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The Bastiat-Proudhon Debate
on Interest (1849-1850)

Capital and Rent


Capital et Rente, February 1849; anonymous translation (as “Capital and Interest”) from Essays on Political Economy by the Late M. Frederic Bastiat (New York: G. P. Putnam’s Sons, and London: Provost, 1874)

[This short work was published in February 1849. – OC]


1. Introduction


by Claude Frédéric Bastiat (1801-1850)



DOI-II-1.1 My object in this treatise is to examine into the real nature of the Interest of Capital, for the purpose of proving that it is lawful, and explaining why it should be perpetual. This may appear singular, and yet, I confess, I am more afraid of being too plain than too obscure. I am afraid I may weary the reader by a series of mere truisms. But it is no easy matter to avoid this danger, when the facts with which we have to deal are known to every one by personal, familiar, and daily experience.
DOI-II-1.2 But, then, you will say, “What is the use of this treatise? Why explain what everybody knows?”
DOI-II-1.3 But, although this problem appears at first sight so very simple, there is more in it than you might suppose. I shall endeavour to prove this by an example. Mondor lends an instrument of labour to-day, which will be entirely destroyed in a week, yet the capital will not produce the less interest to Mondor or his heirs, through all eternity. Reader, can you honestly say that you understand the reason of this?
DOI-II-1.4 It would be a waste of time to seek any satisfactory explanation from the writings of economists. They have not thrown much light upon the reasons of the existence of interest. For this they are not to be blamed; for at the time they wrote, its lawfulness was not called in question. Now, however, times are altered; the case is different. Men, who consider themselves to be in advance of their age, have organised an active crusade against capital and interest; it is the productiveness of capital which they are attacking; not certain abuses in the administration of it, but the principle itself.
DOI-II-1.5 A journal has been established to serve as a vehicle for this crusade. It is conducted by M. Proudhon, and has, it is said, an immense circulation. The first number of this periodical contains the electoral manifesto of the people. Here we read, “The productiveness of capital, which is condemned by Christianity under the name of usury, is the true cause of misery, the true principle of destitution, the eternal obstacle to the establishment of the Republic.”
DOI-II-1.6 Another journal, La Ruche Populaire, [“The Popular Hive.” – RTL] after having said some excellent things on labour, adds, “But, above all, labour ought to be free; that is, it ought to be organised in such a manner, that money-lenders and patrons, or masters, should not be paid for this liberty of labour, this right of labour, which is raised to so high a price by the traffickers of men.” The only thought that I notice here, is that expressed by the words in italics, which imply a denial of the right to interest. The remainder of the article explains it.
DOI-II-1.7 It is thus that the democratic Socialist, Thoré [French art critic and political activist Étienne Joseph Théophile Thoré, a.k.a. Thoré-Bürger (1807-1869). – RTL] expresses himself: –
DOI-II-1.8 “The revolution will always have to be recommenced, so long as we occupy ourselves with consequences only, without having the logic or the courage to attack the principle itself. This principle is capital, false property, interest, and usury, which by the old régime, is made to weigh upon labour.
DOI-II-1.9 “Ever since the aristocrats invented the incredible fiction, that capital possesses the power of reproducing itself, the workers have been at the mercy of the idle.
DOI-II-1.10 “At the end of a year, will you find an additional crown in a bag of one hundred shillings? At the end of fourteen years, will your shillings have doubled in your bag?
DOI-II-1.11 “Will a work of industry or of skill produce another, at the end of fourteen years?
DOI-II-1.12 “Let us begin, then, by demolishing this fatal fiction.”
DOI-II-1.13 I have quoted the above, merely for the sake of establishing the fact, that many persons consider the productiveness of capital a false, a fatal, and an iniquitous principle. [In this essay, written for his countrymen, M. Bastiat quotes exclusively, as was natural, from French writers, for the purpose of illustrating the views of those who maintain that the loan of capital for interest or hire is iniquitous from a moral point of view, and economically considered unprofitable to the people collectively. But quotations of a similar character might equally might equally well have been made from English and American writers, who in some instances are men who have attained to no little reputation. Thus, for example, John Ruskin, the well-known English art critic, in his Fors Clavigera, thus reasons respecting “the immoral nature and injurious effects“ of the taking of interest. “Usury,” he says, “is properly the taking of money for the loan or use of anything (over and above what pays for wear and tear), such use involving no care or labor on the part of the lender. It includes all investments of capital whatsoever, returning ‘dividends,’ as distinguished from labor wages or profits. Thus anybody who works on a railroad as a plate-layer or stoker has a right to wages for his work; and any inspector of wheels or rails has a right to payment for such inspection; but idle persons who have only paid a hundred pounds towards the road-making, have a right to the return of the hundred pounds – and no more. If they take a farthing more, they are usurers. They may take fifty pounds for two years, twenty-five for four, five for twenty, or one for a hundred. But the first farthing they take more than their hundred, be it sooner or later, is usury.

“Again, when we build a house, and let it, we have a right to as much rent as will return us the wages of our labor, and the sum of our outlay. If, as in ordinary cases, not laboring with our hands or head, we have simply paid – say one thousand pounds – to get the house built, we have a right to the one thousand pounds back again at once, if we sell it; or, if we let it, to five hundred pounds rent during two years, or one hundred pounds rent during ten years or ten pounds rent during a hundred years. But if, sooner or later, we take a pound more than the thousand, we are usurers.

“And thus in all other possible or conceivable cases, the moment our capital is ‘increased’ by having lent it, be it but in the estimation of a hair, that hair’s breadth of increase is usury, just as much as stealing is theft, no less than stealing a million.

“But usury is worse than theft, in so far as it is obtained either by deceiving people or distressing them; generally by both; and finally by deceiving the usurer himself, who comes to think that usury is a real increase, and that money can grow of money; whereas all usury is increase to one person only by decrease to another; and every grain of calculated Increment to the rich is balanced by its mathematical equivalent of Decrement to the poor.” And again: “We need not fear our power of becoming good Christians yet, if we will; so only that we understand, finally and utterly, that all gain, increase, interest, or whatever else you call it or think it, to the lender of capital, is loss, decrease, and disinterest to the borrower of capital. Every farthing we, who lend the tool, make, the borrower of the tool loses. And all the idiotical calculations of what money comes to, in so many years, simply ignore the debit side of the book, on which the Laborer’s Deficit is precisely equal to the Capitalist’s Efficit. I saw an estimate made by some blockhead in an Anerican paper, the other day, of the weight of gold which a hundred years’ ’interest” on such and such funds would load the earth with! Not even of wealth in that solid form, could the poor wretch perceive so much of the truth as that the gold he put on the earth above, he must dig out of the earth below! But the mischief in real life is far deeper on the negative side, than the good on the positive. The debt of the borrower loads his heart, cramps his hands, and dulls his labor. The gain of the lender hardens his heart, fouls his brain, and puts every means of mischief into his otherwise clumsy and artless hands.”

As an illustration of similar views of American origin, a pamphlet on Labor Reform, by John T. Campbell, of Indiana, published in 1872, and which has attained considerable popularity and circulation, thus commences a chapter on the causes affecting the distribution of wealth:

“What, then, are the means used by which wealth which labor produces is transferred to the possession of the non-producing few? It is simply an instrument of refined robbery. It is money and its interest.” – DAW]
But quotations are superfluous; it is well known that the people attribute their sufferings to what they call the trafficking in man by man. [The “exploitation of man by man” would be a more accurate translation. DAW omits the phrase entirely. – RTL] In fact, the phrase, tyranny of capital, has become proverbial. [... meaning thereby the unwillingness of the owners of capital to allow others to use it without security for its safe return and compensation for its use. – DAW]
DOI-II-1.14 I believe there is not a man in the world, who is aware of the whole importance of this question: –
DOI-II-1.15 “Is the interest of capital natural, just, and lawful, and as useful to the payer as to the receiver?”
DOI-II-1.16 You answer, No; I answer, Yes. Then we differ entirely; but it is of the utmost importance to discover which of us is in the right, otherwise we shall incur the danger of making a false solution of the question, a matter of opinion. If the error is on my side, however, the evil would not be so great. [But contrast what Bastiat says in his later exchange with Proudhon. – RTL] It must be inferred that I know nothing about the true interests of the masses, or the march of human progress; and that all my arguments are but as so many grains of sand, by which the car of the revolution will certainly not be arrested.
DOI-II-1.17 But if, on the contrary, MM. Proudhon and Thoré are deceiving themselves, it follows that they are leading the people astray – that they are showing them the evil where it does not exist; and thus giving a false direction to their ideas, to their antipathies, to their dislikes, and to their attacks. It follows that the misguided people are rushing into a horrible and absurd struggle, in which victory would be more fatal than defeat; since, according to this supposition, the result would be the realisation of universal evils, the destruction of every means of emancipation, the consummation of its own misery.
DOI-II-1.18 This is just what M. Proudhon has acknowledged, with perfect good faith. “The foundation stone,” he told me, “of my system is the gratuitousness of credit. If I am mistaken in this, Socialism is a vain dream.” I add, it is a dream, in which the people are tearing themselves to pieces. Will it, therefore, be a cause for surprise, if, when they awake, they find themselves mangled and bleeding? Such a danger as this is enough to justify me fully, if, in the course of the discussion, I allow myself to be led into some trivialities and some prolixity. [The author’s aim has not here been to analyse interest and give an account of all its elements, to some of which the socialists themselves raise no objection. One of these, for example, is the insurance premium, or compensation for the risk incurred by the lender of not recovering the total amount for which he has given credit. – The author has confined himself to defending that which has been attacked, the productivity of capital, and has striven to render this truth accessible to every grade of intelligence.– OC]



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