B. The gold that is imported implies that a useful thing is exported, and in this respect there is a satisfaction withdrawn from the country. But is there not a corresponding benefit? And will not this gold be the source of a number of new satisfactions, by circulating from hand to hand, and stimulating labor and industry, until at length it leaves the country in its turn, and causes the importation of some useful thing?
F. Now you have come to the heart of the question. Is it true that a dollar is the principal that causes the production of all the objects whose exchange it facilitates? It is very clear that a piece of coined gold or silver stamped as a dollar is only worth a dollar; but we are led to believe that this value has a particular character: that it is not consumed like other things, or that it is exhausted very gradually; that it renews itself, as it were, in each transaction; and that, finally this particular dollar has been worth a dollar as many times as it has accomplished transactions — that it is of itself worth all the things for which it has been successively exchanged; and this is believed because it is supposed that without this dollar these things would never have been produced. It is said the shoemaker would have sold fewer shoes, and consequently he would have bought less of the butcher; the butcher would not have gone so often to the grocer, the grocer to the doctor, the doctor to the lawyer, and so on.
B. No one can dispute that.
F. This is the time, then, to analyze the true function of money, independently of mines and importations. You have a dollar. What does it imply in your hands? It is, as it were, the witness and proof that you have, at some time or other, performed some labor, which, instead of turning to your advantage, you have bestowed upon society as represented by your client (employer or debtor). This coin testifies that you have performed a service for society, and moreover it shows the value of it. It bears witness, besides, that you have not yet obtained from society a real equivalent service, to which you have a right. To place you in a condition to exercise this right, at the time and in the manner you please, society, as represented by your client, has given you an acknowledgment, a title, a privilege from the republic, a token, a title to a dollar's worth of property in fact, which only differs from executive titles by bearing its value in itself; and if you are able to read with your mind's eye the inscriptions stamped upon it you will distinctly decipher these words: "Pay the bearer a service equivalent to what he has rendered to society, the value received being shown, proved, and measured by that which is represented by me." Now, you give up your dollar to me. Either my title to it is gratuitous, or it is a claim. If you give it to me as payment for a service, the following is the result: your account with society for real satisfactions is enumerated, balanced, and closed. You had rendered it a service for a dollar, you now restore the dollar for a service; as far as you are concerned you are clear. As for me, I am now in the position in which you were previously. It is I who am now in advance to society for the service which I have just rendered it in your person. I have become its creditor for the value of the labor that I have performed for you, and that I might have devoted to myself. It is into my hands then, that the title of this credit — the proof of this social debt — ought to pass. You cannot say that I am any richer; if I am entitled to receive, it is because I have given. Still less can you say that society is a dollar richer because one of its members has a dollar more and another has one less. For if you let me have this dollar gratis, it is certain that I shall be so much the richer, but you will be so much the poorer for it; and the social fortune, taken in a mass, will have undergone no change, because as I have already said, this fortune consists in real services, in effective satisfactions, in useful things. You were a creditor to society; you made me a substitute to your rights, and it signifies little to society, which owes a service, whether it pays the debt to you or to me. This is discharged as soon as the bearer of the claim is paid.
B. But if we all had a great number of dollars we should obtain from society many services. Would not that be very desirable?
F. You forget that in the process that I have described, and that is a picture of the reality, we only obtain services from society because we have bestowed some upon it. Whoever speaks of a service speaks at the same time of a service received and returned, for these two terms imply each other, so that the one must always be balanced by the other. It is impossible for society to render more services than it receives, and yet a belief to the contrary is the chimera which is being pursued by means of the multiplication of coins, of paper money, etc.
B. All that appears very reasonable in theory, but in practice I cannot help thinking, when I see how things go, that if by some fortunate circumstance the number of dollars could be multiplied in such a way that each of us could see his little property doubled, we should all be more at our ease; we should all make more purchases, and trade would receive a powerful stimulus.
F. More purchases! And what should we buy? Doubtless, useful articles — things likely to procure for us substantial gratification — such as food, clothing, houses, books, pictures. You should begin, then, by proving that all these things create themselves; you must suppose the Mint melting ingots of gold that have fallen from the moon; or that the printing presses be put in action at the Treasury Department; for you cannot reasonably think that if the quantity of corn, cloth, ships, hats, and shoes remains the same, the share of each of us can be greater because we each go to market with a greater amount of real or fictitious money. Remember the players. In the social order the useful things are what the players place under the candlestick, and the dollars that circulate from hand to hand are the chips. If you multiply the dollars without multiplying the useful things, the only result will be that more dollars will be required for each exchange, just as the players required more chips for each deposit. You have the proof of this in what passes for gold, silver, and copper. Why does the same exchange require more copper than silver, more silver than gold? Is it not because these metals are distributed in the world in different proportions? What reason have you to suppose that if gold were suddenly to become as abundant as silver, it would not require as much of one as of the other to buy a house?
B. You may be right, but I should prefer your being wrong. In the midst of the sufferings that surround us, so distressing in themselves, and so dangerous in their consequences, I have found some consolation in thinking that there was an easy method of making all the members of the community happy.
F. Even if gold and silver were true riches, it would be no easy matter to increase the amount of them in a country where there are no mines.
B. No, but it is easy to substitute something else. I agree with you that gold and silver can do but little service, except as a mere means of exchange. It is the same with paper money, bank notes, etc. Then, if we had all of us plenty of the latter, which it is so easy to create, we might all buy a great deal, and should lack nothing. Your cruel theory dissipates hopes, illusions, if you will, whose principle is assuredly very philanthropic.
F. Yes, like all other barren dreams formed to promote universal felicity. The extreme facility of the means that you recommend is quite sufficient to expose its hollowness. Do you believe that if it were merely needful to print bank notes in order to satisfy all our wants, our tastes, and desires, that mankind would have been contented to go on till now without having recourse to this plan? I agree with you that the discovery is tempting. It would immediately banish from the world not only plunder, in its diverse and deplorable forms, but even labor itself, except in the National Printing Bureau. But we have yet to learn how greenbacks are to purchase houses, that no one would have built; corn, that no one would have raised; textiles that no one would have taken the trouble to weave.
B. One thing strikes me in your argument. You say yourself that if there is no gain, at any rate there is no loss in multiplying the instrument of exchange, as is seen by the instance of the players, who were entirely unaffected by a very mild deception. Why, then, refuse the philosopher's stone, which would teach us the secret of changing base material into gold, or what is the same thing, converting paper into money? Are you so blindly wedded to logic that you would refuse to try an experiment where there can be no risk? If you are mistaken, you are depriving the nation, as your numerous adversaries believe, of an immense advantage. If the error is on their side, no harm can result, as you yourself say, beyond the failure of a hope. The measure, excellent in their opinion, in yours is merely negative. Let it be tried, then, since the worst that can happen is not the realization of an evil, but the nonrealization of a benefit.
F. In the first place, the failure of a hope is a very great misfortune to any people. It is also very undesirable that the government should announce the abolition of several taxes on the faith of a resource that must infallibly fail. Nevertheless, your remark would deserve some consideration, if after the issue of paper money and its depreciation, the equilibrium of values should instantly and simultaneously take place in all things and in every part of the country. The measure would tend, as in my example of the players, to a universal mystification, in respect to which the best thing we could do would be to look at one another and laugh. But this is not in the course of events. The experiment has been made, and every time a government — be it king or congress — has altered the money —
B. Who says anything about altering the money?
F. Why, to force people to take in payment scraps of paper that have been officially baptized dollars, or to force them to receive, as weighing an ounce, a piece of silver that weighs only half an ounce but that has been officially named a dollar, is the same thing, if not worse; and all the reasoning that can be made in favor of paper money has been made in favor of legal false-coined money. Certainly, looking at it as you did just now, and as you appear to be doing still, if it is believed that to multiply the instruments of exchange is to multiply the exchanges themselves as well as the things exchanged, it might very reasonably be thought that the most simple means was to mechanically divide the coined dollar, and to cause the law to give to the half the name and value of the whole. Well, in both cases, depreciation is inevitable. I think I have told you the cause. I must also inform you that this depreciation which, with paper might go on till it came to nothing, is effected by continually making dupes; and of these, poor people, simple persons, workmen and farmers are the chief.
B. I see; but stop a little. This dose of political economy is rather too strong for once.
F. Be it so. We are agreed, then, upon this point — that wealth is the mass of useful things we produce by labor; or, still better, the result of all the efforts we make for the satisfaction of our wants and tastes. These useful things are exchanged for each other according to the convenience of those to whom they belong. There are two forms in these transactions; one is called barter: in this case a service is rendered for the sake of receiving an equivalent service immediately. In this form transactions would be exceedingly limited. In order that they may be multiplied, and accomplished independently of time and space amongst persons unknown to each other, and by infinite fractions, an intermediate agent has been necessary — this is money. It gives occasion for exchange, which is nothing else but a complicated bargain. This is what has to be noted and understood. Exchange decomposes itself into two bargains, into two departments, sale and purchase — the reunion of which is needed to complete it. You sell a service, and receive a dollar — then, with this dollar you buy a service. Then only is the bargain complete; it is not till then that your effort has been followed by a real satisfaction. Evidently you only work to satisfy the wants of others, that others may work to satisfy yours. So long as you have only the dollar that has been given you for your work, you are only entitled to claim the work of another person. When you have done so, the economical evolution will be accomplished as far as you are concerned, since you will only then have obtained, by a real satisfaction, the true reward for your trouble. The idea of a bargain implies a service rendered, and a service received. Why should it not be the same with exchange, which is merely a bargain in two parts? And here there are two observations to be made. First: It is a very unimportant circumstance whether there be much or little money in the world. If there is much, much is required; if there is little, little is wanted, for each transaction: that is all. The second observation is this: because it is seen that money always reappears in every exchange, it has come to be regarded as the sign and the measure of the things exchanged.
B. Will you still deny that money is the sign of the useful things of which you speak?
F. A gold eagle is no more the sign of a barrel of flour, than a barrel of flour is the sign of a gold eagle.
B. What harm is there in looking at money as the sign of wealth?
F. The inconvenience is this: it leads to the idea that we have only to increase the sign, in order to increase the things signified; and we are in danger of adopting all the false measures that you took when I made you an absolute king. We should go still further. Just as in money we see the sign of wealth, we see also in paper money the sign of money; and thence conclude that there is a very easy and simple method of procuring for everybody the pleasures of fortune.
B. But you will not go so far as to dispute that money is the measure of values?
F. Yes, certainly, I do go as far as that, for that is precisely where the illusion lies. It has become customary to refer the value of everything to that of money. It is said, this is worth 5, 10, or 20 dollars, as we say this weighs 5, 10, or 20 grains; this measures 5, 10, or 20 yards; this ground contains 5, 10, or 20 acres; and hence it has been concluded that money is the measure of values.
B. Well, it appears as if it was so.
F. Yes, it appears so, and it is this appearance I complain of, and not of the reality. A measure of length, size, surface, is a quantity agreed upon, and unchangeable. It is not so with the value of gold and silver. This varies as much as that of corn, wine, cloth, or labor, and from the same causes, for it has the same source and obeys the same laws. Gold is brought within our reach, just like iron, by the labor of miners, the investments of capitalists, and the combination of merchants and seamen. It costs more or less, according to the expense of its production, according to whether there is much or little in the market, and whether it is much or little in request; in a word, it undergoes the fluctuations of all other human productions. But one circumstance is singular, and gives rise to many mistakes. When the value of money varies, the variation is attributed by language to the other products for which it is exchanged. Thus, let us suppose that all the circumstances relative to gold remain the same, and that the wheat harvest has failed. The price of wheat will rise. It will be said, "The barrel of flour that was worth five dollars is now worth eight;" and this will be correct, for it is the value of the flour that has varied, and language agrees with the fact. But let us reverse the supposition: let us suppose that all the circumstances relative to flour remain the same, and that half of all the gold in existence is swallowed up; this time it is the price of gold that will rise. It would seem that we ought to say, "This gold eagle that was worth 10 dollars is now worth 20." Now, do you know how this is expressed? Just as if it was the other objects of comparison which had fallen in price, it is said: "Flour that was worth ten dollars is now only worth five."
B. It all comes to the same thing in the end.
F. No doubt; but only think what disturbances, what cheatings are produced in exchanges when the value of the medium varies without our becoming aware of it by a change in the name. Coins or notes are issued bearing the name of five dollars, and which will bear that name through every subsequent depreciation. The value will be reduced a quarter, a half, but they will still be called coins or notes of five dollars. Clever persons will take care not to part with their goods unless for a larger number of notes — in other words, they will ask ten dollars for what they would formerly have sold for five; but simple persons will be taken in. Many years must pass before all the values will find their proper level. Under the influence of ignorance and custom, the day's pay of a country laborer will remain for a long time at a dollar while the salable price of all the articles of consumption around him will be rising. He will sink into destitution without being able to discover the cause. In short, since you wish me to finish, I must beg you, before we separate, to fix your whole attention upon this essential point: Once false money (under whatever form it may take) is put into circulation, depreciation will ensue, and manifest itself by the universal rise of everything that is capable of being sold. But this rise in prices is not instantaneous and equal for all things. Sharp men, brokers, and men of business, will not suffer by it; for it is their trade to watch the fluctuations of prices, to observe the cause, and even to speculate upon it. But little tradesmen, farm workers, and workmen will bear the whole weight of it. The rich man is not any the richer for it, but the poor man becomes poorer by it. Therefore, expedients of this kind have the effect of increasing the distance that separates wealth from poverty, of paralyzing the social tendencies that are incessantly bringing men to the same level, and it will require centuries for the suffering classes to regain the ground they have lost in their advance toward equality of condition.
B. Well, I've got to go. I will meditate on the lecture you have been giving me.
F. Have you finished your own dissertation? As for me, I have scarcely begun mine. I have not yet spoken of the popular hatred of capital, of gratuitous credit (loans without interest) — a most unfortunate notion, a deplorable mistake, which takes its rise from the same source.
B. What! Does this frightful commotion of the populace against capitalists arise from money being confounded with wealth?
F. It is the result of different causes. Unfortunately, certain capitalists have arrogated to themselves monopolies and privileges that are quite sufficient to account for this feeling. But when the theorists of democracy have wished to justify it, to systematize it, to give it the appearance of a reasonable opinion, and to turn it against the very nature of capital, they have had recourse to that false political economy at whose root the same confusion is always to be found. They have said to the people: "Take a dollar; put it under a glass; forget it for a year; then go and look at it, and you will be convinced that it has not produced ten cents, nor five cents, nor any fraction of a cent. Therefore, money produces no interest." Then, substituting for the word money, its pretended sign, capital, they have made it by their logic undergo this modification: "Then capital produces no interest." Then follows this series of consequences: "Therefore he who lends capital ought to obtain nothing from it; therefore he who lends you capital, if he gains something by it, is robbing you; therefore all capitalists are robbers; therefore wealth, which ought to serve gratuitously those who borrow it, belongs in reality to those to whom it does not belong; therefore there is no such thing as property, therefore everything belongs to everybody; therefore … "
B. This is very serious; the more so from the syllogism being so admirably formed. I should very much like to be enlightened on the subject. But, alas! I can no longer command my attention. There is such a confusion in my head of the words coin, money, services, capital, interest, that really I hardly know where I am. We will, if you please, resume the conversation another day.
F. In the meantime here is a little work entitled Capital and Rent. It may perhaps remove some of your doubts. Just look at it when you are in want of a little amusement.
B. To amuse me?
F. Who knows? One nail drives in another; one wearisome thing drives away another.
B. I have not yet made up my mind that your views on money and political economy in general are correct. But, from your conversation, this is what I have gathered: That these questions are of the highest importance; for peace or war, order or anarchy, the union or the antagonism of citizens, are at the root of the answer to them. How is it that in France and most other countries that regard themselves as highly civilized, a science that concerns us all so nearly, and the diffusion of which would have so decisive an influence upon the fate of mankind, is so little known? Is it that the state does not teach it sufficiently?
F. Not exactly. For, without knowing it, the state applies itself to loading everybody's brain with prejudices, and everybody's heart with sentiments favorable to the spirit of disorder, war, and hatred; so that, when a doctrine of order, peace, and comity presents itself, it is in vain that it has clearness and truth on its side; it cannot gain admittance.
B. Decidedly you are a frightful grumbler. What interest can the state have in mystifying people's intellects in favor of revolutions, and civil and foreign wars? There must certainly be a great deal of exaggeration in what you say.
F. Consider. At the period when our intellectual faculties begin to develop themselves, at the age when impressions are liveliest, when habits of mind are formed with the greatest ease — when we might look at society and understand it — in a word, as soon as we are seven or eight years old, what does the state do? It puts a blindfold over our eyes, takes us gently from the midst of the social circle that surrounds us, to plunge us, with our susceptible faculties, our impressible hearts, into the midst of Roman society. It keeps us there for ten years at least, long enough to make an indelible impression on the brain. Now observe, that Roman society is directly opposed to what our society ought to be. There they lived upon war; here we ought to hate war; there they hated labor; here we ought to live upon labor. There the means of subsistence were founded upon slavery and plunder; here they should be drawn from free industry. Roman society was organized in consequence of its principle. It necessarily admired what made it prosper. There they considered as virtue what we look upon as vice. Its poets and historians had to exalt what we ought to despise. The very words liberty, order, justice, people, honor, influence, etc., could not have the same signification at Rome as they have, or ought to have, at Paris. How can you expect that all these youths who have been at university or conventual schools with Livy and Quintus Curtius for their catechism, will not understand liberty like the Gracchi, virtue like Cato, patriotism like Caesar? How can you expect them not to be factious and warlike? How can you expect them to take the slightest interest in the mechanism of our social order? Do you think that their minds have been prepared to understand it? Do you not see that in order to do so they must get rid of their present impressions, and receive others entirely opposed to them?
B. What do you conclude from that?
F. I will tell you. The most urgent necessity is not that the state should teach, but that it should allow education. All monopolies are detestable, but the worst of all is the monopoly of education.
First published in 1849, this essay is included in The Bastiat Collection (2011). An MP3 audio file of this article, narrated by Holly Hinton and Joel Sams, is available for download.
Topic: Frederic Bastiat Part-2 (Read 1717 times)
