Is Libertarianism What Libertarians Think It Is? Part 1

General Idea Of The Revolution In The Nineteenth Century by Pierre-Joseph Proudhon (1851)

According to wikipedia:

Pierre-Joseph Proudhon (French: [pjɛʁ ʒɔzɛf pʁudɔ̃]) (15 January 1809 – 19 January 1865) was a French politician, mutualist philosopher, economist, and socialist. He was a member of the French Parliament and the first person to call himself an “anarchist“. He is considered among the most influential theorists and organizers of anarchism. After the events of 1848 he began to call himself a federalist.[1]

That last line is interesting, but not relevant to our subject.

Proudhon tells us that the lack of general prosperity  is due to usury, rent for profit, business and government colluding to limit competition and consolidate power in the hands of a few, essentially all the things that the “right” complains about today. Very few conservatives would disagree with his basic assumptions. I am more interested in his solutions, so, in the interest of brevity,I am going to focus on that.

“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…
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…
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.”

“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…
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.”

This sounds a lot like a national credit union. The key difference is that the money belongs to the citizens and there would be no interest to borrow and so no financial incentive to lend.

“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.”

“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.”

If I’m reading this right, it means no financial incentive to build apartments or office parks. Everybody has to build or buy their houses and business space, increasing the expense of opening a business, but since money is freely lent (given?) without interest, and he makes no mention of collateral, I guess that’s not really a problem. I wonder what the penalty is for abusing this generous system?

“The Contract is Equality, in its profound and spiritual essence.”

This sounds like what I hear on the blogs, and its absurd! An assumption that underlies the whole idea of this essay is that all people are equal in every way. This is demonstrably not the case in intelligence or character. If the contract is equality, why are there so many contract lawyers who can demand such exorbitant fees to protect their client’s interests?

“The contract is Fraternity, because it identifies all interests, unifies all divergences,
resolves all contradictions, and in consequence, give wings to the
feelings of goodwill and kindness, which are crushed by economic chaos,
the government of representatives, alien law”

If this isn’t moon eyed utopianism, I don’t know what is. A second assumption is that all people are paragons of virtue and goodwill and would never try to get the better of each other.

“The organization of credit is three-quarters done by the winding up of
the privileged and usurious banks, and their conversion into a National
Bank of circulation and loan, at ½, ¼, or ⅛ percent. It remains only to
establish branches of the Bank, wherever necessary, and to gradually retire
specie from circulation, depriving gold and silver of their privilege as

“As for personal credit, it is not for the National Bank to have to do with
it; it is with the workingmen’s unions, and the farming and industrial societies,
that personal credit should be exercised.”

If I’m reading this correctly, gold and silver will not be money in this utopia. Is credit the only money? I think the purpose is to prevent accumulation of wealth, to keep people working directly for their sustenance. That could be a problem for the elderly, or for the children who have to support them while also supporting their own families in a system with no investments available other than labor.

“In such cases[non agricultural workers], it is one of two things; either the workman, necessarily
a piece-worker, will be simply the employee of the proprietor-capitalistpromoter;
or he will participate in the chances of loss or gain of the establishment,
he will have a voice in the council, in a word, he will become an
In the first case the workman is subordinated, exploited: his permanent
condition is one of obedience and poverty. In the second case he resumes
his dignity as a man and citizen, he may aspire to comfort, he forms a part
of the producing organization, of which he was before but the slave; as, in
the town, he forms a part of the sovereign power, of which he was before
but the subject.”

“Thus we need not hesitate, for we have no choice. In cases in which
production requires great division of labor, and a considerable collective
force, it is necessary to form an association among the workers in
this industry; because without that, they would remain related as subordinates
and superiors, and there would ensue two industrial castes of
masters and wage-workers, which is repugnant to a free and democratic

Unions. He doesn’t mention management because,”Every industry, operation or enterprise, which by its nature requires the employment of a large number of workmen of different specialties, is destined
to become a society or a company of workers…” Is Harley Davidson still owned by its employees?

The idea isn’t bad, but you still have to have managers, people who allocate capital and make the daily decisions necessary to implement the directors wishes. You still have a two caste system, even if both castes have the same salary. The workers can be owners and vote on corporate decisions, but they can’t all be management.

The truth is that financial capital is rarer than labor and, as such, more valuable, giving it a stronger bargaining position. Think about the people you know, how many are employable and how many have access to the capital to start a business? How many that have the assets have the desire to start a business? This essay proposes doing away with capital, but isn’t clear enough on monetary policy or credit to explain how workers finance a start up.

“The industry to be carried on, the work to be accomplished, are the
common and undivided property of all those who take part therein: the
granting of franchises for mines and railroads to companies of stockholders,
who plunder the bodies and souls of the wage-workers, is a betrayal
of power, a violation of the rights of the public, an outrage upon human
dignity and personality…
The cultivator had been bent under feudal servitude through rent and
mortgages. He is freed by the land bank, and, above all, by the right of the
user to the property. The land, vast in extent and in depth, becomes the
basis of equality.”

I should mention that one of the essays in the introduction section is aimed at differentiating this philosophy from communism.

“…why should there not as well be
a universal and tacit agreement to renounce increase, that is to say, to sell
and pay at the only just price, which is the average cost?”

“Usury is the arbitrary factor in commerce. Inasmuch as, under the present
system, the producer has no guarantee that he can exchange his product,
nor the merchant any certainty of reselling, each one endeavors to pass
off his merchandise at the highest possible price, in order to obtain by the
excess of profit the security of which labor and exchange fail sufficiently
to assure him. The profit thus obtained in excess of the cost, including the
wages of the seller, is called Increase. Increase – theft – is therefore compensation
for insecurity.”

“If the dealer usually refuses to sell his goods at cost, it is, on the one
hand, because he has no certainty of selling enough to secure him an income;
on the other, because he has no guarantee that he will obtain like
treatment for his purchases.
Without this double guarantee, sale at a just price, the same as sale below
the market price, is impossible: the only cases in which it occurs arise
from failures and liquidations.”

“This guarantee may take various forms: perhaps the consumers, who
wish to have the benefit of a just price, are producers themselves, and will
obligate themselves in turn to sell their products to the dealer on like terms,
as is done among the different Parisian associations; perhaps the consumers
will content themselves, without any reciprocal arrangements, with assuring
the retailer of a premium, the interest, for example, of his capital, or a
fixed bonus, or a sale large enough to assure him of a revenue. This is what
is generally done by the butchers’ associations, and by the Housekeeper society,
of which we have already spoken.
… When, by the liquidation of debts, the organization of credit, the
deprivation of the power of increase of money, the limitation of property,
the establishment of workingmen’s associations and the use of a just price,
the tendency to raising of prices shall have been definitely replaced by a
tendency to lower them, and the fluctuations of the market by a normal
commercial rate; when general consent shall have brought this great about face of the sphere of trade, then Value, at once the most ideal and most
real of things, may be said to have been constituted, and will express at any
moment, for every kind of product, the true relation of Labor and Wealth,
while preserving its mobility through the eternal progress of industry”

This sounds like price controls, and it still doesn’t address the concern that “the producer has no guarantee that he can exchange his product, nor the merchant any certainty of reselling” This just seems to be an attempt to erase profit and prevent accumulation of wealth or even basic financial security.

“Free trade would then become equal exchange,
the diversity of interests among nations would gradually result in unity of
interest, and the day would dawn when war would cease among nations,
as would lawsuits among individuals, from lack of litigable matter and absence
of cause for conflict…”

Nobody would have anything worth fighting over.

“This organization, which is as essential to society as it is incompatible
with the present system, has the following principles:
1. The indefinite perfectibility of the individual and of the race;
2. The honorableness of work;
3. The equality of fortunes;
4. The identity of interests;
5. The end of antagonisms;
6. The universality of comfort;
7. The sovereignty of reason;
8. The absolute liberty of the man and of the citizen.

I mention below its principal forms of activity:
a) Division of labor, through which classification of the People by industries
replaces classification by caste;
b) Collective power, the principle of workmen’s associations,
in place of armies;
c) Commerce, the concrete form of contract, which takes the
place of Law;
d) Equality in exchange;
e) Competition;
f ) Credit, which turns upon interests, as the governmental hierarchy
turns upon Obedience;
g) The equilibrium of values and of properties.”

“It is industrial organization that we will put in place of government, as
we have just shown.
In place of laws, we will put contracts. – No more laws voted by a majority,
nor even unanimously; each citizen, each town, each industrial union,
makes its own laws.
In place of political powers, we will put economic forces.
In place of the ancient classes of nobles, burghers, and peasants, or of
business men and working men, we will put the general titles and special
departments of industry: Agriculture, Manufacture, Commerce, etc.
In place of public force, we will put collective force.
In place of standing armies, we will put industrial associations.
In place of police, we will put identity of interests.In place of political centralization, we will put economic centralization.
Do you see now how there can be order without functionaries, a profound
and wholly intellectual unity?”

“No more Authority! That means something we have never seen, something
we have never understood; the harmony of the interest of one with the
interest of all; the identity of collective sovereignty and individual sovereignty.
No more Authority! That means debts paid, servitude abolished, mortgages
lifted, rents reimbursed, the expense of worship, justice, and the Statesuppressed; free credit, equal exchange, free association, regulated value,
education, work, property, domicile, low price, guaranteed: no more antagonism,
no more war, no more centralization, no more governments, no
more priests. Is not that Society emerged from its shell and walking upright?
No more Authority! That is to say further: free contract in place of arbitrary
law; voluntary transactions in place of the control of the State; equitable
and reciprocal justice in place of sovereign and distributive justice;
rational instead of revealed morals; equilibrium of forces instead of equilibrium
of powers; economic unity in place of political centralization. Once
more, I ask, is not this what I may venture to call a complete reversal, a
turn-over, a Revolution?”

This seems more like communism without the central planning. In fact one of the essays in the introductory section of Markets Not Capitalism is devoted to explaining how this is different from communism. It may  differ in some details, but it seems like universal poverty for all.

The excerpts I have posted here do not give the full sense of the piece. It sounds to me like a college student passionately expounding on his economic and social philosophy, except that Proudhon was 42 when this was published.


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