Society, according to the Economists of the eighteenth century, 1 is organized on the basis of natural laws, whose essence is Justice and Utility. When these laws are misunderstood, society suffers. When they are fully respected, society enjoys the greatest possible abundance and justice reigns in human relations. 2
Are these laws of providence respected or unrecognized today? 3 Do the sufferings of the masses have their origin in the economic laws which govern society or in the obstacles placed in the way of their beneficent operation? Such is the question which recent events have raised for us. 4
To this question the Socialist schools 5 reply, sometimes by denying that the economic world is governed, as is the physical world, by natural laws, and at other times by arguing that these laws are imperfect or defective, and that the ills of society [p. 2] stem from their imperfections and defects.
The more timid conclude that we must modify these laws; the more daring believe that we must wipe the slate clean of an Organization which is fundamentally bad and to replace it with an entirely new Organization. 6
The base on which the whole edifice of society rests is property. 7 Socialists therefore strive to alter or replace or destroy the principle of property.
Conservatives defend property; but they defend it badly. 8
Here is why.
Conservatives are naturally partisans of the status quo. 9 They think the world all right as it is and are terrified by the very idea of changing anything. Consequently, they avoid sounding out the real depths of society, fearful as they are of finding any distress which might require any reform of existing institutions.
On the other hand they dislike theories and have little faith in foundational principles. Only reluctantly will they discuss property. It would seem that they are afraid to shine a light on this holy principle. Following the example of those [p. 3] ignorant and savage Christians who used to proscribe heretics rather than refute them, they invoke the law rather than science to get the better of the aberrations of socialism.
I have come to the conclusion that the Socialist heresy demands a different refutation and property a different defense.
Recognizing, with all the Economists, 10 that the natural organization of society rests on property, I have sought to discover whether the ills denounced by the Socialists, ills no one who was not blind, or in bad faith, could deny, do or do not have their origin in property.
The result of my studies and of my research, has been to the effect that society's sufferings, so far from originating in the principle of property, flow on the contrary from direct or indirect attacks on this principle.
From this I have reached the conclusion that the way to improve the lot of the working classes lies purely and simply in the emancipation of property. 11
The substance of these dialogues is that the principle of property is the basis for the natural organization of society, that this core truth has never ceased to be held partly in check or misconstrued, that ills have flowed from the deep wounds inflicted on [p. 4] property, that finally the emancipation of property would restore society's natural organization, and that such an organization is intrinsically equitable and useful.
The thesis whose defense I am undertaking is not new; all the Economists have defended property, and political economy is only the demonstration of the natural laws based on property. Quesnay, 12 Turgot, 13 Adam Smith, 14 Malthus, 15 Ricardo 16 and J.B. Say 17 devoted their lives to observing these laws in operation and demonstrating them. Their disciples, MacCulloch, 18 Senior, 19 Wilson, 20 Dunoyer, 21 Michel Chevalier, 22 Bastiat, 23 Joseph Garnier 24 etc., are passionately committed to the same task. I have limited myself to following the path they have set.
It may perhaps be thought that I have gone too far, and that by sticking too strictly to the basic principles, I have failed to avoid the pitfalls of chimeras and utopias. 25 This does not matter, however, since I retain the profound conviction that economic truth hides behind what on the surface are chimeras and utopias. It is also my profound conviction that only the complete and absolute emancipation of private property can save society, by making a reality of all the noble and generous hopes held by the friends of justice and humanity.
Let us debate among ourselves, calmly, the formidable problems thrown up in these last few years. You [the Socialist], who wage a bitter war against present institutions, and you [the Economist], who defend them with certain reservations , what are you actually seeking?
We want to reconstruct society.
We want to reform it.
Oh you dreamers, my good friends, I would ask for nothing better [p. 6] myself, were it possible. But you are chasing chimeras.
What? To want the reign of force and fraud 30 to yield to that of justice; to wish that the poor were no longer exploited by the rich; to want everyone rewarded according to his labor – is all this to pursue a chimera, then?
This ideal, which all the Utopians 31 have put forward since the world began, unfortunately cannot be realized on this earth. It is not given to men to attain it.
I believe quite the opposite. We have lived till now in a corrupt and imperfect society. Why should we not be permitted to change it? As Louis Blanc said, 32 if society is badly constructed, can we not rebuild it? Are the laws on which this society rests, a society gangrenous to the very marrow of its bones, eternal and unchangeable? We have endured them thus far. Are we condemned to do so forever?
God has willed it thus.
Beware of taking God's name in vain. 33 Are you sure that the ills of society really stem from the laws on which society is based? [p. 7]
Where then do they come from?
Could it not be that these ills have their origin in the attacks made on the fundamental laws of society?
A likely story that such laws exist!
There are economic laws which govern society just as there are physical laws which govern the material world. Utility and Justice are the essence of these laws. This means that by observing them absolutely, we are sure to act usefully and fairly for ourselves and for others.
Are you not exaggerating a little? Are there really principles at work in the economic and moral sciences, ones absolutely applicable in all ages and places? I have never believed, I am bound to say, in absolute principles . 34
What principles do you believe in, then?
My goodness, I believe, along with all the other men who have looked closely at the things of this world, that the laws of justice and the rules of utility are essentially shifting and variable. I believe, accordingly, that we cannot base any universal and absolute system on these laws. M. Joseph de Maistre 35 was wont to say: everywhere I have seen men , but nowhere have I seen Man. 36 Well, I believe that one can say likewise, that there are societies, having particular laws, appropriate to [p. 8] their nature, but that there is no Society governed by general laws.
Perhaps so, but we want to establish this unitary and universal society.
I still believe with M. de Maistre that the laws spring from circumstances, and have nothing fixed about them…Do you not know that a law considered just in one society, is often regard as iniquitous in another? Theft was permitted in certain conditions in Sparta; polygamy is allowed in the Orient and castration tolerated too. Would you say, therefore, that the Spartans were shameless thieves and that Asians are despicable debaucherers? No! If you consider things rationally, you will conclude that the Spartans in permitting theft, were obeying particular exigencies of their situation, while Asians, in authorizing polygamy and tolerating castration, are subject to the influence of their climate. Read Montesquieu again! 37 This will persuade you that moral law does not take the same form in all places and at all times. You will agree with him that justice has nothing absolute about it. Truth this side of the Pyrenees, error the other side, said Pascal. Read Pascal again! 38
What is true of the just is no less true of the useful. You speak of the laws of utility as if they were universal and permanent. Your error is truly profound! Do you not know that economic laws have varied, and vary still, endlessly, as do moral laws?...Will your counter-argument be that nations fail to recognize their [p. 9] true interests when they adopt diverse and flexible economic legislation? You have against you, however, centuries of experience. Is it not proven, for example, that England owed her wealth to protectionism? Was it not Cromwell's famous Navigation Act 39 which was the starting point for her maritime and colonial greatness? She has recently abandoned this protectionism, however. 40 Why? Because it has ceased to be useful to her, because it would spell her ruin after having made her rich. A century ago free trade would have been fatal to England; today it gives a new lease of life to English commerce. That is how much circumstances have changed!
In the domain of the Just and the Useful, all is mobility and diversity. To believe as you seem to do, in the existence of absolute principles , is to go astray lamentably, to misunderstand the very conditions for the existence of societies.
So you think that there are no absolute principles, either in morality or in political economy; you think everything is shifting, variable and diverse in the sphere of the Just and in the sphere of the Useful; you think that Justice and Utility depend on place, time and circumstance. Well, the Socialists have the same opinion as you. What do they say? They say that new laws are needed for new times. That the time has come to change the old moral and economic laws which govern human societies.
Criminal folly! [p. 10]
Why? Until now you have governed the world. Why should it not be our turn to govern it? Are you made of superior stuff to us? Or can you really affirm that no one is more fit than you to govern men? We put it to the vote of everyone. Ask the opinion of the wretched souls who languish at the bottom of society, ask whether they are satisfied with the fate which your lawmakers have left them. Ask them if they think they have obtained a fair share of the world's goods. As to your laws, if you had not framed them according to the selfish interests of your class, would your class be the only one to prosper? So, what would be criminal about our establishing laws which advantaged everybody equally?
You accuse us of attacking the eternal and unchanging principles on which society rests: religion, family and property. On your own admission, however, there are no eternal and unchanging principles.
Perhaps you might cite property, but in the eyes of your jurists, what is property in fact? It is a purely human institution which men have founded and decreed and which they are consequently in a position to abolish. Have they not, moreover, incessantly recast it? Does property today resemble ancient Egyptian or Roman property or even that of the Middle Ages? The appropriation and exploitation of man by man used to be accepted. You no longer accept this today, or anyway not in law. In most ancient societies the ownership of land was reserved to the State; you have rendered landed property accessible to everyone. [p. 11] You have, on the other hand, refused to give full recognition to certain kinds of property; you have denied the inventor the absolute title to his invention, and to the man of letters the absolute ownership of his writings. 41 You also came to understand that society had to be protected against the excesses of individual ownership of property and for the general good you passed the law of expropriation. 42
Well, what are we doing now? We are limiting property a bit more; we are subjecting it to more numerous restrictions, and to heavier burdens, in the public interest. So are we so guilty? Was it not you who marked out the direction we now follow?
As to the family, you admit that it has legitimately been able to assume in other eras and other countries, a different organization from that which prevails today with us. Why then, should we be forbidden to modify it again? Cannot man unmake everything he has made?
Then there is religion! Have not your lawmakers, however, always arranged it as they saw fit? Did they not begin by authorizing the Catholic religion to the exclusion of the others? Did they not finish by permitting all faiths and by funding some of them? 43 If they were able to regulate the manifestation of religious feeling, why should it be forbidden to us to regulate it in our turn?
Property, family, religion – you are soft wax which so many lawmakers have marked with their successive imprints – why should we not mark you also with ours? Why should we abstain from touching things which others have so often touched? Why should we respect relics [p. 12] whose guardians themselves have felt no scruple in profaning?
The lecture is deserved. You Conservatives, who admit no absolute, pre-existing and eternal principle in morality, any more than in political economy, no principle equally applicable to all eras and places, look where your doctrines lead! People throw them back at you. After having heard your moralists and your jurists deny the eternal laws of the just and the useful, only to put in their place this or that fleeting expedient, adventurous and committed minds, substituting their ideas for yours, wish to rule the world after you and differently from you. And if you conservatives are right, when you insist that no fixed and absolute rule governs the moral and material arrangement of human affairs, can one condemn these reorganizers of society? 44 The human mind is not infallible. Your lawmakers were perhaps wrong. Why should it not be given to other lawmakers to do better?
When Fourier, 45 drunk with pride, said: All the legislators before me were wrong, and their books are fit only to be burned, might he not, according to your own judgment, have been right? If the laws of the Just and the Useful come from men, and if it falls to men to modify them according to time, place and circumstance, was not Fourier justified in saying, with his eyes on history, that long martyrology of the nations, that the social legislation of the Ancients had been conceived within a false system and that the organization of a new social state was called for? In your insistence that no absolute and superhuman principle governs [p. 13] societies, have you not opened the floodgates to the Utopian torrent? Have you not authorized the first comer to refashion these societies you claim to have made? Does not socialism flow from your own doctrines?
What can we do about it? We are well aware, please believe me, of the chink in our armor. Therefore we have never denied socialism absolutely. What words do we use, for the most part, for socialists? We tell them: between you and us the difference is only a matter of time. You are wrong today, but perhaps in three hundred years, you will be right. Just wait!
And if we do not want to wait?
In that case, so much the worse for you! Since without prejudice to the future of your theories, we regard them as immoral and subversive for the present, we will hound them to our utmost ability. We will cut them down as the scythe cuts down tares 46 …We will dispatch you to our prisons and to penal servitude, there to attack the present institutions of religion, family and property. 47
So much the better. We rely on persecution to advance our doctrines. The finest platform one can give to an idea is the scaffold or the stake. Fine us, imprison us, deport us… we ask nothing better. If you could reestablish the Inquisition against socialists we would be assured of the triumph of our cause. [p. 14]
We are still in a position not to need this extreme remedy. The Majority and Power are on our side.
Until the Majority and Power turn in our direction.
Oh I am quite aware that the danger is immense; still we will resist until the end.
And you will lose the contest. You conservatives are powerless to conserve society.
That is a very categorical statement.
We will see if it is well-founded or not. If you do not believe in absolute principles, you must – is it not the case? – consider nations as artificial aggregations, successively constituted and perfected by the hand of man. These aggregations may have similar principles and interests, but they can also have opposing principles and interests. That which is just for one, may not be just for the other. What is useful for this one, may be harmful to that one. What is the necessary result, however, of this antagonism in principles and interests? War. If it be true that the world is not governed by universal and permanent laws, if it is true that each nation has principles and interests which are special to it, interests and principles essentially variable according to circumstances and the [p. 15] times, is war not in the nature of things?
Obviously we have never dreamed the dream of perpetual peace like the noble Abbé de Saint-Pierre. 48 M. Joseph de Maistre has anyway shown beyond doubt that war is inevitable and necessary .
You admit then, and in effect you cannot not admit, that the world is eternally condemned to war?
War occurred in the past, we have it in the present, so why should it cease to be in the future?
Yes, but in the past in all societies the vast majority of the population were slaves or serfs. 49 Well, slaves and serfs did not read newspapers or frequent political clubs 50 and knew nothing of socialism. Take the serfs of Russia! Are they not such stuff as despotism can mould at will? Does it not make of them, just as it pleases, mere drudges or cannon-fodder?
Yet it is clear that there was good in serfdom.
Unfortunately, there is no longer any way of reestablishing it among us. There are no longer slaves nor serfs. There are the needy masses to whom you cannot deny the free communication of ideas, to whom indeed you are constantly requested all the time to make [p. 16] the realm of general knowledge more accessible. Would you prevent these masses, who are today sovereign, from drinking from the poisoned well of socialist writings? Would you prevent their listening to the dreamers who tell them that a society where the masses work hard and earn little, while above them lives a class of men who earn a lot while working very little, is a flawed society and one in need of change? No! You can proscribe socialist theories as much as you like, but you will not stop their being produced and propagating themselves. The press will defy your prohibitions.
Ah, the press, that monumental poisoner. 51
You can muzzle it and proscribe it for all you are worth. You will never be done with slaying it. It is a Hydra whose millions of heads would defeat even the strength of Hercules.
If we had a decent absolute monarchy…
The press would kill an absolute monarchy just as it killed the constitutional monarchy, and failing the press, books, pamphlets and conversation would do the trick.
Today, to speak only of the press, that powerful catapult is no longer directed solely against the government, but against society too.
Yes, for some years the press has been on the march, thank God!
Once it stirred up revolutions in order to change [p. 17] the type of government; it stirs them up today to change society itself. Why should it not succeed with this plan as it did with the other? If nations were fully guaranteed against foreign conflicts, perhaps we could succeed in bringing to heel for good the violent and anarchic factions which operate domestically. You yourself agree, however, that foreign war is inevitable, since principles and interests are changeable and diverse and no one can claim in response that war, harmful today to certain countries, will not be useful to them tomorrow. Well, if you have no faith in anything save sheer Force to put socialism down, how are you going to succeed in containing it, when you are obliged to concentrate that Force, your final resort, on the foreign enemy? If war is inevitable, is not the coming of revolutionary socialism inevitable too?
That, alas, is what I am truly afraid of. This is why I have always thought of society as marching briskly towards its ruin. We are the Byzantine Greeks and the barbarians are at the gates.
Is that the position you have reached? You despair of the fate of civilization and you watch the rise of barbarism, waiting for that final moment when it comes pouring over your battlements. You really are so many Byzantine Greeks... Well if that is how it is, let the barbarians in. Better still, go out to meet them and hand the keys to the sacred city over to them, humbly. Perhaps you will succeed in assuaging their fury. [p. 18] Beware, however, of redoubling and pointlessly prolonging your resistance. Does not history record that Constantinople was sacked and that the Bosphorus was full of blood and corpses for four days? 52 You Greeks of the new Byzantium, be fearful of the fate of your ancestors and please spare us the agony of a hopeless resistance and the horrors of being taken by storm. If Byzantium cannot be saved, make speed to hand it over.
So are you acknowledging that the future belongs to us?
God forbid! I do think, however, that your enemies are wrong to resist you if they have despaired of defeating you, and I imagine that in not attaching themselves to any fixed and immutable principle, they have ceased to expect to be victorious. Conservatives are powerless to conserve society, that is all I wanted to demonstrate. Now, however, I will tell you other organizers, that you too would be powerless to organize it. You could take Byzantium and sack it; but you would not be able to govern it.
What do you know about it? Have we not ten organizations for your one? 53
You have just put your finger on it. Which socialist sect do you belong to? Please tell me. Are you a Saint-Simonian? 54
No? Saint-Simonianism is old hat. To begin with, it was an aspiration rather than a program… And the disciples have ruined the aspiration without finding the program. [p. 19]
Are you a Phalansterian? 55
It's an attractive idea but the morality of Fourierism is quite risqué. 56
Are you a Cabetist?
Cabet is a brilliant mind but uncultured. 57 He understands nothing, for example, about art. Imagine if you will, the people in Icaria painting statues. The faces of Curtius - that is the ideal of Icarian art. What a barbarian! 58
Are you a follower of Proudhon? 59
Proudhon, is he not a fine destroyer for you? How well he demolishes things! Up to now however all he has managed to set up is his exchange bank and that is not enough. 60
So, not Saint-Simon, not Fouriér, nor Cabét, nor Proudhon. So what are you then?
I am a socialist.
Tell us more though. To what type of socialism do you subscribe? 61
To my own. I am convinced that the great problem of the organization of labour has not yet been resolved. We have cleared the ground, we have laid the foundations, but we have not built the structure. Why should I not seek like [p. 20] anyone else to build it? Am I not driven by the pure love of humanity? Have I not studied science and meditated for a long time on the problem? And I think I can say that…well not yet actually…there are certain points which are not completely clear ( pointing to his forehead) but the idea is there…and you will see it later on.
This is to say that you too are looking for your version of the organization of labor. You are an independent socialist. You have your own particular bible. In fact, why not? Why should you not receive like anyone else the spirit of the Lord? Then again, why should it not come to others as much as to you? So we have lots of different approaches to the organization of labor.
So much the better. The people will be able to choose.
Right by a majority vote. But what will the minority do?
It will give in to the majority.
And if it resists? I admit of course that it will submit willingly or by force. I admit that the organization favored by the majority of voters will be installed. What will happen if someone – you, me or someone else- discovers a superior arrangement?
That is not likely.
On the contrary, it is very likely. Do you not believe in the dogma of indefinite perfectibility? [p. 21]
Most certainly. I believe that humanity will cease to progress only if it ceases to exist.
Well, whence comes the progress of humanity in the main? If one is to believe your learned men, it is society which makes man. When social organization is bad, man either stagnates or retrogresses. When it is good, man grows and progresses…
What could be more true?
Could there be anything more desirable in the world, then, than securing the progress of our organization of society? If this is to happen, what will the constant preoccupation of the friends of humanity have to be? Will it not be to invent and plan more and more perfect organizations?
Yes, probably. What do you see as wrong about that?
In my view this means permanent anarchy. A way of organizing society has just been set up and it functions, more or less well or badly, because it is not perfect…
Does not the doctrine of indefinite perfectibility exclude perfection? What is more I have just cited you half a dozen versions of socialism and you were not satisfied with any of them. [p. 22]
That proves nothing against the ones which will appear later. And so I have the strong conviction that the one I favor…
Fourier worked out his perfect arrangements and yet you do not want them. Likewise you will run up against people who do not like yours. Some sort of system is in operation, whether good or bad. Most people like it, but a minority do not. From this springs conflict and struggle. Take note, moreover, that future arrangements possess an enormous advantage over present ones. People have not yet noticed their shortcomings. In all probability the new system will carry the day… until such time as it too is replaced by a third system. But do you really believe that a society can change its arrangements on a daily basis, without danger? Look what an appalling crisis a simple change of government has entailed for us. 62 What would it be like with a with a change in the whole of society?
The mere thought of it makes me shiver. What a frightful mess! Well, is that not the spirit of innovation for you?
Try as you might, you will not stop it. The spirit of innovation is a fact...
To the world's misfortune.
Not so. Without the spirit of innovation, men would still be eating acorns or [p. 23] nibbling grass. Without the spirit of innovation, you would be an uncouth savage, dwelling under the trees, rather than a worthy man of property with a dwelling place in town and another in the country, well fed, well-clad and well-housed.
Why has not the spirit of innovation stayed within its proper limits?
The spirit of innovation in man has no limits and will perish only when man himself perishes. It will modify perpetually everything men have set up, and if, as you assert, the laws which regulate human societies are of human origin, the spirit of innovation will not be checked in the face of these laws. It will modify them, change them and overthrow them for as long as the human sojourn on earth continues. The world is given to incessant revolutions, to endless strife, unless…
Unless, in fact, there are absolute principles , unless the laws which govern the moral and economic world, are pre-established laws like those which govern the physical world. If it were thus, if societies had been set up by the hand of Providence, would one not have to take pity on the pygmy, swollen with pride, who tried to substitute his work for that of the Creator? Would it not be just as puerile [p. 24] to want to change the foundations on which society rests as to change the orbit of the earth? 63
Without any doubt. Do they exist, though, these providential laws, and even supposing they do, are Justice and Utility among their key features?
That is grossly impious. If God has organized the various societies Himself, if He made the laws which regulate them, it is obvious that these laws are in their essence just and useful and that the sufferings of mankind flow from our not observing them.
Well said, but are you not in your turn obliged to admit that these laws are irreversible and unchangeable?
Well, why do you not reply then? Are you unaware, therefore, that nature proceeds only by universal and unchangeable laws? I also ask whether nature could proceed otherwise. If natural laws were partial, would they not come into conflict with each other constantly? If they were variable, would they not leave the world exposed to endless disruption? I can no more conceive that a natural law might not be universal and unchanging than you can conceive that a law emanating from God might not have Justice and Utility at its core. The only thing is, I doubt whether God was involved in the organization of human societies. Do you know why I am skeptical about this? Because your societies have detestable arrangements, because the history of humanity until now has been no more [p. 25] than a deplorable, hideous tale of crime and poverty. To attribute to God Himself the arrangements of these societies, vile and poverty-stricken as they are – would this not be to hold Him responsible for evil? Would this not be to justify the reproaches of those who accuse Him of injustice and cruelty?
May I be permitted to suggest that from the fact that these providential laws exist, it does not necessarily follow that mankind must prosper? Men are not mere bodies, lacking life and will, like the spheres one sees moving in an eternal order under the governance of physical laws. Men are active and free beings; they can obey or not obey the laws that God has given them. The only thing is, when they do not follow them they are rendered criminal and wretched. 64
If it were indeed thus, they would always obey them.
Yes, if they were familiar with them, and being thus familiar, knew that non-compliance with these laws must inevitably do them harm. That, however, is precisely what they do not know.
So are you asserting that all the ills of humanity have their origin in the non-observation of the moral and economic laws which govern society?
I am saying that if humanity had always obeyed these laws, the sum total of our ills would likewise always have been the smallest conceivable. Does that answer you sufficiently? [p. 26]
Absolutely. I would very much like to know, however, precisely what these miraculous laws are.
The fundamental law on which rests all social organization, and from which flow all the other laws, is PROPERTY. 65
Property? Come off it! Surely it is precisely property from which flow all the evils of humankind.
I assert the contrary. I assert that the wretchedness and the iniquities from which men have never ceased to suffer, do not come from property. I maintain that they come from transgressions, by individuals or society itself, temporary or permanent ones, legal or illegal, committed against the principle of property. I am saying that had property been faithfully respected from the beginning of the world, humanity would continually have enjoyed, in every era, the maximum welfare consistent with the degree of advancement of the arts and sciences, along with complete justice.
What a lot of assertions! And it would seem that you are in a position to substantiate your claims.
I would think so.
All right, so substantiate them then!
I ask nothing better. [p. 27]
First of all, please be so good as to define "property".
I will do better than that; I will start by defining man himself, at least from the economic point of view.
Man is a combination of physical, moral and intellectual powers. These various powers need to be constantly exercised, constantly restored by the acquisition of other similar powers. When they are not so restored, they perish. This is as true of intellectual and moral powers as it is of physical ones.
Man is thus perpetually obliged to assimilate new powers. How is he made aware of this need? By pain and sorrow. Any loss of powers is painful. Any acquisition of powers, any achievement is accompanied, on the other hand, by enjoyment. Driven by this double spur, man takes care endlessly to exercise or augment the set of physical, intellectual and moral powers which constitute his being. This is the reason for his activity.
When this activity occurs, when man acts 66 with a view to repairing or increasing his powers, we say that he is working. If the elements from which man extracts the potential advantages he assimilates, were always within his reach, and nature had prepared them for his use, his work would be reduced to a negligible level. That, however, [p. 28] is not how things are. Nature has not done everything for man; she has left him much to do. She supplies him liberally with the raw material for all the things he needs to perfect himself, but she obliges him to give a host of diverse forms to this raw material in order to make it usable for him.
The preparation of things necessary to consumption is called production.
How is production effected? By the action of the powers or faculties of man on the elements with which nature supplies him.
Before he can consume, man is therefore obliged to produce. All production implying some expenditure of powers, also implies pain and effort. One undergoes this effort and suffers this pain with a view to gaining some enjoyment, or, and this comes to the same thing, sparing oneself some worse suffering. One gains this pleasure or avoids this suffering by means of consumption. To produce and consume, to endure and enjoy, that is human life in a nutshell.
Are you so bold as to say that in your view Pleasure ought to be the sole purpose man should aim at on this earth?
Do not forget that this involves moral and intellectual enjoyment as well as the physical kind. Do not forget that man is a physical, moral and intellectual being. The whole question is: will he develop in these three respects or will he degenerate? If he neglects his moral and intellectual needs entirely, in favor of his physical appetites, he will degenerate morally and [p. 29] intellectually. If he neglects his physical needs so as to increase his intellectual and moral ones, he will degenerate physically. In both eventualities he will suffer in the one direction, while enjoying himself to excess in the other. Wisdom consists in maintaining the balance between the faculties with which one has been endowed, or in producing such a balance when it does not exist. Political economy, however, does not have to concern itself, or not directly anyway, with this inner ordering of our human faculties. Political economy is concerned only with the general laws governing the production and consumption of wealth. The way in which each individual should deploy the restorative powers of his being, concerns morality .
To suffer as little as possible, physically, morally and intellectually, and to enjoy as much as possible, from this triple point of view – this is what constitutes, in the final analysis, the great motivating principle in human life, the pivot around which all our lives move. This motive or pivot is known as self-interest .
You regard self-interest as the sole motive of human action and you say that it consists in sparing oneself pain and obtaining gratification. But is there not any more noble motive to which one might appeal? Might one not find the more elevated stimulus of the love of humanity more exciting than the ignoble lure of personal pleasure? Instead of yielding to self-interest, might one not obey the imperative of devotion to others? [p. 30]
Devotion to others is no more than one of the constituent parts of self-interest.
What does that mean? Are you forgetting that devotion implies sacrifice and that sacrifice involves suffering?
Yes, sacrifice and suffering on one side, but satisfaction and enjoyment on another. When one sacrifices oneself for one's neighbor, one condemns oneself, usually at least, to some material privation, but one experiences in exchange, moral satisfaction. If the effort involved outweighed the satisfaction derived from it, one would not sacrifice oneself for someone else.
What about the martyrs?
The martyrs themselves could supply me with witnesses in support of my case. In them, the moral sentiments of religion outweighed the physical instinct of self-preservation. In exchange for their bodily suffering they experienced moral pleasure of a more intense kind. When one is not armed to a high degree with religious feeling, one does not expose oneself, at least not willingly, to martyrdom. Why is this? It is because the moral satisfaction derived is weak and one finds it too dearly purchased in terms of the physical suffering.
But if that is the way of it, the men in whom physical appetite predominates, will always sacrifice the satisfaction of their more lofty aspirations, to that of their [p. 31] lower ones. Their interest will always be to wallow in the gutter…
This would be so if human existence were limited to this earth. The individuals in whom physical appetites predominate would, in such a case, have no interest in repressing them. Man is not, however, or does not believe himself to be, a creature of a mere day. He has faith in a future life and strives to perfect himself, in order to ascend to a better world rather than descend to a worse one. If he foregoes certain pleasures in this life, it is in order to acquire superior ones in another life.
If he has no faith in these future satisfactions, or reckons them inferior to those present satisfactions which religion and morality command him to give up in order to obtain them, he will not agree to this sacrifice.
Whether the satisfaction is present or future, however, whether it is located in this world or another, it is always the end which man selects for himself, the constant and unchanging motive behind his actions.
When it is elaborated like this, one can, I think, accept self-interest as the sole motive of man's actions.
Driven by his own self-interest, as he sees it, man acts and works. It is the role of religion and morality to teach him how best to invest his effort…
Man therefore strives incessantly to reduce the sum of his sorrows and increase that of his joys. How can he achieve this double outcome? By [p. 32] obtaining, in exchange for less work, more things suitable for consumption, or, which comes to the same thing, by perfecting his labor.
How can man perfect his labor? How can he obtain a maximum of satisfaction in exchange for a minimum of effort?
He can do it by managing efficiently the powers he possesses, by carrying out the work which best suits his abilities and by accomplishing the task in the best possible way.
Now experience proves that this result can be secured only through the most perfect division of labor.
Men's best interests naturally lie therefore in the division of labor. The division of labor, however, implies a bringing-together of individuals, societies and exchanges.
If men remain isolated, if they satisfy all their needs individually, they will expend the maximum effort to obtain a minimum of satisfaction. 67
Even so, this interest which men have in uniting, with a view to reducing their labor and increasing their economic satisfaction, would perhaps not have been sufficient to bring them together, had they not been first of all drawn to each other by the natural stimulus of certain needs which cannot be met in isolation, plus the need to defend – what shall we call it? – their property.
What? Are you saying property exists in isolation? According to those learned in law, it is society which creates it. [p. 33]
If society creates it, then society can abolish it too, a consideration which would make the Socialists who demand its abolition less egregiously guilty. Society did not, however, create property, it being rather the case that property created society.
What is property? 68
Property derives from a natural instinct with which the whole human species is endowed. This instinct reveals to man, prior to any reflection, that he is master of his own person and may use as he chooses all the potential attributes constituting his person, whether they remain part of him, or he has in fact separated himself from them. 69
Separated? What does this mean?
Man has to produce if he wants to consume. In producing he expends, separates from himself, a certain part of his physical, moral and intellectual powers. Products contain the effort expended by those who made them. Man does not cease to own, however, these efforts he has alienated from himself under the pressure of necessity. Human understanding is not deceived and will condemn, without distinction, attacks made on internal and external property. 70
When man is denied the right to own the [p. 34] part of his powers which he separates from himself when he is working, when the right to dispose of it is allocated to others, what happens? That separation, that using up of his powers, implies some degree of pain, and the man thus ceases working unless someone forces him to.
To abolish the rights of man to the ownership of the fruits of his labor, is to prevent the creation of the products concerned.
To seize control of a part of these products is likewise to discourage their creation; it is to slow down man's activity by weakening the motive impelling him to act.
In the same way, to threaten internal property ; to oblige an active and free being to undertake work he would not personally undertake, or to bar him from [p. 35] certain branches of work, that is to deflect his faculties away from the use he would naturally select, is to diminish that man's productive power.
Any assault on property, internal or external, alienated or not, is contrary to Utility as well as to Justice.
How comes it, then, that assaults have been made against property, in every period of history?
Given that any work entails an expenditure of effort, and any expenditure of effort a degree of pain, some men have wished to spare themselves the latter, whilst claiming for themselves the satisfaction it procures. They have consequently made a speciality of stealing the fruits of other men's labor, either by [p. 36] depriving them of their external property, or reducing them to slavery. They have gone on to construct societies organized to protect them and the fruits of their pillaging against their slaves or against other predators. This lies at the origin of most societies.
This quite unwarranted usurpation by the strong of the property of the weak, however, has been successively repeated. From the very beginnings of society an endless struggle has obtained between the oppressors and the oppressed, the plunderers and the plundered; from the very beginning of societies, the human race has constantly sought the emancipation of property. History abounds with this struggle. On the one hand you see the oppressors defending the privileges [p. 37] they have allotted themselves on the basis of the property of others; on the other we see the oppressed, demanding the abolition of these iniquitous and odious privileges. 71
The struggle goes on and will not cease until property is fully emancipated.
But there are no more privileges!
But property has all too many privileges!
Property is scarcely freer today than it was before 1789. It may even be less free. Only, there is a difference: before 1789, the restrictions placed on property rights were advantageous to some people: today, for the most part, no one benefits, without these restrictions being any the less harmful, however, to all of us. 72
Where, though, do you see these pernicious restrictions?
I am going to enumerate the main ones…
One further observation. I readily accept property as supremely equitable and useful in the state of isolation. A man lives and works alone. It is entirely fair that this man should have sole enjoyment of the fruits of his labor. It is equally useful that he be assured of holding on to his property. Can this regime of individual property be maintained fairly and usefully, however, in the social state? [p. 38]
I am also happy to admit that Justice and Utility prescribe, in this common state as much as in the other, that the entire property of each individual and that portion of his powers that he has alienated from his person by working, be recognized as his. Would individuals really, however, be able to enjoy these two forms of property, if society were not organized in such a way as to guarantee them this satisfaction? If this indispensable organization did not exist; if by some mechanism or other, society did not distribute to each person the equivalent of his labor, would not the weak man find himself at the mercy of the strong, would not some people's property be perpetually intruded on by the property of others? And if we were so imprudent as to emancipate property fully, before society was fully empowered with this distributive mechanism, would we not be witness to increasing encroachments of the strong on the property of the weak? Would not the complete emancipation of property 73 aggravate the ill rather than correcting it? 74
If the objection were sound, if it were necessary to construct a mechanism for the distribution to each person of the equivalent of his labor, then clearly socialism would clearly have its raison d'être and I like you would be a socialist. In fact, this mechanism you wish to establish artificially, exists naturally and it works. Society has been organized: the evil which you attribute to its lack of organization, derives from obstacles preventing the free play of that organization.
Are you so bold as to claim that, by allowing all men to manage their property as they see fit, in the social circumstances [p. .39] we live in, we would find things working out by themselves in such a way as to render each man's labor as productive as possible, and the distribution of the fruits of the labor of all, fully equitable? …
I am bold enough to claim this.
So you think it would become unnecessary, leaving aside production, to plan at least distribution and exchange, to free up circulation...
I am sure of it. Let property owners freely go about their business. Let property circulate and everything will work out for the best. 75
In fact, property owners have never been left to go freely about their business and property has never been allowed to circulate freely.
Judge for yourself.
Is it a matter of the property rights of the individual man; of the right he has to use his abilities freely, insofar as he causes no damage to the property of others? In the present society, the highest posts and the most lucrative professions are not open; one cannot practice freely as a solicitor, a priest, a judge, bailiff, money-changer, broker, doctor, lawyer or professor. Nor can one straightforwardly be a printer, a butcher, baker or entrepreneur in the funeral business. 76 We are not free to set up a commercial organization, a bank, an insurance company, 77 or a large transport company, nor free to build a road or establish a charity, nor to sell tobacco or gunpowder, or saltpeter, nor to carry [p. .40] mail, or print money, 78 nor to meet freely with other workers to establish the price of labor. 79 The property a man holds in himself, his internal property , is in every detail shackled.
Man's ownership of the fruits of his labor, his external property , is equally impeded. Literary and artistic property and the ownership of inventions are recognized and guaranteed only for a short period. Material property is generally recognized in perpetuity, but it is subject to a multitude of restrictions and charges. Gifts, inheritance and loans are restricted too. Trade is heavily encumbered as much by capital transfer taxes, registration charges and stamp duty, by licensing and by customs duties, as by the privileges granted to agents working as intermediaries in certain markets. Sometimes, in addition, trade is completely prohibited outside certain limits. Finally, the law of expropriation on grounds of public utility, endlessly threatens such weak remnants of Property as the other restrictions have spared.
All the restrictions you have just listed were established in the interests of society.
That may be true. Those who brought them in, however, brought about a pernicious result, for all these restrictions act, in different degrees, and some with considerable impact, as causes of injustice and harm to society.
So that by destroying them we would come to enjoy a veritable paradise on earth. [p. .41]
I do not say that. What I do say is that society would find itself in the best possible situation, in terms of the present state of development in the arts and science.
And you are setting out to prove it?
Now there is a utopian for you! 80
One of our most distinguished economists, M. L. Leclerc, 81 has recently put forward a theory on the origin of external property, very like the one above. The differences are in form rather than in substance. Instead of an alienation of internal powers, M. Leclerc sees in external property a consumption of life and bodily organs. I quote:
The phenomenon of the gradual consumption and of the extinction, not of the individual self, which is immortal, but of life; this unthinkable breakdown of the faculties and organs, when it takes place as a result of the useful effort called work, seems to me very worthy of attention; for although this outcome [this breakdown] is unavoidable, either to maintain the productive effort itself, or to supplement what may still be in working order or perhaps replace what can no longer work, it is quite clear that such an outcome is painfully achieved. Its real costs include the amount of time it took, and if we may put it thus, the call it made on the faculties and bodily organs irrevocably used up to obtain it. This part of my life and my strength is gone forever. I can never recover it. Here it is, invested as it were, in the result of my efforts. It alone represents what I used legitimately to possess and no longer have. I did not use only my natural right in practising this substitution. I followed my conservative instinct; I submitted myself to the most imperious of necessities. My property rights are there! Work is therefore the certain foundation, the pure source, the holy origin of the rights of property. Otherwise the self is not primordial and original property, and the faculties, an expansion of the self and the organs put to its service, do not belong to it, which would be intolerable.
"To make use of one's time", "to waste it", "to use it well or badly"; "to work oneself to death in order to live"; "to devote an hour or a day": these are familiar phrases used for centuries, integral parts of any human language, which itself is thought made manifest. The self is therefore perfectly aware of foolish or wise, useful or unproductive deployment of its powers, and as it also knows that these powers belong to it, it readily infers from this a potential and exclusive claim on the useful outcomes of this inevitable extinction, when it has been laboriously and fruitfully achieved. Public awareness upholds, directly and spontaneously, these serious principles, these strikingly obvious truths, apparently without engaging in the long disquisitions which we intellectuals regard as obligatory.
Yes, my life belongs to me, as does the right to make of it, freely, a generous sacrifice to humankind, to my country, to my fellow-man, to my friend, my wife, my child. My life is mine, I devote a part of it to what may serve to prolong it. What I have obtained is therefore mine and I can also devote it entirely to those who are dear to my affections. If the effort is successful, religion explains this in terms of divine favor; if it is skillful, the Economist can attribute it to the improved operation of my faculties; if by chance the output exceeds my needs, it is quite obvious that the surplus [p. 36] again belongs to me. I therefore have a right to use it to add other satisfactions to that of living. I have a right to keep it aside for the child whom I might father, or against that terrible time of powerlessness, old age. Whether or not I convert the surplus, or trade it, utility for utility, value for value, it is still mine, since, as cannot be emphasised too much, it remains always the clear representation of a part of my life, of my faculties and my bodily parts, expended in work, which produces this surplus. Have I not committed part of the time given to me to live on Earth, so as to possess, honorably and legitimately, something which, when I close my eyes for the last time, I bequeath to those I love – clothes, furniture, goods, a house, land, contracts, money, and so on. Am I not, in reality, leaving my life and my faculties to those whom I love? I might have spared myself some effort or rendered that effort less painful, or increased my personal consumption. How much sweeter it is, however, to me, to transfer to my loved ones what was mine by right! This is a warm and consoling thought, which bolsters up courage, charms the heart, inspires and safeguards virtue, inclines us to noble commitments, holds different generations together and results in an improvement of our human lot, by the gradual growth of wealth.
Leclerc. – "Some Simple Observations on the Rights of Property" – Journal des Économistes , issue of 15 October, 1848. 82
You have undertaken to prove to us that the ills attributed to property, in reality stem from attacks made on property. Are you in the frame of mind to begin proving this paradox?
Would to God you were teaching such paradoxes… I drew the distinction between internal and external property. The first consists in the right every man has to dispose of his physical, moral and intellectual faculties, as well as of the body which both houses those faculties and serves them as a tool. The second inheres in the right every man has over that portion of his faculties which he has deemed fit to separate from himself and to apply to external objects.
Where do our property rights with respect to external objects begin and end?
They begin at the moment when we apply some portion of our resources and faculties to the things which nature has put freely at our disposal; [p. 43] at the moment when we complete the work of nature by giving these things a new aspect; at the moment when we add to the natural value which inheres in them, an artificial value. They finish at the time when that artificial value is extinguished.
What do you mean by "value" ?
I mean by "value" that quality which things have or which is given to them to satisfy human needs. 83
Thus man possesses his own being and the things, artificial or natural, which depend on his being, his faculties, his body and the things he makes.
The works of man, from which external property derives, are of two kinds: material and non-material. 84
The law recognizes material property in perpetuity, that is to say as long as the object owned, lasts. By contrast, law restricts non-material property to a rather brief time period. Both have the same origin, however.
Do you mean to say that you are treating the property of an invention or a piece of music in the same way as property in houses or land?
Absolutely. Do they not both have their origin equally in work? From the moment effort is expended and value created, whether the effort involves the nerves or the muscles, whether the value be applied to a palpable object [p. 44] or an intangible one, a new property is created. It matters little under what form it manifests itself.
If it is a question of a plot of land under cultivation, it will be for the most part physical force which has been expended; if it is a piece of music, it is the intellectual faculties, with the help of certain physical and moral resources which will have been set to work. But short of placing cognitive faculties below physical powers, or even more, short of claiming that man possesses, in his intelligence, less legitimate claims than those of his physical powers, can one establish some difference between these two sorts of property?
So you would want the inventor of a machine, the author of a book, the composer of a piece of music, to retain total ownership of their work and in perpetuity be able to give them away, bequeath them or sell them. You would want them to be granted even the right to destroy them. You would want the heirs of Bossuet, 85 Pascal 86 and Molière 87 to be allowed to deprive humanity of the immortal works of these mighty geniuses. Well, that is taking exaggeration to barbarous heights.
Applaud, that is the right response. Are you quite aware of what doctrine you have just been supporting, Mr Conservative?
The doctrine of common sense in my opinion. [p. 45]
Not so, the doctrine of Communism. 88
You must be joking. I maintained the rights of society over the products of intelligence, that is all.
That is just what the Communists do. Only, they are more logical than you. They support the rights of society over everything, over material products as well as non-material ones. They say to the workers: fulfill your daily tasks, according to your powers, but instead of claiming the products of your labors, the valuable things you have created, for yourselves, hand them over to the general association of the citizens, to the community itself, which will take upon itself the responsibility of sharing equitably among all, the fruits of each person's efforts. You will get your share. Now is it not true that that is the language of the Communists? 89
Yes, that is just the language of that insane sect which robs the worker of the legitimate fruit of his labor, in order to give him some arbitrary share of the output of all.
Truly you speak with the voice of wisdom. Do you not admit, therefore, that they are stealing all or part of the fruits of his labor, in order to place that whole or that part with the community?
This is theft!
Well this theft is something society practices every day [p. 46] to the detriment of men of letters, artists and inventors.
You are familiar with the law in France regulating literary property. While the ownership of material things – land, houses, furniture – is without date, literary property is limited to the twenty years following the death of the author-owner. 90 The Constituent Assembly had even gone so far as granting only ten years. 91
Before the Revolution the legislation was in some respects much more equitable… 92
Before the Revolution you say?
Yes. You know that at that time all rights, the right to work as well as the right to own, emanated from the King. Authors therefore obtained for themselves and their heirs, when they asked for it, the exclusive right to exploit their books commercially. This privilege was without limits; unfortunately it was revocable at will; moreover, it was subject in practice to tiresome restrictions. When an author sold his work to a book seller, the exclusive right to exploit his works died with him. Only those who had inherited could keep this right exclusively.
Yes. One can find a proclamation by the Council of 14 September, 1761, 95 which maintains La Fontaine's grandchildren in the [p. 47] prerogatives of their ancestor, seventy years after his death. If the Constituent Assembly had understood its mission fully and properly, it would have recognized and guaranteed literary property by freeing it from the shackles of ancient privilege, which the ancien régime had recognized even while circumscribing it. Unfortunately, communist ideas had already germinated at that time in French society. A living resumé of the philosophical and economic doctrines of the eighteenth century, the Constituent Assembly included the disciples of Rousseau and Morelly as well as those of Quesnay and Turgot. 96 It drew back therefore from outright recognition of intellectual property. It mutilated that legitimate property in order to bring down the price of works of the mind.
Was not this praiseworthy end achieved? Suppose that the literary property of Pascal, Molière and La Fontaine had not been annulled to the benefit of the community, would we not be obliged to pay more for the work of these illustrious geniuses? And can one weigh the interests of a few against the interests of everyone?
"When the savages of Louisiana want some fruit" , says Montesquieu, "they cut the tree at its base and gather the fruit. That is what despotism does" . 97 That is what communism does too, the author of The Spirit of the Laws would have said had he lived in our times. When you limit literary property thus, what are you doing? You are diminishing its market value. 98 – I produce a book and I offer to sell it to a book seller. If the ownership of this book is guaranteed to him in perpetuity, he will obviously be able to pay me for it and [p. 48] at a better price than if twenty years after my death this property perishes.
Surely that is very unimportant in practice. How many books live another twenty years after the death of their author?
You are furnishing me with another weapon to use against you. There are two sorts of books; those which do not last and those which do. Your law limiting the life of intellectual property leaves the value of the first kind intact and diminishes the value of the second. Let me give you an example. A man of genius has written a book destined to last down the ages. He is going to take it to his book-seller. Can the latter pay more for this immortal book than for run of the mill stuff destined for oblivion, after a fleeting success? No, because while the book may not die, the property in the work dies, or, which comes to the same thing, it falls into the public domain. After a certain number of years, its titleholder is legally dispossessed. Your law rewards mediocrity and penalizes genius.
So what happens? What we see is the number of lasting books diminishing and the number of short-lived ones increasing. "Time" , says Aeschylus, "respects only what it has founded" . 99 With very few exceptions, the masterpieces which the past has bequeathed us have been the fruit of very long labor. Descartes gave most of his life to writing his Meditations. 100 Pascal made as many as thirteen copies of his Provincial Letters before handing them over to the printers. 101 Adam Smith pondered the economic problems of society for thirty years [p. 49] before penning his immortal treatise The Wealth of Nations. 102 When the man of genius does not, however, enjoy a degree of affluence, can he sow for so long without harvesting? Is he not, pressed by the spur of life's necessities, to supply the fruits of his intelligence while they are not yet mature?
Easy and uncomplicated literature is much denounced, but can we have any other kind? How can we avoid light-weight work when the value of painfully achieved creations is brought down to the level of trivial writings? You will propose in vain that men of letters sacrifice their personal interests to those of art. The men of letters will not listen and in the main they are right. They too have family duties to fulfill, children to raise, parents to care for, debts to pay, a position to maintain. Can they neglect these natural and sacred duties, out of a love of art?
They make do and they head for the type of literature in which making do is easiest. In science the same situation engenders the same deplorable results. It is no longer observation which dominates modern science, but hypothesis. Why? Because you can construct a hypothesis more quickly than you can observe a law. Because you can make books more easily out of hypotheses than you can out of observations. And one also has to add that the hypothesis is often more striking. Paradox is more astonishing than truth. It becomes successful more easily. It probably loses that success more rapidly too. Meanwhile, the fellow who improvises with paradox gets rich, while the [p. 50] patient seeker after truth battles with poverty. Given this, is it surprising that paradoxes abound and real science becomes more and more rare?
You neglect to say that the government undertakes to look after men with distinguished careers in science or the arts. Society has rewards and honors for truly learned men and real men of letters.
Yes, and in this whole absurd system there is nothing less absurd. Just look at it. You devalue the property of real learned men and writers, in the alleged interests of posterity. Some sense or other of natural equity, warns you, however, that you are plundering them. So you extract from society a tax whose proceeds you allot to them. You have a budget for the arts and letters. 103 I take it that the funds raised in this budget are always equitably shared and reach the people the law is aiming at (and you will know whether my hypothesis is correct); is this penalty any the less tainted with iniquity? Is it right to oblige taxpayers to finance a tax to the advantage of future consumers of literature? Is not this a communism of the worst kind, this one which reaches beyond the grave?
Where do you see this alleged communism?
In a communist society, what does the government do? It seizes the product which the work of each man yields in order to distribute it freely to all. Well, what does [p. 51] government do, when it puts a time limitation on literary property? It takes a part of the property of the learned man and the man of letters and distributes it free of charge to posterity; after which it obliges taxpayers to give a part of their property free of charge to learned men and men of letters.
The latter lose out in this communist arrangement, since the proportion of property stolen from them is larger than the benefit which is granted to them.
Taxpayers lose even more in this way, for they get nothing for the amount which they are forced to pay.
Do at least the readers of books gain something?
Present day readers gain nothing since writers gain temporarily an absolute right of property over their works.
Future consumers are able, probably, to buy ancient works more cheaply; on the other hand they are less lavishly supplied with them. In other respects books which last across the ages experience all the inconveniences which attach to communism. Fallen into the public domain they cease to be the objects of that attentive and vigilant care that an owner knows how to give to his own. Even the best editions are full of alterations and mistakes.
Shall I say something of the indirect harm which results from the constraints on literary property – shall I speak about counterfeiting? 104
What connections do you see between counterfeit editions and the legal limitations on literary property? [p. 52]
What is counterfeiting, in effect, other than a limitation on literary property, in terms of place , where your law limits it in terms of time ? 105 Is there in reality the least difference between these two sorts of attack on property? I will go further. It is the limitation in time which gives rise to the limitation in place.
When material property was thought of as a simple privilege emanating from the sovereign's goodwill, this privilege expired at the borders of each state. The property of foreigners was subject to the right of confiscation.
When material property came to be recognized everywhere as an imprescriptible and sacred right, the right of confiscation ceased to be applied to it.
Only intellectual property 106 is still subject to this barbarous law. In all justice, however, can we justifiably complain? If we respect intellectual property less than material property, can we oblige outsiders to respect it equally ?
Perhaps not. But you are taking no account of the moral advantages of counterfeiting. It is thanks to them that French ideas spread abroad. Doubtless our men of letters and our pundits lose out; but civilization gains. What does the interest of a few hundred individuals matter compared to the wider interests of humanity?
You are now using with respect to the advantage of foreign consumers the same argument you have just used about the [p. 53] advantages to future ones. I will set myself up to refute the argument from the point of view of consumption in general .
France is perhaps in all the world, the country where literary production is most active and abundant. Books are very expensive here, however. We pay 15 francs for a two-volume novel, while in Belgium the same two volumes cost only 1 franc 50c. 107 Should we attribute this price difference solely to the rights of authors? Not so. On the admission of the interested parties themselves, it stems mainly from the slender market base available to French booksellers. If illegal printing came to be suppressed, the two volumes which sell at 15 francs in France would probably fall to 5 francs on the general market, or perhaps even lower. In this case the foreign consumer would pay 3 francs 50c more than under the system of counterfeiting; on the other hand the French consumer would pay 10 francs less. From the viewpoint of general consumption, would this not be obviously advantageous?
A few years back I heard M. Chaix d'Est-Ange, in the Chamber of Deputies, defending counterfeiting in terms of the dissemination of enlightenment. 108 It is thanks to counterfeiting, he said, that French ideas penetrate foreign parts. – Possibly so, one might have replied to this distinguished lawyer; on the other hand this practice prevents French ideas from penetrating France herself.
Foreign consumers would pay a little more for our books if counterfeiting ceased, and so on. We would supply them, however, with better and [p. 54] more numerous ones. Would they not benefit equally with us?
I agree. I am most decidedly of the opinion that you are right and I feel much disposed to rally to the cause of literary property.
I would have been able to develop further some considerations on the expansion and stability which full recognition of literary property would bestow not only on the work of literary people but on book selling too… Since I have won my case, however, I do not insist on it.
Since you grant me literary property you must also grant me artistic property.
In what does artistic property consist? 109
If it is a question of a painting, statue or monument, artistic property consists in the right to dispose of it like any other material property and to have it reproduced or give exclusive right to its reproduction by sketching or engraving etc. If it is an industrial design or technical drawing, artistic property resides likewise in an exclusive right of reproduction. It goes without saying that this property can be given away or sold like any other property.
I don't see any difficulty here. It might be agreed, however, to make an exception for industrial designs and technical drawings. Craftsmen, draftsmen, and industrial designers [p. 55] would make excessive demands if they were granted absolute property rights over their work.
Ah, so I've got you again Mr Communist-Conservative. 110 Well let me tell you that quite inadvertently the statutory administrators under the Empire left that form of property outside the framework of limitation. This salutary forgetfulness inevitably bore excellent fruit. Our industrial designs and technical drawings are today unrivalled in the world.
This is easily explained. On the one hand the industrialists who buy from the craftsmen these industrial designs and technical drawings, being guaranteed perpetual tenure of this property, can pay the highest possible price . On the other hand the craftsmen, guaranteed a good price, put in the time and care necessary for their production.
But are you also aware of what has happened? I bet you will never guess. These industrialists, who are such fierce protectors of property, one day realised that they were paying too much for their industrial designs and technical drawings. The issue was put on the agenda one day in their Chambers of Commerce and Industrial Improvement. It was unanimously agreed that the ills arose from the perpetual nature of property. As a result they immediately demanded that the government should curtail it. The government hastened to comply with this demand from the big barons of industry. The Ministry of Agriculture and Commerce rushed through a legal reform reducing to three, five, ten and fifteen years, the property rights pertaining to industrial designs and technical drawings [p. 56] . The project was presented to both Chambers and discussed in the Upper Chamber…. 111
No! The February Revolution forced it from the agenda. You can be quite sure, nevertheless, that discussion of the matter will be resumed and that the law will be passed. These conservatives, however, who strike so ruthlessly at the property of craftsmen, who never hesitate to engage in communism when it is to their advantage, hound communists like so many wild beasts. 112
If the industrialists of whom you speak had thought properly about their true interests; if they had entertained a few sound notions of political economy, they would have understood that in hurting craftsmen they would inevitably hurt themselves too. When the law has limited property rights to industrial designs and technical drawings, these creative works will probably be sold at a lower price; but will they retain the same degree of perfection. Will not elite craftsmen turn away from this branch of work when their output is not properly rewarded?
They could still be paid properly, it seems to me.
If houses could be possessed for three years only, would not their prices fall [p. 57]
Assuredly. One would not put a high price on a house of which one could be dispossessed in three years' time.
Under these arrangements we would build only hovels.
Well if the law likewise reduced the market value 113 of industrial designs and technical drawings, henceforth industrial designs and technical drawings would be nothing but cheap junk.
In this case, however, will our fabrics and bronzes, in which the design, the pattern itself, often constitutes the whole price, still be able to meet foreign competition? In limiting the property rights of craftsmen, will our industrialists not be cutting down the tree to obtain the fruit?
This is true.
You see where constriction of property leads. Maybe things become common; 114 but either they are badly produced or no longer produced.
If you support indefinite property rights over creative works, you must support them also in respect of inventions. 115
Indefinite property rights over inventions! This would be the death of industry, which is already mercilessly fleeced by inventors.
In fact, however, inventions, like works of literature and art, are the fruit of intelligence put to work. [p. 58] If the latter give rise to unlimited and absolute property rights, why should the former, which have the same origin, give rise only to limited and conditional rights?
Are not the interests of society at stake here? I understand granting a right of unlimited and absolute ownership to writers and artists. That has only minor importance. At a pinch the world could do without artists and writers.
But we could not get by without inventors. It is they who supply the tools and techniques of agriculture and industry.
Thus it is not a question of getting rid of inventors or reducing their numbers. It is a question of increasing their numbers by guaranteeing that their labor receives the remuneration due to it.
This is something I want to see. In decreeing the ownership of inventions in perpetuity, however, are you not putting agriculture and industry forever under the yoke of a small number of inventors? Are you not subjecting the most vital branches of production to demanding, intractable, odious monopolies? Suppose, for example, that the inventor of the plough had retained the property rights of his invention, and that that right had been transmitted intact until the present era, what would have happened? [p. 59]
We would have had today more and better tools for ploughing.
This is completely absurd!
Let us talk about it. You are familiar with the legislation which regulates inventions today. Inventors are guaranteed property rights over their inventions for five, ten and fifteen years, on the condition of paying the Exchequer 500 francs in the first case, 1,000 francs in the second, and 1,500 francs in the third. Now it is perfectly possible for an invention not to yield the inventor what he had expected from it. In this case he finds himself punished, fined for having invented something.
I have never said the present law is perfect. It can be reformed. But to grant the inventor perpetual ownership rights to his work: madness!
In whose interest do you wish to deprive the inventor of part of his property rights. Is this in the interests of present consumers? No, because you accord the inventor his property for five, ten or fifteen years. In this period he naturally draws the maximum possible share which will soon be denied him. He exploits his monopoly very rigorously. It is therefore solely in the interests of posterity that you would dispossess inventors.
It is in the interests of progress and civilization. [p. 60] Moreover, how could we disentangle and demarcate the rights of inventors. All inventions interlock somewhere or other.
As do all forms of material property. That does not stop each person at the end of the day protecting the integrity of his own.
Yes, but this would be much more difficult in the domain of invention. Would not the recognition of the property of inventors give rise to a myriad of legal actions?
Is not the abolition of property a strange way of preserving it from the dangers of legal wrangling? Moreover, the difficulty you are emphasizing occurs every day and is every day resolved. The fact that the property from inventions is guaranteed for five, ten or fifteen years, gives rise to legal cases, just as though it were perpetual. These cases are judged and that is that. Your objection fails before the facts. So again I say that you wish to limit the property rights to inventions in the interests of posterity.
There are in the West of the American Union immense, virgin lands which are every day taken up by the intrepid emigrants who go there. When these pioneers of civilization see a plot which takes their fancy, they stop their wagons, pitch the tent and first with the axe [p. 61] and secondly with the plough, they dig and clear the soil. They give value to this soil which previously had none. Well, this value created by labor, would you find it equitable for the community to appropriate it after five, or ten or fifteen years, instead of allowing the worker to bequeath it to his posterity? 116
Heavens above; but that would be communism, barbarism! Who would want to clear land on these terms? Even so, is there even the least analogy between the work of the pioneer and that of the inventor? Is not intelligence a common fund of humanity? Can one limit its fruits entirely to oneself? Does not the inventor draw considerable benefit, moreover, from the discoveries of predecessors and the knowledge which has been built up in society? If he did not engage in invention, would not someone else, drawing advantage from these discoveries and this common knowledge, engage in invention in his place?
The objection applies to the person who clears the land as much as to inventor. Society would not be able to say to this first occupant of the land: you are going to make land hitherto unproductive, valuable: all right; we consent. Do not forget, however, that the soil is God's work and not yours. Do not forget that while its fruits belong to all, the land itself belongs to no one. So enjoy this plot of land for a few years, but after that be sure to restore it to humanity, which holds it from God. If you do not submit with good grace to this legitimate restitution, we know very well how to use force [p. 62] to make the Right of Everyone prevail against the Egoism of a single person. What? Are you resisting? Are you objecting that you alone, by the sweat of your brow, created the value that I am now demanding be taken 117 from you? You rebellious and unnatural proprietor! Could you have created this value, without the tools and the knowledge which the community supplied you with? Reply!
And the proprietor would doubtless reply: The community has indeed supplied me with tools and knowledge but I have paid for them. My forebears and I have acquired by our work everything we possess. Society has therefore no right to the fruits of my present work. And if, abusing its power, it steals my property, holding it in common or handing it over to men who did not create it, it will be committing the most iniquitous and heinous kind of plunder.
Well replied. Answer that one for me, you communist gentlemen!
Answer it yourself. If society accepts that it has no claim on the property of those who clear the land, although they work on previously common land, although they use prior discoveries and knowledge, it would obviously not be able to claim anything against the property of inventors.
That depends on the demands of the general interest. If the [p. 63] community seizes some land, five, ten or fifteen years after it has been cleared….
And if that community forces the person who clears the land to pay 500 francs, 1,000 francs or 1,500 francs before he knows whether or no the land will be fertile….
And whatever the extent of the cleared land….
It is certain that there will not be much clearing of land and that the community itself will be the loser.
It is the same with inventions. Much less is invented under a regime of limited property rights than would be invented under a regime of unlimited property rights. Now since society can advance only on the basis of feats of invention, posterity, whose interests you have invoked, would obviously gain from the recognition of inventors' property rights, just as it benefits from recognition of landed property.
Perhaps you are right for the majority of inventions. There are some, however, so necessary that one could not leave them long in private possession. I cited the case of the plough. Would it not be a dreadful misfortune if a single individual had the right to make and sell ploughs, if the property rights with respect to that tool, so vital to agriculture, had not entered the public domain?
It would be disastrous in fact. [p. 64]
Let us examine together how things would have turned out if the inventor of the plough had enjoyed property rights over his invention, instead of being denied these. Above all, however, here is my reply: No! Society serves its true interests by recognizing the rights of the inventor of the plough, not by seizing for itself this property which is due to the work of one of its own members and rendering it common to all. No! Society has hindered the progress of agriculture instead of facilitating it and in plundering the inventor it is plundering itself.
We will see this clearly. What is the plough and what use is it?
The plough is an instrument pulled by beasts of burden, horses or bullocks, in the charge of a man, and which serves to open up the soil. Before the invention of the plough what did people use to cultivate the ground? They used the spade. There you have two very distinct tools therefore, with the aid of which the same work can be accomplished; two tools which compete the one with the other. This competition is, in truth, very unequal since the plough is infinitely better than the spade; and rather than resorting to this latter tool, the least economic of them all, most farmers would resign themselves to paying a substantial surcharge to the holders of the property right in the plough. But in the end the fields will not remain uncultivated. The spade would be used to that point when the holders of the property right in the plough, [p. 65] noticing that in extremity people could get by without them, would be more accommodating.
What would result however from this situation in society, with its being faced with the inflated claims of the owners of certain indispensable tools? That there would be a huge interest in multiplying the number of these tools and making more perfect versions. 118 At a time when the price of the plough, for example, was soaring, would not anyone who invented a tool as economic or more so to do the same job, make a fortune? And if he wished in his turn to raise considerably the price of his invention, would he not find his claims checked, first by the very fact of two old tools, to which one could always revert, and secondly by the fear of stirring up a wave of new competition, since he would have increased interest in discovering a more perfect tool. So you see that monopoly ought never to be feared because there would always be on the one hand the existing and effective competition of less perfect tools and on the other hand the eventual competition of more perfect tools, quite soon.
Is not the field of invention limited?
The plains of intelligence are still more vast than the earth. In what branch of production can one assert that there is no further progress to be realized, nor discoveries to be made? Have no fear that the history of invention is ending; the powers of humanity will fail [p. 66] before invention has come to an end.
Do you believe for example that we could not find anything better, when it comes to ploughing tools, than the present ones? Is not the plough, compared to the devices employed in manufacturing, a barbarous implement? The plough is a device moved by animal force. Now, does not manufacturing industry owe the immense progress it has realized over half a century to the substitution of the inanimate power of steam for the brute force of animals? Why does this economic substitution of inanimate for animal power not operate in agriculture too? Why has a steam driven device not replaced the plough in the way that the mule jenny has replaced the hand loom, and as the steam mill has replaced the grinding wheel turned by a blind horse, as the plough itself drawn by the power of beasts of burden replaced the spade powered by man?
If from the beginning, property rights over inventions had been recognized and respected to the same degree as material property, is it not at least probable that this benevolent progress would already have been accomplished? Is it not probable that steam would have already transformed and multiplied agricultural production as it has transformed and multiplied industrial production? Would not the result have been an immense advantage to the whole of humanity?
From all this my conclusion is that society would have had, from the start the very greatest interest in recognizing and respecting [p. 67] property rights applied to inventions including the invention of the plough.
So you believe that there will be all the more invention insofar as the property rights of invention are more extensive and better guaranteed?
Most assuredly I do. It was as late as the eighteenth century that people began to recognize property rights in invention. So let us compare the discoveries within a given period before and after that time.
That would seem to argue against your theories because property rights in invention are not unlimited.
If property rights in a field of wheat after the field had long been in common ownership, came to be recognized and guaranteed for five, ten or fifteen years vested in a single individual, would the growth in the production of wheat prove anything against unlimited property rights?
Probably not…But do not certain things discover themselves, so to speak, all on their own? There are discoveries which are in the air.
Just as there are harvests which are under the earth. It is a question only of making them emerge. But rest assured that "chance" does not take care of this requirement. How did you discover the law of gravity? they asked Newton one day. "By thinking about it all the time" , replied the man of genius. Watt, 119 Jacquart, 120 Fulton, 121 , [p. 68] would probably have given the same reply to a similar question. Chance invents nothing. It does not open up the realm of intelligence any more than that of material things. So let us leave chance out of it.
They say that if a discovery were not made today it would be made tomorrow; but could this hypothesis quite as justly be applied to the clearing of land, as to new combinations of ideas and to inventions? If the backwoodsmen 122 who emigrate to the west stayed at home, might one not agree that other backwoodsmen would go to set themselves up on the same virgin lands before five, ten or fifteen years? So why therefore don't we limit the property rights of the former? Why? Because if we did limit them nobody would wish to lose himself in the solitude of the west either today or tomorrow. Likewise, believe you me, nobody would strive to take up the discoveries which are in the air if no one had a personal interest in so doing.
You forget that glory and the even more noble desire to serve humanity act no less powerfully than personal interest does on inventors.
Glory and the desire to serve the human race constitute a part of human interest and are not distinct from it as I have already shown you. But these elevated motives are not enough. Like writers and artists, inventors are subject to human weakness. Like them, they are obliged to feed, clothe and house themselves and usually also to look after a family. If you offer them no other appeal than glory and the satisfaction of having [p. 69] served humanity they will be obliged for the most part to give up pursuing invention as a career. The rich alone will be able to invent, write, sculpt and paint. Now since rich people are not very active workers civilization will scarcely advance.
Now then Mr Conservative admit with good grace that you have been beaten. If you support the perpetuity of material property you cannot but support that of intellectual property. There are the same right and the same necessities in both forms (always supposing of course that one recognizes this right and these necessities). Agree therefore to recognize property rights in invention as you have recognized the other kinds.
All that may be true in theory but, goodness me, in practice I prefer stay with the status quo .
We have noted that property rights with respect to works of the intellect are very badly treated under the present regime. Material property is more favored in the sense that it is guaranteed in perpetuity. This recognition and guarantee, however, are in no sense absolute. An owner can have his property confiscated under the law of expropriation for reasons of public utility. 126
What? Do you wish to abolish that tutelary law without which no undertaking on the grounds of public utility would be possible?
What do you understand by an undertaking on the grounds of public utility?
An undertaking on grounds of public utility is…an undertaking [p. 71] useful to everybody, a railway, for example. 127
Oh, and is not a farm which produces food for everybody not an undertaking also useful to all? Is not the need to eat at the very least as universal and necessary as the need to travel?
No doubt, but a farm is a rather limited individual enterprise.
Not always. In England there are immense farms. In the colonies there are farms which belong to numerous and powerful companies. Anyway, what does it matter? The usefulness of an enterprise is not always a function of the space it occupies and the law does not investigate whether an enterprise known as "a public utility" is owned by a company or isolated individual.
We could not establish any analogy between a farm and plantation and a railway. The development of a railway is subject to certain natural exigencies; the slightest deviation in the route, for example, can entail a large increase in costs. Who will pay for this increase? The public. Well, I ask you, must the interest of the public, the interest of society be sacrificed to the stubbornness and greed of some landowner?
Ah, Mr Conservative. These are words which reconcile me to you. You are a fine fellow. Let us shake on it.
There are in the Sologne vast stretches of extremely poor land. 128 The poverty stricken peasants who farm there receive only a meager return for the most laborious efforts. Yet close to their wretched hovels rise magnificent chateaux with immense lawns where wheat would grow in abundance. If the peasants of the Sologne demanded that these good lands be expropriated and transformed into fields of wheat, would not the public interest require that this be granted them?
You go too far. If the law of expropriation 129 were used in the cause of public utility to transform lawns and pleasure gardens into fields of wheat, what would happen to the security of property? Who would want to manicure a lawn, lay out a park, decorate a chateau?
Expropriation always entails an indemnity.
But the indemnity is not always big enough. There are things for which no indemnity could compensate. Can you pay for the roof which has sheltered generations, the hearth around which they have lived, the great trees which witnessed their births and their deaths? Is there not something of the sacred in these centuries old abodes, in which the traditions of the ancestors live on, [p. 73] in which so to speak the very soul of the family breathes? Is not the expulsion of a family forever from its ancient patrimony, the commission of a deeply immoral assault?
Except, of course, when it is a question of building a railway. 130
Everything depends on the extent to which the undertaking is useful.
But is anything more useful than farming devoted to the people's subsistence? For my part I strongly hope that the law of expropriation for reasons of public utility will soon be given enlarged scope. The Convention had potatoes grown in the Tuileries gardens. What a sublime example! May our legislative Assemblies keep it forever in mind! How many thousands of hectares lie unproductive around the luxurious residences of the lords of the earth? How many mouths could we feed , how much work could we distribute by handing over these fine lands to workers ready to farm them? Oh you rich aristos, 131 one day we will plant potatoes in your sumptuous flowerbeds; we will sow turnips and carrots in place of your dahlias and your Bengal rose bushes! We will expropriate you for the sake of public utility.
Fortunately the expropriation panels 132 will not give permission for these barbarous projects.
Why not? If Public Utility demands that your chateaux [p. 74] with their lawns and parklands be replaced by fields of potatoes why should the panels not agree to the expropriation? If some grant it happily when it is a question of turning farmlands into railways, will not others agree to it with all the more reason when it is a question of replacing luxurious parklands with farming? Will you cite in your reply to me the actual composition of expropriation panels? They are made up of big landlords, a fact of which I am not unaware, but this latter kind of panel will not escape the law of universal suffrage any more than the former will. We will have small owners and workers coming on to them, and then my word… big property will dance a merry tune.
That is a subversive proposal of the first order.
What do you expect? A law you established yourself is being enlarged and its application generalized on grounds of Social Utility. Your work is being completed. Can you complain about it?
I know very well that expropriation in the service of public utility has its dangers, especially since that accursed revolution… Is it not however indispensable? Are not private interests perpetually at war with public interests?
Moreover does not this law contain an implicit recognition of property? If the State did not respect property rights, would it have gone to the trouble of demanding a law of expropriation from the Legislative Chambers? Would simple ordinances not have sufficed? [p. 75] Does the law of expropriation on the grounds of public utility not subsume an implicit recognition of property?
Yes, in the way that rape subsumes an implicit recognition of virginity.
What about the indemnity?
Do you think any indemnity could compensate for a rape? Now if I do not want to hand over my property to you and by using your superior strength you rob me of it, are you not committing a serious crime? 133 The indemnity will not efface this assault made against my rights. But, you will object, the public interest may require the sacrifice of certain private interests, and this necessity must be provided for. And this is you, a conservative who is speaking to me in these terms? Is it really you denouncing for my benefit the antagonism between the public interest and private interests? Do take care, are you not talking socialism? 134
Probably. To each his own. 135 We have denounced and were the first to do so, this lamentable idea of an opposition between the public interest and private interests.
Yes but how can you put an end to it?
That is very simple. We get rid of private interests. We bring about the return of the wealth of each to the domain of All. We apply on an immense scale [p. 76] the law of expropriation in the cause of public utility.
And if there truly is antagonism between the interest of each person and the interest of all, you are acting very wisely and your adversary is in error in not following you all the way.
You are being sarcastic! Do you happen to believe that private interests naturally coincide of themselves with public interest?
If I were not convinced of it, I would have become a socialist a long time ago. I would wage, as you do, perpetual war against private interests, I would demand a tightly knit association, a community, and who knows what else. I would not wish at any price to maintain a social order where no one would prosper save on the condition of hurting other people. Thank God, however, that society is not constructed thus. The various interests are naturally in agreement. 136 The interest of each person coincides naturally with the interest of all. 137 Why therefore make laws which put the former at the mercy of the latter? Either these laws are pointless, or as the Socialists claim, society needs remaking.
You argue as if all men had an accurate understanding of what is in their own interest. Well, this is false. Men frequently mistake what is in their interest.
I know perfectly well that men are not infallible; I also know, however, that each man is the best judge of his own interest. [p. 77]
Perhaps you are right in principle, but in practice some people are truly obstinate and stupid.
Not so obstinate and not so stupid when their interests are in question. I admit, however, that people of that type can ruin some useful enterprises. Do you think that the present law does not cause more harm than they would be able to? Does it not compromise the security of present property and does it not menace it in the future too?
It is quite certain that socialism would make a truly deplorable use of the law of expropriation in the cause of public utility.
And you conservatives who passed that law, would you willingly oppose its application? Is this not a dangerous weapon which you have forged for your enemies' use? By declaring that some majority or other has the right to seize an individual's property when the public interest demands it , have you not supplied socialism in advance with a justification for such expropriation and a legal means of carrying it out?
Alas! But who could foresee that infernal revolution?
When one engages in law making, one has to foresee everything.
Along with this law which threatens property right down [p. 78] to its roots, our Code includes other laws involving partial attacks on certain property; mining legislation for example. 138 Like the works of the intellect, mines end up outside the common law.
Is this not a special kind of property and ought it not therefore to be subject to special laws?
What does today's legislation with regard to the mines say?
French legislation on the mines has for a century undergone very diverse modifications. Under the Ancien Régime the mines were considered as belonging to the royal domain. The king granted mining licences as seemed to him appropriate, to the finder, to the owner of the land or to any other, in exchange for a tenth of the annual output. When the Revolution liberated property and labour, people must have hoped that this advantage would be extended to mining property; unfortunately it did not turn out that way. The law makers refused to grant subterranean property its charter of liberation. 139
Three opinions emerged on the issue of this kind of property. Some said that underground property was simply attached to surface property; according to others it belonged to the whole community; according to a third group it reverted to the finders. In this last view, the only equitable one, the only one consistent with law, the owners of the land could demand only a simple indemnity for those parts of the surface of the land which were necessary for exploiting the mineral deposits, and the government [p. 79] likewise could not demand anything save a tax for the legal protection granted to the miners. 140
According to you then, the ownership of mines ought therefore to be classed in the same category as property rights over inventions? 141
Precisely. Let us suppose you are a gold prospector. After a lot of searching you have managed to find a seam of this precious metal. You have the sole right to exploit this seam that you alone have discovered.
On this reckoning the whole of America should have belonged to Christopher Columbus who had discovered it.
You are forgetting that America was already to a great extent owned at the time of Christopher Columbus's discovery. 142 Moreover, it is a rule of the law of nations that uninhabited land belongs to the first to discover it.
If however, after having discovered it, these first comers decide that it is not appropriate to exploit it, their property rights die. How do you explain this demise of property rights?
The right of property does not die. One ceases to possess only when one renounces that possession. If I have discovered a mine I will exploit it or I will cede it to someone who will exploit it. The case will be the same if I have discovered land: I will exploit it or sell it. [p. 80]
What if you keep it without exploiting it?
It will be my right but not in my interest. Looking after anything is costly: you have to pay for the security of property. If therefore I do not want to develop the land or mineral deposit which I have discovered, and if no one wants to buy it from me I will soon give up on looking after it; for it will incur losses rather than profits for me. So there is, you see, no draw back in leaving to the finder the full disposition of whatever he has discovered.
The discoverer of a deposit possesses a right to it; that seems to me quite legitimate. It is right that his work of discovery be remunerated. Do not society and those who own the surface of the land, however, also have some rights on what is underground? Society protects those who work the mines and it supplies them with the means to work them. As for the owners of the surface of the land, do they not have a claim on the ground below by the very fact of occupying the surface? Where is the boundary between the two properties?
Yes, where is the boundary?
Neither society nor the owners of the land can claim the least right to what is underground. I have already demonstrated to you in respect of inventions, that society has no right to the fruits of the work of individuals. There is no point going over this again. As [p. 81] for the owners of the surface land, Mirabeau 143 has clearly refuted their claims to the ownership of the sub-soil: "The idea that being the owner of a stream or river makes one the owner of the ground below our fields seems to me as absurd as the idea of preventing the passage of a hot air balloon because it passes over the property of a particular landowner." 144 Why is this absurd? Because the ownership of the fields lies solely in the value which work has given to the surface of the land and the owners of the land have contributed nothing of value to what lies below the soil, just as they have contributed nothing to the air above it. Search out who has worked or is working and you will always know who possesses or ought to possess a thing.
But is it possible to discover a mine and to exploit it without the agreement of those who own the surface land?
What happens is this. You ask the owners of the land for permission to explore the ground, at the same time undertaking to give them a payment or part ownership of the mine by way of compensation for the damage which may be caused to them. Once the mine is opened up, you divide up the potential profits and set to work on it. If the exploitation of what lies under the ground is such as to harm the surface property, the owners of that property obviously have the right to oppose this or to claim a further indemnity. Their choice will be the indemnity, since the opening of a mine, by providing a new market for their products, directly or indirectly increases their incomes. In this way, interests which appear opposed, are naturally reconciled. [p. 82]
Unfortunately, the Constituent Assembly and Mirabeau himself, did not understand that the ownership of mineral resources could without any drawbacks, be left unregulated. They attributed the ownership of mines to the nation. They produced a form of underground Communism. The law of 1791 put the government in charge of allocating the ownership of mineral deposits, and it limited the tenure of licences to fifty years. Moreover the government was given the power to withdraw these licences if the mines were not maintained in good shape or if they stopped operating for a while. 145
Undoubtedly the most destructive clause in this legislation was the one limiting the length of leases. Given the huge capital investments mining demands and the preparatory work sometimes stretching over several years, it was important above all that entrepreneurs be assured as to the future; to limit their enjoyments of their rights was to force them to limit their efforts to invest; it was to place an almost insurmountable obstacle in the way of their developing the mining of minerals.
The government's prerogative to withdraw licences in certain specified circumstances also entailed very serious drawbacks. It is not easy to determine whether a mine is being well or badly managed. Opinions can be divided on the most appropriate means of exploitation. It was argued against wholly unrestricted exploitation, for example, that the managements extracted the richest seams first of all and neglected the others. Were they not, however, in taking such a decision, merely acting in the most rational way? Was it not obvious one should start with the most productive [p. 83] parts of the mining project? In starting with developing the less rich seams, would not the licencees have damaged their infant enterprise? Nor could it easily be decided with any greater certainty whether a developer was right or wrong to abandon all or part of his project for a while. His personal interest, which was to keep it all going constantly, was in this respect an insufficient guarantee. Unless demand slowed down, in which case the partial or total cessation of extracting minerals would of course be justified, what interest could he have in interrupting work?
They reformed that bad law.
They reformed it very incompletely. The law of 21 April, 1810, which replaced it, gave the government the right to grant or withdraw licences. The difference, however, is that licences ceased to be limited to fifty years. Even so, in other ways the situation of mine owners has been worsened. The 1810 law forbade them to sell in lots or to split up their mines without a prior authorization from the government, and it subjected their mining to a surveillance system created for this purpose . Furthermore, it maintained the alleged rights of surface landowners, and entrusted the Council of State with the task of determining the amounts of compensation to be granted them. Mining found itself, in this way, closely regulated and heavily burdened.
So what was the result of this law? It was to [p. 84] reduce to the minimum the mining of minerals. 146 Who would want today to be a discoverer of mines? Who would want to specialize in finding new deposits of various minerals? Before a discovery can be exploited, does one not have to lobby for a licence for long years (the licence to a property which one created by one's own work), and having obtained it, submit oneself to an irksome surveillance and brutish directions from the administration of mining? What would happen to our agriculture, I ask you, if our farmers could not remove a shovelful of earth without the approval of some official from the Ministry of Agriculture? If they could not sell the merest parcel of land without the say-so of government? If in a word the government took it upon itself the right to take their property from them, at will? Would not this be the death of our farming? Would not investable funds soon turn away from so detestably oppressed an industry? …Well in fact investment capital has been turned away from mining ventures. It has been necessary to grant them special privileges to attract it back. It has been necessary to keep out foreign competition, and there has thus been facilitated on the domestic front the establishment of an immense monopoly, to persuade investment funds to venture to participate in an industry subservient to the government's good pleasure. It has been necessary to burden consumers of mineral products with some of the damage inflicted on the ownership of mines. Is this not barbarous?
Let us suppose on the contrary that in 1789 the oppressive right which monarchs had taken upon themselves to cede the ownership of mines at will, had simply been abolished; [p. 85] let us suppose further that this ownership had been freely given and guaranteed to those who had created it. Would not the production of mines have developed to the maximum, without there having been any need to protect it? Might not that source of production which still yields only scant output flow copiously in the long run?
Yes, ownership is a marvelous thing. One works with such ardor when one is always sure of possessing the fruits of one's labor, and of being able to dispose of it at will – consuming it, giving it away, lending it, or selling it, all without hindrance, harassment or irritation. Property! That is the real California. Long live property! 147
Long live labor!
Labor and property go together, since it is work which creates property and property which calls out for labor. So long live labor and property!
Government harms the development of production, not only by hampering individual ownership, but also by claiming certain properties for itself. Alongside the property of individuals there is, as you know, the public domain or common property. The State, the departments and the communes, own considerable wealth: fields, meadows, forests, canals, roads and buildings and the like. 148 Do not these diverse properties, which are managed in [p. 85] society's name, constitute a genuine case of communism?
Yes, to a certain extent. Could things be arranged otherwise, however? Does not the government have to have certain kinds of property at its disposal? It is set up to provide certain services to society…
The government must…govern.
Govern, by Jove! What do you mean by that, however? Is it not to manage various interests and harmonize them?
There is no need for interests to be managed or harmonized. They manage and harmonize themselves quite well without anyone interfering.
If that is how it is, what must government do? 149
It must guarantee for each individual his freedom of activity, the security of his person and the conservation of his property. To exercise this particular function, to render this special service to society, government has to have access to certain resources. Anything more it possesses is unnecessary.
But if it provides other services to society, if it supplies education, if it finances religion, if it contributes [p. 87] to the transport of men or merchandise by land or by water, if it makes tobacco or porcelain, or carpets, or gunpowder or saltpeter… 150
In a word if it is communist! Well it does not need to be communist. Like any entrepreneur 151 the government must do one thing and one only, or risk doing what it does very badly. All governments have as their main function the production of security . 152 Let them confine themselves to that.
You have just given us a very rigorous application of the principle of the division of labor. What you would like to see then is the disappearance of the public sector, with the State selling the greater part of its property, and with all production becoming, in a word, specialized .
I would like this for a better development of production. In England there was recently an inquiry into the management of public property. 153 Nothing could be more instructive than the results thrown up by this research. In England the public domain consists of ancient fiefdoms of the crown, which have now become public property. These properties are huge as well as magnificent. In the hands of individuals, they would yield a worthwhile output. Controlled by the State they yield almost nothing.
If you will allow I will give you a single instance.
The main wealth of this domain consists in the four forests of New Forest, Walham, Whittlewood and Whychwood. 154 These forests are entrusted to guardians who [p. 88] administer them. These are the Dukes of Cambridge and Grafton, Lord Mornington and Lord Churchill. The guardians receive no formal payment but are allotted a very sizeable payment in kind, including game, timber etc. The annual income from the New Forest adds up on average to £56,000 or £57,000 sterling, approximately Fr 1, 500,000. The Treasury has never garnered more than £1000 of this income, while the maintenance of the forest between 1841 and 1847 cost the State more than £2000. 155
This is a flagrant abuse. Do not forget, though, that this is happening in aristocratic England.
Plenty of other abuses happen in our democratic France. It has long been known, in France and in England, that the management of state property is dreadful.
That is only too true. There are types of property that obviously must remain in the hands of the State, the roads for example. 156
In England the roads are owned by individuals, and nowhere does one see them so well maintained.
What about the tolls then? Traffic is not free in England as it is in France.
Excuse me, but it is much freer in Great Britain, [p. 89] for road communications are much more numerous. And do you know why? Quite simply because the government has left it to individuals to build roads and has not got involved in building them itself. 157
But I ask once more, what about the tolls?
Oh, do you think then that the roads in France are built and maintained for nothing? Do you think that the public does not pay for their construction and maintenance as happens in England? Only, here is the difference. In England road construction and costs are paid for by those who use them; in France they are paid by the taxpayers, including the goatherds of the Pyrenees and the peasants of the Landes 158 who do not set foot twice a year on a national highway. In England it is the user of such means of transport who pays for them in the form of tolls; in France the whole community pays in the shape of taxes, often of a most excessive and irksome kind. Which is preferable? 159
And the canals, is it not appropriate for them to be left in the public domain?
No more so than the roads. In which countries are the canals the most numerous, the best constructed and the best maintained? Is it in the countries where they are in the hands of the state? No! It is in England and [p. 90] in the United States where that have been built and are used by private groupings of private individuals. 160
Would not roads and canals constitute oppressive monopolies if they were privately owned ?
You forget that they engage in mutual competition. I will show you later on 161 that in any enterprise subject to the free regime of free competition 162 , price must necessarily fall to the level of real costs of production or use and that the owners of a canal or road cannot receive anything in excess of the equitable remuneration of their capital and their labour. This is an economic law as positive and exact as a law of physics.
Most natural waterways, which require a certain amount of management and maintenance work, could with advantage be privately owned in the same way. You know to what inextricable difficulties the common ownership of waterways gives rise today. The dams lead to countless legal cases, and irrigation systems are obstructed everywhere. It would be different if each lake or waterway had its owners against whom those living beside the water could have recourse in case of damage, and who would have responsibility for providing artificial waterfalls and establishing irrigation canals where need arose. 163
The State is still the owner of most sources of mineral water. So these are very badly run, though not lacking in administrators and inspectors. Moreover, under the pretext that artificial mineral waters serve as medicaments, their fabrication has been [p. 91] put under government surveillance. Yet more administrators and inspectors!
Ah, government is our great running sore! 164
There is only way to heal that particular sore, and that is by governing less.
Those who have taken it upon themselves the right to put limitations on property have not failed to limit its free disposition as well. The gifting, bequeathing, lending and exchanging of property have all been subjected to a multitude of encumbrances. 165
The giving away of certain property is subject to irksome and costly formalities. Making a will is even more constrained. Instead of leaving to the father of the family the free disposition of his wealth, the law obliges him to leave it in more or less equal portions to his legitimate children. If one of his children feels wronged by the sharing out, he has the right to have the will invalidated. 166 [p. 93]
Are you are also attacking, therefore, this law which protects family and property?
I am attacking this law which is destructive of family and property. 167 It is in the name of a higher law than that of fathers of families, that society has regulated inheritance, is it not? Why, though, should it not go on to use this superior right to claim for itself, tomorrow, this property which it had at its disposal yesterday? If it has been able to say to the father of the family "you will not dispose of your wealth according to your own will but according to mine" , could it not very well also say to him "it suits me henceforth that you alienate your wealth in my favor" ? Is not the abolition of inheritance, that is to say the elimination of individual property, subsumed in a law which attributes to society the unchallengeable right to dispose of inheritance?
Is not the destruction of paternal authority, that is to say the [p. 94] destruction of the family, likewise subsumed in a law which takes away from the father of the family the free disposition of his wealth in order to grant his children an effective right to an inheritance ? 168
A right to an inheritance you say?
To tell children that they have a right to demand from their father virtually equal shares in his inheritance, whatever their conduct has been, whatever their feelings in his regard; to tell them they have the right to have his will invalidated if they find themselves slighted in the sharing, is this not to sanctify the right to an inheritance ? Is it not to give the child a share in his father's property? Is this not to allow him to consider and demand as a debt , what he once regarded and received as a kindness. Where nature made a son, will your law not be creating a creditor?
But is this not a trifling thing, making a parent share his wealth fairly [p. 95] between his children? Without the law which regulates the shares, would not the children be endlessly frustrated – cheated and inveigled out of what is rightfully theirs? Has not the law prevented all frauds and resolved all difficulties?
By breaking family links; by rendering the father's authority illusory. No doubt if the right to make a will obtained, the father might distribute his wealth very badly. Is he not always held in check, however, by those powerful restraints that no man-made law could possibly replace – paternal love and the sense of justice? If those two feelings have been silenced in his heart, do you think your law would make them speak out? Do you believe that the father will not find some roundabout means of disposing of his wealth to his children's disadvantage? If these feelings are present in him, what good is your law? And then you put forward as a matter of principle the equality of shares as the ideal standard of equity. Are you entirely sure, however, that this brutal equality is always just? Are you also quite sure that a father cannot favor one child without plundering the others? By going so far as to admit that the son has to all intents and purposes some claim on his father's wealth…
What? The son would have no claim on the paternal inheritance? But if this were so he could be dispossessed if there were no will.
The conclusion is false. The children's claim is based in this case on the likelihood of the legacy. The inheritance has to be theirs, not because they possess a potential claim [p. 96] on that inheritance, but because the father has probably bequeathed it to them.
By fathering a child, the father agrees to accept the moral obligation to feed him and to prepare him to earn his living, nothing more and nothing less. If it pleases him to give his child something extra, this is an outcome of his own wishes .
Even allowing your alleged right to an inheritance, however, do you believe that a bad son has the same claim on the paternal estate as a good one? Do you think that a father is bound, from the point of view of natural equity, to bequeath part of his wealth to some miserable creature who has been the despair and shame of his family? Do you not think, on the contrary, that he will be bound to deprive this degraded being of the wherewithal for indulging his evil passions? Can the right to disinherit not be useful and just sometimes?
In the eyes of your legislators, however, the father is a creature at once bereft of the notion of justice and of paternal feeling. He is a ferocious beast who incessantly watches his progeny in order to devour them. The law must intervene to protect them. Society must bind this heartless barbarian, this so-called father, hand and foot to prevent his sacrificing his innocent family to his base inclinations.
Our sad legislators have not noticed that their law would be efficacious only in weakening respect for authority and family feeling. Does respect for authority still exist in France?
Ah! You have just touched on the most lamentable scourge [p. 97] of our time. The present generation has indeed lost the respect for authority – that is only too true. The Union has published some admirable articles on the subject. 169 Who will restore respect for authority for us? The son no longer respects his father. Grownups respect nothing, not even God. Respect for authority is the very anchor of salvation for our society, tossed hither and thither by the storms of revolution, like some ship…
Please do not go on about it. We have read the articles in the Union.
You broke that anchor of salvation with your own hands, the day you attacked the sacred rights of the father of the family, the day when you gave the son a claim on his father's property, the day when by taking away from him the fearsome weapon of disinheritance, you handed him over to the mercies of his rebellious children.
What about the house of correction?
Yes, this is what you have given him in exchange. Short of having lost all human feeling, though, can a father consent to his son's being put on this highway to penal servitude? Better to suffer rebellion than draw infamy down on oneself and family.
I know quite well that the father can defy the law and disinherit his intractable son in fact if not legally; but he is forced to act in secret, avoiding the greedy and jealous eye of his creditor. He no longer uses [p. 98] legitimate means to bequeath his wealth; indeed he makes an immoral infringement on his son's claim to that wealth. His behavior is no longer that of an owner freely handing over what is his; it is rather that of a debtor surreptitiously getting rid of a mortgaged property. That which would secure the father's authority, if the right to inheritance did not exist, serves today only to debase it.
I will not speak to you of the hatreds which spring up in families when a father considers it appropriate to favor one of his children. In countries where there is no right to inheritance, in the United States for example, 170 the other children respectfully bow their heads in the face of this sovereign decision of the paternal will, and they conceive no adverse feelings towards the child whom the father has favored. In countries where the right to an inheritance is recognized, such an act becomes, on the contrary, a profound source of family disunion. In fact is not this straightforward act, often so amply justified by the circumstances – the frailty or incapacity of the preferred child, the care he has bestowed on his father – from the point of view of the legality you espouse, a veritable plundering, a theft? Your law is a new species of harpy, 171 which has corrupted family feelings by interfering with them. Having brought about this, do you now complain that the disorder into which you threw the family now propagates itself in the society at large?
But if the moral results of the law of equal shares leave something to be desired, does that law not have at least some admirable outcomes? It has made everyone a proprietor. Every peasant [p. 99] with his plot of land to work has been sheltered from want.
Are you really sure of this? For my part I hold that no law has been so disastrous for the situation of the laboring poor, both in farming and industry.
Would you prefer, by any chance, the rights of the oldest and of entail? 172
This is abuse of another sort; another kind of attack on property rights. In truth, however, I do think I would prefer them really.
I think so too.
What? You prefer the feudal arrangements of primogeniture and entail to equal sharing. Yet you are for association. Now there is a manifest contradiction.
I do not think so. What are the essential conditions of any economic production? Stability, with security of possession on the one hand; a bringing together of adequate powers of production on the other. Well the present arrangement comprises neither stability nor sufficiency of productive powers. [p. 100]
I agree with you that the leases are too short-term and that our inheritance laws have made undivided ownership of farming plots singularly precarious; I agree too that farming is short of capital but what is to be done about it? There is talk of the organization of agricultural credit and for my part I would think along those lines were it not so difficult to find a good system. 175
A system of agricultural credit, however excellent, would remedy nothing. Under present property arrangements, an increase in the number of institutions of credit would scarcely serve to lower the rate of interest in farming areas. It would be different if our farming units were soundly established like those in England.
You dare to suggest England as a model for us? Oh, well I grant you that the state of the helots 176 in our countryside is truly wretched, but is it not a thousand times preferable to that of the English peasants? Are not the English workers exploited by an aristocracy which devours their substance much as the vulture devoured Prometheus' liver? 177 Is not England the country where the saddest scenes of the dark drama of man exploiting man are played out? Is not England the great whore of capital? England! Oh do not speak to me of England!
Yet the condition of the English peasant, exploited [p. 101] by the aristocracy, is infinitely superior to that of the peasant proprietor of France.
Come on now!
I notice in your library two works by Messieurs Mounier and Rubichon, one called Agriculture in France and England and another called The Role of the Nobility in Modern Societies , which will furnish me with indisputable evidence in support of what I am saying. 178
I humbly confess not to have read them.
That was a mistake on your part. You would have found all the information needed to settle the question which concerns us. It is a summary of the voluminous inquiries published by order of the English Parliament, on the state of agriculture and the condition of farming people. As I leaf through it at random, I find an extract from the most recent inquiry (1846). 179
The Chairman of the Inquiry is speaking to Mr Robert Baker, an Essex farmer, who works some 230 hectares.
Q. What is the standard diet of agricultural laborers?
A. They eat meat and potatoes. If flour is cheap, however, they do not eat potatoes. This year (1846) they are eating the best white bread. Mr Robert Hyde-Gregg, for some twenty years one of the biggest manufacturers in Great Britain, [p. 102] for his part gives the following answers to questions on the situation of laborers in manufacturing.
Q. When you say that the laborer in manufacturing districts eats a lot of potatoes, do you mean by this that, as in Ireland, potatoes are the people's basic food, or are they consumed along with meat?
A. In general the dinner consists of potatoes and pork, while the breakfast and supper consist of tea and bread.
Q. Do the workers generally have pork?
A. I can fairly say that they all eat meat for dinner.
Q. During the time you have been observing things, has there been a great change in the diet of industrial laborers? Have they replaced oat flour with wheat flour?
A. This change has certainly taken place. I remember that in all the workers' houses one used to see flat cakes of rough bread hung up; there is nothing like that now.
Q. Today's population, then, as far as bread goes, has improved its diet, using wheat flour rather than oat flour?
R. Yes, absolutely.
Now I will present some evidence relating to workers in France and England.
Mr Joseph Cramp, expert land evaluator in the country of Kent, and a farmer for forty four years, came to France and took the trouble to make himself familiar with the condition of French agriculture. He was interviewed as to the condition of farm laborers in Normandy.
Q. Following your observations of the conditions of the workers in [p. 103] Normandy, do you think they are better dressed and better fed than the workers in the Isle of Thanet, 180 where you live?
A. No. I have been in their homes, and I have seen them having their meals, which are such that I hope never to see an Englishman sitting down to such bad food.
Q. The workers in the Isle of Thanet eat the best white bread, is that not so?
Q. And in Normandy the farm workers do not eat it?
R. No. They were eating bread whose color came close to that of this inkwell here.
Q. How many hectoliters of wheat 181 are produced per hectare in the Isle of Thanet?
A. About twenty nine.
Q. Having lived and farmed in the Isle of Thanet for so long, can you say if the condition of farm laborers has improved or worsened since you first got to know the region?
A. It has improved.
Q. In every respect?
Q. Do you think then that the workers are better dressed and educated?
A. Better fed, better dressed, better educated.
You see then that the condition of the agrarian populations in England is infinitely superior to that of ours. These people do not own the land. The proprietors of the land in Great Britain [p. 104] are some thirty five or thirty six thousand souls, mostly descendants of former conquerors. 182
Yes, the land in England belongs to the aristocracy and the English people pay two or three billion a year to that haughty and idle caste for the right to work the soil.
It is true that this is rather expensive. So the English have begun to cut back on the landlords' share 183 by abolishing the Corn Laws. 184 You will see, however, that even at this oppressively inflated price, the English have found it really advantageous to maintain their aristocracy, while we committed the sin of hastily eliminating ours.
Oh, dear me!
Let me finish. How have the English succeeded in drawing from their soil much more and far better produce than we have from ours. The answer is in perfecting their agriculture, in making it undergo a series of progressive transformations.
British landowners successively replaced their small farms, insufficiently capitalized, by larger farms [p. 105] much more heavily capitalized. It is thanks to this progressive substitution of factory-like agriculture for the small workshop approach to farming that progress was achieved. 185 The inquiry carried out by MM. Mounier and Rubichon, gives the following information on the distribution of the British population:
Families working in agriculture, 961,134
Families working in industry, commerce etc., 2,453,041
These 961, 134 families employed in agriculture supplied some 1,055,982 able bodied workers to cultivate, 13,849,320 hectares, yielding an output of 4,000, 500,000 francs.
In France agricultural output yielded only 3,523,000,861,000 francs in 1840, yet it was worked by a population of 18,000,000 individuals yielding an active workforce of five to six millions. This means that the output of a French farm laborer is four to five times less productive than that of one in England. You must understand now why our population is less well fed than that of Great Britain.
You are taking no account of the enormous tribute the English farmers pay to the aristocracy.
If as the statistics show, the farming population of England is better fed than ours, despite the tribute paid to the aristocracy, is this not incontestable proof that by producing more they also receive more? [p. 106]
This is clear.
And if it is true that owing to the care of the aristocracy, British agriculture has made immense and rapid progress; if it is true that it is because of this aristocratic management that a farm worker produces more and earns more in England than in France, has not England been right to preserve her aristocracy?
Yes, but at least the French peasant is the owner of the land.
Is it better to earn ten on your own land or twenty on land belonging to some unknown third party?
It is better to earn twenty anywhere.
Very well! Is it really the case, however, that there is an indispensable link between these two things, the preservation of the aristocracy and the progress of British agriculture? Is it not likely that British agriculture would have achieved even greater progress if England had got rid of its aristocracy, as we have got rid of ours. Has not French agriculture made progress since '89?
I do not think it has. Mounier and Rubichon say very strongly that instead of progressing it has regressed. A field which yielded 10 before 1789 now yields only 4. Perhaps they exaggerate the [p. 107] harm. Note, however, one incontestable fact: if the volume of subsistence foods produced by a given labor force has not declined, the quality of the overall mass of subsistence foods has fallen. It is notorious that the consumption of meat has diminished. In Paris itself, this centre where all the productive forces of France converge, they eat less meat than in 1789. According to Lavoisier, 186 the average consumption in Paris (including fowl and game) was then 81.5 kilos per head; by 1838 it had fallen to 62.3 kilos. The fall was no less marked in the rest of the country. According to old documents quoted in the Imperial statistics, the average consumption of each inhabitant of France (excluding cooked meats) was: in 1789, 13.13 kilos; in 1830 only 12.36 kilos; and in 1840, 11.29 kilos. The consumption of an inferior meat – pork – has on the contrary, grown. Today per capita consumption is 8.65 kilos per head.
To sum up, the consumption of meat in France is at only 8.65 kilos per head.
In the USA the average is 122 kilos.
In England it is 68 kilos.
In Germany it is 55 kilos.
Moreover, it is probable that our consumption will go on falling constantly, if our farming system stays the same, for the price of meat goes on rising gradually.
If we divide France into nine regions, we find that the price of meat has risen between 1824 and 1840: 187
In the first region, the North West, by 11%
In the second region, the North, by 22% [p. 108]
In the third region, the North East, by 28%
In the fourth region, the West, by 17%
In the fifth region, the centre, by 19%
In the sixth region, the East, by 21%,
In the seventh region, the South West by 23%
In the eighth region, the South by 30%
In the ninth region, the South East by 38%
Well you know that the retail price of meat is the surest index of a people's prosperity.
I agree with you here; but show us once again, very clearly, the connection which exists, according to you, between the deterioration of our agriculture and our law of the equal division of inherited property. How does the one lead to the other?
I have forgotten one other matter, namely that our soil is naturally more fertile than the British soil…But to answer your question, let me note that England owes the stability of its farming to the care taken by the aristocracy and to the laws which in that country ensure, at least in part, freedom of inheritance. 188
Freedom of inheritance you say. What about entails and the rights of the first born?...
They are perfectly free in that no law obliges the father of the family to establish them. It is tradition which decides and that tradition is based on economic necessities.
Here is what entails consist in.
At the time of the marriage of his eldest son, usually, or at any other time convenient for him to choose, the owner of the land bequeaths his property to his eldest grandson, or in the absence of a grandson, his eldest granddaughter. If at the time of the entail, the owner has a living son and living grandson, he can extend the entail further and designate his great-grandson or great-granddaughter but his right covers only the first unborn generation. In Scotland there is no such limit and a proprietor can entail his wealth in perpetuity. 189
The act of entail once accomplished, the owner and his living inheritors lose the right to dispose freely of the land; they are now only its usufructuaries. They cannot burden it with mortgages, nor sell it whole or in part. An entailed property can be neither seized nor confiscated. It is regarded as a sacrosanct legacy which no one is allowed to deflect from its intended purpose.
At the age of twenty-one the designated beneficiary for whom the entail has operated can break it, but does not commonly do so except to renew it, adding to it certain clauses necessitated by the current situation the family finds itself in. In this way properties are handed on, whole and intact, from generation to generation.
Now let us consider what purpose entails have.
They bestow on farms what our own farms lack, namely stability. In France perspectives are only for a lifetime; in England everything is reckoned in the long term. Our farms [p. 110] are exposed to endless fragmentation by being shared out; British farms run no risks of that kind.
Does this risk really have the importance you give it? It matters rather little whether the land is more or less split up, provided it is well farmed.
Ask the farmers and they will tell you that all farms have to be of a certain size to be worked with maximum economy. This is easy to understand. You can employ the most advanced methods and tools only when the farming is on a very large scale. In England ordinary farms are of three hundred and fifty or four hundred hectares. These farms are heavily capitalized. In France the number of these large farms is extremely limited.
He who sets up some agrarian enterprise does not know whether it will be fragmented and destroyed when he dies. There is nothing he can do to prevent it from fragmentation. Has not the law limited his right to bequeath? He is therefore not very enthusiastic about heavy investment in agriculture. Is the ordinary farmer more so? In France the leases are very short-term; it is a marvel if you see one of twenty one years. I do not need to explain to you the reason for these short-term leases: you will have guessed it! When ownership itself is short-term, it is not possible to arrange long leases. When, however, the farmer himself [ p. 111] occupies his land for only three, six or nine years, he invests the least possible capital; he economizes on fertilizer, he does not put up fencing, he does not renew his equipment; and on the other hand he exhausts the soil as much as possible.
In England the stability which the system of entails has given to agriculture, has brought stability also to rental farming, in the form of long-term leases. So the farmers, confident of reaping themselves what they have sown, generally apply their economic efforts into making the land fertile.
Yet the farmer is subject, in England as in France, to the tyranny of landowners.
Yes, but it is a very gentle tyranny. In England there are farmers who have held the same farm, father and son, from time immemorial. Most have no lease, so strong is the confidence which the landowners inspire in them. This confidence is rarely misplaced; only rarely will an owner decide to expel a farmer with age-old links to his family. There are, nevertheless, in England as elsewhere, different kinds of tenure. In the North a system of leases covering the life-times of three persons is commonly used. The farmer designates himself, and likewise two of his children, and the lease runs until the death of the last one of the three. The average duration of these leases is estimated at fifty four years. When one of the designated children has just died, the farmer ordinarily is authorized to substitute another name [p. 112] for that of the dead person, and thus to prolong the duration of the lease.
When the lease has a fixed term, its duration is commonly determined by that of the crop rotations. For rotations of six and nine years, it is nineteen years but it is rare for the lease not to be renewed.
The sizeable fluctuations to which the price of wheat has been exposed for some time, have given rise to a new form of lease. I want to speak about variable leases, leases varying from year to year according to ups and downs of the cereal markets. A farm will be rented for example for the value of a thousand quarters of wheat; if in 1845 the price of wheat is fifty six shillings, the farmer has to pay two thousand eight hundred pounds sterling in farm rent; if in 1846 the price rises to sixty shillings he will pay three thousand pounds sterling. The average price of wheat in the county is used to calculate these values.
We can see that farmers can safely risk their capital in enterprises so solidly based. We can see too that capitalists will willingly lend to them. The big farmers manage to borrow at four per cent and sometimes even at three. One runs in fact almost no risk investing one's capital in the soil. Farms are not exposed to losing their value by fragmentation or sale intended to end their undivided ownership. Farmers and landowners being established, so to speak, in perpetuity, provide lenders with maximum guarantees. Hence the low rates of interest in agriculture; hence also the considerable numbers of banks established to serve as intermediaries between capitalists and entrepreneurs in the agriculture industry, 190 land owners or farmers. [p. 113]
The English people, endlessly presented to you as deprived of any ownership of the land in Great Britain, in reality possess far more landed wealth than the French people themselves. If they do not use their capital to buy actual land, they do invest it in the land itself whose productivity they thus augment.
In France on the contrary people buy the land but they invest scarcely any capital in it. It could not be otherwise. One does not happily lend to a small farmer whose existence is only half assured for a few years; one even hesitates to lend to the small proprietor whose tiny plot of land may, from one day to the next, be split up yet again between a number of inheritors. Add to this the costly formalities, the delays and insecurity of mortgage lending and you have the explanation of the high interest rates in agriculture.
Yes, usury is gnawing away at our countryside.
Usury perhaps! 191 Examine however the composition of the ten or fifteen per cent which our farm people pay to the usurers, weigh up the risks of loss and the expenses involved and you will be convinced that this usury is in no way illegitimate. You will be convinced that in respect of the extent and the likelihood of agricultural risk, the interest on loans made to agriculture is not in any way worse than the interest on ordinary loans. Since the agricultural banks which people are so keen on will not eliminate these risks, they will contribute only feebly to bringing down the rate of agricultural interest. [p. 114]
So what must be done then to restore to our farming lands the security they have lost? Should we re-establish entails?
God forbid! We must first of all restore to owners the right of disposing freely of their property. This way we will slow down the dividing up of land and give farms a degree of that precious stability which they are lacking today. Capital will then flow more readily into agriculture and its price will fall. If at the same time one rids the soil of the heavy taxes which afflict it and if one improves our mortgage arrangements, if we free our industrial and farming associations from the shackles which Imperial legislation has fastened on them, we will soon see a veritable revolution at work in our agriculture. Numerous companies will be established to develop the land as happened for the operation of the railways and mining, etc. Now since these associations have an interest in being established for the long term, the cultivation of the land will achieve an almost unshakeable stability. Ownership of the land, once it has been divided into tradeable shares 192 will be exchanged and divided without farming being under the slightest threat. Agriculture will be established in the most economic way possible.
Yes, applying the principle of Association to agriculture will put an end to our woes.
Perhaps we do not understand association in the same [p. 115] way. 193 Whatever may be the case I think that the future of our agriculture and of our industry belongs to the anonymous limited company. 194 Outside this form of development, at once flexible and stable, I see no way of keeping the effort of work always proportionate to the resistance of nature. While we have been awaiting the setting up of such an arrangement, we have been under too much pressure to have done with the old institutions. By destroying entails hastily, by then hindering the establishment of farming companies, 195 we have left agriculture to all the miseries of fragmentation. Production carried out in progressively smaller farms 196 has meant retrogression rather than progress. The labor of the farm worker has become less and less productive. While the English worker, aided by machinery perfected by the large agricultural sector produces five, the French worker produces only one and a half, and the greater part of this feeble output goes to the capitalists who risk their funds in our poor "agricultural workshops" .
This is the explanation of the poverty which is gnawing away the French countryside. This is why we are threatened by a new Jacquerie. 197 Do not attribute this Jacquerie to socialism, attribute it rather to those miserable law makers who while decreeing with one hand equality of land ownership, hindered with the other the formation of industrial companies 198 and heaped taxes on farming. These are the guilty men!
Perhaps we will succeed in avoiding the catastrophes which such lamentable errors prepared the way for, but we will have to hurry. From day to day the harm gets worse; from day to day France's situation gets closer to that [p. 116] of Ireland. 199 But our peasants do not have the forbearance of the Irish peasants…..
Ah! We live in very sad times. The countryside is rotten.
Whose fault is it, if not that of the legislators who have attacked the stability of property and the sanctity of the family? The Socialist preachers can attack these two holy institutions as much as they like, they will never harm them as much as you yourselves did, by inscribing in your Legal Codes the right to an inheritance.
The right to make one's will is limited in France, mainly by Articles 913 and 915 of the Civil Code.
Art. 913. Gifts, either by way of acts between living persons, or by will and testament, may not exceed half the wealth of the benefactor if he has one living child at the time of his death; a third if he has two [p. 93] living children; a quarter if he has three or more children.
Art. 915. Gifts, either by way of acts between living persons, or by will and testament, may not exceed half the wealth of the benefactor if he has one or several ascendants on either the paternal or maternal side, or three quarters if he has ascendants on one side only.
It must be said in justification of the authors of the Civil Code, however, that they had had predecessors more illiberal still. By the law of 7th March 1793, the Convention had completely abolished the right to make a will. This law was conceived as follows:
One mode of Inheritance . The right to dispose of one's wealth, either following one's death, or between living persons, or by contractual donation in direct line of descent, is abolished: in consequence, all descendants will have an equal right to share the wealth of their ascendants.
The authors of the Civil Code were unanimous in recognising that [p. 94] this law had made a grave attack on paternal authority. Unfortunately they did not dare do more than half reform it.
Under the Roman Republic, the unlimited right to bequeath had been consecrated by the Law of the Twelve Tables. Divers successive attacks were made on this right, however. Justinian limited the disposable portion of the inheritance to a third when there were four children and a half when there were five or more.
In England, one can dispose in one's will of all one's real estate, without restrictions and of a third of one's movable property; the other two thirds belong to the wife and children. Landed property goes by right to the eldest son, only when there is no will.
In the United States the right of bequeathing is completely free. 200
Rotten usurer! To lend money to a scatterbrain who squanders his inheritance in advance on the young ladies of the Opéra, and, heavens above, at what a rate of interest! 201
So whom are you railing at?
At a damned money-lender 202 who has decided to lend a huge sum to one of my sons.
At what rate?
At 2% a month, 24% a year, no more nor less!
That is not very dear. Imagine if you were still [p. 118] in the flower of youth, strong and healthy. Next, imagine that the law categorically forbade lending at interest. The legal rate of interest is five per cent in civil matters and six in commercial matters. 203
Well it is precisely because the legal interest rate is five or six per cent that people should not be lending at twenty four.
Lending happens, however. And to be wholly truthful with you I will say that I think the law counts for a part of this twenty four per cent.
What? But does not the law authorize me to pursue this vile money-lender…. ?
This capitalist bloodsucker….
Who lends at above the legal rate. So this is the issue then. I will tell you what is going to happen. You are going to sue the money-lender with whom your son has allowed himself to get involved in order to anticipate his inheritance. The man will have to defend himself. The case will be judged and he will win for lack of sufficient evidence. But the proceedings will even so have cost him money. Moreover his reputation will have suffered a new blemish. All these are risks to which he would not be exposed if there were no laws limiting the rate of interest. Now a lender has to cover his risks.
Yes, but twenty four per cent? [p. 119]
If we consider how short the supply of funds is today, and how risky investments are, especially if the borrower is an habitué of Breda-Street , 204 and also how the regulatory system has inflated the cost of legal proceedings, we will find at the end of the day that twenty four per cent is not excessive.
You're joking. If that were the case, why should legislation have limited the legal rate of interest to five or six per cent?
Because the legislator concerned was a poor economist.
So you want usury to be permitted henceforth?
And you want labor to be handed over without mercy to the tyranny of capital?
On the contrary I want the rate of interest always to be as low as possible. That is why I urge lawmakers not to get involved in the matter.
But if you put no brakes on the greed of money-lenders, where in that case will the exploitation of heads of families stop?
But if the law does not limit the power of capitalists where will the exploitation of the workers stop? [p. 120]
So justify this anarchical and immoral doctrine of laisser-faire.
Yes, justify this "bankocratic" 205 and Malthusian doctrine of laisser-faire.
What a charming alliance….So tell me then, oh worthy and venerable conservative, did you not applaud the famous proposal of M. Proudhon, regarding the gradual abolition of interest?
I? I denounced it with the full force of my indignation.
You were wrong. You showed yourself to be utterly illogical in denouncing it. What did M. Proudhon want? He wanted, by means of government action, to reduce interest to zero. 206
This Utopian, however, was content to follow the early lead of your legislators. The only difference is that instead of holding himself to your legal limit of five or six percent, he demanded that the limit be lowered to zero.
Is there no difference, then, between these two limits? Certainly one can fairly say to people: you will not lend at more than five or six per cent. That is a reasonable, [p. 121] an honest level. To oblige them to lend for nothing, however, is that not plundering them, the….Oh, those thieving socialists!
It makes me very angry; but it is you who brought them into existence, those thieves. Socialism is only a radical exaggeration, though a perfectly logical one, of your laws and regulations. You decided, in the interest of society, that it should be the law which decides what happens to the estates left by heads of family. Socialism decides, in the interests of society, that it will be handed over by law to the community. You have decided that various industries shall be run and their workforce paid by the state; socialism has decided that all industries shall be run, and all their employees paid for, by the state. You decided that interest would be limited to five or six per cent; socialism decides that it shall be reduced to zero.
If you had the right to limit the rate of interest, that is to say partially to suppress interest payments , socialism has a perfect right, it seems to me, to suppress it totally.
This is incontestable. We have the right, by the very reckoning of our enemies, and we use it to the full. So in what way are we blameworthy?
That conservatives show consideration towards capital, is understandable. They live on it. They have felt themselves, however, the need to put limits on capitalist exploitation; 207 and they have protected themselves against the most wily and greedy people in their own gang. Capitalists have forbidden lending at very high interest by [p. 122] condemning it as usury. We in turn have arrived on the scene, however, and recognizing the inadequacy of this law we have undertaken to cut out the evil at its root and we have said: let the legal rate of interest henceforth be lowered from five or six per cent to zero. You protest! But if the capitalists have been able legitimately to demand the abolition of gross usury, why should we be committing a crime by demanding the suppression of petty usury? In what way is the one more legitimate than the other?
Your claims are perfectly logical. The only thing is you would no more be able to reduce the rate of interest to zero than the legislators of the Empire were able to lower it to a maximum of five or six per cent. You would end up like them causing it to rise further.
What do you know about it ?
I could invoke the history of all such laws setting a maximum rate 208 and prove to you consulting the evidence that each time people have wanted to limit the price of things whether labor, capital or goods, they have invariably pushed it up. I would like to get you to see, however, the why and wherefore of this rise. I prefer to explain to you how it comes about that interest should naturally be sometimes at ten, fifteen, twenty and thirty per cent, sometimes at five, four, three and two per cent and even lower; and how it arises that no ad hoc legislation can make it go below this.
Do you know what the price of things is made up of?
What you economists usually say [p. 123] is that the price of things is constituted by their production costs.
And in what do production costs consist?
Again according to the Economist, production costs are made up from the labor needed to produce a given merchandise and put it on the market.
Yes, but does the price at which things sell always represent exactly the cost of the labor required, that is their costs of production ?
No, not always. The costs of production represent what Adam Smith, rather wisely in my opinion, has called the natural price of things. Now this same Adam Smith notes that the price at which things sell, the market price , does not always coincide with the natural price. 209
Yes, but Adam Smith also notes that the natural price is, as it were, the central point around which the market price gravitates constantly, and towards which it is irresistibly drawn back.
How does that happen?
When the price of a good exceeds its production costs, those who produce it or who sell it realize an exceptional return. The lure of this unusual return [p. 124] attracts competition and to the extent that this competition mounts, the price falls.
Where does it all stop?
The limit is the costs of production. Sometimes also the price falls below these costs. In this latter case, however, production ceasing to yield a sufficient return, itself slows down, the market becomes depleted and prices rise again. Thanks to this economic gravitation, prices tend always and irresistibly, to attain their natural level; that is to say to represent exactly the amount of labor the merchandise has cost. I will have occasion to come back later to this law which is really the keystone of the economic edifice. 210
To resume: interest is constituted by the costs of production. The market rate of interest gravitates continuously round these production costs.
And from what, may I ask, are the production costs of the rate of interest made up?
From the labor costs and the risks of losses or damage, from which must be deducted…
From the labor costs and the risks of losses or damage.
This is what is not clear. [p. 125]
This will become clear shortly. First, what things does one lend?
Well, we lend things which possess some value.
Having a value means, as you know, being suitable for satisfying one or other of the needs of man. How do things acquire such a property? Sometimes they possess it naturally; sometimes it is bestowed on them by labor.
The value which nature imparts to things is free. Nature works for nothing. Only man has his labor paid for, or to put it better, exchanges his labor for that of others. Things are exchanged in terms of their production costs, that is to say according to the quantities of labor which they embody. 211 These quantities of labor are the foundation of their exchange value. The more one possesses things which embody labor, the richer one is: in fact the better one can satisfy one's needs, either by consuming these things or exchanging them for other consumable things. If we do not want to consume them right away we can either store them or lend them.
Those things which embody useful labor are known as "capital" .
Capital is accumulated by savings.
Two motives drive man to save.
The first arises from the very nature of man. Working life scarcely stretches beyond two thirds of the human lifetime. In his infancy and in his old age, [p. 126] man consumes without producing. He is therefore obliged to put aside a portion of his daily labor to bring up his family and to provide for his own subsistence in his old age. This is the first motive which leads man not to consume immediately the whole value of his labor, in other words to accumulate capital.
There is another motive as well. If need be, man can produce without capital...
Where do you see this happening?
Do you think the first men were born with a bow and arrows, an axe and a plane to hand? At a pinch we can produce without capital but not on any kind of scale. In order to create many useful things in return for little effort, one needs numerous, sophisticated tools; the production of certain things demands, moreover, a lot of time . Now the producer cannot survive during this time unless he gets an advance sufficient for subsistence, unless he has a certain capital at his disposal. The individual therefore has an interest in putting by some of his output, in accumulating capital, in order to be able to increase his production while reducing his efforts, in order to render his labor more fruitful.
But this second motive which leads to the accumulation of capital, is far less general than the first. It acts [p. 127] only on industrial entrepreneurs 212 and those who aspire to become such.
That is to say on everybody.
No! There are many laborers in manufacturing who do not dream of becoming manufacturers, 213 many farm laborers who have no ambition to run farms, many bank clerks who do not aspire to set up a bank. And as industry develops on a bigger scale, there will be fewer and fewer such aspirants.
In the present state of affairs, the manufacturing entrepreneurs 214 are already in a minority. If they were limited to just their own savings, to the capital they are able to accumulate themselves, this would be completely inadequate.
There is no doubt about that. If each manufacturing entrepreneur, 215 manufacturer, farmer or merchant found himself limited to his own resources; if he had at his disposal only his own capital, production would be endlessly stymied by lack of sufficient funds.
Whereas there would be in the hands of non-entrepreneurs, 216 a considerable quantity of inactive capital.
We have overcome that difficulty by means of credit .
Say rather that we should have overcome it. Unfortunately society has not yet been able to organize the supply of credit. [p. 128]
Credit has been organized since the beginning of the world. On the day when, for the first time one man lent to another some product of his own labor, credit was invented. Since that day it has never stopped developing. Intermediaries have set themselves up between the capitalists and the entrepreneurs. The numbers of these traders in capital , bankers or business agents, have multiplied enormously. Stock exchanges have been set up where one can sell capital wholesale and retail.
Ah, the stock exchange….that vile haunt of the pimps of capital, where they gather to negotiate their foul purchases. When are we going to close these temples of usury?
Then you had better close "le marché des Innocents" (The Innocents' Market), 217 too, since theft takes place there as well…Capital lending has been organized on a huge scale and it is destined to develop much further once it has ceased to be directly and indirectly hobbled.
Capital is accumulated in all its forms. In what form however is it accumulated most willingly? In the form of durable objects, not cumbersome and easily exchanged. Certain objects combine these qualities to a higher degree than all the others; I mean precious metals. The price of precious metals has consequently become the bench mark for all prices. When somebody lends his capital in a less durable and more readily depreciating form, the borrower has to be paid compensation for this difference in durability and tendency to depreciation. Furnishings and houses [p. 129] are let out more expensively than a sum of money of the same value.
When someone lends capital in the form of precious metal, the price of the loan takes the name interest, when the loan is transacted in another form, when people are lending land, houses, furniture, the price is called rent. 218
Interest is therefore the sum we pay for the use of a certain quantity of labor accumulated in the most durable form, the least inconvenient and the most freely exchangeable.
Sometimes this use of capital costs more, sometimes less, sometimes it is free and sometimes the capitalists even pay a premium to those to whom they entrust their capital.
Are you joking? Wherever can lenders be seen paying interest to their borrowers? The world would be upside down!
Do you know on what conditions the first deposit banks which were established in Amsterdam, Hamburg and Genoa took in capital deposits? 219 In Amsterdam the capitalists first of all paid a premium of ten florins when an account was opened for them; next they paid an annual custody fee of one per cent. Moreover the various monies at that time being subject to sizeable depreciations, the bank levied a variable charge on the sum deposited. In Amsterdam this charge was commonly 5%. Well, despite the harshness of these conditions, the capitalists preferred to entrust their funds to a bank, rather than keeping them or lending them directly to people who had need of them. [p. 130]
At that time interest was less.
That is right. Well, as in all eras, the man who has accumulated capital has to engage in a certain supervision and to run certain risks if he looks after it himself; since it can happen that it is less trouble and he runs fewer risks if he lends it, interest can therefore, at any time, fall to zero or even below zero.
You also understand, however, that if this negative part of the costs of production were to become very substantial; if holding capital were subject to very great risks, such as a lack of security or excessive taxation; if lending too offered only inadequate security, accumulation would come to a halt. People would stop saving their funds if they could no longer count on consuming them themselves, at least for the most part. Man would start living from day to day, ceasing to care for his old age and for the future of his family, without concerning himself any more with perfecting or expanding his production. Civilization would regress rapidly under such a regime.
The weaker the negative part of interest, the more powerful is the stimulus which drives man to save.
Let us have a look now at the positive part of interest.
This latter represents labor, losses, and risk.
If you go to a certain amount of trouble, if you experience certain losses, if you run certain risks in [p. 131] the keeping of your own capital, you are routinely obliged to take even more care, to sustain even more damage and run even more risks if you lend it.
In what circumstances are you, as a capitalist, disposed to lend out funds?
It is when you yourself have no use for them at present. You lend money willingly until the time comes when you need it yourself. Two borrowers, two men with a present need for capital, approach you: with which one will you deal? You will choose, will you not, the one who gives you the better financial and moral guarantees, the richer and more upright of the two, the one who will reimburse you the more reliably ? Unless, however, his competitor happens to offer you a higher price, in which case you will weigh the difference in risk and rates offered and then decide. If you go for the second, it will be because the better rate seems to you to balance and go a little beyond balancing, the difference in financial and moral guarantees.
Thus the function of interest payments is to cover risks.
You lend your capital for a pre-arranged period; but are you quite sure you will not need it during this period? Could not some accident come your way obliging you to seek access to your savings? Does it not also happen, rather frequently, that we lend funds which we need ourselves? In the first case the harm is only potential; in the second it is real; but whether real or potential, does it not require some payment?
Interest serves therefore to compensate for such losses. [p. 132]
You keep your wealth in a safe, or a barn or elsewhere. If you lend it out, you will have to go to some trouble, that is do a certain amount of work, moving it and having the loan recorded, as well inspecting the use to which the loan will be put. These tasks must be paid for.
Interest therefore serves to pay for this labor.
A premium serving to cover risk, a compensatory payment to cover losses, a cash sum to pay for work done: such are the positive elements in the production costs of interest payments.
These three elements appear, in different degrees, in all loans made at interest.
We would suppress them if we socialized credit. 220
Really? Are there any risks? If you are a lender you can do as much as you like, whether you are banker, a financial agent, a supplier of capital, or a saver, but you will still always be at risk when you lend.
1.You are dealing with people of absolute integrity and perfect knowledge;
2. You are dealing with people whose work is not exposed, directly or indirectly, to any chance catastrophe.
Short of this, you are running risks, and people will have to pay you a premium to cover them.
I agree; but if industry were less [p. 133] risky, this premium could be considerably reduced.
Yes, considerably. So rather than setting up commercial banks, study the real causes which make industry a risky undertaking and study also the causes which change a population's morality or lessen its knowledge.
This is a point of view which seems to me rather novel. Interest rates can be lower, then, in a country which has high standards of morality and practical knowledge than in a country where these qualities are scarce.
Say rather that they must be lower. Do you not lend more willingly to an honest man than to some fellow who is half rogue?
That goes without saying.
Well what you do, everyone else does too. The rate of interest rises in proportion as morality declines. It also rises as knowledge is lessened or is mistaken. Take these economic maxims to heart and know how to apply them apprpriately.
The risks which undoubtedly constitute the most considerable element in the costs of production of interest, can fall very significantly indeed, but I doubt whether they can vanish completely. [p. 134]
If memory serves me well, one of the notables of the School of Saint-Simon, M. Bazard, thought quite the opposite. 221
You are muddling things. Here is what M. Bazard wrote in his preface to the French translation of Bentham's Defense of Usury : 222
"…It is permissible to conclude that interest, as representing the rent accruing to the tools of production, has a tendency to disappear completely, and that of the elements which compose it today, the insurance premium is the only one which has to remain, while itself diminishing, because of progress in industrial organization, as compared to solely those risks which can be regarded as beyond the foresight and wisdom of human beings" . 223
Like M. Bazard, I doubt whether the risks of lending can ever disappear completely; for I do not think we can ever succeed in eliminating all the accidents, natural or otherwise, which threaten capital lending. Those who use capital, those who risk its destruction, will always have to pay an insurance premium to cover this risk.
But a mutual benefit insurance company….
No such company could prevent real risks from falling on people. You lend money to a farmer whose work-sheds may [p. 135] be destroyed by a fire or whose harvests may be ravaged by hail, or weevils, or some other thing. Consequently you are running various risks. These risks must be covered, otherwise, you do not lend.
But what if the farmer is insured against fire, hail and weevils?
He will still pay an annual premium on the capital you have lent him to increase his equipment and expand his cultivation; only instead of paying you he will pay it to underwriters. He will pay them less, since insurance is their speciality and it is not yours; but he will pay it to them. The parts of the interest he will pay annually to have the use of your capital are separate but they will remain nonetheless.
And the rent; do you agree with M. Bazard that it could disappear?
The rent, as defined by M. Bazard, is the portion of the production costs of interest representing compensation for loss and the payment of labor. 224
Can one relinquish capital, without experiencing any loss as a consequence of its absence? Yes, if one is sure of not having need of it until the time when it will be reimbursed, 225 or perhaps again of being able to recover it or realize it without loss. Will these two circumstances happen one day in an orderly, normal, [p. 136] permanent way? Will it turn out that all the capital used in production will be reimbursable or realizable without loss at the behest of the lenders?
I would not be so sure. We should note that all the capital employed or even employable in production, does not constitute all the capital at society's disposal. One generally lends only such capital as one does not need at present. Well it could turn out that we do not lend any other kind of capital. In this case we will not suffer any real loss by lending. Will it be feasible likewise to eliminate potential losses? Will the development of capital one day operate sufficiently perfectly that the exit of capital from production will routinely be compensated for, by capital entry? I could not say but this is possible. If the production and circulation of capital were not slowed and harassed by a thousand obstacles, we would soon be fully informed in this regard.
There remain the payments remunerating the labor involved in the loan, the trouble the lender has to go to in undertaking the loan. The work is real and, like all real work, merits payment.
The invention and proliferation of banks has resulted in the shifting and the division of this labour. The capitalist who sends his money to a bank now incurs very little inconvenience. On the other hand the bank which lends this money to an industrial entrepreneur 226 carries out serious work and accumulates very considerable costs. This work must be paid for and these costs must be covered. Who should [p. 137] pay? Obviously he who uses the capital, provided that he can pass them on to the consumer of the goods produced with the aid of the capital.
Can it be supposed that these costs will ever disappear? No! While they can fall as a result of the proliferation of specialist intermediaries working in the field of capital lending, they could not be eliminated. A bank has to pay and will always have to pay for its premises and pay its employees etc. There at least, we see one part of the production costs of interest that is indestructible.
This is most fortunate.
Why would you say this? Is not the society which consumes the products of labor also interested in their selling at the lowest possible price? Well, the interest on capital figures to a greater or lesser extent in the prices of all things. If it did not exist or were smaller, one could buy these things in exchange for a smaller amount of labor, because they would contain less labor.
The general affluence of populations grows in proportion as interest rates fall; it would be at its maximum if interest came to fall naturally to zero.
I grasp perfectly this analysis of the costs of the production of interest; I see that interest is composed of real parts which must be covered, without which….without which….
…the capitalists would not lend their capital, or if they were forced to lend they would stop accumulating it, [p. 138] they would stop saving . Now since capital, with the exception of precious metals and a few other goods, is essentially destructible, the material capital of society today – fields of wheat, pasturage, vineyards, houses, furniture, tools, provisions – would just disappear in a very few years if we did not take care to renew them by means of work and savings.
You have successfully conveyed my own thinking. I also understand that these different parts of the costs of production tend naturally to fall. But is the market rate of interest therefore always the exact representation of the elements or costs of production of interest?
The same holds for capital as for everything. When people are offering more capital than is demanded, the market rate of interest will fall. Even so, it could never fall much below the production costs of interest, for we would rather hang on to capital than lend it out at a loss. The price could rise above these costs when demand for capital is greater than its supply. If the disproportion becomes too marked, however, the capital attracted by the increasingly large premium offered to it, will soon come flooding into the market and equilibrium will reestablish itself. The market price will in this case converge once again with the natural price.
This equilibrium establishes itself on its own, unless artificial obstacles prevent its doing so. I will talk about these obstacles when we are considering the banks. 227 In the main, however, it is on the costs of production that we must make an impact if we have to act to lower [p. 139] the rate of interest in an ordered and lasting way. The fact is that these costs could not be lowered, either in whole or in part, by means of a law.
So here we are, back with the legal rate!
One can no more say to a capitalist: "You 228 will not lend your capital at above a maximum interest rate of five or six per cent" , than you can to a merchant: "You will not sell your sugar for more than a maximum price of eight sous a pound" . If at eight sous the merchant cannot cover the production costs of the sugar and remunerate his own labor, he will stop selling sugar. Likewise, if being subject to an interest rate maximum of five or six per cent, the capitalist is not covering the risks of the loan, nor the loss resulting from going a while without his capital, nor the work he had to put in to his lending, he will cease lending.
But they do not stop. My usurer…
Or if he continues to lend, will he not be obliged to add to the interest he is making, a premium for the extra risks he runs in breaking the law? This is just what your usurer has not failed to do. If there were no law limiting the rate of interest, he might have charged only twenty per cent or even less.
What? You think that the production costs of the interest on the capital lent to my son really amount to twenty per cent? [p. 140]
Yes, I think so. There are great risks in lending to the youthful customers of Breda Street. Will you not admit that these friendly discounters of the right to an inheritance do not supply moral guarantees of a very substantial sort. 229
All things considered, though, the laws against usury cannot have had really catastrophic effects. They are so easily evaded.
Do not be so sure! Many men find themselves in a situation such that they cannot borrow, short of paying heavy interest. Well, the law having banned so-called usurious loans, the people who conform religiously to the present law, whether it be good or bad, abstain from lending to these needy men. The latter are reduced to approaching certain individuals not burdened with these scruples, men who profit from being few in number and from the urgency of their clients' needs by raising the rate of interest yet again.
The law restricting the rate of interest establishes, you see, a real monopoly in favor of the least scrupulous lenders, and to the detriment of the poorest borrowers. It is thanks to this absurd law that the interlopers who lend money 230 or usurers bleed dry the workers or shopkeepers who incur short-term debts, or traders who have just experienced a disastrous loss, and many others.
Do you now understand that political economy takes a stand, in the interests of the masses, against this [p. 141] limitation on the right to lend, and undertakes the defense of usury?
Yes, I understand. I see that the law does not prevent usury and that, on the contrary, it makes it more bitter. I see that if this restrictive law were to be abolished, the most needy borrowers would pay smaller premiums to the lenders.
That would be an immense benefit to the poorest classes in society. Let us therefore demand the abolition of legal interest. It would be the best way of getting the better of the usurers and of putting an end to usury.
Exchange is even more hindered than lending and borrowing. The exchange of labor is subject to legislation on passports and workbooks 231 and to union law; 232 buying and selling of real-estate is subject to costly and oppressive formalities; the trade in goods is burdened, domestically, by various indirect taxes, notably by licensing duties, and externally by customs. These different infringements on the property of those who engage in exchange, result invariably in reducing output and disrupting the equitable distribution of wealth.
Ought we not, before that, finish examining the various aspects of external property? [p. 143]
We can think of labor as external property. The entrepreneur who buys labor does not buy all the worker's faculties and productive powers; he buys the portion of these which the worker separates from himself by the act of working. The exchange is not really concluded or closed until the worker, who has separated from himself a part of his intellectual and moral capabilities, has received in exchange, products (most commonly precious metals) likewise containing a certain quantity of labor. This is truly, therefore, an exchange of two external properties.
To be equitable, all exchange must be perfectly free. Are not two men who effect an exchange the best judges of their interest? Can a third party legitimately intervene and oblige one of the two contracting parties to give more or receive less than he would have given or received had the exchange been a free one? If one or the other reckons that the thing he is being offered is too dear, he will not buy it.
What if he is forced to buy it in order to live? What if a worker, pressured by hunger, is obliged to relinquish a considerable amount of labor in exchange for a very low wage?
This is an objection which will oblige us to follow a very long, roundabout route.
Admit, though, that the objection is a very strong one…it really contains the whole socialist case. The socialists have [p. 144] recognized, confirmed, that there is not and cannot be equality under the present arrangement for the exchange of labor; that the employer is in the nature of things stronger than the worker, so that he can always lay down the law to the latter and does so. Having clearly asserted this manifest inequality, they have sought the means of eliminating it. They have found two of these: the intervention of the state between seller and buyer of labor; and the Association of Workers which cuts out the private sale of labor. 235
Are you quite sure that the inequality of which you speak exists?
Am I sure of it? But the masters of political economy themselves have recognized this inequality. If I had the works of Adam Smith to hand…..
Here they are in my library.
Here is the page.
Give me your attention please:
What are the common wages of labour, says Adam Smith, depends every where upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.
It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long–run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.
Please listen to this, too:
We rarely hear, it has been said, of the combinations of masters; though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of [p. 146] Masters too sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen; who sometimes too, without any provocation of this kind, combine of their own accord to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions; sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing, but the punishment or ruin of the ringleaders. 236 [p. 147]
So there you have, is it not true, an eloquent condemnation of your system of free competition, from the pen of the very master of economic science? In the arguments over earnings, the employer is stronger than the worker – Adam Smith himself confirms it! After this admission by the master himself, what ought his disciples to have done? If they had truly possessed any love of justice and humanity, ought they not to have searched for ways to establish equality in the relations of employers and workers? Have they fulfilled this duty?...With what have they proposed to replace the wage earners, that ultimate embodiment of servitude, as M. de Châteaubriand has so aptly put it? 237 What do they propose in place of this iniquitous and primitive laissez-faire which builds the prosperity of the master on the ruin of the workers? What have they proposed, I ask you?
In fact they said they could do nothing against the natural laws which govern society; they have shamefully confessed their powerlessness to come to the aid of the workers. This duty of justice and humanity, which they have failed to recognize, has been fulfilled, however, by us socialists. In replacing the wage earners by Associations of Workers 238 we have put an end to the exploitation of man by man and to the tyranny of capital.
I…um! [p. 148]
Allow me first of all to make a simple observation. In the passage from Adam Smith which has just been cited, the subject is laws which repress unequally the employers' coalitions and those of the workers. Thank God, we do not have anything like this in France. Our laws treat all equally. There are no longer inequalities in France.
You are wrong. On the contrary, French law has established a flagrant inequality between employer and worker. To prove this to you it will be enough for me to read articles 414 and 415 of the Penal Code. 239
Art.414. Any coalition between those who give the workers employment, which is aimed at forcing down wages, unjustly and improperly, followed by an attempt at carrying this out or actually beginning to do so, will be punished by an imprisonment of from six days to a month, and a fine ranging from two hundred to three thousand francs.
Art.415. Any coalition, either attempted or initiated, on the part of the workers, which is aimed at bringing all work to a halt simultaneously, forbidding activity in a workshop, preventing people going there or staying there before or after certain hours, and in general, stopping, preventing or making production more expensive, will be punished by an imprisonment of at least one month and no more than three months. The ringleaders or instigators will be punished with an imprisonment of two to five years.
As you see, the employers can be prosecuted only when there is an unjust or improper move on their part to force earnings down; the workers are prosecuted [p. 149] purely and simply for attempting to form coalitions; moreover the punishments are monstrously unequal. 240
Has not the National Assembly reformed these two articles? 241
It would perhaps have reformed them were it not for the opposition of an economist. 242 In the meantime these articles remain in force and God knows what disastrous influence they exert on the price of labor. Remember the union of Parisian carpenters in 1845. The workers formed a union to obtain a rise of one franc on their wage, which at that time stood at four francs. The management combined to resist.
The union was never established.
On the contrary it was fully established. At that time when associations were explicitly forbidden, the employers of carpenters had obtained authorization for the setting up a Chamber of Syndics for the improvement of their industry; but in this Chamber of Better Business there was more concern with wages than with anything else. 243
So what do you know about it? 244
The discussions during the legal proceedings have clearly established the facts. The representatives of the workers addressed their remarks to the chairman of the carpenters' trade association in order to gain an increase in wages. The chairman turned this down after a long deliberation among the participants. The employers, however, were not [p. 150] prosecuted and in reality they could hardly be so. They had combined, truth to tell, but not to lower wages "unjustly and improperly" ; they had combined to prevent wages rising.
Which came down to exactly the same thing.
But the legislators under the Empire had not understood it thus. The employers were sent away absolved. The leaders of the workers' union were condemned, some to five years, others to three years of imprisonment.
Yes, this was one of the most deplorable condemnations which the annals of justice record.
If I am not mistaken the union resorted to blatant ill treatment. Certain workers ill treated fellow workers who had not wanted to go along with the union. But your theory of laissez-faire perhaps authorizes such procedures.
Much less than your theory does. When people say unlimited freedom, they mean equal freedom for everybody, equal respect for the rights of one and all. Now when a worker prevents another worker from working, by intimidation or violence, he is making an assault on a right, he is violating property, he is a tyrant and a plunderer and ought to be sternly punished as such. The workers who had committed this kind of offence in the case of the carpenters, were in no way excusable and it was right [p. 151] and proper to condemn them. But not all of them had been involved. The union chiefs had neither carried out nor ordered any violence. They were however more severely punished than the others.
The law will be reformed.
As long as it remains it will be an iniquitous law.
What? Even though it no longer upheld any difference between masters and workers?
Yes. What does Adam Smith say? He says the employers can make agreements with much greater ease than the workers and that the law can get them much less easily. 245 Now if the law strikes at four trades unions for every one association of the employers, is the law just?
In practice, the effect of this law is disastrous for the workers. The employers, knowing that the law restrains them only with difficulty , while it restrains the workers easily , are encouraged to raise and submit exploitative claims in the management of labor prices. Any law with respect to these unions, however equal we make it, therefore constitutes an intervention by society in favor of the employer. In the end, people were convinced of this in England and this law relating to unions, which had incurred the just condemnations of Adam Smith, was duly abolished.
Let us see though! Are unions legitimate or are they not? Do they constitute a fraudulent agreement or a proper one? That is the question. Well, on this question [p. 152] the opinion of our General Assemblies has never been in doubt. The members of our first Constituent Assembly and of the Convention itself, set their faces unanimously against any union, any agreement either on the part of the entrepreneurs or the workers. Chapelier, 246 a member of the National Convention, in one of his reports wrote the following sentence which has become famous: "It is absolutely necessary to stop both entrepreneurs and workers from combining over their alleged common interests" . 247 What do you think of that?
I think the most discerning specialist in criminal law would be hard put to find anything criminal in the action of two or more men coming to an understanding in order to secure an increase in the price of their merchandise; I think that in issuing laws in order to suppress this alleged crime, we encroach unjustly and harmfully on the property rights of producers 248 and workers.
I go further. In forbidding unions we are preventing agreements which are often crucial.
Have not the economists always regarded unions as harmful or at least as pointless?
That depends on the circumstances and on the way combinations are led. In order to have you see clearly, however, those circumstances in which a union can be useful, and how it must be led to yield good results, I am obliged to return to the fundamentals of the debate. You have asserted that no justice is possible under [p. 153] the wage-system; that the employer, being naturally stronger than the worker, must therefore naturally oppress him.
That outcome is not inevitable. There are philanthropic sentiments which moderate the excessive sharpness which private interests may display.
Not at all. I accept the outcome as inevitable and believe it to be such. We do not pursue philanthropy in the domain of business, and rightly so, for philanthropy would be out of place there. We will return to this issue later….
So you are of the opinion that the employer can always dictate to the worker and that therefore the wage system precludes justice.
I share Adam Smith's opinion.
Adam Smith said that the employer can oppress the worker more easily than the worker can oppress the employer; he does not say that the employer always finds himself necessarily in a position to lay down the law to the worker.
He identified a natural inequality which exists in favor of the employer.
Yes but this inequality can be absent. The situation may be such that the worker is stronger than the employer.
If the workers form a union? [p. 154]
No, without their combining. I will give you an example in a moment. Now, if inequality does not always come about may it not be the case that it never does ?
Good! You are coming over to the idea of the organization of labor. 249
God preserve me from that!
On my way here I passed by Fossin's boutique. 250 There were, in the display window, very beautiful sets of diamonds. On the pavement opposite an orange-seller was offering her wares. She had oranges of two or three grades and on one corner of her stall a packet of over ripe oranges which she was selling at a cut price.
What is this riddle about?
I would ask you to observe the difference between the two industries. Fossin sells diamonds, an essentially durable product. Whether or not a purchaser comes, the diamond merchant can wait without fearing that his merchandise will undergo the least deterioration. If the orange-seller, however, does not succeed in getting rid of her wares, she will soon be left without a single sound orange. She will be forced to throw her merchandise on to the waste heap. There is, certainly, a striking difference between the two kinds of industry. Fossin can wait a long time for buyers without worrying that his products will spoil, but the orange seller cannot. Does this mean that the orange-seller [p. 155] is more exposed than Fossin to purchasers laying down the law?
That depends. If the orange-seller does not take care to match exactly the quantity of her goods to the number of her buyers, she will be obliged to cut her prices or waste some of her oranges.
Well she will be doing very bad business.
So, will any orange seller who knows her trade carefully avoid loading herself with goods that she may not sell at a profitable price?
What do you understand by profitable price?
I understand by it the price which covers the production costs of the good including the natural profit 251 for the merchant.
You are not resolving the difficulty. In a year in which the orange harvest is superabundant, what will one do with the surplus if the traders demand no more than usual? Will the superabundant oranges have to be left to rot?
If more oranges are harvested, more will be supplied and price will fall. With falling price, demand will increase and the harvest surplus will thus find buyers. [p. 156]
By what proportion will it fall?
According to all the research gathered so far, we can assert the following:
When supply exceeds demand in arithmetic progression, price falls in geometric progression, and similarly when demand exceeds supply in arithmetic progression, price rises geometrically. 252
You will not be slow to spot the beneficial results of this economic law. 253
If such a law exists, must it not have on the contrary, essentially dire results? Suppose for example that the proprietor of orange groves normally harvests five hundred thousand oranges a year and can sell them at two centimes a piece. This gives him a sum of ten thousand francs with which he pays his workers and his own labor as director of the farm, covering in a word his production costs. A year of abundance comes along. Instead of five hundred thousand oranges he harvests a million. As a result he supplies twice as many oranges to the market. In line with your economic law, the price falls from two centimes to half a centime, and the unfortunate owner, victim of abundance, receives only five thousand francs for a million oranges, when in the previous year he had received ten thousand francs for half that number. [p. 157]
Certainly a super abundance of goods is sometimes harmful. We had better ask our farmers if they prefer a year of abundance or an average year, a year where corn is at twenty two francs or a year when it falls to ten francs. 254
These are economic phenomena that can be explained only by the law which we have just formulated. It does not follow at all from that law, however, that the doubling of a harvest must lead to a three quarters fall in price, since demand always grows more or less insofar as price falls. Let us go back to the example of the owner of orange groves. At two centimes a piece this owner would cover the production costs of five hundred thousand oranges. If the harvest were to double, production costs would not increase in the same proportion. Nevertheless they would increase. You need more labor to gather a million oranges than to gather five hundred thousand. Moreover the owners will be forced to pay this labor more because wages always rise when the demand for labor increases. The costs of production will therefore rise by half perhaps. They will climb from ten thousand to fifteen thousand francs. To cover this last sum, which represents his production costs, the proprietor will have to sell his harvest of oranges at a rate of one and a half centimes each.
The question is whether, even if he succeeded in selling five hundred thousand oranges at two centimes each, he would succeed in selling a million at a centime and a half. Would a lowering of price by half [p. 158] a centime be enough to bring about a doubling of demand?
If the reduction in price is not sufficient, our proprietor will have to lower his price further for fear of not selling some of his merchandise. This, however, will mean he faces losses. If he sells only nine hundred thousand oranges at a centime and a half, he will not cover his costs; if he sells a million at a centime and a quarter, he will lose even more.
Experience is the only guide in this case. A given drop in price does not increase the demand for all goods equally. A fall by half in the price of sugar, for example, can double consumption. A fall by half in the price of oats or buckwheat will occasion only a weak expansion in demand for these two products. In a year when the harvest exceeds customary expectations, it is therefore hard to know whether it is better to increase supply in line with the increase in the harvest, or to hold back part of the output in order to maintain the price.
And if the commodity is not conservable, it will be advantageous to let it go to waste, therefore.
Yes, or what comes to the same thing economically, to distribute it gratis to people who could not have bought it at any price. There are very few goods, however, that one cannot conserve in one form or another.
If you still have some doubt about the economic law I have just indicated, look at what happened recently in the grain trade. In 1847 our grain harvest was in deficit; instead of [p. 159] gathering sixty million hectoliters of wheat we harvested only about fifty million. 255
You know what effect this harvest deficit had commercially. From twenty or twenty two francs, its normal price level, wheat rose to forty or fifty francs. The following year, on the contrary, the harvest was abundant, yielding ten or twelve million hectoliters more than usual. From forty or fifty francs, price fell then by successive stages to fifteen francs, and in certain areas as low as ten francs. In the first of these two years, a fall in supply of a quarter led rapidly to a doubling of price; in the second a rise in supply of a quarter drove price successively down to a half of its normal level. 256
The same law regulates the price of all goods. The only thing is, we must always take good note when we are studying this law, of the increase in demand which results from a fall in price and vice versa.
If a slight fall in supply can lead to such a sizeable increase in price, I am beginning to understand a fact that until now had remained very obscure to me. At the end of the last century there was a famine in Marseille. The price of wheat had risen very high… but not high enough for the liking of certain merchants who undertook to make it rise further still. Consequently they thought about throwing part of their supplies into the sea. This happy idea was hugely profitable for them. But a child had witnessed their impious and criminal action. His young soul reacted [p. 160] with profound indignation. He wondered what this society could be in which it proved useful to some to starve others, and he declared everlasting war on a civilization which gave birth to such abominable excesses. He devoted his life to putting together a new form of Organisation… This child, this reformer, was, as you know, Fourier. 257
The anecdote may be true since this happens often in years of famine as also in years of plenty; but for me this proves only one thing: that Fourier was a very bad observer.
Fourier saw the effect but he did not see the cause. At that time purchases of foreign wheat were encumbered by the difficulty of communication and also by the Customs regulations. 258 So the domestic suppliers of wheat enjoyed an effective monopoly. To render this monopoly more fruitful still, they did not put on to the market, did not put on sale , more than a part of their output. If the law had not interfered in their activities, they would have kept the rest in the warehouse, for wheat is one of those goods which can be stored for a very long time. Unfortunately there were at that time laws against monopolists. These laws forbad merchants to keep in store more than a certain quantity of foodstuffs. Faced with the alternative of putting all their wheat on the market, or destroying some of it, they often found it more advantageous to [p. 161] to adopt the latter option. It was barbarous, it was odious if you will, but whose fault was it?
Under a regime of complete economic liberty nothing like this could happen. Under this regime, the price of all goods tends naturally to fall to the lowest level possible. Indeed the very fact that a small difference between the two levels of supply and demand, leads to a sizeable difference in price, means that equilibrium must necessarily establish itself. As soon as the supply of a commodity is not sufficient in respect of demand, price rises with such rapidity, that it is soon found very profitable to bring an additional amount of that commodity to the market. Now men being naturally on the lookout for all business which yields them some advantage, the various competitors combine to fill the gap.
As soon as the deficit is closed and equilibrium re-established, the flows stop of their own accord; for prices tending to fall progressively as supplies increase, it does not take long for suppliers to be making losses.
Thus if producers or merchants are left completely free to take their goods where the need for them is felt, supplies will also always be as closely proportionate as possible to the requirements of consumption; if on the contrary, in one way or another there are attacks on freedom of communication, 259 if merchants are harassed during the free exercise of their industry, it will take a long time for equilibrium to be reached, and in the interval the leading producers in the market will be able to realize huge returns, at the expense of the unfortunate consumers. [p. 162]
Let us note again that returns increase all the more with people's increasing inability to go without the commodity. Let us suppose that a company gains a monopoly over the sale of oranges in a country. If this company takes advantage of its monopoly in order to reduce by a half the quantity of oranges supplied compared to previously, in the hope of increasing the price fourfold, demand will likewise decrease. The gap between supply and demand still remaining in consequence very small, the market price of oranges will not be able to rise much above the natural price.
It will be different if a company manages to grab a monopoly of the production or sales of cereals. Wheat being a commodity of primary necessity, a diminution of a half in supply, and consequently a progressive rise in price will occasion only a slight contraction in demand. Such a fall in supply which would make the price of oranges rise only very little would result in a doubling or tripling of the price of wheat.
When a commodity is an absolutely prime necessity like wheat, demand shrinks only with the loss of part of the population or the draining away of its resources.
In brief, in certain circumstances a given commodity whose price could not rise very high in ordinary circumstances, suddenly acquires uncommon value. For example, let's transport an orange seller into the midst of a caravan which is crossing the desert. At first, [p. 163] she has to sell her merchandise at a modest price for fear of not selling anything. But, water becomes scarce and immediately the demand for oranges doubles, trebles, quadruples. The price rises progressively as demand increases. It is not long before it exceeds the resources of the less affluent travellers and threatens the resources of the richest travelers: in a few hours the worth of an orange can climb in this way a million times. If the orange seller, herself suffering from thirst, reduces her supply as her own need becomes more urgent, a point will come when the price of oranges exceeds all the available resources of her companions in the caravan, be they all nabobs.
By observing carefully this economic law you will be explaining to yourself a host of phenomena which until now probably have eluded you. You will know precisely why producers, in certain areas, have always aimed at obtaining exclusive privilege or monopoly with the respect to the sale of their products; why above all they show themselves very keen on monopolies which affect goods of primary necessity; why in a word these monopolies have been immemorially the terror of populations.
I now return to my orange seller and to Fossin.
Thanks to the special nature of his merchandise which is durable, Fossin can, without too much inconvenience, augment [p. 164] his supply of precious stones beyond the needs of the moment. Nothing forces him to release the surplus immediately. The orange seller finds herself in a very different situation. If she has bought more oranges than she can sell at a worthwhile price, she lacks the ability to hold the surplus indefinitely in reserve, since these oranges are subject to decay. By putting her whole stock on sale, however, she is at risk of lowering the price of oranges to the point of losing even the value of this surplus. What will she do therefore? Will she destroy this surplus with which she has unwisely burdened herself? No! She will sell it outside its normal market, or perhaps wait for some of her oranges to be slightly spoiled so that she can sell them to a particular group of purchasers, in such a way as not to compete with the rest of her supply. This explains those little piles of semi-spoiled oranges on the corner of the sellers' stalls.
What does it matter to us?
You will soon see. These piles of fruit are more in evidence the less the merchants understand their business, or when the consumption of oranges is subject to stronger fluctuations. We would see fewer of them encumbering the stalls, however, if the sellers knew exactly how to proportion their purchases to their sales, and also if consumption were never subject to sudden variations. If conditions were like that, the orange sellers would always be able, like Fossin, to [p. 165] balance their supply to demand, without experiencing losses; they would stop selling part of their output at a loss for fear that the surplus would spoil, or wait until that surplus is ruined to sell it off dirt cheap.
Well, if you examine closely the situation of workers with respect to the entrepreneurs of industry, you will find it perfectly analogous to that of orange-sellers with respect to their buyers.
If you examine likewise the situation of entrepreneurs with respect to workers, you will find it absolutely the same as Fossin's with respect to their clientele.
Labor indeed is an essentially perishable commodity, in the sense that the worker, quite lacking in resources, risks perishing in a short space of time if he does not succeed in selling his goods. Thus the price of labor can fall to an excessively low level at times when the supply of labor is sizeable and when the demand for it is weak.
Fortunately charity intervenes at this point by removing from the market in order to feed them for nothing, a section of the workers who are offering their labor unsuccessfully. If the charity is insufficient the price of labor continues to fall until part of the labor unsuccessfully offered, perishes. Then equilibrium starts to establish itself again.
The entrepreneur who offers wages to the workers [p. 166] is not obliged, at least usually, to hurry himself up to the same degree. When labor is scarce on the market, the entrepreneur can hold in reserve some of these wages, and like Fossin, proportion his supply to demand.
There are, however, exceptions to this rule. It sometimes happens that entrepreneurs have to accept lower profits, to concede to paying high wages in exchange for a smaller supply of labour, or, if I may use the common expression, to find the workers laying down the law to the management. This happens when they have a need for more labor than currently available on the market.
This is what happened in the British West Indies at the time of emancipation. 260 When slavery kept the workers on the plantations, the owners had enough ready labor to keep their holdings more or less profitable. When slavery had been abolished, however, a great number of slaves began to work on their own account. The numbers who continued to work in the production of sugar-cane proved insufficient. At the same time the laws of supply and demand made their influence felt on the price of labor. In Jamaica, where the daily work of a slave yielded scarcely 1 fr. in revenue, the same quantity of free labor was sold for 3, 5, 10 or even as much as 15 or 16 fr. 261 This absorbed the greater part of the indemnity paid to the planters. Soon, however, after very many owners had abandoned their plantations, because they were unable to pay these exorbitant wages, demand [p. 167] fell, while on the other hand, the appeal of these wages having drawn in labor from every country, even from China, supply increased. Thanks to this double movement which ceaselessly and irresistibly realigned supply and demand, the price of labor in the British West Indies has today reverted more or less to its natural level.
What do you mean by the natural wage level?
I mean by this, the sum necessary to cover the production costs of the labor. I will give you a fuller explanation of the situation in a subsequent discussion. 262
You see, in short, that entrepreneurs cannot escape the laws of supply and demand any more than the workers themselves can. When the equilibrium between them is adversely disturbed, when the balance of labor is in favor of the workers, the entrepreneurs can doubtless keep in reserve – usually at least – some portion of the wages they pay, and thereby prevent the wage climbing too high. They can imitate the jewelers who hang on to their jewels and precious stones rather than sell them unprofitably. In the end, however, a point comes when under threat of going bankrupt or of giving up their business they are forced to put the wages they have available onto the market.
When equilibrium moves against the workers, when the balance of labor favors the entrepreneurs, the workers are, even so, commonly forced to sell their labor, unless charity comes to their aid, or they succeed, one way or [p. 168] another in withdrawing the excess labor from the market. The situation is then worse than that of the employers when the latter are short of labor, because they are like the orange traders in that they sell a not very durable commodity, one which perishes easily or is easily destroyed.
If, however, well aware of the nature of their commodity, they had exercised sufficient prudence never to overload the market, and always to proportion their supply of it to demand, would not they, too, like the orange sellers who know their business, always sell their wares at a worthwhile price? 263
Is it indeed always possible to align supply and demand? Do the workers have the power to prevent crises from overturning industry? Can they also easily shift excess labor from one place to another, the way bales of merchandise are transported? This equilibrium, which would allow workers to sell their labor at a decent price, must it not, in the very nature of things, be incessantly disrupted to their disadvantage? And in this case, will not the price of labor, like that of any other perishable good, drop in the most frightful way?
The obstacles which you attribute to nature are more often than not artificial. If you study industrial crises more closely, you will see that they almost always have their origin in the restrictions which hamper production and the circulation of wealth, at various points around the world. 264 Look more closely also for the causes of [p. 169] the difficulties workers encounter in aligning their supply to the level of demand. You will find that these difficulties arise, in the main, either from the institutions of state charity, which encourage workers to increase in number constantly, or from the obstacles put in the way both of workers' easily associating with each other, and of the free circulation of labor, obstacles such as economic legislation on unionization, on apprenticeships, or labor workbooks and passports. Then there is civil legislation refusing foreigners equal rights with those of nationals. However weak the action of these artificial obstacles on the behavior of supply and demand may be, they are registered very substantially, even enormously, on the movement of prices, since the arithmetic progression on one hand, engenders a geometric progression on the other.
I have already shown you that the laws against unionization must necessarily and inevitably strengthen the employers' side in wage discussions. In the absence of these dire laws, moreover, the workers would always have ways – lacking to them today – to secure the prompt alignment of the supply of labor to the demand for it. Let me explain.
I return to the example of the seller of oranges, assuming that she sells some hundred oranges every day. One day the demand falls by half; no more than fifty are now purchased. If she persists on this particular day with her wish to sell a hundred, she will have to drop the price sharply and will experience a marked loss. It will be better for her to remove the excess fifty oranges from the market, even if the fruit set aside might perish during the day.
Well, the situation is exactly the same for those sellers of labor, the workers. [p. 170]
I would like to see this, but who will volunteer to play the part of the oranges destined to rot in the shop?
No one, individually! If the workers are intelligent, however, and if the law does not prevent their coming to agreement amongst themselves, do you know what they will do? Instead of letting wages fall progressively as demand falls, they will remove from the market that surplus whose presence generates that fall.
But here again, who will agree to being withdrawn from the market?
Probably no one will do so, unless the workers as a whole compensate those who will be withdrawn; but there will be competition to quit the market if the mass of workers allots compensation to the withdrawn workers equal to the wages they were receiving at work.
Do you believe the workers remaining in employment will regard this scheme as in their interests?
I think so. Let's take an example. One hundred workers receive a wage of four francs a day. Demand happens to fall by a tenth. If our hundred workers nevertheless persist in offering their labor, by how much will the wage fall? It will fall not by a tenth but by close to a fifth, (it would be exactly a fifth if the fall in the price of the commodity did not always increase demand by some small amount); it will fall to 3 fr. 20. The total sum of wages will fall from 400 fr. To 320 fr. But if the workers [p. 171] in concert withdraw from the market the ten surplus workers, granting them compensation equal to the wage, perhaps 40 fr in total, instead of receiving no more than 320 fr. ( 100 x 3 fr. 20), they will receive 360 fr. (90 x 4). Instead of losing 80 fr., they will lose only 40 fr.
You see that unions can have their usefulness, that they are required, perhaps accidentally, by the very nature of the goods which workers bring to the market. To ban them is therefore, with regard to the great mass of workers, to commit a real act of plunder.
If trades unions were legal, while at the same time the laws on labor workbooks and passports did not harass the movements of workers, you would see the mobility of labor developing rapidly on an immense scale. Adam Smith, looking into the extremely low level of wages in certain localities said: "After all that has been said of the levity and inconstancy of human nature, it appears evidently from experience that a man is of all sorts of luggage the most difficult to be transported." 265 The means of communication however have been very much improved today compared with what they were in Adam Smith's time. With the railways and the aid of the electric telegraph, we can rapidly and cheaply transport a great mass of workers from one place, where labor abounds, to another where it is in short supply.
You will understand, nevertheless, that this commerce in labor 266 could not undergo the development of which it is capable, while the law continued to shackle it.
The government should go so far as to guide the workers [p. 172] in their searching. It ought to indicate to them the places where labor is abundant and where it is scarce.
Let private industry be free to go about its business 267 and it will serve the workers much better than the government could. Give full freedom of movement and association to the workers 268 and they will be perfectly able to seek out the places where the sale of labor operates most advantageously; active and shrewd intermediaries will help them at the lowest possible price ( provided that no one takes it upon himself to limit the number of these intermediaries, nor to regulate their activities). The supply of and demand for labor, which spontaneously move one towards the other, will in these circumstances, come to equilibrium without difficulty.
Let the workers be free to go about their business, 269 allow the free movement of labour, that is the solution to the problem of the wage earners.
Struck, some years ago, by the difficulties workers experience in finding the places where they can obtain a good market for that type of merchandise we call labor, I called for the establishment of a labor exchange , 270 along with publicity for the current rates, on the lines of what is done for capital and consumer goods. 271
Later I tried to put flesh on this idea, and in the Courrier français , edited at that time by M. X. Durrieu, I addressed the following appeal to the workers of Paris: 272
For a long time the capitalists, producers and merchants, have been taking advantage of the publicity that the press offers them, for placing their capital or selling their merchandise most advantageously. All the newspapers regularly publish a bulletin of the Stock Exchange. All have also opened their columns to industrial and commercial advertising.
If such publicity renders to capitalists and merchants, services whose importance today no one could deny, why [p. 173] should they not also be put within the reach of the workers? Why not use it to light the way for workers in search of employment, as it already helps capitalists looking for markets for their funds and merchants seeking to place their merchandise? Is not the worker who lives by the sweat of his brow or the use of his intelligence, at least as keen to know which places attract the most advantageous wages, as the capitalist or trader can be to know the markets where their funds or goods will fetch the highest rewards? His physical strength and his brain are his personal capital: it is by exploiting them, making them work , and exchanging their output for the output of other workers like himself, that he manages to subsist.
…It is the press which publishes the industrial bulletins. It would also be the press that would publish an employment bulletin.
So we propose to all government bodies in Paris, 273 to publish each week, free of charge, an employment bulletin, indicating the level of earnings and the disposition of supply and demand. We would divide this government bulletin by the different days of the week, in such a way that each trade had its publication on a fixed day.
If our suggestion is accepted by the government, we will ask our colleagues in the various départements (regions) to publish employment bulletins for their localities, as we will publish the one for Paris. Each week we will bring them all together and create from them a general bulletin. In this way, every week, all the workers in France will be able to have in front of them, a picture of the employment circumstances in the various parts of the country.
We will be aiming above all at the workers employed by the government in Paris. They are already organized. They already have official Labor Exchanges. Nothing would be easier than for them to advertise the bulletin of their daily transactions. Nothing would be easier than for them to provide France with publicity for the labor-force ." ( Courrier français 26th July 1846).
Following this appeal, I got in touch with some of the Parisian guilds, among others with the Stonemasons, who introduced me to one of their comrades, surnamed Parisien la Douceur , one of the most intelligent workers whom [p. 174] I have met. Parisien la Douceur liked my plan very much and promised to explain it to the Stonemasons' Guild. Unfortunately, the Guild did not share its delegate's opinion. Fearing that the publication of wage data in Paris might attract a considerable increase in the number of workers in this great centre of population, it refused to collaborate with me. Nor were my attempts elsewhere more successful.
After the February Revolution, I tried to launch this idea again. I wrote to M. Flocon, at that time Minister of Agriculture and Commerce, 274 to enlist his support, if not for building a Labor Exchange in Paris, at least for putting the already established Stock Exchange at the service of the workers. Businessmen go to the Stock Exchange in the afternoon; could not the workers go there in the morning? Such is the question which I put to M. Flocon; but M. Flocon, busy with lots of other things did not reply to me.
The same idea was taken up again some time later, and a plan for a Labor Exchange was even presented to the Chief of Police, M. Ducoux, by an architect, M. Leuiller. M. Emile de Girardin 275 gave his support to this initiative and he even offered to devote part of page 4 of La Presse to publicizing labor business.
In order to give the reader an idea of how far this very necessary publicity might extend, and of the services it could render to the workers in their capacity as traders in labor , 276 with the help of the electric telegraph and the railways, I reproduce here an extract from a brochure in which I developed this idea at some length: 277
Let us examine how the electric telegraph should be set up in such a way as to give workers in all countries the means of ascertaining instantly the places where labor is demanded on the most advantageous conditions.
The telegraph lines have been established alongside the railways.
In every one of the great states of Europe, the main railway lines gravitate towards the Capital as to a common center. They link all the secondary towns to the metropolis. The secondary towns, in their turn, serve as centers for other means of communication which terminate in population centers of the third rank.
Suppose that in France, for example, there are established in twenty secondary towns, markets and Labor Exchanges , dealing both with the sale of labor and the placement of capital and [p. 175] goods. Let us also suppose that the morning is given over to labor transactions and the afternoon to those of capitalists and merchants. Let us see next how the labor market works.
On the day of the opening of twenty Exchanges , workers who lack employment and directors of industrial firms who need labor, go to the market, the former to sell, the latter to purchase, labor. Note is made of the number of transactions effected, and at what price, and of the relative proportions of jobs offered and jobs demanded. The market bulletin, drawn up at the end of the session, is sent by telegraph to the central Stock Exchange. Twenty bulletins arrive at the same time at this central gathering point, where a general bulletin is composed. This latter, which is dispatched immediately, either by rail or by telegraph, to each of the twenty Secondary Exchanges, can be published everywhere before the Exchange opens the next day.
Informed by the general labor bulletin, as to the situation in the various labor markets of the country, the workers available in certain centers of production, can send their supply details to those where there are jobs available. Let us suppose, for example, that three carpenters are without work in Rouen, while in Lyon the same number of workers in the same trade are in demand at a wage of 4 fr. Having consulted the labor bulletin published in the morning paper, the Rouen carpenters go to the exchange, where the telegraph line comes in, and they send a message to Lyons along these lines:
Rouen ––– Rouen 3 carpenters at fr. 4.50 ––– Lyon
The message goes to Paris and from there to Lyon. If the wage asked by the Rouen carpenters is acceptable to the employers in Lyon, the latter respond immediately with an agreed sign of acceptance. If they think the wage asked too high, negotiations takes place between the two parties. If eventual agreement is reached, the carpenters, bearing the message of agreement stamped by the employee at the telegraph, make their way immediately to Lyon by railway. The transaction has been concluded as rapidly as it could be in the Rouen exchange.
Let us now assume that Frankfurt is the central point on which converge all the telegraph lines connecting with the various central Stock Exchanges of Europe. It is to Frankfurt that all the general bulletins of [p. 176] each country come, there also that a general European bulletin is put together and sent to all the Central exchanges, whence it is transmitted to all the secondary ones. Thanks to this publicity mechanism, the number of jobs and the numbers of workers available, along with the wages on offer or asked for, are made known to us, almost instantly, everywhere in Europe.
Suppose, then, that an unemployed seaman in Marseilles, looking at the European bulletin of labor, learns that there is a shortage of sailors in Riga and that a decent wage is being offered in that port.
He goes to the Exchange and sends Riga a telegram offering his services. From Marseilles his message goes to Paris, in two or three stages, depending on the power of the transmission. From Paris the message is sent to Frankfurt, from Frankfort it goes to Moscow, the Central Exchange in Russia, and from Moscow to Riga. This distance, in the region of 4000 kilometers, is covered in two or three minutes. The reply is transmitted in the same way. If telegrams are priced at the rate of five centimes per hundred kilometers, our seaman will pay about fr. 4 for the telegraph messages sent and received. If his demands are agreed to, he will take the train and arrive in Riga in five days. On the supposition that his fare will be set at the lowest price possible, say, ½ centime per kilometer, his costs of moving, including the telegrams, will add up to some fr. 24.
Thus Europe becomes one huge market, where labor transactions are carried out as rapidly and easily as in a city market-place. The Exchanges of Europe correspond with those of Africa and Asia by way of Constantinople.
Thus steam locomotion and the electric telegraph are, in a sense, the material instruments of the liberty of labor. By giving individuals the means of freely arranging their affairs and of always making their way to countries where life is easier and more agreeable, these vehicles of providence push societies irresistibly in the direction of progress.
The free trade in products 278 is even more restricted than the free trade in labor. The commerce in real-estate is subject to bothersome and costly formalities, and moveable property is hampered or totally blocked by various indirect taxes, notably by city tolls and by customs. 279
Let me leave aside, for the moment, restrictive laws whose purpose is to raise taxes, and busy myself with those whose purpose is mainly obstruction.
I want to talk about customs. 280
Were not customs set up with taxation in mind? [p. 178]
Sometimes, but rarely. For the most part, customs were set up solely to put barriers in the way of trade.
This is the protectionist system.
Fiscal customs, 283 those whose sole function is to fill the coffers of the Treasury, are everywhere violently attacked by the supporters of protectionism. The latter want to exclude the interests of the Treasury from the issue of customs, so that they can busy themselves exclusively with what they call the interests of industry.
So are these two interests contradictory?
If we take the protectionist point of view, yes. In 1822, M. de Bourrienne, 284 the author of the Report of the Commission looking into the the customs law regarding the importation of foreign iron, identified clearly and fully endorsed that opposition. 285
"Any country" , he said, "where customs duties had no purpose other than a fiscal one, would be walking at top speed to its perdition. If the interest of the Treasury carries the day over the general interest, the result would be no more than a brief advantage, to be paid for dearly one day.
A country can have great prosperity with very little revenue from the Customs. It could have huge Customs receipts and yet be failing financially, in a state of [p. 179] of decline; perhaps it could be proved that the latter fact is a result of the former.
Customs duties are not a tax but rather an incentive for agriculture, trade and industry, and the laws which set them up have sometimes to be political in intent, must always offer protection and can never pursue fiscal purposes.
Since the duties do not serve the interests of the Treasury, the tax which results from the duty is only incidental.
One proof that the customs tax is only incidental is that the duty on exports is almost nil and that legislators when they impose an import tax on certain objects, have the intention that they shall not enter, or enter as little as possible. The increase or decrease in tax revenue must never stop this tax.
…If the law you are subject to leads to a fall in the revenue from customs tax, you ought to congratulate yourself. This will be proof that you have attained the purpose proposed, of slowing down dangerous imports and favoring useful exports" .
The purpose of which M. de Bourrienne speaks has been perfectly attained in France. Our tariffs are aimed essentially at protection. Our customs laws were established in such a way as to prevent as far as possible, the entry of foreign goods to France. Well, goods which do not enter do not pay duty, as M. Bastiat, author of Economic Sophisms has wittily shown. 286 A protective tariff must be the least productive possible to attain the purpose proposed. 287
A fiscal tariff on the contrary must be as productive as possible.
If, however, a protective tariff harms on the one hand the interests of the Treasury, it does much better on the other hand in protecting the nation's industry against foreign competition. Protection fills the gap which exists naturally between the cost prices of certain domestic products and the prices of comparable foreign goods.
This is M. de Bourrienne's doctrine. We will very soon see if it fulfills its purpose. First I will observe, however, that the Customs were established in the last three centuries, neither to swell the coffers or the Treasury, nor to bring the cost price of domestic products into line with those of foreign products.
For a long time it was very widely believed that wealth resided solely in gold or silver. Each country therefore strove to discover means of attracting foreign gold, and having attracted it, of preventing its leaving. They had the idea of encouraging the export of domestic commodities and blocking the importation of foreign ones. According to the theorists of this system any difference would inevitably be paid in gold or silver. The larger this difference the more was the country enriching itself.
When exports exceeded imports (or at least when it was thought they did) people said that they had a favorable balance of trade. 288
The system was called the mercantilist system. 289 [p. 181]
You take a high and mighty position. Let me tell you then that today the supporters of the protectionist system repudiate, just as you do, illusions about the balance of trade. In England you will never find the advocates of protection basing their case on the balance of trade. If we confused the protectionist system with the mercantilist system, would we then be making a distinction between similar and non-similar products? If our intended purpose was to attract precious metals into the country and to prevent their ever leaving, would we not be indiscriminately denying ourselves all manner of foreign products, in order to receive in exchange only gold and silver? – We are happy, as you know, to concentrate our attacks on similar products, and even then not on them all. We are happy to let in products which are inferior to our own.
Do admit that your generosity is not very great. I did not say that the mercantilist system is the same as protectionism, but rather that it was its point of departure. It began with the blocking of the imports of foreign goods, in order to import more gold and silver. Later people came to think that this purpose would be even more rapidly attained if the development of the export industries were stimulated. As a result, through a combination of prohibitions and subsidies, this category of industries was favored. The same methods were used to set up new industries in the country.
That's right. [p. 182]
The wish was to free the nation from the tribute it paid to foreigners for the products of these industries. It was Colbert who protected and developed mercantilism in this way. 290
The great Colbert, the restorer of French industry!
I would more happily call him the destroyer of French industry.
So you realize that mercantilism engendered protectionism. More often than not, in truth, the theory of the balance of trade was invoked only as pretext. While protectionism impoverished the masses, it enriched certain producers…
That is well understood. If the prices of goods rise in geometric progression while supply diminishes in arithmetic progression, 291 the producers who obtained exclusion of the products of their foreign competitors, must realize sizeable profits.
They do indeed realize them. The consequence is that most of our great industrial fortunes date from the establishment of the principal protectionist duties. 292
According to you, then, our producers owe their wealth solely to the protection of the law, with their work apparently deserving no remuneration. [p. 183]
Their work deserved the return it obtained quite naturally before the establishment of protectionist duties. We do not attack legitimate gains; we attack those acquired improperly, fraudulently, by way of protectionist duties.
The word is too strong. 293 The producers who invoked the theory of the balance of trade were probably hardly concerned at all with the general conclusions of that theory. They had little in mind beyond the particular advantages which they could derive from it...
Would you tell us what you know about it? [p. 184]
I will let you be judge. Would you ever consider pressing for a law which did not favor your particular interest?
Probably not. No more would I solicit, however, for a law which favored my individual interest rather than the general interest.
I quite sure of that. This is why I reject this word "fraudulently" . Producers of yesteryear demanded protectionist duties with a view to increasing their profits; but did not mercantilism, in recommending protection, put them in conformity with their beliefs?
Would the mass of the people be any less plundered if the mercantilist system was false?
My goodness! How many people would be plundered if the theories of socialism were put into effect? Yet there are very honest men among the Socialists.
I do not accept your comparison. The producers who invoked the sophisms of mercantilism 294 were concerned solely with their private interest; in their eyes the notion of the general interest was only a pretext or an empty formula. We socialists, on the contrary, have only the general interest in mind.
If this is true, if it is only the interest of humanity which [p. 185] drives you to demand measures whose application would be fatal to humankind, you are, indeed, more excusable than the producers in question. Would you really dare to claim, however, that you are never motivated by the stirrings of vanity, pride, ambition or hatred? Are all your apostles equally mild and humble of heart?
The producers who demanded the establishment of protectionist duties based themselves on mercantilism. If we abandon this system, are we not agreeing thereby that they were in error?
Let us understand one another. In fact I condemn mercantilism. I do not believe in the balance of trade, an old economic error. But does it really follow that the producers were wrong to demand protectionist duties?
The conclusion seems logical to me. If these producers begging for protectionism had good reasons to put forward, why would they have used a bad one?
Careful! I do not accept mercantilism with all its excesses, but does not this system also embody some truths? No doubt money is not the whole of wealth, but is it not an important part of it? Does not a nation expose itself to appalling catastrophes when it lets all its cash be depleted? Protectionism shelters it [p. 186 ] from these menacing disasters when it prevents the over-importation of foreign goods.
According to you, protectionism has the sole effect of allowing domestic producers to sell very profitably goods which they previously sold very unprofitably. You have forgotten to say, however, that by establishing new industries in the country, protectionism strengthens national independence and permits fruitful use of previously idle capital and labor. You have forgotten to say that protectionism increases the power and wealth of a country.
You have just expounded the three main arguments for the protectionist system. Please allow me to put the first to one side; I will take it up again when we discuss money. 295 As for the argument about dependence on foreigners, it is one which has been exposed a hundred times before. You yourself, if you reject the balance of trade argument, if you accept that products are bought with other products, 296 must you not accept too that when two nations trade with each other, their dependence is mutual?
We have to take account of the nature of the goods exchanged. Is it prudent, for example to depend on foreigners for a product that is of primary necessity?
England is, you will agree, an essentially prudent nation. She has voluntarily exposed herself, however, to dependence on Russia and the United States, her two great rivals, for her [p. 187] supplies of wheat. 297 Apparently she does not consider the argument about dependence on foreign sources truly convincing. I think it pointless to dwell on this issue. 298
I now turn to your third argument, which has much more weight and is much more difficult to refute. You say that protectionism, by bringing about the introduction of certain new industries to the country, has increased the use of capital and labor, and thus augmented national wealth.
This seems to me incontestable, and since you are fond of examples I am going to give you one. In the past, England drew her cotton goods from India. One day the idea came to her of keeping these Indian goods out. 299 What happened? The market finding itself without the greater part of its ordinary requirements, production and sale of [p. 188] domestically produced cotton goods immediately benefitted hugely. Capital and labor migrated en masse to this production. England which had produced scarcely more than a few thousand yards of cotton fabric, now made thousands of millions. Instead of a few hundred spinners and weavers working from home, she now had thousands operating in immense factories. Her wealth and power suddenly increased enormously. Are you so bold as to claim, in view of these facts, that the prohibition of cotton yarn and cotton goods from India was not beneficial to England?
Yet on the other hand the Indians who lost the English market were ruined. Millions of men on the banks of the Indus and the Ganges found themselves deprived of work while the manufacturers of Manchester established the basis of their colossal fortunes, and while workers were attracted by unusually high wages, and flooded into this new metropolis of cotton production, the workshops of India fell away into [p. 189] ruin, and the Hindu workers were swept away in a tide of poverty and famine.
That is a fact. The markets for the spinners and weavers of India becoming blocked, these workers were obliged to fall back on other branches of production. Unfortunately the latter were already sufficiently supplied with labor. The wage level in India therefore fell below the production costs of labor, that is to say below the sum necessary for the worker to keep himself and perpetuate himself. It fell…until poverty, famine and the epidemics which are their inseparable companions, having performed their function, equilibrium between the supply of and the demand for labor began to re-establish itself and wages to rise. 300
So the prosperity of the English manufacturers had for its stepping stones the corpses of Indian workers.
What do you expect? The profit of the one spells the loss of the other, as Montaigne said. 301
If protectionism cannot establish itself without this funereal cortège of ruin and poverty, it is an immoral and odious system and I repudiate it.
Good heavens! If Providence had made of all humanity only a single nation, then a system which thrust down certain members of this huge nation in order to raise up other members, which ruined the Hindus in order to enrich the English, could, indeed, be called [p. 190] immoral and odious. Providence has not, however, put one, single people into the world; rather she has sown the nations like so many grains of wheat, telling them to grow and prosper . It is a misfortune that the interests of these various nations are now diverse or opposite; but what is to be done about it? Each people must naturally devote itself to increasing its power and wealth. Protectionism is one of the most powerful and surest ways of achieving this double result. So, we resort to protectionism. It certainly is unfortunate that foreign workers are deprived of their means of sustenance. Should not the interests of the domestic labor force 302 take precedence over the rest, however? If a simple legislative measure serves to provide employment and bread to the domestic workforce, is not the lawmaker obliged to pass this measure without inquiring whether the inhabitants of the banks of the Ganges or the Indus are going to suffer because of it? Should not each person concern himself with his own poor people before fretting about those of others? And if this example is universally pursued, if each nation pursues that legislation which best suits its individual interests, will not all things move, in the final analysis, in the best possible direction? Will not all the nations come to enjoy all the prosperity of which they are capable?...So you see that protectionism is odious and immoral only when you examine it superficially. And you also see that statesmen would be profoundly wrong to adopt your false cosmopolitanism.
Mr Huskisson 303 once uttered the following remarkable words in the English parliament: "Protectionism [p. 191] is an invention whose patent is close to expiry. It has already lost much of its value now that all the nations have seized upon it" . 304 All I need to do to destroy your objections, is to enlarge upon these comments by one of England's most illustrious supporters of free trade.
What happened, actually, when England had brutally replaced the work of the weavers of Surat, Madras and Bombay, in order to benefit the manufacturers of Manchester and their workers? What happened was that all the other nations, seduced by this apparent advantage, wanted likewise to replace foreign industries . France, which produced only a part of the cotton, wool, iron and pottery needed for domestic consumption, wanted to produce all she could possibly consume in the way of these goods. Germany and Russia did likewise. There was nowhere, not even the smallest countries – Belgium, Holland, and Denmark – in which the aim was not to replace foreign industries with their own. In a word the drive towards protectionism was general.
What came of it you know. The outcome was that those destroyers of entire industries found themselves having their own labor destroyed in turn. 305 England which had stolen the cotton goods industry from India, lost, along with a part of this same industry, several of its other branches of production. France, which following the English example, had destroyed several industries in foreign countries, found a part of her own destroyed in turn as well. Most notably Germany protected herself as a form of reprisal against French silks, fashionable goods, and wines….You steal some of your neighbor's markets and he steals [p. 192] some of yours. This was universal pillaging.
At the time when this pillaging of foreign industries was at its most active, a very clever pamphlet was published in England. The frontispiece carried a cartoon showing a cage of monkeys. Half a dozen monkeys, lodged in separate compartments, had their daily meal in front of them. But instead of eating in peace the portion which the zoo-keeper had generously given them, every one of these wicked animals was doing his best to steal his neighbors' share, without noticing that the latter were doing the same to him. Each one of them was working hard to steal from his neighbors his livelihood which he could reach easily just in front of him, and a lot of food was being wasted in the scuffle. 306 307
But were not the strongest bound to have the advantage in the struggle? Could they not grab the share of others and still keep their own?
With monkeys that is possible; but it is not so with nations. No nation is strong enough to say to others: "I will protect my production against your industries, but I forbid you to do the same against mine; I will destroy some of your markets, but I forbid you to touch mine." If a nation dared to employ such language, all the others would unite to rule that nation out of bounds, and the coalition would be left the stronger.
In such a way, that all in all no one gains from these mutual depredations, and that the pillagers [p. 193] gain proportionately less as the pillaging becomes more general.
But when one country has adopted protectionism, are not the others obliged to adopt it too? Must they allow their industries to be pillaged without resorting to reprisals? 308
This is a subject for debate.
I must first of all, however, give you a full demonstration of the way in which protectionism has been harmful to the general development of production.
So let us look first at what was happening at the time when protectionism was first established. Each nation procured some of the goods it needed for production from its neighbors and furnished them in turn with other products.
What products did it supply and what did it receive?
It supplied those products which the nature of its soil and the particular talents of its producers allowed it to produce with the least effort. It received those things it would not have been able to produce without devoting more effort to them.
In truth, does this not tell you what international trade must have been like before the advent of protectionism? 309
This is the natural way in which things develop. [p. 194]
What did protectionism do? Did it increase the total sum of production? No more than did the pillaging monkeys in the English pamphlet increase their food supply, when they stole each other's scraps. Judge for yourselves.
England stole the cotton industry from India. If her production increased accordingly, India's fell in the same proportion. France stole part of the English linen industry; if France produced that much more, England produced that much less. Germany took from France part of its silk production; if Germany produced more thereby, France produced less by the same amount… Protectionism therefore did not and could not have the effect of increasing the general level of production.
I will now add that protectionism has, and is bound to have, the effect of reducing the overall level of production.
This is how it happens:
Why did England protect herself against Indian cottons, French silk and Belgian cloth? Because these goods were invading part of her market. Why did they invade it? Because, allowing for differences in quality, they were cheaper than their English counterparts. If they had not been cheaper, they would not have got into England.
That being so, what was the first result of the law which forbade these goods access to the English market? It was to create an artificial deficit in domestic [p. 195] supply. The larger this deficit, the more the prices of indigenous goods were naturally bound to rise.
How could England supply the rest, if foreign cloth was so much cheaper than her own?
There are many varieties of the same good. There are, for example, a very large number of grades of cloth. England produces certain of these grades more cheaply than Belgium, while Belgium makes some grades of cloth cheaper than England does.
Let me resume. Foreign cloth comes to be banned in England. Supply having been halved, how much will the price rise? It will rise in geometric progression. If it had been at 15 fr an ell, it could reach 60 fr.
When the price of a product rises suddenly, however, what happens? Unless the product happens to be of prime necessity, in which case there is no way it could ever fall noticeably, the rise in price will cause a more or less marked contraction in consumption, according to the nature of the product. If the demand for cloth was twenty million ells when price stood at 15 fr., it would scarcely get to four or five millions ells at 60 fr. With prices falling at this point, demand will again start to rise. These fluctuations will continue almost indefinitely. Having ranged across the whole scale taking in both its extremities, however, [p. 196] these fluctuations will converge successively on a central point, which represents the total production costs of cloth in England.
You already know why the price of a product cannot stay very long either above or below its production costs.
The production costs of English cloth, however, are higher than those of foreign cloth. They are and must be, otherwise protection would be entirely pointless. When one can sell at a lower price than one's competitors, one does not need protection to drive them from the market; they remove themselves. I take it that if the production costs of foreign cloth are at 15 fr. the costs of English production will be some 18 fr. This, then, is the level towards which the price of cloth will gravitate from now on in England. At the price of 18 fr., however, people will purchase less cloth than would be the case at 15 fr. If people bought twenty million ells in the period of free entry of foreign goods, they will buy only sixteen or seventeen million after these goods have been prohibited entry.
Maybe so! Will not the increase in national production, however, which will have climbed from ten million ells to seventeen million, compensate, and more, for the slight decline in consumption?
For the moment, that is not the issue. Does protectionism 312 result in a diminution or increase in general production, that is the question? Well, if the production of English cloth has grown by seven million, by contrast that of foreign cloth has fallen [p. 197] by ten million, which clearly means, I think, a reduction of three million in general production.
Yes, but that reduction is only temporary. The growth of an industry in a country always leads to a perfecting of manufacturing procedures. Where the market price was 18 fr. it soon falls to 17, 16, 15 fr. or even lower. Consumption rises in this eventuality to the level which obtained before the import controls, or even ends up exceeding it.
Meanwhile, I find that there has been an increase in the price, associated with a fall in consumption, and consequently a fall in the level of general production. I note further that protectionism has had, and was bound to have, as its first outcome, a fall in general production. Henceforth this will be taken for granted in the discussion.
I claim, furthermore, that the general lowering of production is not accidental or temporary…I maintain that it is permanent…and let us get it straight, it will last as long as protection itself.
Why did the English manufacturers not produce themselves the twenty million ells of cloth purchased in their country? Because foreigners produced at a better price, at lower cost, half of these twenty million ells.
What is the reason for this difference in the production costs of the same good as between one country and another? It lies in natural differences in climate, soil, and national aptitudes. Well, I ask you, can import laws suppress these national differences? Will decrees to the effect [p. 198] that Belgian and French cloth will no longer have access to the English market, somehow endow English producers with the means of producing as well and as cheaply, these particular kinds of cloth? Will the law have supplied the climate, the water, the soil, the workers themselves, with the qualities or capabilities necessary for this particular kind of production? …But if the import laws have not brought about this miraculous transformation, will not the kinds of cloth which England obtained in France, be dearer to make and worse made in England?
Often these differences are hardly noticeable. In such a case, the progress resulting from the instantaneous development of an industry in the homeland itself, is more than sufficient to compensate for them.
Let us see how things work out in practice.
A certain category of foreign goods can without much ado be forbidden to the home market. Germany, for example, establishes a prohibitive duty on Parisian bronzes and ironmongery. The casters of bronze and ironmongers of Germany consequently begin to produce articles they have never been involved with before. Before they complete their apprenticeship with respect to this new manufacture, they set up a lot of schools of instruction and provide consumers with imperfect and expensive products. Years pass before they reach the standard of foreign production, if they ever do reach it.
Let us imagine, for a moment, that prohibition had never [p. 199] been established. Would Parisian ironmongery and bronzes have remained just the same as before?
What was the effect of the German customs restrictions on these two Parisian industries? By cutting back their market, this legislation caused them to retrogress, or at least, it slowed down their progress. You know of course how industrial progress happens. It happens through the division of labor. The greater the division of labor, the greater are the perfecting and multiplication of products.
Now, under what circumstances can the division of labour be taken to its maximum extent? Isn't this when the market is as extensive as possible?
When an market comes to be closed, when the extent of the market comes to be reduced, few manufacturers stop work completely, but most reduce their production. Reducing their output means they can no longer benefit from division of labor; they are forced to use less economic procedures.
The progress in hardware production and the bronze industry therefore slowed down in France. Did it become more vigorous in Germany, in such a way as to make up for the loss in the general level of production? Let us have a look at this. Several years passed before the hardware producers and the makers of bronzes in Germany reached the level attained by their French rivals at the time the protection was established. During these years the French industry would have continued to make progress. Naturally more favored than its rival, would it not have made more progress, much to the advantage of general consumption?
Perhaps you would like a final argument, by way of proof.
Protectionism has been in force everywhere [p. 200] for half a century. 313 Certainly the industries enlarged by tariff protection have had time to equal and surpass their former rivals. Have they surpassed them? Have they even equaled them? Are they in condition to stand up to foreign competition? Ask their opinion and see what they say.
Oh! They will say unanimously, what they said in 1834 – that they need protection more than ever. 314
This means that after half a century of protection, they still cannot achieve the quality and low prices of their rivals.
By displacing a host of industries, in the teeth of what nature dictated should happen, protectionism has had the result, as it was bound to have, of pushing up the production costs of everything, or, which comes to the same thing, of holding up the natural lowering of these costs.
Now it is a law of nature that the market price of things, tends to align itself to the costs of production, and it is another law that consumption diminishes as price rises.
I have already shown you, mathematically, I think, that protectionism has increased the costs of production. That increases in the cost of production lead to increases in prices, which in turn lead to a reduction in consumption, is just as clearly established. I am therefore justified in concluding that protectionism has diminished the general wealth of the world. [p. 201]
Your argument, I have to confess, seems to me difficult to refute. In the event, however, general wealth may have been reduced, and the individual wealth of certain countries may have increased. Given this eventuality, were not the favored countries right to adopt protectionism?
But the eventuality of which you speak can scarcely be taken as acceptable, let us agree on this. If adopting protectionism has inevitably caused this diminution, a loss in the collective wealth of the nations, this general loss must also necessarily have registered itself in individual losses. If everybody has lost, it is difficult to imagine how some may have gained.
England, which you have in mind, has undoubtedly destroyed many foreign industries, but foreign countries have also destroyed many of hers too. If England had not adopted protectionism, she would have perhaps have produced less wheat, fewer cotton goods and silks, but she would have produced more iron, more steel, more tin, more machinery etc. Her share of the general dividend would perhaps be relatively smaller, but the dividend itself being larger, her share would be actually larger.
Protectionism, however, has not only diminished the abundance of wealth, it has also rendered production inevitably unstable, and its distribution necessarily iniquitous.
If these arrangements were fully applied everywhere, in a complete and stable way, if an impassable barrier forever separated each nation from its neighbors, we might perhaps succeed in avoiding the disturbances in these unchanging markets. [p. 202] Protectionism however is nowhere applied in a stable and complete way, nor could it be. All nations have foreign dealings and they cannot dispense with them.
Now, these indispensable relations are daily troubled by modifications to the Customs arrangements of the forty to fifty nations which maintain Customs. Sometimes it concerns a duty being increased, sometimes a duty being reduced, sometimes a subsidy being increased, sometimes one being withdrawn. What is the result of these endless modifications of tariffs? A fall in employment on the one hand, an increase in employment on the other. Any law which closes or contracts openings for employment steals the means of existence for hundreds or thousands of workers, by building colossal fortunes elsewhere…And these laws can be counted in their thousands since the establishment of protectionism.
Subject to these endless disturbances, production becomes intrinsically precarious. Considerable capital has been committed to setting up cloth or silk manufacture. Hundreds of workers are enabled to earn a living. Suddenly, the raising of a foreign tariff closes the market. The workers have to be dismissed and the machinery left to rust or sold off for scrap. The bad effects do not stop there, however. When a factory closes all the industries supplying it are hit in their turn. Once they are affected they spread around them the contagion of misfortune. The perturbation which arose in an isolated place, stretches out in successive waves across the whole industrial world [p. 205] . People get hit and more often than not, do not even know where the blow came from. 315
If a tariff is lowered and general production is increased, there is a very marked benefit; if a tariff is raised, however, there is, likewise, a very marked loss. The capitalist loses his capital, the worker loses his job. The former faces inevitable ruin, the latter death.
It is frightful.
While producing results like these on the one hand, on the other the law swiftly rewards, as if on the throw of a dice, the producers who have become masters of the market. In truth their prosperity does not last long. Capital and labor rush en masse towards the protected industries. Often indeed, they hurry there on an excessive scale. More disruptions and more people ruined!
Under this regime, production is nothing more than a game of chance, in which some become rich and others are ruined, according to fortune's whims, in which the hard-working entrepreneur, formerly a worker, 316 suddenly sees the fruits of a lifetime of working and saving vanish away, while elsewhere rich capitalists see their capital double or treble.
People never murder their fellow human beings with impunity however. A long cry of bitterness and anger rang out one day in the ears of the few beneficiaries of this system. Unfortunately those who uttered it and those who echoed it, did not perceive the cause of the harm. M.de Sismondi 317 [p. 204] , who was the first to explain in eloquent terms this universal cry, did not know that he should go back to the source of so many disastrous disturbances. The Socialists who succeeded him did worse still. They attributed the harm to apparent causes which were precisely opposite to the real ones. They imputed to property, harm which arose precisely from assaults made on people's being free to use or dispose of their property as they wish.
Yes, this system was bound to cause great harm, and we have not perhaps taken sufficient account of it.
We would have been better off doing without it, I agree. But since it has been adopted, is it not best to retain it? Most of our industries have grown big under the wing of protectionism, let us not forget this. Would it not be imprudent to take it away from them?
With what would you replace protective tariffs? [p. 205]
Perhaps by fiscal tariffs?
From the point of view of stability of production, fiscal tariffs are scarcely preferable to the other ones. They are modified just as frequently. Moreover a fiscal tariff is always more or less protectionist.
I am not unaware of this. So I would not accept a fiscal tariff other than as a last resort. It is less bad than a protectionist tariff, but it is still bad. If we want to give production the greatest possible richness and stability, we have to achieve the suppression of every kind of tariff, full liberty of exchange and absolute respect for the right to trade. 322
Note well moreover, that this result cannot be fully achieved without the total abolition of all Customs. As long as one Customs Office remains standing, it will cause disruption and ruin across the entire area of production.
Let the main industrial nations, however, renounce these old instruments of war, and improvement will soon be noticeable.
How many reforms remain!
Yes, how many real reforms!
One of the eminent members of the Anti-Corn Law League, Mr W. J. Fox, has admirably refuted this argument about foreign dependency. 323 Although this passage has been quoted often, I will give in to the temptation to reproduce it again. It is a little masterpiece: 324
[William Fox's original speech:]
... It is a favourite theme, this independence of foreigners. One would imagine that the patriotism of the landlord's breast must be most intense. Yet he seems to forget that he is employing guano to manure his fields; that he is spreading a foreign surface over his English soil, through which every atom of corn is to grow; becoming thereby polluted with the dependence upon foreigners which he professes to abjure.
To what is he left, this disclaimer against foreigners and advocate of dependence upon home? Trace him through his career. This was very admirably done by an honourable gentleman, who just now addressed you, at the Salisbury contest. His opponent urged this plea, and Mr. Bouverie stripped him, as it were, from head to foot, that he had not an article of dress upon him which did not render him in some degree dependent upon foreigners. We will pursue this subject, and trace his whole life. What is the career of the man whose possessions are in broad acres? Why, a French cook dresses his dinner for him, and a Swiss valet dresses him for dinner; he hands down his lady, decked with pearls that never grew in the shell of a British oyster; and her waving plume of ostrich-feathers certainly never formed the tail of a barn-door fowl. The viands of his table are from all the countries of the world; his wines are from the banks of the Rhine and the Rhone. In his conservatory, he regales his sight with the blossoms of South-American flowers. In his smoking room, he gratifies his scent with the weed of North America. His favourite horse is of Arabian blood; his pet dog of the St. Bernard's breed. His gallery is rich with pictures from the Flemish school, and his statues from Greece. For his amusements, he goes to hear Italian singers warble German music, followed by a French ballet. If he rises to judicial honours, the ermine which decorates his shoulders is a production that was never before on the back of a British beast. His very mind is not English in its attainments; it is a mere pic-nic of foreign contributions. His poems and philosophy are from Greece and Rome; his geometry is from Alexandria; his arithmetic is from Arabia; and his religion from Palestine. In his cradle, in his infancy, he rubbed his gums with coral from Oriental oceans; and when he dies, his monument will be sculptured in marble from the quarries of Carrara.
And yet this is the man who says: "Oh! let us be independent of foreigners! Let us submit to taxation; let there be privation and want; let there be struggles and disappointments; let there be starvation itself; only let us be independent of foreigners!" I quarrel not with him for enjoying the luxuries of other lands, the results of arts which make it life to live. I wish that not only he and his order may have all the good that any climate or region can bear for them - it is their right, if they have wherewithal to exchange for it; what I complain of is, the sophistry, the hypocrisy, and the iniquity of talking of independence of foreigners in the article of food, while there is dependence in all these materials of daily enjoyment and recreation. Food is the article the foreigner most wants to sell; food is that which thousands of our operatives most want to buy; and it is not for him - the mere creature of foreign agency from head to foot - to interpose and say: "You shall be independent; I alone will be the very essence and quintessence of dependence." We compromise not this question with parties such as these; no, nor with the legislature. 325
[Bastiat's translation quoted by Molinari and retranslated back into English:]
To be independent of foreigners is a favorite theme of the aristocracy. But who then is this great lord, this advocate of national independence, this enemy of all reliance on foreigners? Let us look at his life. A French cook prepares dinner for the master, and a Swiss valet dresses the master for dinner. Milady who takes his hand is utterly resplendent in pearls, which you never in find in English oysters, while the feather which flutters from her head never comes from the tail of an English turkey. The meats on his table come from Belgium and his wines from the Rhine or the Rhône . He rests his eyes on flowers from South America and he gratifies his sense of smell with the smoke from a leaf which comes from North America . His favorite horse is of Arab origin, and his dog [p. 188] is a St Bernard . His art gallery abounds in Flemish paintings and Greek statues. Does he want entertainment? He goes to listen to Italian singers performing German music, the whole thing rounded off with a French ballet. Does he rise to distinction as a judge? The ermine which adorns his shoulders had never until then been seen on the back of any British animal. His mind itself is a multicolored weave of exotic elements. His philosophy and poetry come from Greece and Rome , his geometry from Alexandria , his arithmetic from the Arabs , and his religion from Palestine . In his cot he pressed his baby teeth on a teething ring of coral from the Indian Ocean . When he dies, Carrara marble will crown his tomb…and this is the man who says ' Let us be independent of the foreigner .' 326
It is not just external property which is attacked; people also attack the property of man in his person, in his faculties, in his powers: that is to say, his internal property . 327
Internal property is violated when a man is forbidden to use his faculties as he sees fit, when he is told:
"You 328 will not work in such and such an industry or, if you do, you will be subject to certain constraints; you will be required to observe certain regulations. The natural right you possess to use your faculties in the way most useful to you and yours will be diminished or regulated. -- By what right? -- By virtue of the superior rights of society."
"But what if I do not put my [p. 207] abilities to any harmful use?"
"Society is convinced that you could not work freely in some industries without harming it."
"But what if society is wrong? What if in using my abilities in this or that branch of production I do not cause society any harm?"
"In that case so much the worse for you. Society cannot be wrong."
In deceiving itself thus, however, does not society inflict upon itself some damage? Rules which hinder the activity of the producer, do they not result inevitably, for certain, in reducing production by raising the price of goods? If one industry is burdened with rules, harassed while other industries remain free, will not people turn to these others by preference? Otherwise, if we are prepared to operate in the highly regulated activity, will we not pass on to the consumers some part of the burden of harassment and regulation?
Let us leave to one side the regimes in which all production is regulated, even more so, those in which no worker is allowed to use his abilities freely, in which labor is still enslaved. Thank God these monstrosities are beginning to be rare. Let us consider only those hybrid regimes where certain industries are free, others regulated, and yet others are monopolised by the state.
Such is the deplorable regime which obtains today in France.
Are you claiming that the government hurts society by regulating certain branches of production, and by engaging in certain industries itself. [p. 208]
That is what I am claiming.
All regulation, as well as all monopoly, leads to an increase, direct or indirect, in the price of goods, and therefore to a fall in production.
Government produces more expensively and less well than individuals; in the first place because by managing several industries, it fails to recognize, if not in the details at least at the level of higher management, the economic principle of the division of labor; in the second place because by itself assuming either directly or indirectly the monopoly of an industry, if fails to recognize the economic principle of free competition. 329
In the event, therefore, the government produces money, builds roads and railways, and provides education more expensively and at a lower quality than individuals would.
Without any doubt.
Money like any other commodity. 330
Is not the minting of coin a prerogative of sovereignty?
No more so than the manufacture of nails or of buttons for gaiters. Why should the manufacture of money be [p. 209] the prerogative of sovereignty? What is money? An instrument with the aid of which the exchange of value takes place….
There are also direct exchanges. A host of exchanges also take place with paper money.
There are very few direct exchanges, and there will be fewer and fewer to the extent that the division of labor continues to grow. A man who passes his life making a tenth part of a pin could not directly exchange his product for the things he needs. 331 He is obliged to barter first of all against some intermediate merchandise, which can easily be exchanged with other things. This intermediate merchandise must be durable, easy to divide and to transport. Various metals -- gold, silver, copper -- in different degree possess these qualities. This is why we have made from them instruments of exchange, money.
As for paper, it can also serve as money but on condition that it represents real value, value already created, value made concrete in an existing object, available and capable of serving as money. 332
This is what the supporters of paper money unfortunately do not understand.
But you yourself give me the impression of not having a proper idea of what money is, when you tell me that the production of this vehicle of exchange is a prerogative of sovereignty. It is not because a sovereign [p. 210] has marked a piece of gold or silver with his effigy that the coin has value, it is because it contains a certain quantity of labor. Whether it be made or marked by a government or individual, matters little. No I am mistaken! Individuals would make it better and cheaper. They would also take care to supply the market with that variety of monies which the needs of circulation demand. Moreover, if from the very start, money had been made by individuals, forgery would have been rarer.
How can you know that?
The forgeries formerly committed by the very people who had the exclusive right to repress all types of pillage and fraud, itself inevitably went unpunished. 333 To which one must add that the public had no way of avoiding it, since the monarchs claimed for themselves the exclusive right to mint money.
If the manufacture of monies had remained open, individuals would have undertaken it as people will undertake any industry which will yield a profit.
Can the manufacture of money yield a profit?
As with any other manufacture. In France the government charges three francs for the minting of a kilogram of silver, and nine in the case of gold. This virtually covers the costs of producing [p. 211] the money. In England minting is free.
Ah! Can you find me an individual who is prepared to work for nothing then?
Please be wary of terms like gratis ,free, gratuity. 334 Nothing which requires labor is free; the point being that there are different ways of remunerating this labor. In France the users of money pay directly for its production; in England taxpayers pay the production costs indirectly in the form of taxes.
Which of these two ways of remunerating labor is the more economic and the more equitable? It is obviously the former. In France the production of money costs a certain sum annually, shall we say a million? Individuals who have the ingots transformed into coinage reimburse this million directly. If minting were free as in England the costs of production would be paid by taxpayers. The collection of tax revenues, however, is not free; in France it is never less than thirteen per cent of the principal. 335 So if our minting were free, it would cost not a million but one million, one hundred and thirty thousand francs.
So much for the economics of things being free.
Now let us look for the justice of "free" production. Who has to pay for a product? He who consumes it, is that not true? Who must, in consequence, bear [p. 212] the costs of making that money? Those who use that money.
But everybody uses it.
The difference being that certain individuals, the richest people, use it a lot; others, the poorest, use it very little. When minting is paid for directly, it is paid for by the users of money in proportion to that use; when it is paid indirectly, when it is free, it is paid for by everybody, by small consumers as by large, often by the former more than by the latter. That depends on the basis of the taxation. Is that fair?
If the government produces money free of charge, the costs of money production are raised to their maximum; if it gets reimbursed directly for minting, likewise it produces money more expensively than private production would, because the production of money is not its speciality.
If minting had remained free, it would in all probability have been carried out by the great goldsmiths companies. Under this regime, with consumers able to refuse money made by forgers, and, what is more, to inflict on them exemplary punishment, forgery would have been extremely rare.
But by joining forces in order to supply less money than is demanded, would not your free manufacturers [p. 213] have realized enormous profits at the expense of the public?
No. First of all because one can, if need be, use ingots in place of money; next because free competition does not take long to smash even the strongest cartels. 336 When the equilibrium between supply and demand is broken, prices soon yield a return which the competition seeks to share in. In this case people start to produce outside the cartel, until the market price falls again to the level of the production costs.
Ah! It is always the same law.
Always. And this law explains also why a country could never run out of money. When the needs arising from circulation come to exceed the supply of money, the price of metals rises progressively . In this event people no longer export ingots; they find it on the contrary advantageous to import them up to the point when equilibrium is re-established.
What you have said demolishes one of the big arguments used by protectionists.
I have another objection. If the production of money was free, would it be possible to have a single currency? Would not each producer supply a distinctive money? We would no longer know where we were.
There are thousands of producers of calicoes, and yet [p. 214] there is only a small number of types of calico. In Manchester, twenty or thirty manufacturers weave lengths of identical quality and size. It would be the same with money; the only coins struck would be those which the public found convenient and advantageous to use. If all the nations wanted to use the same currency we would arrive quite naturally at a single one. If they preferred different money and measures, suitable to their ways and their particular needs, why I ask you would people take it into their heads to impose a single currency?
You could well be right and I understand up to a certain point, that one might leave the production of money to private industry. The producers can in fact develop competition for themselves in such a way as to make the development of a monopoly impossible. Is the same true however for all the industries of which the government has taken over? For example are not communication routes natural monopolies?
There are no natural monopolies. How could the builders and operators of communication routes achieve profits from monopoly? By raising the price of transportation above its production costs. But as soon as the market price exceeds production costs, competition is irresistibly drawn in… 337
In this case would they not build two or three parallel routes from one point to another? [p. 215]
That would not be necessary. Competition in the means of communication, notably improved roads, railways and canals, etc., happens across a very wide range. Let the Le Havre to Strasbourg railway put up its fares, for example, and immediately the movement of travelers and goods to the centre of Europe will shift in favor of Antwerp or Amsterdam. For intermediate points, there is competition from canals, rivers, almost parallel sections of rail, or ordinary roads, competition which becomes more active in the face of attempts at monopoly…provided, of course, that the competition remains free.
Provided this condition obtains, the market price for transport can never exceed the costs of production for very long.
Well I think you will certainly agree with me, that individuals build and run roadways better and cheaper than governments. Would you compare the roads in England with those in France? 338
This is an incontestable fact. Is it not essential, however, that traffic remains free and at no charge for the user?
Have we not examined in depth already the mystery of things which are free? Have you forgotten that no good whatsoever – money, teaching, transport – could be provided free by the government, unless it were paid for by the taxpayers? Have you forgotten that in this case the good's costs, over and above its ordinary production costs, include the further costs [p. 216] of collecting the tax? So if our roads were not free, they would be financed by those who use them, to the degree to which they use them, and the roads would be cheaper.
What is true of the great highways is no less true of little roads. These petty governments 339 we call départements and communes, build roads at their own cost without, however, having central government approval. These roads, voted for by majorities on the councils of the communes and departments, are built and used at the cost of all taxpayers. Under the monarchical regime, when rich taxpayers alone had places on the councils of the communes, the departments, or the central state, the poor peasants were required to contribute a large part of the work decreed…to whose profit? I leave you to think about it. The corvées of the Ancien Régime had reappeared under the benign guise of 'compulsory contributions in kind'. 340
The only way to put an end to this scandalous iniquity is to hand over roads, great and small, to private industry, as well as all forms of transport.
Without making an exception of letter delivery?
Without making an exception of letter delivery. 341
Oh, come on!
The post has not always been in government hands. [p. 217] Before the 1789 Revolution, the letter post had been contracted out to individual companies (or "farmers"). 342 In 1788 this lease brought in twelve million to the State. As you well know, however, the tariff on the letters was very high. The big farmers knew with regard to this, how to bribe the administrators in charge of working out and regulating the tariffs. 343 They flourished under this system but the public were paying handsomely for their good living.
What had to be done to remedy the manifest abuses of this system of farming out state contracts? Quite simply the remedy was to hand over the post to free competition. Under this new regime, the movement of letters would have promptly fallen to the lowest possible price. The preferred choice was to leave the post in the hands of the state. The public gained nothing from this, indeed the contrary! The post remained very expensive and became much less reliable. As you know very well, the abuse of trust and also general unreliability, have multiplied frightfully in the postal service.
That is all too true.
For a long time, moreover, the government claimed the right to infringe the confidentiality of correspondence. It is not long since the Cabinet Noir was suppressed, and some people claim it still exists. 344 The worst of it is that we do not have the power to avoid these risks and these insults to the public. It is strictly forbidden for individuals to handle the post. Interlopers who deliver the mail 345 are subject to severe penalties. [p. 218]
That is the advantage of communism for you....If the post were free you would be able to hold the carriers involved to account, both for the violation of your correspondence, and for stealing from you. Given the government's communist monopoly, 346 none of this is practicable. You are at the mercy of the administrators. 347
At least it has ended up with their giving us postal reform. 348
Yes, but postal reform has destroyed one abuse only to replace it with another. In England, reform has for several years caused a considerable deficit in the receipts. The tariff had been so reduced that half the charge of the postal service was falling on the taxpayers. The service was half free . Now is it not fair that the cost of correspondence should be met by the correspondents? Why should some poor uneducated peasant who neither writes nor receives letters throughout his life, contribute to paying for the carriage of the heavy missives from Monsieur Turcaret or the love-letters of his neighbor Mr. Lovelace? 349 Is there a communism more iniquitous and odious than that?
Shall I talk about the privileges enjoyed by mounted postmen? In past times, the postmasters set up by Louis XI, enjoyed a monopoly in passenger transport. 350 Little by little they were obliged to share this monopoly [p. 219] with the royal parcel service, and finally to leave a space for free enterprise. Given their insistent demands, however, the new entrepreneurs were obliged to pay the masters of the coaching inns, whose horses they did not use, an indemnity of twenty five centimes per delivery and for each horse in harness (law of the fifteenth ventôse in year XIII). 351 The overall indemnity had risen to a figure of six million (francs) per year. But the railways have considerably reduced that windfall. The consequence was loud complaints from the postmasters. They wanted to force the railway companies also, to pay them subsidies. The companies resisted. The question is on-going.
It has to be said in defense of the postmasters, that regulations dating from the reign of Louis XI, oblige them to have available teams of horses in places where these teams are perfectly pointless. But is it not absurd to pay pensions to one industry which no longer functions, at the expense of another which does? Is it not at once absurd and grotesque to constrain entrepreneurs in the coach business 352 to supply a rent to the idle horses of the postmasters?
It is indeed absurd and grotesque. But if the government, the départements and the communes ceased completely their intervention in the transport industry in the construction of roads, canals, bridges and streets, if they stopped setting up communications between diverse parts of the country and seeing to it that established communications are maintained, would individuals take on the burden of this indispensable work? [p. 220]
Do you believe that a stone thrown up into the air will end up falling?
That is a law of physics!
Well it is in virtue of the same physical law that all useful things, roads, bridges, canals, bread, meat etc get produced as soon as society needs them. When a useful thing is demanded , the production of that thing tends naturally to operate with an intensity of movement equal in intensity of movement to that of a falling stone.
When a useful thing is demanded without being produced yet, the ideal price, the price which would be put on it if it were produced, grows in geometric progression while the demand grows in arithmetic progression. 353 A moment comes when this price rises high enough to surmount all current obstacles and when production begins to operate.
This being so, the government could not interfere with any aspect of production without causing harm to society.
If it produces something later than private individuals would have done , it harms society by depriving it of the thing in question during the interval.
If it produces it at the same time as private individuals, its intervention is still harmful, because it will produce at a higher price than private individuals. [p. 221]
Last of all, if it produces it earlier, society is nonetheless harmed…You are protesting. I am going to prove it to you.
What does one produce with? With present labor and past labor or capital. How does an individual starting a new industry secure for himself labor and capital? By going to look for workers and capital in those places where the services of these agents of production are least useful and where consequently they are paid the lowest.
When the demand for a new product is weaker than that for established ones, when producing it one would not recover the costs incurred, individuals will carefully abstain from production. They begin production only from the time when they are sure of covering their costs.
When government gets ahead of them, is it going to find the labor and capital it needs? It finds them where the individual producers themselves would have got them, from the society itself. But by beginning production before the costs can yet have been covered, or even before the ordinary profits of this new industry have reached the level of those of existing industries, does not the government divert capital and labor from more useful employment than it is giving them? Does it not impoverish rather than enrich society?
The government has undertaken, too early, for example, certain stretches of canal which cross deserts. The labor and capital it has devoted to the building of these canals, still unfinished after a quarter of a century, were certainly better engaged where it found them. On the other hand it began building the telegraphs, for which it had reserved the monopoly or licence for itself, too late [p. 222] and then it did not build enough of them. We have only two or three electric telegraph lines and they are still for the exclusive use of the government and railways. In the United States, where this industry is under free enterprise, the electric telegraph is everywhere and serves everybody. 354
I agree with these observations as applied to industries of a purely material nature; but you are pretty well bound to agree, I would think, that the government must be concerned in some degree with the intellectual and moral development of society. Does it not have the right, indeed the duty, to impose a salutary direction on the arts and on literature, as well as on education, and to intervene in religious services? Can it abandon these noble branches of production, to all the winds of private speculation?
Without doubt it would have this right and would be held to the fulfilling of this duty, if its intervention, in this area of the domain of production, were not always and necessarily as harmful here as in the rest.
Are we speaking of the fine arts? The government gives pensions to some men of letters and pays subsidies to some theatres. 355 I think I have proved to you that writers could easily do without the miserable pension allocated to them, if their property rights were fully recognized and respected.
The grants to the theaters are among the most blatant and scandalous abuses of our day. [p. 223]
It has been proven times many that the Théâtre-Français and the Opéra could not survive without subsidies. Do you wish, by any chance, to do away with the Théâtre-Français and the Opéra? 356
Notice first of all what profound injustice hides under this regime of subsidies. Each year the state spends more than two million to maintain two or three Parisian theaters. 357 These theaters are precisely the ones frequented by the richest element of the Parisian bourgeoisie. Who pays these two million? All taxpayers do, including the poor peasant of Lower Brittany, who in his entire life has never set foot in, and never will, the auditorium of a theater, unlike members of the wealthy audience of the Opéra Orchestra. Is this justice? Is it fair to make a poor ploughman, who passes his day stooped over the handle of his plough, contribute to the dainty pleasures of the rich Parisian bourgeoisie?
It is exploitation! 358
Once again, however, would you prefer that there were no Opéra and no Théâtre-Français? What about our nation's glory!
When Louis XIV crushed the people with taxes in order to build his cold and lamentable Château at Versailles; 359 when he reduced the wretched country folk to living on grasses, to help pay for the sumptuous expenditures of his court, did he not also invoke the glory of France? Glory! In what do you think it consists? [p. 224]
In the great things which a people is able to accomplish.
Nothing is greater or more splendid than justice. If an age should dawn when the many cease to be plundered for the sake of the few, and justice comes to be the sovereign law of society, that will be the greatest of the centuries.
I do not believe, however, that the theater needs subsidies. On the contrary, I think theaters are harmed by subsidies. Subsidized theaters are the ones which most mismanage their business. Why? I will tell you.
First of all you should note that they are robbed of part of their subsidy in various ways. A subsidized theater is required to grant free entry to ministers, to influential representatives of government, to a host of political figures, high and low. So the subsidy works, in the first place, to secure free access to the pleasures of theater-going to a crowd of people…
Who are absolutely in a position to pay their own way.
Much more so, for certain, than those who do pay for them. In the second place, the subsidies serve to enrich the most unscrupulous directors. If a theater has a deficit of fifty thousand francs, the director asks for a subsidy of a hundred and fifty thousand. They give it to him. He closes his deficit, gives up his subsidy and goes off to enjoy the income 360 the State has provided for him.
Subsidized theaters are constantly in [p. 225] debt. Is this in spite of the subsidy or because of it? Judge for yourselves. 361
A firm under free enterprise, a firm obliged to cover all its costs itself, achieves prodigious efforts to attain this end. It improves the quality of its product, it lowers its price and comes up every day with some new way of attracting customers. For the firm, this is a question of life or death. A firm enjoying special treatment and subsidies does not make these efforts. Assured of receiving a living, even when its customers may have deserted it completely, even when its annual deficit may be as high as its total costs, it tends, naturally, to look after itself as opposed to the public. If Tortoni 362 received a government subsidy for selling his ice-creams, would he take as much trouble to make sure his trade went well? Would not his ice-creams become detestable, like certain theater pieces put on at a certain theater, and would not the public, which loves good ice-creams, desert his establishment en masse ? You can easily see what a subsidy given to the national ice-cream industry would have succeeded in doing.
There are, however, worse things than subsidies. There are privileges. In France the theater industry is not open to all. It is not just anyone who is allowed to open a theater, nor even any comparable institution. Recently, when the cafés lyriques (musical cafés) became popular, the privileged theaters were very put out. The Directors collectively petitioned for the suppression of this rival industry. The minister refused to comply with their petition, but he forbade the musical cafés: first, to put on any [p. 226] plays, and secondly forbade their singers to wear costumes . Is not such a ban worthy of the Middle Ages?
I have to confess it is ludicrous.
This is what happened in 1849 and it happened to the intellectual nation on earth. The directors, however, are not especially guilty. They are bowing to imperatives created by their privileges.
The regime of privilege is by its very nature precarious. All such privileges are temporary. Now the first condition of all economic production, is clear and unrestricted ownership. In any industry there are general costs whose repayment calls for a long time-period. Examples include the building, improvement and embellishment of premises. If these costs are spread across a long period of production they become almost unnoticeable. When, on the contrary, they are concentrated into a short period of time, they raise the cost of the expenditure significantly. When the tenure is short-term, people tend to run up as few costs as possible. Few halls are worse constructed and maintained than Parisian theater auditoria. The costs of embellishing them nevertheless are a heavy charge on their directors' budgets.
Furthermore, like any industry, theaters have their good and bad seasons. If the theatre industry were free one would work less in poor seasons than in good seasons so that one did not work at a a loss. Theaters are forced to work the whole year round, whether they make [p. 227] profits or not. This is an explicit condition of their privileged status.
What an unimaginable absurdity!
Their costs of production therefore increase by the whole sum of what they are obliged to lose in a bad season. Add to this the very high taxes levied in favor of welfare establishments and you will give yourself an idea of the excessively high price charged for shows. 363 You will also understand why the directors pursued their competitors so relentlessly.
If the theater industry was free, the costs of building and maintaining the auditoria could be spread across an indefinite period. Production could also be geared to the demands of consumers. There would be lots of plays in a good season and a few in a bad one. The costs of production would then fall to the lowest possible level, and the competition would take care of aligning market prices with the costs of production. The lowering of prices would increase consumption and therefore production. There would be more theaters, more actors, more authors.
Wouldn't art be degraded by becoming more popular? [p. 228]
I am convinced, on the contrary, that art would become more noble and broadened in its appeal. Every time production is developed it improves. People say today that dramatic art is languishing and demeaned. Put your trust in freedom to pick it up and reinvigorate it.
What is true for theaters is also true for libraries, museums, exhibitions and academies.
What? You would like the State to cease opening its libraries to the public free of charge?
I am of the view that public libraries should be closed in the interests of spreading knowledge.
Oh! That is too extreme a paradox. I will protest to the bitter end.
Protest by all means but listen. The State owns a certain number of libraries. 364 The government opens some of them to the public, free of charge. It does not open all of them, please note. Some libraries are only pretexts for employing librarians. The annual expenses entailed by the management of public libraries, including in this the maintenance of buildings, add up to more than a million. 365 This means that all taxpayers have to contribute, so that certain individuals can go and study or read, for nothing, at the National Library, the Mazarin Library and elsewhere. If public libraries were run by private individuals, we [p. 229] would first of all save the whole cost of collecting these taxes. The users of books would pay a smaller sum than the one paid today by the nation.
Yes, but they would pay something, while today they pay nothing. And is it not a false economy to skimp on learning?
You are right that it is a false economy. I would ask you, however, to have a good look at how the million which taxpayers make a present of every year to book enthusiasts, is used. Look at private establishments in France, and if you can find a single one whose administration is as bad as that of the National Library, for example, one in which wealth is as badly used and the public as badly served, I will say you have won the case.
Service at the National Library is certainly deplorably organized. There is not a single manufacturing firm in France that does not do its stocktaking every year. The Library has not yet managed to complete its own one. Its catalogue, begun many years ago, is still not finished. One could, however, administer this great national institution better.
I do not think so. As long as it remains locked into the vast communism of the State, the National Library cannot be administered any better.
In reality, then, the communist management of the public libraries [p. 230] has the result of keeping most of the treasures of learning away from the public. Put this capital in the hands of private industry and you will see to what good use the latter will be able to put it. The riches of science come to us slowly and intractably today. You will see how swift and easy our access to them will become. We will no longer wait long hours and often long days, in vain, for a book or manuscript. Service will be immediate. Private industry does not make people wait.
Would science lose out in all this?
Is not a compromise possible? Could not the present libraries get by alongside private enterprise libraries?
This is the hybrid regime we have today. 366 On the one hand we have public libraries, whose vast resources remain more or less unproductive; on the other hand there are expensive and badly supplied reading rooms.
If the free libraries did not exist, the reading rooms would be on a bigger scale; all the precious output of science and literature would accumulate in them in a useful fashion ; each category of knowledge would soon acquire a specialist library, in which those who undertake research would lack for nothing; and where the wealth of scientific and literary publications would on completion be put immediately at the disposal of the public. At the same time, free competition would oblige these establishments to lower their prices to the lowest possible level.
All the same, poor students and needy scholars would have plenty to complain of under this regime.
Library and reading room expenses are the smallest element in the costs of an education. As for poor scholars, they generally work for booksellers who take account of their research costs. A part of these costs falls on taxpayers today. Would it not be fairer if they were exclusively charged to purchasers of books? Moreover, the latter would not lose out thereby, since the books would become more substantial if the business of research became easier.
I was therefore not engaging in paradox at all when I said that we should close the public libraries in the interests of the spreading of knowledge. Maintaining free libraries is communism; and whether the issue is science or industry, communism is barbarous.
This detestable communism is also to be found in the domains of education and religion.
Attack the universities as much as you like, but for pity's sake respect religion. Religion is our mainstay.
It is even in the interest of Religion that the State should stop subsidizing religious services. 367
Is it fair that a man who does not practice any of the religions recognized by the State, should be required, nevertheless, to pay their salaries? Is it fair that one should pay for something [p. 232] which one does not use? Does not all religious morality condemn an abuse and plunder of this kind? Such plunder and abuse, however, are committed every day in France, for the benefit of recognized religions. So much the worse for taxpayers who follow religions that the State does not recognize! 368
Do you think this flagrant iniquity is beneficial to Religion?
Do you also not think that these faiths would be better administered if the State did not subsidize them? Do you not think the services of religion would be distributed with more intelligence and zeal if the State did not guarantee churchmen a stipend, come what may ? 369 Besides, experience has already pronounced on the matter. Nowhere are religious services better managed than in the United States, where the different faiths receive no subsidies. Many enlightened churchmen believe that the same arrangements would give France the same results. 370
This experiment should be carried out.
The present regime of education is more defective still than that of religion. The nation allots an annual sum of seventeen millions to a business which distributes education in the name of the State, and which deals high-handedly with rival enterprises. 371
Under the Ancien Regime, education was, [p. 233] like all other industries, in the hands of certain privileged corporations. The Revolution destroyed these privileges. Unfortunately the Constituent Assembly and the Convention hastened to decree the establishment of State schools, schools run at the expense of the State, of the départements or communes. Napoleon extended and radicalized this communist notion in founding the University. 372
Grafted as it was onto the traditions of the Ancien Régime, and nurtured under the jealous eye of despotism, the University dispensed in the nineteenth century, the education of the fifteenth or sixteenth centuries. It set about teaching dead languages as people had taught them in those times, without suspecting in the least that what might be useful in the sixteenth century might well not be so in the nineteenth. 373
Why is that?
I can accept that the ancient languages were generally taught at the time of the Renaissance. Nations which had scarcely emerged from the darkness of the Middle Ages, had barely developed science and literature as yet. To equip themselves with knowledge, ideas and images, they had to draw on the vast store of antiquity, whose riches had just come to light. The indispensable tool for the assimilation of these intellectual riches was language. One could not learn what the Ancients knew, without a knowledge of Greek and Latin.
In the nineteenth century the situation has changed. All the ideas, all the knowledge of antiquity have passed into the modern languages. We can learn everything the ancients knew without knowing the ancient languages. [p. 234] Modern languages are a universal key which opens up both past and present. The dead languages resemble today those ancient and impressive machines that get put in the Conservatory of Arts and Crafts, but which are no longer used in manufacturing. 374
I am well aware that people have claimed knowledge of the dead languages to be essential for learning living ones. If this were so, however, would we not be obliged to learn half a dozen ancient languages in order to know French, for God knows how many elements went into the formation of our language? A whole lifetime would not be enough. Moreover, how many college pedants write fluently in Latin, and cannot spell in French? Voltaire was certainly weaker in Latin than the Jesuit Patouillet or Father Nonotte. 375 The dead languages are tools which pointlessly clutter up the brain and often obliterate it.
What do you mean?
I mean that by teaching Greek and Latin to children, we are prematurely communicating to them the ideas, beliefs and passions of two nations, without doubt very civilized for the era they lived in, but who would today be regarded as barbarians. This is true above all of their moral outlook. By submitting today's children to a regime of Greek and Latin, one is filling their minds with the prejudices and vices of a civilization scarcely beyond its earliest stages, instead of communicating to them (p235) the knowledge and the moral outlook of an advanced civilization; we are turning them into rather immoral little barbarians…
If education had enjoyed the benefit of freedom 376 instead of passing from the detestable regime of privilege to the still more detestable communist monopoly, it would have rejected long ago this ancient tool kit of dead languages, just as industries in free competition rid themselves of old machinery. We would teach children what is useful or is harmful to them; we would stop teaching them what is useless or harmful to them. Latin and Greek would be relegated to the brains of those museum pieces we call polyglots.
I agree with you that there are considerable reforms to be done in University management. It was odious for example to oblige those institutions which were rivals to the University to pay it an annual contribution; it was scarcely less so to prevent these establishments from opening without special authorization, and to impose on them inspection by the University's agents. Would it not be good, however, to allow the existence, alongside individual institutions which are henceforth totally private, of the institutions of the State and the communes? Would not this salutary competition serve the progress of education admirably?
This regime would scarcely be preferable to the present one. Let me give my reasons:
Educational establishments belonging to the State and to the communes do not cover their costs and are not [p. 236] required so to do. The Treasury and the communal budgets take care of their deficits. The tax payers, those who have no children as well as those who do have, provide part of the costs of this communist education. Now I ask you, can private enterprise compete on a regular basis with these half-free establishments? This half-free condition is, in truth, often very costly, perhaps because of the poor quality of the teaching, perhaps because of the high level of total costs. Have not the establishments of the State and the communes the wherewithal to lower their prices indefinitely? Has it not even been mooted that education be made entirely free? In reality this would make it as expensive as it could possibly be, but this outcome would at the same time make all competition impossible. If the State generously undertook the supplying of cloth at half-price or free , who would consider continuing with the making of cloth? Could cloth production under free enterprise ever assume any really large scale, given the presence of a competitor handing over its goods for nothing?
Liberty in education will remain the purest illusion until the State, the départements and the communes cease completely and absolutely to meddle in public education. 377
Could not the State and Commune Schools manage their costs as well as those of private production?
Let them try! Let us abolish the budget for State education. Let us make the University and communes establishments [p. 237] cover all their costs and you will soon be astonished.
Will you not at least agree with me that the State should retain the overseeing of educational establishments?
I do not see any difficulty there. I think, however, that State surveillance would rapidly become pointless under a regime of true liberty.
What prevents State establishments today from improving in quality and price terms alike, is the precarious existence that the unequal competition from the University imposes on them. Freedom would give them stability. Teaching in these circumstances would become organized on an immense scale, in the same way as any industry whose future is guaranteed will organize and develop itself. The directors of the institutions, with their interest in making known the progress achieved in their establishments, would open their doors to the public. Fathers would be able to judge for themselves the quality of the diet, material, intellectual and moral, being given to their children. Keeping a watch on what was happening in this way, would be just as good as or better than being observed by University inspectors.
This advertising of state education would please me well enough; but I ask you once more do you think private industry could meet all the needs of education?
Put your trust as to that in the law of supply and demand. As soon as some educational need made itself truly felt [p. 238] it would be in someone's interest to satisfy it. Under this regime, the production of education, 378 which the trammels of the regulatory system have confined within limits that are too narrow, would not be long in reaching workable proportions. Teaching would be better and cheaper, and therefore more extensive. The poor would no longer contribute to the paying of educational costs for the rich man's child, the single man would no longer be taxed to the benefit of the married one. Production would be more abundant, and distribution fairer. What more could you ask for?
I thought until the present time that the Revolution of 1789 had completely enfranchised labor and that we lived under a régime of absolute laissez-faire. I am beginning to cast my mistake aside.
Not only has labor not been completely enfranchised, but in certain branches of production retrogression has gone beyond that of the privileged companies. 379 Instead of once privileged industries being made free they have been made State monopolies. Now, State monopoly signals the infancy of any society. 380 In place [p. 240] of the institutions of the Middle Ages, what was substituted? The institutions of Ancient Egypt. This did not, however, stop the retention of industries enjoying special privileges. The fact is that our economic system is a strange jumble of monopolies, industries enjoying privileges and free companies.
Then where are there these industries with special privileges? Is it not the case, according to M. Thiers, that all the privileges were abolished that famous night of the fourth of August? 381
Yes, according to M. Thiers; not according to the true account. 382 There remains in France a host of privileged or controlled industries. We have to put banks at the top of the list. Then come baking, the meat trades, printing, theaters, insurance, the buying and selling of State property, medicine, the Bar, Ministerial offices, prostitution and a number of others which I forget. 383
Let us add again that Association, 384 that indispensable vehicle of industrial progress, is not freely available in France.
Ah! This time I have caught you in glaring inaccuracy. I know my Constitution well.
Article 8. Citizens have the right of association, to assemble peacefully without arms, to petition and to make public their opinions by means of the press or otherwise.
The exercise of these rights has no limit other than the rights and liberty of others and the safety of the public. 385 [p. 241]
So you see that a right of association obtains in France. Perhaps there is only too much of it?
Political associations are free in France… more or less. It is not the same with business associations. As you know, the number of kinds of association is almost boundless. Well, French law recognizes only three kinds of association: partnerships; limited partnerships; and public limited companies. 386 Save for a few irritating formalities, the first two are free; the third, however, which is the most developed, the one most useful to large-scale industrial enterprise, is subject to prior authorization. 387
All right! People want authorization and, after a careful examination, the government grants it, if there are grounds.
Yes, if there are grounds. And you forgot to say that authorization frequently arrives only six months, a year or two years afterwards, that is to say too late. You know enough about industry to know that a delay of six months is enough to cause most enterprises to be abandoned.
Socialists complain of the slowness with which business associations are establishing themselves in France. They do not see that the commercial code has put things in good order by narrowly confining the right of association. A peculiar blindness!
Partnership does not involve large accumulations of capital, especially in a country where wealth holdings are notably sub-divided; limited partnerships as they are at present regulated, put the share-holders [p. 242] at the mercy of a business manager and you know what that results in….The public limited company alone involves huge agglomerations of capital built out of small holdings and the best possible management.
That is not proven.
Take a good look at the individual industrial entrepreneur and what do you find? A capitalist and a manager of labor, a man who receives a return for his capital and a payment for his work. Take a look at the public limited company and what will you find? Workers who supply labor and receive a wage, capitalists who supply capital and receive interest. What is combined in the case of an industrial entrepreneur is separated in the limited company. This separation is one more step taken in the direction of the division of labor; it constitutes progress.
I will give you the proof of this by pointing out to you some of the inherent advantages of the limited company.
Preeminent among these is the ability to set up production projects on an immense scale. This means always being able to match the strength of the effort to that of the obstacles, and thereby cut the costs of production to a minimum.
The second advantage of the limited company lies in the superior administration which it allows. An industrial entrepreneur has responsibility only to himself. The director of a limited company is responsible to his shareholders. He must give them an account of his activities and justify them. This requirement, inherent in the very nature of the limited company, entails [p. 243] on the part of the director, the need to act with intelligence and probity. If he did not manage the business intelligently, the shareholders would not fail to remove him. If he engaged in shady operations, would he really dare to give a public account of them to a meeting of the shareholders? Well, with the system of accountancy in use today, he would not be able to keep secret any of his activities.
Where limited companies are the rule, industrial enterprises would necessarily be managed with intelligence and probity. Industry would necessarily be led by the most capable and upright men.
Industrial fraud would disappear under this regime. In which industries is fraud most common? In those which operate in small, segmented and precarious units. When one cannot count on the future, or construct a large-scale commercial existence for oneself, one is inclined to seek by all possible means, to make a lot of money quickly. The quality of products is corrupted. Merchandise known to be poor is sold as good quality stuff. When one faces on the other hand an indefinite time period ahead and one is deploying very considerable capital, one is concerned to acquire a good reputation in order to keep one's clients. So good products are supplied along with reliable business dealings.
In enterprises organized on a large scale and in a stable way there is more probity than in weak and precarious firms. Compare the various branches of production in France, England, [p. 244] Holland etc and you will be convinced of the absolute correctness of this fact. Adulteration and fraud do not have their origin in industrial liberty; they arise on the contrary from obstacles to the free and full development of industry.
The third advantage of public limited companies and perhaps the most important, is to make the situation of each enterprise a matter of public knowledge; it is to make clear on a daily basis the prosperity or the weak performance of various branches of production.
How is that so?
When a firm manages to sell its products at a price which breaks even, we say it is at par ; when production costs are not covered it is working at a loss; when production costs are more than covered, it is in profit. In a system with individualized production it is extremely difficult to grasp these different industrial situations accurately and to know when one can fruitfully put one's capital in a firm and when one cannot. You often risk further building up an already very lively branch of production, while others are waiting in vain for funds and labor. These mistakes cease to be possible in the case of limited companies. Each company having an interest in making public what it is doing in order to facilitate trading, day by day information is available as to the situation of different branches of production. By taking a look at Stock Exchange prices, we know which firms are in loss and which in [p. 245] profit, and which are breaking even. One knows exactly which one to invest in to achieve the greatest profit. If for example the share price in blast furnaces is better than that in zinc processing one would put one's capital into the iron industry rather than zinc industry. Thus iron production will be increased. What will the result be? That the market price of iron will fall until it matches exactly the costs of production: the price of shares falling in these circumstances to par, people will stop moving towards this branch of production for fear of no longer covering their costs. 388
Thanks to this publicly available information on industrial share prices, production is self regulating, in a way so to speak 'mathematical'. We are no longer exposed to producing too much of one thing and too little of another, to allowing certain prices to rise and others to fall wildly. An endless cause of disturbance disappears from the arena of production.
Notice then the singularly democratic character of limited companies. The industrial entrepreneur is the irresponsible and absolute monarch; the limited company governed by shareholders and run by a director and board of responsible people, is the republic. Having been monarchical, production becomes republican. That shows to you, once again, that monarchy is on the way out.
Society splits up into a multitude of little republics, each one having a special and economically limited purpose. Now that is a very remarkable change. [p. 246]
And one not sufficiently remarked on. Unfortunately the barbaric legislation of the imperial code presents an obstacle to this salutary transformation. ….
Is not the transformation of which you speak, however, naturally confined to certain industries? Would there not be serious disadvantages if the limited liability régime were to be applied to agriculture, for example?
What disadvantages? The limited company would solve the twin problem of the fragmentation of landed property 389 and the economic concentration of farms. The limited company would permit agriculture to be carried out on an immense scale and make farming a very long term concern, by dividing landed property up indefinitely into shares of fr.1000, fr.500, and smaller shares of fr.100, fr.50 and fr.10. From the point of view of the economics of farming, this change would have an incalculable impact. What disadvantages do you see in it? Would not a limited company have an interest in cultivating the soil as well as possible? If it farmed it badly, would it not it not be forced to close down, after its capital was used up, and leave its position, either to other firms or isolated individuals? If you see nothing amiss with an area of land in the possession, in perpetuity, of a single individual, why should you think it amiss for a collection of individuals to possess it? Does not the [p. 247] single owner carry on as well as the association of proprietors? 390
This is quite right. In truth, I cannot imagine why the limited company has not yet been applied to the cultivation of the soil.
Why is agriculture, in France, and elsewhere, the most burdened of economic sectors? Why is the limited company so tightly regulated?
Perhaps the prior authorization demanded for the limited company is now pointless; but do you not admit that government could scarcely give up the right to exert rigorous supervision over that sort of organization?
It would be much more to the point to monitor small private firms. Limited companies publish full accounts of their activities, operating quite openly, while small private firms keep what they are doing secret…..
Do you know what effect government supervision has on limited companies? It serves first of all to diminish the vigilance of shareholders, who trust quite happily in government supervision. It also serves to hamper the development of productive operations. Finally it serves to secure comfortable jobs for the government's minions.
That closes the matter! [p. 248]
The imperial commissioners, whether of the Crown or the Nation, with jurisdiction over insurance companies, railway companies and the like, are no more nor less pointless, no more or less excessive, than those well known councilors, examiners of pigs' tongues, 391 inspectors of woodpiles etc., who flourished under the ancien régime.
I think that should enlighten you on how much credit should be given to the obstacles placed in the way of the right of association. 392 [p. 249]
Besides these restrictions which apply in a general way to industrial and commercial enterprises, there are others which apply particularly to those which devote themselves to commercial banking.
Our public banks are still subject to the regime of privilege. [p. 250]
I must warn you that on this score I will wage all out war on you. I am not a supporter of free banking 393 and I never will be. I cannot understand how the government can allow anyone who wishes, to print paper money or to issue assignats, 394 and toss them freely into circulation. Moreover, [p. 251] what this marvelous utopia of free banking leads to has already been shown...
In the United States and you know what it led to there. 395 A general bankruptcy. God preserve us from a [p. 252] like calamity. I would rather have a bit less freedom and a bit more security.
The only trouble is that your information is quite false. The banks are free in the [p. 253] United States, only in the case of six individual States: Rhode Island, Massachusetts, Connecticut, New Hampshire, Maine and Vermont. And it is precisely these six states and only they which stayed clear of the general bankruptcy.
If you are skeptical I would beg you to read the remarkable works of MM. Carey 396 and Coquelin on the banks. 397 398 In them you will learn that the free banks of America caused fewer disasters than the protected banks of Europe.
And yet I have often heard the complete opposite asserted.
By people about as well informed as you. By minds imbued with all the prejudices of the regulatory regime, who never fail, on an a priori basis and when they have no information, to lay disorders in production at the door of laissez-faire .
Agree at least that it would be highly imprudent to authorize the first person who came along to issue money in paper form.
You do not really believe that. Does not everyone, do not you and I, sir, create paper money? Do we not give our creditors promises every day to pay on such and such a date, such [p. 254] and such a sum of cash? We would give them notes payable in other merchandise, in products made by ourselves, for example, if they were happy to accept notes issued on such a basis. Unfortunately, they do not want to. Why? Because they can always exchange cash against all sorts of merchandise, whilst they cannot easily make satisfactory use of other goods. What would my boot-maker do, for example, with a newspaper article which I undertook to deliver to him three months later, in exchange for a pair of boots? It is probably true, in the end, that a journalist like myself does pay for his boots with newspaper articles; but this does require after all that I succeed in placing them. If I gave my boot-maker a promise payable in leader-articles for Paris newspapers instead of money, it would be up to him to place these leaders and Lord knows whether he would manage it. So he will not accept anything payable except in good, old-fashioned money. 399
What do these promissory notes do? For the most part, they serve the process of circulation. If they did not exist, we would have to replace them with sums in gold or silver. As an individual who issues these promissory notes, I am therefore issuing money. Can I indefinitely issue this paper money? I have the right to do this; if it seems sound to me, I can make millions of promises to pay; I can fill a room with them. The question, however, is not making them, but of exchanging them against things of real value , of value incorporated in the form of cash, clothes, boots, furniture etc. Well, will it be possible for me to exchange my promises to pay indefinitely against these valuable things? It will not! [p. 255] I will barely be able to exchange them for more than the sum which people assume me to be in a position to pay. Before accepting my notes, people will enquire as to my situation, my financial resources, my intelligence, my probity and my health. After all that, they will decide whether my promise to pay is worthwhile or not. There are clever people who will attempt to have their notes valued at more than they will in fact realize; on the other hand there are incompetents who will not manage to place theirs for as much as they are worth. In general, however, each person's credit matches his abilities.
However, that is quite a difficult assessment to make.
It also requires the most delicate tact to make this assessment. Bankers acquire and develop this tact through long experience. Those who do not have it go on to ruin themselves. If the government dared to run a bank in the way it runs so many things, you would soon see the capital from this omnibus banker disappear … Fortunately, the government has not yet become the universal banker. So it is still hardly possible to pump more promises into circulation than one can reimburse.
What difference is there between a bank's promise to pay and an individual's? None, save that the one is payable on demand and the other is payable at the contracted due date. Both must be equally supported by real assets before they are accepted. Your promise will be accepted only on the assumption that it will be paid on the due date; we accept bank notes only [p. 256] if we are sure we can convert them into cash.
When banknotes are not reimbursable in cash, that is to say in the form of a good, one easily exchangeable , easily put into circulation ; when they are reimbursable in land or houses, for example, they undergo a depreciation precisely matching the difficulty of exchanging land or houses against a good more readily circulated; when they are reimbursable neither on demand nor by some specified due date, in anything possessing real value – cash, houses, land, furniture etc., – they lose all value, and cease to be anything other than scraps of paper.
How does it happen then that people accept banknotes instead of demanding cash?
Because such means of circulation are more convenient, easier to move and less costly, that is all.
Once again, though, is not the government right to intervene in order to stop the banks issuing more notes than they can reimburse?
By that reckoning it should intervene also in order to stop individuals from issuing more promissory notes than they can finance. Why does it not do so? First because it is impossible and next because it is pointless. I have no need to show you that it is impossible; I will, however, show you in two words why it is pointless. Your [p. 257] individual issues are not restricted by your will alone; they are limited by the will of others. When people judge that you have gone beyond your ability to pay, they refuse to accept your promises of payment, and your note issue finds itself halted. Certainly, no government could judge as accurately as the interested parties themselves, precisely when an individual has exceeded his financial means. The intervention of the government to regulate credit at the individual level, even supposing it were possible, would therefore be absolutely pointless.
What is true for individuals who issue promissory notes, is no less true for banks who issue notes in the form of notes redeemable in cash on demand.
What is the function of banks, or at least, their main function? It is to discount notes. It is to exchange valuable assets realizable in the future, for assets whose value is already realized or immediately realizable, such that they can be put into circulation immediately. It is the buying of promissory notes with cash or notes representing cash. 400
If a bank only uses cash to [faire l'escompte] complete this discount transaction those who sell notes payable at some future date run no risk, unless the money is counterfeit. Surely, the holders of notes payable at some future date are not so stupid as to exchange them for counterfeit money . ["la fausse monnaie" = false money] 401
If the bank pays for these promissory notes, not in cash but in notes payable on demand, the outcome is different, I agree. The bank might, tempted [p. 258] by this profitable discounting, to issue a sizeable quantity of notes without worrying whether it will always and in all circumstances, able to redeem them.
Just as the bank does not accept promissory notes from individuals, however, when it does not have sufficient trust in their being reimbursed, likewise individuals will not accept the bank's notes when they lack the certainty of being able to realize them, always and in all circumstances.
If individuals judge that the bank is not able to redeem its notes, they do not take them or they demand cash. Or perhaps they do take them, but subject to discounting against risk of non-payment.
How can the public know whether a bank is in a position to honor its notes redeemable on demand?
Since the public does not accept them, unless it is fully reassured in this respect, the banks have an interest in making their situation public. Therefore they publish weekly or monthly accounts of their dealings.
In these accounts members of the public can see how much financial paper has been issued and the total reserves both in cash and in portfolio form. They can compare assets with liabilities and hence judge whether they can continue or not to accept the bank's notes, and at what price.
What if the bank presents a false account of the situation?
In a word, it engages in fraud. In this case the  the holders of its notes can have or ought to have the power to have this bank's directors punished as fraudsters and counterfeiters, and get themselves reimbursed by the responsible shareholders to the full extent of the theft committed against them.
Moreover, the public, guided by its interest, is prudent enough to deal only with the banks whose directors and administrators offer sufficiently firm moral guarantees.
You can see then that if the government can dispense with intervening to prevent individuals from duping the banks, it can also equally well manage without intervening to prevent the banks from duping individuals.
Experience here is fully in accordance with theory. The free banks of Massachusetts, Vermont etc., have caused far fewer disasters than the privileged chartered banks of Europe.
If attempts by the government to intervene in order to regulate the issuing of banknotes are pointless, what purpose does its intervention serve?
I will explain to you in a few words what purpose it serves.
The intervention of the government in questions of credit, in the end always comes down to this: it is to grant a bank the exclusive right to issue banknotes payable on demand. When a bank possesses this right, it can easily take on any competition. Other financial companies, being restricted to cash and fixed-term notes, are in no condition to compete with the privileged bank:
In the first place, because banknotes payable on demand  are superior as instruments of circulation, to cash or promissory notes.
In the second place, because paper money can be made available more cheaply than cash. The reason is this.
It is true enough that banknotes must always be based on real and exchangeable value. The bank must always be in a position to convert them into cash. Here is what happens, however: when a bank is on stable foundations, it is not as a rule faced with more than a small number of bills to redeem. It can therefore dispense with the need to always have on hand a sum of cash equal to the sum of its notes in circulation. It has to be in a position to procure this sum, if the situation arises when the redemption of all its outstanding notes is demanded; it has to have at its disposal a sufficient amount of assets which can easily be converted into cash; this is all that it required! Nothing more could be asked of it. However, these assets, made up of shares in railway and insurance companies and various revenue-yielding properties, add up to less than the cash value of the sum total of interest payments owed.
The less cash the bank is forced to keep in reserve and the cheaper it can sell its notes redeemable on demand, the lower it can hold down the discount rate. Ordinarily the banks do not hold in cash more than a third of the value of their total note issue. 402 The level of the cash reserve however is entirely subordinate to circumstance. The bank has to maintain larger or smaller holdings of cash, according to whether monetary crises 403 [p. 261] are more or less to be feared, and also according to the ease or difficulty with which the other assets constituting its reserves, can be realized in cash. The question is a delicate one. The bank is moreover, soon alerted by the reduction of its discounts, that it is below the necessary limit. For the public is not slow to buy fewer notes when it has less confidence in their reimbursement.
A bank specifically authorized to issue bank notes redeemable on demand, therefore has a double advantage: it can supply an instrument of circulation which is perfectly tuned to those demanding money, and this perfectly tuned instrument can also supply more cheaply than its rival banks can supply the cruder instrument, namely cash. In this way it easily shrugs off all competition.
If the privileged bank however succeeds in remaining sole arbiter of the market, will it not lay down the law to the purchasers of money? Will it not force them to pay more for its bank notes than they would pay under a regime of free competition?
That would seem inevitable to me. It is the law of monopoly.
The shareholders of the privileged bank will benefit from the difference. In truth they will be obliged to admit some co-sharers to the profits of their fruitful monopoly.
In a large country, when a bank obtains the exclusive right to issue banknotes redeemable on demand, all competition succumbing in the face of this privilege, it will find its clientele increasing enormously. Soon it [p. 262] is no longer large enough for the latter; it abandons some of its work and therefore some of its profits to a few chosen bankers. It now accepts only bills bearing three good signatures and surrounds its discounting with formalities and difficulties, such that those demanding its notes are obliged to have recourse to intermediary bankers with accounts open at the bank. 404
This simplifies quite considerably the work of the privileged bank. Rather than having to deal with several thousand individuals, it now need handle only a small number of bankers, whose operations it can easily oversee, although these privileged intermediaries naturally see to it that their services get paid well. Thanks to their small numbers they can lay down the law with regard to the public. Thus they constitute, under the wing of the privileged bank, a veritable financial aristocracy, 405 which shares with the bank the advantages of that privileged status.
These advantages, however, cannot go beyond certain limits. When the bank and its intermediaries push the discount rate too high, the public turn to bankers who do their discounting in cash or term deposit accounts [billet à terme]. Unfortunately, the murderous competition of the privileged establishment, by greatly reducing the number [p. 263] of the former and permitting them only a precarious existence, leads to a permanently excessive discount price.
In times of crisis the privileges some banks have, lead to even more deadly results.
I have said to you that a bank must always have been in a position to reimburse its notes in cash. What happens when it is not in a position to reimburse them all? What happens is that the notes which cannot be reimbursed depreciate in value. Who has to accept this depreciation? The bearers of the notes. They undergo virtual bankruptcy.
Well, do you know the purpose of these privileges? They effectively authorize the banks to get away, legally , with bankruptcy of this sort. The Bank of France and the Bank of England have on numerous occasions been authorized to suspend payments in cash. The Bank of England was a notable case of this in 1797. Those holding notes lost up to 30% during the course of the suspension. The Bank of France was given the same leeway in 1848. 406
Its notes lost very little value.
The magnitude of the loss does not affect the matter. If they had lost only a thousandth per cent in one day, those bearing this loss would still have been victims of a bankruptcy.
If these two Banks had not been privileged, their shareholders would have been obliged to pay the notes presented for redemption, down to the very last sou. In that eventuality those holding notes would have lost nothing; on the other hand the shareholders would have had to impose [p. 264] on themselves sufficient sacrifice to fulfill all the Bank's obligations. This, though, is a risk that all capitalists whose funds are engaged in production run…with the exception, however, of those who enjoy the privilege of imposing their losses on the public.
Now I see why in 1848 the shareholders of the Bank of France were paid their customary dividends, while all other industrial and commercial companies experienced losses.
Let us be fair, however. The shareholders of privileged banks deserved far less condemnation than the governments which handed out these privileges. In France, as in England, the privileges dispensed by the Bank came at a heavy price. In exchange for this favor, the government took possession of all or part of the capital spent by the shareholders. Not being in a position to repay them in times of crisis, it extricated itself from this embarrassment, by authorizing the Bank to suspend its payments in cash. Being unable to fulfill its engagements towards the Bank, it authorized the Bank to fall short in its undertakings to the public. 407 [p. 265]
Formerly, when governments found themselves unable to pay their debts, they debased their coinage, adding copper or lead to it, or perhaps even reducing the weight of the coins. These days they go about it differently: they borrow large sums from those establishments exclusively authorized, by themselves, to issue paper money. Deprived of its natural and requisite foundation, this money depreciates in times of crisis. The government then intervenes in order to make the public bear the weight of the depreciation.
What is the difference between these two procedures?
In a regime of free competition, no such plundering arrangements would be possible.
In this regime, banks would have enough capital to fulfill their commitments, failing which the public would not accept their notes. In times of crisis, they alone would bear the natural losses of the contraction of circulation; they would not be permitted to offload it onto the public.
Furthermore, in this regime it would also mean that competition between the banks [p. 267] would promptly force down the rate of discount, now held at the highest level possible.
Finally, this regime would generate, on a large and growing scale, banknotes of real value, rather than bad debt, such currency being distributed according to the needs of the public and no longer to suit the convenience of parties granted special privileges. Almost the entire circulation would be economically produced in paper form, rather than expensively in cash.
I have to say that you have very much shaken my deepest beliefs. What? Can that finance feudalism 408 whose existence I attributed to free competition, really have sprung up as a result of monopoly? What? Do the high cost of discounting and the disastrous ups and downs in the circulation of our money supply result from privilege and not from liberty? [p. 268]
Precisely. You socialists are as wrong about the banks as you are about everything else. You thought the banks were subject to the regime of laisser-faire , and you attributed to freedom, abuses and miseries which have their origin in privilege. This has been the huge and deplorable error you have made about everything.
Indeed, this is quite possible.
If we had enough time to take a look at all the other industries which either enjoy special privileges or are closely regulated, such as bakery, meat production, printing, the lawyers, brokerage, sale of public property, the Bar, medicine, prostitution etc., you would see that privilege and regulation have always delivered the same disastrous results economically: a reduction and deterioration in production on the one hand, disorder and iniquitous distribution on the other.
Limits were put on the numbers of bakers in the principal areas of population. It became apparent, however, that this limitation put the people at the mercy of the bakers and so a maximum price was put on bread. 409 The wish was to correct one rule by imposing another. Was it successful? The manipulations which take place on a daily basis in the flour market, are evidence to the contrary. Speculators conspire with the bakers to create an artificial rise in the price of flour, the maximum is raised above the real price of the grain, and the authors of this immoral maneuvering pocket the difference. [p. 269]
There are some towns in France where bakery has remained free, for example in Lunel, and nowhere do people eat bread of better quality or at a lower price.
You know how profitable privileges have been to foreign exchange dealers in the case of the small numbers in whom they have been invested; you also know how much the privileges of lawyers have raised the price of civil lawsuits while at the very same time reducing the safety of legal submissions. In no free industry have failures been as numerous and as scandalous as is the case with the lawyers.
The privileges which the printers possess have increased the price of printing by creating a veritable surcharge for the printers. 410 In Paris these charges come to at least twenty five thousand francs. The printing workers, along with the bakers' and butchers' boys and the notaries' clerks, find themselves stuck their whole life long in the lower grades of the business; not possessing sufficient capital to take out a patent or incur any costs, they cannot become entrepreneurs or business managers. Another iniquity!
You drew attention to prostitution too. Is not the limitation on the numbers of brothels 411 necessary in the interests of public morality?
The obstacles applied to the multiplication of brothels do nothing save to increase the profits of the business manageresses and their silent partners, while lowering the earnings of the unfortunates who trade in their beauty and their youth. Sizeable fortunes are drawn from this [p. 261] sordid exploitation….The monopoly of the brothels is reinforced by regulations which forbid prostitutes to stay in rented furnished rooms. Those lacking the means for buying furniture are forced to put themselves at the mercy of the entrepreneurs in the prostitution business or interlopers who engage in prostitution. 412
Do you not think prostitution will disappear one day?
I do not know. In any case, however, it will not be made to go away by means of coercive regulation. On the contrary that would make it more dangerous.
In a regime in which property was fully respected, and in which, as a result, poverty was reduced to a minimum , prostitution would diminish considerably, for poverty is prostitution's very own great and indefatigable supplier. In such a regime there would only be voluntary prostitutes. Things being thus, it would be a better situation, it seems to me if prostitution were specialized, in conformity to the division of labor, rather than universalized. I would rather a few women prostituting themselves a lot than a lot of women prostituting themselves a little.
You would scarcely guess where privilege and communism have nestled most closely to one another: in the coffins where our sad mortal remains are laid; in the cemeteries where our human dust is buried. Funeral homes and cemeteries are both privileged and public. One cannot bury a corpse at will; nor are we free to open a cemetery.
In Paris, the administration of funeral services is leased out [p. 271] to a single firm. 413 The cost of that lease is truly excessive, absorbing as much as some three quarters of the presumed income. And payments are made not to the municipality but to the church businesses recognized by the State. So much the worse for the dead of religions not officially recognized! The total revenue from this funerary taxation covers the minor expenses of the parishes, the payment of well-known preachers, the cost of the sumptuous decorations in the month of Mary, etc. Heretical or orthodox, the dead can scarcely claim much!
Handed over thus to a management endowed with special privilege and, into the bargain, exorbitantly taxed, funeral services could scarcely be other than expensive and of poor quality. The service costs eight or ten times more than it would in a free market system, and its inadequacy is confirmed at all times when death rates are out of the ordinary.
Present funeral arrangements mean that the modest savings of a worker vanish under the costs of burial, unless his children resign themselves to accepting the charity of a pauper's burial. Is there a more monstrous unfairness?
The cemeteries, vast hostelries of death, belong to the municipalities. One is not allowed to compete with them by using free market cemeteries. Moreover, reserved places are extremely expensive. Six feet square in the Père Lachaise cemetery, costs more than an acre of land elsewhere. 414 Only the rich man can go to kneel at the tomb of his fathers; the pauper is reduced to being laid to rest on the bank of the common ditch, where, squeezed together like grains in a [p. 272] grinder, dwell the successive generations of the poor. The most savage hordes would be horrified by this communism of the grave; we are used to it … or to put it better, we tolerate it as we do so many other abuses which torment us … Have you noticed sometimes in our cemeteries, women of the common folk trying to find the place where their father, their husband or their child has been laid? These women had placed there a little cross with an inscription painted in white. But the cross has disappeared under a new layer of coffins. Wearied by a hopeless searching, they go away heavy hearted, carrying with them, the funeral wreath, purchased with a week's retched earnings …
Let us leave this lamentable subject. In your list of privileged industries, you cited the bar, medicine and the professoriate. Everyone is free however to become a doctor or a lawyer or a professor.
This is doubtless true, but these professions are tightly regulated. Well any regulation which obstructs entry to a profession or branch of production, or which hinders the exercise of these, contributes inevitably to raising their costs.
What? You want people to practice medicine and law freely, and to teach as they wish … But what will happen to us in the name of God?
What will happen to us? We will be cured much more quickly and cheaply. Our law suits will [p. 273] will cost us less and our children will receive a better education, that is all! If you want that, put your trust in the law of supply and demand, under a regime of free competition. If teaching were freed thus, would entrepreneurs in the education business 415 stop demanding good teachers? Would the latter not have an interest as a consequence, in being able to supply substantial and wide knowledge? Would not their salaries be in proportion to their merits? If the exercise of medicine came to be released from the regulation which impedes it, would the sick continue any less to seek out the best doctors? Among the studies imposed on doctors and lawyers today, how many are pointless practically? How many displace vital knowledge? What use, I ask you, are Latin and Greek to doctors and lawyers?
To want lawyers and doctors to stop learning Latin and Greek, is that not going too far?
The costs of this Latin and Greek are in part met by taxpayers, who sustain these university establishments, and in part by the clients of lawyers and doctors. Well I wonder to myself in vain what a lawyer and a doctor, who have to discuss French laws and heal French people who are sick, can do with Latin or Greek. All the body of Roman law has been translated, along with Hippocrates and Galen.
What about medical terminology then? [p. 274]
Do you think an illness named in French cannot be healed as easily as one named in Latin or Greek? When therefore, will we deal with it as it deserves, with this evil charlatanism of false and formulaic etiquette that Molière pursued with such remorseless good sense? 416 …
It would take volumes, however, to count the host of privileges and regulations which obstruct the entry to the most crucial professions and which hamper the carrying out of the most vital work. 417 .
I will finish by quoting a final pronouncement from that monument of barbarism known as the Code français.
There is the general complaint that the great public utilities have scarcely developed in France. Do you want to know why? Read this article of the law of the 7-9th of July, 1833. 418
Art. 3. All large-scale public works, roads of highest quality [p. 275] and docks undertaken by the state or by private companies, with or without tolls, with or without subsidies from the Treasury, with or without sale of public land, may not be carried out, except under a legal enactment which will be confirmed only after a government inquiry. An ordinance will suffice to authorize the building of roads, canals and branch railways, not exceeding twenty kilometers in length, of bridges and all other projects of lesser importance. This ordinance must also be preceded by an inquiry.
Well, do you know how much time it takes to mount a ministerial inquiry, to discuss or law or effect an ordinance? Will you complain, then, knowing this, that the spirit of business does not develop in France? Complain rather that the unfortunates you have garrotted cannot walk!
In an article on "Les Sociétés commerciales en France et en Angleterre" (Commercial companies in France and England) in the Revue des Deux Mondes ( Review of the Two Worlds ) [of 1 st of August, 1843], M. Charles Coquelin has insisted above all on the need for full liberty to commercial associations. Here are some extracts from this remarkable essay:
In recent years schools of philosophy have formed, which claim to be leading humanity, by means of the process of association, towards purposes as yet unknown. Is there any need to name them, when the last syllables of their sonorous proclamations still echo all around us? What did the leaders of these schools want? To improve the existing order, to purge this human society of the blemishes which the work of the ages has formed, to continue the efforts of past generations to perfect by degrees its procedures and structures? All this was not enough to satisfy the ambitions of these doctors of philosophy. The society we have, had not in their view been sufficiently controlled; it was not sufficiently absolute, not sufficiently restricted; it left too much room to human free will; it was too regarding of human spontaneity. What they wanted was an utterly unitary society with a single centre and single leader, a society universal in its reach and universal in its purpose, where human individuality disappears in the current of social action, one possessed of a single spirit and a single motivation, where man knows only one bond, one which clasps him, so to speak, whole and entire. This is what these so-called apostles of human sociability wanted. Is that what the future holds in store for us? Is this how progress has to unfold? The truth is far from this: the study of the true character of man and the knowledge of the facts of history, show us on the contrary, that in the natural course [p. 249 ] of things, every day has the social bond dividing and multiplying; that humankind, in its normal development, in its real aspiration to progress, rather than leading society to such a narrow and wretched uniformity, tends constantly to divide and diversifty its forms, to spread it, so to speak, to objects more numerous and varied, every day.
Man is a social creature, some say, and on this basis they want him to be absorbed in one and only one kind of society, as if the social proclivity attributed to him can be exercised only there. Yes, man is a social being; more social than any other sensitive creature. Herein is his most distinctive and his noblest attribute. Along with the feelings of sociability, however, he cherishes within himself a pressing need for freedom and for a certain spontaneity in his relationships. He is a dynamic and diverse being as much as a social one, and he inclines by instinct towards a society as dynamic and diverse as his own nature. So instead of binding himself, once and for all, to a single societal form, by a heavy chain which will impede his freedom of movement, he must instead bind himself by countless light reins, which by connecting him on all sides to his fellow men, nevertheless respect the way in which his lively nature works. This is what reason demands; this is where progress lies....
In years past the principle of association was not widely applied in France. Whether before or after the Revolution, one found scarcely more than a few of those stunted organisations that the basic development of society achieves but few or none of those powerful conglomerations of capital and labor which put a nation's commerce up to the level of large-scale enterprise. Lots of people put the blame on the spirit of the French people, little disposed, they say, to become involved in commercial enterprises. Without dwelling on this explanation, which seems to us premature, we will [p. 250] show that the cause of the harm is entirely a matter of the law regulating our industries.
The law of 1807, 419 which regulates commercial enterprises, has subsisted unchanged until the present. It is in its underlying structure and purpose that we must search for the causes of the torpor in which business languishes among us, as also in the abuses and scandals which have attended its only too rare applications. – We can sum it up thus: the law recognises only three kinds of business companies: partnerships; limited partnerships; and public limited companies.
Under partnership, all the members must be mentioned by name in a published legal agreement and their names only can be part of the corporate name. They are, moreover, united by the bonds of a narrow agreement, being fully responsible without limit, on pain of their person and goods alike, for all undertakings contracted by the society, and for the social undertakings contracted by each one of them, provided he has signed under the company name.
The limited partnership involves a contract between one partner or a number of joint partners, and one financial backer or several associated financial backers, called "sponsors" or limited share associates. Partners' names are the only ones which are posted in the legal agreement. They alone can sign under the company name. Management is theirs alone. As regards them, the firm exercises all the aspects of a partnership. As for the sponsors, they are liable for losses only to the extent of the financial contribution they have made or of the funds which they owe the firm.
The public limited company is not based on signatures under the company name. It is not designated by the name of any of the associates. It is named through the specification of the purpose of the enterprise. All the associates of the company, without [p. 251] distinction, enjoy the advantage of liability only up to the limit their agreed holdings. The company is administered by executives under revocable contract, partners or not, salaried or not, who contract with respect to their management of the company, no personal or collective obligation with respect to the operations of the company, and who are responsible only for the carrying out of their mandate.
When one considers in overall terms the system I have just explained, one cannot help being struck by the restrictive spirit which dominates it and gives itself away, just in these few words: the law recognises three types of commercial company . Association being no more than a natural act, one would expect it necessarily to be regulated in a spontaneous way between the contracting parties, in ways and under conditions freely determined by themselves, according to their interests and needs. We find, on the contrary, that the law substitutes itself in certain respects, for the parties to the contract: it encroaches on their freedom by dictating to them the kind of association allowed to them, specifically restricting them to choosing between the three forms it has itself established. It goes even further, by imposing on each of these specified forms, narrow and unbending rules, whose application it is not permissible even to modify according to different circumstances....
What exactly is the public limited company in France today? Is it by chance a form of association which commerce might be able to apply to its own purposes? It quite obviously is not; it is a form reserved by legal privilege for certain outstanding firms, whose out of the ordinary size and glamorous performance recommend them. It is only these, effectively, which can present themselves to the Council of State with any reasonable chances of success, on which chances public opinion is formed, and which have in their favor the support of the established authorities and of some [p. 252] powerful men. Firms of this kind are rare and whatever their individual importance, that fact in itself renders them of secondary interest for the nation. As for the host of second order enterprises, or to put it another way, those whose usefulness is less apparent and which can only perhaps be appreciated at the local level, access to the status of public limited company is absolutely forbidden them.
In the face of factors like these, we can see why association has not been able to make great progress in France and why, inevitably, commerce is almost entirely deprived of its benefits. Indeed, until these last few years, in which the spirit of association, anxious to get itself up to date, has burst through the legal barriers, scarcely anything about France's appearance could offer us a single clue as to the creative potential of this union of commercial forces. At present, which are the rare companies with extensive joint-stock in our country? In England, under more favourable yet still too stern conditions, association has been developed for a long time on a vastly stronger basis. The number of joint-stock companies which that country contains is incalculable; the imagination would be staggered with the volume of capital involved and, with the amount of freedom they enjoy, these companies have produced marvels. It is the same in the United States. Without our counting the innumerable joint-stock banks that country has, each sizeable part of the Union has can number a host of firms of all types, some of them enormous. The smallest cities, the towns, even the villages, have their own. They support, reinforce and energise private enterprise, at the same time as they complement it. In overall terms, whether they confine themselves to the role of protecting individual firms, or commit themselves to operations of an exceptional kind, their activity and their immense resources, increase the industrial power and wealth of the country. What a long way we are from this marvellous development!
In a letter addressed to M. Napier, in Edinburgh, J.-B. Say provided an interesting account of the privileged status of the Bank of France. Here are a few instructive extracts from that letter:
.....The Bank was recognised by the Bonaparte government, and received from him, by a law of the 24 germinal in the year XI (14 th April, 1803), the exclusive right to put bearer-bills into circulation. 420 .
The apparent motive was to give the public a more solid guarantee of notes issued. The real motive was to make the bank pay [p. 265] for the exclusive privilege of having in circulation, notes bearing no interest. It paid for this exclusive privilege, as did the Bank of England, by making loans to the government.
Events moved on. The Battle of Austerlitz took place. The public, which knew that the Bank had been obliged to lend Bonaparte 20 million of its bills, taking a look at the military strength of this Austrian prince and Russia, thought he was doomed, and themselves rushed to the Bank to have their holdings of its bills reimbursed. The Bank suspended payment in December 1805. The Battle of Austerlitz took place on December 2 nd . The capitulation of Presbourg was the outcome of the (French) victory. Bonaparte emerged more than ever the master of France's resources. He settled his debts with the Bank which accepted his payments again from the beginning of 1806.
Bonaparte took advantage of the extreme difficulties into which he himself had cast the Bank, and to avoid, so he said, the embarrassment that had forced him to suspend payments on his bearer bills, he changed the Bank's administration under a law he had passed on 22 April 1806.
This law meant that the administration of the Bank was handed over to a governor (Jaubert) and two Deputy-Governors, all three nominees of the Head of State, but who were responsible to the general body of shareholders, as represented by the two hundred most notable of them.
At the same time, the Bank's capital, which comprised 45,000 shares at Fr. 1000, was increased to 90,000 shares, constituting a capital of Fr. ninety million.
The needs of the public, which it was said, called for heftier [p. 266] discounts, and the purpose, which the government affected to hold, of taking shares in this establishment, were the apparent motive. The real reason, on the government's part, was the improved access to larger-scale borrowing, which it would gain from the enlargement of the Bank's capital.
The new shares were sold profitably from the establishment's point of view. The credit and power of the government were taken to the highest possible point by these unexpected successes.
The governor of the Bank exercised huge influence over the board of directors, made up of big wholesalers, of whom some were given honorary titles and others positions for their protégés. This influence was not a matter of duress but it was insurmountable. Upright characters who scorned the advantages one can draw from financial transactions, were in a minority in all the deliberations involved. The capital of the Bank, in various forms, (some in 5% consolidated funds, some in Treasury bonds or the takings from taxation) was entrusted whole and entire to the government; but at the same time people resisted as far as they could from lending it their bearer bills, because the latter, having no security other than unenforceable undertakings by the government, would not be reimbursable on presentation.
... In 1814, when France, divided by factions of interest and opinion, was invaded by all the armies of Europe, the government forced the bank to make it some extraordinary loans. At that time, its loans and enforceable undertakings, exceeded [p. 267] its stock of cash and short-term paper, by about 20 million. As a result, on January 18 th , when those in possession of its paper, driven by fear, presented themselves en masse, to get their bills honored, the Bank was obliged, not to suspend payment completely, but to reduce reimbursement to Fr. 500,000 per day. Each payment was limited to a Fr. 1,000 note per person. The Bank reduced its discounting, called in its dated paper, and from the month of the February following, it resumed its payments with an open counter and for all sums.
At this time, its loans to the government, on the basis of Treasury Bonds or tax receipts, or on any other paper earning interest payments, are as high as twenty six millions.
Paris, 14 th August, 1816.
( Mélanges d'Économie politique. Oeuvres de J.-B. Say ; Collection of Guillaumin and Company)
We know that the Bank has not ceased to be the supplier of government, to the great disadvantage of those obliged to suffer the consequences its privileged operations. 421
The privilege which, in France, results from the saleability, at very high prices, of positions of responsibility, established by the law of April 20 th , 1816, and in various other countries, is based on regulations, which have determined, in the public interest, real or imagined, the numbers of persons permitted to work in certain occupations, does not exist in the United States. Everyone is free to become an auctioneer, exchange dealer, bailiff, attorney, notary, insofar as these professions have their analogues in America, for the judiciary and ministerial system there is quite different.
The tendency today is to do away even with the guarantees which society once thought must be demanded of the man who aspires to defend the widow and the orphan or of anyone out to manage the lives of his fellow-citizens. In Massachusetts (I advisedly refer to the more enlightened states) to be a lawyer required one, before 1836, to have been admitted to the degree of Bachelor of Law by a university, or anyway effectively to have passed a certain number of years in the office of a practitioner, who would in due course present the candidate to the court. To practice medicine, or what is different again, to have the right to pursue a client for payment of a professional bill, one had to have acquired pass grades at the medical school of the University of Harvard, near Boston. Today you can be a lawyer in Massachusetts, on the sole condition of passing a public examination in front of a jury of lawyers, chosen for each session by the judge. As for medicine, the examination clause is no longer binding, even for claims over honoraria. Since 1836, the small barrier separating that profession from complete freedom has disappeared.
(Michel Chevalier, De la Liberté aux états-Unis . – Extract from the Revue de Deux-Mondes ( Review of Two Worlds), July 1 st 1849, p.20). 422
I will speak to you today about the disruption and disasters caused by state charity, 423 by the welfare institutions maintained , organized and financed at the government's expense and that of the regional départéments and communes. These institutions, whose costs are met by all taxpayers without distinction, constitute one of the most harmful of the attacks on property. From the point of view of the population ...
Here we go! Ecce iterum Crispinus. Here is Crispinus again. 424 The Malthusian returns. I wager you are going to call for the abolition of welfare offices in the interests of the poor [p. 277] ; but you will not be listened to I warn you. The 1848 Constitution imposed on society the obligation to provide assistance.
And society will be well able to fulfill this duty.
Then so much the worse! How can a government help the poor? By giving them money or help in kind. Where can this money and this help be found? In the taxpayers' pockets. You see the government forced therefore to resort to the Poor Rate, 425 that is to say to the most frightful engine of war which has ever been directed against the poor.
Certainly, that is an insult which honors me . I am a Malthusian when it comes to the population, 428 I am a Newtonian when it comes to gravity, and a Smithian when we are talking about the division of labor.
We are definitely going to fall out. I began, if I have to confess it to you, by letting myself be shaken by your doctrines. I was surprised to find myself praising property and admiring its very fertile results … but, it would be impossible for me to admire Malthus and even more impossible to praise him. What! You would actually dare to undertake the justification of that blasphemer who himself dared to say that "a man arriving without means of existence on land already occupied, will have to leave" , 429 of that heartless economist [p. 278] who was the apologist of infanticide, plague and famine! You could as well defend Attila or Mandrin. 430
You will bear witness that we detest Malthus as much as you yourselves do. Le Constitutionnel recently displayed its disregard for this deplorable fetish of English political economy. 431
Have you read Malthus?
I have read the passages quoted by Le Constitutionnel .
And I have read the passages quoted by M. Proudhon. 432
These are the same, or rather it is the same, for it is that passage alone they quote. Moreover, however barbaric this passage seems, it is for all that the expression of the truth.
What an abomination!
And yet they contain an essential human truth, as I will prove to you.
Tell me, then, do you think that the earth can provide all the raw materials necessary for the maintenance of a limitless number of human beings?
Definitely not! The earth can never feed more than a limited number of inhabitants. Fourier reckoned this number at [p. 279] three to five billion. 433 The population today, however, numbers scarcely a billion. 434
You accept that there is a limit, and indeed it would be absurd to maintain that the world could feed two, three, four or five hundred billion people.
Do you believe that the reproductive power of the human race is limited?
I could not say.
Look at everything which lives or grows and you will find that nature has been immensely generous with the seeds it supplies. Each kind of vegetable spreads a thousand times more seeds than the land makes fertile. Animal species are likewise provided with a superabundance of seed.
Could things be arranged differently? If animal life and vegetable life possessed only limited reproductive power, would not the slightest catastrophe be sufficient to annihilate their species? Could the organizer of everything 435 have managed without providing them with almost unlimited reproductive power?
Vegetable and animal species, however, never exceed certain limits, either because not all the seeds are fertilized, or because some of them which have been fertilized, die. It is thanks to the non-fertilization of seeds or to the swift destruction of fertilized ones, that they balance themselves with the amount of food which nature offers them.
Why should man be shielded from this law which regulates all animal and vegetable species? [p. 280]
Imagine that man's reproductive power had been limited, imagine that any union could produce only two individuals; would humanity then, I will not say have multiplied, but simply maintained itself? Instead of propagating themselves in such a way as to people the earth, would not the different races of mankind have been successively extinguished, through the contingency of sickness, war, accident etc.? Was it not necessary for man, like the animals and plants, to be provided with superabundant reproductive power?
If man possesses, like other animal and vegetable species, superabundant powers of reproduction, what must he do? Must his kind proliferate as they do, leaving to nature the task of destroying their surplus? Must man reproduce without worrying about the fate of his offspring any more than animals or plants do? No, being equipped with reason and foresight, man naturally acts in accord with Providence to maintain his kind within proper limits; he likewise refrains from giving birth to beings doomed in advance to destruction.
Doomed to destruction ...
Let us see. If man used all his reproductive power as he is only too disposed to; if the number of men as a consequence were one day to pass the limit of the means of subsistence, what would happen to the individuals produced in excess of that limit? What happens to the plants which multiply beyond the nutritive potential of the soil? 436 [p. 281]
And can nothing save them?
The productive power of the land could be increased.
Up to a certain limit. That limit reached, however, imagine that the plants multiplied in such a way as to exceed it. What would be bound to happen?
Obviously in that case the surplus will die.
And can nothing save it?
Nothing can save it.
Well what happens to plants happens also to men, when the limit of their means of existence is exceeded. That is the law which Malthus recognized and confirmed; 437 there we find the explanation of this famous passage for which you and yours condemn him: 'A man who arrives in a world already occupied, etc'. And how did Malthus recognize this law? By looking at the facts! By establishing that in all the countries where population has passed the means of subsistence, the surplus has perished through famine, illness, infanticide, etc., and that the destruction has not ceased to carry out its funereal function until the point where population has been pulled back to its necessary equilibrium. [p. 282]
To its necessary equilibrium … So you think that the countries where Malthus observed his law in operation would not have been able to feed their excess population; you think that our beautiful France, where harsh circumstances decimate generations of poor people, could not feed those who die prematurely.
I am convinced that France could feed more people and feed them better if the multitude of economic abuses which I have drawn to your attention had ceased to exist. While we are waiting, however, for light to be shone upon these abuses, while we wait for them to disappear, it is wise not to go beyond the present means of subsistence. Therefore let us demand, vigorously, the reforms necessary to push back the limits of the means of subsistence, and also let us recommend with Malthus, until that is achieved, prudence, abstinence and moral restraint . 438 Later, when the complete emancipation of property 439 has made production more abundant and distribution more just, abstinence will become less rigorous, without, however, ceasing to be necessary. 440
Does not this abstinence, this moral restraint, hide a gross immorality? 441
What immorality? Malthus thought that people were making themselves guilty of a real crime by bringing into the world beings destined inevitably to perish. He advised, consequently, [p. 285] that we abstain from creating them. What do you find immoral in this advice?
Nothing, but you know very well that complete abstinence is not possible in practice, and God knows what immoral compromise you have conjured up.
I beg you to believe that we have conjured up nothing at all. The compromise of which you speak was being practiced long before Malthus was busy working on the laws of population. Political economy never recommended it, speaking only of moral restraint . … As for deciding whether this compromise is immoral or not, this is not a matter for us economists; consult in this connection the Academy of Moral and Political Science (moral science section). 442
I will, without fail.
I understand very well that the population can exceed the limits set by the means of subsistence; but is it easy to establish that limit? Can we say, for example, that the population has gone beyond the subsistence limit in Ireland?
Yes, and the proof of it is that every year a part of the Irish population dies from hunger and poverty. 443
While the rich and powerful aristocracy which exploits Ireland has a splendid existence in London and Paris. 444 [p. 284]
If you looked closely at the causes of this monstrous inequality, you would locate them once again in the attacks made against property. For several centuries confiscation was the order of the day in Ireland. Not only did the Saxon conquerors 445 confiscate the land-holdings of the Irish people, but they also destroyed Irish productive output, by burdening it with deadly restrictions. These barbarities came to an end but the social conditions they established were maintained and aggravated, to England's great shame.
Add it was to England's profit too.
No, because today Irish poverty is maintained and increased on the one hand by the special taxes which England imposes on herself to feed the poor of Ireland, and on the other by the routine taxes she raises to protect the persons and property of the Irish aristocracy. 446
What, are you saying you would like England to let the Irish poor perish without helping them?
What, do you want England to permit the murder of Irish property owners and the pillaging of their property?
I would like to see England say to the landed aristocracy in Ireland: "You possess the greater part of Irish capital and land; well, defend your property yourselves. I no longer wish to devote a single man or a single shilling to this venture. Nor do I [p. 285] want to continue any more to maintain the poor souls you have allowed to multiply on the soil of Ireland. If the wretched Irish peasants unite to burn your country houses and share out your estates between them, so much the worse for you. I do not wish to concern myself any longer with Ireland".
Ireland would ask for nothing better, as you know. "Be so kind" , said the elderly O'Connell 447 to the members of the British Parliament, "as to take your hands off us. Leave us to our own destiny. Allow us to govern ourselves"!
If England complied with this constant request from the champions of Irish independence, what would happen to Ireland? Do you think the aristocracy would abandon its rich estates to the mercy of starving bands of Whiteboys? 448 Most certainly not! It would swiftly abandon its splendid houses in the West End of London and the Faubourg Saint Honoré in Paris, 449 to go to the defence of its threatened properties. It would then understand the need to heal Ireland's terrible wounds. It would use its capital to develop and improve agriculture. It would begin to produce food for those it has reduced to the last extremities of poverty. If it did not take this course, if it continued in the idle spending of its income abroad, while famine did its work in Ireland, would it manage without outside help, to hold on to its land and property for very long? Would it not soon be dispossessed of its domains, by the legions of the poor who are everywhere in Ireland?
If England withdrew the support of its land and sea forces, [p. 286] this would change the situation very markedly; nothing could be surer. Would the Irish not, however, have an interest in the pure and straightforward confiscation of the property of this heartless aristocracy?
This would be a very strict application of the idea of "an eye for an eye." I do not know how far it is just, how far it is moral, to punish one generation for the crimes committed by earlier ones. I do not know if the descendants of the victims of Drogheda and Wexford have the right to make the present landowners of Ireland expiate the crimes of brigands in the pay of Henry VIII, Elizabeth and Cromwell. 450 But to consider the problem from the simple point of view of utility, the Irish would be wrong to confiscate the wealth of their aristocracy. What would they do with it? They would have to share it between a vast number of peasants, who would end up exhausting the soil, for lack of the capital to apply to it. On the contrary, by respecting the property of the aristocracy, they would allow this rich, powerful and enlightened class to take care of the transformation of the land and thus contribute its proper share in the elimination of Irish poverty. The Irish poor would be the principal beneficiaries.
As long as English taxpayers, however, bear the costs of supplying security to the landowners, and food to Ireland's poor, you may be sure that the former will continue with the idle spending of their wealth abroad and the latter with their rapidly increasing numbers in the midst of dreadful poverty. You may also be quite sure that the Irish situation will go from bad to worse. [p. 287]
That English taxpayers should cease paying the costs of the government of Ireland seems entirely just to me; but would it not be inhuman to abandon the Irish poor to their fate?
The Irish landowners should be left to struggle with them. Left to themselves the Irish aristocracy will impose on their own class the harshest sacrifices to maintain their poor. This is what their interest will require, since charity, all things considered, is less expensive than repression. They will, however, measure the help they give precisely in relation to the real needs of the population. To the extent that the development of production will increase the employment of labor, it will diminish the total of almsgiving. The day when output is sufficient to feed the population, the aristocracy will cease its regular contributions to poverty relief. In this new circumstance, no artificial causes will be such as to promote excessive population growth in Ireland.
So you believe that state charity causes an artificial and abnormal growth of population.
This fact has been clearly established, following the inquiries relating to the Poor Rate in England. 451 This fact is effortlessly self-explanatory. What do the institutions known as relief agencies do? They distribute the means of subsistence to the poor, gratis. If these institutions are established by law, if they introduce an guaranteed source of income, if they create an inheritance for the poor, people will always be found to devour [p. 288] that income, to enjoy that patrimony; we will encounter them all the more, as charitable institutions become more numerous, richer and more accessible.
You will then see a slackening in the powerful motivation which impels a man to work so as to feed himself and his family. If the Parish or Commune grants the worker a wage supplement, he will reduce proportionately the length of his working day and the sum total of his efforts; if people open crèches and shelters for children, he will have more of them. If hospices 452 are founded and retirement pensions established for the elderly, he will cease worrying about the fate of his parents and about his own old age; if, finally, hospitals are opened for impoverished sick people, he will stop saving up against the days of illness. Soon you will see this man whom you have freed from the obligation to fulfill most of his duties towards his own and towards himself, devoting himself like a brute to his vilest instincts. The more charitable institutions are opened, the more you will see taverns and brothels opening too. … Ah, well-meaning philanthropists, socialists of almsgiving, you take it upon yourselves to provide for the needs of the poor, as the shepherd undertakes to provide for those of his flock, you substitute your own responsibility for individual responsibility and you think the worker will continue to prove hardworking and farsighted! You think he will still work for his children when you have arranged for the cheap raising of this human livestock in your crèches; you think that when, at his expense, you have opened free hospices, he will continue looking after his old father; you think he will still save against the [p. 289] bad times when your welfare agencies and hospitals have been made available to him. You had better think again! In eliminating responsibility you have eliminated foresight too. Where nature has put men, your communistic philanthropy will soon leave only beasts.
And these brutes whom you have created, these brutes deprived of all moral sense, will proliferate in numbers to the point where you will be quite incapable of feeding them. Then you will utter cries of distress, in which you will condemn the weaknesses of the human heart and the doctrines which overexcite them. You will cast anathema on sensual indulgence, you will denounce the incitements of the daily newspapers and I do not know what else. Unhappy people!
The abuse of charitable institutions can without doubt cause grave disorder in the economy and society; but is it possible to dispense entirely with these institutions? Can we leave the multitudinous poor to die without help?
Who is talking to you of leaving them to die without help? Let private charity freely go about its business 453 and it will help them more than your official institutions do! It will help them without breaking family ties, without separating a mother from her child, without taking the old man away from his son, without depriving the sick husband of the care his wife and daughters will provide. Private charity springs from the heart and respects the heart's attachments.
State charity does not impede private charity. [p. 290]
You are wrong. State charity discourages private charity, or causes it to dry up. The state charity budget in France reaches a hundred million. 454 That sum is levied on the income of all taxpayers. Now private charity is not drawn from some alternative source. When the state charity budget is increased, the private one is therefore necessarily decreased. And the diminution on one side exceeds the increase on the other. When society takes care of the maintenance of the poor, are we not naturally inclined to leave their care to society? We have paid a contribution towards the state charity agency, so that is where we send the poor. This is how the heart becomes closed to charity.
Another even more efficacious means has been employed, however, to root out from our souls, the most noble and generous feeling that the Creator has planted there. We may not have dared to forbid the rich to engage in charity but we have certainly forbidden the poor to ask for it. French law regards begging 455 as a crime and it punishes the beggar as though he were a thief. Begging is strictly forbidden in most of our provinces. Well, if the poor man commits a crime by accepting alms, does not the rich man become an accomplice by giving it to him? Charity has become criminal by virtue of the law. How can you want that noble plant to remain sturdy, when everything you do serves to wither and destroy it?
It could indeed be the case that state enforced charity has diminished voluntary giving. According to your own doctrines, however, is [p. 291] this a social ill? If charity provokes the artificial growth of the population, if as a consequence it engenders more harm than it cures, is it not desirable that we reduce it to its minimum, nay that we even eliminate it entirely?
I have said to you that state charity necessarily results in the artificial development of the population, I did not speak to you about private charity. I beg you not to confuse them. However developed private charity is, it remains essentially precarious , it does not supply a stable and regular provision to a specific segment of the population; nor, moreover, does it change any of the moral motivations of the human soul.
He who receives material aid from an office of state welfare, or goes into a hospital where he is coldly received, where he sometimes even serves as a guinea pig for experiments, neither feels nor could feel any gratitude for the service rendered to him. Moreover, to whom would he address his gratitude? To government or to the taxpayers? But the government is represented by cold accountants and the taxpayers pay their dues most reluctantly. The man whom society helps could not possibly feel gratitude towards a cold abstraction. He will be more inclined to think that society is acquitting itself of its debt to him and reproach it for not doing so more amply.
By contrast, a person whose poverty is relieved by an active and sensitive charity, almost always keeps alive the memory of this kindness. By receiving help, he contracts a moral obligation. Well, rich or poor, the average man [p. 292] does not like to contract more obligations than he can repay, morally or materially. He will accept a kindness graciously, but he will not agree to live on kindness. He would resign himself to the hardest sacrifices, he would load himself with the most repugnant tasks, rather than remain forever dependent on his benefactor. He would die of shame if he were to increase further the burden of his indebtedness through a culpable lack of foresight. Rather than destroying the moral motivation of the human heart, private charity strengthens and sometimes develops it. It raises man up rather than degrading him.
Therefore there is no way in which private charity could promote population growth. It would tend on the contrary to slow it down.
No more could it become, as does state welfare, a dangerous source of divisions and hatreds. Increase the numbers of so-called philanthropic institutions in France, continue the state regulation of charity, complete your work by forbidding him who engages in charity from doing so, as you already forbid him who receives it from taking it and you will soon see the results.
On the one hand you will find an enormous herd-like group of men, receiving as though it were so much debt, the harsh and stinting charity of the Treasury. These men will bitterly resent the wealthy classes for the stinginess of their charity, in the context of a poverty which that very charity has caused to grow endlessly.
On the other hand you will find taxpayers weighed down with taxation and who shy away from making a heavy burden even heavier, by adding voluntary charity to the kind already imposed by the state. [p. 293]
In such a situation can public order be maintained for long? Can such a divided society, one in which no moral tie now holds the rich and the poor together, avoid being torn apart? England was nearly destroyed by the destitution caused by the Poor Rate. Let us be very fearful of following the same path. Let us give to charity individually; let us no longer engage in communal philanthropy! ...
Yes, I understand clearly the difference between these two forms of charity; but ought not private charity to be directed and organised?
Leave it alone. 456 It is sufficiently active and ingenious to distribute its goods in the most functional way. Its instincts serve it better than your directives ever could.
I agree with you that private charity is preferable to state charity. I even agree that the latter results in proliferation of poverty. What, though, if the population increases in such a way as to exceed the number of jobs supplied by production and by the private charity budget? What should we do then? Would we have to let the excess population perish?
We would have to get private charity to double its zeal, and above all take care not to engage in state welfare, for the latter having the inevitable effect both of reducing the [p. 294] total funds available to poverty relief and of increasing the numbers of the poor, would aggravate the harm rather than assuaging it.
I say, however, that in a regime in which the property of all was respected, under one in which the economic laws which govern society would cease to be misunderstood and violated, that surplus population would never come about.
Let me first tell you a few words about the factors which depress the quality of the population, 457 which reduce the numbers of men fit for labor whilst increasing those of the invalids, idiots and cretins, blind people and deaf-mutes, whom society must feed.
That is a side to the question which is not without interest.
And one far too neglected.
Man is a combination of diverse possibilities and powers. These possibilities or powers – of instinct, feeling and intelligence – assume different proportions as between individuals. The most complete man is the one whose faculties have the most energy; the most perfect man is the one whose faculties are at once the most energetic and the most harmoniously balanced.
I can more or less see where you are going with this; [p. 295] but do you therefore think we can act on the breeding of humans as we do on that of animals?
The English have managed to improve their sheep and cattle in an almost miraculous way; they manufacture sheep – literally – of a certain size, of a certain weight, and even of a certain colour. How have they obtained these results? By crossing certain breeds and by choosing among these breeds, those individuals which will mate the most usefully.
Is it not plausible that the laws which govern the reproduction of animal species also govern that of man? Notice that the numerous races or varieties which humanity comprises, are very diversely endowed. Among the inferior races, 458 the moral and intellectual faculties exist only in the embryonic state. Certain races have some faculties particularly well developed, while the rest of their organization is backward or feeble. The Chinese, for example, have a highly developed sense of color ; on the other hand they are almost entirely lacking in the instinct for struggle, or combativeness . The Indians of North America, by contrast, are distinguished by their instinctual aggressiveness and cunning (la ruse), and also by a harmonious ear for sounds. 459 The distinctive abilities of races are transmitted without significant modification, as long as the races do not mix. The Chinese have always been colourists; they have never been distinguished by their bravery. The Indians [p. 296] have always been brave and cunning and spoken in harmonious dialects.
That would lead us to set up stud-farms 460 for the improvement of the human race.
Not at all. It suggests we should get rid of the artificial obstacles which prevent the different races of humanity from coming closer together.
But this coming together must be directed and organised.
This coming closer together will be directed and organised all on its own. The various forces in the human mind which drive people to set up families, obey it would seem, the same law of gravitation which governs matter. 461 The most forceful faculties attract the weakest ones of the same species . It is commonly observed, for example, that the gentlest and least individualistic characters are irresistibly drawn to the most arrogant and aggressive ones. Large forces attract small ones, the result being an average closer to the ideal equilibrium of human organisation.
This equilibrium tends to set itself up through the natural and spontaneous manifestation of individual fellow feeling and affinities. And since all physical organisation depends on the orderly arrangement of physical, moral and intellectual faculties, the body improves itself in tandem with the mind.
If you accept this theory, you have to accept [p. 297] also that out of the immense diversity of types and individuals, there must be a coming together of two beings attracted to each other with the greatest intensity, whose union yields, consequently, the most useful average. Between these two beings the union is necessary and eternal. It is called marriage.
Ah! So you support marriage.
I think that marriage is a natural institution. Unfortunately, look what has happened. Owing to the immense moral and material upheavals society has endured, very many people have ceased to contract unions based purely on mutual feeling. Racial prejudice or financial interest have been preferred as determining criteria, in the great issue of marriage, to natural affinities. Thus we have seen badly matched couples, and as a result of these unions, a degeneration, both of individuals and of the race. Badly matched unions being liable to break up, those who make the laws have proclaimed the indissolubility of marriage and prescribed harsh penalties for adulterers. Despite this law, however, nature has never ceased to take its course in spite of the law and, in the event, bad marriages have been no less likely to dissolution.
When a union is badly matched, when two incompatible persons are brought together, the outcome of this monstrous coupling could scarcely be anything other than a monster itself.
Everybody knows that the superior races who have governed Europe since the fall of the Roman Empire, have mostly been of bastard stock. Why? Because natural, mutual attractions, rarely determined their [p. 298] unions. The races of Royalty in particular rarely formed alliances other than in the light of political interests. So they degenerated more swiftly and completely than the others. What would have happened to the race of the French Bourbons after the reign of the imbecile Louis XIII, if it had not regained energy from the vigorous blood of the Buckinghams? 462 What happened to the Bourbons of Spain and Sicily, the Habsburgs and the offspring of the House of Hanover? What other families have produced so many cretins, idiots, monomaniacs and scrofulous offspring?
Let us look at the history of the French nobility in this light. In the Middle Ages, purely material considerations seem to have exerted only a feeble influence on aristocratic unions, as the history and literature of the time reveal. So this race maintained itself healthy and vigorous. Later, marriages became mere associations of lands and names . Alliances were negotiated between families rather than being arranged between the truly interested parties. People who did not know each other got married. What was the result? That proper unions became a mere fiction and that adulterous relationships proliferated, to the point of becoming the norm. An unhealthy promiscuity ended up by penetrating the French nobility and corrupting it to its very marrow.
The same abuses are reborn in our times. The inflated fortunes that monopolies and privileges have given rise to, tend to get together, in spite of natural propriety. Civil law, by establishing the right to an inheritance, 463 has contributed further to making marriage a matter purely of material interests. Finally, the instability which menaces all our lives under the present economic regime, has brought about [p. 299] an avid search for those sordid pairings which it is conventional to call good marriages.
Those imperfect and depraved beings who spring from badly matched unions or clandestine liaisons, being able neither to manage their wealth, or earn their living, rely on the support of their families or on public charity. In Sparta, they were drowned in the river Eurotas. 464 Our customs are gentler. We leave these semblances of humanity, fruits of greed or libertinism, to vegetate. If it would be a crime to destroy them, however, is it not an even greater crime to give birth to them?
If you make short work of bad laws and prejudices which prevent the useful coming together of the races, or which encourage the pairing of sordid interests to the detriment of unions based on mutual feeling, you can significantly improve the quality of the population, and by the same token you relieve charity of a substantial part of its burden.
All things returning to their natural order, an excess population would never then be anything we need fear.
I define as excess any level exceeding both the jobs made available by production and the ordinary resources of charity.
Do you think then that we will always have to have recourse to charity?
I do not know. It will depend absolutely on the enlightenment and foresight of individuals. If we assume a society where property is fully respected, where the openings for [p. 300] labor will always be at their maximum, where at the same time the distribution of information on labor transactions will always enable us to know whether there is an excess supply of labor or a shortage, 465 it is obvious that in that society the employable proportion of the population will be kept in work without difficulty.
When the supply of labor exceeds the demand, as I have said to you, the price of labor falls with such rapidity, that the workers, like all other buyers and sellers, have an interest in withdrawing part of their commodity from the market. If they do not withdraw it, if at the same time charitable activity does work sufficiently to come to the aid of those thrown out of the workshop and onto the street, the market price of labor can fall far below its costs of production. …
What do you mean by the production costs of labor?
I mean the expenditures incurred in order for labor to be produced and to renew itself. These costs vary, essentially, according to the type of labor. A man who uses only his physical powers, can, at a pinch, restrict his consumption to purely physical things; a man who brings into play moral and intellectual resources, cannot conserve and perpetuate them if he does not look after them like his physical powers. The production costs of labor are all the higher when that labor demands the contribution of a larger number of faculties. To put it in a nutshell, the production costs of labor are proportional to the extent and intensity of the efforts involved.
If the remuneration of a particular type of labor ceases to cover its costs of production, the workers will immediately [p. 301] direct themselves to branches of production which demand less effort for the same pay. In this case the price of labor will immediately rise in the abandoned industry, and equilibrium will soon be re-established. It is in this fashion that the vast scale of earned incomes naturally arranges itself, from the remuneration of the monarch to the pay of the humblest wage-laborer. Unfortunately, privileges and monopolies often shatter this natural harmony, by setting up excessive levels of pay to the advantage of certain occupations and certain industries. Freedom alone establishes a fair pattern of remuneration.
To the extent that the worker uses more of his intellectual and moral faculties at work, the costs of the production of labor rise. Now in all branches of production, the progress of machinery has the effect of making labor less physical and more intellectual. The more such progress proceeds, the more we find the costs of production of labor rising accordingly. At the same time, the growth of output, the fruits of progress, permits these augmented costs to be covered. In an era of barbarism, purely physical labor asks for little and receives less; in a civilised era, labor having become more intellectual, demands much and can obtain even more.
This, however, is on condition that the number of workers does not exceed the number of available jobs, otherwise the market price of labor will fall irresistibly below its costs of production.
Unless the workers remove the excess supply from the market.
Which they will not fail to do in a completely free society. Surplus workers would be fed by employed ones, with the help of voluntary charity. In such circumstances would not the population tend to diminish by itself? Insofar as subsidies by workers and charitable almsgiving extended to more and more people, would not the ever growing difficulty of getting jobs for their children induce people to raise fewer of them? In such circumstances moral restraint would then be exercised and the natural equilibrium of population effortlessly re-established. The opposite circumstance would occur if there were insufficient workers for the available jobs. Quite sure of being able both to feed and find work for their children, the heads of families would raise more of them. Marriage would become more popular and more fruitful, until equilibrium had been restored between population and the means of existence.
This is how the problem of population would be resolved in a regime of full economic liberty. This is the way, moreover, that it always resolves itself eventually. In the meantime, however, how much suffering is caused, sometimes by the artificial and unforeseen contractions in demand for labor, sometimes by the insufficiency of state charity or the stimulus the latter gives to the growth of population! These sufferings would at least be reduced to the lowest possible level, if not entirely eliminated in a system where the number of jobs available to labor and the gifts of voluntary charity were raised to the maximum amount.
Under your system of absolute property rights and of full economic freedom, what is the function of government? [p. 304]
The function of the government consists solely in assuring everyone of the security of his property.
Right, this is the "State-as-Policeman" of Jean-Baptiste Say. 468
But I in turn have a question to put to you:
There are in the world today two kinds of government: the former trace their origin to an alleged divine right.....
Alleged? Alleged? Meaning what?
The others spring from popular sovereignty. Which of them do you prefer?
I want neither one nor the other. The former are monopoly governments and the latter are communist governments. In the name of the principle of property, in the name of the right I possess to provide myself with security , or to buy it from whomever seems appropriate to me, I demand free governments . 469 [p. 305]
It means governments whose services I may accept or refuse according to my own free will.
Are you speaking seriously? 470
You will soon see. You are a partisan of divine right, 471 are you not?
Since we have been living in a republic, I have rather inclined to that persuasion, I confess.
And you regard yourself as an opponent of the right to work ? 472
Regard myself? Why, I am quite sure of it. I attest.....
Bear witness to nothing, for you are a declared supporter of the right to work.
But once again, I.....
You are a supporter of divine right. Well, the principle of divine right is absolutely identical with that of the right to work.
What is divine right? It is the right which certain families possess to the government of the people . Who conferred it on them? God himself.
Just read [p. 306] M. Joseph de Maistre's Considerations on France (Considérations sur la France) and his pamphlet The Generating Principle of Political Constitutions (Principe générateur des Constitutions politiques): 473
"Man cannot create a sovereign, says M. De Maistre. At most he can serve as an instrument for dispossessing a sovereign and delivering his estates into the hands of another sovereign, himself a prince by birth. Moreover, there has never been a sovereign family whose origin could be identified as plebeian. If such a phenomenon were to appear, it would be a new era for the world.
"......It is written: It is I who make the kings. This is not a statement made by the Church, nor a preacher's metaphor; it is the literal, simple and palpable truth. It is a law of the political world. God makes kings, quite literally so. He prepares royal families. He nourishes them within a cloud which hides their origin. They next appear, crowned with glory and honor. They assume their place." 474
All of which signifies that God has invested certain families with the right to govern men and that nobody can deprive them of the exercise of this right.
Now if you recognise that certain families have the exclusive right to carry out that special form of industry which we call government, if furthermore you agree with most of the theorists of divine right, that the people are obliged to supply, either subjects to be governed, or funds, in the form of unemployment benefits to members of these families – all this down through the centuries – are you then properly justified in rejecting [p. 307] the Right to work? Between this oppressive demand that society supply the workers with work which suits them, or with a sufficient benefit in lieu thereof, and this other oppressive that society supply the workers of royal families with work appropriate to their abilities and to their dignity, namely the work of government, or else with a Salary at least to meet minimum subsistence, where is the difference?
In truth there is none.
What does it matter if the recognition of divine right is indispensable to the maintenance of society?
Could not the Socialists reply to you that the recognition of the right to work is no less necessary to the maintenance of society? If you accept the right to work for some, must you not accept them for everyone? Is the right to work anything other than an extension of divine right?
You say that the recognition of divine right is indispensable to the maintenance of society. How then does it happen that all nations aspire to rid themselves of these monarchies by divine right? How does it happen that old monopoly governments are either ruined or on the edge of ruin?
The people are in the throes of vertigo.
That is a widespread vertigo. Believe me, however, the people have good reasons for liberating themselves from [p. 308] their old despots. Monopoly government is no better than any other. One does not govern well and above all one does not govern cheaply, when there is no competition to be feared, when the governed are deprived of the right to choose their rulers freely. Grant a grocer the exclusive right to supply a particular part of town, 475 forbid the inhabitants of that district to buy any commodities from neighboring grocers or even to provide themselves with their own groceries, and you will see what trash the privileged grocer will end up selling and at what price. You will see how he lines his pockets at the expense of the unfortunate consumers, what regal splendour he will display for the greater glory of the neighbourhood. .. Well, what is true for the smallest services is no less true for the greatest ones. A monopoly government is certainly worth more than that of a grocery shop. The production of security 476 inevitably becomes expensive and of poor quality when it is organized as a monopoly.
The monopoly of security is the main cause of the wars which up until our own day have caused such distress to the human race.
How should that be so?
What is the natural inclination of any producer, privileged or otherwise? It is to raise the numbers of his clients in order to increase his profits. Well, under a regime of monopoly, what means can producers of security employ to increase their clientele? [p. 309]
Since the people do not count in such a regime, since they are simply the legitimate domain over which the Lord's anointed can hold sway, no one can call upon their assent in order to acquire the right to administer them. Sovereigns are therefore obliged to resort to the following measures to increase the number of their subjects : first they may simply buy provinces and realms with cash; secondly they marry heiresses, either bringing kingdoms as their dowries or in line to inherit them later; or thirdly by naked force to conquer their neighbours' lands. This is the first cause of war!
On the other hand when peoples revolt sometimes against their legitimate sovereigns, as happened recently in Italy and in Hungary, the Lord's anointed are naturally obliged to force back their rebellious herd into obedience. For this purpose they construct a Holy Alliance 477 and they carry out a great slaughter of their revolutionary subjects, until they have put down their rebellion. 478 If the rebels are in league with other peoples, however, the latter get involved in the struggle, and the conflagration becomes general. A second cause of war!
I do not need to add that the consumers of security, pawns in the war, also pay the costs.
Such are the advantages of monopoly governments.
Therefore you prefer governments based on the sovereignty of the people. You rank democratic republics higher than monarchies or aristocracies. About time!
Let us be clear, please. I prefer governments [p. 310] which spring from the sovereignty of the people. But the republics which you call "democratic" are not in the least the true expression of the sovereignty of the people. These governments are extended monopolies, forms of communism. Well, the sovereignty of the people is incompatible with monopoly or communism.
So what is the sovereignty of the people, in your view?
It is the right which every man possesses to use freely his person and his goods as he pleases, the right to govern himself.
If the sovereign individual has the right to use his person and his goods, as master thereof, he naturally also has the right to defend them. He possesses the right of free defence. 479
Can each person exercise this right, however, in isolation? Can everyone be his own policeman or soldier?
No! No more than the same man can be his own ploughman, baker, tailor, grocer, doctor or priest.
It is an economic law that man cannot fruitfully engage in several jobs at the same time. Thus, we see from the very beginning of human society, all industries becoming specialised, and the various members of society turning to occupations for which their natural abilities best equip them. They gain their subsistence by exchanging the products of their particular occupation for the various things necessary to the satisfaction of their needs.
Man in isolation is, incontestably, fully master of his [p. 311] sovereignty. The trouble is this sovereign person, obliged to perform himself all the tasks which provide the necessities of life, finds himself in a wretched condition.
When man lives in society, he can preserve his sovereignty or lose it.
How does he come to lose it?
He loses it, in whole or in part, directly or indirectly, when he ceases being able to use as he chooses, his person or his goods.
Man remains completely sovereign only under a regime of full freedom. Any monopoly or special privilege is an attack launched against his sovereignty.
Under the ancien régime, with no one having the right freely to employ his person or use his goods, and no one having the right to engage freely in any industry he liked, sovereignty was narrowly confined.
Under the present régime, attacks on sovereignty, by a host of monopolies and privileges restrictive of the free activities of individuals, have not ceased. Man has still not fully recovered his sovereignty.
How can he recover it?
There are two opposing schools, which offer quite opposite solutions to this problem: the liberal school and the communist school.
The liberal school says: eliminate monopolies and privileges, give man back his natural right to carry out freely any work he chooses, and he will have full exercise of his sovereignty.
The communist school says to the contrary: be careful not to allow everyone the right to produce freely anything [p. 312] he chooses. This will lead to oppression and anarchy! Grant this right to the community and exclude individuals from it. Let all individuals unite and organize production communistically. Let the state be the sole producer and the sole distributer of wealth.
What is there behind this doctrine? It has often been said: slavery. It is the absorption and cancellation of individual will by the collective will. It is the destruction of individual sovereignty.
The most important of the industries organised in common is the one whose purpose is to protect and defend the ownership of persons and things, against all aggression.
How are the communities formed in which this activity takes place, namely the nation and communes?
Most nations have been successively enlarged by the alliances of owners of slaves or serfs as well as by their conquests. France, for example, is the product of successive alliances and conquests. By marriage, by force or fraud, 480 the rulers of the Île de France successively extended their authority over the different parts of ancient Gaul. The twenty monopolistic governments which occupied the land area of France at that time, gave way to a single monopolistic government. The kings of Provence, the dukes of Aquitaine, Brittany, Burgundy and Lorraine, the counts of Flanders etc., gave way to the King of France.
The King of France was given charge of the internal and external defence of the State. He did not, however, [p. 313] manage internal defence and civil administration on his own.
Originally, each feudal lord managed the policing 481 of his domain; each commune, freed by the use of force or by buying their way out from the onerous tutelage of his lord, handled the policing of his recognised area.
Communes and feudal lords contributed to some extent to the general defence of the realm.
We can say that the King of France had a monopoly of the general defense and the feudal lords and the burghers of the cities and towns had a monopoly of local defense.
In certain communes, policing was under the direction of an administration elected by city burghers, as in Flanders, for example. Elsewhere, policing was set up as a privileged corporation such as the bakers, butchers, and shoe makers, or in other words like all the other industries.
In England this latter form of the production of security has persisted until modern times. In the City of London, for example, policing was until not long ago still in the hands of a privileged corporation. And what was extraordinarily strange, this corporation refused to come to any agreement with the police of other districts, to such an extent that the City became a veritable place of refuge for criminals. This anomaly was not removed until the era of Sir Robert Peel's reforms. 482
What did the French Revolution do? It took from the king of France the monopoly of the general defence; but it did not destroy this monopoly. It put it in the hands [p. 314] of the nation, organised henceforth like one immense commune.
The little communes into which the former kingdom of France was divided, continued to exist. Their number was even considerably increased. The government of the large commune had the monopoly of general defence, while the governments of the small communes, under the surveillance of the central government, exercised the monopoly of local defence.
This, however, was not the end of it. Both at general commune level and at individual commune level, other industries were organised, notably education, religion and transport, etc., and citizens were variously taxed to defray the costs of these industries which were organised communally.
Later, the Socialists, poor observers of what was going on if ever there were any, not noticing that the industries which were organized in the general commune or the individual communes, functioned both more expensively and less efficiently than the industries which remained free, demanded the communal organization of all branches of production. They wanted the general commune and the individual communes no longer to limit themselves to policing, to building schools, constructing roads, paying the salaries of priests, opening libraries, subsidising theaters, maintaining stud farms, manufacturing tobacco, carpets, porcelain, etc., but rather to set about producing everything .
The public's sound common sense was shocked by this most distasteful Utopia, but it did not react further. People understood well enough that it would be disastrous to produce everything in common. What they [p. 315] did not understand was that it was also ruinous to produce certain specific things in this way. They continued therefore to engage in partial communism , while despising the Socialists calling at the top of their voices for full communism.
The Conservatives, however, supporters of partial communism and opponents of full communism, today find themselves divided on an important issue.
Some of them want partial communism to continue to operate mainly in the general commune; they support centralisation .
The others, on the other hand, demand a much larger allocation of resources for the small communes. They want the latter to be able to engage in diverse industries such as founding schools, constructing roads, building churches, subsidising theatres, etc., without needing to get the authorization of the central government. They demand decentralization .
Experience has revealed the faults of centralisation. 483 It has shown that industries run by the large commune, by the State, supply dearer goods and ones of lower quality than those produced by free industry.
Is it the case, however, that decentralization is superior? Is the implication that it is more useful to free the communes, or – and this comes down to the same thing – allow them freely to set up schools and charitable institutions, to build theaters, subsidize religion, or even also engage freely in other industries?
What do communes need to meet the expenses of the services of which they charged with? They need capital. Where can they get access to it? In [p. 316] private individuals' pockets and nowhere else. Consequently they have to levy various taxes on the people who live in the communes.
These taxes consist for the most part today, in the extra centimes added to the taxes paid to the State. Certain communes, however, have also received authorisation to set up around their boundaries a small customs office to exact tolls. This system of customs, which applies to most of the industries which have remained free, naturally increases the resources of the commune considerably. So the authorisation for setting up tolls is frequently sought from the central government. The latter rarely grants it 484 and, in this, is acting wisely; on the other hand it quite often permits the communes to exert their authority in an extra-ordinary manner, or to put it another way, it permits the majority of the administrators of the commune to set up an extraordinary tax which all the people they administer are obliged to pay.
Let the communes be emancipated, permit the majority of the inhabitants in each locality to have the right to set up as many industries as they please, and force the minority to contribute to the expenses of these industries organised communally, then let the majority be authorised to establish freely every kind of local tax, and you will soon see as many small, various and separate States being set up in France as one can count communes. You will see in succession, forty four thousand internal customs created in order to meet the local tax bill, under the title tolls ; you will see in a word the reconstitution of the Middle Ages.
Under this regime, free trade and the liberty of working 485 [p. 317] will be under assault, both by the monopolies which the communes will grant to certain branches of production, and by the taxes which they will levy on certain other branches of production to support the industries operated communally. The property of all will be exposed to the mercy of majorities.
I ask you, in the communes where socialist ideas predominate, what will happen to property? Not only will the majority levy taxes to meet the expenses of policing, road maintenance, religion, charitable institutions, schools etc., but it will levy them also to set up communal workshops, trading outlets etc. Will not the non-socialist minority be obliged to pay these local taxes?
Under such a regime, what happens to the people's sovereignty? Will it not disappear under the tyranny of the majority?
More directly even than centralisation, decentralisation leads to complete communism, that is to say to the complete destruction of sovereignty.
What has to be done to restore to men that sovereignty which monopoly robbed them of in the past; and which communism, that extended monopoly, threatens to rob them of in the future?
Quite simply the various industries formerly established as monopolies and operated today communally, need to be given their freedom. Industry still managed or regulated by the State or by the communes, must be handed over to the free activity of individuals.
In this way, man possessing, as was the case before the establishment of societies, the right to apply his faculties freely, to any kind of labor, without hindrance [p. 318] or any charge, will once again fully enjoy his sovereignty.
You have reviewed the various branches of industry which are still monopolies, or enjoy privileges or are subject to controls, proving to us, with greater or lesser success, that for the common good such production should be left in freedom. Very well then. I do not wish to return to a worn-out subject. Is it really possible, however, to take away from the State and from the communes the task of general and local defence?
And the administration of justice too?
Yes, and the administration of justice. Is it possible that these industries, to use your word, might be undertaken other than collectively, by the nation and the commune?
I would perhaps be willing to say no more about these two particular communisms if you were to agree very frankly to leave me all the others; if you would agree to reduce the size of the State so that henceforth it would be only a policeman, a soldier and a judge. This, however, is impossible!... For communism in matters of security is the keystone of the ancient edifice of servitude. Anyway, I see no reason to grant you this one rather than the others.
You must choose one or the other:
Either communism is better than freedom, and in that case all industries should be organized in common, in the State or in the commune. [p. 319]
Or freedom is preferable to communism, and in that case all industries still organised in common should be made free, including justice and police, as well as education, religion, transport, production of tobacco, etc.
This is logical.
But is it possible?
Let us see! Are we talking about justice? Under the old regime the administration of justice was not organised and its workforce paid, communally. It was organised as a monopoly and its workforce paid by those who made use of it.
For a number of centuries, no activity was more independent. It constituted, like all the other forms of material or non-material production, a privileged corporation. The members of this corporation could bequeath their offices or functions to their children, or even sell them. Possessing these offices in perpetuity , the judges made themselves well-known for their independence and integrity.
Unfortunately these arrangements had, looked at in another way, all the vices inherent in monopoly. Monopolised justice was paid for very dearly.
And God knows how many complaints and claims required the payment of bribes to the judges. 486 Witness the little verse scrawled on the door of the Palais de Justice after a fire: [p. 320]
One fine day, Dame Justice
Set the palace all on fire
Because she'd eaten too much spice. 487
Should not justice be essentially free of charge? Now, does not being free of charge entail collective organisation?
The complaints were about the justice system receiving too many bribes. It was not a complaint about the bribing itself. If the system had not been set up as a monopoly, if the judges had been able to demand only what was their legitimate payment for their industry, people would not have been complaining about the corruption.
In some countries, where those due to be tried had the right to choose their judges, the vices of monopoly were very markedly attenuated. The competition established in this case by the different courts ameliorates the justice process and makes it cheaper. Adam Smith attributed the progress of the administration of justice in England to this cause. His words are striking and I hope the passage will allay your doubts: [p. 321]
The fees of court seem originally to have been the principal support of the different courts of justice in England. Each court endeavoured to draw to itself as much business as it could, and was, upon that account, willing to take cognizance of many suits which were not originally intended to fall under its jurisdiction. The court of king's bench, instituted for the trial of criminal causes only, took cognizance of civil suits; the plaintiff pretending that the defendant, in not doing him justice, had been guilty of some trespass or misdemeanor. The court of exchequer, instituted for the levying of the king's revenue, and for enforcing the payment of such debts only as were due to the king, took cognizance of all other contract debts; the plaintiff alleging that he could not pay the king, because the defendant would not pay him. In consequence of such fictions it came, in many cases, to depend altogether upon the parties before what court they would chuse to have their cause tried; and each court endeavoured, by superior dispatch and impartiality, to draw to itself as many causes as it could. The present admirable constitution of the courts of justice in England was, perhaps, originally in a great measure, formed by this emulation, which antiently took place between their respective judges; each judge endeavouring to give, in his own court, the speediest and most effectual remedy, which the law would admit, for every sort of injustice. Originally the courts of law gave damages only for breach of contract. The court of chancery, as a court of conscience, first took upon it to enforce the specifick performance of agreements. When the breach of contract consisted in the non–payment of money, the damage sustained could be compensated in no other way than by ordering payment, which was equivalent to a specifick performance of the agreement. In such cases, therefore, the remedy of the courts of law was sufficient. It was not so in others. When the tenant sued his lord for having unjustly outed him of his lease, the damages which he recovered were by no means equivalent to the possession of the land. Such causes, therefore, for some time, went all to the court of chancery, to the no small loss of the courts of law. It was to draw back such causes to themselves that the courts of law are said to have invented the artificial and fictitious writ of ejectment, the most effectual remedy for an unjust outer or dispossession of land. 488
But once again would not a system with no charges be preferable?
So you have not yet retreated from the illusion of something being free of charge. Do I need to demonstrate to you again that the administration of justice without charges is more expensive than the alternative, given the cost of collecting the taxes paid out to maintain your free courts and to give salaries to your free judges. 489 Need I show you again that the provision of justice at no charge is necessarily iniquitous because not everyone makes equal use of the justice system and not everyone is equally litigious? What is more, justice is far from free under the present regime, as you are aware. [p. 322]
Legal proceedings are ruinously expensive. Can we complain, however, about the present administration of justice? Is not the organization of our courts irreproachable?
What! Irreproachable. An Englishman whom I accompanied one day to the Assize Court, came away from the hearing quite indignant. He could not conceive how a civilised people could permit a prosecutor of the Crown or the Republic to engage in rhetoric when calling for a death sentence. He was horror-struck that such eloquence could serve as a purveyor to the executioner.. In England they are content to lay out the accusation before the court; they do not inflame it.
Add to that the proverbial delays in our law courts, the sufferings of the unfortunates who await their sentences for months, sometimes for years, when the inquiry could be conducted in a few days; the costs and the enormous losses which these delays entail, and you will be convinced that the administration of justice has scarcely advanced in France.
We should not exaggerate, however. Today, thank Heaven, we have the jury system.
Which means that, not content with forcing taxpayers to pay the costs of the justice system, we also make them carry out the functions of judges. This is pure communism: ab uno disce omnes. 490 Personally, I do not think [p. 323] the jury is any better at judging than the National Guard, another communist institution!, is at making war. 491
Why is that?
Because the only thing one does well is one's trade or speciality, and the jury's speciality is not acting as a judge.
So it suffices for the jury to identify the crime and to understand the circumstances in which it was committed.
This is to say that it carries out the most difficult, most thorny function of the judge. It is a task so delicate, demanding judgment so sane and so practiced, a mind so calm, so dispassionate, so impartial, that we entrust the job to the chance of names in a lottery. It is exactly as if one drew by lot the names of the citizens who would be entrusted every year with the making of boots or the writing of tragedies for the community. 492
The comparison is forced.
It is more difficult in my opinion to deliver a good judgment than to make a fine pair of boots or to produce a few hundred decent rhyming couplets. A perfectly enlightened and impartial judge is rarer than a skillful shoemaker or a poet capable of writing for the T héâtre Français.
In criminal cases, the jury's lack of skill [p. 324] is revealed every day. Sad to say, however, only scant attention is ever paid to mistakes made in the Court of Assize. Nay, I would go further. People regard it almost as a crime to criticise a judgment rendered in court. In political cases does not the jury tend to pronounce according to its opinion, white (conservative) or red (radical), rather than according to what justice demands? Will not any man who is condemned by a conservative jury be absolved by a radical one and vice versa ?
Already minorities are very weary of being judged by juries belonging to majorities. See how it turns out...
Is the point at issue the industry which supplies our external and internal defence? Do you think it is worth much more than the effort committed to justice? Do not our police and especially our army cost us very dearly for the real services they supply us with? 493
In short, is there no disadvantage in this industry of defence being in the hands of the majority?
Let us examine this issue.
In a system in which the majority determines the level of taxation, and directs the use of public funds, must not taxation weigh more or less heavily on certain parts of the society, according to the predominant influences? Under the monarchy, when the majority was purely notional, when the upper class claimed for itself the right to govern the country to the exclusion of the rest of the nation, 494 did not taxation weigh principally on the consumption [p. 325] of the lower classes, on salt, wine, meat etc.? 495 Doubtless the bourgeoisie played its part in paying these taxes, but the range of its consumption being infinitely wider than that of the consumption of the lower classes, its income ended up, all said and done, much more lightly attacked. To the extent that the lower class, in becoming better educated, will gain more influence in the State, you will see a contrary tendency emerge. You will see progressive taxation, today turned against the lower class, turned against the upper class. The latter will doubtless resist this new tendency with all its powers. It will cry out and protest, quite rightly, against the plunder and the theft; but if the communal institution of universal suffrage is maintained, if a surprise reversal of power does not once again put the government of society into the hands of the rich classes, to the exclusion of the poor classes, the will of the majority will prevail, and progressive taxation will be established. Part of the property of the rich will then be legally confiscated to relieve the burden of the poor, just as a part of the property of the poor has been confiscated for too long in order to relieve the burden of the rich.
But there is worse still.
Not only can the majority of a communal government set the level of taxation wherever it chooses, but it can also make whatever use of that taxation it chooses, without taking account of the will of the minority.
In certain countries, the government of the majority uses a portion of public monies to protect essentially illegitimate and immoral properties. In [p. 326] the United States, for example, the government guarantees the southern planters the ownership of their slaves. There are, however, in the United States, abolitionists who rightly consider slavery to be a theft. It counts for nothing! The communal mechanism obliges them to contribute out of their wealth to the maintenance of this sort of theft. If the slaves were to try one day to free themselves of this wicked and odious yoke, the abolitionists would be required to go and defend, by force of arms, the property of the planters. That is the law of majorities.
Elsewhere, it can come about that the majority, pushed by political intrigue or by religious fanaticism, declares war on some foreign nation. However much the minority are horrified by this war, and curse it, they are obliged to contribute their blood and their funds to it. Once again this is the law of the majority.
So what happens? What happens is that the majority and the minority are in perpetual conflict and that war sometimes comes down from the parliamentary arena into the streets.
Today it is the red minority which is in revolt. 496 If this minority were to become a majority, and if using its majority rights, it reshaped the constitution as it wished, if it decreed progressive taxation, forced loans and paper money, who could assure you that the whites would not be in revolt tomorrow?
There is no lasting security under this system. And do you know why? Because it endlessly threatens property; because it puts at the mercy of a majority, whether blind or enlightened, moral or immoral, the persons and the goods of everybody.
If the communal regime, instead of being applied [p. 327] as in France, to a multitude of objects, found itself narrowly limited as in the United States, the causes of disagreement between the majority and the minority being less numerous, the disadvantages of this regime would be fewer. They would not, however, disappear entirely. The recognised right of the majority to tyrannise over the will of the smaller, would still in certain circumstances be likely to cause a civil war. 497
Once again, though, it is not easy to see how industry which provides the security of persons and property, could be managed, if it were made free. Your logic leads you to dreams worthy of Charenton. 498
Oh, come on ! Let us not get angry. I suppose that after having recognised that the partial communism of the State and of the commune is decidedly bad, we could let all the branches of production operate freely, with the exception of the administration of justice and public defence. Thus far I have no objection. But a radical economist , a dreamer, 499 comes along and says: Why then, after having freed the various uses of property, do you not also set free those who secure the maintenance of property? Just like the others, will not these industries be carried out in a way more equitable and useful if they are made free? You maintain that it is impracticable. Why? On the one hand, are there not, in society, men especially suited, some to judge the disputes which arise between proprietors and to assess the offences committed against property, others [p. 328] to defend the property of persons and of things, against the assaults of violence and fraud? Are there not men whom their natural aptitudes make especially fit to be judges, policemen or soldiers? On the other hand, do not all proprietors, without exception, have need for security and justice? Are not all of them inclined, therefore, to impose sacrifices on themselves to satisfy this urgent need, above all if they are powerless to satisfy it themselves, or can do so only by expending a lot of time and money?
Now, if on the one hand there are men suitable for meeting one of society's needs, and on the other hand men ready to make sacrifices to obtain the satisfaction of this need, is it not enough to allow both groups to go about their business freely 500 so that the good demanded, whether material or non-material, is produced and that the need is satisfied?
Will not this economic phenomenon be produced irresistibly, inevitably, like the physical phenomenon of falling bodies?
Am I not justified in saying, therefore, that if a society renounced the provision of public security, this important industry would nonetheless be carried out? Am I not right to add that it would be done better in a system based on liberty than a system based on community?
In what way?
That does not concern the Economists. Political economy [p. 329] can say: if such a need exists , it will be satisfied and done better in a regime of full freedom than under any other. There is no exception to this rule. As to how this industry will be organized, what its technical procedures will be, that is something which political economy cannot tell us.
Thus I can affirm that if the need for food is plainly visible in society, this need will be satisfied, and satisfied all the better, when each person remains as free as possible to produce food or to buy from whomever he thinks fit.
I can give assurances, too, that things will work out in exactly the same way, if rather than food, security is the issue. 501
Therefore, I maintain that if a community were to announce that after a given delay, say perhaps a year, it would give up financing the pay of judges, soldiers and policemen, at the end of the year that community would not possess any fewer courts and governments ready to function; and I would add that if, under this new regime, each person kept the right to engage freely in these two industries and to buy their services freely from them, security would be generated as economically and as well as possible.
I will still reply to you that this is not conceivable.
At the time when the regulatory regime kept industry prisoner within its communal boundaries, and when each privileged corporation had exclusive control of [p. 330] the communal market, people said that society was threatened, each time some audacious innovator strove to attack that monopoly. If anyone had come and said at that time that instead of the feeble and stunted industries of the privileged corporations, liberty would one day build immense factories turning out cheaper and superior products, this dreamer would have been very smartly put in his place. The conservatives of that time would have sworn by all the gods that such a thing was inconceivable .
Oh come on! How can it be imagined that each individual has the right to create his own government, or to choose his government, or even not choose it...? How would things turn out in France, if having freed all the other industries, French citizens announced by common agreement, that after a year, they would cease to support the government of the community?
On this subject all I can do is conjecture. This, however, is more or less how things would turn out. Since the need for security is still very great in our society, it would be profitable to set up businesses which provide government services. 502 Investors could be certain of covering their costs. How would these firms be set up? Isolated individuals would not be adequate, any more than they would suffice for building railways, docks etc. Huge companies would be set up, therefore, in order to produce security. These would procure the resources and the workers they needed. As soon as they felt ready to operate, [p. 331] these property-insurance companies 503 would look for a clientele. Each person would take out a subscription with the one which inspired him with most confidence and whose terms seemed to him the most favourable.
We would queue up to take out subscriptions. Most definitely we would queue up!
This industry being free, we would see as many companies set up as could usefully be formed. If there were too few, if, consequently the price of security rose too high, people would find it profitable to set up new ones. If there were too many, the surplus ones would not take long to break up. The price of security would in this way always be led back to the level of its costs of production.
How would these free companies arrange things among themselves in order to provide national security?
They would reach agreement as do monopoly or communist governments today, because they would have an interest in so doing. The more, in fact, they agreed to share facilities for the apprehension of thieves and murderers, the more they would reduce their costs.
By the very nature of their industry, these property-insurance companies would not be able to venture outside certain prescribed limits: they would lose by maintaining police in places where they had very few clients. Within their district they would nevertheless not be able [p. 332] to oppress or exploit their clients, on pain of seeing competition spring up immediately.
And if the existing company wanted to prevent the competitors establishing themselves?
In a word, if they encroached on the property of their competitors and on the sovereignty of all...Oh! In that case all those whose property and independence were threatened by the monopolists would rise up and punish them.
And if all the companies agreed to establish themselves as monopolies, what then? What if they formed a holy alliance 504 in order to impose themselves on their peoples , and if, emboldened by this coalition, they mercilessly exploited the unfortunate consumers of security, and if they extracted from them by way of heavy taxes the best part of the results of the labor of these peoples ?
If, to tell the whole story, they started doing again what the old aristocracies did right up until our era...Well, then, in that case the peoples would follow the advice of Béranger:
Peoples, form a Holy Alliance
And take each other by the hand. 505
They would unite in their turn and since they possess means of communication which their ancestors did not, and since they are a hundred times more numerous than their old rulers, the holy alliance of the aristocracies would soon be destroyed. No one would any longer be tempted in this case, I swear to you, to set up a monopoly. [p. 333]
What would one do under this regime to repulse a foreign invasion?
What would be the interest of the companies? It would be to repel the invaders, for they themselves would be the first victims of the invasion. They would agree among themselves, therefore, in order to repel them, and they would demand from those they insured, a supplementary premium for saving them from this new danger. If the insured preferred to run the risks of invasion, they would refuse to pay this supplementary premium; if not they would pay it and they would thus put the companies in a position to ward off the danger of invasion.
Just as war is inevitable in a regime of monopoly, so peace is inevitable under a regime of free government.
Under this regime governments can gain nothing through war; on the contrary they can lose everything. What interest would they have in undertaking a war? Would this be to increase their clientele? But the consumers of security, being free to create their own government as they saw fit, would escape their conquerors. If the latter wished to impose their domination on them, after having destroyed the existing government, the oppressed would immediately demand the help of other nations ....
The wars of company against company could take place, moreover, only insofar as the shareholders were willing to advance the costs. Now, war no longer being able to bring to anyone an increase in the number of clients, since consumers will no longer allow themselves to be conquered, the [p. 334] costs of war would obviously no longer be covered. Who would want therefore to advance them the funds?
I conclude from this that war would be physically impossible under this system, for no war can be waged without an advance of funds.
What conditions would a property-insurance company impose on its clients?
These conditions would be of several different kinds.
In order to be in a position to guarantee full security of person and property to those they have insured, it would be necessary: 507
1. For the insurance companies to establish certain penalties for offenders against persons and property, and for those insured to accept these penalties, in the event of their committing offences against persons and property.
2. For the companies to impose on the insured certain restrictions intended to facilitate the detection of those responsible for offences.
3. For the companies, on a regular basis, in order to cover their costs, to levy a certain premium, varying with the situation of the insured and their individual occupations, and the size, nature and value of the properties to be protected.
If the conditions stipulated were acceptable to the consumers of security, the deal would be concluded; otherwise the consumers would approach other companies, or provide for their security themselves.
Follow this hypothesis in all its details, and I think you will be convinced of the possibility of [p. 335] transforming monopolistic or communist governments into free governments.
I still see plenty of difficulties in this. For example, who will pay the debt? 508
Do you think that in selling all the property today held in common – roads, canals, rivers, forests, buildings used by all the commune governments, the equipment of all the communal services – we would not very easily succeed in reimbursing the capital debt? The latter does not exceed six billion. The value of communal property in France is quite certainly far greater than that.
Would not this system entail the destruction of any sense of nationality? If several property-insurance companies established themselves in a country, would not National Unity be destroyed?
First of all, National Unity would have to exist before it could be destroyed. Well, I do not see national unity in these shapeless agglomerations of people, formed out of violence, which violence alone maintains, for the most part.
Next, it is an error to confuse these two things, which are naturally very distinct: nation and government. A nation is one when the individuals who compose it have the same customs, the same language, the same civilisation; when they constitute a distinct and original variety of the human race. Whether this nation [p. 335] has two governments or only one, matters very little, unless one of these government surrounds, with an artificial barrier, the territories under its domination, and undertakes incessant wars against its neighbours. In this last instance, the instinct of nationality will react against this barbarous fragmentation and artificial antagonism imposed on a single people, and the disunited fractions of the people will strive incessantly to draw together again.
Now governments have until our time divided people in order to retain them the more easily in obedience; divide and rule , such has been at all times the fundamental maxim of their policy. Men of the same race, to whom a common language would supply an easy means of communication, have reacted vigorously against the enactment of this maxim; at all times they have striven to destroy the artificial barriers which separated them. When they achieved this result, they wished to have a single government in order not to be disunited again. Note, however, that they have never demanded that this government should separate them from other people...So the instinct of nationality is not selfish, as is often claimed; it is, on the contrary, essentially sympathetic towards others. Once the various governments cease dragging peoples apart and dividing them, you will see a given nationality happily accepting several others. A single government is no more necessary to the unity of a people, than a single bank, a single school, a single religion, a single grocery store, etc. [p. 337.]
There, in truth, we have a very strange solution to the problem of government!
It is the sole solution consistent with the nature of things. 509
Our discussions are drawing to a close. Do you want me to give you a resumé of our work, as they say in the National Assembly?
I have a clarification to ask of you before that. 510
You have told us that the costs of production of anything are made up of the labor bill and the interests on capital; you added that the market price of things tends naturally and irresistibly to an equilibrium with their costs of production. You have not, however, said a word about rent .
Rent does not play any part in the production costs of things.
What are you saying? Do you deny that thousands of individuals exist, not on interest payments or wages, but on a rent ?
I will not deny it. [p. 339]
So where does that rent reside if not in the price of things? If the smallholder paid no rent to his proprietor, would he not be able to sell his corn cheaper? When he produces wheat, is he not bound to include the rent in his costs of production?
He does not sell his wheat at a higher price because he pays a rent; he pays a rent because he sells his wheat at a higher price. Rent does not act as a cause in the formation of prices; it is only a result .
Cause or result, is it any the less a fact, any the less iniquitous? What! There we have a man who possesses, by way of inheritance, a huge expanse of land on which neither he nor his people have expended any labor. This land belongs to him because it once fell into the hands of one of his ancestors, the chief of one of the barbarian hordes which invaded and devastated the country. Since that time the lord of this land has obliged the peasant to hand over a third or a half of the fruits of his hard labor, by way of rent. Thousands of men have lived and still live by extracting this payment from the labor of their peers. Is this just?
Should not governments put an end to this monstrous abuse, either by seizing the land in order to restore it to the workers, or by imposing on the proprietors obligations which absorb the value of the rent? All incomes have their origin in labor, saving only this one. Is it not time that this exception was stopped? Did not J.-B. Say, himself, agree that the [p. 340] income derived from rent was the least respectable of all? 511 Give me what you take in rent and I will allow you to keep your property.
Grant me property and I will guarantee you that the rent will vanish of its own accord.
Rent vanish on its own? That would be curious!
Rent is not, as you seem to believe, the fruit of property. Rent is on the contrary, the product of various attacks made on property, since societies began.
In his researches on the origin of rent, Ricardo 512 recognised that it was not part of the costs of production . 513 This means that if products never sell at a price higher than their costs of production, above the quantity of labor they have required, there would be no rent.
If rent is not part of the costs of production, what is it then?
It is the difference which exists between the market price of things (the price at which they sell) and their production costs.
What does it matter, I repeat, that rent is not reckoned in the costs of production, if it is counted in the market price and therefore paid ?
This matters enormously. The costs of production, [p. 341] being made up of the labor necessary for the production of a product, cannot help but be part of the price paid. Whatever exceeds the costs of production, on the contrary, cannot be part of of the price paid.
I am beginning to understand.
And I think I have understood all too well.
Do not worry. If rent is not included in the costs of production, the implication is:
What are these causes? What causes are there which raise and maintain the market price of things above their costs or production, or make them fall below these costs, against the force of the natural law which acts incessantly to align the market price with the costs of production?
That is how the question should be framed. 514
If the economic law which brings the market price closer to production costs is the same as the physical law which governs the fall of bodies and maintains the equilibrium of liquid surfaces, I do not understand why its action should be disturbed by artificial causes.
You are not thinking about the dams and the uneven pieces of ground which disturb the natural flow of the water. [p. 342]
Yes but the level always re-establishes itself.
You are wrong. New artificial levels are established. The natural level does not reappear until after the dam has been broken. Now, with each person having wanted to increase the flow of water on his side without bothering about his neighbor, the field of production has been traversed by a multitude of dams. Some of them have had more water than they needed; others have been drained.
The economic equivalents of dams are called monopolies and privileges.
Now we will see how the workings of monopoly and privileges generate rent. 515
If an industry is subject to the law of free competition, it will not for very long be able to sell its products at prices higher or lower than its costs of production. Therefore it will not give rise to any rent. Those who manage it will receive only the legitimate return to their labor and the compensation necessary for the use of their capital.
If, on the contrary, certain producers enjoy the exclusive privilege of selling their merchandize in a given district, these producers will be able to conspire in always supplying this good in a quantity lower than that demanded. By this means they will succeed in raising its market price above the costs of production. The difference constitutes their rent.
On the other hand, when a commodity has been overproduced, in relation to the number of [p. 343] consumers who can reimburse its costs of production, the market price falls below those costs, and the difference once again constitutes a rent . Only this rent, instead of being paid by the consumer, is payed by the producer. Of course, this could happen only accidentally.
The production of goods of prime necessity can just on its own give rise to a considerable rent.
If one lowers the supply of luxury goods in an artificial way, with the price rising, demand will contract. In this circumstance, the price will fall rapidly, and the rent with it.
Suppose the question concerns wheat. If supply is lower than demand, the going price of wheat can rise in almost unlimited fashion. Let us examine how things work out in this connection and how the rent of land is established.
A tribe lives in the midst of a vast tract of land. It is small in numbers, and content to bring into cultivation the best fields, those which yield a sizeable product, in exchange for rather little effort. This tribe's numbers start to grow. If it cannot extend its territory further, either because of lack of security against the outside, or because of internal obstacles making difficult its natural expansion, what will happen?
If it is not permitted to draw its subsistence shortfall from outside, that is from regions where the fertile lands more than suffice to feed the population, domestic shortages will force it to pay a [p. 344] price for wheat above its costs of production. In this instance a rent from land will be created.
The rise in the price of wheat, however, will immediately initiate the cultivation of cereals on land of second quality, or more precisely lands less suitable for that particular crop. Since the production of wheat on this land is more expensive than on land of the first quality, the owners will obtain less rent. It may even happen that the marketing of a new quantity of wheat will push the market price down to the level of the production costs of the lands recently brought under cultivation, or perhaps even lower than that. In the first case, the owners of these lands will cover just the bill for their costs of production, and will receive no rent; in the second case, the production costs will not even be covered, and the rent will fall as a result; which will bring about the abandonment of the lands cultivated beyond the basic requirements .
If, on the contrary, the lands recently put into cultivation are still not enough to make good the deficit in demand, with the market price continuing to yield a rent, yet further lands, of lower quality than the previous ones, will be brought into wheat production. This trend will continue until the market price ceases to exceed the production costs of cereals in the lands most recently put into cultivation. 516
Thus we see in certain countries where the population has grown excessively without being able to spread out, and where at the same time food from outside cannot gain access, soil which is almost barren bearing stunted crops of wheat, while good lands give rise to an enormous rent. [p. 345]
Do you believe that if no artificial obstacle had got in the way of the natural expansion of populations, if no institution or preconceived notion had over-stimulated the growth of the population, if, in a word, the movement of food had always been free, the rent from land would never have been created?
I am sure that such is the case. In those circumstances, what would have happened is this. The various people on the land would have planted in each type of land whatever cultivable crop was most appropriate for that land to grow, and they would have subsisted by exchanging their surplus natural production for the commodities produced under the same conditions by the other peoples. As long as the demand for these diverse commodities, cultivated on their specific lands , did not exceed supply, there would be no rent created. Now, with this mode of natural land-use, with the soil yielding maximum production, the population would easily have been able to align itself always with the available means of subsistence.
This would be true if the various resources which the land contains and which labor transforms into consumable products, turned out to be proportional in their quantities to the various needs of man; if the extent of the wheat-lands were proportionate to the overall consumption of wheat; if the fields of olive-trees and rape seeds were proportionate to the overall consumption of oil; if deposits of ore and coal matched the overall consumption of metals and coal; but does this harmony between our [p. 346] various needs and the resources necessary to satisfy them, exist naturally? Is it not true that certain things are not found in sufficient abundance, given the need for them, and isn't one therefore always obliged to pay a price for them which is higher than the costs of production? The lands which contain primary materials and the people provided with the faculties with which to gain access to them, do they not enjoy a true natural monopoly in the sense that they must either yield or gain a rent?
There are no natural monopolies. Providence has precisely proportioned to our various needs the diverse riches she has put at our disposal. If we have used our free will and our powers, however, to destroy or waste some of these riches instead of using them all, if we have spent centuries quarrelling over small patches of land instead of spreading ourselves freely across the immense areas opening out before us; if, by confining ourselves within narrow limits, we have directly or indirectly overstimulated the reproduction of our species, if we have refused commodities coming from places where they were produced to best advantage, in order to produce them ourselves counter to nature, if in our ignorance we have thus distorted the essential order which the creator had in his wisdom established, is this the fault of Providence?
If, to speak only of France, our institutions of State charity have encouraged the abnormal growth [p. 347] of the population; if at the same time, our customs regulations have blocked the entry of foreign cereals, in such a way that it has become advantageous to chop down magnificent stands of olive-trees in order to replace them with wheat fields of wretched quality, is this Providence's fault?
If our legislation on mines, by stopping the development of mineral production, while our customs regulations were preventing the import of mineral products from abroad, has created an artificial gap in our supply of iron, lead, copper, tin, etc., is this the fault of Providence?
If a detestable monopoly, by deflecting education from its natural path, has made a large number of people unequipped for many useful employments and at at the same time steered others to an excess of training in other areas, is that the fault of Providence?
If, finally, as a result of the perverse outcomes in the natural order of society, arising from monopoly and privileges, with certain individuals becoming masters at satisfying their wildest desires, while the masses can barely meet their primary needs, the natural order of consumption has been distorted, such that some commodities have been too much in demand and others too little, is that the fault of Providence?
No, you are right, it is the fault of mankind!
Just let these causes of disruption disappear, 517 however, and you will soon see the natural order of society re-establishing itself, as one sees the natural course of water re-establishing itself after the destruction of a dam; you will see production [p. 348] concentrated in the areas where it can operate most advantageously and consumption reassume its normal proportions; you will see as a consequence large fluctuations in the market price and the natural price growing smaller and smaller, becoming almost undetectable and finally disappearing, taking rent with them. Then you will see production operating with the maximum abundance and distribution working in conformity with the laws of justice.
You will see this even more clearly when I have summarized for you the ideas of which I have given you an account in these discussions.
Please be so kind, then, as to give us this summary. 518
We took man as our starting-point. Man is driven by his physical, moral, and intellectual needs to engage in production. To this end, he employs his physical, moral and intellectual faculties. The effort he imposes on these faculties in order to produce is called "labor" . Each effort requires a corresponding process of recovery, otherwise the powers are wasted, the faculties deteriorate, and the human being wastes away, instead of maintaining themselves or progressing.
Each effort entailing some pain, each period of recovery or consumption some enjoyment, man naturally devotes himself, driven by his self-interest, [p. 349] to expending less effort and receiving more things suitable for his consumption.
This result is obtained by means of the division of labor.
The division of labor implies exchange, relationships, society .
Here a serious problem emerges.
In the state of isolation (assuming that this condition has ever existed) the efforts of man are at their minimum strength, but the individual who carries them out awards himself all the benefit. He consumes everything he produces.
In the social state, man's efforts acquire their maximum strength, thanks to the division of labor. Can each producer, however, always preserve intact the result of his efforts? Does the social condition allow the same justice, from this point of view, as the state of isolation? How, for example, can a man who spends his life producing the tenth part of a pin, 519 obtain payment as fairly matching his efforts, as can the isolated savage, who, having brought down a deer, consumes this product of his labor all on his own?
How? By means of property.
What is property? It is the natural right to freely use one's faculties and the product of one's labor.
How do the production and distribution of wealth operate under the regime of property?
Man produces all the things he needs by means of his labor, acting on the primary materials [p. 350] provided by nature. His labor is of two kinds:
When man exerts himself to produce something, this effort is called labor. When the effort is complete, when the result has been a product, this product takes the name "capital" . All capital consists of accumulated labor.
Now all production requires the contribution of these two agents: present labor and accumulated labor.
It is between these two agents that the product is shared.
How is it shared? In proportion to the costs of production of each party, that is to say the sacrifices endured or the efforts made by both the owner of present labor, or worker , and the owner of accumulated labor, or capitalist .
In what do the costs borne by the capitalist consist?
They consist in the labor provided by the capitalist, in supplying his capital to a productive endeavor, of the sacrifice he imposes on himself, and the risks he runs in engaging his capital in production.
This labor, this sacrifice and these risks, are the constituent elements of interest .
In what do the production costs borne by the worker consist?
In the total effort which the worker expends in putting his abilities to work. These abilities are of various kinds – physical, moral and intellectual – according to the nature of the work. They require, if they are to be carried out, without impairing the worker's productive abilities, a certain [p. 351] flow of compensation, again varying with the nature of the work.
This compensation, which is necessary to the accomplishment of the labor, constitutes the elements of wages (and salaries) . 520
The combination of interest and wages represent the production costs of products of all kinds.
How are the costs of a piece of calico constituted?
They consist, in the first place:
Of the wages and salaries of workers, foremen and the entrepreneurs in the weaving industry.
Of the interest on the capital set to work by the entrepreneurs in the weaving industry. This capital comprises buildings, machinery, raw materials, cash for paying the workers, etc. The capitalist who has relinquished the use of this cash, receives interest covering his work as a lender or shareholder, his sacrifices and his risk of capital deterioration or loss.
(This results in the) initial interest payments and initial wages and salaries. 521
Before being woven, the cotton has been spun. To spin it, it was necessary, in the same way, to set the capital and labor in motion – the labor of entrepreneurs, foremen, spinners; capital expenditure on buildings, machines, fuel, raw materials and cash.
(This is the) Second set of interest payments and wages and salaries.
Before being spun, the cotton was transported. To transport it, the cooperation of merchants, brokers, porters, ship-owners, entrepreneurs in the haulage business 522 were required. – The work of merchants, brokers, [p. 352] porters, ship-owners, sailors, carters; capital in the form of shops and stores, offices, wagons, ships, provisions for the crew, coaches or wagons, cash.
(This is the) Third set of interest payments and payments of earnings.
Before being transported, the cotton had to be grown. Again, this required capital and labor. – The labor of the plantation managers, of foremen and workers; capital in the form of land made cultivable, of buildings, seed, machinery, cash (If the workers are free, they are usually paid in cash; if they are slaves, they are paid, without free negotiation , in food, clothing and lodging; in both cases, the price of cotton must cover their costs, along with the earnings of the entrepreneur and the foremen, as well as the interest on the capital advanced to the workers before the sale of whatever product the harvesting yields).
(This is the) Fourth set of interest payments and earnings.
Add to this the payments made to storekeepers who put the pieces of calico within the reach of the consumer and cut them up for him according to his specified needs, and the interest on the capital put to work by these indispensable intermediaries, and you will have the overall costs of the production of calico.
Let us suppose that a plantation had supplied a thousand bales of cotton, and that from these thousand bales, twenty five thousand pieces of calico of fifty ells in length have been manufactured. Suppose, also, that these twenty five thousand pieces have been further cut into unbleached sections, at a price of 30 centimes per ell and you will have a total of… fr. 375,000. [p. 353]
This sum of fr. 375,000 will have been distributed among all those who have contributed to the production of the calico, from the slave and the planter, to the shopkeeper and his assistant.
According to what law, however, did the distribution of this sum of fr.375,000 between all those who contributed to forming its value, actually operate? What law determined the fair rate of interest of the capitalists, and the fair wages of the workers, as also the fair price of the product which yielded this interest and these wages?
This law, which is the true regulator of the economic world, I have explained thus:
When supply exceeds demand in arithmetic progression, the price falls in geometric progression, and, likewise, when demand exceeds supply in arithmetic progression, the price rises in geometric progression .
Under the sway of this law, acting in a free milieu , no one can set a price for interest, wages or products above or below the sum necessary to place that interest, wage or product on the market, that is to say at above or below the sum of all the efforts and sacrifices which they really cost.
This is because, consistent with this law, the market price of all things, whether interest, earnings or products, is endlessly and irresistibly pulled to the level of their costs of production.
Man, at once a producer and a consumer, is endlessly obliged, in a society where the division of labor has resulted in most acts of production being specialized, [p. 354] to supply what he produces so that he can demand, in exchange , the things which he needs.
When one asks for a thing, one consults only the extent and the intensity of the need one has for it; nor is one concerned with what it might have cost to produce. It may therefore happen that one imposes on oneself, in order to procure it, sacrifices and efforts considerably greater than those which its production cost. As the witness of experience shows, this is what happens when a great number of individuals need a commodity and few individuals produce it, when it is in much demand and there is little supply of it. In this case, experience also shows that a slight disproportion between demand and supply, engenders a rapid movement in price. When the disproportion increases in arithmetic progression, the change in price grows and accelerates in geometric progression.
As the price increases, however, it also acts more strongly to bring back the equilibrium between supply and demand.
When the price at which a thing sells greatly exceeds the efforts and sacrifices which its production required, the host of men occupied in less advantageous production, or whose capital, intelligence and labor happen just now to be inactive, are immediately motivated to produce this thing. The inducement is all the stronger when the price rises higher, when the gap between demand and supply is more notable. Under the pull of this inducement, a greater or a lesser number of competitors comes forward therefore, to increase production and satisfy demand more completely. [p. 355]
There will, however, be a limit to this increase in production. What will this limit be?
If the price rises in geometric progression when demand rises above supply, it likewise falls in geometric progression, when supply exceeds demand. If therefore, spurred by the lure of profit, producers increase supply, a point will come when the market price of the good falls to the levels of its costs of production. If people in this situation continue bringing to the market larger and larger quantities of this good, and if the increase in demand does not balance that of supply, we will see the market price falling progressively below the costs of production.
But, to the degree that the disparity increases in this way, the producers who are less able to cover their costs have greater interest in turning towards other branches of production. To the degree that the price drops even further, this will cause supply to slow more rapidly until the point is reached where the price returns to the costs of production.
Thus we see the market price of all things, labor, capital and products, gravitating incessantly and irresistibly towards the limit of the production costs of these things, that is to say towards the sum of the real efforts and sacrifices that their production incurred. 523 [p. 356]
If the price of all these things, however, is endlessly and irresistibly driven back to the limit of their costs of production, to the sum of real efforts and sacrifices which they have incurred, each person must inevitably receive, in the social state as much as in a state of isolation, the just payment of his efforts and sacrifices.
With this difference: that the isolated man, producing everything for himself, is forced to spend much effort in securing a small number of satisfactions, while man in society, enjoying the advantage of the division of labor, can obtain lots of satisfaction for very little effort. This satisfaction will be all the more and the [p. 357] effort all the less, to the degree that progress has further developed the division of labor, and thereby cut the production costs of things.
Unfortunately, if numerous efforts have served to develop production economically, numerous obstacles have been raised at the same time, by ignorance or human perversity, both to impede this development and to disturb the natural and equitable distribution of wealth.
It is in a free milieu , in a milieu in which the property rights of each person with respect to his faculties and the results of [p. 358] his labor are fully respected, that production develops to the maximum, and that the distribution of wealth is proportioned inevitably to the efforts and sacrifices each person has put in.
Now from the beginning of the world, the strongest and most dishonest men have infringed the internal or external property of other men, in order to consume some of their share in the fruits of production. From this arose slavery, monopolies and privileges.
At the same time as they destroyed the equitable distribution of wealth, such slavery, monopolies and privileges slowed down production, either by reducing the incentive producers had to make things, or in deflecting them away from the kind of production they could most usefully pursue. Oppression engendered poverty.
For long centuries, humanity groaned in the limbo of servitude. From one age to another, however, the somber clamor of distress and anger echoed in the hearts of the enslaved and exploited masses. The slaves rose up against their masters, demanding liberty.
Liberty! That was the cry of the captives of Egypt, the slaves of Spartacus, 524 the peasants of the Middle Ages, and more recently of the bourgeoisie oppressed by the nobility and religious corporations, of the workers oppressed by masters and guilds. Liberty! That was the cry of all those who found their property confiscated by monopoly and privilege. Liberty! That was the burning aspiration of all those whose natural rights had been forcibly repressed. [p. 359]
A day came when the oppressed found themselves strong enough to rid themselves of oppressors. It was at the end of the eighteenth century. The main industries providing for the needs of all were still organized in closed and privileged corporations. The nobility who provided internal and external defense and security were a corporation; the Parliaments which dispensed justice were a corporation; the clergy who conducted religious services were a corporation; the university and the religious orders who provided education were a corporation; the bakers, the butchers: corporations. These different states were, for the most part, independent of each other, but all found themselves subordinate to the armed body which guaranteed the material privileges of each one.
Unfortunately, when it seemed the hour had come to pull down this regime of iniquity, no one knew with what to replace it. Those who had some notion of the natural laws which govern society, spoke out in favor of laissez-faire . Those who did not believe in the existence of these natural laws protested, on the contrary, with all their might against laissez-faire and demanded the substitution of a new organisation in place of the old. The leading supporter of laissez-faire was Turgot. 525 At the head of the organisers and neo-regulators, 526 was Necker. 527
These two opposed tendencies, without including people of a reactionary persuasion, divided the French Revolution between them. The liberal element dominated the Constituent Assembly, but it was not pure. The liberals themselves did not yet have enough faith in freedom to entrust [p. 360] the direction of human affairs entirely to it. Most material production was freed from the bonds of privilege, but non-material production, with, first and foremost, the defense of property and justice, were organized on the basis of communist theories. 528 Less enlightened than the Constituent Assembly, the Convention proved to be even more communist. Compare the two Declarations of the Rights of Man of 1791 and 1793, and you will see the proof of this. 529 Finally, Napoleon, who combined the passions of a Jacobin with the prejudices of a reactionary, without any tinge of liberalism, tried to reconcile the communism of the Convention, with the monopolies and privileges of the Ancien Régime. He organized communalist 530 education, subsidized communalist religion, set up a department of bridges and highways with the purpose of establishing a vast communalist network of communication, and decreed the introduction of conscription, that is to say a communalist army. Furthermore, he centralized France like some vast commune. Nor was it any fault of his that in that centralized commune all production was not organized on the model of the University 531 and the state control of the tobacco industry. 532 If war had not prevented him, as he himself declared in his Mémoires , 533 he would certainly have accomplished these great things. On the other hand, he revived in this organised France most of the privileges and restrictions of the Ancien Régime; he reconstituted the nobility's prerogative; reestablished the privileges of the meat trade, of baking, [p. 361] of printing, of the theatres and of banks; restricted the free arrangement of labor by legislation on apprenticeships, on labour workbooks and on labor unions; the right to lend by the law of 1807; the right to make wills by the Civil Code; the right to trade by the Continental Blockade and the multitude of decrees and regulations relating to the customs. In a word, he refashioned, under the influence of two inspirations born of opposite viewpoints but equally regulatory, the old network of obstacles which had in former times shackled property.
We have lived until now under this deplorable regime, one aggravated further by the Bourbon Restoration (involving the reestablishment of the sale of offices 534 in 1816 and the increasing of Customs barriers in 1822 535 ), but far from the iniquities and poverty of our present day society being attributed to that regime, property and freedom have been held to blame. The learned men of socialism, misunderstanding the natural organization of society, and unwilling to recognize the deplorable outcomes of the restoration of the privileges of the ancien régime, along with the introduction of revolutionary or Imperial communism, maintained that the former society was offensive in its very foundations, namely property, and strove to organize a new society on a different basis. That led them to utopias, some merely absurd, others immoral and abominable. Moreover, we have seen them at work. 536
Fortunately, the Conservatives put up a barrier against the terrifying incursions of socialism; but having no more precise idea of the natural organization of society than their opponents, they could not defeat them other than out in the streets. 537 The Conservatives, supporters of the status quo because [p. 362] they found it profitable and moreover not worth worrying too much about, opposed the Socialist innovations just as they had in the course of the preceding years, opposed the property- based innovations of the supporters of the freedom of education and commerce.
It is between these two sorts of opponents of property, the former wishing to increase the number of restrictions and levies which already weigh on property, the others wishing purely and simply to preserve those which already exist, that the debate occurs today. On the one hand we have M. Thiers 538 and the old committee of the Rue de Poitiers; 539 and on the other Messieurs Louis Blanc, Pierre Leroux, Cabet, Considérant, Proudhon. 540 The spirit of Necker dominates both groups. I no longer detect the influence of Turgot.
If society is naturally organized and all that is required is to destroy the obstacles blocking the free play of its organization, that is to say the attacks made on property, in order to raise total production to the maximum consistent with the present state of advancement in the arts and sciences, and thereby render the distribution of wealth fully equitable, it is assuredly pointless to look any more to artificial organizations. There is nothing else to do other than to bring society back to a situation of pure property. 541
But how many changes must we make to reach that point? It makes one shudder!
Not so, because all the reforms needed to achieve this are consistent with justice and utility and would not offend any legitimate [p. 363] interest nor cause any harm to society.
Furthermore, one way or another, reforms, either for property or against property, will have to be made. Two systems are before us: communism and property. We have to go in one direction or the other. The regime of part-property and part-communism under which we live, cannot last.
It has already meant appalling catastrophes for us and perhaps some new ones lie in wait for us too.
We must therefore escape from this dilemma. Well, we can only leave by way of communism or by the way of property:
You must choose!
Without determining this law, and also without defining very precisely the role it plays in the production, Adam Smith clearly indicated it in this passage:
8. The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither. Such people may be called the effectual demanders, and their demand the effectual demand; since it may be sufficient to effectuate the bringing of the commodity to market. It is different from the absolute demand. A very poor man may be said in some sense to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the commodity can never be brought to market in order to satisfy it.
9. When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay the whole value of the rent, wages, and profit, which must be paid in order to bring it thither, cannot be supplied with the quantity which they want. Rather than want it altogether, some of them will be willing to give more. A competition will immediately begin among them, and the market price will rise more or less above the natural price, according as either the greatness of the deficiency, or the wealth and wanton luxury of the competitors, happen to animate more or less the eagerness of the competition. Among competitors of equal wealth and luxury the same deficiency will generally occasion a more or less eager competition, according as the acquisition of the commodity happens to be of more or less importance to them Hence the exorbitant price of the necessaries of life during the blockade of a town or in a famine.
10. When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be paid in order to bring it thither. Some part must be sold to those who are willing to pay less, and the low price which they give for it must reduce the price of the whole. The market price will sink more or less below the natural price, according as the greatness of the excess increases more or less the competition of the sellers, or according as it happens to be more or less important to them to get immediately rid of the commodity. The same excess in the importation of perishable, will occasion a much greater competition than in that of durable commodities; in the importation of oranges, for example, than in that of old iron.
11. When the quantity brought to market is just sufficient to supply the effectual demand and no more, the market price naturally comes to be either exactly, or as nearly as can be judged of, the same with the natural price. The whole quantity upon hand can be disposed of for this price, and cannot be disposed of for more. The competition of the different dealers obliges them all to accept of this price, but does not oblige them to accept of less...
15. The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it. 542