"Money and Crisis" (Part Two)

Sergio Bologna

[Part Two of five parts. Continued from here.]

What is seen to be failing is the banking system as a prop for the regime's political stability: "The approaching crash in Bonapartist finance continues to announce itself in a variety of ways." The fever of speculation has by now spread even to the proletariat, encouraged by the ideology of the Saint-Simonians. Stock-exchange speculation has become the basis of industrial development — or rather, industrial activity becomes a pretext for speculation. The operations of the Crédit are now subjected to a more stringent analysis; references in the earlier articles left obscure, such as the mutual relations between the Bonapartist state, the Paris Bourse and the Crédit Mobilier are now explained in detail. The directors of the Crédit maintain that they have found the formula to extend to the maximum the bank's investments and reduce its risks to a minimum. Marx seeks to verify this assertion while divesting it of the "flowery language of Saint-Simonianism". The method is simply to underwrite shares in large quantities, speculate on them, pocket the appreciation, and then sell them as quickly as possible. How is this possible? Since the Crédit is backed by government privileges and hence has an assurance of sufficient capital and credit, each new industrial initiative launched finds immediately — ie. at its first issue — a premium in the Stock Exchange; then it distributes to its shareholders, at a nominal value, a number of shares proportionate to those that they owned in the company. The profit which is thus guaranteed to the shareholders is reflected in the first instance on the shares of the Crédit, while their high rating guarantees a greater value to the next batch to be issued. In this way the Crédit obtains command over a large amount of loanable capital. Apart from the bonus which it receives from being able to sell shares at above their face value, the effects on capital are the exact opposite of the characteristic function of commercial banks. These latter temporarily free up fixed capital via their discounts, loans and emission of notes, whereas the Crédit fixes actually floating capital. "A mill-owner who would sink in buildings and machinery 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?"This passage may be compared to the splendid excursus on crisis in the Grundrisse. It would seem to confirm the hypothesis of those who, like H. Grossman, consider disproportionality to be the central pivot of the Marxist theory of crisis. Before we go on to examine the articles dealing specifically with the monetary and commercial crisis of 1857, a few general points on this question would not be out of place. Marx considers several kinds of disproportion as the source of crisis: that between monetary liquidity and real wealth, due essentially to the nature of the institution of credit; that between the sector producing means of production and that producing means of consumption in the framework of the schemas of reproduction; that between variable and fixed capital within the framework of the growing organic composition of capital which determines the tendency of the rate of profit to fall; and finally that between necessary labour and surplus labour. All these are different articulations of the same contradictory process, but by privileging one rather than the other we end up with an interpretation of the theory that may be of greater or lesser political significance. To put it schematically: if we place the emphasis on any of the first three types, there is a danger of falling into the all too common pathogenic kind of interpretation, which sees crisis as a result of errors on the part of the capitalist class — failures of calculation, inability to plan the economy on the part of capital. It follows that crisis can be "solved" by the introduction of external correctives, by the mobilisation of those famous "counter-tendencies", above all by the action of an overall subjective will, externally imposed — that of the state — to which is assigned the capacity to restabilise the system, to re-establish equilibrium from time to time. From Marx as the theoretician of disharmony to Marx the planner of equilibrium, the utopia of harmonicism, as seen in socialist planning (in Soviet Marxism, for example).

From this standpoint, which has, one needs hardly add, been that of Marxist orthodoxy and still largely remains so today, any incidence that the action of the working class might have on the crisis disappears. The capitalist class is instead divided into "healthy" or "progressive" and "parasitic" or "sick" elements: the "Puritan" entrepreneur is distinguished from his speculative or absenteeist "Jewish" counterpart. The capitalist system both develops and squanders social wealth: periods of crisis are seen as moments in which the "ugly face" of disproportionality and waste prevails over the healthy side. The agency of crisis, the sole responsibility for crisis, thus rests with capitalism. By privileging one or several of these disproportions, in other words, we arrive at explanations which may be partial, not to mention incorrect.

Instead of explanations based on functional proportionality between sectors of capital, it would seem more fruitful politically to stress the disproportion between necessary and surplus labour, because in that case we enter a terrain of capital-labour as an antagonistic relation, in which the working class can be seen as one of the active poles. Hence it becomes possible to grasp the working-class determination of the crisis and crisis, as in Marx, becomes the privileged terrain of a new strategic basis for revolutionary organisation. Marx's theoretical attention to the 1857 crisis was prompted by the urgency of setting up a new type of organisational project. This was what Marx was looking for within general crisis — historical possibilities for insurrection. Crisis was not seen as a catastrophic millennium but as historic opportunity, an "opening" suggestive of a new society, albeit not sufficient in itself to destroy the old order and usher in the new. Marx's theoretical examination of the crisis of 1857 goes hand in hand with the urgency of setting up organisational projects. Besides, development and crisis are indissolubly linked because they are unified in the same institutions of the system. Without a disproportionate expansion of money supply and credit there could be no expansion of industrial capacity; without a disproportionate growth in the organic composition of capital there could be no increase in the mass of profit; without a disproportionate growth of the sphere of exchange, no world market; without a disproportionate increase of surplus labour no control over necessary labour. The causes of crisis are the causes of development; they are intrinsically necessary to capitalist development.

Without the social mobilisation of capital via the Crédit Mobilier type of investment bank, the Bonapartist system could not have hoped to accomplish its goal of industrial expansion. But the laws of survival of institutions such as these geared to mobilising national resources, also produce stagnation and crisis. Hence capital cannot be divided into "healthy" and "sick" elements; development and stagnation exist in symbiosis within the same institutional forms. The Crédit had a revolutionary rather than regressive impact on French capitalism: but the rhythm with which it multiplied wealth in investment shares was not matched by the reduction of necessary labour. Speculative accumulation does not meet with the same resistances that surplus labour encounters in the factory: the money-form depends on productive relations and vice-versa.

Speculative degeneration is a phenomenon that Marx regarded as an accelerator in the timing of crisis, but not as essential to the explanation of crisis. Once again, reference to the Grundrisse is important. It is the selfsame historic necessity of capitalism to enlarge the factory system and to subordinate an ever-increasing mass of labour power to the wage relation, which produces a "crisis of costs". It is that same historic necessity of capital to reduce necessary labour which creates a "crisis of demand". And it is the selfsame increase in labour productivity in order to offset the rigidity of necessary labour, which results in the "crisis of overproduction".

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In the introduction to an anthology of his essays on the history of nineteenth-century French banking, published in 1970, Bertrand Gille recognises that the principal gap is that regarding the history of the Crédit Mobilier - due to a lack of available material in the French national archives (basically restricted to the annual reports which Marx himself used). However, well before systematic research of banking archives was begun, all historians assigned to the Crédit Mobilier a kind of emblematic role in the economic development of France: both as a factor mobilising resources or - vice-versa - inducing Bonapartist "stagnation". In this sense, Marx's basic judgement has been confirmed by later historiography: the dual role of Bonaparte and the two-sided nature of the Crédit. But this historical interpretation also has an ideological orientation: the historiography of French credit institutions has been largely influenced by the doctrines of the Saint-Simonian school. Leaving aside for the present the question as to whether Saint-Simon should or should not be considered a "founder of socialism" (a question raised by Marxist scholars of the 1920's), the writings of Enfantin, or better still Lafitte, give impressive evidence of the theoretical maturity of the Saint-Simonian bankers, the "technicians", as they dealt with problems of industrial development at the time. Lafitte's projects for the establishment of an investment bank, Enfantin's arguments for the need to centralise resources, their experiments in specialising the Caisses (savings banks) in terms of specific industrial sectors, their conception that banks, by concentrating information, can exercise a regulating and programming function in relation to the economy, and the importance they assign to technological innovation, all this represented a lucid anticipation of what was to become the institutional framework of modern capitalist development. Their projects certainly represented a level of awareness on the part of the emerging industrial bourgeoisie which was vastly superior to that expressed by "pure theoreticians" of political economy in France, by Say or Bastiat, for example. While the latter theorised a "harmonious" vision of the economy, a perfect equilibrium between production and consumption and hence the impossibility of any general crisis of overproduction, the banking "technicians", the Saint-Simonian doctrinaires, showed a clear perception that industrial "take-off" in France needed particular incentives, new kinds of instruments of intervention. They clearly sensed that the French revolution had left an extremely conservative legacy in terms of the economy, that a large proportion of capital remained immobilised, particularly in the rural sector (in the savings of the rural petty bourgeoisie) and in investments in property speculation on the part of the nobility. It was no accident that the first banking experiments of Lafitte and Enfantin were credit institutions based on mortgage.

These experiments were a failure. In his journal Producteur Enfantin was to repeat to the point of obsession that credit signified above all trust, confidence in the future, while mortgage as a form of guarantee on debt is the classic expression of an untrusting investment psychology and thus of a practice of immobilism. It is also in this journal that we can follow the first steps in the career of the Péreire brothers. On 6 September 1830 in the Journal du Commerce they published an article arguing for an association able to lend capital to industry and commerce, recognised by law and with state participation in the initial capital outlay. The Comptoirs d'Escompte in the years following 1848, backed by initial capital participation by the state and municipalities, more or less followed this model. But the first bank which fully operated on the scheme of the Crédit Mobilier was the Société Générale de Belgique founded by the Count of Méens.

The objectives of this new type of Péreire-style investment bank were to alter the traditional attitudes of the French saver, the small rentier who preferred to invest his money in state bonds at fixed interest rates. The aim was to mobilise agricultural savings and orient them towards industry. The programmatic declarations of this new type of banking already explicitly indicate its role as a stimulus and as a means of transforming the French bourgeoisie. The historians of the Annales school in France - Morazé in the first instance — have stressed this particular relationship between the new type of banking and the petty-bourgeois legacy of the revolution of 1789. The petty-bourgeoisie, whose immobilism represented the main obstacle to any real economic "take-off", was mobilised into a dynamic and innovatory role and was involved in the process of industrial revolution by the new investment banks. David Landes, who of all historians has best characterised this difference between the old and new type of banking, has, however, contrasted the success of investment banks in Germany and what he sees as their relative failure in France, partly due to the obstinate resistance of the small rentier, but even more to the dominance of the family firm in French industry. Attachment to small scale enterprise, reluctance to borrow on the capital market, conservative attitudes to new machinery, a mistrust of money-lenders, a concern only for the rate of profit, these were the characteristics of the French entrepreneur which the Napoleonic period, instead of diminishing, actually reinforced. The predominance of family structures thus meant that the role of corporate enterprise in France remained limited, consolidating pre-existing firms rather than creating new ones.

According to Landes, the large number of French patents which were developed abroad is indicative of this reluctant attitude to technological innovation. In a situation of this kind, where "new men" had no chance to carve a way for themselves, where "company secrets" were jealously guarded to the point where loans from abroad were preferred in order to maintain secrecy on accounts and new projects, the prospects for a credit institution like the Crédit Mobilier would have been limited, precisely because of a lack of investment opportunities. Landes argues that this attitude also explains the tendency to rely on state backing and guarantees: "half intrigue-ridden and half-thief", the state stood as bureaucratic supervisor, tutor and father over an industrial class that was basically immature. The French business world was in turn blocked socially by the nobility who controlled public administration and used their power to shackle the business classes; hence the proliferation of state monopolies, privileges, concessions etc. The picture of stagnation could not be more total. The function of the Crédit Mobilier in this context as a factor promoting and liberating resources could only be very limited.

Does this picture accord with the few statistics that are available to us? In his major work Landes provides statistics on the development of the textile industry. From 1852 to 1861, the number of spindles in Britain increased from 18 to 31 million; in the USA from 5 million to 11 million; in Germany from 900,000 to 2,235,000; in France from 4,500,000 to 5,500,000, a percentage increase lower than any of the other countries listed. But the indices for iron and steel are more significant, given that this period saw sectors with a high organic composition — ie. heavy industry — gradually supplanting the labour-intensive textiles sector spread out over the countryside.

More dramatic changes, however, were affecting the physiognomy of Paris. Haussmann, Prefect of the Seine, was taking in hand the great military-urbanistic project which was to eliminate the old districts of the centre; the rabbit-warren of small streets and alleys so propitious to urban guerrilla warfare was to be replaced by the grands boulevardes. The workers were expelled from the centre to the periphery, separated and divided from the body of le peuple. Contemporaries, in particular Proudhon himself, bitterly lamented this violent cutting off of the working class from shopkeepers, small tradesmen and artisans. "The People, the Collective Man", as Darimon called it, was physically divided, by the regime itself, by capitalist development, into a working class and a petty bourgeoisie. Yet the unitary composition of these classes remained and has reasserted itself at moments of political tension and insurrectionary movements almost up to the present day. This separation operated in fact to render the hegemony of the workers over the "people" more achievable, and contributed to the more rapid decline of Proudhonism. However, when dealing with political class composition, we should not allow ourselves to fall into schematic models.

In his detailed description of the repression by the Bonapartist regime after the coup d'état, Edouard Dolléans lists: 1,850 journeymen, 1,107 shoemakers, 888 carpenters, 733 builders, 688 tailors, 642 weavers, 457 ironsmiths, 428 locksmiths, 415 bakers, 251 stonecutters, 252 hairdressers, 224 spinners, 238 tanners, and so on in decreasing order - but also 5,423 agricultural workers. Were these perhaps agricultural workers expelled from the countryside, migrant proletarians without work? Was the quota of the industrial reserve army in the class composition that provided the core of the June insurrection already as large as this would suggest? The agricultural crisis of 1847 was not far off, but the coming of the Second Empire accelerated the depopulation of the countryside, especially from areas where domestic industry was concentrated. The process of urbanisation developed very rapidly and new industrial areas appeared, in particular those linked to the coal-iron cycle, ie Lorraine and the North (Pas-de-Calais). The conversion from vegetable to mineral fuels was slow in France, considering that the country had an ancient iron-working tradition and was well placed in relation to other capitalist countries. The reasons for this, according to Landes, lay in lack of suitable coal and the fact that coal deposits were far from the ore, with high transport costs. Moreover much of the industry "was in the hands of small, technically ignorant furnacemasters, bound by resources and habit to uneconomic locations and protected from the incursions of more efficient producers by prohibitive tariffs, costly transport and a tacit general avoidance of price competition." In this sector — and the same applies to others — the real leap forward of French industry took place after 1857, spurred by the "salutary" effects of the crisis.

When we consider Kuczynski's overall verdict, the period 1848-70 is seen as a period of "transition" for French capitalism: the passage from extensive to intensive exploitation of labour power, from manufacture to laying the basis for large-scale industry, with a gradual increase in the organic composition of capital. The railway network was considerably extended — from 3,083km in 1850 to 5,611km in 1855 — but France's share of world exports stagnated — in fact it was less in 1870 than it had been in 1850. This was a period of transition, of restructuration, certainly, not of boom; a period, above all if we consider the indices for the six years prior to the 1857 crisis, marked by difficulties in setting the process of accelerated accumulation into motion. Kuczynski's judgement, albeit from a different standpoint, is analogous to that of quantitative economic historians like Marczewski.

Marczewski's findings have been examined by several writers, including Markhovitch, who examined the series of statistical data for the whole period 1789–1964. They tend to confirm his finding that in France there were neither periods of rapid advance nor of depression, but a very gradual, linear evolution. Stability and controlled expansion were the typical features of French development, in contrast to other cases like Germany or Italy. Even the crisis of 1857, while it put a brake on the "take-off" of coal and iron, cut cotton consumption and sharply increased wholesale prices, causing a financial panic, nonetheless had no catastrophic consequence. Indeed it favoured a certain process of restructuration and restoration of equilibrium, contributing to the subsequent advance of the economy. Summarising these findings, Levy-Leboyer states in Annales: "In France we find no prolonged period of industrial acceleration (except in construction). The maximum points of expansion follow politico-military accidents and in part merely compensate for them." He subdivides the history of the French economy into three main periods: expansion (1815–40), stagnation (1840-1905) and reconstruction (1907–14).

Taking the second period, we find an initial phase, more or less coinciding with the Second Empire, of higher than average growth for the period as a whole (2.87% annual rate, excluding construction) and a second phase of clear recession, starting around 1867, which opens the long phase of genuine stagnation. Levy-Leboyer also notes the relatively mild impact of the 1857 crisis on France, compared to that in the USA or Britain, as regards volume of production — but this is also due to more sustained rates of growth in these other countries. The real decline, relatively speaking, begins with France's defeat in 1870, exacerbated by the impact of the agricultural depression. Without the propulsive role of industry (which constituted one quarter of global production in 1810-40, and one third in 1850-80), the state of the French economy in other sectors would look even more depressed than it appears from the statistical data. Leboyer's conclusions are very similar to those of Marczewski: "The take-off — understood as a brief transitional period which enables the economy to detach itself from its agricultural traditions — is not found in France, because industrialisation was founded on two opposing structures: at first on the traditional agricultural markets, unified by the railways, and subsequently, as from 1880, on the markets in the cities to which the population of the countryside had transferred itself."

More recently, on the basis of a series of indices constructed according to new criteria, François Crouzet was able to state: "As a reaction to certain conceptions which have been fashionable in the post-War period, which claim that the French economy was performing poorly, and even stagnating, in the nineteenth century, a number of historians have recently been examining a more optimistic thesis [...] The slow growth of French industry is due above all to the slow transformation and growth of the traditional sectors such as textiles, and not to any lack of dynamism of the largely newer industries, such as mining, metallurgy or chemicals." One of Crouzet's indices is particularly interesting for us: taking a group of key growth industries, he finds the most rapid spurt of the nineteenth century in the period 1850–57. "It would seem that French industry underwent its most rapid phase of growth in the mid-nineteenth century, and that while this phase centres on the authoritarian period of the Empire, it actually begins towards the end of the July Monarchy."

Apart from this, the picture of regularity, continuity and slow evolution is confirmed. Hence "the most serious obstacles... were linked to exogenous factors, such as the 1848 revolution and the war of 1870." Exogenous factors! The whole vacuity of quantitative historiography is summed up in this phrase. However, in all its innocence, it does convey an important fact: even within dry statistical series it is possible to identify the essentially "political" nature of the outlook and behaviour of the French proletariat. If only the "wage" is endogenous, if only labour power as a dependent variable is "endogenous", then obviously a working class that makes an insurrectionary bid for power must appear as an exogenous, underground phenomenon. But apart from this we could make a whole series of observations on the basis of the graphs which the quantitative historians provide: above all evidence of an extremely rigorous control over economic development, in careful doses, and an emphasis on stability as the prime imperative of government.

Thus we have a traditional presence of the State, plus the social inheritance of the bourgeois revolution of 1789 and a prudent opportunism on the part of France's bourgeoisie, all of which tends to promote stagnation. And what about the mass behaviours of the working class?

Despite the shortage of available statistics, Kuczynski has tried to follow the progress of wage levels and working-class living standards. His indices of the real wage in France show the following: taking 1900 as 100, the index of the real wage is 64 for the cycle 1833–39, 59 for 1840–51, 55 for 1852–58 and 66 for 1859–62. The early phase of the Second Empire thus shows a sharp worsening of workers' living standards — the years of hunger. Although money wages rose, the cost of living rose much faster. Given the large proportion of women and children still present in the industrial workforce (35%), the system of very harsh fines which was widespread, and payment in kind, the overall impression is one of poor diet and great poverty. Dolléans, whose data on strikes show a higher incidence in normal years and a drop in periods of crisis, also emphasises the exceptional increase in the cost of living. He cites a Paris print compositor who attended the London Exhibition as part of the French workers' delegation in 1863, and who stated that over the past ten years 1851–61, his wages had risen by 9–10%, but his rent had gone up by 50%.

But the heavy hand of the regime made itself felt not only in economic terms but also in the repression of workers' associations, the dissolution of secret societies and craft unions, and the introduction of controls over labour mobility — above all the institution of obligatory work passes (livrets) for both domestic and factory workers. But control over mobility also operated on a more spontaneous basis — for instance the existence of small copper coin (monnaie de billon) which circulated widely in the period 1850-60 as a working-class means of payment (only at the end of the century were drastic measures taken to remove it from circulation). It created enormous hardship for working-class families, since shopkeepers often refused to accept this devalued copper coin as payment for goods. As in Italy from 1973, the chronic lack of small change and coin led to an effective increase in prices, especially on articles of working-class consumption. In addition, the wage packet was generally made up of copper (or bronze) coin, posing an immediate problem for the worker of the convertibility of the wage. This exasperating situation gave rise to a whole series of collateral phenomena: the forging of false coin with poor alloy, speculation on the differing prices of coin between departments, and above all the smuggling of foreign coin into the country — especially prevalent in border areas and giving rise to further speculation. Hence, besides the problem of inflation, this monetary situation placed serious limits on labour mobility: the difficulties involved in converting the money form in which their wage packet was paid tied the proletariat to the network of local community ties, especially in relation to shopkeepers, landlords and the providers of basic services. The refusal to accept certain forms of money might begin spontaneously in a particular locality, and then would extend to whole departments. What is striking is that this situation could exist in the France of the Péreire brothers, the great theoreticians of credit, the inventors of modern banking and monetary policy!

Considering the situation of the French proletariat one cannot help noticing with astonishment Marx's lack of attention to French working-class conditions and to the day-to-day existence of the proletariat in this period. It is as if the problem of organisation were not connected in any way with the mass behaviours of the proletariat, with the autonomous and spontaneous reactions of the working class; as if the theory of money should not also include the reality of the money which the proletariat has to live on from day to day. These inequalities, after all, provided the best exemplification of the egalitarian mystification of the reduction of all commodities to their monetary equivalent.

To summarise: Reservations apart, we can say that the Péreire brothers' bank contributed to a revolution within the French capitalist system, and that the years in question saw the basis of heavy industry being laid, with a unification of the national market via the construction of canals and a comprehensive rail network. This delicate phase of transition for French capitalism was carried through by the exercise of a violent pressure on the working class, coupled with refined techniques of ideological cooptation in order to prevent an equally violent backlash. It is striking that this was accomplished without notable changes in class composition (apart from the physical reorganisation of Paris and the more rapid disappearance of domestic industry), and it would be worth studying the political process which enabled the movements of the class as a whole to be divided, controlled and paralysed. On the other hand, the repression of the material needs of the class, the denial of any improvement in living conditions, destroyed any economistic or reformist illusions, despite the preaching of the utopians. Gradualist intermediate objectives were not the order of the day. Insurrection, a bid for power, violence and a spirit of proletarian revenge ± these became the minimum programme of the French proletariat, even if these manifestations of autonomy were to take a while surfacing.

[This essay continues here.]