K. Marx. The French Credit Mobilier. Ill
The approaching crash in Bonapartist finance continues to announce itself in a variety of ways. On May 31 Count Montalembert, in opposing a project of law to raise the postage on all printed papers, books, and the like, sounded the note of alarm in the following strain:
"The suppression of all political life, by what has it been replaced? By the whirl of speculation. The great French nation could not resign itself to slumber, to inactivity. Political life was replaced by the fever of speculation, by the thirst for lucre, by the infatuation of gambling. On all sides, even in our small towns, even in our villages, men are carried away by the mania of making those rapid fortunes of which there are so many examples — those fortunes achieved without trouble, without labor, and often without honor. I seek for no other proof than the bill which has just been laid before you, against the sociétés en commandite* Copies have just been distributed to us; I have not had time to examine it; I feel, however, inclined to support it, despite the somewhat Draconian regulations which I fancy I discovered there. If the remedy is so urgent and so considerable, the evil must be so likewise. The real source of that evil is the sleep of all political spirit in France.... And the evil which I point to is not the only one resulting from the same source. While the higher and middle classes — those ancient political classes — give themselves up to speculation, another labor presents itself among the lower classes of society, whence nearly all the revolutions emanated which France has suffered. At the sight of this fearful mania of gambling which has made a vast gambling booth of nearly all France, a portion of the masses, invaded by Socialists, has been more corrupted than ever, by the avidity of gain. Hence an unquestionable progress of secret societies, a greater and deeper development of those savage passions which almost calumniate Socialism by adopting its name, and which have been recently well shown up, in all their intensity, in the trials at Paris, Angers and elsewhere." l> Thus speaks Montalembert — himself one of the original shareholders in the Bonapartist enterprise for saving order, religion, property and family!
We have heard, from Isaac Péreire, that one of the mysteries of the Crédit Mobilier was the principle of multiplying its action and diminishing its risks by embarking in the greatest possible variety of enterprises, and withdrawing from them in the shortest possible time. Now, what does this mean when divested of the flowery language of St. Simonism? Subscribing for shares to the greatest extent, in the greatest number of speculations, realizing the premiums, and getting rid of them as fast as it can be done. Stockjobbing, then, is to be the base of the industrial development, or rather all industrial enterprise is to become the mere pretext of stockjobbing. And, by the aid of what instrument is this object of the Crédit Mobilier to be attained? What are the means proposed to enable it thus to "multiply its action" and "diminish its risks?" The very means employed by Law. The Crédit Mobilier being a privileged company, backed by Government influence, and disposing of a large capital and credit, comparatively speaking, it is certain that the shares of any new enterprise started by it will, on the first emission, fetch a premium in the market. It has learned thus much from Law, to allot to its own shareholders the new shares at par, in proportion to the number of shares they hold in the mother society. The profit thus insured to them acts, in the first place, on the value of the shares of the Crédit Mobilier itself, while their high range, in the second place, insures a high value to the new shares to be emitted. In this manner the Crédit Mobilier obtains command over a large portion of the loanable capital intended for investment in industrial enterprises.
Now, apart from the fact that the premium is thus the real pivot on which the activity of the Crédit Mobilier turns, its object is apparently to affect capital in a manner which is the very reverse of the action of commercial banks. A commercial bank, by its discounts, loans, and emission of notes, sets free temporarily fixed capital, while the Crédit Mobilier fixes actually floating capital. Railway shares, for instance, may be very floating, but the capital they represent, i. e., the capital employed in the construction of the railway, is fixed. A mill-owner who would sink in buildings and machinery a part of his capital out of proportion with the part reserved for the payment of wages and the purchase of raw material, would very soon find his mill stopped. The same holds good with a nation. Almost every commercial crisis in modern times has been connected with a derangement in the due proportion between floating and fixed capital. What, then, must be the result of the working of an institution like the Crédit Mobilier, the direct purpose of which is to fix as much as possible of the loanable capital of the country in railways, canals, mines, docks, steamships, forges, and other industrial undertakings, without any regard to the productive capacities of the country? According to its statutes, the Crédit Mobilier can patronize only such industrial concerns as are carried on by anonymous societies, or joint-stock companies with limited responsibility. Consequently there must arise a tendency to start as many such societies as possible, and, further, to bring all industrial undertakings under the form of these societies. Now, it cannot be denied that the application of joint-stock companies to industry marks a new epoch in the economical life of modern nations. On the one hand it has revealed the productive powers of association, not suspected before, and called into life industrial creations, on a scale unattainable by the efforts of individual capitalists; on the other hand, it must not be forgotten, that in joint-stock companies it is not the individuals that are associated, but the capitals. By this contrivance, proprietors have been converted into shareholders, i.e., speculators. The concentration of capital has been accelerated, and, as its natural corollary, the downfall of the small middle class. A sort of industrial kings have been created, whose power stands in inverse ratio to their responsibility — they being responsible only to the amount of their shares, while disposing of the whole capital of the society — forming a more or less permanent body, while the mass of shareholders is undergoing a constant process of decomposition and renewal, and enabled, by the very disposal of the joint influence and wealth of the society, to bribe its single rebellious members. Beneath this oligarchic Board of Directors is placed a bureaucratic body of the practical managers and agents of the society, and beneath them, without any transition, an enormous and daily swelling mass of mere wages laborers — whose dependence and helplessness increase with the dimensions of the capital that employs them, but who also become more dangerous in direct ratio to the decreasing number of its representatives. It is the immoral merit of Fourier to have predicted this form of modern industry, under the name of Industrial Feudalism* Certainly neither Mr. Isaac, nor Mr. Emile Péreire, nor Mr. Morny, nor Mr. Bonaparte could have invented this. There existed, also, before their epoch, banks lending their credit to industrial joint-stock companies. What they invented was a joint-stock bank aiming at the monopoly of the formerly divided and multiform action of the private money-lenders, and whose leading principle should be the creation of a vast number of industrial companies, not with the view of productive investments, but simply for the object of stockjobbing profits. The new idea they have started is to render the industrial feudalism tributary to stockjobbing.
According to the statutes, the capital of the Credit Mobilier is fixed at 60,000,000 of francs. The same statutes allow it to receive deposits in accounts-current for twice that sum, i. e., for 120,000,000. The sum at the disposal of the society thus amounts altogether to 180,000,000 of francs. Measured by the bold scheme of obtaining the patronage of the whole industry of France, this is certainly a very small sum. But two-thirds of this sum can hardly be applied to the purchase of industrial shares, or such values as do not command the certainty of immediate realization, precisely because they are received on call. For this reason the statutes open another resource to the Crédit Mobilier. It is authorized to issue debentures amounting to ten times its original capital, i. e., to the amount of 600,000,000 francs; or, in other words, the institution intended for the accommodation of all the world is authorized to come into the market as a borrower for a sum ten times larger than its own capital.
"Our debentures," says M. Péreire, "will be of two kinds. The first, issued for a short period, must correspond with our various temporary investments."(1)
With this sort of debentures we have nothing to do here, as, by article VIII of the statutes, they are to be issued only to make up the supposed balance short of the 120,000,000 to be received in current account, which have been entirely received in that way. With respect to the other class of debentures,
"they are issued with remote dates of payment, reimbursable by redemption, and will correspond with the investments of like nature, which 'we shall have made either in public funds or in shares and debentures of manufacturing companies. According to the economy of 'he system which serves as the basis of our Association, these securities will not only be secured by a corresponding amount of funds purchased under the control of Government, and the united total of which will afford, by the application of the principle of mutuality, the advantages of a compensation and division of the risks, but they will have, besides, the guarantee of a capital which, for that object, we have increased to a considerable amount."
Now, these debentures of the Crédit Mobilier are simply imitations of railway bonds — obligations redeemable at certain epochs and under certain conditions, and bearing a fixed interest. But there is a difference. While railway bonds are often secured by a mortgage of the railway itself, what is the security for the
Crédit Mobilier debentures? The rentes,(2) shares, debentures and the like, of industrial companies, which the Crédit Mobilier buys with its own debentures. Then, what is gained by their emission? The difference between the interest payable on the debentures of the
Crédit Mobilier and the interest receivable on the shares and the like, in which it has invested its loan. To make this operation sufficiently profitable, the Crédit Mobilier is obliged to place the capital realized by the issue of its debentures in such investments as promise the most remunerative returns, i. e., in shares subject to great fluctuations and alterations of price. The main security for its debentures, therefore, will consist of the shares of the very industrial companies started by the Association itself.
Thus, while railway bonds are secured by a capital at least twice in amount, these Crédit Mobilier debentures are secured by a capital only nominally of the same amount, but which must fall below, with every downward movement of the stock-market. The holders of these debentures, accordingly, share in all the risks of the shareholders, without participating in their profits.
"But," says the last Annual Report, "the holders of the debentures have not only the guaranty of the investments in which it [the Crédit Mobilier] has placed its loans, but also that of its original capital."(3)
The original capital, 60,000,000, responsible for the 120,000,000 of deposits, offers to serve as guaranty to 600,000,000 of debentures, beside the guaranties it may be required to furnish for the unlimited number of enterprises which the Crédit Mobilier is authorized to start. If the Association were to succeed in exchanging the shares of all industrial companies against its own debentures, it would indeed become the supreme director and proprietor of the whole industry of France, while the mass of ancient proprietors would find themselves pensioned with a fixed revenue equal to the interest on the debentures. But, on the road to this consummation, the bankruptcy which follows from the economical conditions we have above illustrated, will stop the bold adventurers. This little accident, however, has not been overlooked; on the contrary, the real founders of the Credit Mobilier have included it in their calculations. When that crash comes, after an immensity of French interests has been involved, the Government of Bonaparte will seem justified in interfering with the Crédit Mobilier, as the English Government did in 1797 with the Bank of England.[21] The Regent of France," that worthy sire of Louis Philippe, tried to get rid of the public debt by converting the State obligations into obligations of Law's Bank; Louis Bonaparte, the imperial Socialist, will try to seize upon French industry by converting the debentures of the Crédit Mobilier into State obligations. Will he prove more solvent than the Crédit Mobilier? That is the question.
Endnotes
[21] J1 This refers to an Act to remove doubts respecting promissory notes of the Governor and Company of the Bank of England, for payment of sums of money under £5 of March 3, 1797 and An Act for continuing for a limited time, the restriction contained in the minute of Council of the 26th of February, 1797, on payment of cash by the bank of May 3, 1797 which established a compulsory rate of banknotes and gave temporary permission to the Bank to stop the exchange of banknotes for gold. In 1821 the exchange was resumed under the law of 1819.