The economics behind the revolt
Today is the 150th anniversary of the beginning of the Paris Commune. The Commune (Council) was formed as result of what should be considered the first uprising and revolution led by the working class in history. This new class was the product of the industrial revolution in the capitalist mode of production that Marx and Engels first spoke of most prominently in the Manifesto of the Communist Party published in March 1848.
Before the Paris Commune, revolutions in Europe and North America had been to overthrow feudal monarchs and eventually put the capitalist class into political power. While socialism as an idea and objective was already gaining credence among the radical intelligentsia, it was Marx and Engels who first identified the agency of revolutionary change for socialism as the working class, namely those who owned no means of production but their own labour power.
The Paris Commune came into fruition as the immediate result of the Franco-Prussian war. That war had been launched by Louis Bonaparte, nephew of Napoleon, who had seized power in a coup in the aftermath of the defeat of the 1848 revolution. He autocratically ruled France for the next two decades. Those decades were ones of exceptional economic boom for capitalism in Europe and America. Economic recessions were few and far between (1859 and 1864), and relatively mild. Indeed, profitability rose to highs in the 1850s (up 11%), but then slid back by 4% in the 1860s.
France was transformed from a backward agricultural economy into a fast-growing industrial one. Bonaparte launched a series of public works and infrastructure projects designed to modernise France’s cities. Paris emerged as an international centre of finance in the mid-19th century second only to London. It had a strong national bank and numerous aggressive private banks that financed projects all across Europe and the expanding French Empire. The Banque de France, founded in 1796, emerged as a powerful central bank.
Under Bonaparte, the French government coordinated several financial institutions to fund large projects, including Crédit Mobilier which became a powerful and dynamic funding agency for major projects in France including a transatlantic steamship line, urban gas lighting, a newspaper and the Paris metro system. France increased its rail lines by eight times and doubled its iron ore production. The population rose 10% and much more in the cities that now became urban centres of the new industrial working class. In 1855 and again in 1867 a world exhibition was staged in Paris to rival that of the previous Great Exhibition of British industrial might in 1851. And Ferdinand de Lesseps organized the construction of the Suez Canal.
But Bonaparte’s war policy and the project to redesign Paris using the architect Haussmann proved expensive; France’s national debt increased considerably. And France’s industry found herself under increased international (i.e. mainly British) competition. Between 1848 and 1870, the public sector deficit tripled. What David Harvey has called ‘primitive Keynesianism’ began to run out of steam. The government resorted to monetarising the debt, MMT-style in the hope that this would continue to stimulate investment and growth. Marx called this the “Catholicism” of the monetary base, turning the banking system into “the papacy of production” and embraced what Marx called the “protestantism of faith and credit.”
Financial crashes ensued as profit growth began to slide. Indeed, we can get an idea of the growing problems for the French capitalist boom in the movement of stock prices and equity returns. There was a fall in profits in the 1859 recession, and in 1864 and 1868 before the calamity of the Franco-Prussian war.
As the rate of profit fell during the 1860s, if from historically high levels, annual profits growth also declined, with significant drops in 1859 and 1864.
Inequality of wealth and income soared just as the working class expanded in numbers dramatically. Social tensions began to intensify. You could say it was a similar situation in May 1968 after two decades of economic boom under the rule of the Gaullist presidency — except that in 1870, war intervened and became the catalyst for the rise of the Commune.
It could be argued that Bonaparte, in his hubris, needed a war to divert the class struggle at home and he needed to restore France’ economic hegemony in continental Europe. Bonaparte thought the French army was superior to Bismarck’s Prussia. But he badly underestimated Prussian-led German economic and military power. The French were quickly defeated and humiliated. Bonaparte was captured, abdicated and fled. The bourgeois Republican government tried to fight on but eventually negotiated a terrible peace deal while the Prussian army laid siege to the starving populace in Paris. It was then that the Paris Commune — a council of workers delegates from the districts — emerged to seize political power in the interests of the populace.
This post cannot possibly cover all the events and themes in the short 72 days that the working class of Paris ruled through their own democratic structures, while the bourgeois government fled to Versailles and urged the Prussians to crush the Commune. The Commune did not survive long. It remained broadly isolated within France and was eventually bloodily suppressed by the forces of the Versailles government.
The best accounts of the Pars Commune are that of Communard Lissagaray, the History of the Paris Commune, translated by Eleanor Marx and published in 1876. https://www.marxists.org/history/france/archive/lissagaray/index.htm, and of course the Civil War in France, Marx’s own account written right after the Commune was crushed. https://www.marxists.org/archive/marx/works/1871/civil-war-france/. And Belgian Marxist, Eric Toussaint has given an excellent modern account of the economic machinations of the Banque de France and the Commune here. http://www.cadtm.org/The-Paris-Commune-of-1871-banks-and-debt
So in this short post, I shall just offer a few observations on the Commune’s economic policies. The most important was the failure to take over the financial levers of capital, in particular, the Banque de France. Ten years after the crushing of the Commune, Marx argued the Commune may well have survived if the Banque de France had been taken over. “Besides being simply the uprising of a town under exceptional circumstances, the majority of the Commune was by no means socialist and could not be. With a little bit of common sense, however, she could have obtained from Versailles a compromise favourable to the whole mass of the people – the only objective achievable at the time.”
Indeed, the biggest fear that the Versailles government had about the Commune was the loss of the Banque’s funds. Lissagaray notes, ”All serious insurrections began by seizing the nerve of the enemy, the cash register. The Commune is the only one that refused. It remained in ecstasy before the cash of the upper bourgeoisie which it had on hand.”
And Engels in his introduction to the re-edition of The Civil War in France in 1891: “many things [were] neglected that, according to our conception today, the Commune should have done. The most difficult to grasp is certainly the holy respect with which one stopped in front of the doors of the Banque de France. It was, moreover, a serious political mistake. The Bank in the hands of the Commune was worth more than ten thousand hostages. This meant the entire French bourgeoisie putting pressure on the government of Versailles to make peace with the Commune.”
Why didn’t the Commune leaders take the Bank over? Well, the majority of the Commune delegates were not socialist, but republican democrats. The socialist wing was a minority. And within that socialist minority, the Marxists were an even smaller minority. Most of the socialists were Proudhonists. They saw socialism coming from monetary control, namely through the use of credit. The man put in charge of Commune finances, Charles Beslay, a friend of Proudhon, had a blind faith in banking and finance more generally. He had been a member of the First International since 1866 and had a great influence in the Commune. Beslay had a background as a capitalist, as he had been the owner of a workshop employing 200 employees.
The Banque’s deputy governor and monarchist De Ploeuc commented: “Mr Beslay is one of those men whose imagination is unbalanced and who delights in Utopia; he dreams of reconciling all the antagonisms that are in society, the bosses and the workers, the masters and the servants.” Beslay confirmed his Proudhonism in action: “A bank must be seen from a double aspect; if it presents itself to us under its material side by its cash and its notes, it is also imposed by a moral side which is confidence. Take away the trust, and the banknote is just an assignat.” Beslay attacked the Marxists: “The Commune’s system and mine translate into this sacred word: ‘respect for property, until its transformation’. Citizen Lissagaray’s system results in this repulsive word: spoliation.“
Moreover, financial mechanisms are too complicated to be understood by ordinary citizens, or even by politicians, and should therefore be reserved for specialists or even experts. The attitude of the main Commune leader Rigault, was that “questions of business, credit, finance, banking […] needed the help of special men, who were only to be found in very small numbers. at the Municipality. […] Moreover, financial matters […] are not […] seen as the essential problems of the moment. In the immediate future, all that matters is that the money comes in.”
Instead of removing the very frightened governor of the Bank, Rouland, and taking over control of the huge funds that the bank held, Beslay allowed Rouland to stay in place and merely asked for sufficient funds to pay the National Guards defending Paris. Rouland kindly allowed Beslay to join the board of the bank as “Commune delegate,” where Beslay acted to ensure its independence from Commune control and demands.
Instead of wanting to take control, Beslay did everything to maintain the integrity of the Banque de France and to guarantee its independence. The result was that during the seventy-two days of its existence, the Commune received just 16.7 million francs for its needs: the 9.4 million assets that the Commune already had on account and 7.3 million loaned by the Bank. At the same time, the Banque sent the Versailles government 315 million francs from its network of 74 branches!
The money that the Commune did get was generally put to good use. About 80% went on defence of Paris, but there was also income distributed to the poorest parts of the city. The Commune introduced a progressive tax system, lowering the city tax for the poorest by 50% and introducing higher business taxes. Landlords were force to repay that the last nine months of rents and rents were suspended. There was a moratorium on all debts, which could now be repaid over three years without interest.
But the failure to take over the Banque was the Achilles heel of the Commune’s progress. And the Banque board knew it. They were terrified that there would be an “occupation of the Bank by the Central Committee, which can install a Government of its choice there, have banknotes produced without measure or limit and thus bring about the ruin of the establishment and of the country. ” And another industrialist board member claimed that “the Council cannot […] expose the Bank to being sacked. The evil would be irremediable and the destruction of the values of the wallet and the greenhouse of the deposits would constitute a terrible calamity, because it is a large part of the public fortune.”
If the Bank had been taken over, Versailles would have been denuded of funds to defeat the Commune as it held a portfolio of extended amounts to 899 million francs, of 120 million francs in securities. deposited as security for advances and 900 million francs in securities on deposit. Instead Beslay followed the Banque governor’s instructions and allowed the Banque to send money to Versailles while the deputy governor gave the order to lower all the securities into the cellars and then to silt the access staircase.
Two years after the crushing of the Commune, Beslay summed up his action in a letter to the right-wing daily Le Figaro, published on 13 March 1873: “I went to the Bank with the intention of protecting it from any violence of the exaggerated party of the Commune, and I am convinced that I have kept in my country the establishment, which was our last financial resource.” The Commune was eventually crushed in May 1871 with about 20,000 Communards being killed 38,000 were arrested and more than 7,000 deported. Beslay was allowed to go free and moved to Switzerland.
Some 45 years later, after another revolution sparked by war and defeat for the ruling class, Lenin recalled this lesson of the defeat of the Paris Commune: “The banks, as we know, are centres of modern economic life, the principal nerve centres of the whole capitalist economic system. To talk about “regulating economic life” and yet evade the question of the nationalisation of the banks means either betraying the most profound ignorance or deceiving the “common people” by florid words and grandiloquent promises with the deliberate intention of not fulfilling these promises.”
This article was originally published at Michael Roberts’ blog on 18 March 2021.
Photo: Clash of utopias – sociallist vs capitalist (source: The Barricade)
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Michael Roberts worked in the City of London as an economist for over 40 years. He has closely observed the machinations of the global capitalism from within the dragon’s den. Since retiring, he has written several books. The Great Recession – a Marxist view (2009); The Long Depression (2016); Marx 200: a review of Marx’s economics (2018): and jointly with Guglielmo Carchedi as editors of World in Crisis (2018). He has published numerous papers in various academic economic journals and articles in leftist publications.