CHAPTER V: PROUDHON AND THE SOCIALISM OF 1848
Proudhon comes next, though his place in the history of economic doctrines is not easily defined. Like all socialists he begins with a criticism of the rights of property. The economists had carefully avoided discussing them, and political economy had become a mere résumé of the results of private property. Proudhon regarded these rights as the very basis of the present social system and the real cause of every injustice. Accordingly he starts with a criticism of property in opposition to the economists who defended it.
But how can we reform the present system or replace it by a better? Herein lies the difficulty. Born twenty years earlier, Proudhon, like many others, would perhaps have invented a Utopia. But what was possible in 1820 was no longer so twenty years later. Public opinion was already satiated with schemes of reform. Owen, Saint-Simon, Fourier, Cabet, and Louis Blanc had each in his turn proposed a remedy. The fancy of reformers had roamed at will over the whole wide expanse of possible reforms. Proudhon was well acquainted with all these efforts, and had come to the conclusion that they were all equally useless. Hence he turns out to be a critic of the socialists as well as of the economists.
Proudhon attempts the correction of the vices of private property without becoming a party to what he calls the “crass stupidity of socialism.” Every Utopian scheme is instinctively rejected. He cares nothing for those who view society as they do machinery and think that an ingenious trick is all that is needed to correct all anomalies and to reset the machine in motion. To him social life means perpetual progress.[619] He knows that time is required for the conciliation of those social forces that are warring against one another. He was engrossed with his attempt to find a solution for this difficult problem when the Revolution of 1848 broke out, and Proudhon, suddenly thrown into action, finds himself forced to express his ideas in a concrete form, such that all could understand. The critic has to try his hand at construction, and almost despite himself he outlines another Utopia in his Exchange Bank.
Other writers had sought a solution in the complete overthrow of the present methods of production and distribution. But Proudhon thought it lay in improved circulation. It was an ingenious idea, and it deserves mention in a history of economic doctrines because of the truth, mingled with error, which it contains, and because it has become the type of a series of similar projects. It is upon this conception that we wish to dilate here. Leaving aside his other ideas, which are no whit less interesting, we shall treat of Proudhon the philosopher, moralist, and political theorist only in so far as these have influenced Proudhon the economist.[620]
I: CRITICISM OF PRIVATE PROPERTY AND SOCIALISM
The work that first brought Proudhon to the notice of the public was a book published in 1840 entitled Qu’est-ce que la Propriété? Proudhon was then thirty-one years of age.[621] Born at Besançon, he was the son of a brewer,[622] and was forced to earn his living at an early age. He first became a proof-corrector, and then set up as a printer on his own account. Despite hard work he became a diligent reader, his only guide being his insatiable thirst for knowledge. The sight of social injustice had sent the iron into his soul. Economic questions were faced with all the ardour of youth, with all the enthusiasm of a man of the people speaking on behalf of his brothers, and with all the confidence of one who believes in the convincing force of logic and common sense. All this is very evident in his brilliantly imaginative work. Mingled with it is a good deal of that provoking swagger which was noted by Sainte-Beuve as one of his characteristics, and which appears in all his writings.
Throughout this treatise from first page to last there periodically flashes one telling phrase which sums up his whole argument, “Property is theft.”[623]
The question then arises as to whether Proudhon regards all property as theft. Does he condemn appropriation, or is it the mere fact of possession that he is inveighing against? This is how the public at large have viewed it, and it would be useless to deny that Proudhon owes a great deal to this interpretation, and the consequent consternation of the bourgeoisie. But his meaning is quite different. Private property in the sense of the free disposal of the fruits of labour and saving is in his opinion of the very essence of liberty. At bottom this is nothing more than man’s control over himself.[624] But why attack property, then? Property is attacked because it gives to the proprietor a right to an income for which he has not worked. It is not property as such, but the right of escheat, that forms the butt of Proudhon’s attack; and following the lead of Owen and other English socialists, as well as the Saint-Simonians, he directs his charges against that right of escheat which, according to circumstances and the character of the revenue, is variously known as rent, discount, money interest, agricultural privilege, sinecure, etc.[625]
Like every socialist, Proudhon considered that labour alone was productive.[626] Land and capital without labour were useless. Hence the demand of the proprietor for a share of the produce as a return for the service which his capital has yielded is radically false. It is based upon the supposition that capital by itself is productive, whereas the capitalist in taking payment for it literally receives something for nothing.[627]
All this is simply theft. His own definition of property is, “The right to enjoy the fruits of industry, or of the labour of others, or to dispose of those fruits to others by will.”[628]
The theme is not new, and the line of thought will be resumed—by Rodbertus among others. The originality of the work consists not so much in the idea as in the brilliance of the exposition, the vehemence of the style, and the verve of the polemics hurled against the old arguments which based property upon labour, upon natural right, or upon occupation. A German writer[629] has said that, published in Germany or in England, the book would have passed unnoticed, because in both those countries the defence of property had been much more scientific than in France.[630]
The whole force of the work lies, not in itself, but in the weakness of the opposing arguments, and this fact is quite sufficient to give it a certain permanent value. The treatise sent an echo through the whole world, and its author may be said to have done for French socialism what Lassalle did for German. The ideas set forth are not new, but they are expressed in phrases of wonderful penetration.
There is also a wealth of ingenious remarks, which, if not, perhaps, true, deserve retention because of their originality. How such spoliation on the part of capitalists and proprietors can continue without a revolt of the working men is a question which has been asked by every writer on theoretical socialism, without its full import ever being realised. Is there not something very improbable in this? The problem is a curious one, indeed, and requires much ingenuity for its solution. Marx disposed of it by his theory of surplus value. Rodbertus in a simpler fashion showed the opposition between economic distribution as realised in exchange and the social distribution which lurks behind it. Proudhon has his own solution. There is, says he, between master and men continual miscalculation.[631] The master pays each workman in proportion to the value of his own individual labour, but reserves for himself the product which results from the collective force of all—a product which is altogether superior to that yielded by the sum of their individual efforts. This excessive product represents profits. “It is said that the capitalist pays his workmen by the day. But to be more exact we ought to say that he pays a per diem wage multiplied by the number of workmen employed each day—which is not the same thing. For that immense force which results from union and from the harmonious combination of simultaneous efforts he has paid nothing. Two hundred grenadiers can deck the base of the Louqsor statue in a few hours, a task which would be quite impossible for one man though he worked two hundred days. According to the capitalist reckoning the wages paid in both cases would be the same.”[632] “And so the worker is led to believe that he is paid for his work, whereas in reality he is only partly paid for it. Even after receiving his wage he still retains a right of property in the things which he has produced.”[633] His explanation, though very subtle, is none the less erroneous.
The appearance of the pamphlet made Proudhon famous, not merely in the eyes of the public, who knew little of him beyond his famous formula, but also in the opinion of the economists. Blanqui and Garnier, among others, interested themselves in his work. “It is impossible to have a higher opinion of anyone than I have of you,” writes the former.[634] Blanqui by his favourable report to the Academy of Moral Sciences was instrumental in thwarting the legal proceedings which the Minister of the Interior was anxious to take against Proudhon. And it was upon Garnier’s advice that the publisher Guillaumin, although a strong adherent of orthodox economics, consented to issue a new work by Proudhon in 1846. The book was entitled Les Contradictions économiques, and Guillaumin was not a little startled by it.[635]
The sympathy of the economists is easily explained. They realised from the first that Proudhon was a vigorous opponent of their views, but it was not long before they discovered that he was an equally resolute critic of socialism. Let us briefly examine his attitude with regard to the latter.
No one has ever referred to socialists in harsher terms. “The Saint-Simonians have vanished like a masquerade.”[636] “Fourier’s system is the greatest mystification of our time.”[637] To the communists he writes as follows: “Hence, communists! Your presence is a stench in my nostrils and the sight of you disgusts me.” Elsewhere he says: “Socialism is a mere nothing. It never has been and never will be anything.”[638] The violence of his attitude towards his predecessors springs from a fear of being confused with them. The procedure is intended to put the reader on his guard against all equivocation, and to afford him valuable preparation for appreciating Proudhon’s solutions by showing how utterly impossible the other solutions are.
His attack upon the socialists roughly amounts to a charge of failure to realise that the destruction of the present régime would involve taking a course in the opposite direction. The difficult problem which he set out to solve was not merely the suppression of existing economic forces, but also their equilibration.[639] He never contemplated “the extinction of such economic forces as division of labour, collective effort, competition, credit, property, or even economic liberty.”[640] His chief concern was to preserve them, but at the same time to suppress the conflict that exists between them. The socialists aim merely at destruction. For competition they would substitute an associative organisation of labour; instead of private property they would set up community of goods[641] or collectivism; instead of the free play of personal interest they would, according to Fourier, substitute love, or love and devotion, as the Saint-Simonians put it, or the fraternity of Cabet. But none of these satisfies Proudhon.
He dismisses association and organisation as being detrimental to the liberty of the worker.[642] Labour’s power is just the result of “collective force and division of labour.” Liberty is the economic force par excellence. “Economic perfection lies in the absolute independence of the workers, just as political perfection consists in the absolute independence of the citizens.”[643] “Liberty,” he remarks in an address delivered to the electors of the department of the Seine in 1848, “is the sum total of my system—liberty of conscience, freedom of the press, freedom of labour, of commerce, and of teaching, the free disposal of the products of labour and industry—liberty, infinite, absolute, everywhere and for ever.” He adds that his is “the system of ’89,” and that he is preaching the doctrines of Quesnay, of Turgot, and of Say. Indeed, it would not be difficult to imagine ourselves reading the Classical rhapsodies concerning the advantages of Free Trade over again.[644]
Communism as a juridical system is rejected no less energetically. There is no suggestion of suppressing private property, which is the necessary stimulant of labour, the basis of family life, and indispensable to all true progress. His chief concern is to make it harmless and to place it at the disposal of everyone.[645] “Communism is merely an inverted form of private property. Communism gives rise to inequalities, but of a different character from those of property. Property is the exploitation of the weak by the strong, communism of the strong by the weak.”[646] It is still robbery. “Communism,” he exclaims, “is the religion of misery.”[647] “Between the institution of private property and communism there is a world of difference.”[648]
Racial devotion or fraternity as possible motives for action are not recognised. They imply the sacrifice and the subordination of one man to another. All men have equal rights, and the freer exercise of those rights is a matter of justice, not of fraternity. Proudhon thinks the axiom so very evident that he takes no trouble to explain it, but merely gives us a definition of justice. In his first Mémoire it is defined as “a kind of respect spontaneously felt and reciprocally guaranteed to human dignity in any person and under all circumstances, even though the discharge of that feeling exposes us to some risk.”[649]
His justice is tantamount to equality. If we apply the definition to the economic links which bind men together, we find that the principle of mutual respect is transformed into the principle of reciprocal service.[650] Men must be made to realise this need for reciprocal service. It is the only way in which equality can be respected. “Do unto others as you would that others do unto you”—this principle of justice is the ethical counterpart of the economic precept of mutual service.[651] Reciprocal service must be the new principle which must guide us in rearranging the economic links of society.
And so a criticism of socialism helps Proudhon to define the positive basis of his own system. The terms of the social problem as it presents itself to him can now be clearly followed. On the one hand there is the suppression of the unearned income derived from property—a revenue which is in direct opposition to the principle of reciprocal service. On the other hand, property itself must be preserved, liberty of work and right of exchange must be secured. In other words, the fundamental attribute of property must be removed without damaging the institution of property itself or endangering the principle of liberty.[652]
It is the old problem of how to square the circle. The extinction of unearned incomes must involve the communal ownership of the instruments of production, although Proudhon did not seem to think so. Hitherto the reform of property had been attempted by attacking the production and distribution of wealth. No attention was ever paid to exchange. But Proudhon thought that in the act of exchange inequality creeps in and a new method of exchange is needed. Towards the end of the Contradictions économiques he gives us an obscure hint of the kind of reform to be aimed at. After declaring that nothing now remains to be done except “to sum up all contradictions in one general equation,” he proceeds to ask what particular form that equation is to take. We have already, he remarks, been permitted a glimpse of it. “It must be a law of exchange based upon a theory of mutual help. This theory of mutualism—that is, of natural exchange—is from the collective point of view a synthesis of two ideas—that of property and that of communism.”[653] No further definition is attempted. In a letter written after the publication of the Contradictions he still refers to himself as a simple seeker, and states that he has a new book in preparation, in which these propositions are to be further developed.
About the same time he had laid out his plans for active propaganda in the press. But the Revolution of 1848 threw him into the mêlée of party politics and hastened the publication of his theories.
In order to give a better idea of the place occupied by Proudhon’s ideas, and to show how they were connected with the socialist experiments of the time, we must say a few words about the Revolution itself.
II: THE REVOLUTION OF 1848 AND THE DISCREDIT OF SOCIALISM
Socialists of all shades of opinion, who from 1830 to 1840 had been advocating radical reforms, were given a unique opportunity of putting their theories to the test during the Revolution of 1848. During the four months (February to June) which preceded the terrible ruin of the socialist Republic by the bourgeoisie projects of all kinds which for many years had been discussed in books and newspapers appeared to be on the point of bearing fruit. For a number of weeks nothing seemed impossible. “The right to work,” “organisation of labour,” and “association,” instead of being so many formulas, were by a mere stroke of the magic wand to be translated into realities.
Enthusiasts were not wanting to attempt this task of transformation, but, alas! only to find every scheme tumble into ruins. Every formula, when put to the test, was found to be void. The malevolence of some people, the impatience of others, the awkwardness and haste of the promoters even, made the experiments odious and ridiculous. Public opinion was at last thoroughly wearied and all the reformers were indiscriminately condemned.
The year 1848 is accordingly a memorable one in the history of social ideas. The idealistic socialism of Louis Blanc, of Fourier, and of Saint-Simon was definitely discredited. Bourgeois writers thought that it was utterly destroyed. Reybaud, who contributed the article on Socialism to the Dictionnaire d’Économie politique (edited by Coquelin and Guillaumin) in 1852, writes as follows: “To speak of socialism nowadays is to deliver a funeral oration. It has exhausted itself. The vein is worked out. Should the human mind in its vertigo ever take it up again it will be in a different form and under the influence of other illusions.”
It fared scarcely better at the hands of subsequent socialists. Marx referred to all his predecessors under the rather misleading title of Utopians, and against their fantastic dreams he set up the “scientific socialism” of Das Kapital. Between the two epochs lies a distinct cleavage, marked by the Revolution of 1848. We must briefly see how this was brought about, and rapidly review the more important experiments that were made.
First of all there is “the right to work.” Fourier’s formula, which was developed by Considérant and adopted by Louis Blanc and other democrats, became extremely popular during the reign of Louis Phillipe. Proudhon speaks of it as the only true formula of the February Revolution. “Give me the right to work,” he declares, “and I will give you the right of property.”[654]
Workmen thought that the first duty of the Provisional Government was to give effect to this formula. On February 25 a small group of Parisian workmen came to the Hôtel de Ville to urge their claims, and the Government hastened to recognise them. The decree drawn up by Louis Blanc was as follows: “The Provisional Government of the French Republic undertakes to guarantee the existence of every worker by means of his labour. It further undertakes to give work to all its citizens.” The following day another decree announced the immediate establishment of national workshops with a view to putting the new principle into practice. All that was necessary to gain admission was to have one’s name inscribed in one of the Parisian municipal offices.
Louis Blanc in his book of 1841 had demanded the establishment of “social” workshops. Public opinion, misled by the similarity of names, and encouraged to persist in its error by the enemies of socialism, thought that the national workshops were the creation of Louis Blanc. Nothing could be more incorrect. The “social” workshops, as we know, were to engage in co-operative production, whereas the national workshops were to provide employment for idlers. Similar institutions had been established during every crisis between 1790 and 1830, generally under the name of “charity works.” Moreover, it was Marie, the Minister of Public Works, and not Louis Blanc, who organised them. Far from providing work as the socialists had hoped, the Government soon realised that the workshops afforded an admirable opportunity for binding the workmen together into brigades which might act as a check upon the socialistic tendencies of the Luxembourg Commission, then presided over by Louis Blanc. The workshops were placed under the management of Émile Thomas, the engineer, who was an avowed opponent of the scheme. In his Histoire des Ateliers nationaux, written in 1849, he tells us how they were controlled by him in accordance with the wishes of the anti-socialist majority of the Provisional Government.[655]
But they were mistaken in their calculations. Those who thought that the national workshops could be used for their own political ends were soon undeceived. The Revolution greatly increased the number of idlers, already fairly considerable as the result of the economic crisis of 1847. Moreover, the opening of the workshops brought the workmen from the provinces into Paris. Instead of the estimated 10,000, 21,000 had been enrolled by the end of March, and by the end of April there were 99,400. They were paid two francs a day while at work, and a franc when there was no work for them. In a very short time it became impossible to find employment for so many. The majority of them, whatever their trade, were employed upon useless earthworks, and even these soon proved inadequate. Discontent soon became rife among this army of unfortunate workers, humiliated by the nature of the ridiculous labour upon which they were employed, and scarcely satisfied with the moderate salary which they received. The wages paid, however, were more than enough for the kind of work that was being done. The workshops became centres of political agitation, and the Government, thoroughly alarmed, and acting under pressure from the National Assembly, was constrained to abandon them.
Suddenly, on June 21, a summons was executed upon all men between seventeen and twenty-five enrolled in the shops, ordering them to join the army or to leave for the country, where more digging awaited them. The exasperated workmen rose in revolt. Rioting broke out on June 23, but it was crushed in three days. Hundreds of the workers died in the struggle, and the country was terrorised into reaction.
That simple logic which is always so characteristic of political parties held the principle of “the right to work” responsible for this disastrous experience, and it was definitely condemned. This is quite clear from the constitutional debates in the National Assembly. The constitutional plan laid down by Armand Marrast on June 19, a few days before the riots, recognised “the right to work.” “The Constitution,” says Article 2, “guarantees to every citizen liberty, equality, security, instruction, work, property, and public assistance.” But in the new plan of August 29—after the experience of June—the article disappeared. The right to relief only was recognised. In the discussion on the article an amendment re-establishing “the right to work” was proposed by Mathieu de la Drôme. A memorable debate followed, in which Thiers, Lamartine, and Tocqueville opposed the amendment, while the Radical Republicans Ledru-Rollin, Crémieux, and Mathieu de la Drôme defended it.[656] The socialists had become extinct. Louis Blanc was in exile, Considérant ill, while Proudhon was afraid of startling his opponents and of compromising his friends. Besides, the Assembly had already made up its mind. The amendment was defeated, and Article 8 of the preamble to the Constitution of 1848 runs as follows: “The Republic by means of friendly assistance should provide for its necessitous citizens, either by giving them work as far as it can, or by directly assisting those who are unable to work and have no one to help them.”
During the reign of the July Monarchy “the organisation of labour” was another phrase which divided the honours with “the right to work.” With the spread of the Revolution came a similar menacing demand for its realisation. By a strange coincidence the author of this formula was also a member of the Provisional Government. And so when on February 28, three days after the recognition of “the right to work,” the workers came in a body and claimed the creation of a Minister of Progress, the organisation of labour, and the abolition of all exploitation, Louis Blanc immediately seized the opportunity to urge his unwilling colleagues to accede to their demands. He himself had pressed the Government to take the initiative in social reform, and now that the Revolution had made him a member of the Government how could he escape his responsibility? After some difficulty his colleagues succeeded in persuading him to accept the alternative of a Government commission on labour, of which he was to be president. The commission was entrusted with the task of drawing up the proposed reforms, which were afterwards to be submitted to the National Assembly. To mark the contrast between the old and the new régime the commission carried on its deliberations in the Palais du Luxembourg, where the Chambre des Paris formerly sat.
The Luxembourg commission was composed of representatives elected by workmen and masters, three for each industry. The representatives met in a general assembly to discuss the reports prepared by a permanent committee of ten workers and an equal number of masters, to which Louis Blanc had added a few Liberal economists and socialists, such as Le Play, Dupont-White, Wolowski, Considérant, Pecqueur, and Vidal. Proudhon was also invited, but refused to join. As a matter of fact, only the workers took part in the sittings.
The commission, although it possessed no executive power, might have been of some service. But Louis Blanc, as he himself confessed, regarded it as “a golden opportunity where socialism had at its disposal a tribunal from which it could address the whole of Europe.”[657] He still kept up his rôle of orator and writer, and devoted most of the sittings to an eloquent appeal for the theories already outlined in his Organisation of Labour.[658] Vidal and Pecqueur undertook the task of elaborating the more definite proposals. In a lengthy report which appeared in the Moniteur[659] they outlined a plan of State Socialism, with workshops and agricultural colonies, with State depots and bazaars as places of sale. Money in the form of warrants was to be borrowed on the security of goods, and a State system of insurance—excepting life policies—was to be established. Finally, the Bank of France was to be transformed into a State bank. This was to extend the operation of credit, and to reduce the rate of discount simply to insurance against risk. Vidal and not Pecqueur is obviously the author of the report, for it contains some of the projects that had already appeared in his book De la Répartition des Richesses.
None of the projects was even discussed by the National Assembly. The only positive piece of work accomplished by Louis Blanc’s commission was done under pressure from the workmen. This was the famous decree of March 2, abolishing piece-work and reducing the working day to ten hours in Paris and eleven hours in the provinces. This decree, though it was never put into operation, marks the first rudiments of French labour legislation. Louis Blanc was forced to grant it because the working-class element on the commission refused to take part in its proceedings until they were satisfied on this point. The commission must also be credited with several successful attempts at conciliation.
Not only did the commission fail to do anything permanent, but its degeneracy into a mere political club thoroughly alarmed the public. It became involved in elections, and even intervened in street riots. It finally took a part in the demonstration of May 15, which, under pretext of demanding intervention in favour of Poland, resulted in an invasion of the National Assembly by the mob. Louis Blanc had already retired. Since the reunion of the National Assembly the Government had been replaced by an executive commission, and Blanc, no longer a supporter of the Government, sent in his resignation on May 13. After that the commission was at an end, and, like the national workshops, it all resulted in nothing save a general discredit of socialist opinion.
There still remained the “working men’s associations.” Every socialist writer of the early nineteenth century was agreed on this principle of association. Every reformer, with the exception of Proudhon,[660] who always pursued a path of his own, regarded it as the one method of emancipation. It was quite natural that it should be put to the test.
In its declaration of February 26 the Provisional Government stated that besides securing the right to work, the workers must combine together before they could secure the full benefit of their labour. The moment Louis Blanc attained to power he sought to guide the energies of the commission in this direction. The “Association” was to be of the nature of a co-operative productive society, supported by the State. Under the influence of Buchez, an old Saint-Simonian, a Republican Catholic and the founder of the newspaper called L’Atelier, there had been formed in 1834 an association of jewellers and goldsmiths.[661] But it was a solitary exception.
Louis Blanc was more fortunate. He successively founded associations of tailors, of saddlers, of spinners and lace-makers, and he secured Government orders for tunics, saddles, and epaulettes for them. Other associations followed, and by July 5 the National Assembly was sufficiently interested in these experiments to vote the sum of three millions to their credit. A good portion of this sum passed into the hands of mixed associations of masters and men formed with the sole purpose of benefiting by the Government’s liberality. The workmen’s associations pure and simple, however, received more than a million, and there was not a sou of it left by 1849.
The first co-operative movement inspired by the ideas of Louis Blanc was of short duration. The National Assembly took good care to place the new societies under Ministerial control by appointing a Conseil d’Encouragement, nominated by the Ministry to fix the conditions under which loans should be granted. The Conseil hastened to publish model regulations which left the associations little scope for internal organisation. So stringent were the rules that several of them were immediately jeopardised, and every society which failed to conform to one of the three models outlined in Article 19 of the Commercial Code was obliged to dissolve. This meant every society which was not nominally a collective society, a joint stock or a limited liability company. By 1855, according to the testimony of Reybaud, there remained only nine out of those subsidised in 1848. Consumers’ co-operative societies, that is, the societies which aimed at securing cheap commodities, established at Paris, Lille, Nantes, and Grenoble, were also dissolved.
And so all these experiments—the only ones that had not already brought reformers into discredit—were destined to fail in their turn. Their extinction was partly due to political causes, partly to their founders, who had not yet been trained in the difficult task of building up such associations.
The social experiments of 1848 one after another foundered, bringing a distrust of theories in their train. There still remained one other experiment connected with Proudhon’s name—that of free credit. But it also was destined to fail like the rest.
III: THE EXCHANGE BANK THEORY
The Revolution of 1848 did not take Proudhon quite unawares, although he considered the outbreak was rather sudden. He was soon convinced that the real problem to be determined was economic rather than political, but he also realised that the education of the masses was too backward to permit of a peaceful solution. Proudhon, in this matter at one with his French confrères, had hoped for such a solution.[662] He thought the February Revolution was a child prematurely born.[663] In a striking article in the columns of Le Peuple he gave wistful expression to his fears as he foresaw the Revolution impending. Its solution had been delivered to none and its interpretation baffled the ingenuity of all.
“I have wept over the poor workman, whose daily bread is already sufficiently uncertain and who has now suffered misery for many years. I have undertaken his defence, but I find that I am powerless to succour him. I have mourned over the bourgeois, whose ruin I have witnessed and who has been driven to bankruptcy and goaded to opposition of the proletariat. My personal inclination is to sympathise with the bourgeois, but a natural antagonism to his ideas and the play of circumstance have made me his opponent. I have gone in mourning and paid penance for the spirit of the old Republic long before there were any signs of its offspring. This Revolution which was to restore the public order merely marks the beginning of a new departure in social revolution which no one understands.”[664]
But the Revolution having once begun, Proudhon did not feel himself justified in being behindhand. He had been a most severe critic of the existing régime, and he felt that he was bound to attempt a solution of the practical problems which suddenly came to the front. He became a journalist and threw himself whole-heartedly into the struggle. Hitherto he had been content with vague suggestions as to where the evil lay. But now he was anxious to make reform practicable and to fill in the details of the scheme; and so he invented the Exchange Bank.
Proudhon’s exposition of the scheme is contained in a number of pamphlets, in newspapers, and in his books.[665] The explanations do not always tally, and he is not always happy in stating exactly what he thinks. This explains why he has been so often misunderstood. We shall try to give a résumé of his ideas before proceeding to criticise them and to compare them with analogous projects formulated both before and after his time. This will help us to understand where the originality of the scheme lay.
The fundamental principle on which the whole scheme rests is somewhat as follows: Of all the forms of capital which allow of a right of escheat to the product of the worker, whether in the form of rent, of interest, or of discount, the most important is money, for it is only in the form of money that these dues are actually paid.[666] If we could suppress the right of escheat in the case of this universal form of capital—in other words, if interest were abolished—the right of escheat in every other case would soon disappear.
Let us suppose that by means of some organisation or other money required for the purchase of land, machinery, and buildings for industrial purposes could be procured without interest. Were this the case the required capital would then be obtained in that way instead of by payment of interest or rent as is the case to-day. The suppression of money interest would enable the worker to borrow capital gratuitously, and would give him immediate control over all useful capital instead of renting it. All attempts to hold up capital for the sake of receiving interest without labour would thus be frustrated. The right of property would be reduced to mere possession. Exchange would be reciprocal, and the worker would secure all the produce of his labour without having to share it with others. In short, economic justice would be secured.
This is all very well, but how can the necessary money be obtained without paying interest? Everything depends upon that.
Proudhon invites us to consider what money really is. It is a mere medium of exchange which is designed to facilitate the circulation of goods. Proudhon, who had hitherto regarded money as capital par excellence, now treats it as a mere instrument of exchange. “Money by itself is of no use to me. I merely take it in order to part with it. I can neither consume it nor cultivate it.”[667] It is a mere medium of exchange, and the interest paid merely covers this cost of circulation.[668] But paper money will fulfil this function quite as well and much more cheaply. Banks advance money in exchange for commodities or supply bills which are immediately transferable into cash. In exchange for this service the banker receives a discount which goes to remunerate the shareholders who have supplied the capital. Why not establish a bank without any capital which, like the Bank of France, will discount goods with bills—either circulation or exchange notes? The bills would be inconvertible, and consequently would cost scarcely anything, and there would be no capital to remunerate.
The service given would be equal to that given by the banks, but would cost a great deal less. All that would be required to ensure the circulation of the bills would be an understanding on the part of the clientèle of the new bank that they would accept them as payment for goods. The bearer would thus be certain that they were always immediately exchangeable, just as if they were cash. The clients would lose nothing by accepting them, for the statutes would decree that the bank should never trade in anything except goods actually delivered or under promise of delivery. The notes in circulation would never exceed the demands of commerce. They would always represent goods already produced and actually sold, but not yet paid for.[669] Following the example of other banks, the bank would advance to the seller of the goods a sum of money which it would subsequently recover from the buyer. The merchants and manufacturers would obtain not only their circulating capital without payment of interest, but also the fixed capital necessary for the founding of new industries. These advances obtained without interest would enable them to buy and not merely to rent the instruments of production which they needed.[670]
The consequences of a reform of this kind cannot be easily enumerated. Not only would capital be freely placed at the disposal of everyone, but every class distinction would disappear[671] as soon as the worker ceased selling his products at cost price[672] and government itself would become useless. The aim of all government is to check the oppression of the weak by the strong.[673] But the moment fair exchange becomes possible, free contract is sufficient to secure this; there is no longer anyone who is oppressed. All are equally favoured, for the cause of contention has been removed. “Once capital and labour are identified, society will subsist of its own accord, and there will no longer be any need for government.” Government has “its origin and its whole being immersed in the economic system.” Proudhon’s system means anarchy—the absence of government.[674]
Such is Proudhon’s plan, and such its consequences. To understand its full significance we must inquire whether (1) the substitution of exchange notes for bank-notes payable at sight is practicable, and, (2) supposing it to be practicable, if it is likely to have the effects anticipated by its author.
Proudhon states that his system merely involves the universal adoption of exchange notes.[675] The Exchange Bank would merely append the manager’s signature against the particular commodity discounted. But the issue of bank-notes at the present time involves nothing more than this. Instead of the bill of exchange which it now buys, and which enjoys only a limited circulation because the signatories have only a very limited credit, it is proposed that the Bank of France should substitute a note bearing its own signature, which is universally known and testifies to an illimitable amount of credit. In what respects, then, does Proudhon’s circulating medium differ from a bank-note? It differs simply in the fact that the signature of the Bank of France involves a promise of reimbursement in metallic money, a commodity universally accepted and demanded, while Proudhon’s Exchange Bank enters into no such definite agreement, but merely undertakes to accept it in lieu of payment.
Theoretically, perhaps, the difference may appear insignificant, since the signatures are the only guarantee of the solvency of the notes of the Bank of France and the Exchange Bank alike. But in practice it is enormous. The certainty that the note can be exchanged for money gives it a wide currency and makes it acceptable to many people who rely implicitly upon their confidence in the bank. They need give no thought to the question of its solvency. A mere circulating medium, on the other hand, in addition to transferring a claim to certain goods belonging to clients of the bank, involves a certain amount of confidence in the solvency of those clients—a confidence not always easily justified. A note of this kind will only circulate among the bank’s clientèle. It will never reach the general public as the bank-note actually does. The clients themselves will keep their engagements just so long as the bank continues to discount goods that have actually been delivered and never refuses payment when it falls due. Failing this, the exchange notes, instead of regularly returning to the bank, will remain in circulation. A slight crisis or a little tension, and many of the clients will become insolvent. The total nominal value of the exchange notes will quickly surpass the actual value of the goods which they represent. There will be a rapid depreciation, and clients even will refuse to take them.
It is just possible to conceive of the circulation of such exchange notes, but the area of circulation will be a very limited one, and it will be utterly impossible if all the clients are not perfectly solvent.
Let us, however, suppose that the practical difficulties have been overcome, and that the exchange notes are already in circulation. Interest will not disappear even then, and herein lies the essential weakness of the system.
Why does the Bank of France charge a discount? Is it, as Proudhon suggests, because it supplies cash in return for a bill of exchange, so that “the seigneurial right of discount”[676] would disappear with the adoption of a non-metallic currency? The bank charges discount simply because it gives a certain quantity of merchandise immediately exchangeable in return for a bill of exchange falling due some months hence. It gives a tangible commodity in exchange for a promise—a present good for a future. What the bank takes is the difference between the present value of the bill of exchange and its value when it falls due. It is not the mere whim of the banker or the employment of a particular kind of money that gives rise to discount. It belongs to the very nature of things. Proudhon notwithstanding, a sale for cash and a sale with future payment must remain two different operations,[677] at least as long as the actual possession of a good is judged to be more advantageous than its future possession.
This difference, even in the case of the Exchange Bank, would very soon reappear. The exchange notes would represent goods which were to be sold at a certain date. Although the Bank may refuse to discount, this will not lessen the advantage enjoyed by those merchants who are paid in cash. In order to secure this advantage they will enter into agreement with those buyers who pay cash either in the form of goods or of precious metals (which are, after all, commodities), granting a slight rebate on the paper price. There would thus be two sets of prices, the paper prices of goods sold for future payment and the money price of goods sold for cash. The first would be higher than the second, and the difference—refused by the banks—would be pocketed by the sellers. Money interest would then reappear under a new form.
To this Proudhon would reply that the clients of the bank, under the terms of their agreement, are debarred from taking any such premiums. Of course, if they remained faithful to their promises interest or discount would be suppressed; but this would result, not from the organisation of the Exchange Bank, but because of mutual agreement. This would be a purely moral reform requiring no banking contrivance to aid it, but one in which progress must inevitably be very slow.
The Bank of Exchange failing to suppress discount, or to check the right of escheat in general, Proudhon’s other conclusions fall to the ground.
His theoretical error consists in his treating money at one moment as capital par excellence, at another as a mere medium of exchange having no value. He forgets that money is desired not merely for purposes of exchange, but also as a store of value, as the proper instrument for hoarding and saving; and although the exchange notes may replace it in one respect, they fail in another. We may increase the circulating media at pleasure, but we cannot multiply our capital. Money may be replaced by goods, but this will not add a single franc to the capital which already exists in society, of which money itself is a part. Nor will it lessen the superior value of present as compared with future goods—a superiority which gives rise to the phenomenon of interest. The only result of multiplying the exchange notes without increasing the amount of social capital would be to raise prices as a whole, the price of land, houses, and machinery as well as the price of consumption goods. Capital would be lent as before, and being less plentiful the high rate of interest or rent would tend to maintain the high level of prices, and these would in turn be still further increased—a strange outcome of a reform intended to lower them! Proudhon, having exaggerated the evil effects of gold, now accepts Say’s formula too literally. J. B. Say allowed himself to be led into error by his own formula that “Goods exchange for goods,” and it is interesting to note that the Exchange Bank is the logical, though somewhat paradoxical, outcome of the reaction against the Mercantilist ideas concerning money which can be traced to Adam Smith and the Physiocrats.
This does not imply that Proudhon’s idea is devoid of truth. The false ideal of free credit contains the germ of a true ideal, namely, mutual credit. The Bank of France is a society of capitalists whose credit is established by the public who accept their notes. They really deal in public credit. Proudhon saw clearly enough that their notes are ultimately guaranteed by the public. The public are the true signatories of these commercial goods. Were the public insolvent the bank would never recover its advances, which really constitute the security for the bills. The shareholders’ capital is only a supplementary guarantee. The Comte Mollien, the Financial Minister of Napoleon I, declared that in theory a bank of issue should be able to operate without any capital. The public lends money to itself through the intermediary, the bank. Why not operate without the intermediary? Why not eliminate the entrepreneur of credit just as the industrial or commercial entrepreneur is eliminated in the case of the co-operative society? Discount would not disappear altogether, perhaps, but the rate of discount for borrowers would be diminished in proportion to the extent to which they stood to gain as lenders. This is the principle of the mutual credit society, where the initial capital is almost entirely superseded, its place being taken by the joint liability of the co-operators. Proudhon’s initial conception seems to be reducible to this very simple idea.[678]
It seems that Proudhon was merely following the idea of a co-operative credit bank, just as in other parts of the work he copies other forms of co-operation without ever showing much sympathy for the principle itself.[679]
In addition to a correct conception of the value of mutual credit, there runs throughout his whole system a more fundamental idea which helps to distinguish it from other forms of official socialism which arose either before or after his time. This is his profound belief in individual liberty as the indispensable motive of economic activity in industrial societies. He realised better than any of his predecessors that economic liberty is a definite acquisition of modern societies, and that every true reform must be based on liberty. He has estimated the strength of spontaneous economic forces more clearly than anyone else. He has demonstrated their pernicious effects, but at the same time he has recognised, as Adam Smith had done, that this was the most powerful lever of progress. His passionate love of justice explains his hatred of private property, and his jealous belief in liberty aroused his hostility to socialism. Despite his famous formula, Destruam et ædificabo, he destroyed more than he built. His liberalism rested on his profound hold of economic realities, and the social problem of to-day, as Proudhon clearly saw, is how to combine justice with liberty.
Proudhon’s project for an Exchange Bank must not be confused with analogous schemes that have appeared either before or after his day. All these schemes have a common basis in a reform of exchange as a remedy for social inequalities. Apart from this one idea the resemblance is frequently superficial, and the economic bases differ considerably.
(1) Proudhon’s idea has often been contrasted with Robert Owen’s labour notes, and with the scheme prepared by Mr. Bray in 1839, in a work entitled Labour’s Wrongs and Labour’s Remedy,[680] as well as with the later system outlined by Rodbertus. Proudhon’s circulating notes have nothing in common with the labour notes described by these writers. The circulating notes represent commercial goods produced for the purpose of private exchange. Prices are freely fixed by buyer and seller, and they bear no relation to the labour time, as is the case with the labour notes. The final result, doubtless, was expected to be the same. Proudhon hoped that in this way the price of goods, now that it was no longer burdened with interest on capital, would equal cost of production. This result was to be obtained indirectly. The economic errors in the two cases are also different. Proudhon’s error lay in his failure to realise that metallic money is a merchandise as well as an instrument of circulation. The error of Owen, of Bray, and of Rodbertus consisted of a failure to see that the price of goods includes something more than the mere amount of labour which they have cost to produce—an error which Proudhon at any rate did not commit.
(2) Proudhon’s bank has also been confused with other banks of exchange which are really quite different. The ideas underlying such schemes had become prominent before Proudhon’s days, and numerous practical experiments had been attempted along the lines indicated. These banks aimed, not at the suppression of interest, but at a gradual rapprochement between producer and consumer, the goods offered for sale being bought by the bank, and paid for in exchange notes upon an agreed basis of calculation. Buyers in their turn would come to the bank to obtain the necessaries of life, paying for them in exchange notes. An experiment of this kind was made by a certain Fulcrand Mazel in 1829.[681] In this case the bank was merely an entrepôt which facilitated the marketing of the goods produced. Such a system is open to the objection that the value of the notes issued in payment for goods would necessarily vary with the fluctuations in the value of these goods during the interval which would elapse between the time they are taken in by the bank and their eventual purchase by consumers. Proudhon’s plan was to discount the goods already bought or actually delivered. The bank would only advance what was actually promised, but would make no charge for accommodation. Depreciation could only arise if the buyer were insolvent. It could never result from a fall in price as a result of a diminished demand for the product. Proudhon renounced all dealings with solidarity when he dismissed Mazel’s project.[682]
(3) M. Solvay, a Belgian entrepreneur, has recently elaborated a scheme of “social accounting.” He also proposes the suppression of metallic money and the introduction of a perfect system of payment. Here, however, the analogy ends.
What Solvay proposed was the replacement of metallic money, not by bank-notes, but by a system of cheques and clearing-houses. His plan owes its inspiration to the modern development of the clearing-house system. Solvay thought that the system might be so extended as to make the employment of money entirely unnecessary. To every such clearing-house the State would hand over a cheque-book, covering a sum varying with the amount of real or personal property which the house possessed. This cheque-book was to have two columns, one for receipts, the other for expenditure. Whenever any commodity was sold, the liquidation of debt would be effected by the buyer’s stamping the book on the receipt side and the seller’s stamping it on the expenditure side. As soon as the total value of these transactions equalled the initial sum which the cheque-book was supposed to represent the book would be returned to the State bureau, where each individual account would be made up. “In this way everybody’s receipts and expenditure will always be known with absolute clearness.”[683]
The advantage of such a system would in the first place consist in the economy of metallic money. In the second place it would furnish the State with information as to the extent of everybody’s fortune. The State would then be in possession of the information necessary for setting up an equable scheme of succession duties which would gradually suppress the hereditary transmission of acquired fortune. Such gradual suppression would result in the total extinction of the fundamental injustice of modern society, namely, the inequality of opportunity.[684] It would also help the application of that other principle of distributive justice, namely, “to each according as he produces.” The idea is Saint-Simon’s rather than Proudhon’s.
The scope of the proposed reform is quite clear. Social accounting, according to Solvay, is a mere element in a more general conception, that of “productivism,” which in various ways is to result in increasing productivity to its maximum.[685]
In all this it is impossible to see anything of Proudhon’s ideas. With the exception of the suggestion of suppressing metallic money the fundamental conceptions are utterly different. M. Solvay makes no pretence to ability to suppress interest, and he never imagines that money is the cause of interest. The cheque and clearing system is a mere device for facilitating cash payment. It has nothing in common with the Proudhonian system, whereby circulating notes are supposed to place credit sales and cash payments on an equal footing.[686]
The most serious objection to Solvay’s system lies in the fact that the suppression of money as a circulating medium must also involve its suppression as a measure of value. It seems difficult to imagine that the universal cheque bank with no monetary support would not result in a rapid inflation of prices because of the superabundance of paper. But although the particular process advocated by Solvay is open to criticism there can be no objection to his desire to diminish the quantity of metallic money or to further the ideal of equal opportunity for all.
The project was never successfully put into practice. Like the cognate ideas of “the right to work,” “the organisation of labour,” and “working men’s associations,” the idea of “free credit” has left behind it a mere memory of a sudden check.
On January 31, 1849, Proudhon, in the presence of a notary, set up a society known as the People’s Bank, with a view to showing the practicability of free credit. The actual organisation differs considerably from the theoretical outline of the Exchange Bank. The Exchange Bank was to have no capital: the People’s Bank had a capital of 5,000,000 francs, divided into shares of the value of 5 francs each. The Exchange Bank was to suppress metallic money: the People’s Bank had to be content with issuing notes against certain kinds of commercial goods only. The Exchange Bank was to suppress interest: the People’s Bank fixed it at 2 per cent., expecting that it could be reduced to a minimum of ¼ per cent.
Despite these important changes the bank would not work. At the end of three months the subscribed capital was only 18,000 francs, although the number of subscribers was almost 12,000. Just at that moment—March 25, 1849—Proudhon was brought before the Seine Assize Court to answer for two articles published on January 16 and 27, 1849, containing an attack on Louis Bonaparte. He was sentenced to three years’ imprisonment and fined 3000 francs. On April 11 he announced that the experiment would be discontinued, and that “events had already proved too strong for it,” which seemed to suggest that he had lost faith in the scheme.
From that moment free credit falls into the background, and political and social considerations obtain first place in his later works.
IV: PROUDHON’S INFLUENCE AFTER 1848
It is extremely difficult to follow the influence of Proudhon’s thought after 1848.
Karl Marx, who was almost unknown in 1848, became by the publication of his Kapital in 1867 practically the sole representative of theoretical socialism. Marx’s Misère de la Philosophie,[687] published in 1847, is a bitter criticism of the Contradictions économiques, and shows how violently he was opposed to Proudhon’s ideas. To the champion of collectivism the advocate of peasant proprietorship is scarcely comprehensible; the theorist of class war can hardly be expected to sympathise with the advocate of class fusion, the revolutionary with the pacificist.[688] The success of Marx’s ideas after 1867 cast all previous social systems into the shade. Proudhon, he thought, was a mere petit bourgeois. When the celebrated International Working Men’s Association was being founded in London in 1864 the Parisian workmen who took part in it seemed to be entirely under the influence of Proudhon. At the first International Congress, held at Geneva in 1866, a memorial was presented which bore clear indications of Proudhon’s influence, and its recommendations were adopted. At the following Congress, in 1867, Proudhon’s ideas met with a more determined resistance, and by the time of the Congress of Brussels (1868), and that of Basle (1869), Marx’s influence had become predominant.
One might even doubt whether the Proudhonian ideas defended by the Parisian workmen in 1866 were really those of the Proudhon of 1848. They seemed much more akin to the thesis of his last work, La Capacité politique des Classes ouvrières, published in 1865. This book was itself written under the inspiration of a working men’s movement which had arisen in Paris after 1862 as the result of a manifesto signed by sixty Parisian workmen. This manifesto had been submitted to Proudhon as the best known representative of French socialism. The attitude of the French workmen at the opening of the “International,” then, was the effect of a revival of Proudhonism as the outcome of the publication of this new volume rather than a persistence of the ideas of 1848.[689]
The revival was of short duration. Since then, however, the Marxian ideas have been submitted to very thorough criticism, and certain recent writers have displayed an entirely new interest in Proudhon’s ideas. These writers, chief among whom is M. Georges Sorel, combine a great admiration for Marx with a no less real respect for Proudhon. But even in this case it is difficult to speak of the movement as a revival of Proudhon’s ideas. It is rather a new current which owes its inspiration to syndicalism and combines French anarchy and German collectivism. In any case, it is so recent that we cannot yet determine its full import.