“In exchange for the so-called capital share, reimbursed at the price of issue, in accordance with the depreciation indicated by the table of annuities, the company, wishing to recompense the shareholder for the results due to his money during the duration of its administration, issues him dividend shares.
“In 1959, a singular crisis arises. The majority of the shareholders, unaware of the terms of the contract linking the companies to the State, confuse the dividend shares with the capital shares, having considered the reimbursement of their entitlement as an unexpected bonus. Confident of their ever-increasing value on the Bourse, they have bought them back at the current price, without taking the wise precaution of carrying out that operation with savings from dividends received and thus reconstituting the supposed capital of the interest they enjoy.
“Basing their standard of living on their income, they have created needs in relation to a fictitious fortune; for fortune is relative, needs increasing by virtue of its extension. Habit makes the superfluous a necessity that becomes an integral part of nature. It is for that reason that it is necessary to prevent, as far as possible, the concentration of wealth in a few hands. The more one has, the more one wants to have. A man who lives happily with very little becomes unhappy with a hundred times what he possessed then; he becomes the slave of his fortune.
“Many people, as I said, not having set aside the dividends necessary to maintain their fortune at the level of interest that they would normally receive, are subject to partial ruination. That terrible shock is suffered by the heirs of the initial shareholders.
“Commerce, industry and business in general suffer the reverberations of that crisis. The gradual fall of the share price at the approach of the expiry date had given the signal for panic; their annulment has a devastating effect.
“Liquid fortunes depending, in large measure on that tradable and productive capital, are suddenly reduced by three quarters—I am talking here about those of the people lacking foresight. The absence of funds in the market brings operations to an abrupt halt.
“A turnaround changes the face of things. The State, in becoming the proprietor of the exploitation, finds itself at the head of a considerable stock-in-trade belonging to the shareholders. And as this stock-in-trade is indispensable to the regular functioning of the business, it is obliged to buy it from the shareholders, after evaluation. Now, the stock-in-trade of the Paris-Lyon-Méditerranée Company, estimated today at 2.5 billion francs, is worth 3.75 billion, by virtue of the supplementary networks added to the principal network. The shareholders, in exchange for their title of limited enjoyment, thus receive, in cash, a sum five times greater than the capital share at the moment of its creation. The benefit they receive is more than two thirds of the current price of the capital shares at the present moment—with the result that what had seemed to be a catastrophe is, on the contrary, a renewal of fortune.
The State finds itself rich by virtue of that gigantic haul, which translates into an annual income of between 950 million and a billion francs. To acquire the business’s stock-in-trade, however, it is obliged to have recourse to a loan. That loan of 20 billion increases the public debt to the fabulous figure of 45 billion francs, which creates a deficit of 2.25 billion in interest payments per year, from tax receipts of every sort.
The State then commences the redemption of the debt; from the six billion brought in by taxes combined with the benefits of the exploitation of the railways, it reserves 2.25 billion to service the interest on the debt and a billion for its eventual redemption. After 45 years, therefore, it has repaid the debt in full.”
“But instead of letting the capital saved every year lie dormant,” Hobson objected, “it would be simpler to capitalize the interest, and as capitalized interest reform capital, it would only take the State 14 years to carry out the reimbursement—a saving in time and money.”
“And by what means would it capitalize the interest?” Monsieur Landet replied. “It’s on the taxpayers that the burden would fall. Now, as the taxpayers suffer it in some fashion, it’s better to use the simplest means—which is to say, to buy back a billion shares every year. Better to burden them gradually and take longer to reach the term than to strike them hard to get there more rapidly, in conditions fatal to public prosperity.
“Without that new loan of 20 billion, 19 years would suffice to extinguish the 25 billions already existing.
“The reimbursement of the public debt leads to a crisis even graver than the first. The capitalists, recovering possession of their money, no longer know what to do with it; they cannot reconcile themselves to leave it inactive in their coffers, but have insufficient confidence to invest it in industrial or commercial shares. No longer finding in France the facility of a safe placement, they convert it into foreign income. And the State, in extinguishing an obligation that absorbs a little more than a third of its income, loses three-quarters of that same income in the capital that assured it.
“Prosperity emigrates with the money. Everything is paralyzed in its flight. Industry no longer functions; it lacks its primary raw material, the money that furnishes it with its machines, it fuel, its elements of fabrication. The workers can no longer earn a living. Commerce is restricted, as its guarantees slip away. Agriculture can no longer find an outlet for its produce; it is neglected; the more it hesitates to produce, the less it earns. Discouragement becomes widespread. What point is there in working hard if one does not have a solid foundation of savings for the future that can make the excess income of the present bear fruit and ensure the tranquility of old age? Work requires an encouragement of its efforts, a recompense for its fatigue.
“People take account of the peril. It is recognized that the public debt, while being a burden on the taxpayers, on whom its interest weighs, brings in even more than it costs. It is so inveterately established in social habits that it ought to continue to exist anyway, because it generates capital that can be invested in great enterprises, which enrich collective life.
“They hasten, therefore, to reconstitute the debt to its previous level. The State invites the citizens to bring back the funds invested abroad, to restore them to circulation in their own country. The capitalists are not deaf to this appeal. Immediately, money flows into the coffers; income bonds are issued in exchange; and prosperity is reborn under the impulsion of that sovereign motor.
“But the State changes tactics. Instead of paying off the debt, it lets it stand, limiting itself to equilibrating it with the compensation of the benefit of exploitation of the railways. It no longer burdens the taxpayers to more than a minimal degree; it falls almost entirely on the receipts of indirect contributions. What point is there, anyway, in paying it off? To buy dear that which was sold cheap, in order to sell it again? The contemporary rationale for amortization is that it aims, as its name indicates, if not for the extinction, at least for the diminution of the debt—and yet its maintenance has created a utopia.
“‘It is an unnecessary, deceptive and dispensable measure’ says Monsieur Dupuynode, ‘which, instead of reducing the debt, has served to augment it, constantly and everywhere, thanks to the illusions it creates. What, in fact, does this work of the Danaïdes—amortizing when one never ceases to borrow—signify? Is it not a ludicrous commerce, that which consists of buying back old bonds dearly, at the same time as one is obliged to issue new bonds, which one sells at a low price?’31
“Public debt is necessary, as in the present, and I will even say in the future, given the attitude of society. Cursed be the day when it was invented! Now that it is implanted among us, however, let us not seek to uproot it, but submit to it; it is a counterweight to the prosperity of business. When humans are sufficiently mature to get rid of society’s stockholders as a useless fraction enjoying unjust prerogatives, we shall be able to think of money merely as an agent of transaction, not an element of wealth.
“Gold and silver are means of exchange that farsighted nature reveals in its bosom withi
n reach of our hands; humans have made an idol of it because of the pleasures it procures them, but that is not true wealth. True wealth is, first of all, agriculture, the primary source that furnishes us with the indispensable, and secondly, industry and commerce, which, with the aid of the calculations of intelligence, give us the necessary and the superfluous. But the superfluous passes too often for the necessary, to the point that, in the vainglory of self-love, people prefer to deprive themselves of useful things in order to procure that which flatters the imagination and attracts the gaze. All that is a mirage! The example is set by the upper classes, and the poorer classes, wanting to compete with them, ruin themselves in the unequal game.
“Work is the only capital that is not liable to the fluctuations of politics. It produces returns in the measure of the zeal that one puts into it, while money is centralized in hands that have not earned a centime of what it would need to take possession of it in that proportion.
“Rationally, money ought only to serve to calculate an amount of capital, not to be one. It only has real value insofar as it rests on something other than itself. Why is France so rich in spite of its debt and Turkey so poor? Because France possesses a true capital: agriculture, industry and commerce developed to the highest degree, while Turkey possesses nothing. It is a nation in lethargy, deprived of all moral and physical activity, a petrified nation.
“Thus, although people can make money, real fortune—fortune itself—is labor. Labor makes money bear fruit. Without labor no fortune is possible. Money is only virtual capital.
“I am going a further forward, and I can see another revolution brewing, toward the year 3500.
“The people, avid for liberty and equality, are suppressing public debt yet again and imposing, on income of every sort, and exorbitant tax of 50% when those incomes surpass a figure fixed by the law. This time, however, there is no fear that capitalists will invest their money abroad; the world has established a universal confederation, and the measure in question has been agreed by the International Congress. The people profit from it, to be sure, but lose in another sense. Commerce and industry are hampered in their thrust as capital escapes them, and without capital—which is to say, without a guarantee—there can be no initiative.
“That state of affairs lasts 450 years, until, in 3878, as we have seen, the Minister of Finance takes advantage of the parliamentary vacation to create, on his own authority, a new bond paying 4½%, amortizable over 30 years by virtue of expiration.
“That wise measure allows capital to remain in the same hands long enough to bear fruit; it suddenly revives commerce and industry.
“It is as well to pause on that law and to detail its advantages, which the minister only sketched out on the podium.
“Here, then, public debt is reconstituted in such a way as to reconcile all interests. So long as it existed in the form of a loan, it was a bad thing, because, weighing upon the taxpayers for the periodic service of interest payments, it was onerous to the masses and only profitable to a minority. When it becomes a gradually-expiring life-interest it is a good thing, because, while favoring the minority, it does not burden the masses.
“Interest is levied either on the capital itself or on the movement of that capital, which, after a determined lapse of time, reverts to the masses and, in consequence, enriches them. In addition, as the Minister emphasized during his explanation, between 5%, which is the usual rate of interest, and the 4½% that is the interest prescribed by the law, there is a difference of one tenth, to the profit of the State. That difference becomes a progressive tax, augmenting by reason of the magnitude of the sums invested and the number of bonds issued in exchange. It permits the State to offer immediate relief to taxpayers, while awaiting the distant expiry of the first amortizations.
“As that bond is designed to represent capital in commerce and industry, it is necessary that it has a fixed and invariable value which is entirely independent on fluctuations in business. At the same time, that value has to be guaranteed by the State; otherwise, it would only be fictitious and conventional; it would lack the principal element of circulation: confidence. A scale of decrease has therefore been established, in which the price of the bond, to a base of 100 francs, is calculated to the nearest centime, every day, from the date of its issue to that of its expiry, 30 years thereafter. And the State guarantees the reimbursement at the daily price indicated on the scale of decrease—with the result that merchants and manufacturers operate in accordance within certain rules and do not abuse the value of the paper they have in their hands.
“In case of reimbursement, the State immediately becomes the owner of the bond, which is immediately annulled—but it does not lose by this premature reimbursement since the interest paid before then has been raised either on the capital itself or on the movement of the capital, and it only reimburses the bond at the price on the day when it is presented to the Treasury.
“Thus, in commerce and in industry, the bond is considered more as a letter of exchange than as an interest-bearing instrument. It is endorsed and passed on in payment, but it is convertible into cash not at the price on the day when it was put into circulation but at the price on the day when it falls due, surrendering the difference to compensate the prejudice incurred, the right to draw the dividend for the current trimester being reserved.”
“But if the State guarantees the reimbursement of the bond at the price on the scale of decrease,” Hobson objected, “it’s easy to reconstitute the capital immediately by selling back the bond a fortnight after it has been issued.”
“What seems to you to be a benefit would be a loss,” Monsieur Landet replied. “Because the State takes ten per cent of the interest in advance, one would lose 20% on the second placement, including the initial 10%, 30% on the third, including the loss on the first and second, and so on, every year, when the Finance Commission collects the taxes on behalf of the State. Thus, assuming that the recipient resells his bond to that State at the conversion rate, he would be paying 30 times ten percent, or 300 francs—which is to say, twice the value of the capital. There is, as you see, every advantage in leaving the capital in the State coffers, receiving the interest that it yields and making use of it in business, without having recourse to reimbursement, for when the State reimburses, it retains the dividend for the current trimester.”
“To avoid this ‘conscription’ of income, however,” Hobson objected, again, “individuals have only to move their money abroad.”
“Impossible,” the savant retorted. “The laws voted by each nation are immediately transmitted to the International Congress, which employs prohibitive measures.”
“It’s easy, however, for merchant or manufacturers only to record a part of their business in his books.”
“The books of the people with whom he had traded would contradict his; the Finance Commission would perceive it and open an enquiry, which would result in a severe penalty. To deceive the surveillance of the State requires perfect agreement, and fraud is unmasked sooner or later.”
“Since there nothing else they can do, what if everyone spends his income as it comes in?”
“The State sees nothing inconvenient in that—on the contrary. The more everyone spends, the more immediately reverts to the masses. But the merchant and the manufacturer would lose too much by it to risk doing that. They will still prefer to exchange their money for a bond that discounts the present and ensures the future for them.”
“What about the old and the infirm?”
“Let us take things in order. I’m getting to them.
“In the assemblies, an amendment to the law has been introduced on the motion of an elector. The assemblies, as a revisionary power, enjoy the role that the Senate plays today. They can meet and vote an amendment, which they instruct their representative to put before parliament.
“As I said, an amendment has been introduced in the following terms: ‘In consideration of the age that renders old people incapable of earning
a living, when the income he has is insufficient to ensure his existence; and in consideration of a malady or infirmity that might put someone in the same situation of physical incapacity as the old person:
“‘Article One: at 60, the age fixed for retirement, the old person will be taken at the State’s expense into a special hospice.
“‘Article Two: Every individual recognized as infirm by medical judgment will be placed, until death, in a retirement home.’
“No limit has been fixed to the issue of income bonds. A limit is only necessary when the debt constitutes a loan; but when it is presented in the form of a temporary entitlement, it can increase, without any inconvenience, in proportion to the prosperity of business. It does not burden anyone; it is, instead, a benefit to everyone, since it reverts to the social body at the end of the legal term and the ten per cent tax is in immediate effect before then. The issue thus takes place in direct proportion to the affluence of capital.
“The public debt, thus modified, is a savings bank in which the worker deposits the excess of his labor. As that excess is only levied beyond the bounds of necessity, he is free to capitalize the interest on the sum invested in the Treasury and thus to reconstitute the capital, with the aim of providing for a comfortable old age or leaving his children a fortune that they can conserve by the same economic means, while paying their tribute to the fatherland.
“The law, in any case, determines a sufficient level of ease. It fixes a maximum income of 6000 francs for everyone, the surplus becoming the property of the Treasury under the conditions that we have previously studied. The worker can thus, without privation, leave the interest he receives intact.
The World in 2000 Years Page 16
