The Online Library of Liberty

A project of Liberty Fund, Inc.

• The Works and Life of Walter Bagehot, Volume Ii
• William Cowper. 1 (1855.)
• The First Edinburgh Reviewers. 1 (1855.)
• Thomas Babington Macaulay. 1 (1856.)
• Edward Gibbon. 1 (1856.)
• The Character of Sir Robert Peel. 1 (1856.)
• Percy Bysshe Shelley. 1 (1856.)
• The CrÉdit Mobilier and Banking Companies In France. 1 (1857.)
• Lord Brougham. 1 (1857.)
• The Monetary Crisis of 1857. ( National Review, January, 1858.)

THE CRÉDIT MOBILIER AND BANKING COMPANIES IN FRANCE.1

(1857.)

The crop of currency-pamphlets is beginning. We again read the old titles, “How shall we get through the Winter?” by a Merchant; “Too many Bank-notes,” by Bullion; “Ohe jam satis,” by Anti-Peel; “Faith in Paper,” by a Warwickshire Magistrate; “Infallible Interchange,” by Genius; “Sufficient Accommodation,” by a Manchester Man—familiar to us ten years ago, likely perhaps to be familiar to us ten years hence. These pamphlets are as sure signs of scarce money as many thistles of a poor soil. When the currency is plentiful, people know what it is; when it is rare, they try to make out what it is, in order that they may obtain it. We have, however, no such aim; perhaps, indeed, the recent signs of diminishing scarcity may preclude such literature from multiplying. At any rate, though connected with money, our object is much more humble. We have no certain specific for pecuniary evils: no means of returning to any one the money he has spent. We do not even profess to be able to explain all the phenomena of the recent state of the money-market. We only mean to set forth a few facts as to a neighbouring country, whose pecuniary failures have, it is certain, a close connection with our own.

Even this, in ordinary cases, would be no very easy task. The political institutions of a country are a difficult subject for a foreigner: its daily commercial habits are still more so. We are fortunate, however, in having this time a very accomplished guide.

M. Eugène Forcade, in a series of essays (published in the Revue des deux Mondes) which we have placed at the head of our article, has thrown so much light on the recent history of the banking companies of France, that there is less risk in writing about them than might be fancied.

A person trained in the current political economy would a priori think that governments, despotic or free, had little to do with the trade of banking. The maxims of free-trade forbid them to engage in that trade as much or more than in any other; they cannot learn it; they have no means of watching transactions, estimating traders, scrutinising bills. Since they cannot know the business themselves, it is desirable they should interfere as little as possible with those who may know it. As usual, their true office is limited to enforcing the moralities of commerce, to ensuring the performance of engagements, to punishing frauds or gross negligence in the keeping of other people’s property. So it would seem at first sight. There is something, however, a little interesting in large hoards of money. In a rude age a government is apt to appropriate them; even in a civilised age it is sometimes suspected of doing so; fifty years ago, there was a run on the Bank of France, from a report that the first Napoleon had taken all its reserve to Germany. But in general civilisation is decorous; it is skilled in “indirections”; it has a hundred ways of accomplishing its wishes; it is only after long study that you perceive through their seeming innocence any resemblance to the coarse actions of barbarous societies. On attentive observation, however, it will be found that few governments like to leave quite alone the money of their subjects. They rarely, indeed, keep it themselves; but they very commonly grant a monopoly in keeping it, or a monopoly of the most profitable way of using it when kept, or a monopoly of the right of associating in order to keep it, to some persons who promise “financial help”. Mr. Macaulay has explained to us how political in its origin was the Bank of England. A control over its subjects’ money in some form almost all governments have been anxious to obtain.

As society goes on, a new temptation on this side seems to beset a government. In early society, regular industry is mostly carried on with people’s own money; there is no great facility in borrowing much; no one has much to spare: those who have are anxious or usurious in lending it. As civilisation progresses, this alters. Large sums of money, by the agency of credit, accumulate in few hands. The holders of these have necessarily great power over the national industry. By the amount they choose to lend, they settle, for the moment, whether that industry shall be much or little; by the selection of the persons to whom they lend, they can stimulate one trade or another—one department of industry or another. Few governments have liked to leave this great power uncontrolled; they have striven by laws to keep it in check, by monopolies to keep it in hands which they can trust, likely to use it as they wish. Some power over it they have commonly thus succeeded in retaining.

If there be any truth in these remarks in general, it is perhaps in France, at the present moment, that we should expect the realisation of them. We repeat, till we are tired of repeating, that the government does everything in France; that police regulation there extends through human life; that even small undertakings are not protected by their minuteness from surveillance; that, in important undertakings, the State has the habit both of taking the initiative and keeping the check,—at once of giving the impulse and of watching that it does not go too far. This is not a feature of the present despotic government only. M. de Tocqueville has shown that a network of administration similar to the present existed before the first revolution. It existed equally under the Legitimist monarchy, the Constitutional monarchy, and the Republic; and its activity was pretty much the same under them all. No one can expect that a power so important, so convenient, so tempting as that of money would be left without government supervision; on the contrary, we should expect the State to take a first place, to assume what is called the “leadership of industry” as a matter of course and at once.

The character and antecedents of the present ruler of France1 do not diminish this expectation: on the contrary, they would increase it. He has been called a free-trader; it would be truer to call him a free-spender. No one can go to Paris, or, we believe, to any of the largest towns in France, without seeing great signs of the vast industrial works he has undertaken; of new streets and new public edifices; of an immense expenditure in employing labour. Although he appears, perhaps, to understand the maxims of Adam Smith, as far as they have reference to foreign tariffs, better than any former French Government, he has not shown any leaning towards them in matters of internal traffic. On the contrary, a natural taste for large expenditure seems to indispose him to admit the idea that the daily petty savings of a country are the narrow limit of its public efforts. Socialistic notions, too, from a very early period have had an influence—how great an influence he is too reserved to give us data for saying—upon his mind. He would evidently escape from the régime of competition if he could. His very position, according to the view which he so often inculcates of it, as the omnipotent chief of a democracy of which he is the representative, of a people which has exhausted its mission in appointing him, would incline him to take a view rather similar of matters commercial,—to approve rather of a single association which should embody than of competitive units which should constitute and compose the national industry. In a hundred ways the close narrowness of an anxious despotism shrinks from the free energetic play of internal commercial freedom. Still more important, in this point of view, is the composition of his court. Obvious circumstances separated him from the literary and oratorical statesmen of the monarchy: he wished to be served by those who were essentially and peculiarly men of business; they would have been out of place in a dumb administrative government. The Legitimist families, even if they had been trained in habits of action, have not commonly given their adhesion to a dynasty claiming under the people. The Emperor was almost compelled to choose his most conspicuous associates from the ambitious wealth of the country,—from commercial men, who wish to make money in order to be able to spend money,—whose aim it is to obtain a high social, still better, a court life, from the sums and labours of trade. A spirit of speculation has ever characterised such men. A haste to be rich is part of their essence; and such as are thus in haste, even if innocent, will never be cautious. In France, too, the spirit of Bourse speculation had deeply penetrated the political classes: the name of De Morny explains what we mean. No kind of persons could be imagined to whom the control and management of large sums of money would be more agreeable, or in whose hands it would be more dangerous.

These circumstances account for the inclination of the French Government to obtain the control of its subjects’ money. A part of their law supplies the means. By the Code, the right to form a public company with limited liability (oddly called société anonyme, in contrast to private partnerships with individual names) can only be obtained from a government board which is absolute in practice as well as in theory—which can refuse applications without reason shown, and grant applications without giving an explanation. It is clearly therefore within the competence of a government to give certain of its friends, some of those with whom it has influence, some persons from whom it thinks it can obtain advantages, a real and strictly legal monopoly of a privilege of which able traders will make skilful use, and thereby probably a practical monoply of certain branches of trade. The circumstances are different from what an English trader would suppose. The French law of commercial association does not allow of companies with transferable shares, but with unlimited liability, of which we have so many. Limited liability is—oddly enough to our notions—made essential to a company, to the division of the capital into shares, and to their transferability at the pleasure of the holder; and in practice, accordingly, is an essential condition of great partnerships. It is true, the société anonyme is not the only form in which this limitation of liability can be obtained; partnerships en commandite have likewise the privilege of transferable shares; but the division of the partners into two classes—one of which is unlimitedly and the other only limitedly responsible—however suitable in small undertakings where all the partners know one another, is practically difficult to manage on a large scale, where the interests of the two classes may seem to be in conflict, and where the unworking partners may not, when it comes to the point, quite like to give up the absolute control over the entire management, though its exclusive possession is one of the conditions upon which the working partners have agreed to be solely subject to an unlimited responsibility. There is little chance of a large société en commandite arising to compete with a société anonyme specially favoured by the State. Even if nothing else, the insensible influence of a foreign government forbids. Practically the French Emperor has the privilege of conferring on his friends a monopoly of large and limited commercial association.

The Association Générale de Crédit Mobilier would be the very embodiment of these remarks, if we could believe either the boasts of its friends, or the hints of its enemies. It is a société anonyme. It has a special charter from the government, which is little likely to give it a rival in its chosen sphere. Its conductors have relations, no one knows how intimate, with the courtier wealth and stock-speculating statesmen that surround the Emperor. Its object has been described as embodying the genius of commercial enterprise, “the spirit of the initiative”. It boasts itself that it affords the greatest aid to the government in national loans, and considers it a part of the “spirit in which a great establishment should be conducted”—a trait of its “liberal devotedness”—to subscribe to loans without a profit. The patronage of the best national enterprises, it alleges, is its work. Railways, canals, maritime, all the great enterprises which are to immortalise the “Emperor of Industry,” it is eager to aid. Nor is it content with a commonplace way of doing so. In the spirit of industrial socialism, it regrets the isolation of these undertakings. It wishes to replace them by a single company, which should be the proprietor of all of them; at least of as many as it is able, and of all of them if it could. This design is no imputation of its enemies. The substitution of the stock of a single company for the shares and bonds of different undertakings is a point particularly dwelt on by its official expositor, M. Isaac Péreire.1 It is with this view that it receives, we are informed, deposits of the money of individuals. “Credit” is the instrument with which it is to work. As the public appreciate its singular devotedness, it will gain strength. Differing from the maxim of Adam Smith, “that a trader who professes to be doing good to the public rarely does good to himself,” the société générale will combine national usefulness with private solidity. At present, its greatest aims are in abeyance. Time is necessary to gain a position. It can only now, in a slight degree, and for a short time, aid in commercial undertakings. The limitation of its means, the number of claims on it, compel its conductors, not only to buy shares, but to sell them. The time is not yet come for a single beneficent association of industry.

On the other side we hear very different opinions. All over Europe there has been an impression that the association has been established for sinister purposes; that its disinterestedness is a pretence; that it promotes, and is meant to promote, the worst stock-exchange speculation; that even if it aided in action, the vastness of the schemes it patronises, and their number, might strain the national capital. But, in general, it is alleged that it is not intended for actual enterprise; that it does not really care for making railways or aiding canals; that its scene is the share-market. Some of these thoughts have found a very adequate expression in France itself. Restricted as the expression of opinion is in Paris, it is proportionably ingenious in finding safe vents. By tradition an advocate has a licence. Keenly watchful as a government may be over the conscientious utterance of individual conviction, it has generally given a right of speech to those who do not pretend to be convinced. Those may be allowed to say what they mean who are known not to mean what they say. In Paris, the permission has been taken advantage of. A certain M. Goupo was found to bring an action against the Crédit Mobilier for issuing fictitious statements to raise the value of their shares. M. Goupo’s commercial character was bad, and he could not establish his action; but it afforded M. Berryer an opportunity of giving a sufficiently keen criticism of the government company. “I do not know,” said the great orator, “if, since 1828, M. Goupo has frequented the Bourse; but suppose he has, who is it that reproaches him with it? The Société de Crédit Mobilier, that is to say, the greatest gambling-house which the world has ever seen. We must not be misled by words; there are magnificent ones, I know—the protection of industry, the enfranchisement of the national credit, the development of private credit, the consolidation of all commercial stocks: a dream. All that is the surface; they have given to gambling a new name; they call it in their reports the Industry of Credit. The Industry of Credit; what is that? Their twenty-eight millions of profit; how have they been produced? They are not due to the prosperity of the enterprises in which the Crédit Mobilier has taken a share, and to whose aid it has brought its great influence. No; they are due to realisations which represent the difference between the price at which they sell and the price at which they buy. It is gambling which has produced them.” Nor did the honesty of the administrators escape. “You are then, you say, an institution of public utility; you have limited liability, and you play; you are irresponsible, and you gamble; you are a bank of play which sees the cards,” etc., etc. Such speeches are not now common in Paris.

If we turn from the eloquence of its enemies and the boasts of its friends to the actual facts of the Crédit Mobilier, the first surprise of an Englishman will be at the smallness of its means. Accustomed himself to very large companies, which yet neither wish, nor aim, nor are thought to have a tithe of the influence for good or for evil ascribed to the Association Générale, he naturally expects that the latter is a greater combination than any with which he is familiar. He will be disappointed. The capital of the Crédit Mobilier is not so great as that of the Bristol and Exeter Railway, not one-fifth of the capital of the Great Western, about one-tenth of that of the London and North Western. The table of its liabilities shows how narrow are its means. We may turn it into English money, as the smallness of the French coin of account gives a magnificence to what is numbered in it:—

To an English trader, or an English economist, it appears idle to attempt to revolutionise industry with only seven millions or so of money. The London and Westminster Bank, a most useful institution, but strictly within the limits of pure prose, on which no one writes any eloquence, has as much. There is nothing in any other part of its financial statement which makes such an event more likely. The Crédit Mobilier is an ordinary chartered company, with limited liability; with £20 shares. The amount of the deposits it can receive is limited to twice its capital. It is a bank with special design and limited means. It is true, that according to its original charter it was to be allowed to issue debentures to the amount of ten times its capital; and in the theory of the institution these were to be the great instruments of its operation; they were to be issued in exchange for the shares, or bonds, of different companies by way of purchase money: if a man had ten shares in the Strasburg Railway, he was to sell them to the Crédit Mobilier, and receive a debenture of the latter by way of payment. Gradually, and in an indefinite perspective, this was to be extended, till the Crédit Mobilier had bought up the whole of the Strasburg Railway, and all similar works. Of course, however, a perpetual repetition of this operation would require an indefinite issue of bonds; and on the first attempt to issue them, there was, perhaps, a hesitation on the part of the public, much outcry on the part of the opponents of the company; and finally, a paragraph in the Moniteur quashed the operation. There is as yet no reason either to hope or to fear that the Société Générale will succeed in buying up and incorporating with itself the shares of different undertakings.

The business of the company hitherto has been of a very simple, though profitable nature. As is shown by the above account, they have received four millions, and rather more, of depositors’ money. This has been obtained by a slight variation from their original charter, by which it was only intended that they should act as bankers for public companies; they now receive the deposits of individuals also. The employment of their money has been mainly in share-speculating. Their account of assets, showing what they have done with their money, proves this; it is as follows:—

It is clear that the first item of £4,047,150 is entirely a purchase of public and private securities, stock, shares, or debentures. It is difficult to say how much of the second item of £3,373,016 is a loan on deposit of such securities, or likewise a purchase of them. All ambiguity, however, is removed by a reference to the profit-and-loss account; from which it appears that the profit obtained, or reckoned on a valuation of present stock to be obtainable, from the sales of property purchased, is £962,224.1 The income derived from it £120,816. The interest derivable from other sources, including “continuations,” is only £110,571; from which it is quite clear that the loan operations of the society must be comparatively trifling, and that it is from the bargain and sale of shares and similar property that its profit of more than a million or some 40 per cent. upon its capital has been derived. This explains the influence which is ascribed to it, and the almost terror with which it is mentioned. Seven millions and a half of money, though a trifle in works of real enterprise, insufficient to make a first-class railway, or any work which the nineteenth century would think great,—though not to English notions very vast for loans to commercial men, and for the legitimate operations of banking,—though ludicrously insufficient for “consolidating the stock of different undertakings,” is nevertheless a very large sum to be employed in share-speculating. A movable sum of that amount in the hands of clever scheming and active men (and such, it is universally agreed, are the administrators of the Crédit Mobilier) must be capable of producing great effects. We will not, with M. Berryer, call the Crédit Mobilier the greatest gambling-house which the world has ever seen; but we must regard it as a formidable speculator, a stock-exchange “operator” of the first magnitude.

Such is the Crédit Mobilier, according to the facts and its published accounts; and though it is very different from what the magniloquent pretensions of its expositors would persuade us to believe, the objections to it are very considerable. In the first place, it cannot but promote a spirit of gambling

speculation. In a country where the direct sanction of the government is the strongest of moving powers, that government sanctions the establishment of a huge company, with the special object of speculating. It gives to this company practically the monopoly of the considerable advantages of limited responsibility. That company speculates on a large scale. It buys and sells, as the accounts show, to the extent of nine or ten millions per annum. It is impossible that this should produce no effect on excitable people. The old speculators of the Bourse—many of them the rivals of the fortunate men who have obtained the favour of the government—are not likely to submit quietly. They speculate in rivalship and in opposition to the company; the effect is a still further disturbance of the Bourse market—more rises and falls—a new opportunity for further speculation. The French are the last people who can be trusted with such a temptation. Cautious—timidly cautious as they have ever been in legitimate commerce, remarkable for a tendency to a petty and pedlar traffic, as Mr. Burke said long ago they were—gambling proper, or mere traffic in chance risings and falls of price, has ever had a great attraction for them. A lottery is always a favourite topic. Some of the soundest companies try to combine something like it with the issue of their debentures, in order to make them more popular. Trafficking in the shares of companies with limited responsibility is exactly adapted for a people who are really timid, but are fond of the excitement of risk; it defines the amount of danger; it shows them all they hazard; it allows them the pleasure of venturing it, as well, we fancy, as most commonly the pain of losing it. At present, it is said, the mania has penetrated into a very humble class. A coal-heaver was seen, only a few days since, to come from the Bourse, in the attire of his trade, trying to read his share. To see a sort of government-company speculating; to see opposition rivals speculating; to see a great game going on, and have such sanction for playing it,—is too much for Frenchmen. They have played it.

The share speculations of the Crédit Mobilier are liable to a further objection. Whatever people may do with their own money, they have no right to speculate with the money of other people. The Crédit Mobilier receives deposits on “account current”; doubtless the greater part repayable at short periods, if not on demand. They ought only to employ these in temporary investments—loans, discounts, short transactions, in a word—of which the end can be seen, and from which they can soon have their money returned if they want it. The special design is exactly the contrary. The Crédit Mobilier is avowedly intended to aid undertakings of which the duration is long and the returns slow—“opérations à long terme”. It seems the most obvious common-sense that a company should be sure of having for a long time the moneys it proposes to invest in lengthy operations. If the Crédit Mobilier were to get into discredit, if it were to have to realise the four millions of securities it now holds, it could not be sure of realising them at a profit; as the time would probably be one of diffused discredit, it would, in all reasonable likelihood, realise them at a loss. No apparent or even realised profits for one or two years can make this a generally safe and wise scheme of operations. M. Forcade has remarked that the founders of the Crédit Mobilier recognised a very similar obligation. When speaking of the bonds which they were proposing to issue, they distinguished between those of short date, which were to correspond to mere temporary investments which run off and bring in funds to meet the bonds as soon as they become due, and bonds of long date, which were to correspond to investments comparatively permanent. It is obvious that deposits on “current account” correspond exactly with bonds at short date in this respect. Perhaps we should say, the same reasons apply to them with augmented force, for they constitute the most vital and essential part of the whole association; if ever it get into discredit as a bank of deposit, it cannot go on for a day. In his report for 1854, M. Péreire, the real head of the company, actually boasted that the fixed investments of the company had been restricted to their own capital; we should like to know how he makes out that an equal caution has been observed in 1855. The Minister of Finance, who is said, probably with truth, to be officially (the Moniteur, we believe, says daily) informed of all the Crédit Mobilier does, should look into the matter at once. No government can afford to be blind to the responsibility of founding such a company, or accepting such a supervision.

The danger of such a company as the Crédit Mobilier does not stop at the threshold of the Bourse, nor with its own operations. What it calls the encouragement of industry is in some circumstances a dangerous thing. Industry may be encouraged too much. The limit of the proper new investments of a country in every year is, the saving on hand from the year or years just preceding. All old savings, as a rule, are invested; the only new fund is the new accumulation. This is all which a nation can spend in a new way without trenching on old ways. The experience of 1847 has enlightened us in England about this. We then found that we were endeavouring to lay out in railways more money than we had at call. We were obliged to withdraw funds from our old trades and investments to meet our new engagements; and the time accidentally coinciding with that of a deficient harvest, and finding many old and mismanaged houses living on a credit which they had nothing to justify, the result was a panic. The case is that of a landowner who “improves” himself out of his income; who spends all his available money in draining, and then has no cash to meet his weekly bills. France is now learning this lesson. Mainly devoted to Bourse speculation, as the Crédit Mobilier may be, it nevertheless requires something to speculate with. New shares are the best means. It is a great convenience to enterprising founders of companies to have a wealthy body like the Crédit Mobilier, almost always ready to take a considerable number of shares. The “spirit of the initiative” helps them over the first difficulty. It answers, or, at least, did answer, for a time the purpose of the Crédit Mobilier to take shares; for their support is well known, and the idea that they are “backing” the new enterprise raises the price. This is the old policy of Mr. Hudson, and in excited markets it is a very effective one. The forty per cent. profit which figures in the last account is, we fear, partially caused by reckoning on a value of shares augmented by the notion that the Crédit Mobilier is aiding the undertaking, which may be apt to be followed by a corresponding depreciation when the company begins to sell, and the rumour gets abroad that the Crédit Mobilier, “the leader of industry,” is withdrawing its support. However this may be, it is certain that a very large number of new undertakings are brought out in France, and that the commencement of these is avowedly promoted by the Crédit Mobilier. A well-informed correspondent of the Economist, writing, on the 12th July, before the straits of the autumn, and therefore without any temptation to find “facts” to account for the scarcity of money, wrote as follows: “The manner in which French capitalists and speculators are extending their relations to foreign countries, is one of the most remarkable signs of the times, and affords an astonishing contrast to the extreme timidity which characterised them a few years ago, when it required English capital and enterprise to convince them that railways in France itself might be made profitable. At present they have got under their exclusive control railways in Switzerland, in Austria, in Italy, in Spain, in Holland, and in Belgium; they have established Crédit Mobiliers in Madrid and Turin, are about to do the same in Lisbon, and are trying to do the same at St. Petersburg and Constantinople; they are endeavouring to obtain concessions of railways in Russia; they have established a large bank at Darmstadt, and will not rest until they get one at Constantinople; they recently got up a Crédit Mobilier at Brussels; and though the government has not thought fit to authorise it for the present, they are sure of getting it sanctioned in time; they hold important concessions of mines and coal-pits in Spain, in the Rhenish provinces, and in Silesia; they hold a large, and in some cases a predominating, interest in numerous railways, iron-works, coal-pits, and banks in Belgium; they are about to establish lines of gigantic steamers to ply between different ports of France and Brazil, the United States, the West Indies, etc.; they are taking the lead in the project for cutting through the isthmus at Suez; and they have a pretty considerable interest in the omnibuses of London. As regards foreign enterprise, at least in Europe, they have certainly within the last few years cast the English completely into the shade. Foreigners who now want railways made, and mines worked, and banks established, or money for any other enterprise whatever, do not go to London as they used to do—they come to Paris. And at this very moment France is under engagements to supply to foreign countries at least £40,000,000 sterling in the space of some half-dozen years. Now it may be quite true that this sudden fervour of the French for foreign undertakings is but one phase of the industrial, money-getting mania which now possesses them; and it is quite true, too, that many of the enterprises they take up are regarded less on their intrinsic merits than as an additional element in stock-jobbing operations on the Paris Bourse. But still it is a question whether Englishmen have not of late shown somewhat too much supineness in foreign commercial affairs generally; and whether, in particular, they have not fallen into the habit of regarding French railways, French Crédit Mobiliers, and French everything, as the only matters worthy of interest on the entire Continent.” The domestic investments have not been trifling. M. Rouher, the Minister of Finance, has recently explained to us what the cost of French railways has been:—

The whole previous expenditure of France on railways was very much about the same sum; so that during the reign of Louis Napoleon, France has expended on this sort of investment as much as she had before expended in all her previous history. This would be a great effort for a country not very renowned for commercial activity, even if it stood alone; but we must add to it all the expenditure on public works, edifices, and useful undertakings in various parts of France, and in Paris especially, which mark the reign of the present Emperor. It is impossible that this vast outlay should not try the resources of any nation. The recent scarcity of money proves them to have done so. Even in that which the Crédit Mobilier considers its peculiar usefulness, it has probably been an unnecessary stimulant, administered just when there was occasion for a warning and a restraint.

It is to be remembered likewise, that these great undertakings are commenced either during, or just after, a long war. It is difficult to imagine that they should not strain the movable resources of a country which is not rich in proportion to her political importance; whose saving classes would be terrified at the idea of their money going abroad; where the system of banking is so imperfect as to leave much money in the keeping of the original accumulators, under the thatch of houses, or in corners of cottages, in hands and places where there is no chance of its becoming available.

So far, therefore, from considering his encouragement of industry as one of the great titles which will ennoble (for so his admirers teach) the reign of Louis Napoleon in the eyes of a distant posterity, we believe that the foundation of such an institution as the Crédit Mobilier with a particular view is utterly unsuitable to the proper aims of a government, and is likely to be very mischievous. Already, indeed, it seems to have produced great evils. Although the legitimate commerce of France is, according to the best-qualified judges, extremely healthy,—while its real merchants and shopkeepers are driving a steady business, neither wishing for unusual credit nor entering into unusual speculations,—the rate of interest has been higher than has been known for many years. The legitimate trader has been stinted. Some of the capital usually advanced to him has been withdrawn from the country, some sunk in railways at home; but the greatest demand has been on the Bourse to meet an extravagant and mischievous craving for accommodation from persons who have entered into speculations beyond their means, and who are endeavouring to avoid the certain loss of immediate realisation by paying any rates for the necessary loans. The whole sound, saving, laborious industry of the country is crippled to meet the wants of some speculators, who wish to scheme and spend, but not to save or work. This would be dangerous in any country, but in the present state of France it is especially dangerous there. Nothing is more striking in M. de Tocqueville’s new book than the cold and guarded melancholy with which he regards the increasing inclination of his countrymen for money-making pursuits. It is one of his objections to a combination of equality and absolutism, to a despot appointed by the democracy. “Men in such countries,” he tells us, “being no longer connected together by any ties of caste, of class, of corporation, of family, are but too easily inclined to think of nothing but their private interests, ever too ready to consider themselves only, and to sink into the narrow precincts of self, in which all public virtue is extinguished. Despotism, instead of combating this tendency, renders it irresistible; for it deprives its subjects of every common passion, of every mutual want, of all necessity of combining together, of all occasions of acting together. It immures them in private life: they already tended to separation; despotism isolates them: they were already chilled in their mutual regard; despotism reduces them to ice. In such societies, in which nothing is stable, every man is incessantly stimulated by the fear of falling and by eagerness to rise; and as money, while it has become the principal mark by which men are classed and distinguished, has acquired an extraordinary mobility, passing without cessation from hand to hand, transforming the condition of persons, raising or lowering that of families, there is scarcely a man who is not compelled to make desperate and continual efforts to retain or acquire it. The desire to be rich at any cost, the love of business, the passion of lucre, the pursuit of comfort and of material pleasures, are therefore in such communities the prevalent passions. They are easily diffused through all classes, they penetrate even to those classes which had hitherto been most free from them, and would soon enervate and degrade them all, if nothing checked their influence. But it is of the very essence of despotism to favour and extend that influence. These debilitating passions assist its work: they divert and engross the imaginations of men away from public affairs, and cause them to tremble at the bare idea of a revolution. Despotism alone can lend them the secrecy and the shade which put cupidity at its ease, and enable men to make dishonourable gains whilst they brave dishonour. Without despotic government such passions would be strong: with it they are sovereign.”

If the commerce were of the healthy and legitimate sort which is based on regular industry, this criticism might need qualification. It might be thought to be the expression, if not of a disappointed man, yet of a disappointed literary class. But there is nothing to be alleged against it if the commerce be one of mere bargain and sale, if it lead to no healthy industry, if it foster the desire of gain without the labour which ennobles it. As times go, the making of money by work is perhaps the most innocent employment of man; but no passion is so dangerous as an avarice which is at the same time inactive and intense.

Such are the evil consequences which a government almost inevitably draws upon it by attempting to control or direct the natural industry of individuals. The aim at a monopoly, as we know, is a mistake. Great evils may and do arise under the régime of competition, but they are self-corrective. Certain persons attempt to make a profit in a mistaken way. The issue proves that they were wrong: they fail. Wiser men who never shared in the belief, timid men who wished some one else to try it first, are unaffected. The world profits, or might profit, from the experience. The operation of a single large company is very different. It runs its career alone; it does what no ordinary trader would attempt; neither its failure, nor success are guides to ordinary commerce. We need not touch what even Mr. Cobden now calls the tedium of a free-trade argument. The very evils of competition instruct the competitors; the failure of a monopoly can only instruct the monopolist, and him it destroys.1

. . . . . . . . . .

[1 ]Report presented by the Board of Administration of the General Association of Crédit Mobilier, at the ordinary General Meeting of Shareholders on the 23rd of April, 1856. Translated from the French, and published as an advertisement in the Times of 21st May, 1856.

“Les Institutions de Crédit en France.” Par M. Eugène Forcade. Revue des deux Mondes, 15 Mars, 1 Avril, 15 Mai, 1 Juin, 1856.

[1 ] Napoleon III.

[1 ] The preamble of the statute states that the society has the object “de favoriser le développement de l’industrie des travaux publics, et d’opérer par voie de consolidation en un fonds commun la conversion des titres particuliers d’entreprises diverses”.

[1 ] The profit-and-loss account last published is as follows in English money, omitting shillings and pence:—

[1 ] In 1856 there were strong antipathies against the Emperor Napoleon, and every act by him was misrepresented by his adversaries. The Crédit Mobilier was not, as then supposed, simply a machine for gambling on the Bourse authorised to Court favourites. It was the work of hardy pioneers, the Péreires and Michel Chevalier, I believe, who were far in advance of their age, like the Emperor himself, as he proved later in concluding the treaty of commerce with England. The Crédit Mobilier was a brilliant meteor, and gave such an impetus to the spirit of enterprise as had never before been witnessed. The number of companies launched by it fill nearly a page of McCourtoe’s History of Banks in France. A great many still exist and have become great institutions, like the Paris Gas, Omnibus, and Cab Companies, the Transatlantic Steamship Company; railways in Russia, Spain, France, and elsewhere; the Belgian Vieille Montagne Zinc Works, the Ottoman Bank, etc. Unfortunately it undertook too much and eventually came to grief, and had to go into liquidation, sometime before the war of 1870, and the failure was followed by the prosecution of the old directors. (J. Longhurst, 1895.)