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

Letter 6

[Letter 5 by Tucker’s numbering]

Bastiat to Proudhon,
10 December 1849

[Translation (as “INTEREST. – The Proudhon-Bastiat Discussion Continued. – WHO WAS THE CHALLENGER? – An Ingenious Interview Between lender and Borrower. – HAS SOCIETY AN EXISTENCE OF ITS OWN? – Distinction Between Inetrest and the Cost of Circulation. – WHAT PETER, JAMES, AND JOHN OWE CAPITAL. – Confusion of Payment for Use of Capital with Payment for Past Labor. – INTEREST AND PRINCIPAL. – LETTER FIVE. – BASTIAT TO PROUDHON. – [TRANSLATED FOR THE IRISH WORLD BY BENJ. R. TUCKER.]”) by Benjamin R. Tucker, in The Irish World and American Industrial Liberator, 23 August 1879.]

PARIS, Dec. 10, 1849.

DOI-IV-6.1 Sir, I wish to remain on my own ground; you wish to draw me on to yours, and you ask, What have you undertaken to accomplish in “La Voix du Peuple,” if not the refutation of the theory of gratuitous Credit, etc.?
DOI-IV-6.2 There is a misunderstanding here. I did not go to –La Voix du Peuple;” “La Voix du Peuple” came to me. On all sides we heard of gratuitous Credit, and every day saw a new plan developed for the realization of this idea.
DOI-IV-6.3 Then I said to myself: It is useless to oppose these plans one after another. To prove that Capital has a legitimate and inalienable right [BRT’s “inalienable” makes little sense here; the French has “indestructible.” – RTL] to reward is to destroy them altogether, is to overturn their common base.
DOI-IV-6.4 And I published the brochure entitled “Capital and Rent.”
DOI-IV-6.5La Voix du Peuple,” not finding my demonstration conclusive, attempted to refute it. I asked the privilege of maintaining my position; you frankly consented; it is, then, on my ground that the discussion should proceed.
DOI-IV-6.6 Besides, the perpetual and universal progress has been based on the principle which I defend. It is for those who wish that, from this day forth, society may develop itself on the opposite principle to show that it has been wrong. The onus probandi [“Burden of proof.” – RTL] lies on them.
DOI-IV-6.7 And after all, of what real importance is this preliminary discussion? To prove that Interest is legitimate, just, useful, beneficent, indestructible – is that not to prove that the gratuity of Credit is an illusion?
Out of Pity For My Ignorance,

as well as that of a large number of our readers, of German philosophy, you are willing, by changing Kant into Diafoirus, to substitute for the law of contradiction that of distinction.
DOI-IV-6.9 I thank you for this condescension. It puts me at my ease. My mind decidedly refuses, I confess, to admit that two contradictory assertions can be true at the same time. I respect, as I ought, although on trust, Kant, Fichte, and Hegel. But if their works impel a reader’s mind to admit such propositions as the following: Robbery is Property; Property is Robbery; day is night; I shall thank heaven all the days of my life that they have never been under my eyes. By such lofty subtleties your mind is sharpened; mine certainly would have succumbed, and, very far from being enabled to understand others, I no longer should have been capable of understanding myself.
DOI-IV-6.10 At last, to this question: Is Interest legitimate? You reply, no longer in German, Yes and no, but in Latin, Distinguo. “Let us distinguish; yes, Interest on Capital might once have been considered legitimate; no, it can no longer be considered so.”
DOI-IV-6.11 Well, your condescension, it seems to me, hastens this discussion to a conclusion. It proves, especially, that I have chosen my ground wisely; for what do you claim? You say that at a certain moment, the remuneration of Capital passes from legitimacy to illegitimacy; that is to say, that Capital divests itself of its original nature in order to clothe itself with an opposite one. Certainly, the presumption is not in your favor, and it is incumbent on him who seeks to overturn universal wisdom by so strange an affirmation to prove its truth.
DOI-IV-6.12 I deduced the legitimacy of Interest from the fact that a loan is a service which is capable of evaluation, has, consequently, a value, and

May Be Exchanged

for another equal value. I even thought that you admitted the truth of this doctrine in these words: –
“It is very true, as you have unquestionably established, 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, or, to use the technical phrase, ought to bear Interest.”
DOI-IV-6.14 That is what you said a fortnight ago. To-day you say: Let us distinguish; formerly, to lend was to render a service; such is no longer the case now.
DOI-IV-6.15 Now, if a Loan has ceased to be a service, it clearly follows that Interest is, I do not say illegitimate, but impossible.
DOI-IV-6.16 Your new argument involves the following dialogue: –
BORROWER: – Sir, I wish to build a warehouse; I need ten thousand francs; will you lend them to me?
LENDER: – Willingly; let us discuss the conditions.
BORROWER: – Sir, I accept no conditions. I will keep your money one year, two years, twenty years, after which I will return to you the exact amount borrowed, inasmuch as everything which, in returning a loan, is given in excess of the loan, is Usury, Spoliation.
LENDER: – But since you ask of me a service, it is only natural that I should ask one of you in return.
BORROWER: – Sir, I have nothing to do with your service.
LENDER: – In that case I will keep my capital, though I should consume it.
BORROWER: – Sir, I am a Socialist, and Socialism, with redoubled energy, protests, and says through me: I have nothing to do with your service, – service for you, but robbery for me, – as long as it is possible for society to furnish me with the same advantages which you offer me, and that without reward. To impose on me such a service in spite of myself, by refusing to organize the circulation of capital, is to make me submit to an unjust discount, is to rob me.
LENDER: – I impose nothing on you in spite of yourself. If you do not admit that a loan is a service, abstain from borrowing, as I do from lending. But if society offers you these advantages without reward, deal directly with it, for its terms are much easier; and as for organizing the circulation of capital, as you call upon me to do, if you mean thereby that you would have

The Use of My Capital Gratis

through the mediation of society, I have just the same objection to this indirect method of procedure that induced me to refuse you a direct and gratuitous loan.
DOI-IV-6.25 Society! I was surprised, I confess, at the appearance, in an article written by you, of this new personage, this accommodating Capitalist.
DOI-IV-6.26 What, sir! you, who, in the same journal in which you published your letter to me, have waged such rough and energetic warfare upon the systems of Louis Blanc and Pierre Leroux, [French socialist writers Louis Blanc (1811-1882) and Pierre Leroux (1798-1871) were the principal targets of Proudhon’s article “The State” (La Voix du Peuple, 3 December 1849); though Proudhon’s charges of statism fit Blanc better than Leroux, who did have some fairly anarchistic leanings. – RTL] have you dissipated the illusion of the State only to substitute for it that of Society?
DOI-IV-6.27 What is society, then, but those who lend or borrow, and receive or pay the interest inhering in the price of all commodities? What is this deus ex machina that you would have intervene in so unexpected a manner to solve the problem? Is there, on one side, the entire body of laborers, merchants, artisans, and capitalists, and, on the other, Society, a distinct personality, possessed of Capital in such abundance that it can lend to everyone, unstintedly, and that without reward?
DOI-IV-6.28 That is not what you mean; your articles on the State prove that it is not. You know very well that Society has no other Capital than that in the hands of the Capitalists both great and small. Ought Society to take possession of all Capital and circulate it gratuitously under the pretext of organizing it? To tell the truth, I am puzzled; and it seems to me that your pen constantly effaces the line which separates, in the eyes of the public conscience, property from robbery.
DOI-IV-6.29 In seeking to penetrate to the root of the error that I am here battling against, I think I have found it in your confusion of the cost of circulation of Capital with Interest of Capital. You think that we can arrive at gratuitous circulation, and therefore you conclude that loans should be gratuitous. It is like saying that, when [the costs of transportation from Bordeaux to] [Here and throughout, text in brackets is my conjecture, based on the French, for a line occluded in the Irish World microfilm. – RTL] Paris shall be reduced to zero, Bordeaux wines will be had in Paris for nothing. You are not the first to fall into this error.

Law Said:

“The law of circulation is the only thing which can save empires.” He acted on this principle, and, instead of saving France, he ruined her. [Scottish-born economist John Law (1671-1729), comptroller-general for France under the regency of Philippe d’Orléans; Law’s paper-money scheme was famously disastrous. – RTL]
DOI-IV-6.30 I say: The circulation of Capital and the expense which it involves is one thing; Interest of Capital is quite another. A nation’s Capital consists of material of all kinds, provisions, tools, merchandise, specie; ands these things are not lent for nothing. In proportion as society is more or less advanced, there is more or less facility for the conveyance of a given amount of Capital, or its value, from place to place or from hand to hand; but that is not at all the same as the abolition of Interest. A Parisian wishes to lend; a Bayonnais wishes to borrow. But the first has not the thing which the second needs. Besidse, they are not acquainted with each other’s intentions; they cannot communicate, agree, and contract. These are obstacles to circulation. These obstacles are continually diminishing, first by the intervention of specie, then by that of the bill of exchange, and then by that of the private banker, the National Bank, and free banks successively.
DOI-IV-6.31 It is a happy circumstance for the consumers of Capital, as it is for the consumers of wine, that the means of transportation are improving. But, on the one hand, the cost of circulation can never reach zero, since there is always a mediator who renders a service; and, on the other hand, should this cost be done away with entirely, Interest would still exist, and would not be even sensibly affected. There are free banks in the United States; they are partially controlled by the laborers themselves, who are the stockholders; and, moreover, they are, by reason of their number, always within reach; every day some deposit their savings, and others receive the loans which they need; circulation is as easy and rapid as possible. [What banks Bastiat refers to is not known, the translator being unable to discover record of any which answer his description. – BRT. Bastiat is probably relying on Charles Coquelin’s On Credit and Banks. – RTL] Is that equivalent to saying that there Credit is gratuitous; that there Capital bears no Interest to those who lend it, and costs nothing to those who borrow it? No; it simply signifies that

Lenders and Borrowers

communicate there with less difficulty than elsewhere.
DOI-IV-6.32 Consequently, absolute gratuity of Circulation, – a chimera.
DOI-IV-6.33 Gratuity of Credit, – a chimera.
DOI-IV-6.34 To imagine that the first of these, were it attainable, would imply the second, – a third chimera.
DOI-IV-6.35 You see that I have allowed myself to be led upon your ground, and, since I have taken three steps, I may as well take two more.
DOI-IV-6.36 You wish to organize Circulation in such a way that every one shall receive as much Interest as he pays; and that will bring about, you say, equality of wealth.
DOI-IV-6.37 Now I say: –
DOI-IV-6.38 The universal balance of Interests, – a chimera.
DOI-IV-6.39 Absolute Equality of Wealth, as a consequence of this chimera, – another chimera.
DOI-IV-6.40 All value is composed of two elements, – the remuneration of Labor and the remuneration of Capital. That these two elements may be combined in the same proportion in all equal values, all human production, must be accomplished by the aid of the same machinery, by the same consumption of provisions, and by the same quotas of present and past Labor.
DOI-IV-6.41 Will your bank ever cause a street-messenger, whose whole business consists in lending his time and his legs, to use as much Capital in his services as the printer or stocking-manufacturer in theirs? For, remember that every pair of cotton stockings which this messenger gets has required the aid of Land, which is Capital; of a ship, which is Capital; of a cotton mill, which is Capital. Will you say that, when the messenger exchanges his service, valued at three francs, for a book valued at three francs, he is cheated because the element of present Labor prevails in his service and that of past Labor in the book? What does this matter, provided the two objects of the exchange are equal in value, and their equivalence is determined by free discussion? Provided a hundred is exchanged for a hundred, of what consequence is

The Proportion of the Two Elements

which compose each of these equal values? Would you deny the legitimacy of the remuneration awarded to Capital? That would be to fall back on a point already settled in this discussion. But on what ground should past labor, more than actual capital,/i>, be deprived of all reward?
DOI-IV-6.42 There are two kinds of Labor, quite distinct from each other.
DOI-IV-6.43 One is devoted exclusively to the production of an object, as when the farmer sows, weeds, reaps, and threshes his wheat, or when the tailor cuts and sews a coat, etc.
DOI-IV-6.44 The other aids in the production of an indefinite series of similar objects, as when the farmer fences, improves, and drains his field, or when the tailor furnishes his shop.
DOI-IV-6.45 In the first case, all the labor ought to be paid for by the purchaser of the crop or the coat; in the second, it ought to be charged on an indefinite number of crops or coats. And certainly it would be absurd to say that this second kind of labor ought not to be paid for at all, because it is called Capital.
DOI-IV-6.46 Now, how shall the remuneration due from an indefinite number of successive purchasers be divided? By the contrivances of liquidation and interest, contrivances designed by humanity in the beginning, ingenious contrivances which the Socialists would find difficulty in procuring substitutes for. But all their genius is devoted to the suppression of these, and they do not perceive that thereby they are simply suppressing Humanity.
DOI-IV-6.47 But if we should admit the practicability of all that we have just shown to be chimerical, – gratuity of circulation, gratuity of loans, equalization of interests, – I say that even then we should not arrive at absolute equality of wealth. And the reason is a simple one. Does the Bank of the People pretend to be able to change the human heart? Will it make all men equally strong active, intelligent, orderly, economical and prudent? Will it prevent their desires, propensities, talents, and ideas from varying infinitely? Would not some prefer to sleep in the sunshine while others wear themselves out by labor? Would there not be

Some Spendthrifts and Some Misers.

DOI-IV-6.48 Some people desirous of enjoying the good things of this world and others more interested in the life to come? It is clear that absolute equality of wealth could result only from all these impossible equalities and many others.
DOI-IV-6.49 But, though absolute equality of wealth is chimerical, the constant approximation of all men under the régime of Liberty towards the same level, physically, intellectually, and morally, is not so. One of the most powerful of all the forces which co-operate in this grand work of equalization is that of Capital. And since you have opened your columns to me, permit me to call your readers’ attention for a moment to this subject. It is not enough to show that Interest is legitimate; it still remains to prove that it is useful, even to those who pay it. You have said that Interest was formerly “an instrument of Equality and Progress.” What it was, it still is, and always will be, because, in developing itself, it does not change its nature.
DOI-IV-6.50 Workingmen perhaps will be astonished to hear me make the following statement: –
DOI-IV-6.51 Of all the elements that enter into the price of commodities, the very one which they should pay the most cheerfully is Interest, or the reward of Capital, because this payment always saves them from a greater payment.
DOI-IV-6.52 Peter is a Parisian mechanic. He desires to have a heavy package carried to Lille; it is a present which he wishes to make to his mother. If there was no capital in the world (and there would be none if all remuneration was denied it), the transportation would cost Peter at least two months of toil, whether he did the work himself or employed another to do it for him. For he could do it himself only by carrying the load over mountains and valleys on his shoulders, and it could be done for him in no other way.
DOI-IV-6.53 Why can carriers be found who demand of Peter nut one day of his labor in return for saving him sixty?

Because Capital Steps In

in the shape of cars, horses, rails, wagons, locomotives. Undoubtedly Peter must pay tribute to this Capital, but this is just what enables him to do or get done in one day what would otherwise have required two months.
DOI-IV-6.54 John is a farrier, a very worthy man, but one who is often heard declaiming against Property. He earns three francs per day; it is little, too little; but then, as wheat is worth about eighteen francs per hectolitre, John can say that he produces by his anvil a hectoliter of wheat, or its value, weekly, or fifty-two hectoliters annually. Suppose, now, that there is no Capital, and that, presenting our farrier with a thousand hectares of Land, we say to him: – “Use this Land, which is endowed with great fertility; all the wheat that you can riase is yours.” John undoubtedly would reply: – “Withoiut horses, plow, ax, or tools of any kind, how do you expect me to clear the Land of the trees, roots, plants, stones, and pools which encumber it? I cannot make it yield a sheaf of what in ten eyars.” Then John might come to this conclusion: – “What I cannot accomplish in ten years others do for me, charging me only a week’s work. It is clearly for my advantage to reward Capital, for if I should not reward it, none would exist, and others would find as much difficulty in cultivating this Land as myself.”
DOI-IV-6.55 James buys La Voix du Peuple every morning for a sou. As he earns one hundred sous per day, or fifty centimes per hour, he pays six minutes’ labor for each number, a price made [up of two remunerations, that of Labor and that of] Capital. Why does James not sometimes say, to himself: – “If no Capital aided in printing La Voix du Peuple, I could not obtain it for a hundred francs, much less for a sou.”
DOI-IV-6.56 I might consider all the objects which satisfy the wants of laborers, and always arrive at the same conclusion. Then Capital is not the tyrant it is painted. It renders services, great services; it is but just that it should be rewarded. This reward diminishes as Capital increases. That it may increase, we must be interested in its formation, and that we may be interested in its formation, we must be animated by

The Hope of Reward.

DOI-IV-6.57 Where is the mechanic, where the laborer, who will deposit the fruits of his economy in the savings-bank, or who even will economize at all, when told that Interest is robbery, and must be abolished?
DOI-IV-6.58 No, no, it is a senseless gospel; it conflicts with reason, morality, economic science, the interests of the poor, the universal beliefs of the human race as manifested in the universal practice. You do not reach, it is true, the tyranny of Capital, but you do preach the gratuity of credit, which is the same thing. To say that all reward of Capital is robbery, is to say that capital ought to vanish from the face of the earth, is to say that Peter, John, and James ought to procure their transportation, their wheat, and their books by the performance of as much labor as would be necessary to produce these things directly, and with no other resource than their hands.
DOI-IV-6.59 March on, march on, Capital; pursue your career, realizing benefits for humanity! It is you who freed the slaves; it is you who destroyed the stronghold of Feudalism! Keep on multiplying; subject Nature, force gravitation, heat, light, electricity, to contribute to human happiness; take upon yourself the performance of all that is disagreeable and degrading in mechanical labor; elevate Democracy, transform human machines into men, men endowed with leisure, ideas, feelings, and aspirations!
DOI-IV-6.60 Allow me, sir, in closing, to administer to you a rebuke. At the beginning of your letter you promised to abandon for the present antinomy; you close, nevertheless, with that antinomy which you call your war-cry: Property is robbery.
DOI-IV-6.61 Yes, you have rightly named it; it is, in truth, a mournful tocsin, a sinister war-cry. But I hope that in this respect it has lost something of its power. These is in the mind of the masses a groundwork of good sense which does not abandon its rights, and which rebels, in the long run, against those strange paradoxes which are given out for sublime discoveries. Oh! that you had based your active propagandism on this other axiom, certainly more permanent than yours: Robbery is the opposite of property! Then, with your indomitable energy, your popular style, your invincible logic, cannot measure the good that you might have done for our dear country and for humanity.


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