Equitable Commerce

"Cost the Limit of Price as 'manifested through the exchange of labor notes, would draw people together in a reciprocating society that would in turn organically develop into something that closely resembled the ideals of socialism: worker ownership, nonexploitative labor, the absence of wealthy overlords.' :3722""'Yet it still seems to me that of all the American utopianists, only Josiah Warren found a scheme to balance absolute liberty for the individual with absolute fairness--justice if you will--for the community. Warren's two principles of equitable commerce both protected individual freedom and kept the individual from being exploited by larger economic forces. In a capitalist economy, the absence of the cost principle is what robs men of their liberty and makes them wage slaves. The second principle must therefore exist to protect the first. That was the genius of Warren's particular version of utopian anarchy.' :3836"

"Man seeks freedom as the magnet seeks the pole or water its level, and society can have no peace until every member is really free." :380-381

One Cincinnati wholesaler told Warren during the Cincinnati Time Store Days, "You and I may not live to see it, but the time will come when all the business of the world will be conducted on these principles." :469-470

On the system of apprenticeship, ubiquitous at that time, Warren wrote, "'It is painful to witness the great number of application for employment which the demand does not call for, and when we tell the applicants that they can turn their attention to work that is in demand they reply that they cannot learn a new business without long and costly apprenticeship, that otherwise nobody will teach them their secrets of arts and trades. It therefore becomes necessary to disprove the need for long apprenticeships and throw open the secrets of trades so that they can be obtained on equitable terms.' :474-484"

Cost is the Limit of Price
Warren believed that price should be determined by the cost of production (in time, exertion, and materials), not by the value to the buyer. :2165 As described by a biographer of Warren's, "'A man dying of thirst, after all, will give everything he owns for a glass of water-- that is its value to him at the moment-- but only a scoundrel would charge or accept such a price. Yet this logic that value should determine price is, to varying degrees, the basis of modern capitalism. What's more, if life's basic necessities become too plentiful for the capitalist to make a profit, he can destroy tons of grain and corn simply to drive the price back up.' :2165"By creating artificial scarcity, Warren blamed the rich for keeping the poor in poverty while keeping themselves unjustly wealthy. :2165Warren agreed with the capitalists that "Everyone had a right to his own property and pursuit of happiness... but no one had the right to manipulate and abuse a currency to keep someone else poor." :2184Warren believed that "the central injustice out of which all other social injustices multiplied involved the question of labor and hte historical mistreatment of laborers by the moneyed and propertied classes." :2165He wanted to remove "the profit motive, and thus the abuse motive, out of the game." :2184

"By Cost he meant the sacrifices involved, which time alone could not measure, and the price, therefore, should never exceed the cost thus determined." :524

In his New-York Tribune review of Equitable Commerce Brook Farm founder George Ripley said that while the case for the sovereignty of the individual was never pleaded "more admirably,", he criticized the principle of "cost the limit of price" as a direct contradiction to "the individual's right to do as he or she pleases. 'Could there be a more flagrant violation of Sovereignty of the Individual?' Ripley asked." :3722Stephen Pearl Andrews answered in defense that Cost the Limit of Price was not a "compulsory law of equitable commerce, but rather a principle on which the citizens of an equity village voluntarily agreed to act. As such..it did not violate an individual's sovereignty." :3722

The Failures of Monetary Currency
The labor note was Warren's answer to inequality and greed. This was a currency that could finally bring demand and supply into balance. A federal currency system could never achieve such a feat "as long as financiers upset that ratio by treating money itself as a commodity to be traded, manipulated, and abused." He declared that money should have only one purpose: "that of standing in the place of the thing represented." :2184Warren's labor notes would then be representations of the time and effort that went into producing a good or rendering a service. It would be immune to the abuses of speculators or financiers, and would, finally, Warren believed, be a fair system of currency. :2184

Additionally, he shared the view of Aristotle that the "trade of the petty usurer is hated with the most reason: it makes a profit from currency itself, instead of making it from the process which currency was meant to serve." :2256Indeed at one point during his Cincinnati Equity Store experiment Warren loaned a man about to loose his home thirteen dollars for rent. Two weeks later the man returned with his repayment and said "Your loan saved my family from so much distress that I will gladly pay you any premium you choose to ask." To which Warren answered, "You are a stranger to the principles upon which business is done here." The man cried "But I can never feel myself absolved from obligation to you at any price. Take whatever you please ; I shall not question it." :503Warren replied,"' I see that your friend has not informed you of the peculiar operation of our principles as applied to lending money. The compensation, or interest, has no reference to the benefit conferred upon the borrower, but is based entirely on the cost to the lender. I employed about five minutes in lending the money and shall employ about the same time in receiving it back. It was secured and there was no risk or loss. You have only to compensate me for my labor. If you could give me an equivalent in your own labor, that would make it all right, but as you cannot do so, I will accept from you instead seven cents in money.' :514"And when even that did not silence the deeply grateful man, said Warren, "I perfectly understand you: I am to be properly paid, and shall be with the seven cents. Don't you think I ought to be satisfied with fifty cents an hour for my labor in lending money when the hardest working man gets only fifty cents for a whole day's labor?" :514 The Panic of 1857 further proved the correctness of his theories according to Warren, who believed that it had been caused by too many foreign imports and not enough domestic self-sufficiency. "'A money that will not circulate beyond its own neighborhood is the true and legitimate remedy for these evils, while, at the same time, it would shape foreign commerce into an exchange of products, mutually beneficial to the nations concerned.' 3782"It would be a hundred years before others, such as Jane Jacobs, EF Schumacher, and Wendell Berry, would again start writing publicly of the importance of the local economy. 3782

The Labor Note
In an 1820 plan to "ease the industrial woes of Ireland," Robert Owen was the first to propose the use of labor notes, though it was never put into practice until Warren.

Warren saw the Labor Note as the key to erasing class hierarchy. "Wealth would constitute only what a man or woman could offer others in the form of skill or labor." In this system, the "most disagreeable work (say, collecting the garbage) would b e the most lucrative because so few would want to do it. The entire class system would be reversed." 2201

With the use of Labor Notes, Warren believed the price of goods would be self-regulating since,"'after all, no one would pay 50 hours of labor notes for a pair of shoes when another cobbler in the village could supply shoes of equal value for 30 hours of notes. Thus Warren's communities would operate according to the supposed efficiencies of capitalism without the motive of avarice. Quality would regulate demand. Also, because there would exist no profit motive, no one would be hocking shoddy goods to cut costs.' 2483"Combining the labor note and the idea of "cost is the limit of price" would, Warren claimed, "strike at the root of all political, commercial, and financial corruption, and contribute largely to establish equity, security, liberty, equality, peace and abundance, wherever it shall be introduced." 2201 In Utopia Drive, Erik Reese reported,"'A labor note might read something to the effect of DUE TO JOSIAH WARREN--THIRTY MINUTES OF CARPENTER'S WORK, OR FIVE POUNDS OF CORN. That is to say, the notes were backed not by gold or any federal currency but, rather, by something almost everyone needed and everyone in the Midwest could grow: corn.' 2220"The first labor notes were printed on onionskin paper and approximately the size of a dollar bill. "'On the left side stood a crude image of blindfolded Justice holding her scales below the motto COST THE LIMIT OF PRICE. Down the right margin of the bill ran the words LABOR FOR LABOR. They later evolved into 'handsomely engraved artifacts,' with the additional messages of THE MOST DISAGREEABLE LABOR IS ENTITLED TO THE HIGHEST COMPENSATION and TIME IS WEALTH. 2220"An example of the Labor Note in practice at the Modern Times community, "Two women who needed washing and sewing, respectively, from each other could agree--this actually happened--that washing was the harder job and deserved a larger payment in labor notes." 3704

Warren, writing in his diary during his Cincinnati Time Store days, wrote,"'It has often been asked, What will induce lawyers, physicians, and other professional men to exchange equally with the now underpaid labor ? Different motives may govern different people to do so, and a respect for individuality teaches me to leave the explanation of motives with each one concerned; but the fact is that we can at any time have the services of a lawyer upon this principle, whom we should prefer to all others that we know on account of his long experience and his unconquerable integrity ; and I have on hand at this moment (Nov. 28, 1828), the labor notes of three physicians promising their attendance on this principle, at least two of whom, for skill and experience, would be preferred to any others within our knowledge.' :452"

The Cincinnati Time Store
In 1827 Josiah Warren "took out a 99 year lease on 8 blocks of prime real estate in the heart of Cincinnati." On May 18th, at the corner of Fifth and Elm, he opened what he called an "Equity Store" and what has since been called "the first scientific experiment in cooperative economy in modern history." :2220He may have also leased the land earlier, during his first residency in Cincinnati. According to one biographer, Warren had also built several brick houses on the property, including one in which he lived in for several years. 534

The purpose of the Equity Store, soon dubbed the Time Store by locals thanks to a large clock on which Warren kept track of his time with each customer, was to operate on the principle of labor for labor. Warren saw his position as one of an "ordinary storekeeper," except he would "set and regulate his prices by an equitable principle instead of having no principle." :2221,2238

Having found a wholesaler who allowed him to take whatever he wanted for inventory and pay for it once the goods were sold, Warren was able to price his groceries and some of the dry goods at-cost, with only a small fee added to pay for the heating and lighting of the shop. Warren himself would make no money from his job as shopkeeper-- instead, he would earn labor notes. :2220The fee, to cover "freight, shrinkage, rent, etc.," was "usually about 4 cents on the dollar." "'Warren mounted on one wall a clock that he reset whenever he began helping a customer. However long that took was the cost the customer owed Warren in exchange for some reciprocal labor. The actual goods were paid for in cash, but Warren's time was compensated with a labor note so as to 'emancipate our supplies as well as ourselves from the tyranny of common money.' :2220"This lead to some amusing situations like when one "rustic in a hurry, without pausing even to take breath, cried, 'I want a barrel of your mackerel here is the money and there is a cent for your time you need not come out I know where they are good-by." :474

If a customer could not provide a service that Warren needed, Warren would set a 'labor price' on a staple like coffee. The customer would then purchase the coffee with money--which Warren would immediately buy back from the customer with a labor note (i.e. an hour of labor for the pound of coffee). 2238

At first, there were few customers. For several days he had none at all, and by the end of the first week he had barely made five dollars. But after having his brother and a few skeptical friends give his new grocery a try, word spread quickly. Soon, a nearby merchant whose business had been devastated by the sudden popularity of the Time Store, approached Warren, asking how he, too, may turn his shop into a Time Store. "Both Time stores were so well patronized that the innovation affected the retail trade all over the city." :441

After a few months business, Warren was able to expand the Store's inventory with things he was able to purchase at auction, in particular, medicines. Warren told of an elderly woman who bought her medicines from him, "'The medicines, bought in the common way, would have cost her sixty-eight cents; they now cost here seventeen cents and five minutes of her needle work, given her note for the work. She saved the wages of about two days labor in this little transaction of about five minutes.' :2238"The Time Store also was used as a hub of local barter."'A report of the demand was posted up each morning, showing at all times what goods would be received. The depositor, when his goods were accepted, was at liberty to take in exchange other goods to an equal amount from the store or to take Warren's labor notes instead.' :413""'The plan of accepting from depositors for sale in the store only such goods as were known to be then in demand prevented a glut in any line, and avoided the mistake which, a few years later, was largely responsible for the collapse, after a brief existence, of Robert Owen's Labor Exchange in London.' :413-424""'And as these labor notes were expressed in hours and not in dollars, it was found advisable to keep exhibited for the information of traders a list which was compiled from the ascertained average cost in labor-time of all staple articles, showing their prices in hours. Besides this, the public had access to the bills of all goods purchased, so that no grounds of dispute could exist as to price.' :413"Much of the reaction to the Time Store by the public was positive. A friend of Warren's and a Cincinnati steamboat captain named Captain Richard Folger once told the members of his church during a theological dispute, "'Well, brethren, people have been disputing for eighteen hundred years about what is the true Christianity. Now if you will go down to the corner of Fifth and Elm Streets, you will see it in operation for the first time in the world.' :2256"Not only that, after receiving labor notes from the store in exchange for a delivery of corn meal, spent the next three weeks, instead of doing his own work and instead went to acquaintances in shops across town explaining the principles and application of Equitable Commerce and giving out Time Store labor notes for them to try out. :493

An official notice of the practices of the Time Store were posted:"'Whatever arrangements may be made from time to time in this place, they will always be subject to alteration, or to be abolished, whenever circumstances or increasing knowledge may exhibit the necessity of change.' :424 (12)"After several years proving the feasibility and superiority of his Equity Store idea, Warren was ready to move on to his next big project. He closed the Cincinnati 'Time Store' in 1829. 2369 Warren gave the public several months' notice and made sure that all obligations were met, 524 and "simply returned his eight blocks of real estate" to the "understandably shocked" man he leased it from. The land had appreciated considerably, but "Warren refused to accept a profit when the price of the land had appreciated, as he saw it, through no effort of his own." :2238As Warren believed that the only legitimate title to property is labor, any wealth built by an increase in land values unrelated to the owner's actions is against the principle of Equity. 544

The New Harmony Time Store
In 1842 Warren set out to build a second Time Store in the former utopian town of New Harmony. When word got out, however "there were mutterings and threats from certain quarters where the effects of an enterprise conducted on the Cost principle were dreaded." 705Attempting to counter misunderstandings about the project, Warren lectured throughout the area until he had drummed up strong public support. When the new Time Store was about to be opened, some of Warren's supporters heard that there would be an attempt to force the new venture to close before it could even open. Supposedly "'five men at once jumped up and declared that they would shoulder their rifles and march into New Harmony to protect the enterprise and its founder. The danger passed, however, with nothing worse than covert sneers, studied misrepresentation, and petty falsehoods from some of the neighboring storekeepers.' 705"The shop opened and almost immediately was so busy that there was a 2 hour wait for service. 705As Warren recalled, "its influence spread rapidly outward and began to affect the prices in the surrounding towns. The people would not buy at home, but came twenty, twenty-five, and even one hundred miles, to the 'Time store,' as they called it, and found themselves benefited. There was but one way left for the common stores,— that was, to come down. But they could not come down to the prompt-pay prices and at the same time keep up their credit system. Then down came the credit system, that second monstrous feudalism, by which the storekeepers were rapidly getting possession of the homesteads of the people of the surrounding country .... Whatever may be thought of the hopelessness or the unpopularity of reform movements, I will venture to assert that no new institution, political, moral, or religious, ever assumed a more sudden and extensive popularity than the Time store of New Harmony. But it was principally among the poor, the humble, the downtrodden. None of those who had been accustomed to lead, none who had anything to lead with, offered the least assistance nor aid, nor scarcely sympathy, though they did not attempt to deny the soundness of the principles. . .. When all the stores in the surrounding country had come down in their prices to an equilibrium with the Equity store the custom naturally flowed back again to them, and the next step was to wind up the Time store and commence a village." 714 Like the one in Cincinnati, the New Harmony Time Store lasted two years, and was run in the same way. There was one difference, however-- at New Harmony, Warren began to define the value of a labor note not just in an amount of time, but as an equivalent value, "measured by the ultimate cost." 733

The Book
In his autobiography published 27 years later, John Stuart Mill wrote of "a remarkable American, Josiah Warren, who had framed a System of Society, on the foundation of 'the Sovereignty of the Individual,'" which Mill credited for inspiring his own essay On Liberty. :2455

"Musical harmony was a perfect embodiment of how different notes sounding together forge something beautiful." .:2455

The Application
Equity Villages"'Because language could not be trusted to build consensus among men and women, Warren called for no constitution or set of bylaws. Instead, members of the community could form voluntary alliances to get their houses built and their needs met without ever compromising the rights and liberty of each sovereign self.' .:2455"This would work if a group of like-minded people could simply come together and create two lists on a ledger. On one side they should put everything they could supply (goods or labor they could provide), and on the other side they should list every item or service they wanted. According to Warren, "These become the fundamental data for operations." :2474

"Let no one move to an equity village till he has thoroughly consulted the demand for his labor, and satisfied himself individually that he can maintain himself individually." :2474

Warren wrote "He is ten times a citizen, who can perform a citizen's part in ten different positions; and more than this, when he is ready and willing to teach others to be as useful as himself." :3686

"If our efforts do not secure homes for the homeless, we work to no purpose.." :3686