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

Letter 13

[Letter 12 by Tucker’s numbering]

Proudhon to Bastiat,
11 February 1850

[Translation (as “Under the Scalpel – Bastiat’s Intellect Mercilessly Dissected. – PROUDHON’S LAST LETTER. – An Exhaustive Summary of the Whole Discussion. – LONG EXPOSE OF BASTIAT’S BLUNDERS, – Followed by a Left-Handed Eulogy as a Clincher in Conclusion. – BRILLIANT ENDING OF A FAMOUS CONTROVERSY. – The Defender of Capital Laid in His Grave by the Champion of Labor. – INTEREST AND PRINCIPAL. – LETTER TWELVE. – PROUDHON TO BASTIAT. – [TRANSLATED FOR THE IRISH WORLD BY BENJ. R. TUCKER.]”) by Benjamin R. Tucker, in The Irish World and American Industrial Liberator, 11 October 1879.]



[PARIS, Feb. 11, 1850.]

DOI-IV-13.1 Monsieur Bastiat, your last letter justifies all my anticipations. I knew so well what it would [contain] that, even before I had received La Voix du Peuple of February 4, I had written three-fourths of the reply which you are now to read, and to which I have only to add the finishing touches.
DOI-IV-13.2 You are sincere, Monsieur Bastiat; on that [point] you leave no room for doubt; I have acknowledged it before, and have no desire to retract my words. But it is very necessary for me to tell you that your intellect slumbers, or rather that it has never seen the light: I shall have the honor to demonstrate this fact to you by summing up our controversy. I hope that the sort of psychological consultation at which you are to be present, and of which your own mind is to be the subject, may be to you the beginning of that intellectual education without which a man, whatever dignity of character may distinguish him and whatever talents he may display, is not, and never will be, anything but a speaking animal, to use Aristotle’s [phrase].
DOI-IV-13.3 Man’s intelligence consists in the complete, harmonious, and coherent exercise of the four following faculties, – Perception, Comparison, Memory, Judgment. At least that is what I was taught at college, and what you will find in all philosophies.
DOI-IV-13.4 Two or more judgments joined together, and forming a systematic whole, constitute a process. The processes of the understanding are of several kinds, – syllogism, induction, sorites, dilemma, etc. We give them all the common name of reasoning.
DOI-IV-13.5 The art of reasoning is called logic, – that is, [properly] speaking,

Intellectual Mechanics.

[– These] faculties taken together constitute [REASON].
DOI-IV-13.6 The induction of Plato; the syllogism of Aristotle; the contradiction of the Sophists; the identity of Condillac; the antinomy of Kant and Hegel, – are only various forms of reasoning, special applications of logic, just as the use of steam as a motive power has caused the invention of all kinds of machinery, – locomotives, steamboats, stationary engines, high or low pressure engines, etc., – but which are all dependent upon the same principle, – steam.
DOI-IV-13.7 All the sciences, without exception, are founded [on] logic; that is, on the exercise of the four [basic] faculties, – perception, comparison, memory, judgment. That is why science is essentially demonstrative: spontaneity, intuition, imagination have no scientific authority. [It is] for this reason too, it is by virtue of their reasoning faculties, that men become capable of communicating their thoughts and of conversing with each: deprive them of perception, comparison, memory, and judgment, and [they] speak successively or all at once, but they [do not] answer or understand each other.
DOI-IV-13.8 [Now] to apply these laws of the human mind, our common criterion.
DOI-IV-13.9 [At] the beginning of this controversy, replying [unequivocally] to the question which you asked [me, namely], whether Interest on Loans is legitimate, I said that, under the present economical condition, and until Credit should be democratically organized, an affirmative answer [seemed] to me unavoidable; that consequently the [arguments] which you had taken pains to [give] me were superfluous; that I accepted them in advance; that the whole question, [as far] as I could see, lay in determining whether [the] economical conditions were capable of [change]; and that Socialism, in whose name I [spoke], affirmed this capability. I added that

Change in the Conditions of Credit

[was a] necessity of tradition itself, the last phase [of that] routine which you defend with so much [obstinacy] and so little philosophy.
DOI-IV-13.10 [So] then, to the question propounded by you, is Interest on Capital legitimate, I unhesitatingly replied, Yes, in the present condition of [things], Interest is legitimate. But I assert that [this] condition can and ought to be changed, and [that] inevitably, whether we will or no, it will [be so]. Was this, then, a vague response? And [was I not] entitled to hope that, after having [replied so] plainly to your question, you in turn [should] reply to mine?
DOI-IV-13.11 But I was dealing with a man whose intellect is hermetically sealed, and to whom logic is as [nought]. It is in vain that I exclaim to you: [Yes], Interest is legitimate under certain conditions independent of the will of the Capitalist; [no, it is] not under certain others, the establishment of which depends to-day upon society: [and it] is for this reason that Interest, excusable in the Lender, is, from the standpoint of Society and [History], a spoliation. You hear nothing, you comprehend nothing, you do not even listen to my reply. You lack the first faculty of intelligence, – perception.
DOI-IV-13.12 [The] same thing, moreover, appears from [your] second letter, which begins thus: “Sir, you ask me seven questions. Do you forget that we are concerned at present with but one: [Is] Interest on Capital legitimate?” All the rest of your letter is simply a reproduction [of the results] of the first arguments to which I had not replied, because I had no reply to [make]. Change the conditions, I said, and you change the principle, you change the practice. [– You gave] no heed to my words. You thought it [more] useful to jest about contradiction and antinomy, about thesis, antithesis, and synthesis, [thus] bringing to your side, at so little expense, the [Usurers] and the blockheads, glad to laugh [at that] which they fear to examine.
DOI-IV-13.13 [What] did I do then?
DOI-IV-13.14 [To provoke] in you this refractory perception, I [took]

[Several] Terms of Comparison.

[I proved] to you, citing monarchy, polygamy, [judicial] combat, and industrial organizations [The French has “corporations,” i.e., recipients of feudal privilege. – RTL] as examples, that a thing may very well [have been] at one time good, useful, legitimate, [respectable], and afterwards become bad, illegitimate, pernicious, according to the surrounding circumstances; that progress, the [great law] of humanity, is no other than this [ceaseless] transformation of good into evil and [evil into] good; that, as it is with other things, [so it is] with Interest; that the hour has struck [when it must] disappear, as it is easy to see from the signs of the times, political, historical, and [economical], which I content myself with showing [to you] by summoning them up.
DOI-IV-13.15 [This was] an appeal to the most precious of [your faculties]. It was as much as to say to [you: – When] I affirm that the conditions which [made] lending at Interest excusable and legitimate have disappeared, I affirm no extraordinary [thing]; I announce only a special instance [of social] progress. Observe, compare; and, [the comparison] made, the analogy recognized, [return to] the question asked by me after you [had asked] yours. The forms of credit, can [they, ought] they to be changed in such a way [as to lead] to the abolition of Interest? That, [without] denying the absolution which science [owes to] all lenders, speculators, capitalists, [and usurers], is the question for us to examine.
DOI-IV-13.16 [But what] of it? Does Monsieur Bastiat [compare, he? Is] he any more capable of comparison than of perception? The analogies of history you would not grasp; the progress of institutions and the general law which governs it you call fatalism. “I wish,” you say in your third letter, “to remain upon my own ground.” And thereupon, shaking your rattle, catching at every word capable of use as a pretext, you reproduce, as new arguments, facts whose legitimacy in the established order I do not assail, but whose necessity I deny and of which I consequently demand a revision and a reform.
DOI-IV-13.17 When a man who calls himself an economist, who pretends to reason, to demonstrate, to carry on a scientific discussion, has come to such a pass, I venture to call him, sir,

A Desperate Man.

Neither perception nor comparison; absolutely incapable of listening and replying! After that what could I expect of you? You were outside of philosophy, outside of science, outside of humanity.
DOI-IV-13.18 However, I did not despair. Perhaps, said I to myself, perception and comparison can be aroused in Monsieur Bastiat by the aid of another faculty. To examine an idea closely, then to compare this idea with another, is too subtle, too abstract a thing. Let us try history; history is a record of the observations and experiences of the human race. Let us point Monsieur Bastiat to progress; to grasp progress in its entirety, and consequently its laws, requires only memory.
DOI-IV-13.19 When I speak of memory as a faculty of the human intellect, I mean something essentially different from recollection. Animals recollect, but have no memory. Memory is the faculty of connecting and classifying recollections; of considering several consecutive facts as one and the same fact; of giving to them a sequence and a unity. It is perception applied to a succession of things which happened in the past and have been generalized.
DOI-IV-13.20 I then write a monograph of Usury. I showed you the origin of Usury, its causes, its excuses, its analogies, its development, its effects, its consequences. I proved that the results of the principle of usury are utterly impossible and absurd; that they inevitably produce immorality and misery. That done, I said to you: You see that order and the preservation of society are henceforth incompatible with Usury; that the conditions of Credit can remain no longer what they have been; that Interest, legitimate in the beginning, excusable even to-day in the lender, – who is not bound to deprive himself, – has become, in the eyes of the social conscience, a means of spoliation, a monstrous institution, which sternly calls for reform.
DOI-IV-13.21 Here was a chance, if I mistake not, to study the history and the new conditions of Credit, and the possibility which I affirmed of making it gratuitous. And remember that, carefully setting aside the question of persons, I continually told you:

I Do Not Accuse the Capitalists;

I do not complain of the Proprietors; I take care not to condemn, as the Church did, the the [Repetition sic. – RTL] Bankers and Usurers. I recognize the honesty of all who profit by Interest. I denounce an error exclusively collective, an anti-social Utopia full of iniquity. Well, did you so much as understand me? For, as for refuting me, you have not once dreamed of it.
DOI-IV-13.22 I have before me your fourth letter: does it contain a shadow of this historical perception which I call memory? No. Accomplished facts are to you only recollections, – that is, they are nothing. You do not deny them: but as you are utterly unable to follow their thread and to generalize them, you do not extract from them their meaning; their significance escapes you. The faculty of memory, like the faculties of perception and comparison, you lack. You can only keep on saying the same thing over and over: He who lends at Interest is not a robber, and no one can be forced to lend. Of what use is it, therefore, to inquire whether Credit can be organized on a different basis, or to examine the effects of Interest upon the working classes? Your theme is settled upon; you do not depart from it. And upon that, after having shown the workings of Usury by examples, you reproduce them in the form of propositions, and exclaim: Behold the Science!
DOI-IV-13.23 I confess, sir, that I doubted for a moment whether there really was a man upon the earth so maltreated by nature in point of intellect, and I impeached your intentions. For my own part, I had rather a thousand times be suspected of insincerity than see myself robbed of the most glorious of man’s endowments, that which constitutes his force and his essence. [Several months after the closure of this discussion, M. Proudhon, in the name of an industrial company, requested from the government a guarantee of 5 percent interest, for certain enterprise of conveyance between Chalons and Avignon. Shocked by such an enterprise on the part of the apostle of gratuitous credit and of anarchy, Bastiat manifested his impression in a still unpublished letter, whose closing lines we reproduce: “M. Proudhon, deploring the feebleness of my intellectual faculties, said: – For my own part, I had rather a thousand times be suspected of insincerity than see myself robbed of the most glorious of man’s endowments, that which constitutes his force and his essence. – No doubt M. Proudhon knows his own business: I accept the distribution. For me the humble intelligence which it has pleased God to allot to me; for him, since it is what he prefers, to be suspected of insincerity.” – OC] [Since Proudhon has just finished explaining that in his view the individual capitalist is not to be blamed for charging interest so long as mutual banking has not yet been established, it’s not obvious that this episode represents any hyporisy on Proudhon’s part. – RTL] It was with this painful impression that I wrote my letter of December 31, the significance of which you can now easily appreciate.
DOI-IV-13.24 I said to myself: Since Monsieur Bastiat will condescend neither to honor my reply with his attention, nor to compare the facts which underlie it, nor to consider the historical movement which annihilates his theory; since he is incapable of entering into a discussion with me and understanding the arguments of his opponents, – I am forced to believe that he is

Overburdened with Personality.

He is a man, as they say, who is wedded to his own judgment, and who, by refusing to listen to any one but himself, is cut off from all intercourse with his fellows. Let us, then, assail him in his judgment, – that is, in his consciousness, in his personality, in his ego.
DOI-IV-13.25 That is the way, sir, in which I was led to deal, no longer with your arguments, which were entirely foreign to the question, but with your intentions. I questioned your sincerity: it was an experiment – I beg your pardon for it – which I allowed myself to try upon your individuality. To give shape and substance to my accusation, I concentrated all our discussion upon a contemporaneous, palpable, and positive fact, with which I identified, not only your theory, but yourself, – the Bank of France.
DOI-IV-13.26 The Bank of France, I said, is the living proof of my assertion oft-repeated during the last six weeks, – namely, that interest was once necessary and legitimate, but that to-day society is able, and ought, to abolish it.
DOI-IV-13.27 It is proved, indeed, by comparing the capital of the Bank with its metallic reserve, that while paying to its stockholders interest on the said capital at four per cent., it can give credit and discount at one per cent., and still realize fine profits. It can, it ought; until it does, it robs. By refusing to do so, it keeps the interest, rent, and farm-rent, which ought to come down everywhere to one per cent at most, up to three, four, five, six, seven, eight, ten, twelve, and fifteen per cent. It causes the people to pay annually to the unproductive classes more than six thousand millions in gratuities and extras, and, where they might produce annually a value of twenty thousand millions, it prevents them from producing more than ten thousand. Then, either you must justify the Bank of France, or, if you cannot, if you dare not, you must admit that the institution of interest is only

A Transitional Institution,

which must disappear in a higher state of society.
DOI-IV-13.28 That, sir, is what I said to you, and in terms sufficiently sharp, one would think, to provoke on your part, in the absence of perception, comparison, and memory concerning the wholly historical question which up to that time I had submitted to you, that simple and purely intuitive act of the mind which it performs when it find itself in the presence of a fact, and required to answer yes or no, – I mean a judgment. You had only to reply in a word, it is, or it is not, and the operation was finished.
DOI-IV-13.29 It is: that is to say, yes, the Bank of France can without wronging its stockholders or injuring itself, reduce its rate of discount to one per cent; it can then, through the competition which this decrease would create, lower the rent of all Capital, including its own, to less than one per cent. And since this movement of reduction, once commenced, would never stop, it can, if it will, make Interest disappear entirely. Then paid Credit, if it takes only what belongs to it, leads directly to Gratuitous Credit; then Interest is only a relic of ignorance and barbarism; then Usury and Rent, in an organized democracy, are illegitimate.
DOI-IV-13.30 It is not: that is to say, no, it is not true that the Bank of France, its weekly balance-sheet to the contrary notwithstanding, has a capital of ninety millions and a metallic reserve of four hundred and sixty millions; it is not true that this enormous reserve is the result of the substitution of bank paper for specie in commercial circulation, etc., etc. In that case I should have referred you to M. d’Argout, who is suited for such a discussion.
DOI-IV-13.31 Should we ever have believed it, if you had not caused us to see it? To this categorical, palpable fact of the Bank of France, you replied neither yes nor no. You did not even question the identity which exists between the fact submitted to your judgment and

Your Theory of Interest.

You did not perceive the synonymy of these two propositions: Yes, the Bank of France can give Credit at one per cent., then my theory is false; – no, the Bank of France cannot give Credit at one per cent., then my theory is true.
DOI-IV-13.32 Your reply, indubitable monument of an intellect which the Holy Word never illuminated, was this: that you were not dealing with the Bank of France, but with capital; that you did not defend the privilege of the Bank, but only the legitimacy of Interest; that you were in favor of the liberty of banks, as well as the liberty of lending; that if it was possible for the Bank of France to give Credit and Discount for nothing, you would not try to prevent it; that you confined yourself to the one assertion that the idea of Capital supposes and necessarily implies that of Interest; that the first never exists without the second, though the second sometimes exists without the first, etc.
DOI-IV-13.33 So, you are as powerless to judge as to perceive, compare, and remember. You are lacking in that judicial conscience which, in the presence of two facts, either identical or incompatible, decides: Yes, they are identical; no, they are not identical. Undoubtedly, since you are a thinking being, you have intuitions, illuminations, revelations; I do not undertake to say, for my part, what does go on within your brain. But surely you do not reason, you do not reflect. What sort of a man are you, Monsieur Bastiat? Are you a man at all?
DOI-IV-13.34 What! after having successively rejected metaphysics, which you do not understand; the philosophy of history, which you regard as fatalism; economic progress, which ends in the reduction of Interest to an absurdity, – you also reject practical finance, the grandest result of which is precisely this conversion of Paid Credit into Gratuitous Credit, and you still persist in maintaining the absolute truth of your theory, which you have thus destroyed with your own hands!

You Always Run Away;

Metaphysics, History, Social Economy, and the Bank are successively defaulted by your arguments, as are perception, comparison, memory, and judgment by your intellect; once more, what is your dialectic, and how do you wish to be dealt with?
DOI-IV-13.35 And even then I was not discouraged. I wished to go to the very end, and to make a final effort. I thought that this inertia of the intellectual faculties might arise form the absence of ideas, and I flattered myself with the hope that I might at last cause a spark to flash out of your mind. You yourself seemed to suggest this course in saying to me, “Convinced that this whole discussion rests upon the IDEA of Capital,” and in trying, consequently, to explain your conception of it. Since, then, he is impervious to logic, said I, let us try him with ideas. It would be a shame to allow such a discussion to close before the two opponents could say that, if they had not been able to agree, they had at least understood each other.
DOI-IV-13.36 I analyzed then, expressly for you, the idea of Capital. This analysis finished, I gave the definition; I deduced the consequences; then, that there might be no ambiguity in terns, I called to my aid the art of the accountant. I pictured upon two commercial accounts, drawn up side by side, on the one, your theory of Capital, on the other, mine. I devoted thirteen columns of La Voix du Peuple to this exposition, wholly to accommodate you, but out of which, in my opinion, must grow an Economic Revolution, – yes, better still, a new science.
DOI-IV-13.37 For the last time I said to you: –
DOI-IV-13.38 Remember! times are changed. The Principle of Interest has run its course; its consequences are to-day recognized as immoral, destructive of public happiness, mathematically false; bookkeeping annihilates it, and not only bookkeeping, but as if to leave you no foothold, the very idea of Capital itself. For God’s sake, then, pay heed to the facts that I point out to you; observe, compare, combine, judge, go back to ideas: the only will you be entitled to express an opinion.

You will still Persist in your Error,

I doubt not, but at least your error will be a logical one; you will be mistaken in your premises only.
DOI-IV-13.39 How did you evade this demonstration? That I am to examine in replying to your last letter.
DOI-IV-13.40 I pass by your magnificent and magniloquent exordium, in which you congratulate society upon the service which I have rendered it by unveiling Socialism’s last resource, and in which you celebrate your victory. Nor will I notice certain pleasantries about my hesitating and vacillating method of controversy; on these matters our readers are sufficiently well-informed. They know that what you call my hesitation is only the fundamental distinction which I made at the outset between the social economy of the past and that of the present, a distinction which I sustained successively by all the proofs with which metaphysics, history, progress, and custom itself could furnish me, and to which I tried for two months, but without success, to get your attention. In a word, I slight everything in your letter which has no direct bearing upon the question at issue, and deal only with the essential points.
DOI-IV-13.41 I had defined Capital thus: EVERY SETTLED VALUE, whether in land, machinery, merchandise, provisions, or money, serving, or capable of serving, in production.
DOI-IV-13.42 Singularly enough this definition suits you. You accept it; you adopt it. Alas! you had better a hundred times have rejected it, together with antinomy and the philosophy of history, than have encumbered your intellect with such a formula! One cannot help seeing what frightful havoc this terrible definition has made with your mind!
DOI-IV-13.43 In the first place, you do not yet understand it at all. Despite the trouble that I have taken to explain it to you, you do not know what a settled value is: otherwise, would you have put into the mouth of one of the persons whom you introduce to us the following language: “Gentlemen, if you desire my furniture, my shoes, my nails, my clothes, which are settled values, ‘give me a settled value in return, – that is, twenty francs in silver?’”
DOI-IV-13.44 In commerce we regard as a settled value

A Bill of Exchange,

for example, having a substantial basis, invested with all the legal requirements, issued by a known and solvent party, accepted and, if need be, endorsed by parties equally well-known and solvent, thus offering triple and quadruple security, and susceptible, by the number and stability of it sureties, of circulation in the place of specie. The more the guarantees and acceptances, the better settled the value is: it would be perfect, if all citizens were its sureties and takers. Such is specie, the best settled of all values: for, besides carrying its security within itself, it bears the signature of the State, which puts it into circulation as a bill of exchange, and insures its acceptance by the public. By analogy I say that furniture, shoes, and all other products become settled values, not when their production is finished and they are exposed for sale, as you say, but after they have been appraised by the parties to a transaction, their value determined, and their delivery effected; and then only to him who buys them, or who consents to repurchase them at the same price. Thus, as I told you, product becomes Capital; and it is Capital only to the purchaser, whether he uses it as a tool or as an element of reproduction. To him, I say, and to him alone, the product becomes a settled value – in a word, Capital.
DOI-IV-13.45 Here, sir, at least, I have the advantage of being uncontradicted. I am the author of the definitions; [Sic, for “definition.” – RTL] I know what I meant by it; your own words show you how I [Sic, BRT’s error for “you.” – RTL] understood it. Now, I repeat, you do not comprehend me.
DOI-IV-13.46 However, without examining it closely, you accept my definition of Capital as a good one; you say that it is all that the discussion requires. You thereby tacitly admit that Capital and Product are, in Society, synonymous terms; that, consequently, every transaction involving credit resolves itself, in the absence of fraud, into an exchange: two things which you at first denied, and which I would congratulate you on having understood at last, could I by any possibility believe that you attach the same meaning to my words that I do. What, indeed, could be more productive of good results than this analysis: Since value is only a proportion, and since

All Products Are Necessarily Proportional to Each Other,

it follows that from the social standpoint products are always values and settled values: as far as society is concerned, there is no difference between Capital and Product. The difference is wholly confined to individuals: it arises from their inability to express in exact numbers the relative value of products, and their efforts to arrive at an approximation. For – do not forget it – the mysterious law of exchange, the absolute rule which governs transactions, – a law not written but intuitively recognized, a rule not conventional but natural, – is to make our private acts conform as far as possible to social laws.
DOI-IV-13.47 Now, – and this is what causes my doubts, – this definition of Capital, so profound and so clear, which you see fit to accept; this identity of Capital and Product, of Credit and Exchange, – totally destroys, sir, your theory of Interest, though you do not suspect it in the least! Indeed, from the moment you admit that the formula of J. B. Say, products exchange for products, is synonymous with this one, Capital exchanges for Capital; that the definition of Capital accepted by you is only an expression of this synonymy; that everything tends, in society, to bring commercial transactions more and more into conformity with this law, – from that moment it is evident, a priori, that the day must come when transactions involving loans, rent, farm-rent, Interest, and the like, will be abolished and converted into exchanges; and that thus the lending of Capital becoming simply an exchange of Capital, and all business being conducted on a cash basis, Interest will disappear. Defining Capital thus, the idea of Usury involves a contradiction.
DOI-IV-13.48 This you certainly would have understood, if, in adopting my definition of Capital, you had given it a single moment’s reflection. But to believe that you would reflect upon your own ideas; to imagine that, after having admitted a principle, you would admit its consequences, its tendency, and its laws, – is, as I have found out to my sorrow, to deceive one’s self sadly. To reason, in your estimation, is to contradict at random,

Without Sequence and Without Method.

An idea slips over your mind without penetrating it. You take a sentence, and apply it according to your whims and prejudices; you neglect the idea, the germ, which alone fertilizes the mind and unravels difficulties.
DOI-IV-13.49 I spared no pains, however, in enlightening you as to the meaning and purpose of my definition, and in warning you against it. Despairing of driving the idea into your head by language alone, I reduced it, so to speak, to the form of algebraic equations. For what is the science of bookkeeping, which I used in this connection, but a sort of algebra? But how differently you treat it! You reason about bookkeeping precisely as you do about settled values: it was reserved for you, after having accepted a definition without understanding its terms, without perceiving its consequences, to afterwards deny its demonstration. But, sir, the demonstration is the definition: where are you, then?
DOI-IV-13.50 In your letter of February 3 occurs the following: –
DOI-IV-13.51
“Starting with these data, you draw up the account of A, B, and the Bank. Certainly, if we admit the data, their account are unexceptionable. But are your data admissible? Are they in conformity with the nature if men and things?”
DOI-IV-13.52 This, I make bold to tell you, is contrary to arithmetic and to common sense. Never, sir, had you the slightest smattering of bookkeeping, would you have written such a passage as that. You would have known that if, as you are compelled to confess, my accounts are unexceptionable, the economic data on which I have based them are in the first system, which is yours, necessarily false, and in the second, which is mine, necessarily true. The nature of bookkeeping is such that it does not depend upon the truth of its data; it admits no false data; it is in itself, and in spite of the accountant, a proof of the truth or falsity of its own data. It is on account of this peculiarity that the books of a merchant are received in court as evidence, not only for him, but against him; error, fraud, deceit, in short, false data, are

Incompatible with Bookkeeping.

The bankrupt is much more likely to be condemned on the testimony of his accounts than on the accusation of the public prosecutor. Such, as I say, is the integrity of this science, which I pointed out in my “System of Economical Contradictions” as the most beautiful application of modern metaphysics.
DOI-IV-13.53 You talk of false data. But the datum on which I have based my accounts is yours exactly, – the datum of interest-bearing Capital. This datum being regarded by you as true, I submit it to the test of the account-book. I do the same with the opposite datum, which I uphold. The operation performed, you pronounce it unexceptionable: but as the result is against you, you exclaim that the data are false. I ask you, Monsieur Bastiat, what you mean by that?
DOI-IV-13.54 Certainly, I am not astonished, now, that in consequence of not seeing what a definition did contain, you have finally discovered in it something which it did not contain, and that, blundering along, you have fallen into the most inconceivable error. Where then did you find in these unexceptionable accounts, although in your opinion the data are false, the statement that the system which I defend is Paper Money? I defy you to produce a single word from me, throughout this long controversy, which warrants you in saying, as you do, and, I believe, in order to relieve yourself from embarrassment, that the theory of Gratuitous Credit is the theory of the assignat. I have not said a word about the system that I wish to substitute for the one that now prevails, and in which I still see the cause of all of society’s misfortunes. You have not wished to discuss this system; you would remain upon your own ground; all that I have been able to do has been to prove, yet without making myself understood, that the practise of Interest leads directly to the practise of Gratuity, and that the hour has struck in which this revolution is to be accomplished. My system has not been in question at all. I have constantly argued from your data; I have confined myself, with you, to the ways and customs of Capital. Read again my letter of December 31; it does not deal with the Bank of the People, but with the BANK OF FRANCE,

That Privileged Bank,

managed by M. d’Argout, whom you undoubtedly would not suspect of being an advocate of paper money, or money of paper, or assignats; that Bank, in short, which, since the combination of the departmental banks and the issue of hundred-franc notes, has been continually adding to its reserve; which possesses to-day four hundred and seventy-two millions of bullion and specie; which will end by absorbing into its vaults one thousand million of specie, if its managers again reduce the denomination of its notes, and establish other branches, and if business revives. It is of that Bank that I have spoken: is it possible that you can have taken that, too, for an hypothesis, and its four hundred and seventy-two millions of specie for a dream?
DOI-IV-13.55 This is what I said: –
DOI-IV-13.56 The capital of the Bank of France is ninety millions; its metallic reserve is four hundred and seventy millions; it has, then, a capital, actual or secured, of three hundred and eighty-two millions belonging to the French nation, and on which the Bank should receive no interest.
DOI-IV-13.57 Now, the interest due from the Bank to its stockholders being four per cent on a capital of ninety millions; its cists of administration, including risk, being one-half of one per cent; its specie constantly accumulating, and its total issue exceeding, with perfect safety, its reserve by one-third, – I say that the Bank of France can, and if it can, it must, or else be guilty of extortion and robbery, reduce its rate of discount to one per cent, and organize landed and commercial credit at the same time. Why, then, do you talk to me of paper money, of assignats, of legal tender, of maximum price, of insolvent debtors, of dishonest borrowers, of debauched laborers, and other foolish nightmares? The Bank of France may conduct its affairs with prudence and severity, as it has done hitherto; that is no concern of mine. I say that it can and ought to give credit and discount, to those to whom it has been in the habit of giving it, at one per cent a year, commission included.

Will Monsieur Bastiat do me the Honor for Once to Understand Me?
DOI-IV-13.58 M. BASTIAT. – “In order that the notes of a Bank may be receivable, they must inspire confidence;
DOI-IV-13.59 “In order that they may inspire confidence, the bank must have Capital;
DOI-IV-13.60 “In order that the Bank may have Capital, it must borrow it, and consequently must pay interest on it;
DOI-IV-13.61 “If it pays Interest, it cannot lend without Interest.”
DOI-IV-13.62 MYSELF. – Well, sir, the Bank of France has obtained capital without paying Interest; it possesses at this moment three hundred and eighty-two millions which do not belong to it; it can have, when it wants it, double that amount on similar conditions. Ought it to receive Interest upon it?
DOI-IV-13.63 M. BASTIAT. – [“]Time is precious. Time is money, say the English. Time is the stuff of which life is made, says le Bonhomme Richard.
DOI-IV-13.64 “To give credit is to grant time.
DOI-IV-13.65 “To sacrifice one’s time to another is to sacrifice a precious thing: such a sacrifice cannot be gratuitous.”
DOI-IV-13.66 MYSELF. – There would never be such a sacrifice. I have already told you, and I repeat it, that, in the matter of credit, the case of the need of time is the difficulty of procuring money; that this difficulty is chiefly due to the Interest demanded by the hikers of money; so that if Interest was zero, the duration of credit would also be zero. Now, the Bank of France, under the conditions laid upon it by the public since the Revolution of February, can reduce its Interest nearly to zero: is it you or I that reasons in a circle?
DOI-IV-13.67 M. BASTIAT. – “Ah! yes .... it seems to me .... I think I understand at last what you mean. The public has renounced, in the bank’s favor, its claim to the Interest on the three hundred and eighty-two millions of notes which circulate on its sole guaranty. You ask whether there is no way of enabling the public to reap the benefit of this Interest, or, which amounts to the same thing, of organizing a National Bank which shall receive no Interest. If I am not mistaken, it was the observation of this phenomenon that suggested to you your scheme. Ricardo devised a plan less radical, but similar, and I find in Say these remarkable lines: –
DOI-IV-13.68
“‘This ingenious idea leaves only one question unanswered. Who shall get the interest on this large sum placed in circulation? Shall the Government? In its hands it would be only a means of increasing abuses, such as sinecures, Parliamentary corruption, police spies, and standing armies. Shall a financial company, like the Bank of England or the Bank of France? But why make a present to a financial company already rich of the Interest paid by the public individually? ...... Such are the questions which this subject involves. Perhaps they can be answered. Perhaps there is some way to render highly profitable to the public the economy which would result; but I am not called upon here to develop this new order of ideas.’”
DOI-IV-13.69 MYSELF. – Sir, your

J. B. Say, With all his Genius, is a Fool.

The question is already answered: the people, who own the funds; the people, who are here the sole Capitalists, the sole furnishers of security, the true proprietors; the people, who alone should profit by the Interest, – the people, I say, ought not to pay Interest. Is there anything in the world simpler and fairer than that?
DOI-IV-13.70 So you admit, on the authority of Ricardo and J. B. Say, that there is a way of enabling the public – I quote your own words – to reap the benefit of the interest which it pays to the Bank, and this way is to organize a National Bank, which shall give credit at zero per cent?
DOI-IV-13.71 M. BASTIAT. – No, not that; God forbid! I admit, it is true, that the Bank ought not to profit by the interest paid by the public on capital belonging to the public; I confess further that there is a way of enabling the public to profit by said interest. But I deny that this way is the one which you recommend, – namely, the organization of a National Bank; I say and affirm that this way is the liberty of banks!
DOI-IV-13.72 “Liberty of banks! Liberty of credit! Oh! why, Monsieur Proudhon, have not your brilliant powers of persuasion been devoted to these objects?”
DOI-IV-13.73 I spare the reader your peroration, in which you deplore my obduracy and adjure me, with a comical gravity, to substitute for my formula, Gratuity of Credit, yours, Liberty of Credit, as if Credit could be freer than when it costs nothing! Not a drop of blood in my body – mark it well! – rebels against the liberty of Credit: in the matter of banking, as in the matter of education, Liberty is my supreme law. But I say that, until the liberty of banks and the competition of bankers allows the public to reap the benefit of the Interest which it pays them, it would be well, useful, constitutional, and quite in accordance with republican economy, to establish, in the midst of the other banks and in competition with them, a National Bank giving credit temporarily at one or one-half of one per cent, at the risk of what might happen. Do you object to changing the Bank of France, by reimbursing its stockholders, into this National Bank that I propose? Then,

Let the Bank of France Make Restitution

of the three hundred and eighty-two millions of specie which belong to the public, and of which it is the only holder. With three hundred and eighty-two millions we might very easily organize a bank (what think you?), and the largest in the world. In what respect, then, would this bank, formed by the association of the whole people, not be free? Do that alone, and when you have belled this revolutionary cat, when you have thus decreed the first act of the Democratic and Social Republic, I will undertake to deduce for you the consequences of this grand innovation. You shall then know what my system is.
DOI-IV-13.74 As for you, Monsieur Bastiat, who, an economist, mock at metaphysics, of which Political Economy is but the concrete expression; who, a member of the Institute, are unacquainted even with the philosophy of your century; who, the author of a work entitled “Economical Harmonies” probably in opposition to my “Economical Contradictions,” [M. Proudhon is mistaken in his conjecture. Bastiat did not write the Harmonies in opposition to Economic Contradictions, since on 5 June 1845, that is to say, prior to the appearance of the Contradictions, he communicated in a letter to a friend his intention to write Social Harmonies. Let us also recall that Bastiat was solely a corresponding member of the Institute. – OC] have no conception of the harmonies of history, and see in progress only a desolating fatalism; who, an advocate of Capital and Interest, are utterly ignorant of the principles of commercial bookkeeping; who, conceiving finally, through the circumlocutions of a bewildered imagination and on the authority of your authors more than from your own profound conviction, that it is possible to organize, with the pubic funds, a bank giving Credit without Interest, continue nevertheless to protest, in the name of Liberty of Credit, against GRATUITY OF CREDIT, – you are undoubtedly a good and worthy citizen, an honest economist, a conscientious writer, a loyal representative, a faithful Republican, a true friend of the people: but your last words entitle me to tell you, Monsieur Bastiat, that, scientifically, YOU ARE A DEAD MAN.

[Ironically, Bastiat would in fact be dead by the end of the year. – RTL]

P. J. PROUDHON.



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