[Third (People's) Edition]
Essays on Political Economy.
By the late M. Frederic Bastiat, Member of The Institute of France.
New York: G. P. Putnams & Sons, Fourth Avenue, and Twenty-Third Street. 1874.
London: Printed for Provost and Co., Henrietta Street, W. C.
Capital and Interest. Introduction 1 Capital and Interest 5 The Sack of Corn 19 The House 22 The Plane 24
That Which Is Seen, and That Which Is Not Seen. Introduction 49 The Broken Window 50 The Disbanding of Troops 54 Taxes 58 Theatres, Fine Arts 63 Public Works 71 The Intermediates 74 Restrictions 83 Machinery 90 Credit 97 Algeria 102 Frugality and Luxury 107 Work and Profit 116
What Is Money? 136
The Law 173
Capital and Interest.
My object in this treatise is to examine into the real nature of the Interest of Capital, for the purpose of proving that it is lawful, and explaining why it should be perpetual. This may appear singular, and yet, I confess, I am more afraid of being too plain than too obscure. I am afraid I may weary the reader by a series of mere truisms. But it is no easy matter to avoid this danger, when the facts with which we have to deal are known to every one by personal, familiar, and daily experience.
But, then, you will say, "What is the use of this treatise? Why explain what everybody knows?"
But, although this problem appears at first sight so very simple, there is more in it than you might suppose. I shall endeavour to prove this by an example. Mondor lends an instrument of labour to-day, which will be entirely destroyed in a week, yet the capital will not produce the less interest to Mondor or his heirs, through all eternity. Reader, can you honestly say that you understand the reason of this?
It would be a waste of time to seek any satisfactory explanation from the writings of economists. They have not thrown much light upon the reasons of the existence of interest. For this they are not to be blamed; for at the time they wrote, its lawfulness was not called in question. Now, however, times are altered; the case is different. Men, who consider themselves to be in advance of their age, have organised an active crusade against capital and interest; it is the productiveness of capital which they are attacking; not certain abuses in the administration of it, but the principle itself.
A journal has been established to serve as a vehicle for this crusade. It is conducted by M. Proudhon, and has, it is said, an immense circulation. The first number of this periodical contains the electoral manifesto of the people. Here we read, "The productiveness of capital, which is condemned by Christianity under the name of usury, is the true cause of misery, the true principle of destitution, the eternal obstacle to the establishment of the Republic."
Another journal, La Ruche Populaire, after having said some excellent things on labour, adds, "But, above all, labour ought to be free; that is, it ought to be organised in such a manner, that money-lenders and patrons, or masters, should not be paid for this liberty of labour, this right of labour, which is raised to so high a price by the traffickers of men." The only thought that I notice here, is that expressed by the words in italics, which imply a denial of the right to interest. The remainder of the article explains it.
It is thus that the democratic Socialist, Thore expresses himself:—
"The revolution will always have to be recommenced, so long as we occupy ourselves with consequences only, without having the logic or the courage to attack the principle itself. This principle is capital, false property, interest, and usury, which by the old regime, is made to weigh upon labour.
"Ever since the aristocrats invented the incredible fiction, that capital possesses the power of reproducing itself, the workers have been at the mercy of the idle.
"At the end of a year, will you find an additional crown in a bag of one hundred shillings? At the end of fourteen years, will your shillings have doubled in your bag?
"Will a work of industry or of skill produce another, at the end of fourteen years?
"Let us begin, then, by demolishing this fatal fiction."
I have quoted the above, merely for the sake of establishing the fact, that many persons consider the productiveness of capital a false, a fatal, and an iniquitous principle. But quotations are superfluous; it is well known that the people attribute their sufferings to what they call the trafficking in man by man. In fact, the phrase, tyranny of capital, has become proverbial.
I believe there is not a man in the world, who is aware of the whole importance of this question:—
"Is the interest of capital natural, just, and lawful, and as useful to the payer as to the receiver?"
You answer, No; I answer, Yes. Then we differ entirely; but it is of the utmost importance to discover which of us is in the right, otherwise we shall incur the danger of making a false solution of the question, a matter of opinion. If the error is on my side, however, the evil would not be so great. It must be inferred that I know nothing about the true interests of the masses, or the march of human progress; and that all my arguments are but as so many grains of sand, by which the car of the revolution will certainly not be arrested.
But if, on the contrary, MM. Proudhon and Thore are deceiving themselves, it follows that they are leading the people astray—that they are showing them the evil where it does not exist; and thus giving a false direction to their ideas, to their antipathies, to their dislikes, and to their attacks. It follows that the misguided people are rushing into a horrible and absurd struggle, in which victory would be more fatal than defeat; since, according to this supposition, the result would be the realisation of universal evils, the destruction of every means of emancipation, the consummation of its own misery.
This is just what M. Proudhon has acknowledged, with perfect good faith. "The foundation stone," he told me, "of my system is the gratuitousness of credit. If I am mistaken in this, Socialism is a vain dream." I add, it is a dream, in which the people are tearing themselves to pieces. Will it, therefore, be a cause for surprise, if, when they awake, they find themselves mangled and bleeding? Such a danger as this is enough to justify me fully, if, in the course of the discussion, I allow myself to be led into some trivialities and some prolixity.
Capital and Interest.
I address this treatise to the workmen of Paris, more especially to those who have enrolled themselves under the banner of Socialist democracy. I proceed to consider these two questions:—
1st. Is it consistent with the nature of things, and with justice, that capital should produce interest?
2nd. Is it consistent with the nature of things, and with justice, that the interest of capital should be perpetual?
The working men of Paris will certainly acknowledge that a more important subject could not be discussed.
Since the world began, it has been allowed, at least in part, that capital ought to produce interest. But latterly it has been affirmed, that herein lies the very social error which is the cause of pauperism and inequality. It is, therefore, very essential to know now on what ground we stand.
For if levying interest from capital is a sin, the workers have a right to revolt against social order, as it exists. It is in vain to tell them that they ought to have recourse to legal and pacific means: it would be a hypocritical recommendation. When on the one side there is a strong man, poor, and a victim of robbery—on the other, a weak man, but rich, and a robber—it is singular enough that we should say to the former, with a hope of persuading him, "Wait till your oppressor voluntarily renounces oppression, or till it shall cease of itself." This cannot be; and those who tell us that capital is by nature unproductive, ought to know that they are provoking a terrible and immediate struggle.
If, on the contrary, the interest of capital is natural, lawful, consistent with the general good, as favourable to the borrower as to the lender, the economists who deny it, the tribunes who traffic in this pretended social wound, are leading the workmen into a senseless and unjust struggle, which can have no other issue than the misfortune of all. In fact, they are arming labour against capital. So much the better, if these two powers are really antagonistic; and may the struggle soon be ended! But, if they are in harmony, the struggle is the greatest evil which can be inflicted on society. You see, then, workmen, that there is not a more important question than this:—"Is the interest of capital lawful or not?" In the former case, you must immediately renounce the struggle to which you are being urged; in the second, you must carry it on bravely, and to the end.
Productiveness of capital—perpetuity of interest. These are difficult questions. I must endeavour to make myself clear. And for that purpose I shall have recourse to example rather than to demonstration; or rather, I shall place the demonstration in the example. I begin by acknowledging that, at first sight, it may appear strange that capital should pretend to a remuneration, and above all, to a perpetual remuneration. You will say, "Here are two men. One of them works from morning till night, from one year's end to another; and if he consumes all which he has gained, even by superior energy, he remains poor. When Christmas comes he is no forwarder than he was at the beginning of the year, and has no other prospect but to begin again. The other man does nothing, either with his hands or his head; or at least, if he makes use of them at all, it is only for his own pleasure; it is allowable for him to do nothing, for he has an income. He does not work, yet he lives well; he has everything in abundance; delicate dishes, sumptuous furniture, elegant equipages; nay, he even consumes, daily, things which the workers have been obliged to produce by the sweat of their brow, for these things do not make themselves; and, as far as he is concerned, he has had no hand in their production. It is the workmen who have caused this corn to grow, polished this furniture, woven these carpets; it is our wives and daughters who have spun, cut out, sewed, and embroidered these stuffs. We work, then, for him and for ourselves; for him first, and then for ourselves, if there is anything left. But here is something more striking still. If the former of these two men, the worker, consumes within the year any profit which may have been left him in that year, he is always at the point from which he started, and his destiny condemns him to move incessantly in a perpetual circle, and a monotony of exertion. Labour, then, is rewarded only once. But if the other, the 'gentleman,' consumes his yearly income in the year, he has, the year after, in those which follow, and through all eternity, an income always equal, inexhaustible, perpetual. Capital, then, is remunerated, not only once or twice, but an indefinite number of times! So that, at the end of a hundred years, a family which has placed 20,000 francs, at five per cent., will have had 100,000 francs; and this will not prevent it from having 100,000 more, in the following century. In other words, for 20,000 francs, which represent its labour, it will have levied, in two centuries, a tenfold value on the labour of others. In this social arrangement, is there not a monstrous evil to be reformed? And this is not all. If it should please this family to curtail its enjoyments a little—to spend, for example, only 900 francs, instead of 1,000—it may, without any labour, without any other trouble beyond that of investing 100 francs a year, increase its capital and its income in such rapid progression, that it will soon be in a position to consume as much as a hundred families of industrious workmen. Does not all this go to prove that society itself has in its bosom a hideous cancer, which ought to be eradicated at the risk of some temporary suffering?"
These are, it appears to me, the sad and irritating reflections which must be excited in your minds by the active and superficial crusade which is being carried on against capital and interest. On the other hand, there are moments in which, I am convinced, doubts are awakened in your minds, and scruples in your conscience. You say to yourselves sometimes, "But to assert that capital ought not to produce interest, is to say that he who has created instruments of labour, or materials, or provisions of any kind, ought to yield them up without compensation. Is that just? And then, if it is so, who would lend these instruments, these materials, these provisions? who would take care of them? who even would create them? Every one would consume his proportion, and the human race would never advance a step. Capital would be no longer formed, since there would be no interest in forming it. It would become exceedingly scarce. A singular step towards gratuitous loans! A singular means of improving the condition of borrowers, to make it impossible for them to borrow at any price! What would become of labour itself? for there will be no money advanced, and not one single kind of labour can be mentioned, not even the chase, which can be pursued without money in hand. And, as for ourselves, what would become of us? What! we are not to be allowed to borrow, in order to work in the prime of life, nor to lend, that we may enjoy repose in its decline? The law will rob us of the prospect of laying by a little property, because it will prevent us from gaining any advantage from it. It will deprive us of all stimulus to save at the present time, and of all hope of repose for the future. It is useless to exhaust ourselves with fatigue: we must abandon the idea of leaving our sons and daughters a little property, since modern science renders it useless, for we should become traffickers in men if we were to lend it on interest. Alas! the world which these persons would open before us, as an imaginary good, is still more dreary and desolate than that which they condemn, for hope, at any rate, is not banished from the latter." Thus, in all respects, and in every point of view, the question is a serious one. Let us hasten to arrive at a solution.
Our civil code has a chapter entitled, "On the manner of transmitting property." I do not think it gives a very complete nomenclature on this point. When a man by his labour has made some useful thing—in other words, when he has created a value—it can only pass into the hands of another by one of the following modes—as a gift, by the right of inheritance, by exchange, loan, or theft. One word upon each of these, except the last, although it plays a greater part in the world than we may think. A gift needs no definition. It is essentially voluntary and spontaneous. It depends exclusively upon the giver, and the receiver cannot be said to have any right to it. Without a doubt, morality and religion make it a duty for men, especially the rich, to deprive themselves voluntarily of that which they possess, in favour of their less fortunate brethren. But this is an entirely moral obligation. If it were to be asserted on principle, admitted in practice, or sanctioned by law, that every man has a right to the property of another, the gift would have no merit—charity and gratitude would be no longer virtues. Besides, such a doctrine would suddenly and universally arrest labour and production, as severe cold congeals water and suspends animation; for who would work if there was no longer to be any connection between labour and the satisfying of our wants? Political economy has not treated of gifts. It has hence been concluded that it disowns them, and that it is therefore a science devoid of heart. This is a ridiculous accusation. That science which treats of the laws resulting from the reciprocity of services, had no business to inquire into the consequences of generosity with respect to him who receives, nor into its effects, perhaps still more precious, on him who gives: such considerations belong evidently to the science of morals. We must allow the sciences to have limits; above all, we must not accuse them of denying or undervaluing what they look upon as foreign to their department.
The right of inheritance, against which so much has been objected of late, is one of the forms of gift, and assuredly the most natural of all. That which a man has produced, he may consume, exchange, or give. What can be more natural than that he should give it to his children? It is this power, more than any other, which inspires him with courage to labour and to save. Do you know why the principle of right of inheritance is thus called in question? Because it is imagined that the property thus transmitted is plundered from the masses. This is a fatal error. Political economy demonstrates, in the most peremptory manner, that all value produced is a creation which does no harm to any person whatever. For that reason it may be consumed, and, still more, transmitted, without hurting any one; but I shall not pursue these reflections, which do not belong to the subject.
Exchange is the principal department of political economy, because it is by far the most frequent method of transmitting property, according to the free and voluntary agreements of the laws and effects of which this science treats.
Properly speaking, exchange is the reciprocity of services. The parties say between themselves, "Give me this, and I will give you that;" or, "Do this for me, and I will do that for you." It is well to remark (for this will throw a new light on the notion of value) that the second form is always implied in the first. When it is said, "Do this for me, and I will do that for you," an exchange of service for service is proposed. Again, when it is said, "Give me this, and I will give you that," it is the same as saying, "I yield to you what I have done, yield to me what you have done." The labour is past, instead of present; but the exchange is not the less governed by the comparative valuation of the two services: so that it is quite correct to say that the principle of value is in the services rendered and received on account of the productions exchanged, rather than in the productions themselves.
In reality, services are scarcely ever exchanged directly. There is a medium, which is termed money. Paul has completed a coat, for which he wishes to receive a little bread, a little wine, a little oil, a visit from a doctor, a ticket for the play, &c. The exchange cannot be effected in kind, so what does Paul do? He first exchanges his coat for some money, which is called sale; then he exchanges this money again for the things which he wants, which is called purchase; and now, only, has the reciprocity of services completed its circuit; now, only, the labour and the compensation are balanced in the same individual,—"I have done this for society, it has done that for me." In a word, it is only now that the exchange is actually accomplished. Thus, nothing can be more correct than this observation of J. B. Say:—"Since the introduction of money, every exchange is resolved into two elements, sale and purchase. It is the reunion of these two elements which renders the exchange complete."
We must remark, also, that the constant appearance of money in every exchange has overturned and misled all our ideas: men have ended in thinking that money was true riches, and that to multiply it was to multiply services and products. Hence the prohibitory system; hence paper money; hence the celebrated aphorism, "What one gains the other loses;" and all the errors which have ruined the earth, and embrued it with blood. After much research it has been found, that in order to make the two services exchanged of equivalent value, and in order to render the exchange equitable, the best means was to allow it to be free. However plausible, at first sight, the intervention of the State might be, it was soon perceived that it is always oppressive to one or other of the contracting parties. When we look into these subjects, we are always compelled to reason upon this maxim, that equal value results from liberty. We have, in fact, no other means of knowing whether, at a given moment, two services are of the same value, but that of examining whether they can be readily and freely exchanged. Allow the State, which is the same thing as force, to interfere on one side or the other, and from that moment all the means of appreciation will be complicated and entangled, instead of becoming clear. It ought to be the part of the State to prevent, and, above all, to repress artifice and fraud; that is, to secure liberty, and not to violate it. I have enlarged a little upon exchange, although loan is my principal object: my excuse is, that I conceive that there is in a loan an actual exchange, an actual service rendered by the lender, and which makes the borrower liable to an equivalent service,—two services, whose comparative value can only be appreciated, like that of all possible services, by freedom. Now, if it is so, the perfect lawfulness of what is called house-rent, farm-rent, interest, will be explained and justified. Let us consider the case of loan.
Suppose two men exchange two services or two objects, whose equal value is beyond all dispute. Suppose, for example, Peter says to Paul, "Give me ten sixpences, I will give you a five-shilling piece." We cannot imagine an equal value more unquestionable. When the bargain is made, neither party has any claim upon the other. The exchanged services are equal. Thus it follows, that if one of the parties wishes to introduce into the bargain an additional clause, advantageous to himself, but unfavourable to the other party, he must agree to a second clause, which shall re-establish the equilibrium, and the law of justice. It would be absurd to deny the justice of a second clause of compensation. This granted, we will suppose that Peter, after having said to Paul, "Give me ten sixpences, I will give you a crown," adds, "You shall give me the ten sixpences now, and I will give you the crown-piece in a year;" it is very evident that this new proposition alters the claims and advantages of the bargain; that it alters the proportion of the two services. Does it not appear plainly enough, in fact, that Peter asks of Paul a new and an additional service; one of a different kind? Is it not as if he had said, "Render me the service of allowing me to use for my profit, for a year, five shillings which belong to you, and which you might have used for yourself?" And what good reason have you to maintain that Paul is bound to render this especial service gratuitously; that he has no right to demand anything more in consequence of this requisition; that the State ought to interfere to force him to submit? Is it not incomprehensible that the economist, who preaches such a doctrine to the people, can reconcile it with his principle of the reciprocity of services? Here I have introduced cash; I have been led to do so by a desire to place, side by side, two objects of exchange, of a perfect and indisputable equality of value. I was anxious to be prepared for objections; but, on the other hand, my demonstration would have been more striking still, if I had illustrated my principle by an agreement for exchanging the services or the productions themselves.
Suppose, for example, a house and a vessel of a value so perfectly equal that their proprietors are disposed to exchange them even-handed, without excess or abatement. In fact let the bargain be settled by a lawyer. At the moment of each taking possession, the shipowner says to the citizen, "Very well; the transaction is completed, and nothing can prove its perfect equity better than our free and voluntary consent. Our conditions thus fixed, I shall propose to you a little practical modification. You shall let me have your house to-day, but I shall not put you in possession of my ship for a year; and the reason I make this demand of you is, that, during this year of delay, I wish to use the vessel." That we may not be embarrassed by considerations relative to the deterioration of the thing lent, I will suppose the shipowner to add, "I will engage, at the end of the year, to hand over to you the vessel in the state in which it is to-day." I ask of every candid man, I ask of M. Proudhon himself, if the citizen has not a right to answer, "The new clause which you propose entirely alters the proportion or the equal value of the exchanged services. By it, I shall be deprived, for the space of a year, both at once of my house and of your vessel. By it, you will make use of both. If, in the absence of this clause, the bargain was just, for the same reason the clause is injurious to me. It stipulates for a loss to me, and a gain to you. You are requiring of me a new service; I have a right to refuse, or to require of you, as a compensation, an equivalent service." If the parties are agreed upon this compensation, the principle of which is incontestable, we can easily distinguish two transactions in one, two exchanges of service in one. First, there is the exchange of the house for the vessel; after this, there is the delay granted by one of the parties, and the compensation correspondent to this delay yielded by the other. These two new services take the generic and abstract names of credit and interest. But names do not change the nature of things; and I defy any one to dare to maintain that there exists here, when all is done, a service for a service, or a reciprocity of services. To say that one of these services does not challenge the other, to say that the first ought to be rendered gratuitously, without injustice, is to say that injustice consists in the reciprocity of services,—that justice consists in one of the parties giving and not receiving, which is a contradiction in terms.
To give an idea of interest and its mechanism, allow me to make use of two or three anecdotes. But, first, I must say a few words upon capital.
There are some persons who imagine that capital is money, and this is precisely the reason why they deny its productiveness; for, as M. Thore says, crowns are not endowed with the power of reproducing themselves. But it is not true that capital and money are the same thing. Before the discovery of the precious metals, there were capitalists in the world; and I venture to say that at that time, as now, everybody was a capitalist, to a certain extent.
What is capital, then? It is composed of three things:—
1st. Of the materials upon which men operate, when these materials have already a value communicated by some human effort, which has bestowed upon them the principle of remuneration—wool, flax, leather, silk, wood, &c.
2nd. Instruments which are used for working—tools, machines, ships, carriages, &c.
3rd. Provisions which are consumed during labour—victuals, stuffs, houses, &c.
Without these things the labour of man would be unproductive and almost void; yet these very things have required much work, especially at first. This is the reason that so much value has been attached to the possession of them, and also that it is perfectly lawful to exchange and to sell them, to make a profit of them if used, to gain remuneration from them if lent.
Now for my anecdotes.
The Sack of Corn.
Mathurin, in other respects as poor as Job, and obliged to earn his bread by day-labour, became nevertheless, by some inheritance, the owner of a fine piece of uncultivated land. He was exceedingly anxious to cultivate it. "Alas!" said he, "to make ditches, to raise fences, to break the soil, to clear away the brambles and stones, to plough it, to sow it, might bring me a living in a year or two; but certainly not to-day, or to-morrow. It is impossible to set about farming it, without previously saving some provisions for my subsistence until the harvest; and I know, by experience, that preparatory labour is indispensable, in order to render present labour productive." The good Mathurin was not content with making these reflections. He resolved to work by the day, and to save something from his wages to buy a spade and a sack of corn; without which things, he must give up his fine agricultural projects. He acted so well, was so active and steady, that he soon saw himself in possession of the wished-for sack of corn. "I shall take it to the mill," said he, "and then I shall have enough to live upon till my field is covered with a rich harvest." Just as he was starting, Jerome came to borrow his treasure of him. "If you will lend me this sack of corn," said Jerome, "you will do me a great service; for I have some very lucrative work in view, which I cannot possibly undertake, for want of provisions to live upon until it is finished." "I was in the same case," answered Mathurin, "and if I have now secured bread for several months, it is at the expense of my arms and my stomach. Upon what principle of justice can it be devoted to the realisation of your enterprise instead of mine?"
You may well believe that the bargain was a long one. However, it was finished at length, and on these conditions:—
First—Jerome promised to give back, at the end of the year, a sack of corn of the same quality, and of the same weight, without missing a single grain. "This first clause is perfectly just," said he, "for without it Mathurin would give, and not lend."
Secondly—He engaged to deliver five litres on every hectolitre. "This clause is no less just than the other," thought he; "for without it Mathurin would do me a service without compensation; he would inflict upon himself a privation—he would renounce his cherished enterprise—he would enable me to accomplish mine—he would cause me to enjoy for a year the fruits of his savings, and all this gratuitously. Since he delays the cultivation of his land, since he enables me to realise a lucrative labour, it is quite natural that I should let him partake, in a certain proportion, of the profits which I shall gain by the sacrifice he makes of his own."
On his side, Mathurin, who was something of a scholar, made this calculation:—"Since, by virtue of the first clause, the sack of corn will return to me at the end of a year," he said to himself, "I shall be able to lend it again; it will return to me at the end of the second year; I may lend it again, and so on, to all eternity. However, I cannot deny that it will have been eaten long ago. It is singular that I should be perpetually the owner of a sack of corn, although the one I have lent has been consumed for ever. But this is explained thus:—It will be consumed in the service of Jerome. It will put it into the power of Jerome to produce a superior value; and, consequently, Jerome will be able to restore me a sack of corn, or the value of it, without having suffered the slightest injury: but quite the contrary. And as regards myself, this value ought to be my property, as long as I do not consume it myself. If I had used it to clear my land, I should have received it again in the form of a fine harvest. Instead of that, I lend it, and shall recover it in the form of repayment.
"From the second clause, I gain another piece of information. At the end of the year I shall be in possession of five litres of corn over the one hundred that I have just lent. If, then, I were to continue to work by the day, and to save part of my wages, as I have been doing, in the course of time I should be able to lend two sacks of corn; then three; then four; and when I should have gained a sufficient number to enable me to live on these additions of five litres over and above each, I shall be at liberty to take a little repose in my old age. But how is this? In this case, shall I not be living at the expense of others? No, certainly, for it has been proved that in lending I perform a service; I complete the labour of my borrowers, and only deduct a trifling part of the excess of production, due to my lendings and savings. It is a marvellous thing that a man may thus realise a leisure which injures no one, and for which he cannot be envied without injustice."
Mondor had a house. In building it, he had extorted nothing from any one whatever. He owed it to his own personal labour, or, which is the same thing, to labour justly rewarded. His first care was to make a bargain with an architect, in virtue of which, by means of a hundred crowns a year, the latter engaged to keep the house in constant good repair. Mondor was already congratulating himself on the happy days which he hoped to spend in this retreat, declared sacred by our Constitution. But Valerius wished to make it his residence.
"How can you think of such a thing?" said Mondor to Valerius. "It is I who have built it; it has cost me ten years of painful labour, and now you would enjoy it!" They agreed to refer the matter to judges. They chose no profound economists,—there were none such in the country. But they found some just and sensible men; it all comes to the same thing; political economy, justice, good sense, are all the same thing. Now here is the decision made by the judges:—If Valerius wishes to occupy Mondor's house for a year, he is bound to submit to three conditions. The first is to quit at the end of the year, and to restore the house in good repair, saving the inevitable decay resulting from mere duration. The second, to refund to Mondor the 300 francs which the latter pays annually to the architect to repair the injuries of time; for these injuries taking place whilst the house is in the service of Valerius, it is perfectly just that he should bear the consequences. The third, that he should render to Mondor a service equivalent to that which he receives. As to this equivalence of services, it must be freely discussed between Mondor and Valerius.
A very long time ago there lived, in a poor village, a joiner, who was a philosopher, as all my heroes are in their way. James worked from morning till night with his two strong arms, but his brain was not idle for all that. He was fond of reviewing his actions, their causes, and their effects. He sometimes said to himself, "With my hatchet, my saw, and my hammer, I can make only coarse furniture, and can only get the pay for such. If I only had a plane, I should please my customers more, and they would pay me more. It is quite just; I can only expect services proportioned to those which I render myself. Yes! I am resolved, I will make myself a plane."
However, just as he was setting to work, James reflected further:—"I work for my customers 300 days in the year. If I give ten to making my plane, supposing it lasts me a year, only 290 days will remain for me to make my furniture. Now, in order that I be not the loser in this matter, I must gain henceforth, with the help of the plane, as much in 290 days, as I now do in 300. I must even gain more; for unless I do so, it would not be worth my while to venture upon any innovations." James began to calculate. He satisfied himself that he should sell his finished furniture at a price which would amply compensate for the ten days devoted to the plane; and when no doubt remained on this point, he set to work. I beg the reader to remark, that the power which exists in the tool to increase the productiveness of labour, is the basis of the solution which follows.
At the end of ten days, James had in his possession an admirable plane, which he valued all the more for having made it himself. He danced for joy,—for, like the girl with her basket of eggs, he reckoned all the profits which he expected to derive from the ingenious instrument; but, more fortunate than she, he was not reduced to the necessity of saying good-bye to calf, cow, pig, and eggs, together. He was building his fine castles in the air, when he was interrupted by his acquaintance William, a joiner in the neighbouring village. William having admired the plane, was struck with the advantages which might be gained from it. He said to James:—
W. You must do me a service.
J. What service?
W. Lend me the plane for a year.
As might be expected, James at this proposal did not fail to cry out, "How can you think of such a thing, William? Well, if I do you this service, what will you do for me in return?"
W. Nothing. Don't you know that a loan ought to be gratuitous? Don't you know that capital is naturally unproductive? Don't you know fraternity has been proclaimed. If you only do me a service for the sake of receiving one from me in return, what merit would you have?
J. William, my friend, fraternity does not mean that all the sacrifices are to be on one side; if so, I do not see why they should not be on yours. Whether a loan should be gratuitous I don't know; but I do know that if I were to lend you my plane for a year it would be giving it you. To tell you the truth, that was not what I made it for.
W. Well, we will say nothing about the modern maxims discovered by the Socialist gentlemen. I ask you to do me a service; what service do you ask me in return?
J. First, then, in a year, the plane will be done for, it will be good for nothing. It is only just, that you should let me have another exactly like it; or that you should give me money enough to get it repaired; or that you should supply me the ten days which I must devote to replacing it.
W. This is perfectly just. I submit to these conditions. I engage to return it, or to let you have one like it, or the value of the same. I think you must be satisfied with this, and can require nothing further.
J. I think otherwise. I made the plane for myself, and not for you. I expected to gain some advantage from it, by my work being better finished and better paid, by an improvement in my condition. What reason is there that I should make the plane, and you should gain the profit? I might as well ask you to give me your saw and hatchet! What a confusion! Is it not natural that each should keep what he has made with his own hands, as well as his hands themselves? To use without recompense the hands of another, I call slavery; to use without recompense the plane of another, can this be called fraternity?
W. But, then, I have agreed to return it to you at the end of a year, as well polished and as sharp as it is now.
J. We have nothing to do with next year; we are speaking of this year. I have made the plane for the sake of improving my work and condition; if you merely return it to me in a year, it is you who will gain the profit of it during the whole of that time. I am not bound to do you such a service without receiving anything from you in return: therefore, if you wish for my plane, independently of the entire restoration already bargained for, you must do me a service which we will now discuss; you must grant me remuneration.
And this was done thus:—William granted a remuneration calculated in such a way that, at the end of the year, James received his plane quite new, and in addition, a compensation, consisting of a new plank, for the advantages of which he had deprived himself, and which he had yielded to his friend.
It was impossible for any one acquainted with the transaction to discover the slightest trace in it of oppression or injustice.
The singular part of it is, that, at the end of the year, the plane came into James's possession, and he lent it again; recovered it, and lent it a third and fourth time. It has passed into the hands of his son, who still lends it. Poor plane! how many times has it changed, sometimes its blade, sometimes its handle. It is no longer the same plane, but it has always the same value, at least for James's posterity. Workmen! let us examine into these little stories.
I maintain, first of all, that the sack of corn and the plane are here the type, the model, a faithful representation, the symbol of all capital; as the five litres of corn and the plank are the type, the model, the representation, the symbol of all interest. This granted, the following are, it seems to me, a series of consequences, the justice of which it is impossible to dispute.
1st. If the yielding of a plank by the borrower to the lender is a natural, equitable, lawful remuneration, the just price of a real service, we may conclude that, as a general rule, it is in the nature of capital to produce interest. When this capital, as in the foregoing examples, takes the form of an instrument of labour, it is clear enough that it ought to bring an advantage to its possessor, to him who has devoted to it his time, his brains, and his strength. Otherwise, why should he have made it? No necessity of life can be immediately satisfied with instruments of labour; no one eats planes or drinks saws, except, indeed, he be a conjuror. If a man determines to spend his time in the production of such things, he must have been led to it by the consideration of the power which these instruments add to his power; of the time which they save him; of the perfection and rapidity which they give to his labour; in a word, of the advantages which they procure for him. Now, these advantages, which have been prepared by labour, by the sacrifice of time which might have been used in a more immediate manner, are we bound, as soon as they are ready to be enjoyed, to confer them gratuitously upon another? Would it be an advance in social order, if the law decided thus, and citizens should pay officials for causing such a law to be executed by force? I venture to say, that there is not one amongst you who would support it. It would be to legalize, to organize, to systematize injustice itself, for it would be proclaiming that there are men born to render, and others born to receive, gratuitous services. Granted, then, that interest is just, natural, and lawful.
2nd. A second consequence, not less remarkable than the former, and, if possible, still more conclusive, to which I call your attention, is this:—Interest is not injurious to the borrower. I mean to say, the obligation in which the borrower finds himself, to pay a remuneration for the use of capital, cannot do any harm to his condition. Observe, in fact, that James and William are perfectly free, as regards the transaction to which the plane gave occasion. The transaction cannot be accomplished without the consent of the one as well as of the other. The worst which can happen is, that James may be too exacting; and in this case, William, refusing the loan, remains as he was before. By the fact of his agreeing to borrow, he proves that he considers it an advantage to himself; he proves, that after every calculation, including the remuneration, whatever it may be, required of him, he still finds it more profitable to borrow than not to borrow. He only determines to do so because he has compared the inconveniences with the advantages. He has calculated that the day on which he returns the plane, accompanied by the remuneration agreed upon, he will have effected more work, with the same labour, thanks to this tool. A profit will remain to him, otherwise he would not have borrowed. The two services of which we are speaking are exchanged according to the law which governs all exchanges, the law of supply and demand. The claims of James have a natural and impassable limit. This is the point in which the remuneration demanded by him would absorb all the advantage which William might find in making use of a plane. In this case, the borrowing would not take place. William would be bound either to make a plane for himself, or to do without one, which would leave him in his original condition. He borrows, because he gains by borrowing. I know very well what will be told me. You will say, William may be deceived, or, perhaps, he may be governed by necessity, and be obliged to submit to a harsh law.
It may be so. As to errors in calculation, they belong to the infirmity of our nature, and to argue from this against the transaction in question, is objecting the possibility of loss in all imaginable transactions, in every human act. Error is an accidental fact, which is incessantly remedied by experience. In short, everybody must guard against it. As far as those hard necessities are concerned, which force persons to burdensome borrowings, it is clear that these necessities exist previously to the borrowing. If William is in a situation in which he cannot possibly do without a plane, and must borrow one at any price, does this situation result from James having taken the trouble to make the tool? Does it not exist independently of this circumstance? However harsh, however severe James may be, he will never render the supposed condition of William worse than it is. Morally, it is true, the lender will be to blame; but, in an economical point of view, the loan itself can never be considered responsible for previous necessities, which it has not created, and which it relieves to a certain extent.
But this proves something to which I shall return. The evident interests of William, representing here the borrowers, there are many Jameses and planes, in other words, lenders and capitals. It is very evident, that if William can say to James,—"Your demands are exorbitant; there is no lack of planes in the world;" he will be in a better situation than if James's plane was the only one to be borrowed. Assuredly, there is no maxim more true than this—service for service. But left us not forget that no service has a fixed and absolute value, compared with others. The contracting parties are free. Each carries his requisitions to the farthest possible point, and the most favourable circumstance for these requisitions is the absence of rivalship. Hence it follows, that if there is a class of men more interested than any other in the formation, multiplication, and abundance of capitals, it is mainly that of the borrowers. Now, since capitals can only be formed and increased by the stimulus and the prospect of remuneration, let this class understand the injury they are inflicting on themselves when they deny the lawfulness of interest, when they proclaim that credit should be gratuitous, when they declaim against the pretended tyranny of capital, when they discourage saving, thus forcing capitals to become scarce, and consequently interests to rise.
3rd. The anecdote I have just related enables you to explain this apparently singular phenomenon, which is termed the duration or perpetuity of interest. Since, in lending his plane, James has been able, very lawfully, to make it a condition that it should be returned to him, at the end of a year, in the same state in which it was when he lent it, is it not evident that he may, at the expiration of the term, lend it again on the same conditions? If he resolves upon the latter plan, the plane will return to him at the end of every year, and that without end. James will then be in a condition to lend it without end; that is, he may derive from it a perpetual interest. It will be said, that the plane will be worn out. That is true; but it will be worn out by the hand and for the profit of the borrower. The latter has taken into account this gradual wear, and taken upon himself, as he ought, the consequences. He has reckoned that he shall derive from this tool an advantage, which will allow him to restore it in its original condition, after having realised a profit from it. As long as James does not use this capital himself, or for his own advantage—as long as he renounces the advantages which allow it to be restored to its original condition—he will have an incontestable right to have it restored, and that independently of interest.
Observe, besides, that if, as I believe I have shown, James, far from doing any harm to William, has done him a service in lending him his plane for a year; for the same reason, he will do no harm to a second, a third, a fourth borrower, in the subsequent periods. Hence you may understand that the interest of a capital is as natural, as lawful, as useful, in the thousandth year, as in the first. We may go still further. It may happen that James lends more than a single plane. It is possible, that by means of working, of saving, of privations, of order, of activity, he may come to lend a multitude of planes and saws; that is to say, to do a multitude of services. I insist upon this point,—that if the first loan has been a social good, it will be the same with all the others; for they are all similar, and based upon the same principle. It may happen, then, that the amount of all the remunerations received by our honest operative, in exchange for services rendered by him, may suffice to maintain him. In this case, there will be a man in the world who has a right to live without working. I do not say that he would be doing right to give himself up to idleness—but I say, that he has a right to do so; and if he does so, it will be at nobody's expense, but quite the contrary. If society at all understands the nature of things, it will acknowledge that this man subsists on services which he receives certainly (as we all do), but which he lawfully receives in exchange for other services, which he himself has rendered, that he continues to render, and which are quite real, inasmuch as they are freely and voluntarily accepted.
And here we have a glimpse of one of the finest harmonies in the social world. I allude to leisure: not that leisure that the warlike and tyrannical classes arrange for themselves by the plunder of the workers, but that leisure which is the lawful and innocent fruit of past activity and economy. In expressing myself thus, I know that I shall shock many received ideas. But see! Is not leisure an essential spring in the social machine? Without it, the world would never have had a Newton, a Pascal, a Fenelon; mankind would have been ignorant of all arts, sciences, and of those wonderful inventions prepared originally by investigations of mere curiosity; thought would have been inert—man would have made no progress. On the other hand, if leisure could only be explained by plunder and oppression—if it were a benefit which could only be enjoyed unjustly, and at the expense of others, there would be no middle path between these two evils; either mankind would be reduced to the necessity of stagnating in a vegetable and stationary life, in eternal ignorance, from the absence of wheels to its machine—or else it would have to acquire these wheels at the price of inevitable injustice, and would necessarily present the sad spectacle, in one form or other, of the antique classification of human beings into masters and slaves. I defy any one to show me, in this case, any other alternative. We should be compelled to contemplate the Divine plan which governs society, with the regret of thinking that it presents a deplorable chasm. The stimulus of progress would be forgotten, or, which is worse, this stimulus would be no other than injustice itself. But no! God has not left such a chasm in His work of love. We must take care not to disregard His wisdom and power; for those whose imperfect meditations cannot explain the lawfulness of leisure, are very much like the astronomer who said, at a certain point in the heavens there ought to exist a planet which will be at last discovered, for without it the celestial world is not harmony, but discord.
Well, I say that, if well understood, the history of my humble plane, although very modest, is sufficient to raise us to the contemplation of one of the most consoling, but least understood of the social harmonies.
It is not true that we must choose between the denial or the unlawfulness of leisure; thanks to rent and its natural duration, leisure may arise from labour and saving. It is a pleasing prospect, which every one may have in view; a noble recompense, to which each may aspire. It makes its appearance in the world; it distributes itself proportionably to the exercise of certain virtues; it opens all the avenues to intelligence; it ennobles, it raises the morals; it spiritualizes the soul of humanity, not only without laying any weight on those of our brethren whose lot in life devotes them to severe labour, but relieving them gradually from the heaviest and most repugnant part of this labour. It is enough that capitals should be formed, accumulated, multiplied; should be lent on conditions less and less burdensome; that they should descend, penetrate into every social circle, and that by an admirable progression, after having liberated the lenders, they should hasten the liberation of the borrowers themselves. For that end, the laws and customs ought all to be favourable to economy, the source of capital. It is enough to say, that the first of all these conditions is, not to alarm, to attack, to deny that which is the stimulus of saving and the reason of its existence—interest.
As long as we see nothing passing from hand to hand, in the character of loan, but provisions, materials, instruments, things indispensable to the productiveness of labour itself, the ideas thus far exhibited will not find many opponents. Who knows, even, that I may not be reproached for having made a great effort to burst what may be said to be an open door. But as soon as cash makes its appearance as the subject of the transaction (and it is this which appears almost always), immediately a crowd of objections are raised. Money, it will be said, will not reproduce it self, like your sack of corn; it does not assist labour, like your plane; it does not afford an immediate satisfaction, like your house. It is incapable, by its nature, of producing interest, of multiplying itself, and the remuneration it demands is a positive extortion.
Who cannot see the sophistry of this? Who does not see that cash is only a transient form, which men give at the time to other values, to real objects of usefulness, for the sole object of facilitating their arrangements? In the midst of social complications, the man who is in a condition to lend, scarcely ever has the exact thing which the borrower wants. James, it is true, has a plane; but, perhaps, William wants a saw. They cannot negotiate; the transaction favourable to both cannot take place, and then what happens? It happens that James first exchanges his plane for money; he lends the money to William, and William exchanges the money for a saw. The transaction is no longer a simple one; it is decomposed into two parts, as I explained above in speaking of exchange. But, for all that, it has not changed its nature; it still contains all the elements of a direct loan. James has still got rid of a tool which was useful to him; William has still received an instrument which perfects his work and increases his profits; there is still a service rendered by the lender, which entitles him to receive an equivalent service from the borrower; this just balance is not the less established by free mutual bargaining. The very natural obligation to restore at the end of the term the entire value, still constitutes the principle of the duration of interest.
At the end of a year, says M. Thore, will you find an additional crown in a bag of a hundred pounds?
No, certainly, if the borrower puts the bag of one hundred pounds on the shelf. In such a case, neither the plane nor the sack of corn would reproduce themselves. But it is not for the sake of leaving the money in the bag, nor the plane on the hook, that they are borrowed. The plane is borrowed to be used, or the money to procure a plane. And if it is clearly proved that this tool enables the borrower to obtain profits which he would not have made without it, if it is proved that the lender has renounced creating for himself this excess of profits, we may understand how the stipulation of a part of this excess of profits in favour of the lender, is equitable and lawful.
Ignorance of the true part which cash plays in human transactions, is the source of the most fatal errors. I intend devoting an entire pamphlet to this subject. From what we may infer from the writings of M. Proudhon, that which has led him to think that gratuitous credit was a logical and definite consequence of social progress, is the observation of the phenomenon which shows a decreasing interest, almost in direct proportion to the rate of civilisation. In barbarous times it is, in fact, cent, per cent., and more. Then it descends to eighty, sixty, fifty, forty, twenty, ten, eight, five, four, and three per cent. In Holland, it has even been as low as two per cent. Hence it is concluded, that "in proportion as society comes to perfection, it will descend to zero by the time civilisation is complete. In other words, that which characterises social perfection is the gratuitousness of credit. When, therefore, we shall have abolished interest, we shall have reached the last step of progress." This is mere sophistry, and as such false arguing may contribute to render popular the unjust, dangerous, and destructive dogma, that credit should be gratuitous, by representing it as coincident with social perfection, with the reader's permission I will examine in a few words this new view of the question.
What is interest? It is the service rendered, after a free bargain, by the borrower to the lender, in remuneration for the service he has received by the loan. By what law is the rate of these remunerative services established? By the general law which regulates the equivalent of all services; that is, by the law of supply and demand.
The more easily a thing is procured, the smaller is the service rendered by yielding it or lending it. The man who gives me a glass of water in the Pyrenees, does not render me so great a service as he who allows me one in the desert of Sahara. If there are many planes, sacks of corn, or houses, in a country, the use of them is obtained, other things being equal, on more favourable conditions than if they were few; for the simple reason, that the lender renders in this case a smaller relative service.
It is not surprising, therefore, that the more abundant capitals are, the lower is the interest.
Is this saying that it will ever reach zero? No; because, I repeat it, the principle of a remuneration is in the loan. To say that interest will be annihilated, is to say that there will never be any motive for saving, for denying ourselves, in order to form new capitals, nor even to preserve the old ones. In this case, the waste would immediately bring a void, and interest would directly reappear.
In that, the nature of the services of which we are speaking does not differ from any other. Thanks to industrial progress, a pair of stockings, which used to be worth six francs, has successively been worth only four, three, and two. No one can say to what point this value will descend; but we can affirm that it will never reach zero, unless the stockings finish by producing themselves spontaneously. Why? Because the principle of remuneration is in labour; because he who works for another renders a service, and ought to receive a service. If no one paid for stockings, they would cease to be made; and, with the scarcity, the price would not fail to reappear.
The sophism which I am now combating has its root in the infinite divisibility which belongs to value, as it does to matter.
It appears at first paradoxical, but it is well known to all mathematicians, that, through all eternity, fractions may be taken from a weight without the weight ever being annihilated. It is sufficient that each successive fraction be less than the preceding one, in a determined and regular proportion.
There are countries where people apply themselves to increasing the size of horses, or diminishing in sheep the size of the head. It is impossible to say precisely to what point they will arrive in this. No one can say that he has seen the largest horse or the smallest sheep's head that will ever appear in the world. But he may safely say that the size of horses will never attain to infinity, nor the heads of sheep to nothing.
In the same way, no one can say to what point the price of stockings nor the interest of capitals will come down; but we may safely affirm, when we know the nature of things, that neither the one nor the other will ever arrive at zero, for labour and capital can no more live without recompense than a sheep without a head.
The arguments of M. Proudhon reduce themselves, then, to this:—Since the most skilful agriculturists are those who have reduced the heads of sheep to the smallest size, we shall have arrived at the highest agricultural perfection when sheep have no longer any heads. Therefore, in order to realise the perfection, let us behead them.
I have now done with this wearisome discussion. Why is it that the breath of false doctrine has made it needful to examine into the intimate nature of interest? I must not leave off without remarking upon a beautiful moral which may be drawn from this law:—"The depression of interest is proportioned to the abundance of capitals." This law being granted, if there is a class of men to whom it is more important than to any other that capitals be formed, accumulate, multiply, abound, and superabound, it is certainly the class which borrows them directly or indirectly; it is those men who operate upon materials, who gain assistance by instruments, who live upon provisions, produced and economised by other men.
Imagine, in a vast and fertile country, a population of a thousand inhabitants, destitute of all capital thus defined. It will assuredly perish by the pangs of hunger. Let us suppose a case hardly less cruel. Let us suppose that ten of these savages are provided with instruments and provisions sufficient to work and to live themselves until harvest time, as well as to remunerate the services of eighty labourers. The inevitable result will be the death of nine hundred human beings. It is clear, then, that since 990 men, urged by want, will crowd upon the supports which would only maintain a hundred, the ten capitalists will be masters of the market. They will obtain labour on the hardest conditions, for they will put it up to auction, or the highest bidder. And observe this,—if these capitalists entertain such pious sentiments as would induce them to impose personal privations on themselves, in order to diminish the sufferings of some of their brethren, this generosity, which attaches to morality, will be as noble in its principle as useful in its effects. But if, duped by that false philosophy which persons wish so inconsiderately to mingle with economic laws, they take to remunerating labour largely, far from doing good, they will do harm. They will give double wages, it may be. But then, forty-five men will be better provided for, whilst forty-five others will come to augment the number of those who are sinking into the grave. Upon this supposition, it is not the lowering of wages which is the mischief, it is the scarcity of capital. Low wages are not the cause, but the effect of the evil. I may add, that they are to a certain extent the remedy. It acts in this way: it distributes the burden of suffering as much as it can, and saves as many lives as a limited quantity of sustenance permits.
Suppose now, that instead of ten capitalists, there should be a hundred, two hundred, five hundred,—is it not evident that the condition of the whole population, and, above all, that of the "proletaires," will be more and more improved? Is it not evident that, apart from every consideration of generosity, they would obtain more work and better pay for it?—that they themselves will be in a better condition, to form capitals, without being able to fix the limits to this ever-increasing facility of realising equality and well-being? Would it not be madness in them to admit such doctrines, and to act in a way which would drain the source of wages, and paralyse the activity and stimulus of saving? Let them learn this lesson, then; doubtless, capitals are good for those who possess them: who denies it? But they are also useful to those who have not yet been able to form them; and it is important to those who have them not, that others should have them.
Yes, if the "proletaires" knew their true interests, they would seek, with the greatest care, what circumstances are, and what are not favourable to saving, in order to favour the former and to discourage the latter. They would sympathise with every measure which tends to the rapid formation of capitals. They would be enthusiastic promoters of peace, liberty, order, security, the union of classes and peoples, economy, moderation in public expenses, simplicity in the machinery of government; for it is under the sway of all these circumstances that saving does its work, brings plenty within the reach of the masses, invites those persons to become the formers of capital who were formerly under the necessity of borrowing upon hard conditions. They would repel with energy the warlike spirit, which diverts from its true course so large a part of human labour; the monopolising spirit, which deranges the equitable distribution of riches, in the way by which liberty alone can realise it; the multitude of public services, which attack our purses only to check our liberty; and, in short, those subversive, hateful, thoughtless doctrines, which alarm capital, prevent its formation, oblige it to flee, and finally to raise its price, to the especial disadvantage of the workers, who bring it into operation. Well, and in this respect is not the revolution of February a hard lesson? Is it not evident that the insecurity it has thrown into the world of business on the one hand; and, on the other, the advancement of the fatal theories to which I have alluded, and which, from the clubs, have almost penetrated into the regions of the legislature, have everywhere raised the rate of interest? Is it not evident, that from that time the "proletaires" have found greater difficulty in procuring those materials, instruments, and provisions, without which labour is impossible? Is it not that which has caused stoppages; and do not stoppages, in their turn, lower wages? Thus there is a deficiency of labour to the "proletaires," from the same cause which loads the objects they consume with an increase of price, in consequence of the rise of interest. High interest, low wages, means in other words that the same article preserves its price, but that the part of the capitalist has invaded, without profiting himself, that of the workmen.
A friend of mine, commissioned to make inquiry into Parisian industry, has assured me that the manufacturers have revealed to him a very striking fact, which proves, better than any reasoning can, how much insecurity and uncertainty injure the formation of capital. It was remarked, that during the most distressing period, the popular expenses of mere fancy had not diminished. The small theatres, the fighting lists, the public-houses, and tobacco depots, were as much frequented as in prosperous times. In the inquiry, the operatives themselves explained this phenomenon thus:—"What is the use of pinching? Who knows what will happen to us? Who knows that interest will not be abolished? Who knows but that the State will become a universal and gratuitous lender, and that it will wish to annihilate all the fruits which we might expect from our savings?" Well! I say, that if such ideas could prevail during two single years, it would be enough to turn our beautiful France into a Turkey—misery would become general and endemic, and, most assuredly, the poor would be the first upon whom it would fall.
Workmen! they talk to you a great deal upon the artificial organisation of labour;—do you know why they do so? Because they are ignorant of the laws of its natural organisation; that is, of the wonderful organisation which results from liberty. You are told, that liberty gives rise to what is called the radical antagonism of classes; that it creates, and makes to clash, two opposite interests—that of the capitalists and that of the "proletaires." But we ought to begin by proving that this antagonism exists by a law of nature; and afterwards it would remain to be shown how far the arrangements of restraint are superior to those of liberty, for between liberty and restraint I see no middle path. Again, it would remain to be proved that restraint would always operate to your advantage, and to the prejudice of the rich. But, no; this radical antagonism, this natural opposition of interests, does not exist. It is only an evil dream of perverted and intoxicated imaginations. No; a plan so defective has not proceeded from the Divine Mind. To affirm it, we must begin by denying the existence of God. And see how, by means of social laws, and because men exchange amongst themselves their labours and their productions, see what a harmonious tie attaches the classes one to the other! There are the landowners; what is their interest? That the soil be fertile, and the sun beneficent: and what is the result? That corn abounds, that it falls in price, and the advantage turns to the profit of those who have had no patrimony. There are the manufacturers—what is their constant thought? To perfect their labour, to increase the power of their machines, to procure for themselves, upon the best terms, the raw material. And to what does all this tend? To the abundance and the low price of produce; that is, that all the efforts of the manufacturers, and without their suspecting it, result in a profit to the public consumer, of which each of you is one. It is the same with every profession. Well, the capitalists are not exempt from this law. They are very busy making schemes, economising, and turning them to their advantage. This is all very well; but the more they succeed, the more do they promote the abundance of capital, and, as a necessary consequence, the reduction of interest. Now, who is it that profits by the reduction of interest? Is it not the borrower first, and finally, the consumers of the things which the capitals contribute to produce?
It is therefore certain that the final result of the efforts of each class is the common good of all.
You are told that capital tyrannises over labour. I do not deny that each one endeavours to draw the greatest possible advantage from his situation; but, in this sense, he realises only that which is possible. Now, it is never more possible for capitals to tyrannise over labour, than when they are scarce; for then it is they who make the law—it is they who regulate the rate of sale. Never is this tyranny more impossible to them, than when they are abundant; for, in that case, it is labour which has the command.
Away, then, with the jealousies of classes, ill-will, unfounded hatreds, unjust suspicions. These depraved passions injure those who nourish them in their hearts. This is no declamatory morality; it is a chain of causes and effects, which is capable of being rigorously, mathematically demonstrated. It is not the less sublime, in that it satisfies the intellect as well as the feelings.
I shall sum up this whole dissertation with these words:—Workmen, labourers, "proletaires," destitute and suffering classes, will you improve your condition? You will not succeed by strife, insurrection, hatred, and error. But there are three things which cannot perfect the entire community, without extending these benefits to yourselves; these things are—peace, liberty, and security.
That Which Is Seen, and That Which Is Not Seen
In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession—they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.
In fact, it is the same in the science of health, arts, and in that of morals. If often happens, that the sweeter the first fruit of a habit is, the more bitter are the consequences. Take, for example, debauchery, idleness, prodigality. When, therefore, a man, absorbed in the effect which is seen, has not yet learned to discern those which are not seen, he gives way to fatal habits, not only by inclination, but by calculation.
This explains the fatally grievous condition of mankind. Ignorance surrounds its cradle: then its actions are determined by their first consequences, the only ones which, in its first stage, it can see. It is only in the long run that it learns to take account of the others. It has to learn this lesson from two very different masters—experience and foresight. Experience teaches effectually, but brutally. It makes us acquainted with all the effects of an action, by causing us to feel them; and we cannot fail to finish by knowing that fire burns, if we have burned ourselves. For this rough teacher, I should like, if possible, to substitute a more gentle one. I mean Foresight. For this purpose I shall examine the consequences of certain economical phenomena, by placing in opposition to each other those which are seen, and those which are not seen.
I.—The Broken Window.
Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way which this accident has prevented.
Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier's trade is encouraged to the amount of six francs: this is that which is seen.
If the window had not been broken, the shoemaker's trade (or some other) would have been encouraged to the amount of six francs: this is that which is not seen.
And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labour, is affected, whether windows are broken or not.
Now let us consider James B. himself. In the former supposition, that of the window being broken, he spends six francs, and has neither more nor less than he had before, the enjoyment of a window.
In the second, where we suppose the window not to have been broken, he would have spent six francs in shoes, and would have had at the same time the enjoyment of a pair o shoes and of a window.
Now, as James B. forms a part of society, we must come to the conclusion, that, taking it altogether, and making an estimate of its enjoyments and its labours, it has lost the value of the broken window.
Whence we arrive at this unexpected conclusion: "Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end—To break, to spoil, to waste, is not to encourage national labour; or, more briefly, "destruction is not profit."
What will you say, Moniteur Industriel—what will you say, disciples of good M. F. Chamans, who has calculated with so much precision how much trade would gain by the burning of Paris, from the number of houses it would be necessary to rebuild?
I am sorry to disturb these ingenious calculations, as far as their spirit has been introduced into our legislation; but I beg him to begin them again, by taking into the account that which is not seen, and placing it alongside of that which is seen.
The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B., represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another, under the title of the glazier, shows us the producer, whose trade is encouraged by the accident. The third is the shoemaker (or some other tradesman), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction. It is he who will soon teach us that it is not less absurd to see a profit in a restriction, which is, after all, nothing else than a partial destruction. Therefore, if you will only go to the root of all the arguments which are adduced in its favour, all you will find will be the paraphrase of this vulgar saying—What would become of the glaziers, if nobody ever broke windows?
II.—The Disbanding of Troops.
It is the same with a people as it is with a man. If it wishes to give itself some gratification, it naturally considers whether it is worth what it costs. To a nation, security is the greatest of advantages. If, in order to obtain it, it is necessary to have an army of a hundred thousand men, I have nothing to say against it. It is an enjoyment bought by a sacrifice. Let me not be misunderstood upon the extent of my position. A member of the assembly proposes to disband a hundred thousand men, for the sake of relieving the tax-payers of a hundred millions.
If we confine ourselves to this answer—"The hundred millions of men, and these hundred millions of money, are indispensable to the national security: it is a sacrifice; but without this sacrifice, France would be torn by factions or invaded by some foreign power,"—I have nothing to object to this argument, which may be true or false in fact, but which theoretically contains nothing which militates against economy. The error begins when the sacrifice itself is said to be an advantage because it profits somebody.
Now I am very much mistaken if, the moment the author of the proposal has taken his seat, some orator will not rise and say—"Disband a hundred thousand men! Do you know what you are saying? What will become of them? Where will they get a living? Don't you know that work is scarce everywhere? That every field is over-stocked? Would you turn them out of doors to increase competition and to weigh upon the rate of wages? Just now, when it is a hard matter to live at all, it would be a pretty thing if the State must find bread for a hundred thousand individuals? Consider, besides, that the army consumes wine, arms, clothing—that it promotes the activity of manufactures in garrison towns—that it is, in short, the godsend of innumerable purveyors. Why, any one must tremble at the bare idea of doing away with this immense industrial movement."
This discourse, it is evident, concludes by voting the maintenance of a hundred thousand soldiers, for reasons drawn from the necessity of the service, and from economical considerations. It is these considerations only that I have to refute.
A hundred thousand men, costing the tax-payers a hundred millions of money, live and bring to the purveyors as much as a hundred millions can supply. This is that which is seen.
But, a hundred millions taken from the pockets of the tax-payers, cease to maintain these tax-payers and the purveyors, as far as a hundred millions reach. This is that which is not seen. Now make your calculations. Cast up, and tell me what profit there is for the masses?
I will tell you where the loss lies; and to simplify it, instead of speaking of a hundred thousand men and a million of money, it shall be of one man and a thousand francs.
We will suppose that we are in the village of A. The recruiting sergeants go their round, and take off a man. The tax-gatherers go their round, and take off a thousand francs. The man and the sum of money are taken to Metz, and the latter is destined to support the former for a year without doing anything. If you consider Metz only, you are quite right; the measure is a very advantageous one: but if you look towards the village of A., you will judge very differently; for, unless you are very blind indeed, you will see that that village has lost a worker, and the thousand francs which would remunerate his labour, as well as the activity which, by the expenditure of those thousand francs, it would spread around it.
At first sight, there would seem to be some compensation. What took place at the village, now takes place at Metz, that is all. But the loss is to be estimated in this way:—At the village, a man dug and worked; he was a worker. At Metz, he turns to the right about and to the left about; he is a soldier. The money and the circulation are the same in both cases; but in the one there were three hundred days of productive labour, in the other there are three hundred days of unproductive labour, supposing, of course, that a part of the army is not indispensable to the public safety.
Now, suppose the disbanding to take place. You tell me there will be a surplus of a hundred thousand workers, that competition will be stimulated, and it will reduce the rate of wages. This is what you see.
But what you do not see is this. You do not see that to dismiss a hundred thousand soldiers is not to do away with a million of money, but to return it to the tax-payers. You do not see that to throw a hundred thousand workers on the market, is to throw into it, at the same moment, the hundred millions of money needed to pay for their labour: that, consequently, the same act which increases the supply of hands, increases also the demand; from which it follows, that your fear of a reduction of wages is unfounded. You do not see that, before the disbanding as well as after it, there are in the country a hundred millions of money corresponding with the hundred thousand men. That the whole difference consists in this: before the disbanding, the country gave the hundred millions to the hundred thousand men for doing nothing; and that after it, it pays them the same sum for working. You do not see, in short, that when a tax-payer gives his money either to a soldier in exchange for nothing, or to a worker in exchange for something, all the ultimate consequences of the circulation of this money are the same in the two cases; only, in the second case the tax-payer receives something, in the former he receives nothing. The result is—a dead loss to the nation.
The sophism which I am here combating will not stand the test of progression, which is the touchstone of principles. If, when every compensation is made, and all interests satisfied, there is a national profit in increasing the army, why not enrol under its banners the entire male population of the country?
Have you never chanced to hear it said: "There is no better investment than taxes. Only see what a number of families it maintains, and consider how it reacts upon industry: it is an inexhaustible stream, it is life itself."
In order to combat this doctrine, I must refer to my preceding refutation. Political economy knew well enough that its arguments were not so amusing that it could be said of them, repetitions please. It has, therefore, turned the proverb to its own use, well convinced that, in its mouth, repetitions teach.
The advantages which officials advocate are those which are seen. The benefit which accrues to the providers is still that which is seen. This blinds all eyes.
But the disadvantages which the tax-payers have to get rid of are those which are not seen. And the injury which results from it to the providers is still that which is not seen, although this ought to be self-evident.
When an official spends for his own profit an extra hundred sous, it implies that a tax-payer spends for his profit a hundred sous less. But the expense of the official is seen, because the act is performed, while that of the tax-payer is not seen, because, alas! he is prevented from performing it.
You compare the nation, perhaps to a parched tract of land, and the tax to a fertilising rain. Be it so. But you ought also to ask yourself where are the sources of this rain, and whether it is not the tax itself which draws away the moisture from the ground and dries it up?
Again, you ought to ask yourself whether it is possible that the soil can receive as much of this precious water by rain as it loses by evaporation?
There is one thing very certain, that when James B. counts out a hundred sous for the tax-gatherer, he receives nothing in return. Afterwards, when an official spends these hundred sous, and returns them to James B., it is for an equal value in corn or labour. The final result is a loss to James B. of five francs.
It is very true that often, perhaps very often, the official performs for James B. an equivalent service. In this case there is no loss on either side; there is merely an exchange. Therefore, my arguments do not at all apply to useful functionaries. All I say is,—if you wish to create an office, prove its utility. Show that its value to James B., by the services which it performs for him, is equal to what it costs him. But, apart from this intrinsic utility, do not bring forward as an argument the benefit which it confers upon the official, his family, and his providers; do not assert that it encourages labour.
When James B. gives a hundred sous to a Government officer for a really useful service, it is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes.
But when James B. gives a hundred sous to a Government officer, and receives nothing for them unless it be annoyances, he might as well give them to a thief. It is nonsense to say that the Government officer will spend these hundred sous to the great profit of national labour; the thief would do the same; and so would James B., if he had not been stopped on the road by the extra-legal parasite, nor by the lawful sponger.
Let us accustom ourselves, then, to avoid judging of things by what is seen only, but to judge of them by that which is not seen.
Last year I was on the Committee of Finance, for under the constituency the members of the Opposition were not systematically excluded from all the Commissions: in that the constituency acted wisely. We have heard M. Thiers say—"I have passed my life in opposing the legitimist party and the priest party. Since the common danger has brought us together, now that I associate with them and know them, and now that we speak face to face, I have found out that they are not the monsters I used to imagine them."
Yes, distrust is exaggerated, hatred is fostered among parties who never mix; and if the majority would allow the minority to be present at the Commissions, it would perhaps be discovered that the ideas of the different sides are not so far removed from each other; and, above all, that their intentions are not so perverse as is supposed. However, last year I was on the Committee of Finance. Every time that one of our colleagues spoke of fixing at a moderate figure the maintenance of the President of the Republic, that of the ministers, and of the ambassadors, it was answered:—
"For the good of the service, it is necessary to surround certain offices with splendour and dignity, as a means of attracting men of merit to them. A vast number of unfortunate persons apply to the President of the Republic, and it would be placing him in a very painful position to oblige him to be constantly refusing them. A certain style in the ministerial saloons is a part of the machinery of constitutional Governments."
Although such arguments may be controverted, they certainly deserve a serious examination. They are based upon the public interest, whether rightly estimated or not; and as far as I am concerned, I have much more respect for them than many of our Catos have, who are actuated by a narrow spirit of parsimony or of jealousy.
But what revolts the economical part of my conscience, and makes me blush for the intellectual resources of my country, is when this absurd relic of feudalism is brought forward, which it constantly is, and it is favourably received too:—
"Besides, the luxury of great Government officers encourages the arts, industry, and labour. The head of the State and his ministers cannot give banquets and soirees without causing life to circulate through all the veins of the social body. To reduce their means, would starve Parisian industry, and consequently that of the whole nation."
I must beg you, gentlemen, to pay some little regard to arithmetic, at least; and not to say before the National Assembly in France, lest to its shame it should agree with you, that an addition gives a different sum, according to whether it is added up from the bottom to the top, or from the top to the bottom of the column.
For instance, I want to agree with a drainer to make a trench in my field for a hundred sous. Just as we have concluded our arrangement the tax-gatherer comes, takes my hundred sous, and sends them to the Minister of the Interior; my bargain is at end, but the minister will have another dish added to his table. Upon what ground will you dare to affirm that this official expense helps the national industry? Do you not see, that in this there is only a reversing of satisfaction and labour? A minister has his table better covered, it is true; but it is just as true that an agriculturist has his field worse drained. A Parisian tavern-keeper has gained a hundred sous, I grant you; but then you must grant me that a drainer has been prevented from gaining five francs. It all comes to this,—that the official and the tavern-keeper being satisfied, is that which is seen; the field undrained, and the drainer deprived of his job, is that which is not seen. Dear me! how much trouble there is in proving that two and two make four; and if you succeed in proving it, it is said "the thing is so plain it is quite tiresome," and they vote as if you had proved nothing at all.