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

Letter 4

[Letter 3 by Tucker’s numbering]

Bastiat to Proudhon,
26 November 1849

[Translation (as “THE USURY DEBATE – Bastiat’s Defence of the Right of Increase. – IS CAPITAL LABOR’S FOE? – Proudhon Charged with Repeated Contradictions. – AN ANALYSIS OF THE LABORER’S WAGES. – Interest the Reward of Abstinence, Skill, and Previous Labor, – AND A MATERIAL BENEFIT TO THE CONSUMER. – The Hostility of Claims Characterized as Material and Moral Suicide. – INTEREST AND PRINCIPAL. – LETTER THREE. – BASTIAT TO PROUDHON. – [TRANSLATED FOR THE IRISH WORLD BY BENJ. R. TUCKER.]”) by Benjamin R. Tucker, in The Irish World and American Industrial Liberator, 2 August 1879.]

PARIS, NOV. 26, 1849.

DOI-IV-4.1 SIR. – You ask me seven questions. Do you forget that we are concerned at present with but one –

Is Interest on Capital Legitimate?

DOI-IV-4.2 This question is full of tempests. It must be cleared of them. In accepting the frank hospitality of your columns, I did not contemplate an analysis of all the possible contrivances of credit which the fertile genius of Socialists may invent. I am asked whether Interest, which is an element in the price of all things, is extortion; whether, in consequence, the world is divided into Capitalists robbing and Laborers robbed. I do not think so, but there are others who do. To decide whether I have the truth or they, is to decide whether the future in reserve for our dear country is peace or a bloody and inevitable war. The question is deserving, therefore, of serious attention.
DOI-IV-4.3 Let us agree upon this starting point. Our work should be confined to the destruction of the fatal errors and dangerous prejudices which now fill the minds of the masses. We should exhibit Capital to the people, not as a greedy parasite, but as a friendly and fruitful power. We should exhibit it to them – and here I almost reproduce your own words – accumulating by activity, order, economy, foresight, division of labor, peace, and public security; distributing itself, by virtue of liberty, among all classes; putting itself more and more within the reach of all by the growing moderation of its claim for reward; and, finally, relieving humanity of the burden of fatigue and

The Tyranny of Want.
DOI-IV-4.4 But how are we ever to rise to other views of the Social problem when to this first question, Is Interest on Capital legitimate? you reply: YES and NO?
DOI-IV-4.5 YES; because “It is very true that a loan is a service, and as every service has a value, and, in consequence, is entitled by its nature to a reward, it follows that a loan ought to have its price, that it ought to bear Interest.”
DOI-IV-4.6 NO; because “A loan, by the Interest which results from it, yields a profit which enables the Capitalist to live without working. Now, to live without working, is, in political as well as moral economy, a contradictory proposition, an impossible thing.”
DOI-IV-4.7 YES; because “The fundamental denial of Interest does not destroy, in our view, the principle, the right which gives birth to Interest. The real problem before us is not to ascertain whether Usury has an excuse for its existence; on this point we agree with the economists.”
DOI-IV-4.8 NO; because “We deny, with Christianity and the Bible, the legitimacy, per se, of lending at Interest.”
DOI-IV-4.9 YES; because “Usury has been, as a providential institution, simply an instrument of equality and progress.”
DOI-IV-4.10 NO; because “Everything which, in returning a loan, is given in excess of the loan is Usury, Spoliation.”
DOI-IV-4.11 YES and NO, finally; because “Socialism aims to convert neither party; the Church, which denies Interest, nor Political Economy, which supports it, especially as it is convinced that both are right.”
DOI-IV-4.12 There are those who say that Mr. [sic; BRT otherwise uses “M.” throughout. – RTL] Proudhon invents these contradictions for the sake of intellectual amusement. Still others say that these are only pistol-shots which M. Proudhon fires into the street to bring the public to the windows. For my part, knowing that you apply them to all subjects – Liberty, Property, Competition, Machinery, Religion – I regard them as a sincere and serious conception of your mind.
DOI-IV-4.13 But, sir, do you imagine that the people can log follow you in your labyrinth of Antinomies? Their minds have not been trained on the worm-eaten benches oif the Sorbonne. The famous sayings, Quidquid dixeris, argumentabor, and ego vero contra, [“Whatever you say, I shall argue,” and “I maintain the contrary.” – RTL] are not suited to their plain-spoken ways. They wish to find

The Bottom of Things

and they feel instinctively that at the bottom of things there is either a yes or a no, but that both cannot be there together. Not to leave the subject which immediately concerns us, they will say to you: – Interest surely must be either legitimate or illegitimate, just or unjust, providential or satanic, property or robbery. A contradiction, to be sure, is very difficult of acceptation, even by subtle intellects, much more so by the people.
DOI-IV-4.14 If I stop with the first half, and, I make bold to say, the best half, of your thesis, I must ask you in what respect you differ from the Economists?
DOI-IV-4.15 You admit that to advance Capital is to render a service which entitles one to an equivalent service susceptible of valuation and called Interest.
DOI-IV-4.16 You admit that the only way to ascertain the equivalence of these two services is to allow them to exchange for each other freely, for you oppose State interference, and proclaim, at the beginning of you article, the liberty of the man and the citizen.
DOI-IV-4.17 You admit that Interest has been, as a providential institution, an instrument of equality and progress.
DOI-IV-4.18 You admit that, by the accumulation of Capital (which surely would not accumulate if all remuneration were denied it), Interest grows less and less, and tends to place within easier reach of the more numerous classes tools, raw material, and provisions.
DOI-IV-4.19 You admit that the obstacles which stand in the way of this desirable distribution of Capital are artificial, and are called privileges, restrictions, monopolies; that they cannot be the necessary result of Liberty, for you appeal to Liberty.
DOI-IV-4.20 Here we have a doctrine which, by its simplicity, its grandeur, its harmony, and the perfume of justice which it exhales, forces itself upon the mind, attracts the heart, and fills all the recesses of the intellect with the feeling of certainty. Why, then,

Do You Reproach Political Economy?

Is it for having rejected the different formulas – and consequently for having refused to take the name – of Socialism? Yes, it has opposed St. Simonism and Fourierism; you have opposed them as well. Yes, it has criticised the theories of the Luxembourg; [The Luxembourg Palace, site of the French Senate. – RTL] you have criticised them as well. Yes, it has struggled against Communism; you have done more, you have crushed it.
DOI-IV-4.21 In agreement with Political Economy concerning Capital, its origin, its mission, its rights, and its tendencies; in agreement with it concerning the principle to be promoted, Liberty; in agreement with it concerning the enemy to be opposed, the unwarrantable interference of the State with honest transactions; in agreement with it in its struggles against the former manifestations of Socialism – how happens it that you turn against it? It is because you have found in Socialism a new formula, the contradiction, or, if you prefer, the antinomy. That is why you administer to Political Economy the following rebuke: –
DOI-IV-4.22 You are a hundred years old. You are not up with the questions of the day. You see but one side of the question. You take your stand on the legitimacy and utility of Interest, and you are right, for it is useful and legitimate; but you do not perceive that at the same time it is harmful and illegitimate. This contradiction astonishes you; it is the glory of neo-socialism to have discovered it, and that is why it passes your understanding.
DOI-IV-4.23 Before accepting your invitation to reconcile these contradictory premises, it is necessary to find out whether the contradiction exists, and we are thereby led more and more to the investigation of this question: –
DOI-IV-4.24 Is Interest on Capital legitimate?
DOI-IV-4.25 But what can I say? My eyes are fixed on the sword of Damocles which you hold suspended over my head. The more conclusive my arguments, the more you will rub your hands, crying: My thesis could not be better proved. But if from the lowest depth of Communism

A Sophistical Refutation

of my arguments shall appear, you still will rub your hands, crying: – See the support which comes to my antithesis! Oh, antinomy! thou art indeed an impregnable citadel; thou resemblest skepticism, feature for feature. How convince Pyrrho, who says to you: – I doubt if you speak to me or if I speak to you; I doubt if you are and if I am; I doubt if you affirm; I doubt if I doubt?
DOI-IV-4.26 Let us see, nevertheless, on what foundation you base the second half of your antinomy.
DOI-IV-4.27 You first appeal to the Fathers of the Church, Judaism and Paganism. Permit me to take exceptions to these as economic authorities. You yourself admit that Jews and Gentiles have said one thing and done another. When one is studying the general laws which society obeys, the manner in which men universally have acted has more weight than any words.
DOI-IV-4.28 You say: – “He who lends does not deprive himself of the Capital which he lends. He lends it, on the contrary, because the loan is not a deprivation to him. he lends it because he has no use for it himself, being sufficiently provided with Capital without it. He lends it finally, because he neither intends, nor is able, to make it valuable to him personally.” [The argument based on the capitalist’s not depriving himself is not employed exclusively by socialists. To consider the deprivation undergone by the lender as an important element in the legitimacy of interest is an opinion which was maintained on 15 June 1849, in the Journal des Économistes, on the occasion of the recently published Capital and Rent. – OC]
DOI-IV-4.29 And what matters it if he has created it by his labor for the express purpose of lending it? This is only a quibble upon the necessary effect of the separation of industries. Your argument is as valid against selling as loaning. Do you desire the proof? I will reproduce your words, substituting sale for loan and hatter for capitalist.
DOI-IV-4.30 “He who sells,” I will say, “does not deprive himself of the hat which he sells. He sells it, on the contrary, because the sale is not a deprivation to him. He sells it because he has no use for it himself, being sufficiently provided with hats without it. He sells it, finally, because he neither intends nor is able to make it useful to himself personally.”
You Bring Forward Compensation

also in support of your antithesis.
DOI-IV-4.32 “You lend me, at Interest, the plane which you have made for smoothing your planks. If, in my turn, I lend you the saw which I have made for cutting up my lumber, I also shall be entitled to Interest. ... If equal amounts of capital are advanced, the interests canceling each other, the balance will be zero.”
DOI-IV-4.33 Undoubtedly; and if the amounts of capital advanced by unequal, a legitimate balance will appear. This is precisely the way in which business is transacted. But here, again, what you say of a loan might be said if exchange, and even of labor. Because exchanged works compensate each other, do you conclude that work itself has been annihilated?
DOI-IV-4.34 Modern socialism aspires, you say, to the realization of this mutual loaning of Capital, to the end that Interest, an integrant part of the price of all things, may become the same for all, and therefore, and thereby be abolished. That it may become the same for all is not theoretically impossible, and I ask nothing better. But for this other things are needed than a bank of a new pattern. Let Socialism endow all men with equal activity, skill, honesty, economy, foresight, needs, desires, virtues, vices and chances even, and then it will have succeeded. But then, indeed, it will matter little whether the rate of Interest is one-half of one per cent or fifty per cent.
DOI-IV-4.35 You charge us with mistaking the meaning of Socialism, because we do not base great hopes upon its dreams of gratuitous credit. You say to us: – “You give Capital the credit for the progress made in the domain of Industry and Wealth, whereas this progress is caused, not by Capital, but by the CIRCULATION of Capital.”
DOI-IV-4.36 I think it is you who mistake the cause for the effect. In order that Capital may circulate, it must first exist; and in order that it may exist, it must have an incentive to birth in the prospect of reward offered to the virtues which create it. It is not because it circulates that Capital is useful; it is because it is useful that it circulates. Its intrinsic value causes some to demand it and others to supply it; hence its circulation, which needs but one condition, FREEDOM.
DOI-IV-4.37 But what I especially deplore is the separation of Capitalists and Laborers into

Two Hostile Classes,

as if there was a single laborer in the world who was not, in some decree, a Capitalist; as if Capital and Labor were not one and the same thing; as if to reward one was not to reward the other. Surely it is not to you that this proposition must be proved. Permit me, however, to elucidate it by an example; for, as you well know, we are not writing for each other, but for the public.
DOI-IV-4.38 Take two laborers, equal in activity, strength, and skill. One has only his arms; the other has an axe, a saw, and an adze. I pay the former three francs per day, the latter three francs and seventy-five centimes. Their wages seem to be unequal, but when we look into the matter, we shall be convinced that this apparent inequality is really equality.
DOI-IV-4.39 In the first place I must pay the carpenter Usury in the tools which he uses in my service and for my profit. He must find, in an increase of wages, means for keeping his tools in repair and maintaining his position. Under this head I pay him twenty-five centimes more per day than the simple worker with his hands, without thereby offending equality in the least.
DOI-IV-4.40 Again – and I call the attention of the reader especially to this, for we are now at the heart of the matter – why is the carpenter in possession of these tools? apparently because he has made them by his labor, or paid for them by his labor, which amounts to the same thing. Suppose that he made them by devoting the entire first month of the year to their manufacture. The common laborer, who has not put himself to this trouble, is able to loan me his services for three hundred days, while the carpenter-capitalist has but two hundred and seventy days of remunerative labor at is disposal. Then the work of two hundred and seventy days with tools must produce as much as that of three hundred days without them; in other words, the former must be paid twenty-five centimes each more than the latter.
DOI-IV-4.41 And that is not all. When the carpenter decides to make these tools, he has an object in view, and certainly a very legitimate one – that of

Improving His Condition.

We are not justified in putting into his mouth the following argument: – “I will accumulate provisions, and suffer privations in order that I may work an entire month without earning anything. That month I will devote to the manufacture of tools by which I shall be able to accomplish much more work for the benefit of my employer; then I will require him so to regulate my wages for the ensuing eleven months that I may receive just as much, in the aggregate, as if I had remained a common workman.” No, that cannot be so. It is evident that the stimulant of this artisan to sagacity, skill, foresight, and abstinence was the hope, the very just hope, of obtaining a greater reward for his labor.
DOI-IV-4.42 Thus we arrive at the following analysis of the carpenter’s reward: –

DOI-IV-4.43 Where is the injustice, the iniquity, the spoliation? What signifies all this outcry so absurdly raised against our carpenter who has become a Capitalist?
DOI-IV-4.44 And observe that the extra wages which he receives is obtained at the expense of no one; I, who pay it, should be the last person to complain. Thanks to the tools, an additional product has been, so to speak, created from nothing. This additional value is shared between the Capitalist and myself, I representing, as a Consumer, the community, humanity generally.
DOI-IV-4.45 Another example – for it seems to me that this direct analysis of facts is more instructive than controversy.
DOI-IV-4.46 A laborer owns a field made almost sterile by excessive dampness. Being a primitive man, [Perhaps better, “Like a primitive man.” – RTL] he takes a pitcher every morning and goes out to empty his furrows of the water which is flooding them. This is a waste of Labor. Who must pay for it? Evidently the purchaser of the crop. If man had never discovered any other method of drainage, wheat would be so dear that, although

There Would Be No Capital

to be paid for (or rather because there would be none), it would not be produced; and such was humanity’s lot for centuries.
DOI-IV-4.47 But our laborer is suddenly struck with the idea of digging a trench. Here Capital appears. Who ought to defray the expense of this work? Not the purchaser of the first crop. That would be unjust, since the trench will benefit an indefinite number of successive crops. How then shall its distribution be regulated? By the law of Interest ad Liquidation. The laborer, like the carpenter, must recover the four elements of reward which I have just enumerated, or he will not dig the trench.
DOI-IV-4.48 And although the price of the wheat is increased by Interest, we nevertheless should fall into an economic heresy if we should say that this Interest is a loss to the Consumer. Quite the contrary; it is because the Consumer pays Interest on this Capital in the form of a trench that he does not pay for the much more expensive drainage by Human Labor. And, of you look closely at this matter, you will say that it is always Labor that is paid; only, in the second case, there comes in Nature’s co-operation, which, though very useful and productive, costs nothing.
DOI-IV-4.49 Your chief complaint against Interest is that it permits the Capitalist to live without working. “Now,” you say, “to live without working is, in Political as well as Moral Economy, a contradictory proposition, an impossible thing.”
DOI-IV-4.50 Undoubtedly, man being what it has pleased God to make him, to live without working is, in an absolute sense, an impossible thing. But it is not impossible for a man to live two days on the labor of one. It is not impossible for humanity – more, it is a providential consequence of humanity’s perfectible nature – to continually increase the proportion of results obtained to efforts expended. If a Laborer has been able to improve his condition by

Making Rude Tools

why should he not still further improve it by inventing more complicated machines; by displaying more industry, more genius, more foresight; by submitting to longer privations? And if talent, perseverance, order, economy, the exercise of all the virtues, perpetuate themselves in the family, why should it not arrive, at length, at a state of comparative leisure, or, better, engage in labors of a higher order?
DOI-IV-4.51 This state of leisure, to justly provoke irritation and envy among those who have not yet reached it, would have to be reached at the expense of another (and I have proved that it is not thus reached), and not the eternal and universal aspiration of all men.
DOI-IV-4.52 I will finish this letter, already too long, by a few observations upon Leisure.
DOI-IV-4.53 Notwithstanding the sincerity of my admiration for the wonderful laws of Social Economy; notwithstanding the time I have devoted to the study of this science; notwithstanding the confidence with which its solutions inspire me, I am not one of those who believe that it embraces the whole of Human Destiny. The production, distribution, circulation, and consumption of wealth is not all there is for man. There is nothing in Nature which has not its final cause, and man also must have another end than that of providing for his material existence. Every things suggests to us the following queries concerning him: Whence arise the delicacy of his feelings and the warmth of his aspirations; his power to admire and enjoy? How does it happen that he finds an object of contemplation in the slightest flower; that his organs grasp with so much vivacity, and convey to the soul, like bees to the hive, all the treasures of beauty and harmony which Nature and art have scattered around him? Why do tears fill his eyes on hearing a description of the slightest act of devotion? Whence come the ebb and flow of affection which his heart elaborates, as it elaborates his blood and his life? Whence spring his love of humanity and his aspirations towards the infinite? These are

The Indices of a Noble Destiny,

not confined to the narrow sphere of industrial production. Man has, then, an end. What is it? This is not the place to answer that question. But, whatever it be, we can say that he cannot attain to it if, bent under the yoke of inexorable and perpetual labor, he has no leisure for the development of his organs, his affections, his intelligence, his sense of the beautiful, all the purest and loftiest portions of his nature, which exist in germ in all men, but which, in too many of them, lie latent and dormant for want of leisure. [See chapter 6 of Economic Harmonies. – OC]
DOI-IV-4.54 What is the power which will lighten, for all in some degree, the burden of toil? What will lessen the hours of Labor? What will loosen the bonds of this heavy yoke which to-day bends towards matter, not only men, but women and children, who seem to have no destiny? Capital, Capital; which, in the form of wheel, gear, rail, waterfall, weight, sail, oar, plough, performs so large a part of the work originally accomplished at the expense of our nerves and muscles; Capital, which brings into action, more and more, for the benefit of all, the gratuitous forces of Nature. Capital is, then, the friend and benefactor of all, and especially of the suffering classes. They should desire its accumulation, its multiplication, its unlimited diffusion. And if there is a sad spectacle in the world – a spectacle which can be described only by these words, material, moral, and collective suicide – it is to see these classes, in their delusion, wage with Capital an angry warfare. It would be no more absurd, no more sad, to see all the capitalists in the world banding together to paralyze arms and to destroy Labor.
DOI-IV-4.55 In conclusion, Monsieur Proudhon, I will say this: The moment that we shall agree on this first premise – Interest on Capital, determined by free discussion, is legitimate – I shall deem it a pleasure and a duty frankly to discuss with you the other questions which you propound.


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