[Manchester, about 11 August 1851] 

Dear Marx, 

Today I shall continue the glosses on Proudhon‘ which were 
interrupted yesterday. For the time being I shal] disregard the 
many gaps in the formula, e.g. the fact that one cannot see how 
the factories are to be transferred from the hands of the 
manufacturers to the compagnies ouvriéres,’ since interest and land 
rent are to be abolished, but not profit (for there will still be 
competition); further, what is to become of the big landowners 
who exploit their land by means of hired labour, and other such 
deficiencies. In order to assess the thing as a theoretical whole, I 
should have to have the actual book in front of me. Hence I can 
give an opinion only in so far as I consider the feasibility, le cas 
échéant, of the individual measures and at the same time examine 
the extent to which they lend themselves to the centralisation of all 

a all the communes in the Republic which come to an agreement regarding mutual 
compensation for the difference in the quality of their lands, and for the hazards of 
agriculture - > See this volume, pp. 408-09. - © P. J. Proudhon, Idée générale de la 
Révolution au XIX¢ siécle.- 4 workers’ associations - © should the occasion arise 

the productive forces. And even then. I really ought to have the 
book in order to see all the développements. 

‘the fact that Mr Proudhon has at last come to realise the need 
for more or less covert confiscation is, as I have already said, a 
step ferward. The question is, however, whether his pretext for 
confiscation will serve, for, as always with these blinkered fellows 
who persuade themselves that compulsory measures of this kind 
are not confiscation, the whole thing hinges on that pretext. 
‘Interest is reduced to ‘/y or ‘/, per cent.’ But your extracts say 
HOu NE of how this is done, save that the State, or the Bank which 

secretly and under another name is part and parcel of the State, 
must make an annual loan on mortgage of 500 mill. fr. at that rate 
of interest. From this I conclude that the reduction is intended to 
take place gradually. Once interest was as low as that, the annual 
liquidation of all debts etc., etc., at a rate of 5 to 10 per cent per 
annum would, of course, be easy. But Mr Proudhon fails to 
indicate by what means this is to be attained. In this connection I 
recall our recent discussion about your scheme for reducing the 
teterest rate by setting up a national bank with exclusive privileges 
and a monopoly of paper currency, gold and silver being excluded 
from circulation.’ I believe that any attempt to lower the interest 
rate rapidly and steadily would inevitably fail because of the 
growing need, at a time of revolution and stagnating business, 
for usury, for the granting of credit to people who are 
momentarily in a tight corner, at a loss what to do, in other words, 
momentarily unsound financially. Even if that portion of the 
interest rate intended for the actual repayment of the Joan can be 
depressed by weight of capital, there still remains the portion 
representing the guarantee of repayment, which, at times of crisis, 
rises enormously. In any revolution merchants are grateful to a 
government which lends to them, not at '/, or '/; per cent, but at 5 
per cent. Cf. 1848, loan offices, etc., etc. The State, and any large, 
centralised state bank, unless it operates branches in the most 
out-of-the-way places and has given its officials a long training in 
commercial practice, can lend to large businesses only, otherwise it 
would be lending at random. And small businesses cannot pledge 
their goods like large ones. Donc,? 1. the consequence of any 
reduction in interest rate for government loans=increased profits 
for big businessmen and a general advancement of that class. 

Small businesses would, as before, be compelled to have 
recourse to middlemen to whom the government had advanced 

* See this volume, pp. 299-300. - » Hence 

200. Engels to Marx. About 11 August 1851 42] 

money at '/, per cent so that they could lend it again at 5-10 per 
cent. That is inevitable. Small businesses furnish no guarantees, 
and can offer no pledges. Hence in this respect, too, advancement 
of the big bourgeoisie—indirect creation of a large usurer class, 
bankers at a lower level. 

The constant harping by the socialists and Proudhon on the 
reduction of interest is, in my opinion, no more than a glorified 
pious wish of the bourgeoisie and petty bourgeoisie. So Jong as 
interest and profit remain in inverse proportion, a reduction of 
interest can only lead to an increase in profit. And so long as there 
are people who are financially unsound, unable to provide a 
guarantee and for that very reason truly in need of money, state 
lending cannot supersede private lending, i.e. cannot bring down 
interest rates in respect of all transactions. The State, which lends 
at '/y per cent, would be in precisely the same position vis-a-vis the 
usurer whom it provides with money as was the French 
Government of 1795 vis-a-vis the property speculators and stock 
jobbers of that time when it collected taxes to the tune of 500 mill. 
in assignats* and reissued them for 3 mill. and, simply to maintain 
its ‘credit’ which had already collapsed, accepted the assignats used 
for tax payments at their face value, or 200 times their real value. 

Proudhon is altogether too naive. Le crédit personnel trouve or doit 
trouver son exercice dans les compagnies ouvriéres Hence the 
dilemma: either management and finally administration and 
regulation of these companies by the State, which Proudhon 
doesn’t want, or the organisation of the most splendid association 
fraud, the fraud of 1825 and 1845, reproduced at the level of 
the proletariat, Lumpenproletariat and petty bourgeoisie. 

To seek to place the main emphasis on the gradual reduction of 
the interest rate by commercial and compulsory measures so that 
all debts etc., etc., are liquidated by converting interest payments 
into repayments, all real wealth being concentrated in the hands of 
the State or the communes, seems to me utterly impracticable, 1) 
on the grounds already cited; 2) because it takes far too long; 3) 
because the only consequences, if state paper maintained its credit, 
would necessarily be the country’s indebtedness to foreigners, 
since all money repaid would find its way abroad; 4) because, even 
if the feasibility of the thing were accepted in principle, it would 
be nonsense to believe that France, la République, could carry this 
out in the teeth of England and America; 5) because war abroad 
and the pressure or THE Moment generally, make sheer nonsense of 

4 paper money issued at the time of the French Revolution - > Personal. credit 
finds or should find its application in the workers’ associations 

such systematically protracted measures, extending over 20 or 30 
years and more especially of money payments. 

The only practical significance of the thing would seem to be 
that it is indeed possible, at a certain point of revolutionary 
development, and with the help of a monopolist state bank, to 
decree: Art. 1: interest is abolished or limited to '/, per cent; Art. 
2: interest will continue to be paid as hitherto, being regarded as 
repayment; Art. 3: the State is empowered to purchase all real 
estate, etc., at current tax value and pay for it over 20 years at 5 
per cent. Such might perhaps one day serve as the final and 
immediate precursor of undisguised confiscation; but it would be 
pure speculation to ponder on the when, where and how. 

In any case it would seem that this book of Proudhon’s is much 
more down-to-earth than his earlier ones—even the constitution de 
la valeur assumed a more fleshly aspect: that of the juste prix des 
boutiquiers. Quatre francs, Monsieur, c'est le plus juste prix!’ What 
there is in common between the abolition of customs and that of 
interest is not clear. The fact that, since 1847, Proudhon should 
have made so complete a transition from Hegel to Stirner is 
another step forward. Be it said, however, that he won't 
understand German philosophy even should he persist with it 
until his corpse is in the final stage of decomposition. 

Write soon and tell me what you think of the foregoing. 

Your 
F. E.