 Section 1 of Essays on Political Economy, by Frédéric Bastia. Section 1. Capital and Interest My object in this treatise is to examine into the real nature of the interest of capital, for the purpose of proving that it is lawful and explaining why it should be perpetual. This may appear singular, and yet I confess, I am more afraid of being too plain than to obscure. I am afraid I may weary the reader by a series of mere truisms, but it is no easy matter to avoid this danger when the facts with which we have to deal are known to everyone by personal, familiar, and daily experience. But then, you will say, what is the use of this treatise? Why explain what everybody knows? But, although this problem appears at first sight so very simple, there is more in it than you might suppose. I shall endeavour to prove this by an example. Mander lends an instrument of labour today, which will be entirely destroyed in a week. Yet the capital will not produce the last interest to Mander, or his heirs, through all eternity. Reader, can you honestly say that you understand the reason of this? It would be a waste of time to seek any satisfactory explanation from the writings of economists. They have not thrown much light upon the reasons of the existence of interest. For this they are not to be blamed, for at the time they wrote, its lawfulness was not called in question. Now, however, times are altered. The case is different. Men, who consider themselves to be in advance of their age, have organised an active crusade against capital and interest. It is the productiveness of capital, which they are attacking, not certain abuses in the administration of it, but the principle itself. A journal has been established to serve as a vehicle for this crusade. It is conducted by M. Proudhon, and has, it is said, an immense circulation. The first number of this periodical contains the electoral manifesto of the people. Here we read, Another journal, LaRouche Populaire, after having said some excellent things on labour, adds, But, above all, labour ought to be free. That is, it ought to be organised in such a manner that moneylenders and patrons or masters should not be paid for this liberty of labour, this right of labour, which is raised to so high a price by the traffickers of men. The only thought that I notice here is that expressed by the words in italics, which imply a denial of the right to interest. The remainder of the article explains it. It is thus that the democratic socialist, Thore, expresses himself. The revolution will always have to be recommended, so long as we occupy ourselves with consequences only, without having the logic or the courage to attack the principle itself. This principle is capital, false property, interest, and usury, which, by the old regime, is made to weigh upon labour. Ever since the aristocrats invented the incredible fiction that capital possesses the power of reproducing itself, the workers have been at the mercy of the idol. At the end of a year, will you find an additional crown in a bag of one hundred shillings? At the end of fourteen years, will your shillings have doubled in your bag? Will a work of industry or of skill produce another at the end of fourteen years? Let us begin, then, by demolishing this fatal fiction. I have quoted the above merely for the sake of establishing the fact that many persons consider the productiveness of capital a false, a fatal, and an iniquitous principle. But quotations are superfluous. It is well known that the people attribute their sufferings to what they call the trafficking in man by man. In fact, the phrase, tyranny of capital, has become proverbial. I believe there is not a man in the world who is aware of the whole importance of this question. Is the interest of capital natural, just, and lawful, and is useful to the payer as to the receiver? You answer no. I answer yes. Then we differ entirely. But it is of the utmost importance to discover which of us is in the right. Otherwise we shall incur the danger of making a false solution of the question, a matter of opinion. If the error is on my side, however, the evil would not be so great. It must be inferred that I know nothing about the true interests of the masses, or the march of human progress. And that all my arguments are but as so many grains of sand, by which the car of the revolution will certainly not be arrested. But if, on the contrary, M. M. Proudhon and Thorey are deceiving themselves, it follows that they are leading the people astray, that they are showing them the evil, where it does not exist, and thus giving a false direction to their ideas, to their antipathies, to their dislikes, and to their attacks. It follows that the misguided people are rushing into a horrible and absurd struggle, in which victory would be more fatal than defeat. Since, according to this supposition, the result would be the realization of universal evils, the destruction of every means of emancipation, the consummation of its own misery. This is just what M. Proudhon has acknowledged with perfect good faith. The foundation stone, he told me, of my system is the gratuitousness of credit. If I am mistaken in this, socialism is a vain dream. I add, it is a dream, in which the people are tearing themselves to pieces. Will it, therefore, be a cause for surprise, if, when they awake, they find themselves mangled and bleeding? Such a danger as this is enough to justify me fully, if, in the course of the discussion, I allow myself to be led into some trivialities and some prolixity. Capital and Interest I address this treatise to the workmen of Paris, more especially to those who have enrolled themselves under the banner of socialist democracy. I proceed to consider these two questions. First, is it consistent with the nature of things and with justice that capital should produce interest? Second, is it consistent with the nature of things and with justice that the interest of capital should be perpetual? The working men of Paris will certainly acknowledge that a more important subject could not be discussed. Since the world began, it has been allowed, at least in part, that capital ought to produce interest. But laterally, it has been affirmed that herein lies the very social error, which is the cause of pauperism and inequality. It is therefore very essential to know now on what ground we stand. For, if levying interest from capital is a sin, the workers have a right to revolt against social order, as it exists. It is in vain to tell them that they ought to have recourse to legal and pacific means. It would be a hypocritical recommendation. When, on the one side, there is a strong man, poor, and a victim of robbery, on the other a weak man, but rich and a robber, it is singular enough that we should say to the former, with a hope of persuading him, wait till your oppressor voluntarily renounces oppression, or till it shall cease of itself. This cannot be. And those who tell us that capital is by nature unproductive ought to know that they are provoking a terrible and immediate struggle. If, on the contrary, the interest of capital is natural, lawful, consistent with a general good, as favorable to the borrower as to the lender, the economists who deny it, the tribunes who traffic in this pretended social wound, are leading the workmen into a senseless and unjust struggle, which can have no other issue than the misfortune of all. In fact, they are arming labour against capital. So much the better if these two powers are really antagonistic, and may the struggle soon be ended. But if they are in harmony, the struggle is the greatest evil which can be inflicted on society. You see, then, workmen, that there is not a more important question than this. Is the interest of capital lawful or not? In the former case, you must immediately renounce the struggle to which you are being urged. In the second, you must carry it on bravely, and to the end. Productiveness of capital, perpetuity of interest. These are difficult questions. I must endeavour to make myself clear. And for that purpose I shall have recourse to example rather than to demonstration, or rather I shall place the demonstration in the example. I begin by acknowledging that, at first sight, it may appear strange that capital should pretend to a remuneration, and above all to a perpetual remuneration. You will say, here are two men, one of them worked from morning till night, from one year's end to another, and if he consumes all which he has gained, even by superior energy, he remains poor. When Christmas comes he is no forwarder than he was at the beginning of the year, and has no other prospect but to begin again. The other man does nothing, either with his hands or his head, or at least, if he makes use of them at all, it is only for his own pleasure. It is allowable for him to do nothing, for he has an income. He does not work, yet he lives well. He has everything in abundance, delicate dishes, sumptuous furniture, elegant equipages, nay, he even consumes daily things which the workers have been obliged to produce by the sweat of their brow, for these things do not make themselves, and as far as he is concerned, he has had no hand in their production. It is the workmen who have caused this corn to grow, polished this furniture, woven these carpets. It is our wives and daughters who have spun, cut out, sewed, and embroidered these stuffs. We work, then, for him and for ourselves. For him first, and then for ourselves, if there is anything left. But here is something more striking still. If the former of these two men, the worker, consumes within the year any profit which may have been left him in that year, he is always at the point from which he started, and his destiny condemns him to move incessantly in a perpetual circle and a monotony of exertion. Labor, then, is rewarded only once. But if the other, the gentleman, consumes his yearly income in the year, he has, the year after, in those which follow, and through all eternity, an income always equal, inexhaustible, perpetual. Capital, then, is remunerated not only once or twice, but an indefinite number of times, so that, at the end of a hundred years, a family which has placed twenty thousand francs at five percent will have had a hundred thousand francs, and this will not prevent it from having a hundred thousand more in the following century. In other words, for twenty thousand francs, which represent its labor, it will have levied, in two centuries, a tenfold value on the labor of others. In this social arrangement, is there not a monstrous evil to be reformed? And this is not all. If it should please this family to curtail its enjoyments a little, to spend, for example, only nine hundred francs, instead of a thousand, it may, without any labor, without any other trouble beyond that of investing a hundred francs a year, increase its capital and its income in such rapid progression that it will soon be in a position to consume as much as a hundred families of industrious workmen. Does not all this go to prove that society itself has, in its bosom, a hideous cancer, which ought to be eradicated at the risk of some temporary suffering? These are, it appears to me, the sad and irritating reflections, which must be excited in your minds by the active and superficial crusade which is being carried on against capital and interest. On the other hand, there are moments in which I am convinced, doubts are awakened in your minds and scruples in your conscience. You say to yourself sometimes, but to assert that capital ought not to produce interest is to say that he who has created instruments of labor, or materials, or provisions of any kinds, ought to yield them up without compensation. Is that just? And then, if it is so, who would lend these instruments, these materials, these provisions? Who would take care of them? Who even would create them? Everyone would consume his proportion, and the human race would never advance a step. Capital would be no longer formed, since there would be no interest in forming it. It would become exceedingly scarce. A singular step towards gratuitous loans. A singular means of improving the condition of borrowers to make it impossible for them to borrow at any price. What would become of labor itself? For there will be no money advanced, and not one single kind of labor can be mentioned, not even the chase, which can be pursued without money in hand. And, as for ourselves, what would become of us? What? We are not to be allowed to borrow in order to work in the prime of life, nor to lend, that we may enjoy repose in its decline. The law will rob us of the prospect of laying by a little property, because it will prevent us from gaining any advantage from it. It will deprive us of all stimulus to save at the present time, and of all hope of repose for the future. It is useless to exhaust ourselves with fatigue. We must abandon the idea of leaving our sons and daughters a little property, since modern science renders it useless, for we should become traffickers in men if we were to lend it on interest. Alas! the world which these persons would open before us, as an imaginary good, is still more dreary and desolate than that which they condemn, for hope at any rate, is not banished from the latter. Thus in all respects, and in every point of view, the question is a serious one. Let us hasten to arrive at a solution. Our civil code has a chapter entitled On the Manor of Transmitting Property. I do not think it gives a very complete nomenclature on this point. When a man by his labor has made some useful thing, in other words, when he has created a value, it can only pass into the hands of another by one of the following modes. As a gift, by the right of inheritance, by exchange, loan, or theft. One word upon each of these, except the last, although it plays a greater part in the world than we may think. A gift needs no definition. It is essentially voluntary and spontaneous. It depends exclusively upon the giver, and the receiver cannot be said to have any right to it. Without a doubt, morality and religion make it a duty for men, especially the rich, to deprive themselves voluntarily of that which they possess in favour of their less fortunate brethren. But this is an entirely moral obligation. If it were to be asserted on principle, admitted in practice, or sanctioned by law, that every man has a right to the property of another, the gift would have no merit. Charity and gratitude would be no longer virtues. Besides, such a doctrine would suddenly and universally arrest labour and production, as severe cold congeals water and suspends animation. For who would work if there was no longer to be any connection between labour and the satisfying of our wants? Political economy has not treated of gifts. It has hence been concluded that it disowns them, and that it is therefore a science devoid of heart. This is a ridiculous accusation. That science which treats of the laws resulting from the reciprocity of services has no business to inquire into the consequences of generosity with respect to him who receives, nor into its effects, perhaps still more precious, on him who gives. Such considerations belong evidently to the science of morals. We must allow the sciences to have limits. Above all, we must not accuse them of denying, or undervaluing, what they look upon as foreign to their departments. The right of inheritance, against which so much has been objected of late, is one of the forms of gift, and assuredly the most natural of all. That which a man has produced, he may consume, exchange, or give. What can be more natural than that he should give it to his children? It is this power, more than any other, which inspires him with courage to labour and to save. Do you know why the principle of right of inheritance is thus called into question? Because it is imagined that the property thus transmitted is plundered from the masses. This is a fatal error. Political economy demonstrates, in the most preemptory manner, that all value produced is a creation which does no harm to any person whatever. For that reason it may be consumed, and still more transmitted, without hurting anyone. But I shall not pursue these reflections which do not belong to the subject. Exchange is the principal department of political economy, because it is by far the most frequent method of transmitting property, according to the free and voluntary agreements of the laws and effects of which this science treats. Properly speaking, exchange is the reciprocity of services. The parties say between themselves, give me this and I will give you that, or do this for me and I will do that for you. It is well to remark, for this will throw a new light on the notion of value, that the second form is always implied in the first. When it is said, do this for me and I will do that for you, an exchange of service for service is proposed. Again, when it is said, give me this and I will give you that, it is the same as saying, I yield to you what I have done, yield to me what you have done. The labor is passed instead of present, but the exchange is not the less governed by the comparative valuation of the two services. So that it is quite correct to say that the principal of value is in the services rendered and received on account of the productions exchanged, rather than in the productions themselves. In reality, services are scarcely ever exchanged directly. There is a medium which is termed money. Paul has completed a coat for which he wishes to receive a little bread, a little wine, a little oil, a visit from a doctor, a ticket for the play, etc. The exchange cannot be affected in kind. He first exchanges his coach for some money which is called sale. Then he exchanges this money again for the things which he wants which is called purchase. And now only has the reciprocity of services completed its circuit. Now only the labor and the compensation are balanced in the same individual. I have done this for society. It has done that for me. In a word, it is only now that the exchange is actually accomplished. Thus, nothing can be more correct than this observation of J.B. Say. Since the introduction of money, every exchange is resolved into two elements, sale and purchase. It is the reunion of these two elements which renders the exchange complete. We must remark also that the constant appearance of money in every exchange has overturned and misled all our ideas. Men have ended in thinking that money was true riches and that to multiply it was to multiply services and products. Hence the prohibitory system, hence paper money, hence the celebrated aphorism, what one gains the other loses, and all the errors which have ruined the earth and imbrewed it with blood. After much research, it has been found that in order to make the two services exchanged of equivalent value and in order to render the exchange equitable, the best means was to allow it to be free. However plausible, at first sight, the intervention of the state might be, it was soon perceived that it is always oppressive for one or other of the contracting parties. When we look into these subjects we are always compelled to reason upon this maxim that equal value results from liberty. We have in fact no other means of knowing whether, at a given moment, two services are of the same value but that of examining whether they can be readily and freely exchanged. Allow the state, which is the same thing as force, fear on one side or the other, and from that moment all the means of appreciation will be complicated and entangled, instead of becoming clear. It ought to be the part of the state to prevent and above all to repress artifice and fraud. That is, to secure liberty and not to violate it. I have enlarged a little upon exchange, although loan is my principal object. My excuse is that I can see that there isn't alone an actual exchange, an actual service rendered by the lender, and which makes the borrower liable to an equivalent service, two services whose comparative value can only be appreciated, like that of all possible services, by freedom. Now, if it is so, the perfect lawfulness of what is called house rent, interest, will be explained and justified. Let us consider the case of loan. Suppose two men exchange two services, or two objects, whose equal value is beyond all dispute. Suppose, for example, Peter says to Paul, give me ten six pence's and I will give you a five shilling piece. We cannot imagine an equal value more unquestionable. When the bargain is made, neither party has any claim upon the other. The exchanged services are equal. Thus it follows that if one of the parties wishes to introduce into the bargain an additional clause, advantageous to himself, but unfavorable to the other party, he must agree to a second clause, which shall re-establish the equilibrium and the law of justice. It would be absurd to deny the justice of a second clause of compensation. This granted we will suppose that Peter, after having said to Paul, give me ten six pence's, I will give you a crown, as you shall give me the ten six pence's now and I will give you the crown piece in a year. It is very evident that this new proposition alters the claims and advantages of the bargain, that it alters the proportion of the two services. Does it not appear plainly enough, in fact, that Peter asks of Paul a new and an additional service, one of the different kinds? Is it not as if he had said, render me the service of allowing me to use, for my profit, for a year, five shillings which belong to you and which you might have used for yourself? And what good reason have you to maintain that Paul is bound to render this a special service gratuitously, that he has no right to demand anything more in consequence of this requisition, that the state ought to interfere to force him to submit? Is it not incomprehensible that the economist, who preaches such a doctrine to the people, can reconcile it with his principle of the reciprocity of services? Here I have introduced cash. I have been led to do so by a desire to place, side by side, two objects of exchange, of a perfect and indisputably quality of value. I was anxious to be prepared for objections, but, on the other hand, my demonstration would have been more striking still if I had illustrated my principle by an agreement for exchanging the services, or the productions themselves. Suppose, for example, a house and a vessel of a value so perfectly equal that their proprietors are disposed to exchange them even-handed without excess or abatement. In fact, let the bargain be settled by a lawyer. At the moment of each taking possession, the ship owner says to the citizen, very well, the transaction is completed and nothing can prove its perfect equity better than our free and voluntary consent. Our conditions thus fixed, are proposed to you a little practical modification. You shall let me have your house today, but I shall not put you in possession of my ship for a year. And the reason I make this demand of you is that, during this year of delay, I wish to use the vessel. That we may not be embarrassed by considerations relative to the deterioration of the thing lent, I will suppose the ship owner to add. I will engage at the end of the year and over to you the vessel in the state in which it is today. I ask of every candid man, I ask of M. Proudhon himself if the citizen has not a right to answer. The new clause which you propose entirely alters the proportion or the equal value of the exchanged services. By it I shall be deprived for the space of a year, both at once of my house and of your vessel. By it you will make use of both if in the absence of this clause the bargain was just for the same reason the clause is injurious to me. It stipulates for a loss to me and a gain to you. You are requiring of me a new service. I have a right to refuse or to require of you as a compensation an equivalent service. If the parties are agreed upon this compensation the principle of which is incontestable we can easily distinguish two transactions in one two exchanges of service in one. First there is the exchange of the house for the vessel. After this there is the delay granted by one of the parties and the compensation correspondent to this delay yielded by the other. These two new services take the generic and abstract names of credit and interest. But names do not change the nature of things and I define anyone to dare to maintain that there exists here when almost done a service for service or a reciprocity of services. To say that one of these services does not challenge the other to say that the first ought to be rendered gratuitously without injustice is to say that injustice consists in the reciprocity of services that justice consists in one of the parties giving and not receiving which is a contradiction in terms. To give an idea of interest and its mechanism allow me to make use of two or three anecdotes but first I must say a few words upon capital. There are some persons who imagine that capital is money and this is precisely the reason why they deny its productiveness for as M. Thore says crowns are not endowed with the power of reproducing themselves but it is not true that capital and money are the same thing. Before the discovery of the precious metals there were capitalists in the world and I venture to say that at that time as now everybody was a capitalist to a certain extent. What is capital then? It is composed of three things. First, of the materials upon which men operate when these materials have already a value communicated by some human effort which has bestowed upon them the principle of remuneration wool, flags, leather, silk, wood, etc. Second, instruments which are used for working tools, machines, ships, carriages, etc. Third, provisions which are consumed during labour vitals, stuffs, houses, etc. Without these things the labour of men would be unproductive and almost void yet these very things have required much work especially at first. This is the reason that so much value has been attached to the possession of them and also that it is perfectly lawful to exchange and to sell them to make a profit of them if used to gain remuneration from them if lent. Now for my anecdotes. End of Section 1 Recording by Katie Riley February 2010 Section 2 of Essays on Political Economy by Frédéric Bastiat This is a Librevox recording All Librevox recordings are in the public domain For more information or to volunteer please visit Librevox.org Essays on Political Economy by Frédéric Bastiat Section 2 The Sack of Corn Mathurin, in other respects as poor as Job and obliged to earn his bread by day labour became nevertheless by some inheritance the owner of a fine piece of uncultivated land he was exceedingly anxious to cultivate it Alas! said he to make ditches, to raise fences to break the soil to clear away the brambles and stones to plow it, to sow it might bring me a living in a year or two but certainly not today or tomorrow It is impossible to set about farming it without previously saving some provisions for my subsistence until the harvest and I know by experience that preparatory labour is indispensable in order to render present labour productive The good Mathurin was not content with making these reflections he resolved to work by the day and to save something from his wages to buy a spade and a sack of corn without which things he must give up his fine agricultural projects he acted so well and was so active and steady that he soon saw himself in possession of the wished-for sack of corn I shall take it to the mill, said he and then I shall have enough to live upon till my field is covered with a rich harvest Just as he was starting Jerome came to borrow his treasure of him If you will lend me the sack of corn, said Jerome you will do me a great service for I have some very lucrative work in view which I cannot possibly undertake for want of provisions to live upon until it is finished I was in the same case, answered Mathurin and if I have now secured bread for several months it is at the expense of my arms and my stomach Upon what principle of justice can it be devoted to the realization of your enterprise instead of mine? You may well believe that the bargain was a long one However, it was finished at length and on these conditions First, Jerome promised to give back at the end of the year a sack of corn of the same quality and of the same weight without missing a single grain This clause is perfectly just, said he for without it Mathurin would give and not lend Secondly, he engaged to deliver five liters on every hectoliter This clause is no less just than the other thought he for without it Mathurin would do me a service without compensation He would inflict upon himself a privation He would renounce his cherished enterprise He would enable me to accomplish mine He would cause me to enjoy for a year the fruits of his savings and all this gratuitously Since he delays the cultivation of his land Since he enables me to realize a lucrative labor it is quite natural that I should let him partake in a certain proportion of the profits which I shall gain by the sacrifice he makes of his own On his side, Mathurin, who was something of a scholar made this calculation Since by virtue of the first clause the sack of corn will return to me at the end of the year he said to himself I shall be able to lend it again and it will return to me at the end of the second year I may lend it again and so on to all eternity However, I cannot deny that it will have been eaten long ago It is singular that I should be perpetually the owner of a sack of corn although the one I have lent has been consumed forever But this is explained thus It will be consumed in the service of Jerome It will be put into the power of Jerome to produce a superior value and consequently Jerome will be able to restore me a sack of corn or the value of it without having suffered the slightest injury but quite the contrary And as regards myself this value ought to be my property as long as I do not consume it myself If I had used it to clear my lands I should have received it again in the form of a fine harvest Instead of that, I lend it and shall recover it in the form of repayment From the second clause I gain another piece of information At the end of the year I shall be in possession of five liters of corn over the one hundred that I have just lent If then I were to continue to work by the day and to save part of my wages as I have been doing in the course of time I should be able to lend two sacks of corn then three, then four and when I should have gained a sufficient number to enable me to live on these additions of five liters over and above each I shall be at liberty to take a little repose in my old age But how is this? In this case, shall I not be living at the expense of others? No, certainly for it has been proved that in lending I perform a service I complete the labor of my borrowers and only deduct a trifling part of the excess of production due to my lendings and savings It is a marvelous thing that a man may thus realize a leisure which injures no one and for which he cannot be envied without injustice The house Mondor had a house In building it he had extorted nothing from anyone, whatever He owed it to his own personal labor or, which is the same thing to labor justly rewarded His first care was to make a bargain with an architect, in virtue of which by means of a hundred crowns a year the latter engaged to keep the house in constant good repair Mondor was already congratulating himself on the happy days which he hoped to spend in this retreat declared sacred by our constitution But Valerius wished to make it his residence How can you think of such a thing? said Mondor to Valerius It is I who have built it It cost me ten years of painful labor and now you would enjoy it They agreed to refer the matter to judges They chose no profound economists There were none such in the country But they found some just and sensible men It all comes to the same thing Political economy, justice, good sense are all the same thing Now here is the decision made by the judges If Valerius wishes to occupy Mondor's house for a year he is bound to submit to three conditions The first is to quit at the end of the year and to restore the house in good repair saving the inevitable decay resulting from mere duration The second to refund to Mondor the 300 francs which the latter pays annually to the architect to repair the injuries of time For these injuries taking place whilst the house is in the service of Valerius it is perfectly just that he should bear the consequences The third, that he should render to Mondor a service equivalent to that which he receives As to this equivalence of service it must be freely discussed between Mondor and Valerius The plane A very long time ago there lived in a poor village, a joiner who was a philosopher as all my heroes are in their own way James worked from morning till night with his two strong arms but his brain was not idle for all that He was fond of reviewing his actions, their causes and their effects He sometimes said to himself with my hatchet, my saw and my hammer I can make only coarse furniture and can only get the pay for such If I only had a plane I should please my customers more and they would pay me more It is quite just I can only expect services proportioned to those which I render myself Yes, I am resolved I will make myself a plane However, just as he was setting to work James reflected further I worked for my customers 300 days in the year If I give 10 to making my plane supposing it lasts me a year only 290 days will remain for me to make my furniture Now, in order that I be not the loser in this matter I must gain henceforth with the help of the plane as much in 290 days as I do now in 300 I must even gain more for unless I do so it would not be worth my while to venture upon any innovations James began to calculate He satisfied himself that he should sell his finished furniture at a price which would amply compensate for the 10 days devoted to the plane and when no doubt remained on this point he set to work I beg the reader to remark that the power which exists in the tool to increase the productiveness of labour is the basis of the solution which follows At the end of 10 days James had in his possession an admirable plane which he valued all the more for having made it himself He danced for joy for, like the girl with her basket of eggs he reckoned all the profits which he expected to derive from the ingenious instrument but, more fortunate than she he was not reduced to the necessity of saying goodbye to the calf, cow, pig and eggs together He was building his fine castles in the air when he was interrupted by his acquaintance William a joiner in the neighbouring village William, having admired the plane was struck with the advantages which might be gained from it He said to James W, you must do me a service J, what service? W, lend me the plane for a year As might be expected, James at this proposal did not fail to cry out How can you think of such a thing, William? Well, if I do you this service what will you do for me in return? W Nothing Don't you know that a loan ought to be gratuitous? Don't you know that capital is naturally unproductive? Don't you know fraternity has been proclaimed? If you only do me a service for the sake of receiving one from me in return what merit would you have? J William, my friend, fraternity does not mean that all the sacrifices are to be on one side If so, I do not see why they should not be on yours Whether a loan should be gratuitous, I don't know But I do know that if I were to lend you my plane for a year it would be giving it to you To tell the truth, that was not what I made it for W Well, we will say nothing about the modern maxims discovered by the socialist gentlemen I ask you to do me a service What service do you ask me in return? J First, then, in a year the plane will be done for it will be good for nothing It is only just that you should let me have another exactly like it or that you should give me money enough to get it repaired or that you should supply me the ten days which I must devote to replacing it W This is perfectly just I submit to these conditions I engage to return it or to let you have one like it or the value of the same I think you must be satisfied with this and can require nothing further J I think otherwise I made the plane for myself and not for you I expected to gain some advantage from it by my work being better finished and better paid by an improvement in my condition What reason is there that I should make the plane and you should gain the profit? I might as well ask you to give me your saw and hatch it What a confusion Is it not natural that he should keep what he has made with his own hands as well as his hands themselves To use without recompense the hands of another I call slavery To use without recompense the plane of another Can this be called fraternity? W But then I have agreed to return it to you at the end of a year as well polished and as sharp as it is now J We have nothing to do with next year We are speaking of this year I have made the plane for the sake of improving my working condition If you merely return it to me in a year it is you who will gain the profit of it during the whole of that time I am not bound to do you such a service without receiving anything from you in return Therefore, if you wish for my plane independently of the entire restoration already bargained for you must do me a service, which we will now discuss and you must grant me remuneration And this was done thus William granted a remuneration calculated in such a way that at the end of the year James received his plane quite new and in addition a compensation consisting of a new plank for the advantages of which he had deprived himself and which he had yielded to his friend It was impossible for anyone acquainted with the transaction to discover the slightest trace in it of oppression or injustice The singular part of it is that at the end of the year the plane came into James' possession and he lent it again recovered it and lent it a third and fourth time It has passed into the hands of his son who still lends it Poor plane, how many times it has changed sometimes it's blade sometimes it's handle It is no longer the same plane but it has always the same value at least for James' posterity Workman, let us examine into these little stories I maintain first of all that the sack of corn and the plane are here the type, the model, a faithful representation the symbol of all capital as the five liters of corn and the plank of the type the model, the representation, the symbol of all interest This granted, the following are, it seems to me a series of consequences the justice of which it is impossible to dispute First, if the yielding of a plank by the borrower to the lender is a natural, equitable, lawful remuneration the just price of a real service we may conclude that, as a general rule it is in the nature of capital to produce interest When this capital, as in the foregoing examples takes the form of an instrument of labor it is clear enough that it ought to bring an advantage to its possessor to him who has devoted to it his time, his brains, and his strength Otherwise, why should he have made it? No necessity of life can be immediately satisfied with instruments of labor No one eats planes or drinks halls except indeed he be a conjurer If a man determines to spend his time in the production of such things he must have been led to it by the consideration of the power which these instruments add to his power of the time which they save him of the perfection and rapidity which they give to his labor in a word, of the advantages which they procure for him Now, these advantages which have been prepared by labor by the sacrifice of time which might have been used in a more immediate manner Are we bound, as soon as they are ready to be enjoyed to confer them gratuitously upon another? Would it be in advance in social order if the law decided thus and citizens should pay officials for causing such a law to be executed by force? I venture to say that there is not one amongst you who would support it It would be to legalize, to organize to systematize injustice itself for it would be proclaiming that there are men born to render and others born to receive gratuitous services Granted, then, that interest is just natural and lawful Second A second consequence, not less remarkable than the former and, if possible, still more conclusive to which I call your attention, is this interest is not injurious to the borrower I mean to say the obligation in which the borrower finds himself to pay a remuneration for the use of capital cannot do any harm to his condition Observe, in fact, that James and William are perfectly free as regards the transaction to which the plane gave occasion The transaction cannot be accomplished without the consent of the one as well as of the other The worst which can happen is that James may be too exacting and, in this case, William, refusing the loan remains as he was before By the fact of his agreeing to borrow he proves that he considers it an advantage to himself He proves that after every calculation including the remuneration, whatever it may be required of him he still finds it more profitable to borrow than not to borrow He only determines to do so because he has compared the inconveniences with the advantages He has calculated that the day on which he returns the plane accompanied by the remuneration agreed upon he will have affected more work with the same labor thanks to this tool A profit will remain to him otherwise he would not have borrowed The two services of which we are speaking are exchanged according to the law which governs all exchanges the law of supply and demand The claims of James have a natural and impassable limit This is the point in which the remuneration demanded by him would absorb all the advantage which William might find in making use of a plane In this case, the borrowing would not take place William would be bound either to make a plane for himself or to do without one which would leave him in his original condition He borrows because he gains by borrowing I know very well what will be told me You will say, William may be deceived or perhaps he may be governed by necessity and be obliged to submit to a harsh law It may be so As to errors in calculation they belong to the infirmity of our nature and to argue from this against the transaction in question is objecting the possibility of loss in all imaginable transactions in every human act Ever is an accidental fact which is incessantly remedied by experience In short, everybody must guard against it As far as those hard necessities are concerned which force persons to burden some borrowings it is clear that these necessities exist previously to the borrowing If William is in a situation in which he cannot possibly do without a plane and must borrow one at any price does this situation result from James having taken the trouble to make the tool? Does it not exist independently of this circumstance? However harsh, however severe James may be he will never render the supposed condition of William worse than it is Morally it is true the lender will be to blame but in an economical point of view the loan itself can never be considered responsible for previous necessities which it has not created and which it relieves to a certain extent but this proves something to which I shall return The evident interests of William representing here the borrowers in other words, lenders and capitals it is very evident that if William can say to James your demands are exorbitant there is no lack of planes in the world he will be in a better situation than if James's plane was the only one to be borrowed assuredly there is no maximum more true than this service for service but let us not forget that no service has a fixed and absolute value compared with others the contracting parties are free each carries his requisitions to the farthest possible point and the most favorable circumstance for these requisitions is the absence of rivalship hence it follows that if there is a class of men more interested than any other in the formation multiplication and abundance of capitals it is mainly that of the borrowers now, since capitals can only be formed and increased by the stimulus and the prospect of remuneration let this class understand the injury they are inflicting on themselves when they deny the lawfulness of interest when they proclaim that credit should be gratuitous when they declaim against the pretended tyranny of capital when they discourage saving thus forcing capitals to become scarce and consequently interests to rise third the anecdote I have just related enables you to explain this apparently singular phenomenon which is termed the duration or perpetuity of interest since, in lending his plane James has been able, very lawfully to make it a condition that it should be returned to him at the end of a year in the same state in which it was when he lent it is it not evident that he may, at the expiration of the term lend it again on the same conditions? if he resolves upon the latter plan the plane will return to him at the end of every year and that without end James will then be in a condition to lend it without end that is, he may derive from it a perpetual interest it will be said that the plane will be worn out that is true but it will be worn out by the hand and for the profit of the borrower the latter has taken into account this gradual wear and taken upon himself as he ought the consequences he has reckoned that he shall derive from this tool an advantage which will allow him to restore it to its original condition after having realized a profit from it as long as James does not use this capital himself or for his own advantage as long as he renounces the advantages which allow it to be restored to its original condition he will have an incontestable right to have it restored and that independently of interest observe, besides, that if, as I believe I have shown James, far from doing any harm to William has done him a service in lending him his plane for a year for the same reason he will do no harm to a second a third, a fourth borrower in the subsequent periods hence you may understand that the interest of a capital is as natural, as lawful, as useful in the thousandth year as in the first we may go still further it may happen that James lends more than a single plane it is possible that by means of working, of saving of privations, of order, of activity he may come to lend a multitude of planes and stalls that is to say, to do a multitude of services I insist upon this point that if the first loan has been a social good it will be the same with all the others that they are all similar and based upon the same principle it may happen, then, that the amount of all the remunerations received by our honest operative in exchange for services rendered by him may suffice to maintain him in this case there will be a man in the world who has a right to live without working I do not say that he would be doing right to give himself up to idleness I say that he has a right to do so and if he does so it will be at nobody's expense but quite the contrary if society at all understands the nature of things it will acknowledge that this man subsists on services which he receives certainly, as we all do but which he lawfully receives in exchange for other services which he himself has rendered that he continues to render and which are quite real as much as they are freely and voluntarily accepted End of Section 2 Recording by Katie Riley February 2010 Section 3 of Essays on Political Economy This is a LibriVox recording All LibriVox recordings are in the public domain For more information or to volunteer please visit LibriVox.org Essays on Political Economy by Frédéric Bastiat Section 3 And here we have a glimpse of one of the finest harmonies in the social world I allude to leisure Not that leisure that's the warlike and tyrannical classes arranged for themselves by the plunder of the workers but that leisure which is the lawful and innocent fruit of past activity and economy In expressing myself thus I know that I shall shock many received ideas but see, is not leisure an essential spring in the social machine? Without it, the world would never have had a Newton, a Pascal, a Fennelin mankind would have been ignorant of all arts, sciences and of those wonderful inventions prepared originally by investigations of mere curiosity thought would have been inert man would have made no progress On the other hand, if leisure could only be explained by plunder and oppression if it were a benefit which could only be enjoyed unjustly and at the expense of others there would be no middle path between these two evils either mankind would be reduced to the necessity of stagnating in a vegetable and stationary life an eternal ignorance from the absence of wheels to its machines or else it would have to acquire these wheels at the price of inevitable injustice and would necessarily present the sad spectacle in one form or another of the anti-classification of human beings into masters and slaves I defy anyone to show me, in this case, any other alternative We should be compelled to contemplate the divine plan which governs society with the regret of thinking that it presents a deplorable chasm The stimulus of progress would be forgotten or, which is worse, this stimulus would be no other than injustice itself But no, God has not left such a chasm in his work of love We must take care not to disregard his wisdom and power for those whose imperfect meditations cannot explain the lawfulness of leisure are very much like the astronomer who said, at a certain point in the heavens there ought to exist a planet which will be at last discovered for without it the celestial world is not harmony but discord Well, I say, that, if well understood, the history of my humble plane although very modest, is sufficient to raise us to the contemplation of one of the most consoling but least understood of the social harmonies Is it not true that we must choose between the denial or the lawfulness of leisure? Thanks to rent and its natural duration, leisure may arise from labour and saving It is a pleasing prospect, which everyone may have in view a noble recompense to which each may aspire It makes its appearance in the world It distributes itself proportionately to the exercise of certain virtues It opens all the avenues of intelligence It ennobles It raises the morals It spiritualizes the soul of humanity not only without laying any weight on those of our brethren whose lot in life devotes them to severe labour but relieving them gradually from the heaviest and most repugnant part of this labour It is enough that capitals should be formed, accumulated, multiplied should be lent on conditions less and less burdensome that they should descend, penetrate into every social circle and that by an admirable progression after having liberated the lenders they should hasten the liberation of the borrowers themselves For that end, the laws and customs ought to be favourable to economy the source of capital It is enough to say that the first of all these conditions is not to alarm, to attack, to deny that which is the stimulus of saving and the reason of its existence interest As long as we see nothing passing from hand to hand in the character of loan, but provisions, materials, instruments things indispensable to the productiveness of labour itself the idea thus far exhibited will not find many opponents Who knows, even, that I may not be reproached for having made a great effort to burst what may be said to be an open door But as soon as cash makes its appearance as the subject of the transaction and it is this which appears most always immediately a crowd of objections are raised Money, it will be said, will not reproduce itself like your sack of corn It does not assist labour, like your plain it does not afford an immediate satisfaction like your house It is incapable by its nature of producing interest of multiplying itself and the remuneration it demands is a positive extortion Who cannot see the sophistry of this Who does not see that cash is only a transient form which men give at the time to other values to real objects of usefulness for the sole object of facilitating their arrangements In the midst of social complications the man who is in a condition to lend scarcely ever has the exact thing which the borrower wants James, it is true, has a plain But perhaps William wants a saw They cannot negotiate The transaction favourable to both cannot take place and then what happens? It happens that James first exchanges his plain for money he lends the money to William and William exchanges the money for a saw The transaction is no longer a simple one it is decomposed into two parts as I explained above in speaking of exchange But, for all that, it has not changed its nature it still contains all the elements of the direct loan James has still got rid of a tool which was useful to him William has still received an instrument which perfects his work and increases his profits There is still a service rendered by the lender which entitles him to receive an equivalent service from the borrower This just balance is not the less established by free mutual bargaining The very natural obligation to restore at the end of the term the entire value still constitutes the principle of the duration of interest At the end of the year, says M. Thore Will you find an additional crown in a bag of a hundred pounds? No, certainly if the borrower puts the bag of one hundred pounds on the shelf In such a case, neither the plane nor the sack of corn would reproduce themselves But it is not for the sake of leaving the money in the bag nor the plane on the hook that they are borrowed The plane is borrowed to be used or the money to procure a plane and if it is clearly proved that this tool enables the borrower to obtain profits which he would not have made without it if it is proved that the lender has renounced creating for himself this excess of profits we may understand how the stipulation of a part of this excess of profits in favor of the lender is equitable and lawful Ignorance of the true part which cash plays in human transactions is the source of the most fatal errors I intend devoting an entire pamphlet to this subject from what we may infer from the writings of M. Prouton that which has led him to think that Cretuit's credit was a logical and definite consequence of social progress is the observation of the phenomenon which shows a decreasing interest almost in direct proportion to the rate of civilization In barbarous times it is in fact cent, percent, and more Then it descends to 80, 60, 50, 40, 20, 10, 5, 4 and 3% In Holland it has even been as low as 2% Hence it is concluded that in proportion as society comes to perfection it will descend to zero by the time civilization is complete In other words that which characterizes social perfection is the gratuitousness of credit When therefore we shall have abolished interest we shall have reached the last step of progress This is mere savastry and as such false arguing may contribute to render popular the unjust, dangerous, and destructive dogma that credit should be gratuitous by representing it as coincident with social perfection with the reader's permission I will examine in a few words this new view of the question What is interest? It is the service rendered after a free bargain by the borrower to the lender in remuneration for the service he has received by the loan By which law is the rate of these remunerative services established by the general law which regulates the equivalent of all services that is by the law of supply and demands The more easily a thing is procured the smaller is the service rendered by yielding it or lending it The man who gives me a glass of water in the Pyrenees does not render me so great a service as he who allows me one in the desert of Sahara If there are many planes, sacks of corn, or houses in a country the use of them is obtained, other things being equal on more favorable conditions than if they were few for the simple reason that the lender renders in this case a smaller relative service It is not surprising therefore that the more abundant capitals are the lower is the interest Is this saying that it will ever reach zero? No Because, I repeat, the principle of a remuneration is in the loan To say that interest will be annihilated is to say there will never be any motive for saving for denying ourselves in order to form new capitals nor even to preserve the old ones In this case the waste would immediately bring a void and interest would directly reappear In that, the nature of the services of which we are speaking does not differ from any other Thanks to industrial progress, a pair of stockings which used to be worth six francs has successively been worth only four, three, and two No one can say to what point this value will descend but we can affirm that it will never reach zero unless the stockings finish by producing themselves spontaneously Why? Because the principle of remuneration is in labor because he who works for another renders a service and ought to receive a service If no one is paid for stockings they would cease to be made and, with the scarcity the price would not fail to reappear Thisophism which I am now combating has its roots in the infinite divisibility which belongs to value as it does to matter It appears at first paradoxical but it is well known to all mathematicians that, through all eternity fractions may be taken from a weight without the weight ever being annihilated It is sufficient that each successive fraction be less than the preceding one in a determined and regular proportion There are countries where people apply themselves to increasing the size of horses or diminishing in sheep the size of the head It is impossible to say precisely to what point they will arrive in this No one can say that he has ever seen the largest horse or the smallest sheep's head that will ever appear in the world but he may safely say that the size of horses will never attain to infinity nor the heads of sheep to nothing In the same way, no one can say to what point the price of stockings nor the interest of capitals will come down But we may safely affirm when we know the nature of things that neither the one nor the other will ever arrive at zero For labour and capital can no more live without recompense than a sheep without a head The arguments of M. Prouton reduce themselves then to this Since the most skillful agriculturalists are those who have reduced the heads of sheep to the smallest size we shall have arrived at the highest agricultural perfection when sheep have no longer any heads Therefore, in order to realize the perfection let us behead them I have now done with this weary some discussion Why is it that the breath of false doctrine has made it needful to examine into the intimate nature of interest? I must not leave off without remarking upon a beautiful moral which may be drawn from this law The depression of interest is proportioned to the abundance of capitals This law being granted if there is a class of men to whom it is more important than any other that capitals be formed, accumulate, multiply abound and superabound it is certainly the class which borrows them directly or indirectly It is those men who operate upon materials who gain assistance by instruments who live upon provisions produced and economized by other men Imagine, in a vast and fertile valley a population of a thousand inhabitants destitute of all capital that thus defined it will assuredly perish by the pangs of hunger let us suppose a case hardly less cruel let us suppose that ten of these savages are provided with instruments and provisions sufficient to work and to live themselves until harvest time as well as to remunerate the services of eighty laborers The inevitable result will be the death of 900 human beings It is clear, then, that since 990 men urged by want will crowd upon the supports which would only maintain a hundred the ten capitalists will be masters of the market They will obtain labor on the hardest conditions for they will put it up to auction or the highest bidder And observe this If these capitalists entertain such pious sentiments as would induce them to impose personal privations on themselves in order to diminish the sufferings of some of their brethren this generosity which attaches to morality will be as noble in its principle as useful in its effects But if duped by that false philosophy which persons wish so inconsiderately to mingle with economic laws they take to remunerating labor largely, far from doing good they will do harm They will give double wages, it may be But then 45 men will be better provided for whilst 45 others will come to argument the number of those who are sinking into the grave Upon this supposition it is not the lowering of wages which is the mischief it is the scarcity of capital Low wages are not the cause but the effect of the evil I may add that they are to a certain extent the remedy It acts in this way It distributes the burden of suffering as much as it can and saves as many lives as a limited quantity of sustenance permits Suppose now that instead of ten capitalists there should be a hundred, two hundred, five hundred Is it not evident that the condition of the whole population and above all that of the proletaires will be more and more improved? Is it not evident that, apart from every consideration of generosity they would obtain more work and better pay for it? That they themselves will be in a better condition to form capitals without being able to fix the limits of this ever-increasing facility of realizing equality and well-being? Would it not be madness in them to admit such doctrines and to act in a way which would drain the source of wages and paralyze the activity and stimulus of saving? Let them learn this lesson then Doubtless capitals are good for those who possess them who denies it but they are also useful to those who have not yet been able to form them and it is important to those who have them not that others should have them Yes, if the proletare knew their true interests they would seek, with the greatest care, what circumstances are and what are not favorable to saying in order to favor the former and to discourage the latter They would sympathize with every measure which tends to the rapid formation of capitals They would be enthusiastic promoters of peace, liberty, order, security the union of classes and peoples, economy, moderation in public expenses simplicity in the machinery of governments for it is under the sway of all the circumstances that saving does its work brings plenty within the reach of the masses invites those persons to become the formers of capital who were formerly under the necessity of borrowing upon hard conditions They would repel, with energy, the war-like spirit which diverts from its true course so large a part of human labor a capitalizing spirit which deranges the equitable distribution of riches in the way by which liberty alone can realize it the multitude of public services which attack our purses only to check our liberty and in short, those subversive, hateful, thoughtless doctrines which alarm capital, prevent its formation oblige it to flee, and finally to raise its price to the special disadvantage of the workers who bring it into operation Well, and in this respect is not the revolution of February a hard lesson? Is it not evident that the insecurity it has thrown into the world of business on the one hand, and on the other the advancement of the fatal theories to which I have alluded, and which, from the clubs have almost penetrated into the regions of the legislature have everywhere raised the rate of interest? Is it not evident that from that time the proletaire have found greater difficulty in procuring those materials, instruments, and provisions without which labor is impossible? Is it not that which has caused stoppages and do not stoppages in their turn lower wages? Thus there is a deficiency of labor to the proletaire from the same cause which loads the objects they consume with an increase of price, in consequence of the rise of interest High interest, low wages, means in other words that the same article preserves its price but that the part of the capitalist has invaded without profiting himself, that of the workmen A front of mine, commissioned to make inquiry into Parisian industry, has assured me that the manufacturers have revealed to him a very striking fact which proves, better than any reasoning can how much insecurity and uncertainty injure the formation of capital It was remarked that during the most distressing period the popular expenses of mere fancy had not diminished The small theaters, the fighting lists, the public houses and tobacco depots were as much frequented as in prosperous times In the inquiry the operatives themselves explained this phenomenon thus What is the use of pinching? Who knows what will happen to us? Who knows that interest will not be abolished? Who knows but that the state will become a universal and gratuitous lender and that it will wish to annihilate all the fruits which we might expect from our savings Well, I say that if such ideas could prevail during two single years it would be enough to turn our beautiful France into a turkey misery would become general and endemic and most assuredly, the poor would be the first upon whom it would fall Workmen, they talk to you a great deal upon the artificial organization of labor Do you know why they do so? Because they are ignorant of the laws of its natural organization that is of the wonderful organization which results from liberty You are told that liberty gives rise to what is called the radical antagonism of classes that it creates and makes to clash two opposite interests that of the capitalists and that of the proletaire But we ought to begin by proving that this antagonism exists by a law of nature and afterwards it would remain to be shown how far the arrangements of restraint are superior to those of liberty For between liberty and restraint I see no middle path Again it would remain to be proved that restraint would always operate to your advantage and to the prejudice of the rich But no, this radical antagonism this natural opposition of interests does not exist It is only an evil dream of perverted and intoxicated imaginations No, a plan so defective has not proceeded from the divine mind To affirm it, we must begin by denying the existence of God And see how, by means of social laws and because men exchange amongst themselves their labors and their productions See what a harmonious tie attaches the classes one to the other There are the landowners What is their interest? That the soil be fertile and the sun beneficent And what is the result? That corn abounds, that it falls in price And the advantage turns to the profit of those who have no patrimony There are the manufacturers What is their constant thought? To perfect their labor, to increase the power of their machines To procure for themselves, upon the best terms, the raw material And to what does all this tend? To the abundance and the low price of produce That is, that all the efforts of the manufacturers and without their suspecting it result in a profit to the public consumer of which each of you is one It is the same with every profession Well, the capitalists are not exempt from this law They are very busy making schemes economizing and turning them to their advantage This is all very well But the more they succeed the more do they promote the abundance of capital and as a necessary consequence the reduction of interest Now, who is it that profits by the reduction of interest? Is it not the borrower first? And finally, the consumers of the things which the capitalists contribute to produce? It is, therefore, certain that the final result of the efforts of each class is the common good of all You are told that capital tyrannizes over labor I do not deny that each one endeavors to draw the greatest possible advantage from his situation But, in this sense, he realizes only that which is possible Now, it is never more possible for capitalists to tyrannize over labor than when they are scarce For then, it is they who make the law It is they who regulate the rate of sale Never is this tyranny more impossible to them than when they are abundant For, in that case it is the labor which has the command Away, then, with the jealousies of classes ill-will, unfounded hatreds, unjust suspicions These depraved passions injure those who nourish them in their hearts This is no declamatory morality It is a chain of causes and effects which is capable of being rigorously mathematically demonstrated It is not the less sublime in that it satisfies the intellect as well as the feelings I shall sum up this whole dissertation with these words You will not succeed by strife, insurrection, hatred, and error But there are three things which cannot perfect the entire community without extending these benefits to yourselves These things are peace, liberty, and security and of Section 3 Recording by Katie Riley February 2010 Section 4 of Essays on Political Economy This is a LibriVox recording All LibriVox recordings are in the public domain For more information or to volunteer please visit LibriVox.org Essays on Political Economy by Frédéric Bastia Section 4 That which is seen and that which is not seen In the Department of Economy an act, a habit, an institution, a law gives birth not only to an effect but to a series of effects Of these effects, the first only is immediate It manifests itself simultaneously with its cause It is seen The others unfold in succession They are not seen It is well for us if they are foreseen Between a good and a bad economist this constitutes the whole difference The one takes account of the visible effect The other takes account both of the effects which are seen and also of those which it is necessary to foresee Now this difference is enormous for it almost always happens that when the immediate consequence is favorable the ultimate consequences are fatal and the converse Hence it follows that the bad economist pursues a present good which will be followed by a great evil to come While the true economist pursues a great good to come at the risk of a small present evil In fact it is the same in the science of health arts and in that of morals It often happens that the sweeter the first fruit of a habit is the more bitter are the consequences Take for example debauchery idleness, prodigality When, therefore, a man absorbed in the effect which is seen has not yet learned to discern those which are not seen he gives way to fatal habits not only by inclination but by calculation This explains the fatally grievous condition of mankind Ignorance surrounds its cradle then its actions are determined by the first consequences the only ones which in its first stage it can see only in the long run that it learns to take account of the others it has to learn this lesson from two very different masters experience and foresight experience teaches effectually but brutally it makes us acquainted with all the effects of an action by causing us to feel them and we cannot fail to finish by knowing that fire burns if we have burned ourselves for this rough teacher I should like if possible to substitute a more gentle one I mean foresight for this purpose I shall examine the consequences of certain economical phenomena by placing an opposition to each other those which are seen and those which are not seen one the broken window have you ever witnessed the anger of a good shopkeeper? James B. when his careless son happened to break a pane of glass if you have been present at such a scene you will most assuredly bear witness to the fact that every one of the spectators were there even 30 of them by common consent apparently offered the unfortunate owner this invariable consolation it is an ill wind that blows nobody good everybody must live and what would become of the glaciers if panes of glass were never broken now this form of condolence contains an entire theory which it will be well to show up in this simple case seeing that it is precisely the same as that which unhappily regulates the greater part of our economical institutions suppose it costs six francs to repair the damage and you say that the accident brings six francs to the glaciers trade that it encourages that trade to the amount of six francs I grant it I have not a word to say against it you reason justly the glacier comes performs his task receives his six francs rubs his hand and in his heart blesses the careless child all this is that which is seen but if, on the other hand you come to the conclusion as is too often the case that it is a good thing to break windows that it causes money to circulate and that the encouragement of industry in general will be the result of it you will oblige me to call out stop there your theory is confined to that which is seen it takes no account of that which is not seen it is not seen that as our shopkeeper has spent six francs upon one thing he cannot spend them upon another it is not seen that if he had not had a window to replace he would perhaps have replaced his old shoes or added another book to his library in short he would have employed his six francs in some way this accident has prevented let us take a view of industry in general as affected by this circumstance the window being broken the glacier's trait is encouraged to the amount of six francs this is that which is seen if the window had not been broken the shoemaker's trade or some other would have been encouraged to the amount of six francs this is that which is not seen and if that which is not seen taken into consideration because it is a negative fact as well as that which is seen because it is a positive fact it will be understood that neither industry in general nor the sum total of national labor is affected whether windows are broken or not now let us consider James B. himself in the former supposition that of the window being broken he spends six francs and has neither more nor less than he had before the enjoyment of a window in the second where we suppose the window not to have been broken he would have spent six francs in shoes and would have had at the same time the enjoyment of a pair of shoes and of a window now as James B. forms a part of society we must come to the conclusion that taking it all together and making an estimate of its enjoyments and its labors it has lost the value of a broken window once we arrive at this unexpected conclusion society loses the value of things which are uselessly destroyed and we must ascend to a maximum which will make the hair of protectionists stand on end to break, to spoil, to waste is not to encourage national labor or more briefly destruction is not profit what will you say? monitor industrial what will you say? disciples of good MF champions who has calculated with so much precision how much trade would gain by the burning of Paris from the number of houses it would be necessary to rebuild I am sorry to disturb these ingenious calculations as far as their spirit has been introduced into our legislation but I bank him to begin them again by taking into account that which is not seen and placing it alongside of that which is seen the reader must take care to remember that there are not two persons only but three concerned in the little scene which I have submitted to his attention one of them, James B represents the consumer reduced by an act of destruction to one enjoyment instead of two another under the title of the glazier shows us the producer whose trade is encouraged by the accident the third is the shoemaker or some other tradesman whose labor suffers proportionably by the same cause it is this third person who is always kept in the shade and who, personating that which is not seen is a necessary element of the problem it is he who shows us how absurd it is to think we see a profit in an act of destruction it is he who will soon teach us that it is not less absurd to see a profit in a restriction which is, after all, nothing else than a partial destruction therefore, if you will only go to the root of all the arguments which are adduced in its favor all you will find will be the paraphrase of this vulgar saying what would become of the glaziers if nobody ever broke windows two, the disbanding of troops it is the same with a people as it is with a man if it wishes to give itself some gratification it naturally considers it is worth what it costs to a nation, security is the greatest of advantages if, in order to obtain it it is necessary to have an army of a hundred thousand men I have nothing to say against it it is an enjoyment bought by a sacrifice let me not be misunderstood upon the extent of my position a member of the assembly proposes to disband a hundred thousand men for the sake of relieving the taxpayers of a hundred millions if we can find ourselves to this answer the hundred millions of men and these hundred millions of money are indispensable to the national security it is a sacrifice but without this sacrifice France would be torn by factions or invaded by some foreign power I have nothing to object to this argument which may be true or false, in fact but which, theoretically contains nothing which militates against economy the error begins when the sacrifice itself is said to be an advantage because it profits somebody now I am very much mistaken if the moment the author of the proposal has taken his seat some orator will not rise and say disband a hundred thousand men do you know what you are saying what will become of them where will they get a living don't you know that work is scarce everywhere that every field is overstocked would you turn them out of doors to increase competition and to weigh upon the rate of wages just now when it is a hard matter to live at all it would be a pretty thing if the state must find bread for a hundred thousand individuals consider, besides wine, arms, clothing that it promotes the activity of manufacturers in garrison towns that it is, in short the godsend of innumerable purveyors why anyone must tremble at the bare idea of doing away with this immense industrial movement this discourse it is evident concludes by voting the maintenance of a hundred thousand soldiers for reasons drawn from the necessity of the service and from economical considerations it is these considerations only that I have to refute a hundred thousand men costing the taxpayers a hundred millions of money live and bring to the purveyors as much as a hundred millions can supply this is that which is seen but a hundred million taken from the pockets of the taxpayers cease to maintain these taxpayers and the purveyors as far as a hundred millions reach this is that which is not seen now make your calculations cast up and tell me what profit there is for the masses I will tell you where the loss lies and to simplify it instead of speaking of a hundred thousand men and a million of money will now be of one man and a thousand francs we will suppose that we are in the village of A the recruiting sergeants go there round and take off a man the tax gatherers go there round and take off a thousand francs the man and the sum of money are taken to Metz and the latter is destined to support the former for a year without doing anything that are Metz only you are quite right the measure is a very advantageous one but if you look towards the village of A you will judge very differently for unless you are very blind indeed you will see that that village has lost a worker and the thousand francs which would remunerate his labor as well as the activity which by the expenditure of those thousand francs it would spread around it at first sight there would seem to be some compensation what took place at the village now takes place at Metz that is all but the loss is to be estimated in this way at the village a man dug and worked he was a worker at Metz he turns to the right about and to the left about he is a soldier the money and the circulation of cases but in the one there were 300 days of productive labor in the other there are 300 days of unproductive labor supposing of course that a part of the army is not indispensable to the public safety now suppose the disbanding to take place you tell me there will be a surplus of a hundred thousand workers that competition will be stimulated and it will reduce the rate of wages this is what you see but what you do not see is this you do not see that to dismiss a hundred thousand soldiers is not to do away with a million of money but to return it to the tax payers you do not see that to throw a hundred thousand workers on the market is to throw into it at the same moment the hundred millions of money needed to pay for their labor currently the same act which increases the supply of hands increases also the demand from which it follows that your fear of a reduction of wages is unfounded you do not see that before the disbanding as well as after it there are in the country a hundred millions of money corresponding with a hundred thousand men that the whole difference consists in this before the disbanding the country gave the hundred millions to the hundred thousand men for doing nothing and that after it it pays them the same sum for working you do not see in short that when a taxpayer gives his money either to a soldier in exchange for nothing or to a worker in exchange for something all the ultimate consequences of the circulation of this money increases only in the second case the taxpayer receives something in the former he receives nothing the result is a dead loss to the nation the softism which I am here combating will not stand the test of progression which is the touchstone of principles if when every compensation is made and all interest satisfied will profit in increasing the army why not enroll under its banners the entire male population of the country three taxes there is no better investment than taxes only see what a number of families it maintains and consider how it reacts upon industry it is an inexhaustible stream it is life itself in order to combat this doctrine I must refer to my proceeding refutation political economy knew well enough that its arguments were not so amusing that it could be said of them repetitions please it has therefore turned the proverb to its own use well convinced that in its mouth repetitions teach the advantages which officials advocate are those which are seen the benefit which accrues to the providers is still that which is seen this blinds all eyes but the disadvantages which the taxpayers have to get rid of are those which are not seen and the injury which results from it to the providers is still that which is not seen although this ought to be self-evident when an official spends for his own profit an extra hundred Sue it implies that a taxpayer spends for his profit a hundred Sue less but the expense of the official is seen because the act is performed while that of the taxpayer is not seen because alas he is prevented from performing it you compare the nation perhaps to a parked in the tax to a fertilizing rain be it so but you ought also to ask yourself where are the sources of this rain and whether it is not the tax itself which draws away the moisture from the ground and dries it up again you want to ask yourself whether it is possible that the soil can receive as much of this precious water by rain as it loses by evaporation there is one thing very certain that when James B counts out a hundred Sue for the tax-gatherer he receives nothing in return afterwards when an official spends these hundred Sue and returns them to James B it is for an equal value in corn or labor the final result is a loss to James B of five francs it is very true that often perhaps very often the official performs for James B an equivalent service in this case there is no loss on either side there is merely an exchange therefore my arguments do not at all apply to useful functionaries all I say is if you wish to create an office prove its utility show that its value to James B by the service which it performs for him is equal to what it costs him but, apart from this interesting utility do not bring forward as an argument the benefit which it confers upon the official his family and his providers do not assert that it encourages labor when James B gives a hundred Sue to a government officer for a really useful service it is exactly the same it gives a hundred Sue to a shoemaker for a pair of shoes but when James B gives a hundred Sue to a government officer and receives nothing for them unless it be annoyances he might as well give them to a thief it is nonsense to say that the government officer will spend these hundred Sue to the great profit of national labor the thief would do the same and so would James B who had not been stopped on the road by the extra legal parasite nor by the lawful sponger let us accustom ourselves then to avoid judging of things by what is seen only but to judge of them by that which is not seen last year I was on the committee of finance for under the constituency the members of the opposition were not systematically excluded from all the commissions in that the constituency acted wisely we have heard M. Thierre say I have passed my life in opposing the legitimist party and the priest party since the common danger has brought us together now that I associate with them and know them and now that we speak face to face I have found out that they are not the monsters I used to imagine them yes distrust is exaggerated hatred is fostered among parties who never mix and if the majority would allow the minority to be present at the commissions it would perhaps be discovered that the ideas of the different sides are not so far removed from each other and above all that their intentions are not so perverse as is supposed however last year I was on the committee of finance every time that one of our colleagues spoke of fixing at a moderate figure the maintenance of the president of the republic that of the ministers and of the ambassadors it was answered for the good of the service it is necessary to surround certain officers with splendor and dignity as a means of attracting men of merit to them a vast number of unfortunate persons apply to the president of the republic and it would be placing him in a very painful position to oblige him to be constantly refusing them a certain style in the ministerial saloons is a part of the machinery of constitutional governments although such arguments may be controverted they certainly deserve a serious examination they are based upon the public interest whether rightly estimated or not and as far as I am concerned I have much more respect for them than many of our caters have who are actuated by a narrow spirit of parsimony or of jealousy but what revolts the economical part of my conscience and makes me blush for the intellectual resources of my country is when this absurd relic of feudalism is brought forward which it constantly is and it is favorably received too besides the luxury of great government officers encourages the arts industry and labour the heads of the state and his ministers cannot give banquets and soiree without causing life to circulate through all the veins of the social body to reduce their means would starve Persian industry and consequently that of the whole nation I must beg you gentlemen to pay some little regard to arithmetic at least and not to say before the national assembly in France less to its shame it should agree with you that in addition gives a different sum according to whether it is added from the bottom to the top or from the top to the bottom of the column for instance I want to agree with a drainer to make a trench in my field for a hundred Sue just as we have concluded our arrangements the tax gatherer comes takes my hundred Sue and sends them to the minister of the interior my bargain is at end but the minister will have another dish added to his table upon what ground will you dare to affirm that this official expense helps the national industry do you not see that in this there is only reversing of satisfaction and labour a minister has his table better covered it is true but it is just as true that an agriculturalist has his field worse drained a Parisian tavern keeper has gained a hundred Sue I grant you but then you must grant me that a drainer has been prevented from gaining five francs it all comes to this that the official and the tavern keeper being satisfied is that which is seen the field undrained and the drainer deprived of his job is that which is not seen dear me how much trouble there is in proving make four and if you succeed in proving it it is said the thing is so plain it is quite tiresome and they voted if you had proved nothing at all end of section four recording by Katie Riley February 2010