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

Letter 14

Bastiat to Proudhon,
7 March 1850

[Translation by Roderick T. Long]

7 March 1850

DOI-IV-14.1 The case is heard and the debate is closed, proclaims M. Proudhon, making himself a judge in his own cause. M. Bastiat is condemned ... to death. I condemn him in his intelligence; I condemn him in his attention, in his comparisons, in his memory, and in his judgment; I condemn him in his reason; I condemn him in his logic; I condemn him by induction, by syllogism, by contradiction, by identity, and by antinomy.
DOI-IV-14.2 Oh! monsieur Proudhon, you must have been in quite a temper when you cast upon me this cruel anathema!
DOI-IV-14.3 I am reminded of the formula of excommunication:
Maledictus sit vivendo, moriendo, manducando, bibendo.
Maledictus sit intus et exterius.
Maledictus sit in capillis et in cerebro.
Maledictus sit in vertice, in oculis, in auriculis, in brachiis, etc., etc.; maledictus sit in pectore et in corde, in renibus, in genubus, in cruribus, in pedibus, et in unguibus.
[“Cursed be he in living, in dying, in eating, in drinking. Cursed be he within and without. Cursed be he in his hair and in his brain. Cursed be he in his crown, in his eyes, in his ears, in his arms, etc., etc.; cursed be he in his breast and in his heart, in his reins, in his knees, in his legs, in his feet, and in his nails.” – RTL]
DOI-IV-14.8 Alas! all churches are alike; when they find themselves in the wrong, they fly into a rage.
DOI-IV-14.9 Nonetheless I challenge the conclusion, and I protest against the closure of the debate.
DOI-IV-14.10 I challenge the conclusion, because it is not up to my adversary to pronounce it. I recognise no judge but the public.
DOI-IV-14.11 I protest against the closure of the debate, because as the defendant I ought to have the last word. [Chevé, by contrast, evidently regarded himself and Proudhon as the defendants, taking Bastiat’s Capital and Rent rather than his own letter as the first blow struck in the exchange. – RTL] M. Chevé wrote to me, I responded; – M. Proudhon wrote to me, I responded; – he wrote to me again, I responded once more; – he is pleased to address to me a fourth, a fifth, a sixth letter. The proper thing is for me to make him as many answers; and it is well to say, unless justice and propriety are also antinomies, that I am within my right.
DOI-IV-14.2 As for the rest, I shall limit myself to making my summation. Besides the fact that I cannot continue my discussion with M. Proudhon against his will, and still less when personalities begin to replace arguments, I would at present be in too unfavourable a situation.
DOI-IV-14.13 M. Proudhon is persecuted; hence all the prejudices, all the sympathies of the public would pass to his side. He had compromised the cause of gratuitous credit; behold, power rehabilitates it by placing it upon the pedestal of persecution: I had but one adversary; I would have three: M. Proudhon, the police, and popularity.
DOI-IV-14.14 M. Proudhon reproaches me for two things: first, for my perpetually keeping to the defense of my thesis, the legitimacy of interest; next, for my declining to discuss his system, the gratuity of credit.
DOI-IV-14.15 Yes, in each of my letters I applied myself to penetrating, under a variety of standpoints, the intimate nature of capital in order to deduce from it the legitimacy of interest. To any logical mind, this manner of proceeding was decisive: for it is fairly clear that the chimera of gratuitous credit evaporates once it has been demonstrated that interest is legitimate, useful, indestructible, of the same essence as all other remuneration, profit, or salary; – the just recompense for a sacrifice of time and of labour, voluntarily transferred to the party making the sacrifice by the party profiting from it; – in other words, that the loan is one of the varieties of the sale. Moreover, was it not incumbent upon me to strive to give this polemic a useful impact? And when the labouring classes, misled, attribute their sufferings to Capital, when the flatterers of the people, carelessly concurring with their prejudices, never cease to enflame them against infamous capital, infernal capital, how better could I employ my time than in exposing to all eyes the origin and the effects of the so poorly understood power, since in doing so I should also attain, at the same stroke, the precise object of our polemic?
DOI-IV-14.16 By proceeding in this manner, I gave some proof of my patriotism and self-abnegation. If I had heeded only the self-love of the author, I would have confined myself to discussing and refuting the quibbles of M. Proudhon. The role of the critic is easy and sparkling; to explain a doctrine one is under no necessity to explain is to abandon this attractive role in order to cede it to one’s adversary. I have nevertheless done just this, because I was more concerned with the polemic than with the polemicist, and with the readers rather than with myself. [Some readers have found Bastiat’s patience during the course of this discussion excessive. This paragraph and the one before it reveal with entire clarity the reason for his attitude. He attached great value to being able to diffuse some salutary truths among the workers, with the aid of the Voice of the People to boot. He would soon have gratifying reason to congratulate himself for having pursued this result. One morning, a few days before the closure of the debate, he received a visit from three workers, delegates from a certain number of their comrades who had come together under the banner of Gratuitous credit. These workers came to thank him for his good intentions, for his efforts to enlighten them on an important question. They were by no means converted to the legitimacy and utility of interest, but their faith in the contrary principle was severely shaken, and they no longer held to their lively sympathies for M. Proudhon. “M. Proudhon wishes us exceedingly well,” they said, “and we owe him much gratitude. It is a pity that the words and phrases he generally tends to seek out are so difficult to comprehend.” Finally, they expressed the wish that MM. Bastiat and Proudhon might reach agreement, and declared themselves ready to accept with eyes closed any solution whatsoever, provided that it should be proposed by the two of them together. – OC]
DOI-IV-14.17 Is this to say that I have neglected M. Proudhon’s arguments? I shall show that I have answered them all, and in so categorical a manner that he has abandoned them all in succession. I look for no further proof than this: M. Proudhon has ended where one ends when one is in the wrong; he is in a rage.
DOI-IV-14.18 I thus retrace my steps, and after having drawn the reader’s attention once more to the nature of capital, I shall review M. Proudhon’s arguments.
DOI-IV-14.19 Allow me to hark a bit farther back, merely ... to the Flood.
DOI-IV-14.20 When the waters had receded, Deucalion [The Noah figure of Greek mythology. – RTL] cast stones behind him, and men were born from them.
DOI-IV-14.21 And these men were in a pitiable condition, for they had no capital. They were deprived of arms, of nets, of tools, and they were unable to manufacture any, because for that they would have had to have some provisions. Now they could scarcely succeed in taking each day enough game to satisfy each day’s hunger. They felt themselves penned within a circle difficult to cross, and they understood that they could not have been delivered from it by all the gold in California, nor yet by as many notes as the Bank of the People could print in a year, and they said amongst themselves: capital is not all that it is said to be.
DOI-IV-14.22 However, one of these unfortunates, named Hellen, [Son of Deucalion and mythic ancestor of the Greeks (Hellenes). – RTL] more energetic than the others, said to himself: I shall rise earlier in the morning, I shall go to bed later; I shall not shrink back before any fatigue; I shall suffer hunger and produce so much that I shall an advance reserve of three days’s worth of rations. These three days I shall devote to making a bow and some arrows.
DOI-IV-14.23 And he succeeded. By dint of working and saving, he obtained a provision of game. This was the first capital that had appeared in the world since the flood. This was the starting point of all progress.
DOI-IV-14.24 And several of his fellows presented themselves to borrow this capital. Lend us these provisions, they said to Hellen, and we will return the same amount to you in a year. – But Hellen replied: If I were to lend you my provisions, I would ask to share in the advantages you would derive from them; but I have a plan, I have taken enough pains To put myself in a position to accomplish it, and I shall accomplish it.
DOI-IV-14.25 And indeed he lived three days on his accumulated labour, and during these three days he made a bow and some arrows.
DOI-IV-14.26 One of his companions presented himself anew, and said: Lend me your arms, and I will return them to you in a year. To which Hellen replied: My capital is precious. We are a thousand; only one of us can enjoy it, and it is natural that it be me, since I created it.
DOI-IV-14.27 But thanks to his bow and his arrows, Hellen was much more easily enabled than the first time to accumulate additional provisions and to manufacture additional arms.
DOI-IV-14.28 This is why he lent the former or the latter to his companions, stipulating each time a share for himself in the surplus of the game that he was putting them in a position to obtain.
DOI-IV-14.29 And despite this division, the borrowers saw their labour facilitated. They too accumulated provisions, they too manufactured arrows, nets, and other tools, with the result that capital, becoming more and more abundant, was rented on less and less expensive conditions. The first movement had been imparted to the wheel of progress, it turned with ever-increasing rapidity.
DOI-IV-14.30 Nevertheless, and despite the fact that the ease of borrowing increased unceasingly, the latecomers took a mind to grumble, saying: Why do those who possess provisions, arrows, nets, axes, saws, stipulate a share for themselves when they lend us these things? Don’t we too have the right to live, and to live well? Ought not society to provide us with all that is necessary for the development of our physical, intellectual, and moral faculties? Clearly we would be better off if we could borrow for nothing. Hence it is infamous capital that causes our wretchedness.
DOI-IV-14.31 And Hellen, having brought them together, told them: Examine attentively my conduct and that of all those who, like me, have succeeded in creating resources for themselves; you will end up being convinced that not only does it fail to do you any wrong, but it is useful for you, even if we should be hard-hearted enough to wish otherwise. When we hunt or fish, we tackle a class of animals that you cannot obtain, in such a way that we have relieved you of having to compete with us. It is true that, when you come to borrow our tools from us, we reserve for ourselves a share in the product of your labour. But first of all, this is just, since our own must surely receive its recompense as well. Next, this is necessary, for if you decide that from now on arms and nets are to be sold for nothing, who will make arms and nets? Finally, and this is what concerns you especially, despite the agreed-upon remuneration, borrowing, when you engage in it, is always profitable for you, since otherwise you would#146;t do so. It can improve your condition, it can never worsen it; for consider that the share that you give up is but a portion of the surplus that you obtain because of our capital. Thus after that share that is paid, there remains to you more, thanks to borrowing, than if you had not engaged in it, and this surplus makes easier for you the means to make provisions and tools, that is capital, for yourselves. Whence it follows that the conditions of the loan become day by day more advantageous for the borrowers, and that your sons will be in this respect be better provided for than you are.
DOI-IV-14.32 These primitive men reflected on what he had said, and found it sensible.
DOI-IV-14.33 Since that time, social relations have grown quite complex. Capital has taken a thousand different forms: transactions have been facilitated by the introduction of currency, written contracts, etc., etc.; but throughout all these complications, there are two facts that have remained and will remain eternally true, namely:
DOI-IV-14.34 1. Each time that past labour and present labour associate in the work of production, the product is divided between them according to definite proportions.
DOI-IV-14.35 2. The more abundant capital becomes, the more its share in the product is reduced. And since capital, by becoming more abundant, increases the ease with which more capital can be created, it follows that the condition of the borrower improves unceasingly.
DOI-IV-14.36 I realise that I may be asked: What have we to do with your demonstrations? Who disputes with you the usefulness of capital?
DOI-IV-14.37 Again, what I am asking the reader to consider is not the absolute and uncontested usefulness of capital, nor even its usefulness in relation to those who possess it, but above all its usefulness for those who do not possess it. That is where economic science lies, that is where the harmony of interests reveals itself.
DOI-IV-14.38 Science itself may be impassive, but the scientist carries within his chest the heart of a man; all his sympathies are engaged on behalf of those disinherited by fortune, to those of his brothers who succumb to the triple yoke of physical, intellectual, and moral needs unsatisfied. It is not from the point of view of those overflowing with wealth that the science of wealth is of interest. What we desire is the continual approximation of all men to an ever rising level. The question is whether this humane evolution is to be accomplished by liberty or by constraint. If, then, I did distinctly perceive how capital is profitable even to those who do not possess it, how, under a regime of liberty, it increases itself, universalises itself, and levels itself unceasingly; if I had the misfortune to see in capital only the advantage of the capitalists, thus grasping only one side, and assuredly the narrowest and least consoling side, of economic science, I would turn myself into a Socialist; for in one way or another it is necessary that inequality be progressively erased, and if this revolution were not to be found within liberty’s embrace, then like the socialists I would appeal to the law, to the State, to compulsion, to artifice, to utopia. But it is my joy to recognise that artificial arrangements are superfluous where liberty suffices, that God’s intentions are superior to those of the legislator, that true science consists in understanding the divine handiwork, not in imagining a different one in its place; for it is God indeed who has created the marvels of the social world no less than those of the material world, and surely one of these has not earned his smile less than the other: Et vidit Deus quod esset bonum [“And God saw that it was good,” Genesis 1:10, 12, 18, 21, 25, with variants at 1:4 and 1:31. – RTL] Our task, then, is not to change the laws of nature, but to know them in order to conform ourselves to them.
DOI-IV-14.39 Capital is like light. [Coming on the heels of the Genesis reference, this is probably meant to put the reader in mind of Genesis 1:3-4’s “And God said, Let there be light: and there was light. And God saw the light, that it was good.” – RTL]
DOI-IV-14.40 Once there was a hostel in which some men were blind and others clear-sighted. The former were undoubtedly more unfortunate, but their misfortune was not the result of the latter’s capacity for sight. Quite to the contrary, in their daily arrangements those who could see rendered services to those who could not see, services that the latter could never have managed for themselves, and that force of habit prevented them from sufficiently appreciating.
DOI-IV-14.41 But it so happened that hatred, jealousy, and distrust broke out between the two classes. The clear-sighted ones said: Let us refrain from pulling back the veil which covers the eyes of our brothers. If their sight should be returned to them, they would take up the same work as ourselves; they [Reading ils for il. – RTL] would make competition for us, they would lower the price of our services, and what would become of us?
DOI-IV-14.42 The blind, for their part, exclaimed: The greatest of all goods is equality; and if we, so like our brothers, cannot see, then they, like us, must lose their sight. [Reading et si, si for et, si; otherwise the phrase would seem to mean “if we, like our brothers, cannot see,” which would imply that the sighted brothers are already blind, as well as placing the comma oddly. – RTL]
DOI-IV-14.43 But one man, who had studied the nature and effects of the transactions which were being accomplished in the hostel, said to them:
DOI-IV-14.44 Passion is leading you astray. You who can see, you suffer from the blindness of your brothers, and the community would attain a far higher sum of material and moral enjoyments, far less dearly bought, if the gift of sight had been made to all. You who cannot see, give thanks to Heaven that others can see. They can carry out, and help you to carry out, a multitude of things from which you profit, and of which you would otherwise have been eternally deprived.
DOI-IV-14.45 Yet this comparison is at fault in one essential point. The solidarity between the blind and the clear-sighted is far from being as intimate as that which binds proletarians to capitalists; for if those who can see render services to those who cannot see, these services do not go so far as to restore their sight, and equality is forever impossible. But the capital of those who possess it, in addition to being useful at present for those who do not possess it, makes easier for these latter the means of acquiring it.
DOI-IV-14.46 It would thus be more just to compare capital with language. What madness would it not be in infants [Infant, in fans, not speaking. – OC. The French word “enfant” can mean either “infant” or “child”; the previous note is explaining that the former is meant. Actually, however, the Latin phrase in-fans in practice meant not “unable to speak” but something more like “ineligible to perform legally recognised speech-acts,” as it applied to children through the age of seven. – RTL] to feel jealousy toward adults over the faculty of speech, and to behold therein an irremediable principle of inequality; since it is precisely because the adults can speak today that the infants will be speaking tomorrow!
DOI-IV-14.47 Do away with speech in adults, and you shall have equality in brutishness. Let speech have liberty, and you open up a chance for equality in intellectual advancement.
DOI-IV-14.48 Likewise, do away with capital (and to do away with its recompense would certainly do away with it), and you shall have equality in wretchedness. Let capital have liberty, and you shall have the greatest possible total chance of equality in wellbeing.
DOI-IV-14.49 That is the idea that I have struggled to make emerge from this polemic. M. Proudhon reproaches me for it. If I have one regret, it is not having devoted enough space to it. I was prevented from doing so by the need to respond to the arguments of my adversary, who now reproaches me for not having responded to any of them. That is what remains to be seen.
DOI-IV-14.50 The first objection that was addressed to me (this one from M. Chevé) consists in maintaining that I confuse property with use. The lender, he said, yields only the use of the property, and cannot receive in return a permanent property.
DOI-IV-14.51 I answered that exchange is legitimate when it is made freely and voluntarily between two equal values, whether or not one of these values attaches to a material object. Now the use of a useful property has a value. If I lend, for a year, the field that I have enclosed, cleared, and drained, I have a right to remuneration that is susceptible of valuation. Given that it receives valuation, even though I am paid in material objects like wheat and currency, what have you to say against it? Do you wish to prohibit three-quarters of the transactions that men voluntarily make amongst themselves, probably because it suits them to do so? You are always telling us to emancipate ourselves, yet you offer us nothing but new fetters.
DOI-IV-14.52 At this point M. Proudhon, intervening, abandoned M. Chevé’s theory and raised up antinomy against me. Interest is legitimate and illegitimate at the same time, said he. It implies a contradiction, like property, like liberty, like everything; for contradiction is the very essence of phenomena. I replied that on this principle, neither he nor I nor any man could ever be either in the right or in the wrong on this subject; that to adopt this starting-point is to rule out ever reaching any solution, since it implies proclaiming in advance that every proposition is true and false at the same time. Such a theory not only discredits all reasoning, it goes so far as to impeach the very faculty of reason. What, in any discussion, is the sign by which one may recognise that one of the two adversaries is in the wrong? It is his being forced to admit that his arguments are self-contradictory. Yet it is precisely when M. Proudhon is reduced to this point that he declares victory. I contradict myself, therefore I am in the right, because contradiction is the essence of phenomena. Surely I could have refused combat if M. Proudhon had insisted on my taking up such logic as my own weapon.
DOI-IV-14.53 I went further, however, and took pains to show how M. Proudhon had succumbed to the theory of contradictions. I attribute it to his inferring from perfectibility to absolute perfection. Now it is true that absolute perfection is, for us, contradictory and incomprehensible; and that is why we believe in God but cannot explain him. We cannot conceive of anything without limits, and every limit is an imperfection. Yes, interest bears witness to a social imperfection. It is the same with labour. Our members, our organs, our eyes, our ears, our brain, our nerves likewise bear witness to a human imperfection. The perfect being is not imprisoned in such machinery.
DOI-IV-14.54 But there is no reasoning more vicious than that which would consist in saying: since interest bears witness to a social imperfection, to achieve social perfection we must do away with interest. This is precisely to doaway with th remedy for the evil. One might as well say: since our nerves, our organs, our brain bear witness to limitation, and thus to a human imperfection, let us do away with these things, and man will be perfect.
DOI-IV-14.55 That is how I answered, and M. Proudhon, as far as I can see, made no reply.
DOI-IV-14.56 He made no reply, but he invoked the theory of compensations.
DOI-IV-14.57 We do not ask, he says, that one should lend for nothing, but rather that there shall be no more occasion for lending. What we aspire to is not precisely the abolition but rather the compensation of interest. We desire to achieve a situation where, in any exchange, the outlay of capital and labour is the same for all shares.
DOI-IV-14.58 Chimera and despotism, I answered. You will never bring it about that one of M. Bidault’s skilled artisans will put accumulated labour and present labour into his services in the same proportions as the maker of stockings. So long as the values exchanged are equal, what does the rest matter? You seek compensation? but you have it under the regime of free exchange. Valuation is the comparison of present labour with present labour, of past labour with past labour, or, finally,of present labour with past labour. By what right do you seek to do away with this latter form of valuation; and in what respect will men be better off when they are less free?
DOI-IV-14.59 That is how I answered, and M. Proudhon, as far as I can see, made no reply.
DOI-IV-14.60 He made no reply, but going all out against the capitalist, he dealt him this terrifying and familiar kick: the capitalist has no right to any remuneration, because he does not deprive himself. He does not deprive himself of the item he hands over, since he would not have been able to make personal use of it.
DOI-IV-14.61 I answered that this contained a wretched equivocation, which render a sale just as criminal as a loan. If man were not a sociable being, he would be obliged to produce directly all the objects necessary for the satisfaction of his needs. But he is sociable; he engages in exchange – whence the division of labour and the separation of occupations. That is why each person makes just one kind of article, and makes much more of it than he can personally consume. This surplus he exchanges for other articles which he does not make, and which are indispensable to him. He works for others and the others work for him. Undoubtedly, he who makes two houses and lives in only one does not deprive himself personally when he leases it to another. He would not deprive himself any more by selling it; and if on this theory lease-price is robbery, then sale-price is equally so. The hatter who has a hundred hats in his shop, when he seels one of them does not deprive himself personally, in the sense that he is not reduced to going bareheaded. The editor of M. Proudhon’s books, who has a thousand copies of them in his warehouse, does not deprive himself personally as a result of his sales, because a single copy would suffice for his instruction; the lawyer and the physician who offer counsel do not deprive themselves. Thus your objection attacksnot interest alone, but the very principle of transactions and of society. It is certainly a deplorable thing to be reduced, in the nineteenth century, to refuting seriously such equivocations, such puerilities. That is how I answered, and M. Proudhon, as far as I can see, made no reply.
DOI-IV-14.62 He made no reply; but he undertook to invoke what one might call the doctrine of metamorphoses:
DOI-IV-14.63 Interest was formerly legitimate, at a time when all transactions were tainted with violence. It is illegitimate today under the regime of right. Have not many institutions been good, just, useful to humanity, which nowadays would be abusive? Such are slavery, torture, polygamy, trial by combat, etc. Progress, the great law of humanity, is nothing else but this transformation of good into evil and evil into good.
DOI-IV-14.64 I answered that this represented a fatalism as pernicious in morals as antinomy is disastrous in logic. What! according to the caprice of circumstance, what had been respectable becomes odious, and what had been iniquitous becomes just! I reject with all my force this indifference between good and evil. Actions are good or evil, moral or immoral, legitimate or illegitimate in virtue of themselves, in virtue of the motives that determine them, in virtue of the consequences they entail, and not in virtue of considerations of times and places. Never shall I be convinced that slavery was formerly legitimate and good; that it was useful that some men reduce others to servitude. Never shall I be convinced that subjecting an accused person to inexpressible torments was a legitimate and good means to make him tell the truth. That humanity had no ability to escape from these horrors I grant. Perfectibility being its essence, evil must be found at its beginnings; but it is no less evil, and rather than assisting the process of civilisation, it retards it.
DOI-IV-14.65 Is remuneration that is voluntarily granted to past labour, is recompense that is freely accorded to a sacrifice of time, is interest, in a word, an atrocity like slavery, an absurdity like torture? It is not enough to assert such a claim; it must be proven. From the fact that in antiquity there were abuses which have since ceased, it does not follow that all the usages of those times were abuses and must cease.
DOI-IV-14.66 That is how I answered M. Proudhon, who did not persist.
DOI-IV-14.67 He did not persist, but he made a new and no less strange flight into history.
DOI-IV-14.68 Interest, he maintained, was born from the contrat de pacotille. When for a maritime expedition one man provided a Ship and Merchandise, and another Talent and Labour, the profit was divided between them in agreed-upon proportions.
DOI-IV-14.69 Nothing more natural and more just, I replied, than such a division. Only it has no necessary connection to operations that are carried out at sea. It embraces the totality of human transactions. You here make into an exception what is the universal rule; and by this means you undermine interest, because the exception is always prejudged to be illegitimate, whereas nothing better proves the legitimacy of a rule than its universality. The day when a savage lent his weapons on condition of having a share of game, the day when a herder lent his herd on condition of having a share of the increase; on that day, which no doubt dates back to the beginning of societies, the principle of interest was born; for interest is simply the arrangement made between past labor and present labour, whether it is a matter of exploiting the earth, the sea, or the air. Ever since, and when experience had permitted this advance, capital’s share for risk incurred became fixed, just as sharecropping was transformed into tenant-farming; interest was regularized without changing its nature.
DOI-IV-14.70 That is how I answered, and M. Proudhon made no reply.
DOI-IV-14.71 He made no reply; but he threw himself, uncharacteristically, into a sentimentalist argument. He must have been close to the end of his resources to resort to such a thing.
DOI-IV-14.72 Thus he proposed extreme cases to me in which a man could not without horrific consequences demand remuneration for a loan. For example, may a rich proprietor living on the coast, who should give shelter to a castaway and lend him some clothing, push his demands to the extreme limit?
DOI-IV-14.73 I answered M. Proudhon ... or rather M. Proudhon answered himself by means of another example, from which it results that in certain extreme cases, remuneration for a sale, or even for labour, would be quite as abominable as remuneration for a loan. Such would be the case of a man who, before offering his hand to his brother who was being engulfed in the waves, should demand the highest price that he could obtain in these circumstances.
DOI-IV-14.74 Thus this argument of M. Proudhon’s attacks not only interest, but all remuneration: a sure means of establishing universal gratuity.
DOI-IV-14.75 Moreover, it opens the door to all those sentimentalist theories (which M. Proushon combats with so much force and reason) that seek at all costs to base the affaits of this world on the principle of self-abnegation.
DOI-IV-14.76 Finally, like Proteus of Fable, [In Greek mythology, the “Old Man of the Sea” who when captured took on one form after another in his efforts to escape. – RTL] of whom it was said: “to vanquish him, one must wear him out,” M. Proudhon, hunted from contradiction to compensation, from compensation to deprivation, from deprivation to transformation, from transformation abnegation, has suddenly quit the controversy and arrived at execution. [The double meaning of “execution” works in French as well as in English. – RTL]
DOI-IV-14.77 The means of execution which he proposes in order to achieve gratuity of credit is paper money. – I have not so named it, he says. – This is true. But what else is it, then, when a national bank lends to all comers, and gratuitously, supposed capital in the form of notes?
DOI-IV-14.78 Evidently we find here once again this fatal and so inveterate error which produces a confusion between the instrument of exchange and the object exchanged, an error of whose seed M. Proudhon allowed us a glimpse in his earlier letters, when he said: It is not things which make wealth, but circulation. – And again, when he calculated that the interest rate in France was 160 percent, because he compared all the rents paid to capital in terms of cash.
DOI-IV-14.79 I had posed to M. Proudhon the following dilemma: either your national Bank will lend notes indiscriminately to all those who present themselves; in which case circulation will be so saturated with notes that they will be depreciated, – or else it will not yield them up except with discernment: and then your goal is not attained.
DOI-IV-14.80 It is clear, indeed, that if each person can show up and be provided gratis with fictitious currency at the Bank, and if this currency is received at its normal value, the notes issued will have no limit and will rise to over fifty billion by the end of the first year. The effect will be the same as if gold and silver were to become as common as mud. – The illusion that consists in believing that wealth is multiplying, or indeed that circulation is stimulated, in proportion as the instrument of exchange is increased, ought not to enter the head of any writer on public affairs who discusses economic questions nowadays. We all know by our own experience that inasmuch as cash bears interest no more than banknotes do, each person keeps in his coffers or his wallet no more than the least possible; and consequently the quantity that the public demands of it is limited. One cannot increase it without depreciating it, and all that results from this increase is that for each exchange one needs two ecus, or two notes, instead of one.
DOI-IV-14.81 What takes place at the Bank of France is lesson that must not be lost sight of. For the past two years it has issued many notes. But the number of transactions has not increased. This depends on other causes, and these causes have acted in the direction of a reduction in business. Now how did this come to pass? Thanks to the fact that as the Bank issued notes, cash flowed into its vaults, so that one instrument of exchange was substituted for another. That is the whole story.
DOI-IV-14.82 I go farther: it is possible for transactions to increase without the instrument of exchange increasing. There is more business in England than in France, and yet the total sum of notes and specie is less there than here. Why? Because the English, through the intermediary of the bankers, fill out plenty of balance-sheets with transfers of debts from one party to another.
DOI-IV-14.83 According to M. Proudhon’s ideas, his bank has as its object to reduce payments to the transfers of debts from one party to another. This is precisely what ecus do, albeit in a fairly expensive manner. Banknotes are a mechanism that delivers the same result at a lower cost; and the Clearing-House [“Clearing-House” in English in the original. – RTL] is less costly still. But whichever manner one chooses for balancing payments, what do these various procedures, more or less developed, have to do with the principle of interest? Is there a single one of them that can make it the case that past labour need not be remunerated and that time does not have its price?
DOI-IV-14.84 To flood circulation with notes is thus a means neither to the increase of wealth nor to the destruction of rent. Moreover, to dispense notes to all comers is to send the bank to bankruptcy within six months’s time.
DOI-IV-14.85 Now M. Proudhon flees the first horn of my dilemma and takes refuge in the second.
DOI-IV-14.86 “The Bank of France may conduct its affairs with prudence and severity, as it has done hitherto. That is no concern of mine.”
DOI-IV-14.87 That is no concern of yours! What! you dream up a new bank that is supposed to bring gratuitous credit to everybody, and when I ask you whether it will lend to everybody, you reply, to escape the conclusion that threatens you, that is no concern of mine!
DOI-IV-14.88 But despite saying that it is no concern of yours, you add “that the new bank will conduct its affairs with prudence and severity.” Either that means nothing, or it means it will lend solely to those who can answer for being able to repay.
DOI-IV-14.89 But what now becomes of Equality, which is your idol? and do you not see that instead of rendering men equal as regards credit, you are setting up an inequality more shocking than the one you are claiming to destroy?
DOI-IV-14.90 In your system, the rich will indeed borrow gratis, while the poor will not be able to borrow at any price.
DOI-IV-14.91 When a rich man presents himself at the bank, he will be told: You are solvent, here is the capital, we lend it to you for nothing.
DOI-IV-14.92 But let a worker dare to show his face. He will be asked: Where are your guarantees, your lands, your houses, your goods? – I have only my arms and my probity. – That does not reassure us, we must act with prudence and severity, we cannot lend to you gratis. – Well, then: lend to us, to my companions and myself, at rates of 4, 5, or 6 percent, this will be an insurance premium whose product will cover your risks. – What are you thinking of? Our law is to lend gratis or not lend at all. We are too philanthropic to make anyone pay us for doing nothing; this applies to the poor man no less than to the rich one. That is why the rich man obtains gratuitous credit at our establishment, and why you will have none, whether you pay or not.
DOI-IV-14.93 To help us comprehend the marvels of his invention, M. Proudhon subjects it to a decisive test, that of commercial bookkeeping
DOI-IV-14.94 He compares two systems.
DOI-IV-14.95 In one, the worker borrows gratis (we have just seen how); then, by grace of the axiom all labour leaves a surplus, he realizes a 10 percent profit.
DOI-IV-14.96 In the other, the worker borrows at 10 percent. The economic axiom does not reappear, and he accordingly suffers a loss.
DOI-IV-14.97 Applying bookkeeping to these assumptions, M. Proudhon proves to us by means of figures that the worker is much better off in the first case than in the second.
DOI-IV-14.98 I had no need of double entry bookkeeping to be convinced of that.
DOI-IV-14.99 But I must point out to M. Proudhon that his bookkeeping begs the question. I was never in any doubt that it would be very agreeable to have, without paying anything, the use of well-furnished houses, well-kept grounds, powerful tools and equipment. It would be still more agreeable if larks might drop, already roasted, into our mouths, and whenever M. Proudhon likes I shall prove it to him by means of debit and credit.
DOI-IV-14.100 I thus permitted myself to point out to M. Proudhon that what I disputed was not the accuracy of his bookkeeping, but rather the truth of the data on which it was based.
DOI-IV-14.101 His answer is curious:
“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.”
DOI-IV-14.103 I beg M. Proudhon’s pardon, but I am forced to inform him that courts of justice are not limited, like the Court of Accounts, to examining whether the bookkeeping is regular and the accounts balance. They investigate, in addition, whether or not false data have been introduced.
DOI-IV-14.104 But truly, M. Proudhon has an unparalleled imagination for coming up with convenient methods of enriching oneself, and in his place I should hasten to abandon gratuitous credit as a superannuated, complicated, and questionable apparatus. It has been outdistanced, and by a long way too, by bookkeeping, which is in itself a proof of the truth of its own data.
DOI-IV-14.106 Have two sous in your pocket, that’s all that’s needed. Buy a sheet of paper. Write out upon it an account pro forma, the most Californian [Meaning the most extravagantly optimistic as regards financial returns; a reference to the California Gold Rush, which was ongoing at the time of the Bastiat-Proudhon exchange. – RTL] that you can dream up in your brain. Posit, for example, that you purchase, at a low price and on credit, a ship which you fill with sand and pebbles gathered from the seashore, that you send the whole load off to England, that you receive in exchange an equal weight of gold, silver, lace, precious stones, cochineal, vanilla, perfume, etc.; that upon the ship’s return to France the buyers vie with one another for your opulent cargo. Put it all down in figures. Draw up your double entry bookkeeping. Make sure it is exact – and you will be in a position to say of Crœsus what M. Rothschild said of Aguado: “He left thirty million, I had thought him more comfortably situated.” – Because your bookkeeping, so long as it conforms to the laws of M. Juvigny, implies the truth of your data. [Crœsus: 6th century BCE King of Lydia; his name has become a byword for great wealth. Rothschild: this might refer to any of several members of the famously wealthy German banking family, but probably refers to Baron James Mayer de Rothschild (1792-1868), who spent much of his life in Paris. Aguado: Spanish banker and naturalized French citizen Alexandro Maria Aguado, marquis de Las Marismas del Guadalquivir, viscount de Monte Ricco (1784-1842). Juvigny: Presumably financial writer Jean-Baptiste Juvigny (1772-1836). – RTL]
DOI-IV-14.107 There has yet to come within my cognizance any more convenient means of enriching oneself than this one, though it be that of the son of Æolus. [Greek mythology contains multiple Æoluses with multiple sons, but Bastiat probably means Sisyphus, famous inter alia for theft and trickery. – RTL] I recommend it to M. Proudhon.
DOI-IV-14.108 “He took into his head to go out into all the crossroads, where he cried out continually in a raucous voice: People of Betica, do you wish to be wealthy? Imagine that I am very much so, and that you are very much so as well. Convince yourself every morning that your fortune has doubled during the night. Rise then, and if you have creditors, pay them with whatever you shall have imagined, and tell them to imagine it in their turn.” [Persian Letter no. 142. – OC. By Montesquieu (1689-1755). – RTL]
DOI-IV-14.109 But at this point I leave M. Proudhon, and in bringing this polemic to a close, I address myself to the socialists, and entreat them to examine impartially – not from the standpoint of the capitalists, but in the interest of the workers – the following questions:
DOI-IV-14.110 Must a man’s legitimate remuneration be precisely the same, whether he devotes his present day’s work to production, or instead devotes tools, the fruit of past labour, to production?
DOI-IV-14.111 No one will be so bold as to maintain it. There are two elements in remuneration, and who can object? Will it be the buyer of the product? But who does not prefer to pay 3 francs per day for a joiner equipped with a saw, rather than pay 2 francs 50 centimes for the same joiner making planks with his ten fingers?
DOI-IV-14.112 Here the two elements in work and remuneration are in the same hands. But if they are separated and then join in association, is it not just, useful, inevitable that the product should be divided between them according to definite proportions?
DOI-IV-14.113 When it is the capitalist who undertakes an enterprise at his own risk, the remuneration of labour is often fixed and is called wages. When it is the labourer who undertakes the enterprise and runs the risks, it is the remuneration of capital that is fixed, and is called interest. [See the chapter Wages, in Economic Harmonies. – OC]
DOI-IV-14.114 One may believe in more developed arrangements, in a tighter association between risk and recompense. This was the path that socialism has lately explored. This fixity of one of the two terms has struck it as retrograde. I could demonstrate that it is actually a form of progress, but non est hic locus. [“Here is not the place.” RTL]
DOI-IV-14.115 Here is one school – and it proclaims itself the entirety of socialism – that goes still further. It affirms that all recompense must be denied to one of the two elements in production, to capital. And this school has inscribed on its banner: Gratuitous credit in place of its former motto: Property is robbery!
DOI-IV-14.116 Socialists, I appeal to your good faith, is this not the same meaning under other words?
DOI-IV-14.117 It is not possible to contest, in principle, the justice and usefulness of a shared distribution between capital and labour.
DOI-IV-14.118 What remains to be ascertained is the law of this shared distribution.
DOI-IV-14.119 And you will find it without delay in the following formula: the more abundant one of the two elements is in relation to the other, the more its proportional share decreases, and vice versa.
DOI-IV-14.120 And if this is so, the propaganda of gratuitous credit is a calamity for the working class.
DOI-IV-14.121 For just as the capitalists would be doing themselves a injury, after proclaiming the illegitimacy of wages, they should reduce the workers to dying or expatriating, in the same way the workers commit suicide when, having proclaimed the illegitimacy of interest, they force capital to disappear.
DOI-IV-14.122 If this fatal doctrine should become widespread, if it may be assumed that the voice of universal suffrage would not hesitate to invoke the assistance of the law, that is to say organised force, is it not evident that terrified capital, threatened with the loss of its right to any recompense, should be constrained to flee, to hide itself, to disappear? There will be fewer enterprises of any kind, in relation to a number of workers that remains the same. The result can be expressed in two words: a rise in interest and a fall in wages. [It’s not two words in French either. – RTL]
DOI-IV-14.123 There are pessimists who maintain that this is just what the socialists want: that the worker should suffer; that order should be unable to reassert itself; that the country should be forever on the edge of an abyss. – If there exist beings so perverse as to form such wishes, may society stigmatise them and may God judge them!
DOI-IV-14.124 As for me, it is not my task to pass sentence on intentions in which I in any case do not believe.
DOI-IV-14.126 But I say: Gratuity of credit is scientific absurdity, antagonism of interests, class hatred, barbarism.
DOI-IV-14.127 Liberty of credit is social harmony, it is right, it is respect for independence and human dignity, it is faith in progress and the destiny of society.


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