Beyond tax
Elie Halevy (1906) insisted on the idea that socialism should not be reduced to the fiscal expropriation of capitalists. The early socialists effectively envisaged alternative projects for circulating capital to radically alter social organisation and encourage associations.
Socialisation through public borrowing and a perpetual public debt
For Enfantin, while the task of public finance was to deduct money where it could be found to fund the industrial transition, borrowing was preferable to taxation. The industrial worker initially without capital and obliged to rent it had to deduct from the wealth he created enough to pay interest on the capital and the tax demanded of him. Enfantin therefore suggested that the State attract the superfluous capital of the idle through public borrowing. He insisted on two points: (a) deductions from idle capital should be favoured over draining productive and circulating wealth and (b) the funding of public spending should be borne by those who “with regard to the present distribution of property and the products of labour, have the most disproportionate income in relation to the share enjoyed by other members” (Enfantin 1831b). By delegating to the most capable industrial workers the realisation of major works, the industrial state, judge of social needs, would thus regulate the possession of instruments of production. Borrowing was thus devised as a measure for the circulation and socialisation of wealth:
[it is] the most powerful lever that can be employed by a moral, enlightened and shrewd government to extend to the poorest and most numerous class the use of capital concentrated among the class privileged by birth; we put this forward as the transaction most conducive to popular welfare.
(Enfantin 1831b, 58)
It made it possible to “break the social bonds that oppress the poor” and to replace them with “new bonds that, without violently dispossessing those privileged by birth, would allow those whom birth disinherited and who have the taste and ability for work, to benefit from the tools possessed by the idle rich” (Enfantin 1831b, 58).
It was from this angle that the young Saint-Simonians entered debates about the framework and funding of public debt. Believing that one should only worry about servicing interest (debt arrears) and not about the nominal amount of the debt, the Pereire Brothers, Enfantin and the young Chevalier (1831) denounced the use of a debt redemption fund that vainly pursued the hope of extinguishing public debt: according to them, this measure was a retrograde policy consisting in “returning to the hands of the idle the capital lent by them to the workers” (Enfantin 1831b, 58). Pereire underlined the inefficiency of the process: “for every effort that we make to achieve this aim [debt reduction], we find ourselves further away. Each repurchase leads to new issues, the State buys back more dearly than it issues, and instead of paying off, it is constantly falling behind” (Emile and Isaac Pereire 1913 [1831—35]). He concluded that, since they cared little about being reimbursed for the capital they had advanced, annuitants were only interested in receiving interest payments. Pubic debt could therefore be declared truly perpetual. Rather than debt retirement (par value capital), the Saint-Simonians argued for the conversion of annuities with a reduction of the nominal interest paid to its creditors: converting annuities amounted to repaying a debt that was incurred at a certain interest (through the intermediary of 5% annuities) to contract a new one at a lower interest rate (e.g. an average of 4.5% annuities), with the alternative of repayment always offered to creditors who refused the conversion (and the loss of income it entailed).The reduction in annuities, the stated aim of which is to reduce the income that labour pays to idleness, is the latest method invented and put into practice by industrial engineering to avoid and combat a legislation of property marked by feudal immobility, which prevents the instruments of labour from reaching the hands of the man who wishes to and will know how to use them.
(Enfantin 1832, 58-9)
The conversion of annuities presented three, interlinked benefits. It allowed for (1) capital movement, with reimbursed capital able to be placed elsewhere: it therefore involved directing the circulation of capital by offering an incentive so that this capital was invested elsewhere (in private firms) if holders refused to
accept the reduction in their income caused by the conversion. It then represented (2) savings for taxpayers. Lastly, (3) the conversion of annuities should lead to a reduction in rent on capital in all spheres of industry. The Saint-Simonians saw in borrowing and truly perpetual public debt a possible solution to the problem of the distribution of capital. The Saint-Simonian line on debt employed the flagship values of the Doctrine: the promotion of industrial workers’ individual abilities, the fight against idleness and the extensive development of public works. The Saint- Simonians were thus opposed to unalterable taxation - according to them, the widespread development of public credit and the regular reduction of debt servicing and capital rent by annuity conversion made the operation financially viable. However, this system depended on raising the price of public securities. Any fall in stock prices financially would compromise the State and the distribution of capital to the most able.
Against the Utopia of unlimited public credit: social property
Among the third-generation socialists, Jules Leroux strongly condemned the “Utopia of unlimited public credit” in that it left the doors of the stock market open, abandoning to the market (even if it were supervised) the task of governing the economy and distributing capital. He also criticised it for ignoring the power relations inherent in any system of public borrowing based, on one hand, on the law of supply and demand, and, on the other, the “duality of sovereign power”[249] (J. Leroux 1843a). Whilst recognising the Saint-Simonians’ ambition, Leroux explained that the emancipation of the workers (the “proletarians”) would be compromised by the tutelage the bourgeoisie exercised over both the State and the proletariat through the public borrowing system.
In the world of the governed, a small number, tempted by the lure of the loan transaction, opens their wallets to the governors; a small number, friends of the first or simply enemies of the greatest number, vote for the tax that must pay the interest of this loan; and there is nothing left to say - the thing takes place.
(J. Leroux 1843a, 757)
Unlike the Saint-Simonians, he highlighted the extent of the interest established and the power relations likely to influence the effectiveness of economic policies designed to change social antagonisms. It was, therefore, preferable to remove from the market the distribution of capital considered indispensable for individual development.
For Pecqueur, it was precisely this failure of industrial organisation that justified the tax: a substitute therefore had to be found. While progressive taxation of income and capital were temporarily necessary, Pecqueur feared a battle that labour would lose in advance: “capital is a phoenix perpetually arising from its ashes” (Pecqueur 1850c, 37), that would always claw back from labour what was deducted through taxation. It would therefore be preferable
to establish an association between capitalists and workers in the joint ownership of the instruments of labour by means of expropriation with compensation rather than building a new world alongside the old one with the resources from a tax on capital, since these two worlds are antagonistic and incompatible.
(Pecqueur 1850c, 38)
Pecqueur was building the scaffolding for the architecture of an “Economic Republic”[250] in which he made a distinction between “national property” - including “all the instruments of labour, land and other capital, all the material conditions of production and all the wealth necessary for services and social functions” - and “material and private property” corresponding to “the share of consumable wealth privately allocated to each according to their function” (Pecqueur 1850a, 26).
In these new conditions of capital and labour, the question of taxation is quite simple. There is no longer any tax in the big national company, nor is there any tax in the small railways and other companies. The expenses required for the good management of the general interest are deducted from the gross products of the association.... So there are no longer two purses, two treasuries, or two interests, those of the citizens and those of the State.
(Pecqueur 1850a, 27)
Rather than taxing an individual’s income or capital, it was now a question of a social “contribution” deducted from “the gross product of the association”, which should be used “1° to preserve each and every one of us from the unavoidable vicissitudes that may befall us in the course of our lives, and 2° to meet the common needs of all, such as education, road maintenance etc.” (Pecqueur 1844). The Saint-Simonian’s views of the State as a banker, or of hierarchical workshop contrasted with Pecqueur’s social State. In Pecqueur’s philosophy, this Economic Republic should represent the closing phase of history, where “social credit will be free, where few people will own the instruments of labour, and where each citizen will have no other property than the income from his labour”.[251]
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