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• Translator's Preface
• Introduction: the Problem of Interest
• Book I: The Development of the Problem
• Book I, Chapter I: The Opposition to Interest In Classical and Mediæval Times
• Book I, Chapter II: The Defence of Interest From the Sixteenth Till the Eighteenth Century
• Book I, Chapter III: Turgot's Fructification Theory
• Book I, Chapter IV: Adam Smith and the Development of the Problem
• Book I, Chapter V: The Colourless Theories
• Book II: The Productivity Theories
• Book Ii, Chapter I: The Productive Power of Capital
• Book Ii, Chapter II: The Naïve Productivity Theories
• Book Ii, Chapter III: The Indirect Productivity Theories
• Book III: The Use Theories
• Book Iii, Chapter I: The Use of Capital
• Book Iii, Chapter II: Historical Statement
• Book Iii, Chapter III: The Plan of Criticism
• Book Iii, Chapter IV: The Use of Capital According to the Say-hermann School
• Book Iii, Chapter V: The True Conception of the Use of Goods
• Book Iii, Chapter VI: Criticism of the Say-hermann Conceptions
• Book Iii, Chapter VII: The Independent Use: an Unproved Assumption
• Book Iii, Chapter VIII: The Independent Use: Its Untenable Conclusions
• Book Iii, Chapter IX: The Independent Use: Its Origin In Legal Fiction
• Book Iii, Chapter X: Menger's Conception of Use
• Book Iii, Chapter XI: Final Insufficiency of the Use Theory
• Book IV: The Abstinence Theory
• Book Iv, Chapter I: Senior's Statement of the Theory
• Book Iv, Chapter II: Criticism of Senior
• Book Iv, Chapter III: Bastiat's Statement
• Book V: The Labour Theories
• Book V, Chapter I: [the Labour Theories]
• The English Group
• The French Group
• The German Group
• Book VI: The Exploitation Theory
• Book Vi, Chapter I: Historical Survey
• Book Vi, Chapter II: Rodbertus
• Book Vi, Chapter III: Marx
• Book VII: Minor Systems
• Book Vii, Chapter I: The Eclectics
• Book Vii, Chapter II: The Later Fructification Theory
• Conclusion

The French Group

A second group of Labour theorists pronounce interest to be the wage of that labour which consists in the saving of capital (Travail d'Epargne). This theory is carried out most thoroughly by Courcelle-Seneuil.25

According to Courcelle-Seneuil, there are two kinds of labour—muscular labour and the labour of Saving (p. 85). The latter conception he expounds as follows. In order that a capital once made should be conserved, there is need of a continual effort of foresight and saving, in so far as, on the one hand, one looks to future needs, and, on the other hand, refrains from present enjoyment of capital with the view of being able to satisfy future needs by means of the capital thus saved. In this "labour" lies an act of intelligence—the foresight, and an act of will—the saving that "refrains from enjoyment for a given period of time."

Of course, at the first glance, it appears singular to give to saving the name of Labour. But this impression, in the author's opinion, only arises from our usually looking too much at the material side of things. If we reflect dispassionately for a moment we will recognise that it is just as painful to a man to refrain from the consumption of an article when made, as to labour with his muscles and his intellect to obtain an article that he wishes; and that it really requires a special un-natural exertion of intellect and will to maintain capital in existence—an act of will which is contrary to the natural bias toward pleasure and idleness.

After attempting to strengthen this line of argument by pointing to the habits of savages, the author concludes with this formal deliverance: "We consider then that saving is really and not simply metaphorically, a form of industrial labour, and consequently a productive power. It demands an exertion which, it is true, is purely of a moral kind, but it is all the same painful. It has therefore as much right to the character of labour as an exertion of the muscles has."

Now the labour of saving demands remuneration in the same way as muscular labour. While the latter is paid by the salaire, the former obtains its payment in the shape of interest. The following passage explains the necessity of this, and shows in particular why the wage of the labour of saving must be a permanent one: "The desire, the temptation to consume, is a permanent force; its action can only be suspended by combating it with another force which, like itself, is permanent. It is clear that every one would consume as much as possible if he had no interest (si'l n'avait pas intérêt) to abstain from consuming. He would cease to abstain from the moment that he ceased to have this interest, so that it must continue without interruption, in order that capitals may always be conserved. That is why we say that interest" (l'intérêt: note the play upon words) "is the remuneration of this labour of saving and of conservation; without it capitals, whatever be their form, could not continue; it is a necessary condition of industrial life" (p. 322).

The height of this wage is regulated "according to the great law of supply and demand"; it depends, on the one side, on the wish and the ability to expend a sum of capital reproductively; and on the other, on the wish and the ability to save this sum.

To my mind all the pains which its author has taken to represent the Labour of Saving as a real labour cannot efface the stamp of artificiality which this theory bears on its very face. The non-consuming of wealth a labour; the pocketing of interest by those who toil not nor spin, a suitable wage for work;—what a chance for any Lassalle who cares to play upon the impressions and emotions of the reader! But, instead of stating rhetorically that Courcelle is wrong, I prefer to show on rational grounds why he is wrong.

First of all, it is clear that Courcelle's theory is only Senior's Abstinence theory clad in a slightly different dress. As a rule, where Senior says "abstinence," or "sacrifice of abstinence," Courcelle says "labour of abstinence," but really both writers make use of the one fundamental idea in the same way. Thus at the outset Courcelle's Labour theory is open to a great many of those objections raised to Senior's Abstinence theory, on the ground of which objections we have already pronounced that theory to be unsatisfactory.

But further, the new form which Courcelle gives it is open to special objections of its own.

It is quite correct to say that foresight and saving do cost a certain moral pain. But the presence of labour in anything by which an income is obtained is far from justifying us in explaining that income as a wage of labour. To do so we must be able to show that the income is really obtained for the labour, and only in virtue of the labour. Now this will be best shown if we find that the income emerges where labour has been expended; that it is wanting where there has been no labour; that it is high where much of the labour has been expended, and low where little has been expended. But of any such harmony between the alleged cause of interest and the actual emergence of interest, it would be difficult to discover a trace. The man who carelessly cuts the coupons of £100,000, or gets his secretary to cut them, draws a "wage of labour" of £4000 or £5000. The man who, with actual pain of foresight and saving, has scraped together £50, and put them in the savings bank, scarcely gets a couple of pounds for his "labour"; while the man who, with as much pain, has saved £50, but cannot risk them out of his hand because of some claim that may be made on him at any moment, gets absolutely no wage at all.

What is the reason of this? Why are wages apportioned so differently—differently as between individual classes of saving labourers; differently as compared with the wage payment of muscular labour? What is the reason that the owner of £100,000 gets £5000 for his "year's labour"; that the manual labourer, who suffers pain and saves nothing, gets £50; that the artisan, who suffers pain and saves £50 thereby, gets the sum of £52 for "muscular labour" and "labour of saving" together? A theory which pronounces interest to be wages of labour must undertake to make its explanation more exact. Instead of this, the nice question of the rate of interest is simply dismissed by Courcelle with a general reference to the great law of supply and demand.

Without meaning to be ironical, one might say that Courcelle would have had almost as much justification, theoretically speaking, if he had pronounced the bodily labour of pocketing the interest, or of cutting the coupons, to be the ground and basis of interest. These also are "labours" which the capitalist performs, and if it should be thought strange that, according to the law of supply and demand, this sort of labour is paid at such an unusually high rate, it is scarcely more strange than the fact we have just been considering—that the intellectual labour of inheriting a million of money is annually paid by so many thousands of pounds. One might say of this latter kind of labour, So few people have the "wish and the ability" to lay up millions of capital, that, in the existing demand for capital, the wages of such people must be very high; and similarly it might be said of the former, So very few people have the "wish and the ability" to pocket thousands of pounds in interest. Of "wish" there will be no lack in either case; but of ability—well, that rests in both cases principally on the fact of a person being so fortunate as to possess a million of capital!

If after what has been said a direct refutation of Courcelle's Labour theory still seems necessary, let me put the following case. A capitalist lends a manufacturer £100,000 at 5 per cent for a year. The manufacturer employs the £100,000 productively, and by doing so receives a profit of £6000. From this he deducts £5000 as interest due to the capitalist, and keeps £1000 as undertaker's profit to himself. According to Courcelle the £5000 which the capitalist receives are the wage for providing for future wants, and for the act of will which resists the temptation to consume the £100,000 immediately—an act of will directed to the refraining from enjoyment. But has not the manufacturer performed exactly the same, or even a greater labour? Was the manufacturer, when he had the £100,000 in his hands, not tempted to consume it immediately? Could he not, for instance, have squandered the capital, and gone through the bankruptcy court? Has he then not also withstood the temptation and asserted his will in refraining? Has he not by prudence and foresight done more than the capitalist to provide for future needs, in as much as he not only thought of future needs in general, but gave his stock of materials that positive treatment which changed them into products, and thus actually fitted them to satisfy human wants? And yet the capitalist for the labour of conserving his £100,000 receives £5000, and the manufacturer, who has performed the same intellectual and moral labour on the same £100,000 in still greater degree, gets nothing; for the £1000 which constitute his undertaker's profit are payment for quite another kind of activity.

It may be objected that the manufacturer would not have dared to use the £100,000, seeing that it was not his property; in his saving, therefore, there is no merit to deserve payment. But in this theory merit has nothing to do with the case. The wage of saving is great if only the sum saved and conserved be great, without the slightest consideration whether the conservation has demanded much moral striving or little. But that the debtor has actually conserved the £100,000, and has overcome the temptation to consume it, admits of no denial. Why then does he get no "wage of saving"? To my. mind there can be no doubt about the explanation of these facts. It is that people get interest, not because they work for it, but simply because they are owners. Interest is not an income from labour, but an income from ownership.

Quite recently Courcelle-Seneuil's theory has been, somewhat timidly, followed by Cauwes.26

This writer states it, but not as his sole interest theory, and not without certain clauses and turns of expression which show that he finds this conception of the "labour of saving" not quite beyond question. "Since the conservation of a capital presupposes an exertion of the will, and in many cases even industrial or financial combinations of some difficulty, one might say that it represents a veritable labour such as has sometimes, and not without justification, been called Travail d'Epargne" (i. p. 183). And in another place Cauwes meets the doubt whether interest be due to the capitalist, since the loan costs no labour to justify the claim of interest, in the words: "In the loan, it may be, there is no labour; but the labour consists in the steadfast will to preserve the capital, and in the protracted abstinence from every act of gratification or consumption of the value represented by it. It is, if the expression does not seem too bizarre, a labour of saving that is paid by interest."27 But besides this Cauwes brings forward other grounds for interest, particularly a statement of the productivity of capital, and thus we shall meet him again among the eclectics.

A slight approach to Courcelle's Labour theory is to be found in a few other French writers; as in Cherbuliez,28 who pronounces interest to be wage for the "efforts of abstinence"; and in Josef Garnier, who gives a very parti-coloured explanation, in the course of which he uses the catchword "labour of saving."29 But these last named do not carry the conception any farther.

[25.]Traité théorique et pratique d'Economie Politique, i. Paris, 1858.

[26.]Précis du Cours d'Economie Politique, second edition, Paris, 1881, 1882.

[27.]ii. p. 189; also i. p. 236.

[28.]See above, p. 286. [Book IV, Chapter II, par. IV.II.38.—Econlib Ed.]

[29.]Traité d'Economie Politique, eighth edition, Paris, 1880. P. 522: "Le loyer rémunère et provoque les efforts ou le travail d'épargne et de conservation."