the utmost importance along with eliminating the exploitation of labor. When people have their basic needs met through free land and shelter (and in my opinion society should give free food staples, electricity and other basics), survival needs are already taken care of. If these needs are not taken care of people will tend to settle for wages that pay them less than the value of their labor because they need to pay for basics like food, shelter, etc, just to live. The market would no longer have equality of opportunity and hence usury would flourish. Once all their survival needs are met the market becomes one of equality of opportunity, and naturally the prices on the market would reflect the full value of their labor because people would not settle for working with employers who pay them less than the value of their labor. For more information on JK Ingalls see the book Men Against the State by Martin. Non-exploitive landlords who rent can exist in an Individualist Mutualist Society based on the cost principle. Within Capitalism tenants pay for a lodging based on how popular or how useful the house or place is. However, in an Individualist Mutualist society based on the cost principle the price of the rent factors in only the wear and tear of maintaining the house or place and the cost of insurance and the labor of the landlord in maintaining the house or place. Warren states: Within Capitalism and the subjective theory of value: “Rents of land, buildings, etc., especially in cities, are based chiefly on the value to the occupants, and this depends on the degree of want or distress felt by the landless and houseless; the greater the distress, the higher the value and the price.” Within the Individualist Mutualist society: “The equitable rent of either would be the wear, insurance, etc., and the labor of making contracts and receiving the rents, all of which are different items of cost.” Warren, Josiah. Equitable Commerce, p 46. By ‘cost’ Warren means that the physical and mental labor as well as the material costs, according to the average going rates on the market, are all factored into price.
[i] Tucker, Benjamin. Instead of a Book. Forgotten Books. 2012. Also please see: Marx, Karl. Capital Volume One. Penguin Classics. 1990. Kropotkin states: “…the capitalists to appropriate for themselves a quite disproportionate share of the yearly accumulated surplus of production…” Kropotkin, Peter., Anarchism (1910) Encyclopedia Britannica. And Alexander Berkman The Individualists and Mutualists maintain that liberty means “the right of every one to the product of his toil” Berkman, Alexander. The ABC of Anarchism. New York. Vanguard Press. 1929. Chapter 23 Non-Communist Anarchists. For Capitalism and the subjective theory of value please see: Marshall, Alfred. Principles of Economics. The Macmillan Company, London. 1930.
[ii] Tucker, Benjamin. Instead of a Book. Forgotten Books. 2012. Please also see: Marx, Karl. Capital Volumes 1 and 2.
[v] “…it will make no difference whether men work for themselves, or are employed, or employ others. In any case they can get nothing but that wage for their labor…” Tucker, Benjamin. Instead of a Book: By a Man Too Busy to Write One. New York: Gordon Press. (1972) pp 5 and pp 475. Andrews, Stephen. Science of Society. Leopold Classic Library. USA (2016) pp 233.
[vi] Please see: State Socialism and Anarchism by Benjamin Tucker.
[viii] Warren, Josiah. Equitable Commerce. ULAN Press. USA (2017) p 46.