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

Letter 9

[Letter 8 by Tucker’s numbering]

Proudhon to Bastiat,
31 December 1849

[Translation (as “Zero Per Cent. – An Appeal to Facts and Figures by – PERSEVERING PROUDHON. – Bastiat’s Ignorance of Finance Exposed. – THE VAULTS OF THE BANK OF FRANCE – Illustrate His Theory of the Proportion Between Capital and Interest. – THE PEOPLE PAYING THE USURERS 160 PER CENT. – A Seething Arraignment of the Combined Opponents of Honest Finance. – INTEREST AND PRINCIPAL. – LETTER EIGHT. – PROUDHON TO BASTIAT. – [TRANSLATED FOR THE IRISH WORLD BY BENJ. R. TUCKER.]”) by Benjamin R. Tucker, in The Irish World and American Industrial Liberator, 13 September 1879.]

PARIS, Dec. 31, 1849.

DOI-IV-9.1 You have deceived me.
DOI-IV-9.2 I expected from you a serious discussion. Your letters are but a series of insipid mystifications. If you had made a compact with me to obscure the question and to prevent our debate from coming to a definitive conclusion, by embarrassing it with incidents, digressions, trifles, and quibbles, you could have taken no other course.
DOI-IV-9.3 Now what are we after, if you please? To ascertain whether Interest of Money ought, or ought not, to be abolished. I have told you myself that there is the pivot of Socialism, the mainspring of the Revolution.
DOI-IV-9.4 First of all, then, a preliminary question arises, of whether, indeed, it is possible to abolish this Interest. You say No; I say Yes: which of us is to be believed? Clearly, neither. An examination is necessary: that is the course which common sense dictates, and which the merest notion of justice commands. You, on the contrary, protest against this examination. Since two months ago, when we opened, in La Voix du Peuple, this solemn court, in which Capital was to be tried, and Usury either convicted or absolved, you have not ceased to

Ring the Changes on this Refrain: –
DOI-IV-9.5 “Capital, as I understand it and as its real nature is revealed to me, is productive. This conviction is enough for me: I care to know no more. Beside, you admit that, in lending at Interest, I render a service and am not a robber; why then do I need to understand you? When I have proved that, under my system, Gratuity of Credit is impossible, and that you admit that an honest man, without violating conscience, may derive an income from his Capital, you also must regard this gratuity as impossible. That which has been shown to be true under one system cannot become false under another: otherwise we should have to say that the same thing may be both true and false at the same time, – a proposition which my mind absolutely refuses to entertain. I will not stir from that position.”
DOI-IV-9.6 Where then, sir, did you learn, – I do not say to reason, for it has been evident from the beginning of this debate that your reasoning consists in continually affirming your own proposition without refuting your opponent’s, – but to discuss? The pettiest clerk in an attorney’s office will tell you that, in any discussion, the statements of each party must be examined successively and opposed; and since we have chosen the public as our judge, it is evident that, when your system has been explained and discussed, mine must be considered.
DOI-IV-9.7 But that is not your manner of procedure. Satisfied with the concession that I made to you, – namely, that, as things now are, lending at Interest cannot be considered illegitimate, – you looked upon the necessity of Interest as established; and thereupon, under the pretext that you do not understand antinomy, thus [shutting] my mouth, you let the debate go by default: – is this discussion, I ask you?
DOI-IV-9.8 Forced by so strange a course, I then took a step towards you. Seeing that my method of demonstration seemed to trouble you, I abandoned it, and showed you, by the ordinary form of argument, that all social arrangements change; that that which is a help to-day

Becomes a Hindrance To-Morrow;

and thus, disregarding time, the same idea, the same fact, completely changes its character, according to the respect in which we view it; that there is no evidence that this is not the case with Interest; that consequently your objection is inadmissible, and that you must immediately examine with me the idea of Gratuity of Credit and the Abolition of Interest.
DOI-IV-9.9 Now what was your reply? I scarcely dare recall it to your mid. Because, out of respect for you, I deemed it my duty to change my method, you accused me, first of tergiversation, and then of fatalism! I treated you – allow me this comparison – just as the professor of mathematics treats his pupils when, for a difficult demonstration, he substitutes another more [accessible] to their minds. For, observe, sir, that Hegelian dialectic, though not the whole of logic, is to the syllogism and to induction what differential calculus is to ordinary geometry. Laugh, if you will; it is the right of the human mind to laugh at that which it has once understood and mastered; but it must be understood; or else the laugh is but a senseless grimace. And you, in return for my efforts to oblige, [repay] me with sarcasm; in your opinion, I am but a sophist. Is that serious?
DOI-IV-9.10 I went farther. You had said, – I quote your own words: – Show me how Interest passes from legitimacy to illegitimacy, and I consent to discuss the theory of Gratuitous Credit.
DOI-IV-9.11 To satisfy this desire, which by the way was a [perfectly] legitimate one, I traced the history of Interest, I wrote the biography of Usury. I showed that this practice originated in a combination of political and economic circumstances, independent of the will of the contractors, and unavoidable in the early stages of society, namely: 1, the incommensurability of values, resulting from the non-division of Labor and from the absence of terms of comparison; 2, the risks incurred in commerce; 3, the habit, which was introduced at an early date among negotiants, and gradually became fixed and general, of demanding a proportional surcharge, by way of fine or indemnity, from every recalcitrant debtor; 4, the advantage possessed [by]

The Precious and Coined Metals

over ordinary merchandise; 5, the custom of making contrats de pacotille, d’assurance, and a la grosse; 6, and last, the establishment of Ground-rent, analogous to Interest of Money, and which, admitted without resistance by the casuists, was to serve afterwards as a justification of this same Interest.
DOI-IV-9.12 To make the demonstration complete, I next proved, by a simple arithmetical operation, that Interest, while excusable as an accident, and during the condition in which it arose and in which it grew, becomes absurd and dishonest, as soon as we undertake to generalize it and to make it a LAW of public economy; that it is a direct violation of the economic principle that in society net product is identical with raw product, so that every demand made by Capital against Labor disturbs the social balance and is an impossibility. I proved, in conclusion, that though Interest did serve once as an aid to the circulation of Capital, to-day, like the tax on salt, wine, sugar, meat, like the very custom-house itself, it is only an obstacle to its circulation; that to it we owe the present stagnation of business, the suspension of Labor, the distress of agriculture, and the ever-growing danger of universal bankruptcy.
DOI-IV-9.13 All this was historical, theoretical, and practical, as well as mathematical: you yourself have observed that I have not once appealed, in support of my opposition to Interest, to fraternity, philanthropy, the authority of Scripture, or the Fathers of the Church. I have little faith in philanthropy; as for the Church, it has never understood this matter, and the casuistry of its [teachers] on this subject has been simply absurd. [The French says: “on this subject, from Christ to Pius IX, has been simply absurd.” – RTL] Absurd, I say, whether in condemning Interest without considering the circumstances which justified and required it, or in

Showering Its Curses

upon Usury of Money while allowing Usury of Land.
DOI-IV-9.14 To this demonstration, the importance of which has been recognized by you, what reply did you make in your fourth letter? – None.
DOI-IV-9.15 Do you deny history? – No.
DOI-IV-9.16 Do you dispute my figures? – Not at all.
DOI-IV-9.17 What then do you say? – You repeat your unending refrain: He who lends renders a service; therefore it is proved that Capital has an inherent and indestructible right to be rewarded. On the strength of which you lay before me, as an embodiment of the wisdom of centuries, five or six aphorisms, excellent for quieting uneasy consciences, but all of which, as I shall prove presently, are the most absurd things ever sanctioned by the rudest routine. Then, making the Sign of the Cross, you declare the discussion closed. Amen!
DOI-IV-9.18 You are an economist, Monsieur Bastiat, a member of the Academy of Moral and Political Sciences, a member of the Committee on Finance, a member of the Peace Congress, a member of the Anglo-French Free Trade League, and, more than all, an honest and intelligent man. Well, I am obliged, in order to save your intelligence and your honesty, to prove to you, by the method of A plus B, that you do not know the first thing about the questions you have undertaken to discuss; that you are no better acquainted with Capital, Interest, price, Value, Circulation, Finance, and the whole subject of Political Economy, than with German Metaphysics.
DOI-IV-9.19 Did you ever, in your life, hear of the Bank of France? Do me the favor to visit it some day; it is not far from the Institute. There you will find M. d’Argout, who knows more about Capital and Interest than you and all the economists of Guillaumin. [D’Argout: Antoine Maurice Apollinaire d’Argout (1782-1858), governor of the Bank of France from 1834 to 1857. Guillaumin: the chief publishing house associated with the French liberal movement. – RTL] The Bank of France is an association of capitalists, formed fifty years ago, at the solicitation of the State and by a privilege granted by the State, for the purpose of

Levying Usury Upon the Whole of France.

From its beginning it has not ceased to grow: the Revolution of February, by joining with it the Departmental Banks, made it the first power in the Republic. The principle on which this association was formed is yours precisely. They said: We have obtained our Capital by our labor or by that of our fathers. Why then, in return for making it an aid to general circulation and for devoting it to the service of our country, should we not draw a legitimate salary, since the landlord derives an income from his land; since the builder derives an income from his houses; since the merchant gets a profit on his goods over and above his running expenses; since the workingman who lays our floors includes in the price of his day’s work a charge for the use of his tools which certainly more than covers the amount which they cost him?
DOI-IV-9.20 There could be, as you see, no more plausible argument. It is the argument which has always, and with reason, been opposed to the Church when she has condemned Interest as distinct from Rent; it is the argument which you fall back on in every one of your letters.
DOI-IV-9.21 Now, do you know where the stockholders of the Bank of France, all of whom, including M. d’Argout, I regard as very honest people, have been led by this seductive reasoning? – To robbery; yes, sir, to the most unmistakeable, shameless, detestable robbery; for it is this robbery alone which, since February, has suspended Labor, hindered business, caused the people to die of cholera, hunger and cold, and which, with the secret intention of restoring the monarchy, is breathing despair among the working classes.
DOI-IV-9.22 It is right here that I propose to how you how Interest passes from legitimacy to illegitimacy, and, what will surprise you still more, how paid Credit, the moment that it ceases to rob, the moment that it claims only the price which legitimately belongs to it, becomes gratuitous Credit.
What is the Capital of the Bank of France?
DOI-IV-9.24 According to the last inventory, ninety millions.
DOI-IV-9.25 What is the legal rate of discount, agreed upon between the Bank and the State? – Four per cent a year.
DOI-IV-9.26 Then the legal and legitimate annual income of the Bank of France, the just price of its services, is, for a capital of ninety millions, at four per cent a year, three million six hundred thousand francs.
DOI-IV-9.27 Three million six hundred thousand francs, – that is the amount, according to the fiction of the productivity of Capital, which the commerce of France owes annually to the Bank of France as reward for its Capital, which is ninety millions.
DOI-IV-9.28 Under these conditions, the shares of the Bank of France are like so many pieces of real estate yielding a regular income of forty francs each: issued at one thousand francs, they are worth one thousand francs.
DOI-IV-9.29 Now, do you know what follows?
DOI-IV-9.30 Consult the same inventory: you will find that these same shares are quoted at two thousand four hundred francs, instead of one thousand. Last week they were two thousand four hundred and forty-five; and if the amount of commercial effects in the portfolio should increase a little, they would go up to two thousand five hundred or three thousand francs; which means that the capital of the bank, instead of yielding four per cent, the legal and conventional rate, yields eight, ten, and twelve per cent.
DOI-IV-9.31 Has the capital of the bank, then, been doubled or tripled? This, indeed, is what should have happened, according to the theory announced in your third and fourth propositions, – namely, that Interest decreases in proportion as Capital increases, but in such a way that the total income of the Capitalist is enlarged.
DOI-IV-9.32 But such is not the case at all. The capital of the bank has remained the same, ninety millions. Only the company,

By Means of Its Privilege

and with the aid of its financial machinery, has discovered a method of doing as much business with its capital of ninety millions as if it had four hundred and fifty millions, or five times as much.
DOI-IV-9.33 Do you ask how that can be? This is the method; it is very simple, and I can explain it; it is precisely one of those which the Bank of the People proposes to use in the annihilation of Interest.
DOI-IV-9.34 To avoid the transfer of specie and the troublesome handling or coin, the Bank of France issues bills of credit, called bank notes, which represent the specie lying in its vaults. These are the notes which it ordinarily issues to its customers in return for the drafts and bills of exchange which they bring to it, and the redemption of which, secured by drawers and drawees alike, it undertakes the task of procuring,
DOI-IV-9.35 The bank paper has thus a double security: the coin in the vault and the commercial paper in the portfolio. This double deposit is such good security that business men prefer bank notes to specie, and every one is as anxious to know the condition of the bank as that of his own money-drawer.
DOI-IV-9.36 It is even thought, in theory, that in this way the Bank of France might dispense with Capital altogether and discount paper without specie: indeed, the commercial paper which it discounts, and against which it issues its notes, being certain of redemption at the appointed time either in Silver or in Bank-Notes, the holders of Bank-Notes would only have to dismiss the desire to covert them into coin to enable all transactions to be effected by paper alone. Then the circulating medium would be based, not on the credit of the Bank whose Capital would thus be set free, but on the Public Credit, through the general acceptance of the notes.
DOI-IV-9.37 In practice the facts do not harmonize exactly with the theory. Never have we seen bank-paper wholly substituted for specie; there is only a tendency in this direction. Now, see what results from this tendency.
DOI-IV-9.39 The Bank, relying with perfect security upon the Public Credit, sure moreover of its debts, does not limit its discounts to the amount of its metallic reserve, but

Always Issues More Notes

than it has Specie; which shows that sometimes, instead of getting real value and making an actual exchange, it only transfers debts, without using any Capital. That which here takes the place of the Capital of the Bank is, I repeat, established custom, commercial confidence, in a word, the Public Credit.
DOI-IV-9.40 It seems, therefore, that the rate of discount ought to decrease in proportion to the amount of notes issued in excess of the Capital; that if, for example, the Capital of the Bank is ninety millions, and its circulation one hundred and twelve millions, the fictitious capital being one-fourth of the real Capital, the rate of discount should decrease from four to three per cent. What could be fairer than that, pray? Is not the Public Credit Public Property? Is not the surplus issue of the Bank secured by the mutual obligations of citizens? Does not the acceptance of this paper, which has no metallic basis, rest entirely upon their confidence in each other? Is it not this very confidence which makes the paper pass? What has the Capital of the Bank done? What does it secure?
DOI-IV-9.41 You can already see from this simple outline how false your third proposition is, which makes a decrease of Interest involve a corresponding increase of Capital. Nothing is falser than this proposition: the theory and practice of all Banks proves, on the contrary, that a Bank may easily get four per cent on its Capital while its rate of discount is only three per cent: we shall see presently that the rate may go much lower.
DOI-IV-9.42 Why, then, does not the Bank, which, with ninety millions of Capital, issues, as we suppose, one hundred and twelve millions of notes, and which consequently operates, by the aid of the Public Credit, just as if its Capital had increased from ninety millions to one hundred and twelve, – why, I ask, does it not reduce its rate of Discount in a like proportion? Why this four per cent Interest received by the Bank as a reward for Capital not its own? Can you give me a reason which will

Justify this Extra One Per Cent

on one hundred and twelve millions? For my part, sir,

“I call a cat a cat, and Rollet a rascal,”
[i.e., “I call a spade a spade”; from Nicolas Boileau-Despréaux (1636-1711)’s Satires I.1.51.
According to W. S. Walsh’s 1908 International Encyclopedia of Prose and Poetical Quotations,
“Boileau, half afraid of the consequences (Rolet was an attorney whom it was dangerous to provoke),
appended a note to the name, ‘Innkeeper at Blois’; but, oddly enough, there was an innkeeper
at Blois of the same name, who immediately threatened proceedings against the poet.” – RTL]

and I say quite plainly that the bank ROBS.
DOI-IV-9.43 But that is nothing.
DOI-IV-9.44 While the Bank of France issues Notes in the place of Coin, a portion of its customers continue to redeem their Notes in Specie: so that, the Capital stock remaining always the same, – ninety millions, – the metallic reserve, or the amount of Specie present in the Bank, rises gradually to one hundred, two hundred, three hundred millions: to-day it is four hundred and thirty-one millions.
DOI-IV-9.45 This accumulation of Specie, with which some people have a mania for afflicting themselves, is the decisive fact which annihilates the theory of Interest, and shows in the most palpable manner the necessity of gratuitous Credit. This can easily be explained.
DOI-IV-9.46 It is a point admitted in theory that exchange of products can be carried on very well without Specie; you admit it yourself, and all the economists know it. Now, the proof of this theory lies precisely in the fact that it is carried out under our very eyes. The Circulation of Bills of credit replacing gradually the metallic currency; paper being preferred to coin; the public choosing to pay their debts in Specie rather than in Bank Notes; and the Bank being constantly persuaded, either by the needs of the State which borrows from it, or by those of commerce which comes en masse to get its paper discounted, or by any other cause, to make new issues frequently, – the result is that Gold and Silver go out of circulation, and are absorbed by the Bank, thus continually increasing its reserve and making its power to multiply its Notes literally unlimited.
DOI-IV-9.47 It is by this conversion that the reserve of the Bank has

Reached the Enormous Sum

of four hundred and thirty-one millions. It results therefore that the association forming the Bank, in spite of the renewal of its privilege, is no longer alone entitled to it: by this increase of its reserve it has entered into partnership with one more powerful than itself: this partner is the country, the country, which represents every week upon the balance-sheet of the Bank of France a capital varying form three hundred and forty to three hundred and fifty millions. And as the interests are joint and indivisible, we may say with entire truth that it is no longer the privileged company of 1803 that constitutes the Bank; that neither is it the State, which gives it its charter: it is commerce, it is industry, it is the producers, it is the entire Nation, which, by accepting the Bank’s paper in preference to Gold, has really secured it, and has established, in place of the old Bank of France with its Capital of ninety millions, a National Bank with a Capital of four hundred and thirty-one millions.
DOI-IV-9.48 A decree of the National Assembly, having for its object the redemption of the stock of the Bank of France, and the conversion of this Bank into a central Bank, in which all French citizens should be silent partners, would be only an announcement of the already accomplished fact of the absorption of this association by the nation.
DOI-IV-9.49 This point established, I resume my former argument.
DOI-IV-9.50 The annual Interest agreed upon between the association and the State is four per cent of the Bank’s capital.
DOI-IV-9.51 This capital is ninety millions.
DOI-IV-9.52 The metallic reserve to-day (December 31, 1849) is four hundred and thirty-one millions.
DOI-IV-9.53 The amount of notes issued is four hundred and thirty-six millions.
DOI-IV-9.54 The Capital, both real and fictitious, with which the Bank operates, being almost quintupled,

The Rate of Discount Ought to be Reduced

to one-fifth of the rate stipulated in the law by which the Bank was established, – that is, to something like three-fourths of one per cent.
DOI-IV-9.55 You must see, sir, how far short of the accuracy of Euclid’s your propositions fall. It is not true – and the facts just cited prove beyond a doubt that it is not – that the decrease of Interest is proportional to the increase of Capital. Between the Price of Merchandise and Interest of capital there is not the least analogy; the laws governing their fluctuations are not the same; and all your dinning of the last six weeks in relation to Capital and Interest has been utterly devoid of sense. The universal custom of banks and the common sense of the people give you the lie on all these points in a most humiliating manner.
DOI-IV-9.56 Now, would you believe, sir, – for indeed you do not seem to be well-informed about anything, – that the Bank of France, an association composed of honest people, philanthropists, God-fearing men, utterly incapable of compromising with their consciences, continues to charge four per cent on all its discounts without allowing the public to derive the slightest bonus therefrom? Would you believe that it regulates the dividends of its Stockholders, and quotes its stock in the Money-Market, on this basis of four per cent on a Capital of four hundred and thirty-one millions not its own? Say, is that robbery, yes or no?
DOI-IV-9.57 But we have not reached the end. I have not begun to tell you of the crimes of this society of stock-jobbers, founded by Napoleon for the express purpose of supporting parasitic officials and proprietors and sucking the nation’s life-blood. A few millions, more or less, are not sufficient to affect dangerously a population of thirty-six millions of men. That portion of the robberies committed by the Bank of France which I have exposed is but a trifle: only the results are worthy of consideration.
The Fortune and Destiny of the Country

is today in the hands of the Bank of France.
DOI-IV-9.59 If it would relieve industry and commerce by a decrease of its rate of discount proportional to the increase of its reserves; in other words, if it would reduce the price of its Credit to three-fourths of one per cent, which it must do in order to quit stealing, – this reduction would instantly produce, throughout the Republic and all Europe, incalculable results. They could not be enumerated in a volume: I will confine myself to the indications of a few.
DOI-IV-9.60 If, then, the Credit of the Bank of France, when that Bank has become a National Bank, should be loaned at three-fourths of one per cent instead of at four per cent, ordinary Bankers, Notaries, Capitalists, and even the Stockholders of the Bank itself, would be immediately compelled by competition to reduce their Interest, Discount, and Dividends to at least one per cent, including incidental expenses and brokerage. What harm, think you, would this reduction do to Borrowers on Personal Credit, or to Commerce and Industry, who are forced to pay, by reason of this fact alone, an annual tax of at least two thousand millions?
DOI-IV-9.61 If financial circulation could be effected at a rate of discount representing only the cost of Administration, Drafting, Registration, etc., the Interest charged on Purchases and Sales on Credit would fall in its turn from six per cent to zero, – that is to say, business would then be transacted on a cash basis: there would be no more debts. Again, to how great a degree, think you, would that diminish the shameful number of suspensions, failures, and bankruptcies?
DOI-IV-9.62 But as in society net product is undistinguishable from raw product, so in the light of the sum total of economic facts CAPITAL is undistinguishable from PRODUCT. These two terms do not, in reality, stand for two distinct things; they designate relations only. Product is Capital; Capital is Product; there is a difference between them only in private economy;

None Whatever in Public Economy.
DOI-IV-9.63 If, then, Interest, after having fallen, in the case of Money, to three-fourths of one per cent, – that is, to zero, inasmuch as three-fourths of one per cent represents only the service of the bank, – should fall to zero in the case of merchandise also, by analogy of principles and facts it would soon fall to zero in the case of real estate: rent would disappear in becoming one with liquidation. Do you think, sir, that that would prevent people from living in houses and cultivating land?
DOI-IV-9.64 If, thanks to this radical reform in the machinery of circulation, Labor was compelled to pay to Capital only as much Interest as would be a just reward for the service rendered by the Capitalist, Specie and Real Estate being deprived of their reproductive properties and valued only as products, – as things that can be consumed and replaced, – the favor with which Specie and Capital are now looked upon would be wholly transferred to products; each individual, instead of restricting his consumption, would strive only to increase it. Whereas, at present, thanks to the restriction laid upon consumable products by Interest, the means of consumption are always very much limited, then, on the contrary, Production would be insufficient: Labor would then be secure in fact as well as in right.
DOI-IV-9.65 The Laboring class, gaining at one stroke the five thousand millions, or thereabouts, now taken in the form of Interest from the ten thousand which it produces, plus five thousand millions which this same Interest deprives it of by destroying the demand for Labor, plus five thousand millions which the parasites, cut off from a living, would then be compelled to produce, the national production would be doubled and the welfare of the laborer increased four-fold. And you, sir, whom the worship of Interest does not prevent from lifting your thoughts to another world, – what say you to

This Improvement of Affairs Here Below?
DOI-IV-9.66 Do you see now that it is not the multiplication of Capital which decreases Interest, but on the contrary, that the decrease of Interest multiplies Capital?
DOI-IV-9.67 But all this is displeasing to the Capitalists and distasteful to the Bank. The Bank holds in its hand the horn of plenty which the people have entrusted to it: that horn is the three hundred and forty-one millions of Specie accumulated in its vaults, which testify so loudly to the power of the Public Credit. To revive Labor and diffuse Wealth everywhere, the Bank needs to do but one thing; namely, reduce its rate of discount to such a figure that the sum total of the Interest it receives shall be equal to four per cent of ninety millions. It will not do it. For the sake of a few millions more to distribute among its Stockholders, and which it steals, it prefers to cause an annual loss to the country of ten thousand millions. In order to reward parasitism, remunerate crime, satisfy the intemperate cravings of two millions of officials, Stock-Jobbers, Usurers, prostitutes, and spies, and preserve this leper of a Government, it will cause, if necessary, thirty-four millions of men to rot in poverty. Once more, I ask, is that robbery? Is that rapine, plunder, premeditated and willful murder?
DOI-IV-9.68 Have I told all? – No; that would require ten volumes, but I must stop. I will close by considering a stroke which seems to me a masterpiece of its kind, and to which I ask your undivided attention. A defender of Capital, you are not acquainted with its tricks.
DOI-IV-9.69 The amount of Specie, I will not say existing, but circulating in France, including the Bank’s reserve, does not exceed, by common estimation, one thousand millions.
DOI-IV-9.70 At four per cent Interest – I am reasoning on the supposition of paid Credit – the laboring people should pay forty millions annually for the use of this Capital.
DOI-IV-9.71 Can you, sir, tell me why, instead of forty millions, we are paying

Sixteen Hundred Millions –

I say sixteen hundred millions – as the reward of this Capital?
DOI-IV-9.72 “Sixteen hundred millions! One hundred and sixty per cent! Impossible!” you exclaim. Did I not tell you, sir, that you knew nothing about Political Economy? This is the fact, though to you, I am sure, it is still an enigma.
DOI-IV-9.73 The amount of mortgages, according to the most reliable authorities, is twelve thousand millions; some put it at fourteen thousand millions;

which agriculture, manufactures, and commerce, in a word, Labor, which produces everything, and the State, which produces nothing and is supported by Labor, owe to Capital.
DOI-IV-9.74 All these debts – note this point – arise from money lent, or said to have been lent, [HC has “money loaned, or said to have been loaned.” – RTL] at four, five, six, eight, twelve, and even fifteen per cent.
DOI-IV-9.75 Taking six per cent as the average rate of interest on the first three items, which amount to twenty thousand millions, they would yield twelve hundred millions. Add the interest on the public debt, which is about four hundred millions, and we have altogether sixteen hundred millions of interest per annum on a capital of one thousand millions.
DOI-IV-9.76 Now, then, tell me, is it in this case also the scarcity of specie that causes the enormous amount of interest? No, for all these amounts were lent, [HC has “loaned.” – RTL] as we have seen, at an average rate of six per cent. How, then, has an interest, stipulated at six per cent, become an interest of one hundred and sixty per cent? I will tell you.
DOI-IV-9.77 You, sir, who regard all Capital as naturally and necessarily productive, know that this productivity is not possessed by all kinds of property in the same degree; that it belongs mainly to two kinds, the kind known as real estate (land and houses), if we have a chance to lease them (which is not always easy or always safe), and the kind known as money. Money, money especially! that is

The Capital Par Excellence,

the Capital which is lent, which is hired, which is paid for, which produces all those wonderful financiers whom we see manœuvering at the Bank, at the Stock Exchange, and at all the Interest and Usury shops.
DOI-IV-9.78 But Money is not, like Land, capable of cultivation, nor, like houses or clothes, can it be consumed by use. It is only a token of exchange, receivable by all merchants and producers, and with which a shoemaker, for example, can buy him a hat. In vain, through the agency of the Bank, does paper, little by little and with universal consent, get substituted for specie: the prejudice sticks fast, and if bank paper is received in lieu of specie, it is only because the opinion prevails that it can be exchanged at will for specie. Specie alone is in demand.
DOI-IV-9.79 When I lend money, then, it is really the power to exchange my unsold product of to-day or of the future which I lend: money, in itself, is useless. I take it only to expend it; I neither consume nor cultivate it. The exchange once consummated, the money again becomes transferable, and capable, consequently, of being lent [HC again has “loaned.” – RTL] anew. Thus it goes on: and as, by the accumulation of interest, money-capital, in the course of exchange, always returns to its source, it follows that the new loan, always made by the same hand, always benefits the same persons.
DOI-IV-9.80 Do you say that, inasmuch as money serves to facilitate the exchange of capital and products, the Interest paid on it is a compensation not so much for the money itself as for the capital exchanged; and that, thus viewed, the sixteen hundred millions of Interest paid on one thousand millions of Specie represent really the reward of from twenty-five to thirty thousand millions of Capital? That has been said or written somewhere by an economist of your school. [That M. Proudhon should have been deluded by the rather doubtful value of the figures and arguments employed in this letter may be strictly conceded. But it is quite difficult to regard as an involuntary error the incredible confusion which he here introduces between the cash and the capital of the nation. – OC]
DOI-IV-9.81 Such an allegation cannot be sustained for one moment. How happens it, I ask you, that houses are rented, that lands are leased, that merchandise sold on credit bears Interest? Just because of the use of Specie; Specie, which intervenes, as a fiscal agent, in all transactions; Specie, which prevents houses and lands from being exchanged instead of lent [HC again has “ loaned.” – RTL]

And Merchandise from Being Sold for Cash.

Specie, then, intervening everywhere as a supplementary capital, as an agent of circulation, as a means of security, – this it is precisely that we pay for, and the remuneration of the service rendered by it is exactly the point now in question.
DOI-IV-9.82 And since in another place we have seen, from an explanation of the workings of the Bank of France and the consequences of the accumulation of its metallic reserve, that a capital of ninety millions of specie, having to produce an annual interest of four per cent, admits of a rate of discount of three, two, one, or even three-fourths of one per cent, according to the amount of business transacted by the bank, it is very evident, further, that the sixteen hundred millions of Interest which the nation pays to its usurers, bankers, bondholders, notaries, and sleeping-partners are simply the rent of one thousand millions of gold and silver, unless you prefer to acknowledge with me that these sixteen hundred millions are obtained by robbery.
DOI-IV-9.83 I told you, sir, at the beginning of this controversy, and I now repeat it, that I never intend to attack men. I arraign only ideas and institutions. In this respect I have been, throughout this discussion, more just than the Church, more charitable than the Gospel itself. You have seen with what care I have separated, in considering the question of Interest, the man from the institution, conscience from theory. Never shall I attack society: in spite of all the crimes of my fellows and the vices of my own heart, I believe in the holiness of humanity.
DOI-IV-9.84 Nevertheless, when I consider what follies the Revolution is struggling against to-day; when I see millions of men sacrificed to Utopias so abominable, – I am almost ready to yield to my misanthropy, and I no longer feel courage to attempt their refutation. Then I try to elevate and ennoble, by the sublimity of dialectics, the miseries of my subject, but your merciless routine inevitably

Drags Me Back to the Hideous Reality.
DOI-IV-9.85 A two-fold increase of production;
DOI-IV-9.86 A four-fold increase of the comfort of the laborer, –
DOI-IV-9.87 That is what we can realize in twenty-fours, [BRT’s (or the Irish World’s) error for “twenty-four hours.” – RTL] if we wish, by a simple reformation of the Bank, without the dictatorship, without communism, without a phalanx, without Icaria, and without the Triad. [Phalanx, Icaria, and Triad are references to the ideas of Charles Fourier, Étienne Cabet, and Pierre Leroux respectively, representing proposed forms of social organisation that Proudhon regards as excessively collectivistic and restrictive. – RTL]
DOI-IV-9.88 A decree, in twelve articles, from the National Assembly; a simple declaration of the fact that the Bank of France, by the increase of its Specie, has become a National Bank; that, consequently, it ought to act in the name and on behalf of the nation, and reduce its rate of Discount to three-fourths of one per cent, – and the Revolution is three-fourths accomplished.
DOI-IV-9.89 But this is not what we desire, this is what we refuse to understand, to so great a degree have our political babble and our parliamentary bluster stifled our moral and political sense!
DOI-IV-9.90 This is not what the Bank of France, the citadel of parasitism, desires;
DOI-IV-9.91 This is not what the Government, created expressly to sustain, protect, and encourage parasitism, desires;
DOI-IV-9.92 This is not what the majority of the National Assembly, composed of parasites and accomplices of parasites, desires;
DOI-IV-9.93 This is not what the minority, infatuated with Government and desirous to know what will becomes of society when there shall be no more parasites, desires;
DOI-IV-9.94 This is not what the Socialists themselves, pretended revolutionists, to whom Liberty, Equality, Wealth, and Labor are nothing if they have to abandon, or even postpone, their chimeras, and renounce their hope of power, desire;
DOI-IV-9.95 This is what the proletariat, confused with social theories, toasts to love, and discourses on fraternity, does not know enough to demand.
DOI-IV-9.96 Go on, go on, then, Capital; continue to rob this miserable people! Devour this stupid bourgeoisie, grind the workingman, fleece the peasant, eat up children, prostitute woman, and reserve your favors for the coward who accuses, the judge who condemns, the soldier who shoots, and the slave who applauds. The morality of wine-merchants has become that of honest people. A curse on my contemporaries!


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