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

Letter 10

[Letter 9 by Tucker’s numbering]

Bastiat to Proudhon,
6 January 1850

[Translation (as “INTEREST. – Bastiat Accuses Proudhon of Unfairness. – AN EFFORT AT BURLESQUE. – The Labor of Producing Capital Again Confounded – WITH THE LABOR OF LENDING CAPITAL. – Proudhon Charged With Using the Word “Capital” in Different Senses. – FREE TRADE AND FREE BANKING RECOMMENDED. – Ceaseless Contrast of Liberty of Credit With Gratuity of Credit. – INTEREST AND PRINCIPAL. – LETTER NINE. – BASTIAT TO PROUDHON. – [TRANSLATED FOR THE IRISH WORLD BY BENJ. R. TUCKER.]”) by Benjamin R. Tucker, in The Irish World and American Industrial Liberator, 20 September 1879.]

[PARIS, Jan. 6, 1850.]

DOI-IV-10.1 Sir, you say I have deceived you; no, I have been deceived.
DOI-IV-10.2 Admitted under your roof, to your fireside, here to discuss, surrounded by your own friends, a weighty question, I was at least entitled to believe that, if my arguments fell before your criticism, my person would be held sacred. You neglect my arguments, and characterize my person. – I have been deceived.
DOI-IV-10.3 Writing in your journal, addressing myself to your readers, it was my duty to confine myself strictly to the subject under discussion. I thought that, appreciating the constraint of my position, you would feel bound to impose upon yourself, under your own roof, the same constraint. – I have been deceived.
DOI-IV-10.4 I said to myself: M. Proudhon has an independent mind. Nothing in the world would induce him to fail in the duties of hospitality. But, M. Louis Blanc having shamed you for your politeness towards an economist, you are in reality ashamed. – I have been deceived.
DOI-IV-10.5 Again, I said to myself: The discussion will be a fair one. Has Capital, like Labor itself, an inherent right to remuneration? Such was the question we had to solve in order to conclude for or against the Gratuity of Credit. Without hoping to agree with you concerning the answer, I thought at least that we should agree as [to] the question. But, strangely enough, you continually reproach me, with bitterness and almost with anger, for confining myself to an examination of it. Our first task was the verification of a PRINCIPLE on which, by your own admission, depends

The Worth of Socialism,

[and] you fear the light which I try to concentrate upon this principle. You are ill at ease upon the ground of the discussion; you continually avoid it. – I have been deceived.
DOI-IV-10.6 What a remarkable spectacle is afforded to our readers, and through no fault of mine, by [this] debate, which may be summed up as follows: –
– It is day.
– It is night.
– See! the sun shines above the horizon. All men, throughout the country, come and go, walk to and fro, and so conduct themselves as to prove that it is light.
– That proves that it is day. But I affirm that at the same time it is night.
– How can that be?
– By virtue of the beautiful law of Contradiction. Have you not read Kant, and do you not know that only those propositions are true which contradict each other?
– Then let us cease to discuss; for with this logic we cannot understand one another.
– Well, since you do not appreciate the [surpassing] lucidity of the method of contradiction, I will condescend to your ignorance, and prove my proposition by the method of distinction. There is a day which is light, and a day which is not light.
– I see no more clearly than before.
– The method of digression is still open to me. Follow me, and I will show you the road.
– It is not my duty to follow you. I have proved that it is day; you admit it; the question is settled.
– You always fall back upon the same assertion and the same proofs. You have proved that it is day; so be it. Now prove to me that it is not night.
DOI-IV-10.19 Is that serious?
DOI-IV-10.20 When a man arises and says to the people: the time has come when Society should loan you Capital gratis, when you should have houses, tools, machinery, materials, and provisions for nothing, – when a man, I say, expresses these sentiments, he should be ready to meet an opponent who interrogates him as to

The Essential Nature of Capital.

You have appealed in vain to contradiction, distinction, and digression; I recall you to the principal and vital question. That is my part in this controversy; perhaps it is yours to call me a bigoted ignoramus, unacquainted with the art of reasoning.
DOI-IV-10.21 For, indeed, so fundamental a difference in our views must proceed form the fact that we do not understand each other’s use of this word, Capital.
DOI-IV-10.22 In your letter of December 17 you said: “If the Labor of the Creditor is zero, the Interest of the Creditor must become zero.”
DOI-IV-10.23 Amen. But it follows therefrom: –
DOI-IV-10.24 If the Labor of the Creditor is something, the Interest must be something.
DOI-IV-10.25 Prove, then, that the time has come when houses, tools, and provisions spring into existence spontaneously. Otherwise, you have no foundation for your assertion that the Labor of the Capitalist is zero, and that consequently his reward must be zero.
DOI-IV-10.26 Truly, I know not what you mean by this word, Capital; for in your letter you give it two entirely different definitions.
DOI-IV-10.27 First, you seem to think that the Capital of a nation consists of the specie in its possession. It is from this premise that you undertake to prove the rate of Interest in France to be one hundred and sixty per cent. You calculate thus. The amount of specie is one thousand millions. We pay sixteen hundred millions of Interest altogether on mortgages, notes of hand, invested wealth, and the public debt. Therefore Capital is paid one hundred and sixty per cent.
DOI-IV-10.28 It follows, then, that in your eyes Capital and Specie are identical.
DOI-IV-10.29 Reasoning from this hypothesis, I find your estimate of the rate of Interest a very moderate one. You might have said that Capital receives also a part of the price of all products, and thus you would have arrived at an estimate of

Four or Five Hundred Per Cent.

But now, after having based your argument on this remarkable definition of Capital, you overturn it in these words: –
“Capital is undistinguishable from Product. These two terms do not in reality stand for two distinct things; they designate relations only. Product is Capital; Capital is Product.”
DOI-IV-10.31 Here is a basis much larger than that of Specie. If Capital is Product, or the aggregate of products (lands, houses, merchandise, money, etc.), surely the nation’s Capital amounts to more than one thousand millions, and your estimate of the rate of interest is absurd.
DOI-IV-10.32 Convinced that this whole discussion rests upon the idea of Capital, suffer me to say, at the risk of fatiguing you, what I think in regard to it, not by way of definition, but by way of description.
DOI-IV-10.33 A joiner works three hundred days, earning and expending five francs per day.
DOI-IV-10.34 That is, he renders services to society, and society renders equivalent services to him, both being estimated at fifteen hundred francs, the five-franc pieces serving only as a means of facilitating the exchanges.
DOI-IV-10.35 Suppose that this workman lays up one franc per day. What does that signify? It signifies that he renders to society services to the amount of fifteen hundred francs, but actually draws upon society for services to the amount of twelve hundred francs only. He acquires the right to call upon society, where, when, and in what form he pleases, for services, well and duly earned, to the amount of three hundred francs. The sixty five-franc pieces that he has saved are at once his title to this right and his means of making it effective.
DOI-IV-10.36 At the end of the year, then, our joiner can, if he chooses, claim from society the fulfilment of his acquired right. He can demand its satisfaction. He can choose between

The Tavern, the Theatre, and the Shop;

he can replenish his tool-chest, purchase better tools, and enable himself to make his future labor more productive. It is this acquired right that I call Capital.
DOI-IV-10.37 This being the situation of affairs, the blacksmith, his neighbor, comes to the joiner, and says: You, by your labor, your economy, and your advances, have acquired the right to draw upon society for services to the amount of three hundred francs; give me your right for a year; for I can use it in such a way as to have more hammers, more iron, more coal, in a word, to ameliorate my condition and improve my business.
DOI-IV-10.38 – It is the same with me, replies the joiner; however, I am willing to yield my rights to you and deprive myself of them for a year, on condition that you allow me to share some extent in the additional profit which you make thereby.
DOI-IV-10.39 If this transaction, profitable to both parties, is voluntarily agreed upon, who dares to pronounce it illegitimate?
DOI-IV-10.40 Here, then, we have Interest defined, and it originally appeared, as you have said, in the form of a share of the profits, of an award to Capital of a portion of the surplus profit which it helped to realize.
DOI-IV-10.41 It is this portion belonging to Capital which I regard as larger or smaller in proportion as Capital itself is scarcer or more abundant.
DOI-IV-10.42 Afterwards the contracting parties, for their own accommodation and to save themselves the trouble of watching each other, examining accounts, etc., made definite agreements concerning this portion. As metayage [The practice of farming land for half the crop. – BRT] was changed into farm-rent, and the uncertain premium of insurance into a fixed premium, so Interest, instead of remaining a variable share of the profits, has become

A Definite Remuneration.

It has a rate, and this rate, thank heaven, tends to lower in proportion to the order, industry, economy, and security prevailing in society!
DOI-IV-10.43 And certainly, if you wish Credit to be gratuitous, you are bound to prove that Capital is not the result of the labor of the lender and does not increase the productive power of the borrower.
DOI-IV-10.44 Who, then, is the loser by this arrangement? Is it the joiner, who makes a profit? Is it the blacksmith, who is enabled to increase his production and gives up only a portion of his surplus? Is it some third person in society? Is it society itself, which obtains from the blacksmith more and cheaper products?
DOI-IV-10.45 It is true that in the transactions relative to Capital there is room for fraud, cheating, extortion, and abuses by force or strategy. Have I ever denied it, and is that the point we are discussing? Are there not many transactions relative to Labor, where Capital is not involved, upon which the same reproach may be cast? And would it be any more logical to infer from these abuses the Gratuity of Credit in the first instance than the Gratuity of Labor in the second?
DOI-IV-10.46 This leads me to say a few words concerning the new line of argument suggested to you by the proceedings of the Bank of France. If anything induced me to reconsider the resolution which I had formed to close this discussion, it was the temptation to seize this opportunity to enter an energetic protest against an imputation which has been unjustly cast upon me.
DOI-IV-10.47 The charge has been made that I am a self-appointed defender of Capitalistic Privilege.
DOI-IV-10.48 No; I defend no privilege; I defend nothing but

The Rights of Capital

considered in itself. You, sir, are fair enough to recognize that we are not dealing with questions of special acts, but with a question of science.
DOI-IV-10.49 What I defend is free trade.
DOI-IV-10.50 By your theory of contradiction you render identical principles contradictory; do you wish also, by a theory of reconciliation no less surprising, to identify contradictory principles, – liberty and privilege, for example?
DOI-IV-10.51 What, then, has the privilege of the Bank of France to do with out discussion? When and where have I justified this privilege and the evil to which it gives rise? Has this evil been defended by any of my friends? Read the work of M. Ch. Coquelin, and see. [Charles Coquelin, On Credit and Banks (1848). – RTL]
DOI-IV-10.52 But when, to the end that Capital may be legitimately rewarded, you strike a blow against the illegitimate extortions of privilege, do you not thereby confess your powerlessness against the rights of Capital when exercised where liberty prevails?
DOI-IV-10.53 The issue of a thing which the public wants, – namely, bills payable to the bearer, is prohibited to all Frenchmen save one. This privilege enables him who is invested with it to reap large profits. What has that to do with the question whether Capital is entitled to receive a reward freely consented to?
DOI-IV-10.54 Notice this: Capital, which, as you say, is undistinguishable from Product, represents labor, so that from the beginning of this discussion you have not struck a single blow at the one which has not fallen with equal force upon the other; that is what I pointed out to you in my last letter, when considering your two apologues. To prove that there are cases when one is bound in honor to lend for nothing, you suppose a rich Capitalist face to face with a poor victim of a shipwreck. And you, yourself, a moment before, placed a workingman in the presence of a Capitalist about to be

Swallowed Up By the Waves.

What follows? That there are circumstances when Capital, like Labor, ought to be given away. But from that fact we can no more infer the normal gratuity of the one than of the other.
DOI-IV-10.55 Now, you speak of the misdeeds of Capital, and point me to an example of privileged Capital. I will reply by pointing you to an example of privileged Labor.
DOI-IV-10.56 Suppose a reformer, more radical than yourself, to rise in the midst of the people and say: “Labor ought to be gratuitous; Wages are robbery. Mutuum date, nil inde sperantes. And, to prove to you that the profits of Labor are illegitimate, I point you to this agent of exchange who has a monopoly of the brokerage business, this butcher who has an exclusive right to feed the town, this manufacturer who has closed all shops save his own. You see clearly that Labor has no inherent right to a reward, that that which it receives it steals, and that Wages ought to be abolished.”
DOI-IV-10.57 Surely, on hearing this reformer compare forced compensations to voluntary compensations, you would be justified in asking him this question: Where did you learn to reason?
DOI-IV-10.58 Well, sir, if you infer the Gratuity of Credit form the privilege of the Bank, I think I can turn upon you with the question which you asked me in your last letter: Where did you learn to reason?
DOI-IV-10.59 “In Hegel,” you say; “he has furnished me with an infallible logic.” Malebranche also devised a system of logic by means of which he could always avoid error; yet he was in error all his life, so much so that it has been said of this philosopher:

“Lui que voit tout en Dieu, n’y voit pas qu’il est fou.”
[“He who sees all things in God, sees there not that he is mad.”
“Lui que” is BRT’s (or the Irish World’s) misprint for “Lui qui.”
The reference is to French rationalist philosopher Nicolas Malebranche
(1638-1715) and his doctrine of the relation of human to divine cognition. – RTL]
DOI-IV-10.60 Let us, then, leave the Bank of France. Whether or no you have a clear apprehension of its evils, whether or no you

Exaggerate the Mischief

that it causes, it is privileged; that alone is sufficient to prevent it from throwing any light upon this discussion.
DOI-IV-10.61 Perhaps, nevertheless, we can find in it a point of reconciliation. Is there not a point here on which we agree? I mean that of demanding and energetically striving for liberty in transactions, as well in those which involve Capital, Specie, and Bank-Notes, as in all others. I wish that we might freely establish everywhere money-shops and lending and borrowing offices, just as we establish shoe-shops and restaurants.
DOI-IV-10.62 You believe in the Gratuity of Credit; I do not. But, indeed, what use is there in discussing it, if we are agreed upon the point that the transactions involving Credit should be free?
DOI-IV-10.63 Surely, if the nature of Capital will allow it to be lent gratuitously, it will allow it under the regime of Liberty; and you certainly have no desire to accomplish this Revolution by force.
DOI-IV-10.64 Let us, then, attack the privilege of the Bank of France, as well as all other privileges. Let us achieve Liberty, and leave it to do its work. If you are right, if it is in the nature of Credit to be gratuitous, Liberty will develop this nature, – and rest assured that, if I ever see it developed, I shall be the first to rejoice at it. I will borrow for nothing, and keep for the rest of my days, a beautiful house on the Boulevards, with furniture to match, and a million besides. My example will undoubtedly be contagious, and here will be plenty of borrowers in the world. Provided there is no lack of lenders, we shall all lead a happy life.
DOI-IV-10.65 And since the subject leads me thither, would you like me, impious man that I am, to say a word, in conclusion, concerning the metaphysics of antinomy? I have not studied Hegel, but I have read you, and this is the idea I have formed of it.
DOI-IV-10.66 Yes, there are many things which we may truly say are both good and evil, according as we look at them in their relation to human infirmity, or from

The Standpoint of Absolute Perfection.
DOI-IV-10.67 Our legs are a good, for they enable us to transfer ourselves from one place to another. They are also an evil, for they bear witness to the fact that we are not ubiquitous.
DOI-IV-10.68 So it is with every painful and efficacious remedy; it is a good and an evil: a good in that it is efficacious; an evil in that it is painful.
DOI-IV-10.69 It is true, then, that we can detect an antinomy in every one of these ideas: Capital, Interest, Property, Competition, Machinery, the State, Labor, etc.
DOI-IV-10.70 Yes, if man was absolutely perfect, he would not have to pay Interest, for Capital would spring into existence spontaneously, or rather, there would be no need of Capital.
DOI-IV-10.71 Yes, if man was absolutely perfect, he would not have to labor: a fiat would be all-sufficient for the satisfaction of his desires.
DOI-IV-10.72 Yes, if man was absolutely perfect, we should have to establish neither Government nor State. As he would have no lawsuits, he would need no judges. As he would commit neither crimes nor misdemeanors, he would need no police. As he would engage in no wars, he would need no armies.
DOI-IV-10.73 Yes, if man was absolutely perfect, there would be no property, for each one possessing, like God, abundant means of gratifying their desires, there could be no distinction imagined between thine and mine.
DOI-IV-10.74 Viewing things in this light, we can imagine that a subtle metaphysic, perverting the indisputable doctrine of human perfectibility, might say: We are approaching the time when Credit shall be gratuitous and the State shall be annihilated. Then only will society be perfect, for the ideas on which Interest and the State are based exclude the idea of Perfection.
DOI-IV-10.75 With as much truth might the same thing be said of Labor, arms, legs, eyes, stomach, intelligence, virtue, etc.
DOI-IV-10.76 And certainly this metaphysic would be guilty of

The Grossest Sophistry

if it should add: Since Society will be perfect only when it no longer recognizes Interest and the State, let us abolish the State and Interest, and we shall have a perfect Society.
DOI-IV-10.77 It might as well say: Since man will have no further use of his legs when he has acquired the faculty of omnipresence, to make him omnipresent let us cut off his legs.
DOI-IV-10.78 The sophistry consists in disguising the fact that what is here pronounced an evil is a remedy; that suppressing the remedy does not bring perfection; that, on the contrary, perfection renders the remedy useless. [The author had already presented, under another form, his refutation of this sophism; see page 57. – OC]
DOI-IV-10.79 But we can conceive how this metaphysic of which I speak might confuse and mislead people’s minds, if skillfully managed by a vigorous publicist.
DOI-IV-10.80 It would be easy, indeed, for it to exhibit, as good and evil by turns, Property, Liberty, Labor, Machinery, Capital, Interest, the Judiciary, and the State.
DOI-IV-10.81 It might name its book “Economical Contradictions.” Everything might be alternately attacked and defended. The false might always sail under the colors of the true. If the author should be a great writer, he might protect principles behind the most impenetrable of shields, while at the same time assailing them with the most dangerous weapons.
DOI-IV-10.82 His book would be an inexhaustible arsenal for and against all causes. The reader, after finishing it, would lay it down, not knowing truth from error. Frightened by the feeling that he was the victim of skepticism, he would beseech the master, saying, as was said to Kant: I pray you, reveal the hidden. [From the Pensées of French essayist Joseph Joubert (1754-1825). – RTL] But the hidden will not reveal itself.
DOI-IV-10.83 But if, like a bold knight, you enter the lists, you will not know at what point to attack this formidable champion, whose system leaves open to him

Many Doors of Escape.

Should you say to him, “I come to defend property,” he will reply, “I have defended it better than you.” And that is true. Should you say to him, “I come to assail property,” he will reply, “I have assailed it before you.” And that too is true. Whatever be the question, – whether Credit, the State, Labor, or Religion, – you will find him, book in hand, ever ready to affirm or deny.
DOI-IV-10.84 And all this solely because he has falsely deduced absolute perfection from indefinite perfectibility, which is certainly not permissible when man is a factor in the problem.
DOI-IV-10.85 But what you can say, Monsieur Proudhon, and what my feeble voice [A play on words, as Bastiat’s voice was at this time literally quite faint owing to illness. – RTL] will repeat with you, is this: Let us approach perfection in order to render more and more useless Interest, the State, Labor, and all disagreeable and painful remedies.
DOI-IV-10.86 Let us create around us order, security, economical and temperate habits, to the end that Capital may multiply and INTEREST decrease.
DOI-IV-10.87 Let us create within us the spirit of justice, peace, and harmony, that we may render more and more useless the army, the navy, the police, the judiciary, repression, in a word, the STATE.
DOI-IV-10.88 And, above all, let us achieve LIBERTY, which gives birth to all the forces of civilization.
DOI-IV-10.89 This very day, Jan. 6, 1850, [This seems to imply, surprisingly, that Bastiat had access to the other contents of La Voix du Peuple prior to publication. – RTL] La Voix du Peuple interrogates La Patrie in these words: –
“Does La Patrie wish to demand with us the suppression of the banking privilege; the suppression of monopolists, whether notaries, brokers, attorneys[,] sheriffs, printers, or bakers; liberty in the transportation of letters and the manufacture of salt, powder and snuff; the abolition of the law against combinations; the abolition of the custom-house, the city-tax, and the tax on liquors and sugar? Does La Patrie wish to support the tax on capital, the only proportional one; the disbanding of the army, and the substitution for it of the National Guard; the substitution of juries for magistrates, and the liberty of education to the fullest extent?”
DOI-IV-10.91 That is my programme; I never had any other. What follows from it? That Capital should be lent, not gratuitously, but freely.


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