Coordinating abilities, needs and resources: the banking system and the railway network

Replacing conquest with labour is therefore the principal characteristic of modern times. The time had come to give prominence to the real producers of the material and spiritual conditions of life: to manufacturers, scientists and artists.

Let us suppose that France would suddenly lose its fifty leading physicians, its fifty leading chemists, its fifty leading physiologists, its fifty leading mathema­ticians, its fifty leading poets, its fifty leading painters, its fifty leading sculp­tors, its fifty leading musicians, its fifty leading men of letters... mechanics, civil and military engineers, cultivators, blacksmiths, arms manufacturers, tan­ners, dyers, miners, drapery manufacturers,... printers, engravers, jewellers and other metal-workers, masons, carpenters... and the hundred other people of various occupations.

([1819-20] 2012, 2119-20)

What would have become of France? “Since these are the Frenchmen... most use­ful to their country... the nation would turn into a soulless body at the very moment it loses them”. Replacement of these specific, non-interchangeable abilities would span “at least one full generation”. We may now imagine another scenario:

Let us suppose that France would keep all its outstanding men of sciences, fine arts and arts and crafts, but on the same day unluckily loses Monsieur, the king’s brother, his Lordship the Duke of Angouleme, his Lordship the Duke of Berry, his Lordship the Duke of Orleans, his Lordship the Duke of Bourbon, her Ladyship the Duchess of Angouleme... and simultaneously all of the Crown’s first officers, all State ministers... all of its marshals, car­dinals, archbishops, bishops... all prefects and assistant prefects, all minis­try staff, all judges and in addition the ten thousand most wealthy landowners among those who lead the life of a noble.^[219]

([1819-20] 2012, 2120-21)

What would happen in France? Undoubtedly French people would be afflicted by the loss of these individuals known to France’s most powerful persons, but there would be no harm to France as a nation.

Saint-Simon thus considered two different components in the nation: the “national” and the “anti-national” (updating another parable, of the hornets and the bees). The first consists of “those who carry out works useful to society”, and the second of “those who consume, and produce nothing” ([1819—21] 2012, 1947). The authorities must be quickly replaced, shifting from the hands of the “anti­national party” (the “hornets”) to those of the “national party” (the “bees”). Since “these days political science essentially consists in producing a good budget”, only the industrials, who have “the ability to administrate”, can be entrusted with power ([1819—21] 2012, 1950). The new system’s essential task should consist in manag­ing “abilities”.

Abilities and property

For Saint-Simonians “ability” refers to the whole set of non-interchangeable com­petences, talents, skills and know-how an individual acquires during their educa­tion and personal experiences. Each individual is unique. Such is the significance of the Saint-Simonian credo: “All privileges acquired by birth shall be abolished, without exceptions, each individual shall acquire a position according to his abili­ties and be rewarded according to his achievements” (Bazard et al. 1831, 54). This is why the great social, political, economic and ethical issue addressed by modern times becomes the coordination of the nation’s abilities. How to extract abilities from the confinement to which the static and rigid ancient system had condemned them for centuries? How to guide individuals to open up to the world, to meet, interact with and support each other, building a “fluid” and ceaselessly progressing society? How to establish the basis for a “universal association”? This aim can be achieved only if effective instruments for interaction within the system are avail­able.

The rational management of abilities requires that they be provided with the appropriate tools for production - Saint-Simonians called them “work instruments” or sometimes “industry instruments” - and that the concept of property be ques­tioned. According to general prejudice, property is an “unvarying fact” throughout history since it is “the very basis of the political order” (Bazard et al. 1831, 179). But this prejudice is seriously mistaken: like any other human institution, property rights change over time. Owning a human being had for example become totally unacceptable (1831, 181); however, in times of slavery it had given rise to no out­rage, and was seen as totally natural. Today the institution of property needed to be thoroughly reconsidered and reformed once more in accordance with the require­ments of the new system, especially because of the technological developments. In modern societies “working tools” - “inanimate servants” - had evolved, becoming much more complex and extensive. The property system had become a major issue as a result: “who shall have these inanimate servants available, whose property shall they be, to whom shall they be handed over?” (1831, 180). Distributing such precious “servants” through the institution of inheritance was pure nonsense: this would mean that resources within a rationally organised society would be allo­cated “blindly” (1831, 92). Does an owner’s son have the education, the profi­ciency, the knowledge, in short, all the abilities needed to use the instruments of his father’s company scientifically, rationally? Existing inheritance laws only led

to the distribution of the property of “productive powers” into “the idlers’ hands” (1831, 186). The Revolution had abolished all privileges by birth, but had left “the most immoral of privileges” - inheritance - untouched. In the new system such a “fate of birth” (1831, 92) shall be forever abolished: “the State, no longer the fam­ily, shall inherit the accumulated wealth since it constitutes what economists call the productive fund” (1831, 183).

However, this legal provision should not be mistaken for “sharing goods in common” (Bazard et al. 1831, 183), with communism, a regime which abol­ished all inequalities. Quite the contrary, the Saint-Simonian system carefully maintains those inequalities that are inherent to the movement’s basic credo: everyone will be rewarded according to their work. Concern about achieving the best possible distribution of those instruments at the lowest possible cost to the nation is the reason for providing the State with the right of inheritance over work instruments.

The issue of disposition over production instruments goes far beyond the mere motive of inheritance. When examining the conditions under which resources are granted during the failing system of the critical period, it appears that the pro­tagonists involved are “isolated individuals, ignoring both industrial needs and the men and means likely to provide for them” (Bazard et al. 1831, 192). The ill-fated failure in communication between needs, abilities and resources is typical of such a system. The purpose of political economy is thus “to determine the social condi­tions in which the work instruments, the products of work and the workers them­selves would best be combined and divided, in a word, ORGANISED” (Enfantin [1831] 2010, 19).

The banking system

Previously the owner of capital, who does not invest his assets himself but instead rents them to a business owner, had no or very little trustworthy information about the borrower’s real abilities and working conditions. Capital is “blindly” trans­ferred from the former to the latter. The system is prone to waste and counter­productivity, caused by the lack of communication and trust between economic agents. Fortunately, the new organic period invented an institution capable, at the national level, of building a bridge between individual owners and workers, and, still more fundamentally, between abilities, needs and resources: the banking system.

In the midst of the disorder...

positioned to evaluate both the needs of industry and the ability of industrials than idle, isolated individuals; the use of capital which goes through their hands is both more useful and fair.

Thanks to banks, society is able to accurately assess its abilities, resources, actual needs and potential creativity. As intermediary agents, banks overcome the distrust and isolation which had paralysed the ancient system and contribute to making economic and social relations more fluid. This facilitates and increases credit oper­ations between owners and workers, particularly through reducing the regulated rates of interest (Jacoud 2010, 19-21).

However, the immediate benefits for society and the working class expected from the banking system should not be overestimated, especially as regards an effi­cient transfer of resources from idle hands into capable ones. Thanks to the advent of these new organisations, society was experiencing “a rough draft of the indus­trial institution” (Bazard et al. 1831, 203). On the one hand, even though banks made economic life more efficient than before, they were still institutions obeying the logic of profit. As the distributor of resources they were “constantly pressed to levy the highest tithes on the product of work” (1831, 203). On the other hand, significant transactions between idlers and workers still took place outside banking institutions, subordinating the weak worker to the capitalist’s will in a violent and arbitrary transaction. The “exploitation of man by man” - a phrase coined by the Saint-Simonians - was inevitably occurring in modern society. A radical reform of banking organisation was required.

The most important conceivable political action today would be the creation of new banks, some of them more specialised, progressively limiting their patronage to a specific industrial branch which they would increasingly over­see and direct; others on the contrary would become more and more general, linking up the special banks and imposing a unity of purpose; thus, in each locality, each significant branch of industry would have its special bank; and all these special banks would be grouped into a general bank presiding over material work as a whole.

(Enfantin [1830] 2010, 111)

This new organisation of banking should have a dual purpose: both increasingly specialised and increasingly centralised, following the two requirements for a sci­entifically organised society. This would in turn require gathering highly detailed and accurate knowledge about the needs, resources and real abilities of the nation. Such an ambition could only be achieved through the constant expansion of the network of “special banks”^[220] throughout the national territory. Only those at the head of these extremely specialised institutions, the bankers, would be able to acquire the particular knowledge that would make efficient production possible. Saint-Simonians always insisted on this type of knowledge and on the evolutionary aspect of industrial information. An efficient disposition of resources could only be achieved if it was based on such particular and relevant knowledge.^[221]

The degree of urgency of the various needs in society was also to be addressed. The private secondary banking network alone has no access to such knowledge. The efficient disposal of resources calls for an institutional mecha­nism other than that ruled by the logic of profit, namely the “central bank representing the government” (Bazard et al. 1831, 206), located at the top of the hierarchic system of the reformed banking institutions. The special banks would be at the bottom of this hierarchy; in the middle would be the “general banks”, consisting of several special banks and consequently several indus­trial sectors in a given area. At the third level would stand the central bank, which should bring all general banks together. This overall system is designed to organise the feedback of all information about abilities, needs and resources regarding all industrial sectors. In possession of relevant information about the nation’s economic life, the central bank should be capable of rationally allo­cating resources to all specific and relevant abilities, according to the order of priorities it has established among the various needs of the nation.

Any action which might lead to the centralisation of generalist banks, to the specialisation of specific banks, and to linking them up with each other hierarchically will necessarily lead to a better understanding of the means of production and the needs of consumption; which supposes both a more precise classification of workers and a more enlightened distribution of the tools of industry, a better appreciation of work and a fairer reward for work. (Bazard et al. 1831, 204-205)

The rational reform of the banking system thus involved the rational organisa­tion of the lending system: granting resources to appropriate abilities is achieved through an efficient mechanism for advancing credit. Resources can be rationally allocated only if credit is granted by a central organisation possessing relevant knowledge of the “interests of all”. Only such an institution, enlightened by reason and scientific information, can bring justice, peace and prosperity to the nation.

At the head of the social body are commanders whose function is to show each man the most important place that he should occupy, both for himself and for others. If credit is refused to a branch of industry it is because, in the interests of all, the capital has been judged capable of being better used; if a man does not receive the work instruments he requested, it is because com­petent managers consider him more suited to another function. Error is no doubt inherent in human imperfection, but it must be admitted that superior abilities, occupying a general standpoint and freed from the fetters of spe­ciality, must present as little risk of error as possible in making the choices with which they are entrusted, since their feelings, their personal desires, support them and make them directly interested in giving as much prosperity to industry as is possible, and in each branch as many work instruments to individuals as the state of wealth and human activity requires.

(Bazard et al. 1831, 209)

In short, when Saint-Simonians declared that it is “the State, and no longer the family, [which] shall inherit accumulated wealth”, they presumed that the central bank was the most rational actor capable of allocating capital to work - a kind of central planning institution ante litteram. They consequently opposed “unlimited competition”:

Let us look at the society around us. Numerous crises and dreadful catastro­phes smite industry daily; a few people have started to notice [them], but they do not realise the cause of such great disorder, they do not see that this disorder is the result of the implementation of the principle of unlimited competition.

(Bazard et al. 1831, 200)

This does not mean that they were completely opposed to the logic of profit. They were however convinced that the market is unable to solve the critical issue of coordinating abilities, needs and resources. They were opposed to “unlimited competition” since they thought that, in a system totally deprived of regulation, competition necessarily leads society towards anarchy and the perpetuation of the exploitation of man by man.

Such are the Saint-Simonians’ ideas as exposed in the Doctrine during their two initial years (1828-30). These general ideas would be practically developed by bankers who were adherents, such as the Pereire brothers, Emile and Isaac. As early as 1831 the latter argued that the organisation of industrial society according to the terms announced by Saint-Simon could only be achieved through reforming and developing the credit system. To begin with, economic life should be set free from rules obstructing the creation of money. As a matter of fact, in Europe, the bill of exchange had long replaced money in external relations. This practice of “substitut­ing money with paper” should be extended within national economies themselves, through vigorous encouragement of the use of “bills and promissory notes” (Pereire 1831, 5). Pereire thought that credit was created by these instruments, “since by using these bills producers made available all the working instruments held by the idle” (1831, 6). Therefore, in order to secure trust between agents and ensure the sol­vency of those holding bills, bankers have one essential task: discounting. The more resolutely bankers support the task of boosting trust within economic life, the more that bills will become “securities” which “will create a spiritual community, a real religion strongly binding workers of all countries together” (1831, 14).

Based on these convictions, the Pereire brothers contemplated the foundation of a special bank for the rational organisation and centralisation of credit within soci­ety. The instruments of production would be removed from the hands of the idle and given to workers: this would become Credit Mobilier. In April 1854 the first gen­eral assembly of this institution published a report which argued that the institution “stems from the need to provide the market with a steady flow of new capital which can contribute to developing public and industrial credit”. It went on to state that it

shall also serve the need to centralise the financial and administrative dealing of large companies, especially those of railway companies; and in particular to use in this way, to the greatest advantage of all, the capital over which each successively disposes, so as to manage common resources both for the benefit of the companies and that of their numerous shareholders.

(quoted by Yonnet 2000, 207)

This profoundly Saint-Simonian project of transforming the society into “one large ‘association’ granting general access to the instruments of production” (Yonnet 2006, 129) suffered a severe crisis during the Second Empire. Nonetheless, this bold and original financial experiment would form the template for the expansion of European banking.

The railway network

For the Saint-Simonians the railway network, together with the bank system, should contribute to the construction of modern society. Just like banks, railways are among the major innovations of modern Europe. Railways achieve at a territo­rial level what banks do at the economic level. They enable individuals to meet and communicate. Thanks to the network woven by European railways, individuals and regions, knowledge, innovations and products escape their isolation, furthering a cooperative society. Their ceaseless expansion and intensification fosters Euro­pean and continental communication, which in turn enables man’s emancipation: the railway network contributes to the advent of universal association.

In this context, one can even speak of a “religious cult of networks” (Musso 1997, 7 and 173). Human history moves towards the constant and ever more inten­sive interpenetration of the most various and dispersed human experiences, within any given nation and throughout the world. A series of articles by Michel Chevalier, titled “The Mediterranean System” and published in January and February 1832 in Le Globe, is here significant. He expounded an idea particularly precious to Saint- Simonians: the need for a spiritual and material unification of the Orient with the Occident,^[222] where the latter (the Occident) is the “male” (“solid”) and the former (the Orient) the “female” (“fluid”) component of our world. Industry was supposed to be able to achieve this worldwide unification without any kind of recourse to violence, simply through the peaceful development of the banking and railway networks. He wrote that “Industry consists of production centres which are materi­ally brought together through transportation routes, as well as spiritually, through banks”, adding that “considering the material aspect, the railway most perfectly symbolises universal association. The railway will change the conditions of human existence” (Chevalier [1832] 2008, 119) and bring about harmony.

The means to achieve this harmony is of course the advent of industry. It will eventually create awareness that it is time to put an end to absurd wars and so that, in peaceful cooperation and solidarity, all might enjoy the opportunities offered by nature. For the Saint-Simonians, “taking advantage of nature” is definitely mankind’s destiny: the “globe [will be] considered as mankind’s great landed estate” (Enfantin 1825, 100). “Exploitation of man by man, such was the condition of human relations in the past; man associated with man and exploiting nature, such is the picture offered by the future” (Bazard et al. 1831, 162).

The second volume of the Doctrine de Saint-Simon shows how modern Europe gradually emancipates itself from its preoccupation with warfare. The banking and railway networks are leading towards an “irrevocable organic status” of society (Bazard and Carnot 1832, 7).

Is it not now the time, O my Lord, for all of your children to learn how to bless Thee with one name only..., for a new religion to eventually unify mind and substance, science and industry, theory and practice, Orient and Occident, hitherto destined for fighting and antagonism, henceforth in sol­emn matrimony.

(Barrault [1832] 2008, 94)

Chevalier proposes an immense railway network forming the “Mediterranean Sys­tem”, linking Spain, France, England, Italy, Germany, European Turkey, Russia, Asian Turkey, Asia and Africa. The endeavour would establish “eternal peace” on Earth. Where could the resources be found for such a huge and costly endeavour? All peoples, all nations, all men, Chevalier states, would be convinced by the ben­efits conferred with the advent of industry. They would be aware of what peace­ful cooperation throughout the world could bring about, for well-being, prosperity, happiness, quality of life, scientific progress and capacities for moral and spiritual emancipation. They would therefore cease waging ruinous wars (Chevalier [1832] 2008, 130). In such a peaceful socio-political context there would be no need for armies. In 1822 Saint-Simon had stated that “the removal of permanent armies will bring about the biggest possible saving in public expenses” ([1820—22] 2012, 2780). For Chevalier, the financial and productive resources freed by such worldwide sav­ing would be sufficient to develop this immense network without costing the citi­zen a single penny. Chevalier’s enthusiasm for the railway - but also for all types of canals and transport routes linking together the furthest and most remote areas of planet Earth - is further expressed in his 1838 work Des interets materiels en France (On Material Interests in France), as well as his article “Chemins de fer”, published in 1852 in the Dictionnaire de l’economiepolitique. He retained a lifelong and unwavering faith in the civilising and pacifying mission of the railway network.

There also existed “a different, less ambitious and less mystical idea” of the railway, as Ribeill puts it. It was shared by another group of Saint-Simonian engineers: Gabriel Lame (1795-1870), Emile Clapeyron (1799-1864), Stephane Flachat (1800-1884) and Eugene Flachat (1802-1873). Their conception of pub­lic works was less costly and more limited than that of Chevalier. “Instead of... claiming to cover three continents in a few years” they intended to “ensure con­nection within a general system of internal communications” (Ribeill 2006, 132). Another Saint-Simonian engineer, Paulin Talabot (1799-1885), undertook another initiative worth noting: constructing a railway between a coal basin and the Rhine “led in 1857 to the establishment of the very prestigious railway company linking Paris with Lyon and the Mediterranean” (Ribeill 2006, 134).

4.