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]