  |
The Bastiat-Proudhon Debate
|
|
|
The Bastiat-Proudhon Debate
|
|
PARIS, Dec. 24, 1849.
| |
| DOI-IV-8.1 | Is Gratuity of Credit possible? |
| DOI-IV-8.2 | Is Gratuity of Credit impossible? |
| DOI-IV-8.3 | It is clear that to answer one of these questions is to answer the other. |
| DOI-IV-8.4 | You accuse me of lacking in charity, because I persist in discussing the second. This is my motive: – |
| DOI-IV-8.5 | An inquiry into the possibility of Gratuity of Credit would have drawn me into a discussion of the Bank of the People, the Tax upon Capital, the National Workshops, the Organization of Labor, and, in short, all of the thousand and one means by which each school hopes to realize this Gratuity; whereas, to show that it is impossible, I had only to analyze the essential nature of Capital; that accomplishes my object, and, as I think, yours also. |
| DOI-IV-8.6 | Fifty arguments were offered against Galileo’s theory of the earth–s rotation. Did he need to refute them all? No; he proved that it turned, and all was said. E pur si muove. [“And nevertheless it moves,” the line supposedly muttered under his breath by Galileo after being forced to recant publicly his theory of terrestrial motion. – RTL] |
| DOI-IV-8.7 |
As an innovater, [sic] you say, you have a right to an examination. Undoubtedly; but first, society, as the defendant, has a right to be proved wrong. You indict Capital and Interest at the bar of Public Opinion, accusing them of injustice and robbery. It is for you to prove their guilt; for them to prove their innocence. You say that you have several methods of compelling their return to the path of right. We must first know if they have strayed from it. The examination of your theories, since they imply
A Well-Grounded Accusation,
is not in order until that which they deny has been discussed. |
| DOI-IV-8.8 | This course is so logical that you accept in these words: – |
| DOI-IV-8.9 |
“True or false, legitimate or illegitimate, moral or immoral, I accept Usury, I approve it, I even applaud it; I will renounce all the dreams of Socialism, and become a Christian, if you will show me that the loaning of Capital, like the circulation of values, cannot, in any case, be gratuitous.” |
| DOI-IV-8.10 | Now, what else am I doing? That is my own ground: to prove that Capital has an inherent and indestructible right to be rewarded. |
| DOI-IV-8.11 | In opposing this doctrine, your first weapon was the theory of contradiction, your second that of distinction. Interest, you said, had once a raison d’etre; now it has none. It was once an instrument of equality and progress; now it is only robbery and oppression. And thereupon you cite several institutions and customs, once legitimate and liberal, that afterwards became unjust and fatal to Liberty; among others, the rack, the boiling-water test, slavery, etc. |
| DOI-IV-8.12 | For my part, I reject this cruel fatalism which consists in justifying all abuses on the ground that they were once aids to civilization. Slavery, the rack, the judicial tests, have not helped, but hindered, the progress of humanity. It would have been the same with Interest, if it had been, as you say, only an abuse of force. |
| DOI-IV-8.13 | Besides, even if some things do change, there are others which do not. It has been true ever since the creation that the three angles of a triangle are equal to two right angles, and it will remain true until the day of judgment and afterwards. Likewise, it has always been true, and always will be, that accumulated Labor, or Capital, is entitled to a reward. |
| DOI-IV-8.14 | You compare my reasoning to that of a contractor who should say: “Of what importance, then, to me is steam, and atmospheric pressure, and electricity? To prove the legitimacy of the four-wheeled vehicle, – is that not to prove that the invention of railways is a chimera?” |
| DOI-IV-8.15 |
I accept the analogy, but in this way: –
I Admit that the Railroad is a Step in Advance.
I am glad that it has lowered the price of transportation; but if you reason from that to the gratuity of transportation, if you say that any price, however great, was once legitimate, but that the time has come now when transportation should be gratuitous, I reply that the conclusion is a false one. As progress goes on, this price may continually diminish, but it can never reach zero, since Human Labor, Human Service, which has an inherent right to be rewarded, must always be involved in it. |
| DOI-IV-8.16 | Likewise, I admit that an abundance of Capital tends to decrease its income. I admit it and rejoice at it, for thus it is diffused more and more among all classes, and relieves them, with every need that it satisfies, of the burden of Labor. But, from this constant decrease in the rate of Interest, I cannot infer its absolute annihilation, because Capital will never create itself, because it will always be the product of Human Labor, because lending it will always be a service in a greater or less degree, and because, on that account, it, like Transportation, has an inherent right to a reward. |
| DOI-IV-8.17 | So, sir, I see no reason for changing the course of this debate now that it is drawing to a close; and I do not believe that there is one of our readers but will consider my task accomplished when I have proved the following propositions: – |
| DOI-IV-8.18 | All Capital (whatever be its form, crops, tools, machines, houses, etc.), – all Capital is the result of prior Labor, and increases the power of subsequent Labor. |
| DOI-IV-8.19 | Inasmuch as it is the result of prior Labor, he who lends it receives a reward. |
| DOI-IV-8.20 | Inasmuch as it increases the power of subsequent Labor, he who borrows it owes a reward. |
| DOI-IV-8.21 | And you say yourself: “If the Labor of the Creditor is zero, Interest should become zero.” |
| DOI-IV-8.22 |
Then, what is the question before us? It is this: –
Is it Possible for Capital to be Created Without Labor!
|
| DOI-IV-8.23 | If it is possible, I am wrong; Credit should be gratuitous. |
| DOI-IV-8.24 | If it is impossible, you are wrong; Capital should be rewarded. |
| DOI-IV-8.25 | You are wasting words; the question is reduced to this: Has the time arrived, will it ever arrive, when capital will spring up spontaneously without the aid of human effort. |
| DOI-IV-8.26 | But, in a spirited review of the past, plunging headlong into Palestine, Athens, Sparta, Tyre, Rome, and Carthage, you drag me off at a tangent from the circle within which I try in vain to hold you. Well! before returning, I will try, if not to follow you, at least to accompany you for a few steps. |
| DOI-IV-8.27 | You begin thus: – |
| DOI-IV-8.28 |
“The reason why Interest of Capital, excusable and even just in the infancy of Social Economy, becomes, as industrial institutions develop, real spoliation and robbery, is because it has no other principle, no other raison d’etre, than those of necessity and force. Necessity explains the unreasonableness of the lender; force causes the resignation of the borrower. But, in proportion as in human relationships, necessity gives way to truth, and force is succeeded by right, the Capitalist loses his excuse.” |
| DOI-IV-8.29 | He loses more than that; he loses the only title you allow to him. If, under the reign of liberty and equity, Interest still abides, it is undoubtedly because, whatever you may say, it has another raison d’etre than force. |
| DOI-IV-8.30 | Indeed, I do not understand your distinguo. You say: “Interest was just once; to-day it is not just.” And what us your reason for saying so? This: “Formerly force was the ruling-power; to-day right is.” Far from inferring therefrom that Interest has passed from legitimacy to illegitimacy, is it not rather the converse which follows from your premises? |
| DOI-IV-8.31 | And certainly the facts would confirm this conclusion; for Usury was detested when people became Capitalists through robbery, but Interest is justified now that they become so through Labor. |
| DOI-IV-8.32 | “We must look to foreign commerce to find the origin of lending at Inter[e]st. The contrat a la grosse, a variety, or rather a separate part, of the contrat de pacotille, was its original form.” |
| DOI-IV-8.33 |
I Believe that Capital Has a Nature Peculiar to Itself,
entirely independent of the means by which men effect its transportation. They may travel and send their merchandise by land, water or air, in car, vessel, or balloon – Capital will not lose or gain a single right thereby. |
| DOI-IV-8.34 | We are justified, moreover, in presuming that Interest is older than foreign commerce. It is very improbable that the Patriarch, Abraham, lent his flocks without reserving to himself a share in their increase, and undoubtedly those who were the first to build houses in Babylon after the flood did not grant others the use of them without reward. |
| DOI-IV-8.35 | What, sir! these transactions which have been carried on so constantly and voluntarily from the beginning of the world under the names of Letting, Interest, Farm-Rent, Lease, Rent, are not the result of the natural instincts of humanity! Born of the contrat de pacotille! |
| DOI-IV-8.26 | Then, apropos of the contrat a la grosse, you construct a theory of profit which really seems to me inadmissible. But to discuss it here would be to wander from the subject. |
| DOI-IV-8.37 | At last you come to the very root of all economic errors, – namely, the confusion of Capital with specie; a confusion by the aid of which it is easy to entangle the question. But you do not share it yourself, as I will prove by your recent words to M. Louis Blanc: “Specie is not social wealth; it is simply a medium of circulation, for which Paper, a substance of no value, can be substituted with advantage.” |
| DOI-IV-8.38 | Understand, then, that when I speak of the productivity of Capital (the tools, instruments, etc., employed by Labor), I do not mean to attribute to Specie a miraculous generative property. |
| DOI-IV-8.39 | Shall I follow you, sir, to Palestine, Athens, and Lacedæmonia? That certainly is unnecessary. Only a word concerning the non fœnerabis of Moses. |
| DOI-IV-8.40 |
I admire the piety which has been developed in certain Socialists (with whom I do not confound you) since they have discovered, in support of their theory, a few texts in
The Old and New Testaments,
the Councils and Fathers of the Church. I will venture to ask them this question: Do they expect us to regard these as infallible authorities in scientific and social matters? |
| DOI-IV-8.41 | Certainly they will not go so far as to reply: We regard as infallible the texts which support our theories, and as fallible those which do not. – If we are to appeal to sacred books as repositories of the indisputable will of God, we must take them as a whole, unless we would enact a childish farce. Well! setting aside a great number of sentences from the Old testament, which cannot with safety be interpreted literally, the Gosepls contain other texts than the famous mutuum date, [Mutuum date nihil inde sperantes, “Give a loan hoping for nothing therefrom,” Luke 6: 35. – RTL] from which they wish to deduce the gratuity of credit; among others the following: – |
| DOI-IV-8.42 |
“Blessed are they that weep.” |
| DOI-IV-8.43 | What would our Socialists say, should we base political and social economy on one of these texts? |
| DOI-IV-8.44 |
We are justified in believing that, when the Founder of Christianity said to His disciples, Mutuum date, He intended it as a lesson in charity and not as a doctrine of political economy. [Bastiat here follows Turgot’s Reflections on the Formation and Distribution of Riches §75. – RTL] Jesus was a carpenter, who worked for His living. Consequently He could not make gift an absolute rule. I think I may add, without irreverence, that
He Demanded Pay,
as was perfectly right, not only for the labor performed in making His planks, but also for the labor performed in making His saws and planes, – that is, for His capital. |
| DOI-IV-8.45 | Finally, I ought not to allow you the two apologues with which you close your letter to pass by without calling your attention to the fact that, far from weakening my doctrine, they condemn yours; for we cannot deduce from them the Gratuity of Credit without deducing the Gratuity of Labor also. Your second story was a powerful sword-thrust; but you kindly furnished me, in the first, with a coat-of-mail entirely proof. |
| DOI-IV-8.46 | For by what device do you endeavor to show me that there are circumstances under which or conscience bids us to lend gratuitously? You sketch one of those extraordinary situations which silence all our personal instincts and call into action our sympathy, pity, compassion, devotion, and sacrifice. An islander is well provided with everything. He finds a shipwrecked party, cast naked by the waves upon the shore. You ask me if it is legitimate for this islander to reap every possible benefit from his position, to push his demands to the utmost limit, to exact a thousand per cent upon his Capital, and even to lend to the unfortunates at the price of their honor. |
| DOI-IV-8.47 | I see the trap. If I reply: Oh! in this case he should fly unconditionally to the aid of his brother and share with him his last mouthful of bread, you would triumphantly shout: Ha! my opponent has admitted that there are occasions when Credit should be gratuitous. |
| DOI-IV-8.48 | Fortunately, your first apologue, which I should have invented had you not anticipated me, has furnished me with a reply. |
| DOI-IV-8.49 |
A man is walking along a river’s bank. He sees a fellow-being drowning, and, in order to save him, has only to extend his hand. Could he conscientiously take advantage of the occasion to insist upon
The Most Extravagant Terms,
and to say to the unfortunate struggler in the current: I am free; my labor is at my own disposal. Die, or give me your whole fortune! |
| DOI-IV-8.50 | I imagined, sir, that if a brave laborer found himself in such a situation, he would throw himself into the water without hesitation, without consideration, without calculating his wages, and without even dreaming of them. |
| DOI-IV-8.51 | But in this case, observe, Capital is not involved; Labor only is in question. Here it is a sacrifice of Labor which conscience demands. Do you therefore regard Gratuity of Labor as the normal rule for the government of human transactions, as a law of political economy? and because, in an extreme case, service ought to be gratuitous, do you in theory retract your axiom, mutuality of service? |
| DOI-IV-8.52 | And yet, if you infer from your second apologue that we should always lend for nothing, you ought to infer from your first that we should always work for nothing. |
| DOI-IV-8.53 | The truth is that, in order to solve a problem in political economy, you have cited two cases in which all the laws of political economy are suspended. Who ever dreamed of denying that, under certain circumstances, we are bound to sacrifice Capital, Interest, Labor, Life, Reputation, Affections, Health, etc.? But is that the law of ordinary transactions? and to have recourse to such examples to effect the Gratuity of Credit or the Gratuity of Labor, – is not that to confess your inability to bring about this gratuity by the ordinary course of events? |
| DOI-IV-8.54 | You ask, sir, what the consequences are, to the working classes, of lending at Interest, and you enumerate a few of them, inviting me to make them the subject of the remainder of our discussion. |
| DOI-IV-8.55 |
I do not deny that among your objections there are some very plausible and even serious ones. It is impossible, in one letter, for me to notice them one by one;
I Will Try to Refute Them All at Once
by the simple exposition of the law by which, in my opinion, are divided between Capital and Labor the products of their co-operation; and by that road will I re-enter within the limits of my modest economic circle. |
| DOI-IV-8.56 | Allow me to lay down five propositions which seem to me capable of mathematical demonstration. |
| DOI-IV-8.57 | 1. Capital fructifies Labor. |
| DOI-IV-8.58 | It is very clear that we can accomplish more with a plough than without one; with a saw than without one; with a road than without one; with provisions than without them, etc.; whence we may conclude that the mediation of Capital increases the amount of products to be divided. |
| DOI-IV-8.59 | 2. Capital is the result of Labor. |
| DOI-IV-8.60 | Ploughs, saws, roads, provisions, do not create themselves, and the labor to which we are indebted for them is entitled to a reward. |
| DOI-IV-8.61 | I am compelled here to recall what I said in my last letter about the difference between the method of rewarding Capital and that of rewarding Labor. |
| DOI-IV-8.62 | The labor performed every day by the water-carrier should be paid for by those who profit by this daily labor. But his labor in manufacturing his wheelbarrow and cask should be paid for by an indefinite number of consumers. |
| DOI-IV-8.63 | In like manner, planting, ploughing, weeding, harvesting, have to do only with the present crop. But fencing, clearing, draining, building, affect the cost of an indefinite number of successive crops. |
| DOI-IV-8.64 | The present labor of the cobbler who makes shoes, the tailor who makes clothes, the carpenter who makes planks, and the ;lawyer who makes pleas, is one thing; quite another in [sic, for “is.” – RTL] the accumulated labor required in making the bench, the cutting-board, the saw, and in studying law. |
| DOI-IV-8.65 |
That is why labor of the former kind is rewarded by wages, and that of the latter by the contrivances of interest and liquidation, which are nothing but
Wages Ingeniously Assessed
upon a multitude of consumers.
|
| DOI-IV-8.66 | 3. In proportion as Capital increases, Interest decreases, but in such a way that the total income of the Capitalist is enlarged. |
| DOI-IV-8.67 | This is not unjust and prejudicial to Labor, because, as we shall see, the excess of income derived by the Capitalist is taken from the excess of products derived from Capital. |
| DOI-IV-8.68 | What I affirm here is that, although Interest decreases, the total income of the Capitalist increases of necessity, and in this way: – |
| DOI-IV-8.69 | Call the Capital one hundred francs, and the rate of Interest five per cent. I say that the rate cannot descend to four per cent, unless the Capital increases to more than one hundred and twenty francs at least. Indeed, we should have no motive to increase the Capital if we should thereby diminish the income, or even leave it unchanged. It is absurd to say that, the Capital being one hundred francs and the rate of five per cent, the Capital can be increased to two hundred francs, and the rate lowered to two per cent; for in the first case we should have an income of five francs, and in the second an income of only four. The remedy would be too simple and agreeable: we should consume half of our Capital to get our income back. |
| DOI-IV-8.70 | Therefore, when the rate of Interest decreases from five to four, four to three, three to two per cent, that means that Capital has increased from one hundred to two hundred, two hundred to four hundred, four hundred to eight hundred francs, and that the Capitalist has received incomes of five, eight, and twelve francs successively. And Labor loses nothing: quite the contrary; for it had at its disposal a power of one hundred, then a power of two hundred, and finally a power of eight hundred, with the extra advantage of paying less and less for a given amount of power. |
| DOI-IV-8.71 |
Hence it follows that those calculators are very unskillful who say: – “Interest decreases; therefore it must disappear.” To be sure, it decreases, relatively, to every hundred francs; but it is just because the number of francs increases that Interest decreases. Yes, the multiplicator grows small, but only from the same cause which makes the multiplicand grow large; and
I Defy the God of Arithmetic Himself
to infer therefrom that the product will reach zero by that road. [Bastiat here adds the following footnote, one not translated by BRT (I’m guessing it was added by Bastiat in his own edition of the letters, Gratuity of Credit, and so was perhaps missing from Proudhon’s, Interest and Principal, from which BRT seems to have been working; I have not seen Proudhon’s edition); translation mine. – RTL.] [BASTIAT: This law of a decrease that, while indefinite, never arrives at zero, a law well known to mathematicians, governs a multitude of economic phenomena and has not received sufficient attention. Let us cite a familiar example. Everybody knows that in a large city, in a wealthy and populous neighbourhood, one can gain more by reducing one’s selling price. This is what is familiarly expressed by the following phrase: to recover on quantity. [i.e., to make up via quantity for what one loses per individual sale. – RTL] Let us suppose there are four knife merchants, one in a village, another in Bayonne, a third in Bordeaux, and a fourth in Paris. We may then draw up the following table:  [The ” mark should here be read as meaning “0.” – RTL] Here we see a multiplier (second column) continually decreasing, because the multiplicand (first column) always increases; the constant advance of the total product (third column) excludes the idea that the multiplier might ever reach zero, even though one should pass from Paris to London, and on to ever larger, ever wealthier cities. What it is important to notice here is that the buyer has nothing to complain of in the progressive increase of the total profit realised by the merchant, because what is of interest to him, the buyer, is the proportional profit levied on him in his capacity of remunerator of services rendered, and that profit perpetually diminishes. Thus, from different standpoints, the seller and the buyer progress at the same time. This is the law of capital. When properly understood, it also reveals the harmony of interests between capitalist and proletarian, and their simultaneous advancement.] |
| DOI-IV-8.72 | [4.] In proportion as Capital increases (and with it Production), its share of the Production increases ABSOLUTELY, but decreases RELATIVELY. |
| DOI-IV-8.73 | This needs no proof. Capital derives five, four, and three francs successively from every hundred francs invested; then its income relatively decreases. But, as it invests one hundred, two hundred, and four hundred francs successively, it finds that it receives, in all, first five, then eight, then twelve francs, and so on; then its income absolutely increases. |
| DOI-IV-8.74 | 5. In proportion as Capital increases (and with it production), the Wages of Labour increase both relatively and absolutely. |
| DOI-IV-8.75 | How could it be otherwise? Since the income of Capital increases absolutely, even though it consists successively of only one-half, one-third, one-fourth, one-fifth of the total product, the Wages of Labor, which consist successively of one-half, two-thirds, three-fourths, four-fifths, constantly increase both relatively and absolutely. |
| DOI-IV-8.76 |
The law of this division may be shown by the following figures, which make no pretensions to accuracy, but which I present to make my thought clear: –
 |
| DOI-IV-8.77 |
Here we see how the gradual increase in production, corresponding to the gradual accumulation of Capital, explains
This Double Phenomenon, –
namely, that the income of Capital increases absolutely, even though it decreases relatively, whereas the Wages of Labor increase in both senses at the same time. |
| DOI-IV-8.78 | From the foregoing we derive the following conclusions: – |
| DOI-IV-8.79 | That the condition of the masses may improve, the Rent of Capital must decrease. |
| DOI-IV-8.80 | That Interest may decrease, Capital must multiply. |
| DOI-IV-8.81 | That Capital may multiply, five things are necessary: industry, economy, liberty, peace, and security. |
| DOI-IV-8.82 | And these benefits, which are important to everybody, are of especial importance to the working class. |
| DOI-IV-8.83 | I by no means deny the hardships of laborers, but I say that they are on a false scent when they attribute them to infamous Capital. |
| DOI-IV-8.84 | Such is my doctrine. I entrust it confidently to the sincerity of our readers. It has been said that I have appointed myself the defender of Capitalistic privilege. To this they, not I, must reply. |
| DOI-IV-8.85 | This doctrine, I venture to say, promotes harmony and peace of mind. It tends to the union of classes; it points out the agreement of principles; it destroys the antagonism both of persons and ideas; it satisfies the mind and the heart. |
| DOI-IV-8.86 | Is this the case with the doctrine which serves as a new support for socialism; which denies Capital all right to a reward; which sees everywhere nothing but contradiction, antagonism, and robbery; which excites classes against each other; and which paints iniquity as a universal plague, for which every man is more or less responsible and to which he is in some degree a victim? |
| DOI-IV-8.87 | But, nevertheless, if the principle of Gratuity of Credit is true, we must admit it: Fiat justitia, ruat coelum. [“Let justice be done, though the heavens fall.” – RTL] But if it is false!!! |
| DOI-IV-8.88 |
For my part, I hold it to be false, and in closing I thank you for having so generously furnished me with an opportunity to oppose it.
FREDERIC BASTIAT.
|
Previous section
Next section
Up to table of contents
Back to online library