Study 5 : Social Liquidation
Revolt Library >> Anarchism >> General Idea of the Revolution in the Nineteenth Century >> Study 00005
The preceding studies, as much upon contemporaneous society as upon the reforms which it suggests, have taught us several things which it is well to recount here summarily.
Passing then to the examination of the chief ideas that offer themselves as principles for guidance, and that serve as banners to parties, we have recognized:
Thus we come to recognize the essential factors of the Revolution.
Its cause: the economic chaos which the Revolution of 1789 left after it.
Its occasion: a progressive, systematic poverty, of which the government finds itself, willy-nilly, the promoter and supporter.
Its organic principle: reciprocity; in law terms, contract.
Its aim: the guaranty of work and wages, and thence the indefinite increase of wealth and of liberty.
Its parties, which we divide into two groups: the Socialist schools, which invoke the principle of Association; and the democratic factions, which are still devoted to the principles of centralization and of the State.
Finally, its adversaries, the capitalistic, theological usurious, governmental, partizans of the statu quo, all those indeed who live less by labor than by prejudice and privilege.
To deduce the organizing principle of the Revolution, the idea at once economic and legal of reciprocity and of contract, taking account of the difficulties and opposition which this deduction must encounter, whether on the part of revolutionary sects, parties or societies, or from the reactionaries and defenders of the statu quo; to expound the totality of these reforms and new institutions, wherein labor finds its guaranty, property its limit, commerce its balance, and government its farewell; that is to tell, from the intellectual point of view, the story of the Revolution.
What I am about to say, as what I have said, is therefore neither prophecy, nor agitation, nor alarm. Everybody to-day knows well enough that I belong to no party and reject all schools, and therefore have no following to which I could give instructions and orders of the day. I tell what is; consequently what will be: I have no reason to write anything but the truth as it strikes me, and the desire to enlighten my compatriots and contemporaries upon their situation.
How and in what order will these questions arise? How long will the working out of the revolution last? Will it be completed in one night, like that of the 4th of August, or by a series of victories of the revolution over the counter-revolution? What compromises will be made? What delays and postponements granted? What modifications in principles will parties, sects, and self-conceit permit to prevail? What parliamentary, administrative, electoral, military, episodes will occur, to enliven and adorn this epic? I do not know: I am absolutely ignorant of these things. Once again, I am no more a fortuneteller than I am a man of party or sect. I deduce the general consequences of the future from the facts of the present; some leaves from the book of Destiny that I throw to the winds. This is to be, that is all I can say, because it is written, and we cannot prevent it. But in what manner it will come to pass, I cannot foresee, since we are entirely masters of our fate, and on this point, our free choice is the judge of last resort.
I therefore beg my readers not to judge my sentiments as a man entirely according to my convictions as a historian. More often than once it will fall to me to sustain, from the point of view of the necessity of things, such and such a measure, upon which, if I should listen to my heart, I should perhaps change my mind; a painful wrench for me, but for which the public will forgive me, if it prefers an inflexible logician who instructs it, to the elegant and sentimental writer who flatters it.
After these preliminaries, we have now three things to do:
1st. To cut short the disorganizing tendency which the old revolution bequeathed to us, and to proceed, with the aid of the new principle, to the dissolution of established interests. —Thus the Constituent Assembly proceeded on the night of the 4th of August 1789.
2nd. To organize, always with the aid of the new principle, the economic forces, and to lay down the law of property.
3rd. To dissolve, submerge, and cause to disappear the political or governmental system in the economic system, by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State.
Such are the questions that we are about to treat in this study, and in the two succeeding. In another work, taking up again revolutionary practice from a higher standpoint, we shall endeavor to separate from it a loftier view, notably in what concerns religious ideas, morality, philosophy, literature and the arts; and we shall say the last word about the present revolution.
Suppose that in 1852, when they were summoned to elect their representatives, the People, before going to the ballot boxes, had taken counsel with themselves, revised, as in ’89, the list of their desires, and ordered their deputies to put them into execution; that they had said to them:
We desire a peaceful revolution, but we want it to be prompt, decisive, complete. We desire that to this system of oppression and poverty should succeed a system of comfort and liberty; that for a constitution of political powers should be substituted an organization of economic forces; that the man and the citizen, instead of being attached to society by any bond of subordination and obedience, should be held only by free contract. Finally we desire that for the realization of our wishes, you should make use of the very institutions which we charge you to abolish, and the principles of law which you will have to complete, in such a way that the new society may appear as the spontaneous, natural and necessary development of the old, and that the Revolution, while abrogating the old order, should nevertheless be derived from it.
Suppose, I say, that the People, once enlightened as to their true interests, declare their will, not to reform government, but to revolutionize society: in that case, without prejudice to a better plan, without pretending that the steps herein pointed out are at all absolute, or incapable of all sorts of modifications, this is how I conceive the Representatives of the People might carry out their mandate.
I take for my starting point a question which may be deemed tiresome, the Bank of discount: I shall try to present it in a new and more interesting light, by suppressing all technical details, and all discussion of theory.
Two producers have the right to promise each other, and to guarantee reciprocally for, the sale or exchange of their respective products, agreeing upon the articles and the prices. (Art. 1589 and 1703 of the Civil Code.)
The same promise of reciprocal sale or exchange, under the same legal conditions, may exist among an unlimited number of producers: it will be the same contract, repeated an unlimited number of times.
French citizens have the right to agree, and, if desired, to club together for the establishment of bakeries, butchery shops, grocery stores, &c., which will guarantee them the sale and exchange, at a reduced price, and of good quality, of bread, meat, and all articles of consumption, which the present mercantile chaos gives them of light weight, adulterated, and at an exorbitant price. For this purpose the Housekeeper was founded, a society for the mutual insurance of a just price and honest exchange of products.
By the same rule, citizens have the right to found, for their common advantage, a Bank, with such capital as they choose, for the purpose of obtaining at a low price the currency that is indispensable in their transactions, and to compete with individual privileged banks. In agreeing among themselves with this object, they will only be making use of the right which is guaranteed to them by the principle of the freedom of commerce, and the articles 1589 and 1703 of the Civil Code, which are the interpretation of it.
Thus a Bank of Discount may be a public establishment, and to found it there is needed neither association, nor fraternity, nor obligation, nor State intervention; only a reciprocal promise for sale or exchange is needed; in a word, a simple contract.
This settled, I say that not only may a Bank of Discount be a public establishment, but that such a bank is needed. Here is the proof:
The Bank of France was founded, with Governmental privilege, by a company of stockholders, with a capital of $18,000,000. The specie at present buried in its vaults amounts to about $120,000,000. Thus five-sixths of this specie which has accumulated in the vaults of the Bank, by the substitution of paper for metal in general circulation, is the property of the citizens. Therefore the Bank, by the nature of its mechanism, which consists in using capital which does not belong to it, ought to be a public institution.
Another cause of this accumulation of specie is the gratuitous privilege which the Bank of France has obtained from the State of issuing notes against the specie of which it is the depositary. So, as every privilege is public property, the Bank of France, by its privilege alone, tends to become a public institution.
The privilege of issuing bank notes, and of gradually displacing coin by paper in the circulation, has for its immediate result, on the one hand, to give to the stockholders of the Bank an amount of interest far in excess of that due to their capital; on the other, to maintain the price of money at a high rate, to the great profit of the class of bankers and money-lenders, but to the great detriment of producers, manufacturers, merchants, consumers of every kind who make use of currency. This excess of interest paid to stockholders, and the rise in the rates for money, both the result of the desire which Power has always had to make itself agreeable to the rich, capitalistic class, are unjust, they cannot last forever; therefore the Bank, by the illegitimacy of its privileges, is doomed to become a public establishment.
I propose therefore, in the first place, in conformity with the indications furnished by financial practice, that the Representatives of the people, who hold the portfolios of their departments, shall make use of the power granted to them by the Constitution of 1848, and promulgate a decree declaring the Bank of France, not the property of the State, I shall shortly tell why, but an institution of public utility, and ordering the dissolution of the company.
That is not all.
The Bank of France, having become an institution of public utility, and having its capital furnished by its own customers, will no longer have to serve any outside interests. In the first place, the axiom of the law, Res sua nulli servit, is contrary to it. Moreover, the general good, which requires that money, like meat, wine and other merchandise, shall be sold at the lowest price possible, is opposed to it. All merchants and manufacturers recognize this: it is the dearness of money and capital which keeps up poverty in our country, and causes our inferiority to England.
The present rate of interest on money at the Bank is 4 per cent; which means 5, 6, 7, 8 and 9 per cent. at other bankers, who almost alone have the privilege of discounting at the Bank.
Well, as this interest belongs to the public, the public will be able to reduce it at will to 3, 2, 1, ½ and ¼ per cent., according to whether it is found to be of greater advantage to draw a large revenue from the Bank, or to carry on business at a lower cost.
Let this course of reduction, for however small an amount, once be entered upon, and continued as slowly as you like, faster or more slowly makes no difference; then, I assert, the social tendency in all that concerns the price of money and discount, throughout the whole territory of the Republic, will be immediately changed, ipso facto, and that this simple change will cause the Country to pass from the present capitalistic and governmental system to a revolutionary system.
Ah! is anything so terrible as a revolution?
If you ask me now how far I for my part think this reduction of interest should be carried, I do not hesitate to answer: to the figure that is rigorously necessary to cover the expenses of administration and wear of metals, perhaps ½ or ¼ per cent.; and I propose to add to the decree a second clause to that effect.
I will not discuss here my reasons for that opinion, which for a long time were personal to me. I have given them elsewhere. For the present I have nothing to do with political economy, nor finances, nor morals; I am talking of revolution pure and simple. That is why I insist chiefly upon the principle, while taking the liberty of expressing my opinion in advance upon what relates to practice. On the day upon which you shall have decreed the democratization of the Bank, and the reduction of interest, on that day you will have entered upon the path to revolution.
Nevertheless I must not fail to touch in passing upon one essential consideration. If I desire to pay no interest to the Bank, it is because interest is in my eyes a governmental, feudal practice, from which we shall never be able to escape if the Bank of the Country becomes a Bank of the State. For a long time Socialism has dreamed of a State Bank, State Credit, revenues and profits of the State; all which means the democratic and social consecration of the spoliation principle, robbery of the worker, in the name, with the example, and under the patronage of the Republic. Place the Bank of the People in the hands of the Government, and, under the pretext of saving for the State the profits of discount in place of new taxes, new sinecures, huge pickings, unheard of waste will be created at the expense of the People: usury, parasitism and privilege will again be favored. No, no, I want no State, not even for a servant; I reject government, even direct government; I see in all these inventions only pretexts for parasitism and refuges for idlers.
Such would be my first revolutionary act; that by which I should begin the dissolution of society.
What do you find in this of injustice or violence? Does it seem to you to bear the imprint of despotism, or to be marked by liberty? Do you not recognize the expression of the organic principle, reciprocity, contract? Will the merchants, manufacturers, agriculturists, have anything to complain of? Once the decree is passed by the National Assembly,—for why should I not use things as they are to change things as they are?—the institution founded, the council of administrators elected, what can the Bank of the People have in common with government? And, as for this famous centralization, of which you are so proud, would not that which would reduce the rate of interest in all towns, indusries, and corporations to 3, 2, 1, or ½ per cent. seem superior to that which would result from the absolute control of all agriculture and industry by a Central Bank, presided over by the Minister of Finance? Understand, routine politicians, that true centralization is not a hierarchy of functionaries, but the equality of wealth and security.
In criticizing government generally, I have said that if contract could solve a single question in the relations between two individuals, it could as easily solve all questions that might arise among millions; whence it follows that the problem of order in society is millions of times easier to attack by way of a bargain than by way of authority. That is what I hope to bring home, by the fullest evidence, in this study and the succeeding. The first problem, that of exchange and currency, being solved, all the others will easily follow.
The public debt, floating and funded, is about $1,200,000,000. The interest, according to the budget of 1841, is $54,000,000.
To this charge of $54,000,000 is added another charge, which, under the name of redemption, is intended to extinguish every year, by repurchase, a part of the permanent charge. This redemption charge amounts to $14,800,000.
It is no part of my design to tell how this redemption charge, always carried in the budget, always furnished by the taxpayer, never redeems anything; how the whole of it is charged to excess over expenditure; how the debt unceasingly increases. All that I seek at present is some means of paying off the debt.
Finally, to these $68,800,000 of interest and redemption, add $11,000,000 of pensions and annuities which occasionally the Government presents to its functionaries, after twenty-five or thirty years of service, and you will have the total of $79,800,000 due by the State, outside of all that it pays for service.
From the fact alone that the State, when becoming a borrower, creates a redemption fund, with the avowed intention of freeing itself from debt, it follows that there is both the desire and the intention on the part of the State to pay it off. I say more: the State has the right, a natural right, inherent in its position as a debtor, to achieve its relief by means of reimbursement.
The interest on the debt is fixed at 5, 4½, 4 and 3 per cent. That again shows that, like all borrowers, the State submits to more or less onerous conditions, according to circumstances, and that if it were possible to borrow at a lower rate, it would have the right to do so.
In fact, he who talks of permanent interest implies that the debt cannot be demanded by the creditor, but may be repaid at will by the debtor: such is recognized by financiers as the relation of the State to bondholders.
Therefore if, by the first decree that we have supposed the Representatives of 1852 to make, credit were democratically organized throughout the Republic, and the interest on money at the National Bank reduced from 4 to 3 per cent., as a result of competition among bankers, there would be a flow of capital to the Stock Exchange, and a demand for bonds of the Government, which then would be able to replace a part of its securities at 5, 4½, and 4 per cent. by 3 per cents.; what is called a conversion. If the interest at the Bank were reduced to ⅓ or ¼ per cent., the ease of redunging would increase for the State in like proportion. At the end of a certain time, the whole debt would have been converted, and the annual interest charge reduced six-sevenths, or rather, the interest having become insignificant, the demand for reimbursement would come from the bondholders themselves, and the State would no longer have to pay interest but annuities. The force of circumstances would bring this about, without solicitation by the State.
Instead of awaiting this movement, the thing to be done now is to anticipate it, to provoke it, to use, for the rapid and complete discharge of all State indebtness, all the powers secured to it by law, all the strength furnished by such an institution as a National Bank.
First, I observe, as I have just done, that whichever side may be chosen, whether resignedly to await the effects of the reduction of discount rates, offers of capital, demands for bonds, etc., or to take an active part in conversions, the tendency of the budget, and consequently that of the Country, will have been changed, in all that concerns this part of the political organism, and, once in the way of paying our debts instead of continually increasing them, we shall be on the revolutionary road. Whether we move fast or slowly, the proportionate amount of reduction to be gained does not touch the principle; and it is the principle, the tendency, that it is most important to consider.
Do you want to increase your debts? That is Conservatism. In that case, no National Bank, no reduction of interest, entire liberty for usury, permanent grant of privilege for the Bank of France, periodical funding of the floating debt, State loans at 25, 30, 40, below par, etc..
Do you, on the contrary, want to diminish your debts? That is Revolution. You have but one means of doing this. It is to take away from individual capital the business of discount; and to fix commercial interest everywhere at from ½ to ¼ per cent. Thus capital will flow to the Treasury, and you can convert and redeem until the debt is extinguished.
That is the whole difference between Conservatism and Revolution.
Since I have begun to give my views, I will say that, in my opinion, the wisest course to follow, the surest, the most just, would be to do with the Debt the same as with the Bank, to abolish interest at one blow. I mean that from the day of the decrée, the interest, which would continue to be paid as before to the bondholders, would be counted as annuities, and deducted from the principal, the latter fixed at par, whatever the state of the market, and the difference between the market price and par taking the place of a premium for the delay in reimbursement.
Oh, I know well that the bondholders, the stock gamblers, all the financial gang, will cry spoliation if the State should lower the rate of interest, instead of lowering the market value of the principal, as is done every day on the Stock Exchange. Admire the bancocratic morality! Usurious speculation, which raises or lowers the nominal capital, the only real value, while keeping the interest the same, is legitimate; but the decree of the Sovereign People which annuls interest, although restoring the whole capital, is robbery! And these people call themselves economists, moralists, jurisconsults, statesmen! There are even some who pass for Christians! So be it. I have too long disputed with this rabble; I ask pardon of Humanity. They are the strongest! Have patience, things may take a turn.
I address myself to intelligent and sincere people. If in the natural course of affairs, through market fluctuations, the rate of interest generally in France should fall to 3 per cent., there is no one who would not regard a refunding of all government bonds, from 5, 4½ and 4 per cents. into 3 per cents., as perfectly legitimate. Why should it be less so if, by an act of the sovereign will, by an advance in public intelligence, and a bargain among all interests, the principle, Trust one another, which is now but a saying, should become the first article of the social compact; if, by virtue of this law of the Nation, of which the first light is already dawning in coöperative associations, the price of money should decline to the cost of carrying on the Bank? All business being controlled by the rate of discount, what iniquity would there be in demanding reciprocity from creditors of the State? And because the debt might have been contracted before the law was passed, does it follow that the capital lent should be freed from its operation? Would it not suffice, in order that non-retroactivity might be preserved, that the law should effect only loans that expire afterwards, and not those that expire before?
What Society does for all, it has a right to expect from each: the same reduction of interest that it grants to each citizen on his discounted notes, it should profit by on the interest which it pays. The former is the measure of the latter: such is the law of Reciprocity, the law of Contract, outside of which there is nothing but poverty and servitude for the producer.
Tell me, is it necessary to revise our political constitution a dozen times more, to exhaust us by fifty years more of parliamentary orgies, to begin over again the tragicomedy of ’92, ’93, ’95, ’99, 1804, to end by 1814, 1830 and 1848; to wear out even the Nation with such nonsense as Direct Legislation, Direct Government, and the rest, which the sick brains of leaders of parties and schools bring forth daily, in order to accomplish this important reform, to pay off the debts of the State, to forbid all ministers from contracting any further loan in the name of the Country, seeing that under the new system this practice of the old finance wlil be entirely abandoned; to suppress all pensions, annuities, &c., because it is for counties, towns, corporations, associations, &c., to take care of their invalids, and to recompense and honor their employes; in a word, to discharge the Central Administration from this enormous burden of bond issues, of redemption of the floating debt, of savings banks, of the distribution of crosses, ribbons, annuities, and pensions?
An immense majority of the people do not know that there is a debt. They have no idea of what is meant by redemption, consolidation, conversion, annuities: they would be terribly scandalized to hear of a loan at 75, 70, or 55. Perhaps half a century will pass before they will be in a position to understand this fact of elementary history, that from 1789 to 1852 matters were so arranged by the Government that, at the second of these dates, after having swept away the debts of the monarchy, the People still had to pay every year a sum exceeding $80,000,000 for replacing the ancient feudal claims which they believed had been abolished, under the names of Public Debt, Refunding, Loans, Pensions, Annuities!
And it is to this people, ignorant of all that is important to it, to which you talk of sovereignty, of legislation, of government! To amuse it, and to distract its thoughts from the Revolution, you talk to it about politics and fraternity! Queer revolutionists you are, who always take the white bean instead of the red, as one of the ancients said, and busy yourselves only with evading, dissimulating, burying really essential questions! In truth, if such as you had lived in 1789, they would have saved the monarchy and the feudal system by their prudence. They would not have permitted anybody to speak to the people about the Deficit, or the Red Book, or the Starvation Pact, or the Tithes, or Feudal Rights, or the Income of the Clergy, or the millions of abuses which made the Revolution necessary. They would have preached about Association and the Servant State! Is not that what they have been doing since February? Who in the Provisory Government did anything to aid the Revolution? who worried about a settlement at the Hotel de Ville? who thought of it at the Luxembourg? who amoung the Mountainists dared to mention the word? ...
Let us reckon no longer on these men: the Revolution in the nineteenth century will be the work of fate. Fate! have pity on us!
The public debt checked in its growth and paid off, it becomes necessary to check and pay off the debts of citizens.
The debts of individuals are of two kinds, debts secured by mortgage, when they are for a long term and are secured by a pledge of real estate or mortgage, and commercial debts, when they are guaranteed only by a simple note of hand.
Add to these the bonds of stock companies, whereof the interest differs somewhat from dividends, and is carried every year to the debit of the companies.
The interest paid for these two kinds of debts may be estimated at $240,000,000; the whole public debt, estimated as capitalized at 5 per cent., would be then only one-third of the private debts.
It is with the private debts as with the public debt, the debtors not only desire to decrease the rate of interest, but seek to do so. The schemes presented to the Constituent Assembly by the most honored proprietors, such as Messrs. Flandin, Pougeard, and others, who in this matter gave evidence of real revolutionary spirit, had no other aim, under the title of Organization of Land Banks, but to furnish money to agriculture, to property, to industry, at a low price, and to deliver them gradually from usury. The reduction which these well-meaning and moderate republicans hoped to obtain for their constituents by their reform, was not less than 6 per cent. average, upon the totality of interest. Instead of the 9 per cent. which money costs at the State Bank, the Land Banks would have asked only 3 per cent. That would accomplish to a slight degree what I propose to accomplish completely by the dissolution of the Bank of France; it was, more or less, to begin the Revolution. But nobody thought then that such an institution would have been spoliation of the established lenders. The critics confined themselves to saying that people would lack confidence, that credit notes would be subject to depreciation, &c., I cannot either approve or disapprove the various modes of putting this plan into execution which were advanced and rejected. I confine myself to noting that the idea was eminently revolutionary; and that it was rejected chiefly because it was revolutionary. The corporation of money robbers thought that interest at 9 per cent. was better for them than interest at 3 per cent., that privilege was good for the privileged, that the Land Bank led straight to Socialism, &c. Having is keeping, and a fool for asking, says the proverb. They who wanted to clip the claws of usury, not being in the majority in the Constituent Assembly, were beaten, naturally. Since in our governmental system politics takes precedence of justice, and the ballot of truth, what was done was well done, and we have nothing to complain of.
Nevertheless the matter may come up again. A simple change in the majority may change the law: it is with this anticipation that I publish this program.
The propriety of the reform in mortgage-secured loans being thus placed beyond question, I mean the reduction of interest in loans upon mortgage, the questions that remain are: 1st. At what rate shall the interest be fixed? and 2nd. How long will it be before the new system will be substituted for the old everywhere?
Whatever system may be adopted, on the rate of interest, on the conditions of loan, on the form of the document, and on the amount of issues, it is clear that, once entered upon this path, the tendency of society will have changed in all that concerns loans and debts: from the retrograde tendency which now prevails, on account of the obstacles to credit and the high rate of interest, it will have become revolutionary, through the facility of obtaining loans and the moderation of the cost. The greater or less rapidity of the movement will not affect its nature: whether you leave Paris for Dunkirk by rail or by wagon, you turn your back upon Bayonne in either case.
Suppose that the Land Bank of Messrs. Flandin, Pougeard, &c., existed, with an interest rate of 3 per cent.; after a time, by its issues, this bank would have become the regulator of the rate of interest for mortgages, and of interest generally, and it would fall everywhere, as far as the influence of the institution extended.
Suppose again that the Bank limits its issues, that is to say, the amount of its credits, to $100,000,000 a year; the total of indebtedness, national, municipal, and private, being by hypothesis $5,000,000,000, in less than 50 years the turnover of the bank will have entirely absorbed this mass, unless the present creditors maintain their claims by the postponement of maturity and voluntary reduction of interest.
According to this calculation, the revolution in credit, in the proportion of 9 to 3 per cent., would be completed in half a century.
Would you prefer, on the other hand, to continue the present system, and further strengthen it? The way is simple. Do nothing: reject all plans relating to credit, as did the Constituent Assembly. Debts will continue to accumulate: the Country will be crushed; property will be ruined; labor subjugated; the Nation, together with the State, will be sunk in slavery, until it emerges from it by the usual route, bankruptcy.
Thus there is no middle way between Reaction and Revolution. But Reaction is mathematically impossible: we are not free to remain unrevolutionized; our only choice is how fast it shall occur. For myself, I prefer the locomotive.
My advice then is to treat private debts as we have treated the public debt and the Bank; that is to say, to clear the course at a single leap, and reach the goal without stopping by the way.
To this end, without worrying about government, or constitution, prorogation or revision, nor about association, we should proceed by general measures, and make use of the State, since the State, although already encroached upon by our first scheme, is still the mainspring of society.
By decree of the National Assembly.
Whereas the previous decrees have fixed the rate of discount at the Bank and of interest on the public debt at ½ per cent., the interest on all debts, including mortgages, notes of hand and bonds, is fixed at the same rate.
Repayment of the principal may be claimed only by annuity payments.
The annuity for all sums below $400 shall be 10 per cent.; above that, 5 per cent.
To facilitate the reimbursement of creditors, and fulfill the function of the former money-lenders, a department of the National Bank of Discount will make loans on mortgage. The maximum total of such loans annually shall not exceed $100,000,000.
Who could complain of a reform at once logical and beneficent, in its universality as well as its radicalism? The lenders? They are not one in a thousand. Still, no matter how few they are, we must come to an understanding with them. Might does not make right.
Certainly he who lends at 6, 8 or 9 per cent. will not complain that the borrower is robbing him, because he prefers to borrow at 3 per cent.: on this point the capitalists will make no objections. But this is what they will say to mortgagors and to the State:
You can reduce interest, and even make the reduction general, if by a sudden flow of capital or financial scheme you can find credit below the present rates. But what you have no right to do is to postpone repayment of the principal. You would be violating the sanctity of contracts. Either reimburse the principal forthwith, or pay the interest. That is the dilemma.
And as the whole indebtedness, not including National or municipal, amounts to about $3,600,000,000, while there is at the most only $200,000,000 in circulation, it is clear that immediate repayment is impossible. they have got us.
I was in Lyons in 1846–47, employed in a commission and shipping concern. The house had a large number of consignors, and purchasers with annual accounts, from the South and the East. The charges for transportation were a fixed sum, and included the rights of navigation on the canals as well as on the rivers. An order for reduction in favor of cereals having issued, the amount of the charges for rights of navigation was deducted from the bills of lading, so that the customers, not the carriers, profited by the deduction. The contrary would have occurred if the Minister, instead of lowering the charges, had increased them. In both cases there was supreme power, arising from the act of a prince, which had to be complied with regardless of the contract, inasmuch as it was outside of the provisions of the contract.
Let us apply this rule.
If by an unexpected event, resulting from improvement on the exchange, and the intervention of authority, the legal rate of interest is lowered to 3, 2, 1 or ½ per cent., it is clear that, at the same moment, the stipulated interest in existing contracts must be proportionally reduced. The price of money, like that of transportation and merchandise, is composed of various elements, whereof the multiplication causes a rise, the absence in consequence produces a fall. Up to this point the comparison is exact.
But the creditor, who is no longer willing to give credit, demands repayment; that is to say, he profits by the scarcity of money to evade the law and maintain his interest. The dishonesty is flagrant; nevertheless the pretext is specious: it must be answered.
Upon what does the money market rest? Upon the scarcity of money. If the quantity of gold and silver were increased ten times, twenty times, the value of these metals would be ten times, twenty times less; in consequence, the rate of interest ten times, twenty times lower. It would end by our esteeming gold and silver no more than iron and copper: they would no longer be lent at interest. The scarcity of money is therefore essential to the nature of its function.
But this scarcity is not the less an evil, because in the last analysis it is always of this scarcity that agriculture, commerce and industry complain; so that, by a singular contradiction, labor and exchange are condemned to suffer from the scarcity of merchandise which is necessary to them, and which cannot be otherwise than scarce.
However, the citizens by their agreement, or the State which represents them until the new order is established, have found a method by which money, without having become less scarce, and thus losing nothing of its value, can no longer place their interests in peril, nor be a menace to commerce and production: this method is to centralize circulation, and render loans reciprocal.
After that, is it not evident that to take advantage of the scarcity of money in order to demand an impossible reimbursement, or failing that, an illegal rate of interest, is to argue from the very fact whereof the legislator desired to destroy the malign influence, and to lay down as a principle precisely that which is in question; more than that, which has been settled?
We may say to the capitalists: You demand from us three and a half billions of specie; how is it that there is but half a million in existence? How, with half a million dollars, have you managed to make us your debtors for three and a half billions? You say it is by the turnover of money and the renewal of loans. Then it is by the turnover of money and the renewal of annuities that we will discharge our indebtedness to you. You have taken time to lend; we will take time to repay. Are you not happy to preserve the value of your principal, even though you do lose the interest?
But reasoning will avail nothing. The eagle defends his eyrie, the lion his den, the hog his trough, capital will not relinquish its interest. And we, poor sufferers, we are ignorant, unarmed, divided: there is not one of us who, when one impulse urges him to revolution, is not held back by another.
In ’89 the affair at least was clear: on one side the nobility, the clergy, the Crown; on the other, the Third Estate, forming by itself ninety-nine hundredths of the nation. Today, interests are divided and complicated to infinity: the same individual may represent in his own person a dozen different interests, a dozen contradictory opinions. When the Republic of February entered this thicket, it was like the dragon with many heads; it stayed in the underbrush. The mor efforts it made, the more involved it became. There is only one way to put an end to it: to set fire to the woods.
Whatever may be my personal conclusions, whatever radicalism I may profess in my propositions, it will nevertheless be observed that I always start from a generally admitted principle, from a recognized tendency, from an expressed desire of respectable people; moreover that I constantly proceed by way of direct consequences, supposing the progress to be as slow and imperceptible as you like. The Revolution for me is one thing; the putting of it into execution is quite another. The first is assured, unconquerably entrenched; as for the second, though I think it prudent and advisable to hasten it as much as possible, I shall not regard him as an adversary who differs with me on this point.
Let us take up this great question of property, the source of such intolerable pretensions, and of such ridiculous fears. The Revolution has two things to accomplish about property, its dissolution and its reconstitution. I shall address myself first to its dissolution, and begin with buildings.
If by the above described measures, property in buildings were relieved of mortgages; if the owners and builders found capital at a low price, the former for the buildings they wanted to put up, the latter for the purchase of materials; it would follow, in the first place, that the cost of construction would diminish considerably, and that old buildings could be cheaply and advantageously repaired; and furthermore, that a drop in the rental of buildings would be perceived.
On the other hand, as capital could no longer be invested with advantage in government securities and in banks, capitalists would be led to seek investments in real estate, especially in buildings, which are always more productive than land. There would thereupon occur in this matter also an increase of competition; the supply of buildings would tend to outrun the demand, and the rentals would fall still lower.
It would fall so much the more as the reduction of interest collected by the Bank, and paid to the creditors of the State was greater; and if, as I propose, the interest of money were fixed at zero, the returns of capital invested in buildings would soon be zero also.
Then, as the rental of buildings is composed of but three factors, the reimbursement of the capital spent in their construction, the keeping up of the building and the taxes, a lease would cease to be a loan for use and would become a sale by the builder to the tenant.
Finally, as speculation would no longer seek buildings as an investment, but only as an object of industry, the purely legal relation of landlord and tenant, which the Roman law has transmitted to us, would give place to a purely commercial relation between the seller and the tenant: there would be the same relation, and in consequence the same law, the same jurisdiction, as between the forwarder of a package and the consignee. In a word, house rent, losing its feudal character, would become an act of commerce.
It is always the law of contract and reciprocity which guides us, to the exclusion of all reminiscence of government.
Now, is it true that the lowering of rentals, in so far as it is caused by the low price of capital and of services, is a sign of the increase of wealth and of comfort for the people?
Is it true that Society naturally desires this reduction, and is frustrated in its desires only by the economic chaos wherein the old Revolution has plunged it?
Is it true, finally, that for three years past the idea of organizing cheap rentals of dwellings has been taken up officially, notably in the movement for Workmen’s Villages, to which the first subscriber was the President of the Republic?
If these facts are undeniable, legitimate, worthy in every respect of the desires of the government and people, it follows that society wishes to change the legal position of property in buildings; and that if, since the Revolution of February, society has been able to turn itself in this direction, if the impulse given from above could have constituted, we should be this day, as far as relates to buildings, well on the revolutionary road. If there has been a change of opinion in regard to this, it is due to the warmth with which the factotums of M. Louis Bonaparte have opposed every idea of amelioration, to the lack of intelligence and energy of the republican party, and to the poverty and ignorance of the working classes.
Instead of demanding reduction of rent, a movement arose for the reduction of the selling price of real estate: it was the owners who suffered. While rentals remained almost stationary, selling values declined 50, 60 and 80 per cent. The Revolution would have maintained property: the Reaction, in its frenzy, caused it to suffer irreparable depreciation.
This understood, let us suppose that the City of Paris resuming the abandoned project of Workmen’s Settlements, should reopen the campaign against the cost of dwellings; should buy houses that were for sale at the lowest price, contract with associations of building trades for repairing them and keeping them in repair, then lease them, according to the rules of competition and equal exchange. After a while the City of Paris would own most of the houses of which it is composed, and would have all its citizens for tenants.
In this as always, the tendency is noticeable and significant: the right is incontestable. If after the taking of the Bastille, the City of Paris had set aside for such acquisition the sums which it has spent on public festivals, royal coronations, and celebrations of the births of princes, it would already have paid for several hundred millions worth of property. Let the Country be the judge: let it decide in how many years it intends to revolutionize this first class of properties: what it resolves, I shall hold to be wisely resolved and I accept in advance.
While waiting, permit me to formulate a scheme.
The right of property, so honorable in its origin, when that origin is none other than labor, has become in Paris, and in most cities, an improper and immoral instrument of speculation in the dwelling places of citizens. Speculation in bread and food of prime necessity is punished as a misdemeanor, sometimes as a crime: is it more permissible to speculate in the habitations of the people? Our consciences, selfish, lazy, blind, most of all in matters that touch our pockets, have not yet noticed this similarity: all the more reason that the Revolution should denounce it. If the trumpet of the last judgment should resound in our ears, which of us at that moment would refuse to make this confession? Let us make it then, for I vow the last hour is approaching for the ancient abuse. It is too late to talk of purgatory, of gradual penitence, of progressive reform. Eternity awaits you. There is no middle ground between heaven and hell. We must take the leap.
I propose to manage the dissolution of rentals in the same manner as that of the Bank, of the public debt, and of private debts and obligations.
From the date of the decree which shall be passed by future representatives, all payments made as rental shall be carried over to the account of the purchase of the property, at a price estimated at twenty times the annual rental.
Every such payment shall purchase for the tenant a proportional undivided share in the house he lives in, and in all buildings erected for rental, and serving as a habitation for citizens.
The property thus paid for shall pass under the control of the town administration, which shall take a first mortgage upon it, in the name of all the tenants, and shall guarantee them all a domicile, in perpetuity, at the cost price of the building.
Towns may bargain with owners for the purchase and immediate payment for rented buildings.
In such case, in order that the present generation may enjoy the benefit of reduction in rental, the said towns may arrange for an immediate diminution of the rental of the houses for which they have negotiated, in such manner that complete payment may be made within thirty years.
For repairs, management, and upkeep of buildings, as well as for new constructions, the towns shall deal with masons’ Unions, or associations of building trades, according to the rules and principles of the new social contract.
Proprietors who occupy their own houses shall retain property therein, as long as suits their interests.
Let the Country enter upon this course, and the safety of the people is assured. A guaranty stronger than all laws, all electoral combinations, all popular sanctions, will assure lodging to the workers forever, and render a return to speculation of rents impossible. Neither government, nor legislation, nor code is needed, a simple agreement among citizens suffices, with the execution of it confided to the town: the producer is housed by a simple business transaction; something which neither kings nor dictator will ever accomplish.
Through the land the plundering of man began, and in the land it has rooted its foundations. The land is the fortress of the modern capitalist, as it was the citadel of feudalism, and of the ancient patriciate. Finally, it is the land which gives authority to the governmental principle, an ever-renewed strength, whenever the popular Hercules overthrows the giant.
To-day the stronghold, attacked upon all the secret points of its bastions, is about to fall before us, as fell, at the sound of Joshua’s trumpets, the walls of Jericho. The machine which is able to overthrow the ramparts has been found; it is not my invention; it has been invented by property itself.
Everybody has heard of the land banks that have been in use for a long time among the land owners of Poland, Scotland, and Prussia, of which French proprietors and farm owners are demanding so insistently the introduction into our own country. In a previous article, speaking of the liquidation of mortgage secured debts, I had occasion to recall the attempts made by several honorable conservatives in the National Assembly to endow France with this beneficent institution. I showed, in connection therewith, how the land bank might become an instrument of revolution with regard to debts and interest. I am about to show how it may be the same with regard to landed property.
The special characteristic of the land bank, after the low price and the facility of its credit, is the reimbursement for annuities.
Suppose that the proprietors, no longer waiting for the Government to act, but taking their affairs into their own hands, follow the example of the workmen’s associations, and get together to found a Bank by subscription, or mutual guaranty.
Suppose that in this credit concern the amount of issues were fixed at $80,000,000 a year, as much as comes to a capital of $400,000,000, and the annuity fixed at one-twentieth, payable in advance, plus a small interest in addition.
It is easily seen that, with the aid of this bank, property, which now borrows at an average rate of 9 per cent., could arrange every year the conversion of $80,000,000 of mortgages, that is to say, pay off $80,000,000 worth of its mortgages at 9 per cent. by an annuity subscription at 5½, 6, or 7 per cent.
At the end of five years the capital of $400,000,000 would be exhausted; but the bank, with its returns from annuities and the discounts which it makes on credits, would have in hand, as the result of its dealings, a sum of $400,000,000, which it will replace anew. The operation will continue thus until at the end of twenty years landed property will have converted four times $400,000,000, that is $1,600,000,000 of mortgages; and in thirty years it will be delivered from usurers.
Once again I say that I do not intend to approve any of the plans for a land bank that have been advanced. I believe that it is possible to organize such an institution, and I base my reasoning on this assumption, which is to me more than a hypothesis.
Nothing is easier than to apply to the repurchase of land the mechanism of this system of credit, which is usually regarded only as a protection against excessive interest, and an instrument for the conversion of mortgages.
The average revenue of landed capital is 3 per cent.
When it is said that the land brings in 2, 3, 4 or 5 per cent., it means that after the cost of labor is paid (the farmer, peasant or slave must live), the surplus, whatever it may be, in other words, the share of the owner, is held to represent the twentieth, twenty-fourth, thirtieth or fortieth part of the value of the land.
Thus thirty-four years of farm rent at 3 per cent., or forty years at 2½ per cent., cover the value of the property.
The farmer or peasant can [then] pay for the land that he cultivates in twenty-five, thirty, thirty-four or forty years, if the owner will agree to it: he can pay for it in twenty, eighteen, or fifteen years, if he can buy it by the system of annuities. What then prevents the peasant from becoming everywhere the owner of the soil, and freeing himself from farm rent?
What prevents him is that the owner demands to be paid in cash; and that if cash is not forthcoming, he lets the land; that is to say, he requires payment in perpetuity.
In that case, you will say, why does not the tenant borrow?
Ah! that is because the loan of money on mortgage agrees exactly with farm rent. The interest required for this kind of loan serves not in the least to extinguish the debt, and is even higher than the farm rent. The peasant therefore finds himself enclosed in a circle: he must cultivate to eternity, but never possess. If he borrows, he gives himself a second master, double interest, double slavery. There is no way of escape without the aid of a fairy.
Well, the fairy exists: it remains only for us to test the virtue of her wand: the fairy is the land bank.
A young peasant, about to start housekeeping, wants to buy a farm: the farm is worth $3,000.
Suppose that this peasant, with the marriage portion of his wife, a trifle inherited, and some savings, can raise a third of this sum: the Land Bank upon a pledge of $3,000 will not hesitate to lend $2,000, payable, as we have said, by annual installments.
This will be as if the cultivator had to pay rent for 15, 20 or 30 years, in order to become the owner of property worth $2,000. Thus the farm rent is not perpetual: it is annually charged off the price: it gives a title to the property. And as the price of real estate cannot be raised indefinitely, since it is only the capitalization of twenty, thirty or forty fold of the part of the product which is in excess of the cost of working the land, it is evident that the peasant cannot fail to obtain the property. With the Land Bank the farmer is released; it is the proprietor who is caught. Do you understand now why the conservatives of the Constituent Assembly were unwilling to permit a Land Bank?
Thus what we call farm rent, left to us by Roman tyranny and feudal usurpation, hangs only by a thread, the organization of a bank, demanded even by property itself. It has been demonstrated that the land tends to return to the hands that cultivate it, and that farm rent, like house rent, like the interest of mortgages, is but an improper speculation, which shows the disorder and anomaly of the present economic system.
Whatever may be the conditions of this Bank, which will come into existence on the day when those who need it desire it; whatever be the rate of charge for its services, however small its issues, it can be calculated in how many years the soil will be delivered from the parasitism which sucks it dry, while strangling the cultivator.
And when once the revolutionary machine shall have released the soil, and agriculture shall have become free, feudal exploitation can never reëstablish itself. Property may then be sold, bought, circulated, divided or united, anything; the ball and chain of the old serfdom will never be dragged again; property will have lost its fundamental vises, it will be transfigured. It will no longer be the same thing. Still, let us continue to call it by its ancient name, so dear to the heart of man, so agreeable to the ear of the peasant, property.
What is it that I ask now: that a Land Bank should be founded at once? That would be something, no doubt. But why should we not cover at one stride what it might take a Land Bank a century to accomplish?
Our tendency is our law; and although there may be never any lack of continuity among our ideas, although the mind may always be able, at need, to insert as many middle terms as it chooses between one idea and another, yet sometimes Society likes to form rapid inferences, to take great leaps. What more puerile than to make a third, a quarter, a tenth of a revolution? Has not capital had enough? Is capital so honorable, so generous, so pure, that we still owe it fifty years of sacrifice? We are in the line of progress; universal practice pleads for us. What, then, are we waiting for? Forward! and at full speed, against land rent.
I propose to decree:
Every payment of rent for the use of real estate shall give title to the farmer for a share of the real estate, and shall be a lien upon it.
When the property has been entirely paid for, it shall revert immediately to the town, which shall take the place of the former proprietor, and shall share the fee-simple and the economic rent with the farmer.
Towns may bargain directly with owners who wish to do so for the repurchase of rentals and the immediate purchase of the properties.
In that case, provision shall be made for the supervision of the towns, for the installation of cultivators, and for the fixing of the boundaries of possessions, taking care to make up by an increase in quantity for any deficiency in the quality of the land, and to proportion the rent to the product.
As soon as all landed property shall have been completely paid for, all the towns of the Republic shall come to an understanding for equalizing among them the quality of tracts of land, as well as accidents of culture. The part of the rent to which they are entitled upon their respective territories shall serve for compensation and for general insurance.
Beginning with the same date, the former proprietors who have held their title by working their properties themselves, shall be placed on the same footing as the new, subjected to the same rights; in such a manner that the chance of locality or of succession may favor no one, and that the conditions of culture shall be equal for all.
The tax on land shall be abolished.
The rural police are placed under the control of the municipal councils.
I suppose that I need not write a commentary to show that this plan, which is the necessary sequel to the others, is still only the application on a large scale of the idea of contract; that the central authority appears only for the execution of the popular will, which I assume has already been expressed by vote of the electors; that when once the reform has been put in practice, the hand of power will forever disappear from agricultural and farm land affairs. Such repetition would be tiresome. It is more advantageous, just now, I think, to adduce certain urgent considerations in support of my plan.
In many provinces the attention of country dwellers has been awakened in relation to the probable consequences of the Revolution of February, in connection with farm property. They understand that this Revolution ought to put an end to their precarious holding, and procure for them, not only a market for their produce, not only money at a low rate, but, above all, property.
In connection with this, one of the ideas which have obtained favor among the peasants is the Right of the cultivator to improvements in the property that he cultivates.
A farm worth $8,000 is leased to a farmer for $240 a year; that is, at 3 per cent.
At the end of ten years this farm, under the intelligent management of the farmer, has gained 50 per cent. in value: instead of $8,000, it is worth $12,000. This improvement, which is the exclusive work of the farmer, not only profits him nothing, but when the lease has expired, the idler, the proprietor, comes along, and raises the rent to $360. The farmer has created $4,000 for somebody else; more than that, in augmenting the fortune of his master by a half, he has increased proportionally what he himself must pay; he has given his master a stick to beat him with, as they say.
The peasant understands this injustice; and, rather than fail to obtain reparation for it, he will, sooner or later, overthrow government and property, as in ’89 he burned the charters. This may be expected at any time. This may be expected at any time. From another side, certain owners also have felt the necessity that labor should reap the reward of its own work: they have even gone beyond the demands of their farmers, and have begun the work of reparation spontaneously. The Right to the value of Improvements is one of the first which the legislator must recognize, at least in principle, on pain of revolt and perhaps a peasants’ war.
As for myself, I do not believe that such an innovation is practicable in our system of laws and the condition of property; and I doubt whether the hopes of the peasants can triumph over the innumerable difficulties and complications that are involved. I am the first to recognize the legitimacy of the right to the value of improvements; but it is one thing to recognize a right, and another to grant it; the latter is incompatible with all the laws, traditions, and usages which control property. Nothing less is needed than a complete recasting of the second third books of the Civil Code, with suppressions, additions and modifications at each sentence, almost at each word; seventeen hundred and sixty-six articles to revise, discuss, analyze, abrogate, replace, and develop; more work than a National Assembly could do in ten years.
All that concerns the recognition of goods, the right of accession, usufruct, servitude, succession, contract, prescription, mortgages, must be harmonized with the right to the value of improvements, and remodelleed from bottom to top. However willing the representatives, whatever light they can shed. I doubt whether they can devise a law which will satisfy their constituents or themselves. A law which separates, consecrates and regulates, under all conditions, the right to the value of improvements, and the consequences which follow it, is simply an impossible law. It is one of the cases in which the Right, although perfectly clear, escapes the definitions of the legislator.
Just as farm land does not increase in value but by the labor of the farmer, so it does not maintain its value without labor. Abandoned or ill-worked land loses in value or deteriorates, while if properly worked, it increases in value. To preserve farm land is to create it, because it means to make it over again every day, in proportion to its loss. Therefore if it is just to recognize a share in the value of improvements for the farmer, it is also just to recognize his share in the value of maintenance. After recognizing the right to the value of improvements, we must further admit the right to the value of conservation. Who will make this new ruling? Who can embrace it in legislation: who enshrine it in the Code?
To raise such questions is to cast a plummet into an abyss. The right to the value of improvements, so dear to the heart of the peasant, and admitted by the fairmindedness of many owners, is impracticable because it lacks generality and depth, in a word, because it is not sufficiently radical. It is with it as with the right to labor, of which no one in the Constituent Assembly contested the justice, but of which the codification was equally impossible. The Right to Labor, the Right to Life, the Right to Happiness, the Right to Love, all these formulas, capable in an instant of arousing the masses, are entirely without practical sense. If they betray a real need among the people, they show even more clearly the incompetence of their authors.
Let us now proceed to tell the peasant, as we told the workmen in 1848, that there is nothing to be done; that the right to the value of improvements, like the right to labor, like all the evangelical rights, is a charming thing, no doubt, but quite impossible to realize; that the world has always been so, and will always be so; that Providence has made some people proprietors and some tenants, as he has created oaks and hawthorn bushes; and all the normal commonplaces of Malthusianism, that have been refuted a hundred times. The information may be ill received; it may be doubted whether the peasants, any more than the workmen, will be persuaded by it. Before long, there must be a solution; if not, take care! ... I see coming universal expropriation, without public gain and without preliminary indemnity.
I bring this study to an end, leaving it to my readers to follow it out in detail, and contenting myself with having touched upon the general points.
A general liquidation is the obligatory preliminary of every revolution. After sixty years of mercantile and economic chaos, a second night of the 4th of August is indispensable. We are still masters of the situation, and free to proceed with all the prudence, all the moderation, that we may think advisable: later, our fate may not depend upon our free choice.
I have proved at length that in the aspirations of the Country, in the ideas that are current among capitalists and proprietors, as well as among peasants and workmen, everything tends toward this liquidation: coöperative associations, accumulation of coin at the Bank, discount houses, credit notes, land banks, workmen’s villages, right to value of improvements, &c., &c. I have analyzed and deduced these ideas, and I have found at the bottom of them always the principle of reciprocity and contract, never that of government. Finally, I have shown how liquidation could, on each point, be made to work as rapidly as might be desired; and if I have pronounced myself in favor of the easiest and quickest way, it was not, as might be supposed, because I held extreme opinions, but because I was convinced that this method is the wisest, the most just, the most conservative, the most advantageous to all interested, debtors, creditors, house owners, tenants, land proprietors and tenant farmers.
I in favor of extreme opinions! Do you think, then, that there is nothing more radical, more summary, then, the plan of conciliation which I prefer and propose? Have you forgotten the saying of Frederick the Great to the miller of Sans Souci:
Do you know that I could take it without paying for it?
Between reimbursement by annuities and confiscation, there are many degrees. Let the counter-revolution persist in its course, and perhaps before a year is over the lower classes will demand from the rich, as reparation and indemnity, a quarter, a third, a half of their property, and after some years, the whole. And the lower classes are stronger than Frederick the Great. Then the peasants and workmen will not demand the Right to Labor, nor the Right to the Value of Improvements: it will be, the Right to War, and the Right of Reprisal. What will the answer be?
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