Mutualism is an anarchist school of thought and economic theory that advocates a society where each person might possess a means of production. This may be either individually or collectively and trade representing the same amount of labor in the free market. Integral to the plan was the creation of a bank that would lend to producers at a very minimal interest rate. One just high enough to cover administration costs. Mutualism is based on a labor theory of value which holds that when labor or its product is sold, in exchange, it should receive goods or services embodying the same amount of labor needed to produce another article of equal utility. Notice the word: utility. Mutualism does not take into consideration the arts. There is no equal exchange of labor when vintage film posters are bought or sold. What is a piece of paper that at one time in the past was massed produced (even in a limited quantity) really worth. How would a Mutualist feel when that vintage movie poster sold for thousands of dollars? Obviously the film poster did not sell at a price that would reflect the amount of labor required to produce it. Any recognized piece of art when it is sold would also be in the same situation as a “valuable” vintage movie poster. The price of an important art piece is never sold at a “mutually equal” price!
Mutualism originated with the writings of philosopher Pierre-Joseph Proudhon.
Mutualists oppose the idea of individuals making an income on loans, investments or rent because they feel that these people are not laboring. Even though Proudhon did oppose this type of income, he expressed, he had never intended “…to forbid or suppress, by sovereign decree, ground rent and interest on capital. I think that all these manifestations of human activity should remain free and voluntary for all: I ask for them no modifications, restrictions or suppressions, other than those which result naturally and of necessity from the universalization of the principle of reciprocity which I propose.” as long as they ensure a worker’s right to the full product of their labors, Mutualists support markets (or artificial markets) and property in the product of labor. They argue for conditional titles to land, whose ownership is legitimate only so long as it remains in use or occupation (which Proudhon called “possession”) this advocates personal property but not private property.
The major aspects of mutualism are Mutualist credit, free association, gradualism (or dual – power) & contract (or federation / confederation). Mutualism is described by its proponents as advocating an “anti – capitalist free market”.
Mutualists argue that most of the economic problems associated with capitalism each amount to a violation of the cost principle, or as Josiah Warren interchangeably said, “Cost the limit of price.” It was inspired by the labor theory of value, which was popularized, though not invented, by Adam Smith in 1776 (Proudhon mentioned Smith as an inspiration). The labor theory of value holds that the actual price of a thing (or the “true cost”) is the amount of labor that was undertaken to produce it. In Warren’s terms, cost should be the “limit of price,” with “cost” referring to the amount of labor required to produce a good or service. Anyone who sells goods should charge no more than the cost to himself of acquiring these goods. Proudhon also held that the “real value of products was determined by labor time, and that all kinds of labor should be regarded as equally effective in the value – creating process, and he advocated therefore equality of wages and salaries.”