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.