“Mutuality, reciprocity exists,” Proudhon stressed, “when all the workers in an industry, instead of working for an entrepreneur who pays them and keeps their products, work for one another and thus collaborate in the making of a common product whose profits they share amongst themselves. Extend the principle of reciprocity as uniting the work of every group, to the Workers’ Societies as units, and you have created a form of civilisation which from all points of view—political, economic and aesthetic—is radically different from all earlier civilisations.” In short: “All associated and all free.”54
Thus “the means of production should be publicly owned, production itself should be organised by workers companies.”55 As Daniel Guérin summarised:Proudhon and Bakunin were ‘collectivists,’ which is to say they declared themselves without equivocation in favour of the common exploitation, not by the State but by associated workers of the large-scale means of production and of the public services. Proudhon has been quite wrongly presented as an exclusive enthusiast of private property.56
It is important to stress that Proudhon’s ideas on association as part of the solution of the social question were not invented by him. Rather, he generalised and developed what working class people were already doing.57 As Proudhon put it in 1848, “the proof” of his mutualist ideas lay in the “current practice, revolutionary practice” of “those labour associations... which have spontaneously... been formed in Paris and Lyon.”58 These hopes were well justified as the “evidence is strong that both worker participation in management and profit sharing tend to enhance productivity and that worker-run enterprises often are more productive than their capitalist counterparts.”59
Finally, a few words on why this fundamental position of Proudhon is not better known, indeed (at best) ignored or (at worse) denied by some commentators on his ideas. This is because state socialists like Louis Blanc advocated forms of association which Proudhon rejected as just as oppressive and exploitative as capitalism: what Proudhon termed “the principle of Association.” Blanc came “under attack by Proudhon for eliminating all competition, and for fostering state centralisation of initiative and direction at the expense of local and corporative powers and intermediate associations. But the term association could also refer to the mutualist associations that Proudhon favoured, that is, those initiated and controlled from below.”60 If Blanc advocated Association, Proudhon supported associations. This is an important distinction lost on some.
ON CREDIT
While Proudhon’s views of workers’ associations are often overlooked, the same cannot be said of his views on credit. For some reform of credit was all he advocated! However, for Proudhon, the socialisation and democratisation of credit was seen as one of the key means of reforming capitalism out of existence and of producing a self-employed society of artisans, farmers and co-operatives.
The Bank of the People “embodies the financial and economic aspects of modern democracy, that is, the sovereignty of the People, and of the republican motto, Liberty, Equality, Fraternity.” Like the desired workplace associations, it also had a democratic nature with a “committee of thirty representatives” seeing “to the management of the Bank” and “chosen by the General Meeting” made up of “nominees of the general body of associates” (“elected according to industrial categories and in proportion to the number... there are in each category.”)61
Proudhon rightly mocked the notion that interest was a payment for abstinence62 noting, in his exchange with the laissez-faire economist Frédéric Bastiat, that the capitalist lends “because he has no use for it himself, being sufficiently provided with capital without it.” There is no sacrifice and so “it is society’s duty to procure Gratuitous Credit for all; that, failing to do this, it will not be a society, but a conspiracy of Capitalists against Workers, a compact for purposes of robbery and murder.”63 The obvious correctness of this analysis is reflected in Keynes’ admission that interest “rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.”64
As is clear from his exchange with Bastiat, Proudhon took care to base his arguments not on abstract ideology but on the actual practices he saw around him. He was well aware that banks issued credit and so increased the money supply in response to market demand. As such, he was an early exponent of the endogenous theory of the money supply.65 His argument against metallic money was rooted in the fact that this legacy of the past ensured that interest remained as the supply of money, though dynamic due to credit creation, was ultimately limited by the available gold and silver deposits monopolised by capitalist banks.
In other words, Proudhon was pointing out that a money economy, one with an extensive banking and credit system, operates in a fundamentally different way than the barter economy assumed by most economics (then and now). He recognised that income from property violated the axiom that products exchanged for products. As interest rates within capitalism did not reflect any real cost and credit creation by banks violated any notion that they reflected savings, these facts suggested that interest could be eliminated as it was already an arbitrary value.
The availability of cheap credit would, Proudhon hoped, lead to the end of landlordism and capitalism. Artisans would not be crushed by interest payments and so be able to survive on the market, proletarians would be able to buy their own workplaces and peasants would be able buy their land. To aid this process he also recommended that the state decree that all rent should be turned into part-payment for the property used and for public works run by workers’ associations.
While these notions are generally dismissed as utopian, the reality is somewhat different. As Proudhon’s ideas were shaped by the society he lived in, one where the bulk of the working class were artisans and peasants, the notion of free credit provided by mutual banks as the means of securing working class people access to the means of production was perfectly feasible. Today, economies world-wide manage to work without having money tied to specie. Proudhon’s desire “to abolish the royalty of gold”66 was no mere utopian dream—capitalism itself has done so.
Perhaps this correspondence between Proudhon’s ideas on money and modern practice is not so surprising. Keynes’s desire for “the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital”67 has distinctly Proudhonian elements to it while he praised Proudhon’s follower Silvio Gesell.68 Sadly, only the economist Dudley Dillard’s essay “Keynes and Proudhon”69 addresses any overlap between the two thinkers and even this is incomplete (it fails to discuss Proudhon’s ideas on co-operatives and falsely suggests that his critique of capitalism was limited to finance capital70). Another area of overlap was their shared concern over reducing uncertainty in the market and stabilising the economy (by the state, in the case of Keynes, by mutualist associations for Proudhon). Both, needless to say, under-estimated the power of rentier interests as well as their willingness to wither away.
This abolition of gold-backed money has not lead to the other reforms Proudhon had hoped for. This is unsurprising, as this policy has been implemented to keep capitalism going and not as a wider reform strategy as expounded by the Frenchman.71 So while the banks may issue credit and central banks accommodate it with non-specie money, they are still capitalist enterprises working within a capitalist environment—they have not been turned into a Bank of the People. Interest was not abolished nor was there a social movement, as in the 19th century, aiming to create workers’ associations. Nationalisation, not socialisation, was the preferred social reform of the post-World War II years.
The notion that a mutual bank should fund investment is also hardly utopian. The stock market is not the means by which capital is actually raised within ca
pitalism and is largely of symbolic value (the overwhelming bulk of transactions are in shares of existing firms). Small and medium sized firms are hardly inefficient because they lack equity shares. Moreover, there is good reason to think that the stock market hinders economic efficiency by generating a perverse set of incentives and “the signals emitted by the stock market are either irrelevant or harmful to real economic activity.” As “the stock market itself counts little or nothing as a source of finance,” shareholders “have no useful role.” Moreover, if the experience of capitalism is anything to go by, mutual banks will also reduce the business cycle for those countries in which banks provide more outside finance than markets have “greater growth in and stability of investment over time than the market-centred ones.”72
All of which confirms Proudhon’s arguments for mutual credit and attacks on rentiers. There is no need for capital markets in a system based on mutual banks and networks of co-operatives. New investments would be financed partly from internal funds (i.e., retained income) and partly from external loans from mutual banks.
The standard argument against mutual credit is that it would simply generate inflation. This misunderstands the nature of money and inflation in a capitalist economy. The notion that inflation is caused simply by there being too much money chasing too few goods and that the state simply needs to stop printing money to control it was proven completely false by the Monetarist experiments of Thatcher and Reagan. Not only could the state not control the money supply, changes in it were not reflected in subsequent changes in inflation.73
In a real capitalist economy credit is offered based on an analysis of whether the bank thinks it will get it back.74 In a mutualist economy, credit will likewise be extended to those whom the bank thinks will increase the amount of goods and services available.75 The Bank of the People would not just print money and hand it out in the streets,76 it would ration credit and aim to fund investment in the real economy. This would create money and lead to debt but it adds to the goods and services in the economy as well as the capacity to service that debt. Moreover, the reduction of interest to zero would ensure more people repaid their loans as servicing debt would be easier.77
Finally, John Ehrenberg’s assertion that 1848 saw a “subtle and important shift” in Proudhon’s ideas is simply untenable. He asserts that whereas Proudhon “formerly placed primary importance on the organisation of work, he was now thinking of the organisation of credit and exchange; where he had previously made an attempt to articulate the needs of the proletariat, he was now demanding help for the petty bourgeois.”78 Yet “the organisation of credit” in Proudhon’s eyes did not exclude “the organisation of labour.” If anything, Proudhon’s arguments for workers’ associations and against wage-labour became more, not less, pronounced! Proudhon started to discuss “the organisation of credit” more because it reflected a shift from goals to means, from critique to practical attempts to solve the social question in the revolution of 1848.
Proudhon’s letter to Louis Blanc in April 1848 suggested that “the Exchange Bank is the organisation of labour’s greatest asset” and allowed “the new form of society to be defined and created among the workers.”79 Another, written two days later, reiterated this point: “To organise credit and circulation is to increase production, to determine the new shapes of industrial society.”80 His second election manifesto of 1848 argued that workers “have organised credit among themselves” and “labour associations” have grasped “spontaneously” that the “organisation of credit and organisation of labour amount to one and the same.” By organising both, the workers “would soon have wrested alienated capital back again, through their organisation and competition.”81 This was reiterated in a letter to socialist Pierre Leroux in December 1849, with credit being seen as the means to form workers’ associations.82
Moreover, the necessity to differentiate his ideas from other socialists who advocated “the organisation of labour” (such as Louis Blanc) must also have played its part in Proudhon’s use of “the organisation of credit.” Given his opposition to centralised state-based systems of labour organisation it made little sense to use the same expression to describe his vision of a self-managed and decentralised socialism.
ON THE STATE
Proudhon subjected the state to withering criticism. For some, this has become the defining aspect of his theories (not to mention anarchism in general). This is false. This opposition to the state flowed naturally from the critique of property and so anarchist anti-statism cannot be abstracted from its anti-capitalism. While recognising that the state and its bureaucracy had exploitative and oppressive interests of its own, he analysed its role as an instrument of class rule:In a society based on the principle of inequality of conditions, government, whatever it is, feudal, theocratic, bourgeois, imperial, is reduced, in last analysis, to a system of insurance for the class which exploits and owns against that which is exploited and owns nothing.83
He repeatedly pointed to its function of “protecting the nobility and upper class against the lower classes.”84 This analysis was consistent throughout his political career. In 1846 he had argued that the state “finds itself inevitably enchained to capital and directed against the proletariat.”85
So what was the state? For Proudhon, the state was a body above society, it was “the EXTERNAL constitution of the social power” by which the people delegate “its power and sovereignty” and so “does not govern itself; now one individual, now several, by a title either elective or hereditary, are charged with governing it, with managing its affairs, with negotiating and compromising in its name.” Anarchists “deny government and the State, because we affirm that which the founders of States have never believed in, the personality and autonomy of the masses.” Ultimately, “the only way to organise democratic government is to abolish government.”86
His attacks on “Direct Legislation” and “Direct Government” in General Idea of the Revolution refer to using elections and referenda in a centralised state on a national scale rather than decentralised communal self-government. For Proudhon democracy could not be limited to a nation as one unit periodically picking its rulers (“nothing resembles a monarchy more than a république unitaire”87). Its real meaning was much deeper: “politicians, whatever their colours, are insurmountably repelled by anarchy which they construe as disorder: as if democracy could be achieved other than by distribution of authority and as if the true meaning of the word ‘democracy’ was not dismissal of government.”88
Given this analysis, it becomes unsurprising that Proudhon did not seek political power to reform society. This was confirmed when, for a period, he was elected to the National Assembly in 1848: “As soon as I set foot in the parliamentary Sinai, I ceased to be in touch with the masses; because I was absorbed by my legislative work, I entirely lost sight of the current events... One must have lived in that isolator which is called a National Assembly to realise how the men who are most completely ignorant of the state of the country are almost always those who represent it.” There was “ignorance of daily facts” and “fear of the people” (“the sickness of all those who belong to authority”) for “the people, for those in power, are the enemy.”89
Real change must come from “outside the sphere of parliamentarism, as sterile as it is absorbing.”90 Unsurprisingly, then, the “social revolution is seriously compromised if it comes through a political revolution”91 and “to be in politics was to wash one’s hands in shit.”92
Thus, rather than having some idealistic opposition to the state,93 Proudhon viewed it as an instrument of class rule which could not be captured for social reform. As David Berry suggests, “repeated evidence of the willingness of supposedly progressive republican bourgeoisie to resort to violent repression of the working classes had led Proudhon, like many of his class and generation, to lose faith in politics and the state and to put the emphasis on working-class autonomy and on the question of socio-economic organisation. For Proudhon and
the mutualists, the lessons of the workers’ uprising of 1830 and 1848 were that the powers of the state were merely another aspect of the powers of capital, and both were to be resisted equally strongly.”94
ON STATE SOCIALISM
Like other libertarians, Proudhon was extremely critical of state socialist schemes which he opposed just as much as he did capitalism: “The entire animus of his opposition to what he termed ‘community’ was to avoid the central ownership of property and the central control of economic and social decision-making.”95
He particularly attacked the ideas of Jacobin socialist Louis Blanc whose Organisation of Work argued that social ills resulted from competition and they could be solved by eliminating it. “The Government,” argued Blanc, “should be regarded as the supreme director of production, and invested with great strength to accomplish its task.” The government would “raise a loan” to create social workplaces, “provide” them “with Statues” which “would have the force and form of laws” and “regulate the hierarchy of workers” (after the first year “the hierarchy would be appointed on the elective principle” by the workers in the associations). Capitalists would “receive interest for their capital” while workers would keep the remaining income. They would “destroy competition” by “availing itself of competition” as their higher efficiency would force capitalist firms to become social workplaces.96
Proudhon objected to this scheme on many levels. Blanc appealed “to the state for its silent partnership; that is, he gets down on his knees before the capitalists and recognises the sovereignty of monopoly.” As it was run by the state, the system of workshops would hardly be libertarian as “hierarchy would result from the elective principle... as in constitutional politics... Who will make the law? The government.”97 This was because of the perspective of state socialists:As you cannot conceive of society without hierarchy, you have made yourselves the apostles of authority; worshippers of power, you think only of strengthening it and muzzling liberty; your favourite maxim is that the welfare of the people must be achieved in spite of the people; instead of proceeding to social reform by the extermination of power and politics, you insist on a reconstruction of power and politics.98
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