Marx-Engels Correspondence 1851

Engels to Marx
In London

Source: MECW Volume 38, p. 419;
First published: in Der Briefwechsel zwischen F. Engels und K. Marx, 1913.

[Manchester, about 11 August 1851]

Dear Marx,

Today I shall continue the glosses on Proudhon which were interrupted yesterday. For the time being I shall disregard the many gaps in the formula, e.g. the fact that one cannot see how the factories are to be transferred from the hands of the manufacturers to the compagnies ouvrières since interest and land rent are to be abolished, but not profit (for there will still be competition); further, what is to become of the big landowners who exploit their land by means of hired labour, and other such deficiencies. In order to assess the thing as a theoretical whole, I should have to have the actual book in front of me. Hence I can give an opinion only in so far as I consider the feasibility, le cas échéant, [should the occasion arise] of the individual measures and at the same time examine the extent to which they lend themselves to the centralisation of all the productive forces. And even then, I really ought to have the book in order to see all the développements.

The fact that Mr Proudhon has at last come to realise the need for more or less covert confiscation is, as I have already said, a step forward. The question is, however, whether his pretext for confiscation will serve, for, as always with these blinkered fellows who persuade themselves that compulsory measures of this kind are not confiscation, the whole thing hinges on that pretext. ‘Interest is reduced to 1/2 or 1/4 per cent. But your extracts say nothing of how this is done, save that the State, or the Bank which secretly and under another name is part and parcel of the State, must make an annual loan on mortgage of 500 mill. fr. at that rate of interest. From this I conclude that the reduction is intended to take place gradually. Once interest was as low as that, the annual liquidation of all debts etc., etc., at a rate of 5 to 10 per cent per annum would, of course, be easy. But Mr Proudhon fails to indicate by what means this is to be attained. In this connection I recall our recent discussion about your scheme for reducing the interest rate by setting up a national bank with exclusive privileges and a monopoly of paper currency, gold and silver being excluded from circulation. I believe that any attempt to lower the interest rate rapidly and steadily would inevitably fail because of the growing need, at a time of revolution and stagnating business, for usury, for the granting of credit to people who are momentarily in a tight corner, at a loss what to do, in other words, momentarily unsound financially. Even if that portion of the interest rate intended for the actual repayment of the loan can be depressed by weight of capital, there still remains the portion representing the guarantee of repayment, which, at times of crisis, rises enormously. In any revolution merchants are grateful to a government which lends to them, not at 1/4 or 1/2 per cent, but at 5 per cent. Cf. 1848, loan offices, etc., etc. The State, and any large, centralised state bank, unless it operates branches in the most out-of-the-way places and has given its officials a long training in commercial practice, can lend to large businesses only, otherwise it would be lending at random. And small businesses cannot pledge their goods like large ones. Donc, 1. the consequence of any reduction in interest rate for government loans = increased profits for big businessmen and a general advancement of that class.

Small businesses would, as before, be compelled to have recourse to middlemen to whom the government had advanced money, at 1/2 per cent so that they could lend it again at 5-10 per cent. That is inevitable. Small businesses furnish no guarantees, and can offer no pledges. Hence in this respect, too, advancement of the big bourgeoisie — indirect creation of a large usurer class, bankers at a lower level.

The constant harping by the socialists and Proudhon on the reduction of interest is, in my opinion, no more than a glorified pious wish of the bourgeoisie and petty bourgeoisie. So long as interest and profit remain in inverse proportion, a reduction of interest can only lead to an increase in profit. And so long as there are people who are financially unsound, unable to provide a guarantee and for that very reason truly in need of money, state lending cannot supersede private lending, i.e. cannot bring down interest rates in respect of all transactions. The State, which lends at 1/2 per cent, would be in precisely the same position vis-à-vis the usurer whom it provides with money as was the French Government of 1795 vis-à-vis the property speculators and stock jobbers of that time when it collected taxes to the tune of 500 mill. in assignats [paper money issued at the time of the French Revolution] and re-issued them for 3 mill. and, simply to maintain its ‘credit’ which had already collapsed, accepted the assignats used for tax payments at their face value, or 200 times their real value.

Proudhon is altogether too naïve: “Personal credit finds or should find its application in the workers’ associations”. Hence the dilemma: either management and finally administration and regulation of these companies by the State, which Proudhon doesn’t want, or the organisation of the most splendid association fraud, the fraud of 1825 and 1845, reproduced at the level of the proletariat, Lumpenproletariat and petty bourgeoisie.

To seek to place the main emphasis on the gradual reduction of the interest rate by commercial and compulsory measures so that all debts etc., etc., are liquidated by converting interest payments into repayments, all real wealth being concentrated in the hands of the State or the communes, seems to me utterly impracticable, 1) on the grounds already cited; 2) because it takes far too long; 3) because the only consequences, if state paper maintained its credit, would necessarily be the country’s indebtedness to foreigners, since all money repaid would find its way abroad; 4) because, even if the feasibility of the thing were accepted in principle, it would be nonsense to believe that France, la République, could carry this out in the teeth of England and America; 5) because war abroad and the pressure of the moment generally, make sheer nonsense of such systematically protracted measures, extending over 20 or 30 years and more especially of money payments.

The only practical significance of the thing would seem to be that it is indeed possible, at a certain point of revolutionary development, and with the help of a monopolist state bank, to decree: Art. 1: interest is abolished or limited to 1/4 per cent; Art. 2: interest will continue to be paid as hitherto, being regarded as repayment; Art. 3: the State is empowered to purchase all real estate, etc., at current tax value and pay for it over 20 years at 5 per cent. Such might perhaps one day serve as the final and immediate precursor of undisguised confiscation; but it would be pure speculation to ponder on the when, where and how.

In any case it would seem that this book of Proudhon’s is much more down-to-earth than his earlier ones — even the constitution de la valeur assumed a more fleshly aspect: that of the juste prix des boutiquiers. Quatre francs, Monsieur, c'est le plus juste prix! What there is in common between the abolition of customs and that of interest is not clear. The fact that, since 1847, Proudhon should have made so complete a transition from Hegel to Stirner is another step forward. Be it said, however, that he won’t understand German philosophy even should he persist with it until his corpse is in the final stage of decomposition.

Write soon and tell me what you think of the foregoing.

F. E.