Letter to Friedrich Engels, August 14, 1851

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To Engels in Manchester

[London,] 14 August 1851, 28 Dean Street, Soho

Dear Engels,

In a day or two I shall be sending you the Proudhon itself, but send it back as soon as you've read it. For I intend — for the money — to publish 2-3 sheets about the book. So let me have your views in greater detail than your hasty letter-writing generally allows.

The Proudhon business — and the whole is first and foremost a polemic against communism, however much he may filch from it and however much it may appear to him in the light of the Cabet-Blanc transfiguration — boils down, in my opinion, to the following line of reasoning:

The real enemy to be combatted is capital. The pure economic affirmation of capital is interest. So-called profit is nothing but a particular form of wage. We abolish interest by transforming it into an annuity, i.e. repayment of capital by annual instalments. Thus the working class — read industrial class — will be assured precedence for ever, while the actual capitalist class will be condemned to an ever-diminishing existence. The various forms of interest are money interest, rent interest and lease interest. In this way bourgeois society is retained, justified, and divested only of its mauvaise tendance [evil tendency].

Liquidation sociale is simply a means of building anew a ‘healthy’ bourgeois society. Quick or slow, peu nous imports [it matters little to us]. I want first to hear your views on the contradictions, uncertainties and obscurities of this liquidation as such. The truly healing balm of the newly built society, however, consists in the abolition of interest, i.e. in the yearly transformation of interest into an annuité. This, introduced not as a means but as an economic law of the reformed bourgeois society, has, of course, a twofold result:

1. The transformation of small, non-industrial capitalists into industrial capitalists. 2. The perpetuation of the big capitalist class, for au fond if one takes an overall view of the thing, it becomes apparent that, by and large, — and aside from industrial profits — society never pays anything except the annuité. Were the converse true, Dr Price’s compound interest calculations would become a reality and the entire globe would not suffice to pay interest on a capital, however tiny, invested at the time of Christ. In fact, however, it may be confidently said that the capital invested, whether in land or otherwise, over the past 50 or 100 years e.g. in England — the most tranquil and bourgeois of countries, that is — has never as yet paid interest, at least in terms of price, which is what we are concerned with here. Let us assume, e.g., that at the highest estimate, England’s national wealth amounts to e.g. 5 thousand million. Suppose England produces 500 millions each year. Hence England’s entire wealth merely = England’s annual labour x 10. Hence, not only is this capital not paying interest, it is not even reproducing itself in terms of value. And this by reason of the simple law. Value originally determined by the original production costs, in terms of the working time originally needed to manufacture the object. But once the product is produced, its price is determined by the costs necessarily incurred in reproducing it. And reproduction costs fall steadily and at a speed proportionate to the current state of industrialisation. Hence the law of the continuous depreciation of capital value itself, through which the law des rentes and of interest, which would otherwise lead to absurdity, is nullified. This also explains the thesis you yourself put forward that no factory covers its production costs. Thus Proudhon cannot refashion society by introducing a law which, au fond, is already being observed without his counsel.

The means by which Proudhon proposes to achieve all this is the bank. Il y a ici un qui pro quo. The bank’s business is divisible into two parts: 1. The conversion of capital into cash. Here money is simply substituted for capital, which can, of course, be done simply at production cost, i.e. at 1/2 to 1/4 per cent. 2. Advances of capital in the form of money, and here the interest rate will adjust itself in accordance with the amount of capital. All that credit can do here is to convert by means of concentration, etc., etc., existing but unproductive wealth into truly active capital. Proudhon considers No. 2 to be as easy as No. 1, and au bout du compte he will find that by making over an illusory mass of capital in the form of money he will at best reduce the interest on the capital, only to increase its price in like proportion. Whereby nothing is gained but the discrediting of his paper.

I shall allow you to savour in the original the correlation between customs and interest. The thing’s too delicious to spoil it by mutilation. Mr Proudhon entirely fails to elucidate either the commune’s share in the houses and land — something he certainly should have done as regards the communists — or how the workers come into possession of the factories. At any rate, while anxious to have ‘des compagnies ouvrières puissantes’, he is so afraid of these industrial ‘guilds’ that he reserves the right, if not for the State, then for société, to dissolve them. As a true Frenchman who knows neither a Moses & Son nor a Midlothian farmer, he confines association to the factory. To him, the French peasant and the French shoemaker, tailor, merchant appear as des données éternelles et qu'il faut accepter [eternal data which must be accepted]. But the more I go into the stuff, the more I become convinced that the reform of agriculture, and hence the question of property based on it, is the alpha and omega of the coming upheaval. Without that, Father Malthus will turn out to be right.

So far as Louis Blanc, etc., are concerned the piece is capital, notably because of its cheeky outpourings about Rousseau, Robespierre, God, fraternité and similar twaddle.

As to the New York Tribune, you've got to help me, now that I'm so busy with political economy. Write a series of articles on Germany, from 1848 onwards. Witty and uninhibited. The gentlemen of the foreign department are exceedingly uppish.

In a few days’ time I'll send you 2 volumes of Roman stuff. To wit économie politique des Romains. Par Dureau de la Malle. I sent to Paris for the book (very erudite). It will open your eyes to, amongst other things, the economic backing of the Roman way of waging war, which was nothing else than the — cadastre. What’s the cheapest way of sending the thing to you? There are 2 fat volumes.

You must pinch the Lithographische Correspondenz article or try to get hold of a copy. As soon as Weydemeyer gets there, he must make the jackasses in New York run the gauntlet. For that all the documents are needed. Faucher is correspondent of the Neue Preussische Zeitung. Sigel has not yet turned up. Willich, of course, is a unifying member of the Emigré Fraternity. They held their first general meeting on Friday. We had a spy there. The proceedings opened with a reading (by General Hang) of the Lithographische Correspondenz article in which we are attacked. For because of us they live and move and have their being. Next, a resolution in favour of all manner of undesirable and contentious lectures. Mr. Meyen undertook to do Prussia; Oppenheim, England; Ruge, France; and Kinkel, America — and the future. I very much look forward, by the way, to hearing, what you think about all this.