Split Value Circuits
Split Value Circuits
You don't get what you're paid for, nor can you keep it all
Our March dispatch outlined a political philosophy that we (cheekily) called Libertarian Communism: a socialism with American characteristics aiming to maximize individual liberty while fostering communal ownership and control over the means of production for basic goods and necessities. The embedded contradiction in the name is designed to (hopefully) capture attention across the left- and right-wings of the American body politic, and if typical Americans indeed have short attention spans, it might even sell well—if only to a narrow segment of the population, and only for the briefest time.
(From the time generously afforded me on The Daniel Natal Show in February, it looks like that’s about an hour.)
But now that we’re back from vacation, I’m taking another look at what we’ve got in inventory, and it looks to me like we could spend a little more time on its primary selling-point: its promise to reverse the ongoing immiseration of the American public, first through the nationalization of natural resources and of the means of production in essential industries to ensure that resources are used for the citizenry’s benefit rather than for private profit, and second, through policy initiatives to develop a social market economy favoring worker-owned enterprises to enrich its working class.
Rather fittingly, however, describing how Libertarian Communism proposes to accomplish that laudable goal—of treating everyone as if their lives have value—demands we spend a little more time unpacking theories of economic value.
The labor theory of value is a fundamental concept in economics that posits the value of a good or service is determined by the amount of labor required for its production. In classical economics, the theory’s foundations lay with Adam Smith (1723–1790) and David Ricardo (1772–1823), this theory suggests that the value of a commodity is intrinsically tied to the labor inputs involved in its creation. According to this perspective, the more labor-intensive a production process, the higher the value of the resulting product. While variations and criticisms of this theory exist, particularly regarding its application under post-industrial capitalism, the labor theory of value remains influential in shaping economic thought and understanding the foundational principles of value creation in economies throughout history.
In An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), Smith articulates the labor theory of value to describe how the value of a commodity is determined by the amount of labor required for its production. He argues that the natural price of a commodity is ultimately regulated by the amount of labor needed to produce it, including the labor required to acquire the materials and to fashion the tools and machinery used in production. Smith acknowledges that other factors, such as scarcity and demand, can influence market prices in the short term, but he emphasizes the central role of labor in determining long-term value.
Smith’s ardent belief in the theory surely helps explain the critical view of landlords expressed when he observes in the eighth chapter of The Wealth of Nations’ first book that “landlords, like all other men, love to reap where they never sowed, and demand a rent even for [the land’s] natural produce”—collecting profits from economic growth performed and improvements made upon the land without contributing themselves. Smith believes that economic distortions and an unfair distribution of wealth resulted from landlords maximizing their rent—passed on to consumers at the market, since “in the price of the greater part of commodities [it] makes a third component part”—without regard to the productive potential of the land: without investing any of their own labor.
Ricardo elaborates on the labor theory of value in On the Principles of Political Economy and Taxation (1817), arguing that the value of a good derives from the socially necessary labor time required for its production, and that the price of a good tends to gravitate towards the labor embodied in it. Though this implies that goods with the same amount of labor input should theoretically exchange for each other in a free market, Ricardo also discusses how workers of some countries can produce some goods at a lower opportunity cost compared to other goods—or compared to workers in other countries—affording them a comparative advantage in that specialized sector, allowing for more efficient production and trade between nations, ultimately leading to increased overall wealth.
Though acknowledging the insights of Smith and Ricardo, critics of the labor theory of value uncovered theoretical and practical limitations to its use for price analysis, resulting in its inability to explain fluctuations in market prices over time. For this application, three seminal texts produced the subjective theory of value in what’s remembered now as the Subjectivist Revolution in the late 19th century: William Stanley Jevons’ The Theory of Political Economy (1871), which emphasized that value emerges from individuals’ subjective evaluations of usefulness rather than labor inputs; Léon Walras’ treatise Elements of Pure Economics (1874), which introduced the concept of general equilibrium theory based on subjective preferences and market interactions; and Carl Menger, whose Principles of Economics (1871) laid the foundation for the Austrian School of Economics, advocating for marginal utility theory and highlighting the role of individual preferences in determining value. Collectively, these contributions shifted the focus from labor to subjective evaluations of usefulness, and reshaping the field for generations to come.
It’s worth noting too that these weren’t the first critics of the labor theory: in fact, they follow in the footsteps of Aristotle. In his Politics, the philosopher rejected the labor theory of value, arguing instead that value derives from a good’s utility and demand— thereby distinguishing between use-value and exchange-value—and asserting that exchange-value stems from use-value as perceived through market demand.
But rather than simply carrying on the intellectual traditions of ancient Greece, the Subjectivist Revolution arose in direct response to Karl Marx (1818–1883), the godfather of the labor theory of value who raised it to maturity, whose Capital, Vol. 1 (1867) lays out the economics he developed from Smith and Ricardo. While an Aristotlean focus on utility and demand provides a useful foundation for price analysis in markets, it neglects inquiring into how modes of production change the input costs (including labor, materials, and capital investment) involved in transforming raw materials to useful products—while doing a poorer job of accounting for impact of the cost of labor on the price of goods, which challenges the notion that utility and market demand alone can adequately explain value.
To that end, Marx spends his sixth chapter introduces to the theory the “peculiar commodity” of labor-power as it’s traded under capitalism. Here, Marx explains that capitalists purchase labor-power as a commodity in the production of consumer goods to sell at their private profit—and, therefore, to convert the labor-power of workers into capital throughout the course of industrial production. In the seventh chapter he goes on to navigate the creation of exchange-value and surplus-value, further elucidating how capitalism organizes production so that labor-power yields more value than its cost for employers to retain as captured profit, before delving in the eighth chapter into the intricate relationship between labor-power, value, and the means of production as the former incorporates the latter into any new product, thereby describing how they interact to create and distribute value under capitalism. Accordingly Marx illustrates how changes in productivity and input costs affect the distribution of value between labor and means of production: more sophisticated means of production transfer more value into the product because they decrease the required labor-power.
For our purposes, the ninth chapter delivers the real goods. Here Marx describes how the capitalist’s profit represents the captured surplus-value generated by labor-power: the difference between a product’s exchange-value on the retail market and the sum of the constant and variable capital required for production. Constant capital, Marx explains, retains its value throughout the production process, while the variable capital advanced to the capitalist as labor-power adds new value to the product, which is then extracted at sale. The extraction of surplus-value, then, accounts for capital’s self-expansion. With that understanding, Marx formalizes the rate of surplus-value—the quotient of the extracted surplus-value (S) and the variable capital (V) advanced as labor-power: S/V—for measuring labor-power exploitation.
Depraved Radio Free Pizza fanatics will remember that in March we cited Caleb Maupin describing another formulation of these Marxist economics: A+B+(C1+C2)=D, where: A and B represent the production costs of manufacturing materials and transportation comprising Marx’s constant capital; C1 represents the wages paid for the variable capital advanced as labor-power; C2 represents the extracted surplus-value; and D represents the exchange-value realized as revenue at the time of a product’s sale. In Maupin’s formulation, therefore, the rate of surplus-value becomes C2/C1. But regardless of what notation one uses or the rate itself at any given time, the extraction of surplus-value leads to overproduction and the tendency of the rate of profit to fall: in societies composed not of Jefferson’s yeoman-farmers—independent agriculturalists who owned and cultivated small plots of land, embodying ideals of self-sufficiency and democratic citizenship in early American society—but composed instead of wage-workers who don’t own their own homes, this leads to periodic downturns and (as we also covered in March) inevitably generates the ongoing crisis of imperialism, with which we still live today.
Even prior to Maupin’s contribution, however, Marxist economics had entered our coverage through the analysis of Dr. Richard Wolff, whom we cited last July to help us establish the correspondence between austerity and fascism. Of course, Wolff’s career long predates Radio Free Pizza’s advent, and so he has offered many comments on the labor theory of value in particular: for example in 2019, when he debated Antony Sammeroff on whether capitalists exploit workers by expropriating their surplus value in a free market. Here Wolff affirms that capitalism inherently exploits workers because their employers paying them less value than they produce (similar in that regard to slavery and feudalism) while failing to deliver on promises of liberty and equality due to the aforementioned exploitation. Though Sammeroff contends (at ~17:29) that employment for wages is voluntary, it seems that, for Wolff, the misery of poverty means that this “voluntary” choice is one made under duress.
Sammeroff raises another counterargument that Wolff address in their 2019 debate and again in a 2021 episode of his Economic Update series. As Sammeroff pointed out, capitalists take risks, but here Wolff argues (at ~6:14) that all involved in production take risks, not just employers—and that workers take risks in relying on the company for their livelihood. For that reason, Wolff describes Marx as desiring to reveal and articulate the asymmetry in who takes risks versus who appropriates the surplus. As Wolff explains (at ~8:20), Marx did not aim to use value theory to determine prices. Rather, Marx examined how labor creates private abundance in capitalism, with one class working to produce it while another class appropriates the surplus.
Wolff returned to the subject once more in a 2022 episode to explain Marx’s perspective on the aforementioned Adam Smith’s original labor theory of value, highlighting how Smith analyzed the function of labor-value in determining prices while emphasizing again how, in contrast, Marx saw the relationship of labor-value to the commodity of labor-power and in turn to industrial overproduction, as well as the effect that privately distributing surplus-value had on society’s structure. Here Wolff draws another comparison (at ~2:50) between capitalism, feudalism, and slavery, with each system representing only the transfer of surplus-value from employees, serfs, and slaves to employers, lords, and masters, respectively. Accordingly, Wolff distinguishes Marx’s labor theory of value for its on critiquing capitalism’s worker surplus appropriated by employers, in contrast to Smith’s use of it for price analysis under varying conditions of supply and demand—and, we might add, to Ricardo’s use for the same under varying conditions of comparative advantage. Both, of course, would influence the costs of equipment and supplies, which in Marxism fall in the category of constant capital.
(Given how these costs vary in one country compared to another—as does the cost for labor-power—and how these variances represent in no small part the endowment of Ricardo’s comparative advantage that a country has in a given sector, we might complain about Marx’s terminology, but nonetheless we soldier on.)
For Wolff, the critique of capitalism in Marx reveals how fundamental the exploitation of workers is to this historical mode of production, and therefore allows us to better examine existing alternatives, or to develop some of our own. Though he doesn’t explicitly subscribe to the framework of participatory economics, Wolff’s longtime followers know how he advocates time and again for organizing workplaces as self-managed cooperatives where decisions about production, investment, and distribution are made democratically by the workers themselves, to ensure that more of those directly affected by these economics decisions have a say in how resources are allocated and utilized. In addition, Wolff speaks often of worker-owned enterprises and ESOP ownership-share compensation plans, like those we’ve discussed previously as a potential endeavor of Diaphora Co., and in our first outline of Libertarian Communism as a socialism with American characteristics.
Maupin, on the other hand, focuses more often than Wolff on the geopolitical consequences of the inequitable distribution of gains inherent to this mode of production, as he did with “Globalism = Imperialism” in March. Here he explains (at ~05:33) that, in the Marxist-Leninist framework, imperialism is not just a policy of one country invading another. Instead, imperialism represents an advanced stage of capitalism that emerged in the late 1800s, under which large banks and corporations based in Western countries dominate the global economy by extracting super profits from developing nations like India, Nigeria, Mexico, and Libya, through the export of capital, seizing control of raw materials, and creating captive markets.
However, Maupin also describes (at ~36:12) how technological advancements and the rise of countries breaking free from imperialism have left the Western capital order in crisis because imperialists can no longer provide a comfortable existence for a layer of workers in their home countries, as automation and outsourcing have eliminated many industrial jobs. Meanwhile, they face fresh competition from countries like Russia, China, and Venezuela, which have reasserted control over their economies and are experiencing economic growth.
Accordingly, Maupin argues (at ~49:09), these imperialists pursue strategies like degrowth (forcibly reducing economic activity and living standards), austerity (cutting government services and wages), and war to maintain their dominance and save their irrational system by making the working class pay for the crisis created by the their own greed. Therefore he calls (at ~56:41) for an anti-monopoly coalition—comprising both the working class and small businesses in the West along with countries resisting imperialism—to defeat the imperialists and build a society focused on growth, prosperity, and the betterment of humanity. Such a coalition would aim to rebuild domestic infrastructure and promote technological advancement and technological development, rather than the policies of degrowth and austerity that serve the interests of international bankers and corporations.
So far, we’ve seen the labor theory of value developed from its origins in Smith for price analysis to its macroeconomic application under Ricardo and, finally, to its elaboration with Marx as the source of the private profit extracted via the capitalist mode of production. But, as you might guess, especially from the debate between Wolff and Sammeroff, most libertarians reject Marx’s variation for its limitations for price analysis in retail consumer markets. Instead, they tend to favor theories from the Austrian School of Economics that sprang from Carl Menger, as mentioned above.
However! That doesn’t mean libertarians don’t see another villain out there robbing people of what’s theirs. Just as communists argue that capitalists swindle workers by extracting surplus-value through labor exploitation, libertarians posit that central banks engage in their own form of expropriation by swindling savers through monetary manipulation. (For an early on where I’m going here, refer to the mixed chants resolving into “End the Fed” during Donald Trump’s speech at the Libertarian National Convention [at ~7:09:13 in the livestream I watched yesterday].) In fact, Sammeroff himself made the point in 2016, when he traced the root cause of high living costs in the UK to central banks’ printing of money and artificially low interest rates inflate asset prices, particularly housing. Of the U.S., he notes that, since the Federal Reserve began printing U.S. dollars to lend to the country’s own government in 1914, “the dollar declined in value by 96%.”
Of course, the idea of central banks destroying the finances of common folk shouldn’t come as news to genuine Radio Free Pizza freaks: as we covered in March, the near-collapse of the British East India Company in 1772 due to a debt-induced banking crisis prompted a bailout by the British government via the Bank of England, financed through oppressive taxes on the colonies. That bailout represented the advent of central banks as lenders of last resort, and (along with other grievances) fueled the colonial anger that produced the American Revolution. Alexander Hamilton, influenced by agents from the Bank of England, played a pivotal role in establishing the first Bank of the United States—with a significant portion of its stock owned by the Bank of England—which marked a shift towards federalism and centralized economic control, signaling the end of the original American Republic established under the Articles of Confederation.
But for details on the modern Federal Reserve, we can turn to our trusted James Corbett, and his Century of Enslavement: The History of the Federal Reserve (2014). As Corbett explains, the Federal Reserve and its power to regulate the money supply didn’t originate with the need for maintaining price stability, promoting employment, or ensuring the safety and soundness of the banking system. Instead he describes (at ~09:38) its origins with a clandestine meeting in 1910 on Jekyll Island off the coast of Georgia, where a group of influential bankers and financiers, including representatives from J.P. Morgan, Rockefeller, and Kuhn Loeb, conspired to draft the Federal Reserve Act. Here Corbett includes footage (at ~11:55–14:41) of G. Edward Griffin, author of The Creature from Jekyll Island (1994), the seminal text on the subject, who describes how these financiers concocted their scheme in anticipation of impending legislation to regulate their industry and decided to lead the call for reform themselves, exploiting the public’s positive perception of the term “reform” to establish a cartel with the power of government regulation, allowing them not only to regulate their industry but also to gain the authority to issue the nation’s money supply—an unexpected and significant concession from Congress.
As we soon learn (at ~17:04), this transfer of sovereign rights from the federal government to private banks through the Federal Reserve Act was only the latest struggle between the United States and central banks. After locating the origins of central banking systems (whereby a privately owned central bank lends money to the government) with the 1694 creation of the Bank of England, which was replicated in the United States with the establishment of the Bank of North America in 1781 and later the First Bank of the United States in 1791, despite initial opposition from figures like Thomas Jefferson and James Madison. This pattern continued with the creation of the First Bank of the United States in 1791 and later the Second Bank of the United States in 1816, both privately owned institutions granted authority to loan money created out of thin air to the government. Despite President Andrew Jackson’s dismantling of the Second Bank in the 1830s, financial crises persisted, culminating in the Panic of 1907, touched off when J.P. Morgan spread false rumors about a competitor and resulting in a financial crisis that inspired the dissatisfied American public to push for the establishment of a central bank that would serve the public interest. Instead, they got the Federal Reserve.
Corbett goes on (at ~33:08) to examine the structure and governance of the Federal Reserve, highlighting the conflicts of interest inherent in its design, with private banks effectively controlling the nation’s monetary policy through the Federal Open Market Committee (FOMC). That certainly gives U.S. financial oligarchs ample opportunity to pursue their own benefit regardless of whether it serves the public, but as we soon learn from another appearance (at ~42:35–47:03) by G. Edward Griffin, swindling the citizenry is even more fundamental to this system of money creation due to fractional reserve banking. Though banks initially issued paper receipts backed by gold or silver deposits—effectively creating the first form of paper money—they realized they could issue more receipts than they had actual gold reserves since only a small percentage of depositors would request their gold at any given time, allowing them to lend out more money than they possessed and to collect interest on loans for money that didn’t previously exist. Therefore, when a larger than expected number of depositors demand their gold or silver, these bank runs lead to bank failures and financial crises.
We might add that the creation of new money resulting from fractional reserve lending can be verified with forensic accounting, as John Titus of Best Evidence explains in “Mommy, Where Does Money Come From?” dating to 2019.
Here Titus describes previous competition between the theory of banks as financial intermediaries lending pre-existing money saved in accounts versus, that of banks creating new money out of thin air when they lend. As Titus reports, many top economists believe the intermediary theory, though in fact Richard Werner disproved the lending-intermediary theory by taking out a 200,000-euro loan and tracking the changes in the bank’s balance sheet: assets and liabilities expanded by the loan amount, proving money creation from thin air. As Titus explains, disproving the myth that savings-deposits fund loans reveals the risk of concentrating the banking industry: with commercial bank loans then totaling $9.4–9.5 trillion out of a total M2 money supply of $14.4 trillion, the failure of even a single mega bank could potentially shrink that money supply by 30% overnight, triggering systemic collapse.
But whenever financial crises like that might arise, the Federal Reserve can respond as they develop—like they did in 2008, when the FOMC slashed interest rates to zero, invoked Depression-era powers to lend to a broader range of financial institutions, and launched a program of quantitative easing that issued loans on fractional reserves, with this newly created money then used to purchase bonds. As Corbett explains in Century of Enslavement (at ~57:17), these actions helped bail out some institutions to which Federal Reserve officials had professional ties.
Though it doesn’t fall within the remit of Corbett’s documentary, it’s worth mentioning for our purposes here a little more about how that quantitative easing and those bailouts were accomplished: the Federal Reserve performed both with currency held in deposit on behalf of commercial banks. Traditionally, the U.S. monetary system comprises “bank money” for daily transactions and “reserve money” held by banks at the Federal Reserve, forming a split-circuit system where commercial banks act as both issuers and users of money in separate circuits, which historically hindered the Federal Reserve from directly expanding the money supply. By buying assets, a central bank increases the reserves of commercial banks and therefore provides them with more liquidity to lend in the interest of promoting spending and economic recovery.
That, of course, served to redistribute more wealth toward the rich while eroding the purchasing power of the U.S. dollar due to their expansion of the money supply. Again, however, the inflation these central banks stoke doesn’t just stem from “open market operations” like those bailouts, or from programs of quantitative easing, but instead as a direct result of fractional reserve banking—of, in other words, the private lending industry itself.
As we’ve seen, the tensions between individual freedom and economic equality have long been centerpieces of political and economic discourse. While communists contend that capitalists exploit the labor of workers by paying them less than the value they produce, leading to the accumulation of surplus-value for capitalist profit, libertarians argue that central banks exploit savers by devaluing currency through inflationary practices, thereby eroding the purchasing power of savings and transferring wealth first in the form of credit to borrowers and then as currency back to commercial banks themselves.
Here at Radio Free Pizza, we contend that both are true. Accordingly, redressing the ongoing immiseration of the working class under capitalism demands that we develop both a mode of production and a banking system that ensures equitable distribution of economic development across society, instead of restricting its benefits to the wealthy elite. Because, as G. Edward Griffin tells us in Corbett’s Century of Enslavement (at ~1:01:50–1:02:46), doing anything less means sacrificing not just personal prosperity, but individual liberty:
After a person has all the money in the world that you could possibly use to buy anything you want, what’s left to capture your imagination? And the answer, of course, is power: power over people. Now, money is power over people, but there’s another power over people as well […] the political power, the social power. And I think this has now become the dominant driving force of these people. They’ve already got the money […] Now they’re striving for this New World Order […] They want all of the world into one political unit, which they dominate not only with money, but with military and psychological means and education and media and propaganda. They want total control over every human on the planet. And by golly, they’re moving pretty rapidly in that direction.
We need not only take Griffin’s word on it. As we learn too from the same documentary (at ~1:03:55–1:04:38), the late Carroll Quigley—historian at Georgetown University and mentor to Bill Clinton—wrote similarly about the aims of central banking in his Tragedy & Hope: A History of the World in Our Time (1966):
The powers of financial capitalism had a far-reaching aim, nothing less than to create a world system of financial control in private hands, able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank, owned and controlled by the world’s central banks, which were themselves private corporations.
(Longtime readers will recognize the Bank for International Settlements from previous dispatches, in September of last year and in February of this one, describing how the institution—nominally established to promote monetary and financial stability among central banks—enjoys a unique legal status exempting it from taxes and protecting its assets from seizure as it facilitated foreign capital flows into German corporations such as IG Farben and Volkswagen, funding Nazi Germany’s militarization before and during World War II, and even transferring Czechoslovak gold to the Reichsbank following Hitler’s invasion of Czechoslovakia.)
As Quigley’s full text continues, “Each central bank […] sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence co-operative politicians by subsequent economic rewards in the business world.” Accordingly, we see that private central banking constitutes a fundamental pillar propping up dictatorships of capital across the globe, subverting not just the fiscal sovereignty of nations but, through the manipulation of their executives and legislators, even the foundations of their republican governments.
Corbett presents (at ~1:09:32–1:18:41) alternative proposals for monetary reform, such as state-owned banks, decentralized cryptocurrencies like Bitcoin, and community-based currencies, and concludes by emphasizing the importance of understanding the true nature of the monetary system and the need for an informed and engaged population to work towards viable alternatives and dismantle the current system controlled by the banking oligarchy.
It’s interesting that Corbett includes state-owned banks among those alternative proposals, knowing that he identifies as an anarchist. Surely he’s just trying to offer the broadest range of viable alternatives, and therefore sketches a potential return to a debt-free U.S. monetary system with state-run banks issuing the currency. To that end he includes a clip from his conversation with Ellen Brown from Oct 2011 for GlobalResearchTV of the Center for Global Research, in which she describes (at ~28:44–32:12 in their original interview) a public banking system, with state-owned banks providing liquidity to local banks for lending to small businesses and individuals—which commercial banks then had no interest in facilitating—while pointing to the Bank of North Dakota for inspiration:
We’ve had two banking systems ever since the 1860s, with the state bank system and the federal bank system. And the federal bank system are the big Wall Street banks, particularly. They dominate the federal system. So they’re taking over right now […] we don’t even have any local banks where I am […] They've been taken over. [But] it’s the local banks that have an interest in serving the local business. The big banks have no interest in making loans to local business. It’s too risky: why should they bother? So a state bank partnering with the local banks […] can help them with capital. In North Dakota, the state bank guarantees the loans of the local banks, allowing them to make much bigger loans than they could otherwise. The state bank provides liquidity to the small banks. That’s why the local banks [outside of North Dakota] aren’t making loans to small business right now: because they don’t know that they can get money from the other banks as needed. The way banking works is they make the loan first. I mean, if you have credit lines to many different businesses, and if they all hit up their credit lines at once, you are going to run out of money. So you don’t dare do that unless you know that you can get short-term loans from the other banks. And so what’s happening right now, even though there’s $1.6 trillion is excess reserves sitting on the books of the big banks, they’re not available to the little banks […] because the Fed is paying 0.25% interest on those reserves. So the banks have no incentive to lend them to the little banks. Why let go of them when you can make just as much keeping them and then you still have your reserves and you can use them as collateral to buy bonds or something that’ll make you more money?
The capacity of public banks to support local economic development—by helping local banks lend to businesses, farmers, and students (often at lower interest rates than commercial banks) and reinvesting profits into the community—certainly makes it an attractive alternative. Some might answer, however, that central banks have broader macroeconomic responsibilities—regulating the national money supply, controlling inflation, setting interest rates, and serving as a lender of last resort to commercial banks—which public banks, operating at a local level to directly benefit regional communities, aren’t designed to bear. Nonetheless, in our project to outlining potential economic policies of Libertarian Communism, it shouldn’t escape our attention that Corbett’s documentary might present the possibility of replacing the Federal Reserve with a public bank, since calls to do so would echo (however distantly) a tune of Vladimir Lenin’s.
For those unaware, Lenin advocated for nationalizing the banking industry under socialism. The third chapter of Imperialism, the Highest Stage of Capitalism (1917) presents his reasons for it, explaining how finance capital (capital controlled by banks and used by industrialists) promotes a concentration of production and capital that leads to the formation of monopolies and to a financial oligarchy wherein a few powerful financial entities dominate the economy. He criticizes other scholars for ignoring the true mechanisms and consequences of this financial oligarchy, which uses the “holding system” (the exercise of majority control in a parent company to direct subsidiaries) to control vast production areas with small investments while evading legal responsibilities. Lenin argues that finance capital—marked by the dominance of financial oligarchs and the separation between capital ownership and production—produces imperialism, which represents the highest stage of capitalism.
Accordingly, Lenin criticized private central banks for perpetuating the exploitation of the working class and for concentrating wealth and power in the hands of a few capitalists, facilitating the capitalist ruling class’s command over economy. In The State and Revolution (1917) , he discusses the role of the state in managing the economy and criticizes the power that banking interests exercise over state policy in capitalist republics. Nationalizing banks and turning them into public institutions, Lenin argues, can help dismantle the capitalist system and facilitate the transition to socialism, and so he advocates for the proletariat to seize these banks and integrate them into a single one, allowing them to exercise control over the economy and ensure that financial resources are used for the benefit of the majority, rather than for private profit.
Lenin calls again for the nationalization of banks In “Can the Bolsheviks Retain State Power?” (1917), which he considers a critical step towards establishing socialism, breaking the power of capital and enabling the state to control economic activity effectively, emphasizing that a unified state bank would facilitate the distribution of resources according to socialist principles. In “The Impending Catastrophe and How to Combat It” (1917), Lenin dismisses arguments against nationalization as deceptive or ignorant and outlines the technical simplicity of the process, which involves amalgamating banks into a single state entity without confiscating private property. Meanwhile, nationalization would offer the socialist state real control over banking operations, economic regulation, and tax collection, with benefits including easier access to credit for small owners, increased transparency, and state control over monetary operations.
Of course, nothing Lenin prescribed sounds at all libertarian—and, once again, we’d surely do Corbett and other anarchists a disservice if we allowed any implication that he advocated a similar prescription, and we shouldn’t do that either to any of their adjacent libertarians.
Indeed, recalling Corbett once used the phrase “socialist claptrap” to describe the politics espoused by one of his own sources, I searched his website for the term and in the results came across his July 2022 newsletter (though the term didn’t appear there), in which he presents Ludwig von Mises’ Economic Calculation in the Socialist Commonwealth (1920) as supplying proof that “the centralization of all authority and decision-making in society (i.e., the technocratic ideal) is not just a bad idea but an actual impossibility.”
Perhaps the Bolsheviks even read the treatise themselves before introducing the New Economic Policy (NEP) for the Soviet Union in March 1921, in response to the widespread devastation, economic crisis, and social unrest that had arisen following the Russian Civil War and the policies of War Communism, with the aim of reviving the Soviet economy by incorporating limited market-oriented reforms.
The NEP allowed for the reintroduction of small-scale private enterprises in agriculture, trade, and industry. While major industries, banks, and foreign trade remained under state control, smaller businesses and industries could be privately owned and operated. The policy of grain requisitioning was replaced with a tax in kind (a fixed percentage of their production)—which was less burdensome and incentivized greater production—and peasants were permitted to sell their surplus produce on the open market. The NEP also included reforms to stabilize the currency and revive the financial system. This helped to facilitate trade and investment.
The NEP led to a rapid recovery in agricultural production as peasants responded positively to the new incentives and agricultural output reached pre-World War I levels by the mid-1920s. Small and medium-sized enterprises began to flourish, contributing to the overall economic revival, state-owned enterprises also benefited from more efficient management and the reintroduction of market mechanisms. As a pragmatic response to the dire economic and social conditions facing the Soviet Union in the early 1920s, the NEP successfully stabilized the economy and alleviated widespread hardship, laying the foundation for future industrialization efforts.
But regardless of whether the Bolsheviks took any inspiration from it, libertarian economics—as a school of thought rooted in principles of free markets and property rights—naturally advocates for minimal government interference in the economy, allowing supply and demand to determine prices and production, so that resources can be allocated most efficiently by and for private gain, which serves as a measure of economic growth.
(As an aside, I believe it’s worth noting that among the most prominent libertarian economists stands Milton Friedman of “the Chicago Boys” who appeared in a Radio Free Pizza dispatch last year as an example of neoliberal economists whom we called “technocratic” for how their economic prescriptions over the policies of the Pinochet regime represented the prerogative of the globalist capital order.)
Libertarians argue that when individuals are free to trade as they choose, in voluntary transactions between consenting parties, it leads to mutual benefit and wealth creation—an interpersonal version of Ricardo’s comparative advantage—which fosters greater innovation. Additionally, libertarians support low taxes, viewing taxes themselves as a form of coercion that infringes on personal freedom and hampers economic activity. Minimal taxes should support a small government with a role limited to protecting individual rights (with an emphasis on property rights), enforcing contracts, and ensuring national defense.
In our view here at Radio Free Pizza, when these libertarian economists talk about free trade between individuals, they seem to have in mind the economics of a community of Jefferson’s yeoman-farmers. That is to say, their analysis doesn’t reach so far as to consider a society in which the wage-earning proletariat—those from whom the capitalist mode of production extracts surplus-value, and who therefore can’t ever purchase the inventory of products at market—represents too great a percentage of the total population, after which point capitalism’s trademark overproduction leads to poverty amidst plenty.
Some might say we’re being more charitable to libertarians here than Tucker Carlson was on System Update last December when he described it to Glenn Greenwald (at ~39:42–40:01) as a “now demonstrable fact” that “libertarian economics was a scam perpetrated by the beneficiaries of the economic system that they were defending. So they created this whole intellectual framework to justify the private-equity culture that’s hollowed out the country”—to justify imperialism, in other words, and to sell its ideology as both to the masses. In Carlson’s view, the proliferation of dollar stores throughout the country is a clear indication that libertarian economics have failed to improve the lives of ordinary people.
That, of course, elicited backlash from libertarians who typically support his foreign policy views, though a response from Tho Bishop on the libertarian Mises Wire acknowledged how policies like quantitative easing have harmed middle- and low-income consumers, exemplified by the rise of dollar stores. In his view, Carlson’s critique highlights a perceived disconnect between libertarian principles and the actions of some policy organizations, particularly in Washington—which he views as overly supportive of big business and indifferent to the consequences of monetary policy—and further underscores the need for a nuanced examination of economic policies and their impact on average Americans.
Regardless, as a socialism with American characteristics, our Libertarian Communism supports a social market economy, and can surely accommodate some principles of libertarian economics in its market sector. Indeed, it seems to me that this sector will only prove all the more innovative if the U.S. government—or, I suppose, its imagined successor, the United People’s Commonwealths of America (UPCA), in the event of its collapse—nationalized the private central bank of the Federal Reserve and replaced it with a state-owned central bank mandated to implement monetary policy that supported worker-owned enterprises with ESOP ownership-share compensation plans. The UPCA might also consider libertarian support for sound money principles, such as returning to the gold standard or another form of commodity-backed currency (even one on a Bitcoin standard, I suppose, if it can accomplish the job) to prevent inflation and ensure monetary stability, in administering the nationalized replacement for the U.S.’s central banking system.
Comparing libertarian attitudes toward central banks and Lenin’s stance on private banking reveals a common critique of centralized control of monetary policy in the hands of a financial oligarchy, despite their vastly different ideological foundations. Libertarians, like communists, identify private central banks as agents of economic manipulation and exploitation. Libertarians argue that these institutions undermine individual freedom and prosperity by devaluing currency and inflating asset prices, enriching the financial elite at the expense of savers and the broader public. Lenin, on the other hand, viewed private central banks as pillars of capitalist oppression, consolidating wealth and power in the hands of a few while facilitating the exploitation of the working class.
Communists hold that capitalist oppression arises first from the surplus-value extracted from the labor of wage-workers as private profits. The bourgeois owners of the means of production then deposit their profits into the commercial banking system, within which that surplus-value withheld from the workers goes on to immiserate the population at large through its deployment in fractional reserve lending, such that even Jefferson’s yeoman-farmers will soon enough find themselves alienated from their own purchasing power just through their currency’s depreciation.
Accordingly, adapting what we learned above about the Federal Reserve’s split-circuit system, we might say now that the capitalist wage system and the imperialist banking system both represent distinct circuits through which economic value passes in different modes—that is, in their work’s labor-value and their money’s exchange-value, respectively—to split wealth away not just from people who worked for it but even from those who only hold it.
All together, the discourse surrounding economic systems, particularly in the context of Libertarian Communism, reveals a complex interplay of theories and historical perspectives. From the labor theory of value as expounded by economists like Adam Smith, David Ricardo, Karl Marx, and Richard Wolff, on through to Lenin’s trailblazing of imperialism as a theory of geopolitical economy, the analysis of economic exploitation and the role of central banks in shaping societal structures remains a central theme.
The tension between individual liberty and economic equality underscores much of the debate, with communists highlighting the exploitation of labor by capitalists and libertarians pointing to the manipulation of currency and wealth by central banks. The call for equitable distribution of economic development and resources echoes across these discussions, whether through the establishment of worker-owned enterprises advocated by Wolff or the nationalization of banks proposed by Lenin.
While libertarians advocate for minimal government intervention and a return to sound money principles to curb inflation and maintain economic stability, Lenin called for the nationalization of banks to dismantle capitalist control and redistribute resources according to socialist principles. Despite their obvious contradictions, both perspectives highlight the profound impact of financial institutions on societal power dynamics and economic outcomes, emphasizing the need for reform to achieve a more equitable distribution of economic growth.
At Radio Free Pizza, we accordingly recognize the validity in both critiques. Addressing the ongoing immiseration of the working class requires both a mode of production and a banking system that ensures equitable economic development. By combining elements of libertarian and socialist thought, we can envision a future where the benefits of economic growth are not restricted to the wealthy elite but are shared broadly across society. This approach would protect personal prosperity and individual liberty, aligning with the broader goals of Libertarian Communism to foster a social-market economy that promotes innovation and equity.
In the end, exploring economic theories and historical realities leads to a recognition of the need for informed and engaged populations to challenge existing systems and work towards viable alternatives. While communists speak often of the exploitation inherent in capitalist labor relations, and libertarians often emphasize the importance of abolishing central banks and eliminating the influence of a private banking cartel over monetary policy, these adversarial schools of economics might try for a moment to look past their disagreements about how to explain discrepancies between wages and commodity prices to instead consider alternative political philosophies (like Libertarian Communism) through which they might build support across ideological lines for implementing transformative solutions to replace any mechanisms currently immiserating the masses.