System of Economical Contradictions; Or, The Philosophy of Misery

by P.-J. Proudhon

The economists had no difficulty in showing, by generalizing the idea of rent, that in the economy of society the action of capital, or its productivity, was the same whether it was consumed in wages or retained the character of an instrument; that, consequently, it was necessary either to prohibit the rent of land or to allow interest on money, since both were by the same title payment for privilege, indemnity for loan. It required more than fifteen centuries to get this idea accepted, and to reassure the consciences that had been terrified by the anathemas pronounced by Catholicism against usury. But finally the weight of evidence and the general desire favored the usurers: they won the battle against socialism; and from this legitimation of usury society gained some immense and unquestionable advantages. Under these circumstances socialism, which had tried to generalize the law enacted by Moses for the Israelites alone, Non foeneraberis proximo tuo, sed alieno, was beaten by an idea which it had accepted from the economic routine,— namely, farm-rent,—elevated into the theory of the productivity of capital.

But the economists in their turn were less fortunate, when they were afterwards called upon to justify farm-rent in itself, and to establish this theory of the product of capital. It may be said that, on this point, they have lost all the advantage they had at first gained against socialism.

Undoubtedly—and I am the first to recognize it—the rent of land, like that of money and all personal and real property, is a spontaneous and universal fact, which has its source in the depths of our nature, and which soon becomes, by its natural development, one of the most potent means of organization. I shall prove even that interest on capital is but the materialization of the aphorism, ALL LABOR SHOULD LEAVE AN EXCESS. But in the face of this theory, or rather this fiction, of the productivity of capital, arises another thesis no less certain, which in these latter days has struck the ablest economists: it is that all value is born of labor, and is composed essentially of wages; in other words, that no wealth has its origin in privilege, or acquires any value except through work; and that, consequently, labor alone is the source of revenue among men. How, then, reconcile the theory of farm-rent or productivity of capital—a theory confirmed by universal custom, which conservative political economy is forced to accept but cannot justify—with this other theory which shows that value is normally composed of wages, and which inevitably ends, as we shall demonstrate, in an equality in society between net product and raw product?

The socialists have not wasted the opportunity. Starting with the principle that labor is the source of all income, they began to call the holders of capital to account for their farm-rents and emoluments; and, as the economists won the first victory by generalizing under a common expression farm-rent and usury, so the socialists have taken their revenge by causing the seignorial rights of capital to vanish before the still more general principle of labor. Property has been demolished from top to bottom: the economists could only keep silent; but, powerless to arrest itself in this new descent, socialism has slipped clear to the farthest boundaries of communistic utopia, and, for want of a practical solution, society is reduced to a position where it can neither justify its tradition, nor commit itself to experiments in which the least mistake would drive it backward several thousand years.

In such a situation what is the mandate of science?

Certainly not to halt in an arbitrary, inconceivable, and impossible juste milieu; it is to generalize further, and discover a third principle, a fact, a superior law, which shall explain the fiction of capital and the myth of property, and reconcile them with the theory which makes labor the origin of all wealth. This is what socialism, if it wishes to proceed logically, must undertake. In fact, the theory of the real productivity of labor, and that of the fictitious productivity of capital, are both essentially economical: socialism has endeavored only to show the contradiction between them, without regard to experience or logic; for it appears to be as destitute of the one as of the other. Now, in law, the litigant who accepts the authority of a title in one particular must accept it in all; it is not allowable to divide the documents and proofs. Had socialism the right to decline the authority of political economy in relation to usury, when it appealed for support to this same authority in relation to the analysis of value? By no means. All that socialism could demand in such a case was, either that political economy should be directed to reconcile its theories, or that it might be itself intrusted with this difficult task.

The more closely we examine these solemn discussions, the more clearly we see that the whole trouble is due to the fact that one of the parties does not wish to see, while the other refuses to advance.

It is a principle of our law that no one can be deprived of his property except for the sake of general utility, and in consideration of a fair indemnity payable in advance.

This principle is eminently an economic one; for, on the one hand, it assumes the right of eminent domain of the citizen expropriated, whose consent, according to the democratic spirit of the social compact, is necessarily presupposed. On the other hand, the indemnity, or the price of the article taken, is fixed, not by the intrinsic value of the article, but by the general law of commerce,—supply and demand; in a word, by opinion. Expropriation in the name of society may be likened to a contract of convenience, agreed to by each with all; not only then must the price be paid, but the convenience also must be paid for: and it is thus, in reality, that the indemnity is estimated. If the Roman legists had seen this analogy, they undoubtedly would have hesitated less over the question of expropriation for the sake of public utility.

Such, then, is the sanction of the social right of expropriation: indemnity.