II. Falseness of the Economic Principles of Circulation
(Proved by three features of the Table, Nos. 7, 8 and 12: artificial obstruction of supply sources, oppressive surpluses and fictitious money) "Our century, which has been so prolifi<* of theories about the movement of industry, still cannot distinguish circulation from obstruction. It confuses circulation interrupted in places with that which is uninterrupted, simple circulation with compound. However, let us leave these dull distinctions; the facts may speak and serve us as a basis for principles which are directly opposed to those of economics.
"Both governments and peoples agree that forgers, both of money and of public securities, should be punished with death. Those who counterfeit coins and bank-notes are indeed condemned to death. A very wise precautionary measure. But why does trade enjoy the right to forge money when this practice brings other people to the gallows?
"Every bill of exchange made out by a merchant bears the seed of counterfeit, for it is extremely uncertain whether it will ever be paid. Everyone who steers a course towards bankruptcy floods circulation with his bills of exchange without intend-ing ever to pay them. In this way he in fact makes and spreads counterfeit money.
"Will it be objected that everyone else enjoys the same privilege, that a property-owner, like a merchant, can put bills of exchange into circulation?
"That is not true. A property-owner cannot do that. A right is illusory when it cannot be exercised. Witness the constitutional right of the people to sovereignty, a pompous prerogative in spite of which the plebeian cannot even get his midday meal if he has not a sou in his pocket. And yet how far from the pretension to sovereignty is the claim to a midday meal. Many rights exist thus on paper, but not in reality, and their granting is an insult to him who cannot even ensure himself rights a hundred times less important.
"So it is with the property-owner as regards the issuing of bills of exchange. He has the right to issue them as the plebeian has the right to claim sovereignty; but to possess the right and to exercise it are two very different things. When the property-owner makes out a bill of exchange he will not find anybody who will accept it without a guarantee, and he will be treated as one who forges money. He will be required to hypothecate a completely debt-free immovable property and to pay a usurious rate of interest into the bargain. His bills of exchange would be accepted at this price, and with such a security they would be money with real value, not fictitious money like those of a second-hand dealer who, by virtue of his title as a 'friend of trade, finds means of putting into circulation 'good'(1) bills to the value of a million when he does no.t possess even the hundredth part of that sum, even 10,000 francs as guarantee for that million.
"How beautifully those governments let themselves be cheated who deprive themselves of this ability and guarantee it for the merchant! A merchant who has ten thousand francs security issues bills of exchange to the amount of a million when he pleases; he is protected and authorised to do so; he has the right to set this mass of paper in circulation without the law being entitled to investigate how he places his capital and what securities he has. The Treasury, offering a guarantee of say ten million, would have to be able, according to this ratio, to issue securities up to a thousand million. But if a government tries to do so without consulting public opinion, without informing it of the move, it will see its credit ruined and its.country exposed to political disturbances; and yet it is only doing the same, only availing itself of the same privilege which is enjoyed by so many schemers, who often cannot offer the hundredth part of these guarantees and cannot run their business.
"It will be answered that these schemers know how to talk over the foolish and insinuate themselves into their confidence; it is therefore set up as a principle of commerce that the art of duping and plundering good-natured, credulous people deserves to be protected in every way and that this protection must be limited to the merchant and not be enjoyed by the government. I do not maintain that this fine art should be allowed to both, but on the contrary that it should be denied both to rulers and to merchants.
"From this it follows that the merchant enjoys the ability to issue fictitious money in the form of bilk of exchange (twelfth feature)—a crime which is equivalent to forging money, for which the other categories of rascals are sent to the gallows — and that the trade system of civilised people legalises and protects competition of fraudulence (third feature).
"The accusation of forging money, like the other points of the accusation, will be answered as follows: there must be merchants in order to ensure circulation, and business would become impossible if these agents were placed under restraint; the state would disrupt the public credit and place the whole of its industry in jeopardy.
"It is true enough that a quality of trade is that it forges our fetters still tighter whenever the social body shows any signs of resistance. As soon as any administrative measure hampers the machinations of trade, trade restricts credit and paralyses circulation, while the state, which wanted to eliminate an old disorder, in the end adds new ones. This effect is called repercussion (eleventh feature) in the Table.
"This danger is used as the basis for establishing the principle: Let the merchants do their job, their complete freedom is the guarantee of circulation. An exceedingly false principle, for it is precisely this complete freedom which gives rise to all the tricks that are so obstructive to circulation: stockjobbing, cornering, bankruptcy, and so on, the consequences of which are the two features:
"7. Artificial obstruction of supply sources. "8. Oppressive surpluses. "Let us see what influence these two features have on circulation." Trade does not content itself with delivering commodities from the producer to the consumer,(2) "it schemes by means of cornering and stockjobbing speculation to produce an artificial dearth of those food articles which are not exactly plentiful. In 1807 a stockjobbing manoeuvre suddenly raised the price of sugar to five francs in the month of May, and the same sugar dropped to two francs in July, although not the slightest new supplies had arrived. But the stockjobbing had been countered by means of false information and thus the sugar had been brought down to its value; the scheming and artificially aroused fears that there would be no supply had been disposed of. These schemes and artificial fears play their tricks every day with some food article and make it scarce without a real scarcity existing. In 1812, when the harvest was assured and the corner-men were disappointed in their hopes, enormous quantities of grain and flour were suddenly seen coming from their warehouses. So there had been no shortage at all and absolutely no danger of famine, if only these foodstuffs had been distributed rationally." But trade has the peculiarity that even before there is a danger, with an eye to its possibility, it diverts supplies, stops circulation, arouses panicky fears, produces artificial food shortage.
"The same effect is produced in times of surplus, when trade obstructs supplies out of affected fear of profusion. In the former case it operates positively, by buying up foodstuffs in anticipation; in the latter case negatively, by not buying and thus causing prices to drop so low that the peasant does not even get his production costs refunded. Hence arises the eighth feature, oppressive surpluses.
"Trade will retort that it does not need to buy when it foresees no profit, and that it will not be so insane as to overload itself with grain which offers no probability at all of a surcharge, while it, trade, can invest its capital far more usefully in such commodities as hold out profit for it because of their scarcity, which can easily be increased by cornering.
"There you have convenient and pleasant principles in a social system in which people talk about nothing but mutual guarantees. Trade is therefore exempted whenever it pleases from serving the social body. It acts like an army which would be authorised to refuse to fight whenever danger were present, and to do service only in its own interest, without any consideration for the state interest. Such is our mercantile policy, so one-sidedly does it determine all obligations.
"In 1820 the price of grain dropped below three francs in various provinces in which a price of four francs hardly covered the costs. This would not have occurred had French trade bought in advance six months' food supplies for thirty million persons," as it would have had to do under a system of mutuality adapting itself to the interests of both parties.3 "This reserve stock, withdrawn from circulation and locked up in granaries, would have kept up the price of the rest, and the peasant would not have suffered from the depreciation and the impossibility to market his products. But our trade system works exactly in the opposite direction: it aggravates the pressure of surplus and the evils of famine and thus has a destructive effect on both sides.
"I have chosen the eighth feature, oppressive surplus, to show that the existing mode of trade has both negative and positive defects, and that it often sins by non-intervention, by omitting a service which it could easily render. For when in a time of famine the sum of five hundred million is required to buy up the corn, it is immediately available; but if this sum is needed for precautionary measures to increase stocks in times of surplus, not even five hundred talersc can be scraped together. There is neither mutuality nor guarantee in the contract concluded between the social body and the commercial body. The latter serves only its own interest, not that of society, and hence the abundant capital which it uses is a robbery perpetrated against industry as a whole. In the Table I have listed this robbery as the fifth feature: 'Removal of capital."
Thus, on both sides of trade "there is not the slightest sense of obligation towards the social body, which surrenders itself, bound hand and foot, to the • Minotaur, to whom it guarantees despotic power over capitals and foodstuffs." Yes, indeed, despotic power! "After so many declamations against despotism we still have not discovered the real one,, which is no other than f/ie despotism of trade, that real satrap of the civilised world!
"To sum up, it follows Irom this that the civilised mechanism guarantees the merchants complete impunity for the crime of forging money, for which other classes are punished with death — and that this impunity is based on the pretence of help which they allegedly render to circulation but in reality refuse — positively by artificial obstruction of supply sources and negatively by oppressive profusion.
"To this falsity in the results must be added the lack of any principles. The economists admit that their science has absolutely no fixed principles; and it is indeed the height of unprincipledness to grant complete freedom to a class of so exceedingly depraved agents as the merchants.
"The consequence of all this is that the commercial movement proceeds by fits and starts, in spasms, surprises and excesses of all descriptions, as can be seen every day in the present trade mechanism, which can achieve only a periodically interrupted circulation, without regular graduation, without balance and guarantees.
"An amusing result of this disorder is that people have the courage to reproach the government with financial abuses which they never dare to reproach trade with. Witness the two bankruptcies — that of Law's bank-notes and that of the assignats.[211] These were gradual bankruptcies, they were seen approaching from afar; with a timely partial sacrifice they could have been guarded against. Despite these extenuating circumstances the public gave no quarter. It rightly declared Law's notes and the assignats to be forgery, armed plunder.
"Why then does the same public good-naturedly tolerate the issue of counterfeit money by the merchants when it does not allow it for governments, even when these are cautious enough to prepare for the bankruptcy by a slow depreciation which affords the holders of the papers the possibility to evade it? This possibility does not exist for the holders of the securities issued by trade. Bankruptcy strikes them like a thunderclap. Many a man goes to sleep tonight in possession of 300,000 francs and wakes up tomorrow with no more than 100,000 as a result of a bankruptcy. The National Convention copied this manoeuvre in the operation of the Consolidated Third ; people did not tire of reproaching it with this as a fully established robbery. And yet every merchant is allowed the right to commit still more vexatious robberies and to steal by bankruptcy two-thirds of what he received, whereas the Convention withheld two-thirds of sums it had never received. How outrageous the crimes of trade become when compared with other, and even the biggest, political infamies![3]
"The following details will demonstrate that modern politics, by handing over trade to completely free merchants exempt from any kind of obligation, has set the wolf among the fold and provoked robberies of all kinds."
Let us now go on to bankruptcy to describe it in somewhat greater detail.
Endnotes
[211] The author has in mind the bank-notes issued in France in 1716 with the Government's permission by a special bank founded by the adventurer John Law, who had decamped from England in 1720 after becoming bankrupt. As he had transferred his bank to the state beforehand, its ruin was a concealed form of state bankruptcy. Assignats were paper money issued during the French Revolution from December 1789 and backed by the revenue from the sale of property confiscated from the feudal aristocracy and the church (national estates). As a result of emissions and speculation, which were particularly intensified after the counter-revolutionary coup in July 1794 (9 Thermidor), they quickly depreciated. In December 1796 their issue was stopped.
[3] Here and elsewhere Engels quotes Reichardt's reviews of C. Briiggemann's book, Preussens Beruf in der deutschen Staats-Entwickelung, und die nächsten Bedingungen zu seiner Erfüllung, Berlin, 1843 and A. Benda's Katechismus für wahlberechtigte Bürger in Preussen, Berlin, 1843. Both reviews were published in the Allgemeine Literatur-Zeitung, Heft VI, May 1844.