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In Economics, what is Mutualism?

By Paul Woods
Updated May 17, 2024
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Mutualism is an economic theory primarily based on the thoughts of French politician and philosopher Pierre-Joseph Proudhon. Many see mutualism as splitting the difference between capitalism and communism. The theory is distinguished mainly by its views on four issues: the cost of goods in terms of labor, the free association of laborers, access to non-exploitative credit, and property ownership. While mutualism has present-day adherents, it reached the height of its influence in the mid-19th century.

The mutualist philosophy begins with the idea that every individual has a right to engage in productive labor and receive appropriate compensation. An economic system, in the mutualist view, whether capitalist or communist, facilitates worker exploitation by consolidating property and the means of production in the hands of few. In capitalism, these are consolidated in an upper class of large landowners and industrialists; in communism, they are consolidated in the state.

Proudhon and the followers of mutualism believed the cost of goods should be based on the labor required to produce them. This implies that the laborer will have control of a means of production. The cost, therefore, would be the full value of whatever the laborer extended to produce a good, covering both the worker’s materials and living expenses.

Mutualism recognized industrialization would require larger means of production than one laborer could manage. There would be individual laborers working as independent craftsmen, but there also would need to be free, democratic associations of workers sharing equally in the ownership of the means of production such a factories. Goods produced by the factories would still be priced according to the total cost to the associated laborers, who would share the proceeds equally.

Economic viability requires credit, which the mutualists understood. They proposed mutually held savings banks which would lend money only at an interest rate required to meet the administrative costs of operating the bank. The stakeholders in the banks would be the freely associating laborers who benefited from the credit.

Mutualism opposed both the collectivization of property under communism and the accumulation of property under capitalism. Proudhon also rejected what he called the possession of property in which the property holder could make money by rents or impede others from using the property. Instead, mutualism supported private ownership of that amount of property required by a laborer to support the means of production the laborer or laborers controlled.

An anarchistic philosophy is one that opposes any government intervention, and Proudhon was among the first to claim the title anarchist. He believed government regulation let to the creation of a class system which exploited workers and violated property rights. The word mutualism appeared first in the 18th century, and the philosophy also gained a number of supporters and theorists in England and the U.S.. Some aspects of this theory are associated with libertarian thought.

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