The Housing Question by Frederick Engels

Part One
How Proudhon Solves the Housing Question

In No. 10 and the following numbers of the Volksstaat appears a series of six articles on the housing question. These articles are only worthy of attention because, apart from some long-forgotten would-be literary writings of the ‘forties, they are the first attempt to transplant the Proudhonist school to Germany. This represents such an enormous step backward in comparison with the whole course of development of German socialism, which delivered a decisive blow particularly to the Proudhonist ideas as far back as twenty-five years ago, [In Marx: Misère de la Philosophie, etc., Bruxelles et Paris, 1847 (The Poverty of Philosophy, etc.). – Note by F. Engels.] that it is worth while answering it immediately.

The so-called housing shortage, which plays such a great role in the press nowadays, does not consist in the fact that the working class generally lives in bad, overcrowded and unhealthy dwellings. This shortage is not something peculiar to the present; it is not even one of the sufferings peculiar to the modern proletariat in contradistinction to all earlier oppressed classes. On the contrary, all oppressed classes in all periods suffered more or less uniformly from it. In order to make an end of this housing shortage there is only one means: to abolish altogether the exploitation and oppression of the working class by the ruling class. — What is meant today by housing shortage is the peculiar intensification of the bad housing conditions of the workers as the result of the sudden rush of population to, the big towns; a colossal increase in rents, a still further aggravation of overcrowding in the individual houses, and, for some, the impossibility of finding a place to live in at all. And this housing shortage gets talked of so much only because it does not limit itself to the working class but has affected the petty bourgeoisie also.

The housing shortage from which the workers and part of the petty bourgeoisie suffer in our modern big cities is one of the numerous smaller, secondary evils which result from the present-day capitalist mode of production. It is not at all a direct result of the exploitation of the worker as a worker by the capitalists. This exploitation is the basic evil which the social revolution strives to abolish by abolishing the capitalist mode of production. The cornerstone of the capitalist mode of production is, however, the fact that our present social order enables the capitalists to buy the labour power of the worker at its value, but to extract from it much more than its value by making the worker work longer than is necessary in order to reproduce the price paid for the labour power. The surplus value produced in this fashion is divided among the whole class of capitalists and landowners together with their paid servants, from the Pope and the Kaiser, down to the night watchman and below. We are not concerned here as to how this distribution comes about, but this much is certain: that all those who do not work can live only from fragments of this surplus value which reach them in one way or another. (See Marx’s Capital where this was worked out for the first time.)

The distribution of this surplus value, produced by the working class and taken from it without payment, among the non-working classes proceeds amid extremely edifying squabblings and mutual swindling. In so far as this distribution takes place by means of buying and selling, one of its chief methods is the cheating of the buyer by the seller, and in retail trade, particularly in the big towns, this has become an absolute condition of existence for the sellers. When, however, the worker is cheated by his grocer or his baker, either in regard to the price or the quality of the commodity, this does not happen to him in his specific capacity as a worker. On the contrary, as soon as a certain average level of cheating has become the social rule in any place, it must in the long run be leveled out by a corresponding increase in wages. The worker appears before the small shopkeeper as a buyer, that is, as the owner of money or credit, and hence not at all in his capacity as a worker, that is, as a seller of labour power. The cheating may hit him, and the poorer class as a whole, harder than it hits the richer social classes, but it is not an evil which hits him exclusively or is peculiar to his class.

And it is just the same with the housing shortage. The growth of the big modern cities gives the land in certain areas, particularly in those which are centrally situated, an artificial and often colossally increasing value; the buildings erected on these areas depress this value, instead of increasing it, because they no longer correspond to the changed circumstances. They are pulled down and replaced by others. This takes place above all with workers’ houses which are situated centrally and whose rents, even with the greatest overcrowding, can never, or only very slowly, increase above a certain maximum. They are pulled down and in their stead shops, warehouses and public buildings are erected. Through its Haussmann in Paris, Bonapartism exploited this tendency tremendously for swindling and private enrichment. [Haussmann was Prefect of the Seine Department in the years 1853-70 and carried on big building alterations in Paris in the interests of the bourgeoisie. He did not fail to profit himself also. -Ed.] But the spirit of Haussmann has also been abroad in London, Manchester and Liverpool, and seems to feel itself just as much at home in Berlin and Vienna. The result is that the workers are forced out of the centre of the towns towards the outskirts; that workers’ dwellings, and small dwellings in general, become rare and expensive and often altogether unobtainable, for under these circumstances the building industry, which is offered a much better field for speculation by more expensive houses, builds workers’ dwellings only by way of exception.

This housing shortage therefore certainly hits the worker harder than it hits any more prosperous class, but it is just as little an evil which burdens the working class exclusively as the cheating of the shopkeeper, and it must, as far as the working class is concerned, when it reaches a certain level and attains a certain permanency similarly find a certain economic adjustment.

It is with just such sufferings as these, which the working class endures in common with other classes, and particularly the petty bourgeoisie, that petty-bourgeois socialism, to which Proudhon belongs, prefers to occupy itself. And thus it is not at all accidental that our German Proudhonist occupies himself chiefly with the housing question, which, as we have seen, is by no means exclusively a working class question; and that, on the contrary, he declares it to be a true, exclusively working class question.

“As the wage worker in relation to the capitalist, so is the tenant in relation to the house owner.” [Mülberger in Der Volkstaat February 10 1872]

This is totally untrue.

In the housing question we have two parties confronting each other: the tenant and the landlord or house owner. The former wishes to purchase from the latter the temporary use of a dwelling; he has money or credit, even if he has to buy this credit from the house owner himself at a usurious price as an addition to the rent. It is simple commodity sale; it is not an operation between proletarian and bourgeois, between worker and capitalist. The tenant – even if he is a worker – appears as a man with money; he must already have sold his own particular commodity, his labour power, in order to appear with the proceeds as the buyer of the use of a dwelling, or he must be in a position to give a guarantee of the impending sale of this labour power. The peculiar results which attend the sale of labour power to the capitalist are completely absent here. The capitalist causes the purchased labour power firstly to produce its own value and secondly to produce a surplus value which remains in his hands for the time being, subject to its distribution among the capitalist class. In this case therefore an extra value is produced, the total sum of the existing value is increased. In the rent transaction the situation is quite different. No matter how much the landlord may overreach the tenant it is still only a transfer of already existing, previously produced value, and the total sum of values possessed by the landlord and the tenant together remains the same after as it was before. The worker is always cheated of a part of the product of his labour, whether that labour is paid for by the capitalist below, above, or at its value.

The tenant, on the other hand, is cheated only when he is compelled to pay for the dwelling above its value. It is, therefore, a complete misrepresentation of the relation between landlord and tenant to attempt to make it equivalent to the relation between worker and capitalist. On the contrary, we are dealing here with a quite ordinary commodity transaction between two citizens, and this transaction proceeds according to the economic laws which govern the sale of commodities in general and in particular the sale of the commodity, land property. The building and maintenance costs of the house, or of the part of the house in question, enters first of all into the calculation; the land value, determined by the more or less favourable situation of the house, comes next; the state of the relation between supply and demand existing at the moment is finally decisive. This simple economic relation expresses itself in the mind of our Proudhonist as follows:

“The house, once it has been built, serves as a perpetual legal title to a definite fraction of social labour although the real value of the house has already long ago been more than paid out in the form of rent to the owner. Thus it comes about that a house that, for instance, was built fifty years ago, during this period covers the original cost two, three, five, ten and more times over in its rent yield.”

Here we have at once the whole Proudhon. Firstly, it is forgotten that the rent must not only pay the interests on the building costs, but must also cover repairs and the average sum of bad debts, unpaid rents, as well as the occasional periods when the house is untenanted, and finally pay off in annual sums the building capital which has been invested in a house which is perishable and which in time becomes uninhabitable and worthless. Secondly, it is forgotten that the rent must also pay interest on the increased value of the land upon which the building is erected and that therefore a part of it consists of ground rent. Our Proudhonist immediately declares, it is true, that this increase of value does not equitably belong to the landowner, since it comes about without his co-operation, but to society as a whole. However, he overlooks the fact that with this he is in reality demanding the abolition of landed property, a point which would lead us too far if we went into it here. And finally he overlooks the fact that the whole transaction is not one of buying the house from its owner, but of buying its use for a certain time. Proudhon, who never bothered himself about the real and actual conditions under which any economic phenomenon occurs, is naturally also unable to explain how the original cost price of a house is paid back ten times over in the course of fifty years in the form of rent. Instead of examining and establishing this not at all difficult question economically, and discovering whether it is really in contradiction to economic laws, and if so how, Proudhon rescues himself by a bold leap from economics into legal talk: “The house, once it has been built, serves as a perpetual legal title” to a certain annual payment. How this comes about, how the house becomes a legal title, on this Proudhon is silent. And yet – that is just what he should have explained. Had he examined it, he would have found that not all the legal titles in the world, no matter how perpetual, could give a house the power of obtaining its cost price back ten times over in the course of fifty years in the form of rent, but that only economic conditions (which may have social recognition in the form of legal titles) can accomplish this. And with this he would again be as far as at the start.

The whole Proudhonist teaching rests on this saving leap from economic reality into legal phraseology. Every time our good Proudhon loses the economic hang of things – and this happens to him with every serious problem – he takes refuge in the sphere of law and appeals to eternal justice.

“Proudhon begins by taking his ideal of justice, of ‘justice eternelle,’ from the juridical relations that correspond to the production of commodities: thereby, it may be noted, he proves, to the consolation of all good citizens, that the production of commodities is a form of production as everlasting as justice. Then he turns round and seeks to reform the actual production of commodities, and the actual legal system corresponding thereto, in accordance with this ideal. What opinion should we have of a chemist, who, instead of studying the actual laws of the molecular changes in the composition and decomposition of matter, and on that foundation solving definite problems, claimed to regulate the composition and decomposition of matter by means of the ‘eternal ideas,’ of ‘naturalite and affinite’? Do we really know any more about ‘usury,’ when we say it contradicts ‘justice kernel,’ ‘equite eternelle,’ ‘mutualite eternelle,’ and other ‘verites eternelles’ than the fathers of the church did when they sad it was incompatible with ‘grace eternelle,’ ‘foi eternelle,’ and ‘la volonte eternelle de Dieu’?” [Marx, Capital, Vol. 1, Kerr edition, footnote, pp. 96-97. - Ed.]

Our Proudhonist does not fare any better than his lord and master:

“The rent agreement is one of the thousand exchanges which are as necessary in the life of modern society as the circulation of the blood in the bodies of animals. Naturally, it would be in the interests of this society if all these exchanges were pervaded by a conception of justice, that is to say, if they took place always according to the strict demands of justice. In a word, the economic life of society must, as Proudhon says, raise itself to the heights of economic justice. In reality, as we know, exactly the opposite takes place.”

Is it credible that, five years after Marx had characterised Proudhonism so summarily and convincingly precisely from this decisive angle, it should be possible to print such confused stuff in the German language. What does this rigmarole mean? Nothing more than that the practical effects of the economic laws which govern present-day society run contrary to the author’s sense of justice and that he cherishes the pious wish that the affair might be so arranged that this would then no longer be the case. — Yes, but if toads had tails they would no longer be toads! And is then the capitalist mode of production not “pervaded by a conception of justice,” namely, that of its own right to exploit the workers? And if the author tells us that that is not his idea of justice, are we one step further?

But let us go back to the housing question. Our Proudhonist now gives his “conception of justice” free rein and treats us to the following moving declamation:

“We do not hesitate to assert that there is no more terrible mockery of the whole culture of our lauded century than the fact that in the big cities 90 per cent and more of the population have no place that they can call their own. The real key point of moral and family existence, hearth and home, is being swept away by the social whirlpool.... In this respect we are far below the savages. The troglodyte has his cave, the Australian aborigine has his clay hut, the Indian has his own hearth – the modern proletarian is practically suspended in mid air,” etc.

In this jeremiad we have Proudhonism in its whole reactionary form. In order to create the modern revolutionary class of the proletariat it was absolutely necessary to cut the umbilical cord which still bound the worker of the past to the land. The hand weaver who had his little house, garden and field along with his loom, was a quiet, contented man “in all godliness and respectability” despite all misery and despite all political pressure; he doffed his cap to the rich, to the priests and to the officials of the state; and inwardly was altogether a slave. It is precisely modern large-scale industry, which has turned the worker, formerly chained to the land, into a completely propertyless proletarian, liberated from all traditional fetters and free as a [jail-]bird; it is precisely this economic revolution which has created the sole conditions under which the exploitation of the working class in its final form, in the capitalist mode of production, can be overthrown. And now comes this tearful Proudhonist and bewails the driving of the workers from hearth and home as though it were a great retrogression instead of being the very first condition for their intellectual emancipation.

Twenty-seven years ago I described in The Condition of the Working Class in England the main features of just this process of driving the workers from hearth and home as it took place in the eighteenth century in England. The infamies of which the landowners and factory owners were guilty in so doing, and the deleterious effects, material and moral, which this expulsion inevitably had on the workers concerned in the first place, are there also described as they deserve. But could it enter my head to regard this, which was in the circumstances an absolutely necessary historical process of development, as a retrogression “below the savages”? Impossible! The English proletarian of 1872 is on an infinitely higher level than the rural weaver of 1772 with his “hearth and home.” Will the troglodyte with his cave, the Australian aborigine with his clay hut, and the Indian with his hearth ever accomplish a June insurrection and a Paris Commune?

That the situation of the workers has in general become materially worse since the introduction of capitalist production on a large scale is doubted only by the bourgeoisie. But should therefore look backward longingly to the (likewise very meager) flesh-pots of Egypt, to rural small-scale industry, which produced only servile souls, or to “the savages”? On the contrary.

Only the proletariat created by modern large-scale industry, liberated from all inherited fetters, including those which chained it to the land, and driven in herds into the big towns, is in a position to accomplish the great social transformation which will put an end to all class exploitation and all class rule. The old rural hand weavers with hearth and home would never have been able to do it; they would never have been able to conceive such an idea, much less able to desire to carry it out.

For Proudhon, on the other hand, the whole industrial revolution of the last hundred years, the introduction of steam power and large-scale factory production which substituted machinery for hand labour and increased the productivity of labour a thousandfold, is a highly repugnant occurrence, something which really ought never to have taken place. The petty-bourgeois Proudhon demands a world in which each person turns out a separate and independent product that is immediately consumable and exchangeable in the market. Then, as long as each person only receives back the full value of his labour in the form of another product, “eternal justice” is satisfied and the best possible world created. But this best possible world of Proudhon has already been nipped in the bud and trodden underfoot by the advance of industrial development which has long ago destroyed individual labour in all the big branches of industries and which is destroying it daily more and more in the smaller and smallest branches which has set social labour supported by machinery and the harnessed forces of nature in its place, and whose finished product immediately exchangeable or consumable, is the joint work of many individuals through whose hands it has to pass. And it is precisely this industrial revolution which has raised the productive power of human labour to such a high level that – for the first time in the history of humanity – the possibility exists, given a rational division of labour among all, to produce not only enough for the plentiful consumption of all members of society and for an abundant reserve fund, but also to leave each individual sufficient leisure so that what is really worth preserving in historically inherited culture – science, art, human relations is not only preserved, but converted from a monopoly of the ruling class into the common property of the whole of society, and further developed. And here is the decisive point: as soon as the productive power of human labour has developed to this height, every excuse disappears for the existence of a ruling class. Was not the final reason with which class differences were defended always: there must be a class which need not plague itself with the production of its daily subsistence, in order that it may have time to look after the intellectual work of society? This talk, which up to now had its great historical justification, has been cut off at the root once and for all by the industrial revolution of the last hundred years. The existence of a ruling class is becoming daily more and more a hindrance to the development of industrial productive power, and equally so to science, art and especially cultural human relations. There never were greater boors than our modern bourgeois.

But all this is nothing to friend Proudhon. He wants “eternal justice” and nothing else. Each shall receive in exchange for his product the full proceeds of his labour, the full value of his labour. But to reckon that out in a product of modern industry is a complicated matter. For modern industry obscures the particular share of the individual in the total product, which in the old individual handicraft was obviously represented by the finished product. Further, modern industry abolishes more and more the individual exchange on which Proudhon’s whole system is built up, namely direct exchange between two producers, each of whom takes the product of the other in order to consume it. Consequently a reactionary character runs throughout the whole of Proudhonism; an aversion to the industrial revolution, and the desire, sometimes overtly, sometimes covertly expressed, to drive the whole of modern industry out of the temple, steam engines, mechanical looms and the rest of the swindle, and to return to the old, respectable hand labour. That we would then lose nine hundred and ninety-nine thousandths of our productive power, that the whole of humanity would be condemned to the worst possible labour slavery, that starvation would become the general rule – what does all that matter if only we succeed in organising exchange in such a fashion that each receives “the full proceeds of his labour,” and that “eternal justice” is realized? Fiat justitia, pereat mundus!

Justice must prevail though the whole world perish!

And the world would perish in this Proudhonist counter-revolution if it were at all possible to carry it out.

It is, moreover, self-evident that, with social production conditioned by modern large-scale industry, it is possible to assure each person “the full proceeds of his labour,” so far as this phrase has any meaning at all. And it has a meaning only if it is extended to mean not that each individual worker becomes the possessor of “the full proceeds of his labour,” but that the whole of society, consisting entirely of workers, becomes the possessor of the total proceeds of its labour, which it partly distributes among its members for consumption, partly uses for replacing and increasing the means of production, and partly stores up as a reserve fund for production and consumption.

After what has been said above, we already know in advance how our Proudhonist will solve the great housing question. On the one hand, we have the demand that each worker own his own home in order that we may not remain “below the savages.” On the other hand, we have the assurance that the two, three, five or tenfold repayment of the original cost price of a house in the form of rent, as it actually takes place, is based on a “legal title” and that this legal title is in contradiction to “eternal justice.” The solution is simple: we abolish the legal title and declare, in virtue of eternal justice, the rent paid to be a payment on account of the cost of the dwelling itself. If one has so arranged on premises that they already contain the conclusion in them, then of course it demands no greater skill than any charlatan possesses to produce the already prepared result from the bag and to point to unshakable logic whose result it is.

And so it happens here. The abolition of rented dwellings proclaimed as an necessity, and indeed in the form that the demand is put forward for the conversion of every tenant into the owner of his own dwelling. How are we to do that? Very simply:

“Rented dwellings will be redeemed.... The previous house owner will be paid the value of Ws house to the last farthing. Rent, instead of being as previously the tribute which the tenant must pay to the perpetual title of capital, will be, from the day when the redemption of rented dwellings is proclaimed, the exactly fixed sum paid by the tenant to provide the annual installment for the payment of the dwelling which has passed into the possession of the tenant.... Society... transforms itself in this way into a totality of independent and free owners of dwellings.”

The Proudhonist finds it a crime against eternal justice that the house owner can without working obtain ground rent and interest out of the capital he has invested in the house. He decrees that this must cease, that capital invested in houses shall produce no interest, and so far as it represents purchased landed property, no ground rent either. Now we have seen that hereby the capitalist mode of production, the basis of present-day society, is in no way affected. The pivot on which the exploitation of the worker turns is the sale of labour power to the capitalist and the use which the capitalist makes of this transaction in that he compels the worker to produce far more than the paid value of the labour power amounts to. It is this transaction between capitalist and worker which produces all the surplus value which is afterwards divided in the form of ground rent, commercial profit, interest on capital, taxes, etc., among the various sub-species of capitalists and their servants. And now our Proudhonist comes along and believes that if we were to forbid one single sub-species of capitalists, and at that of such capitalists who purchase no labour power directly and therefore also cause no surplus value to be produced, to receive profit or interest, it would be a step forward! The mass of unpaid labour taken from the working class would remain exactly the same even if house owners were to be deprived tomorrow of the possibility of receiving ground rent and interest. However, this does not prevent our Proudhonist from declaring:

“The abolition of rent dwellings is thus one of the most fruitful and magnificent efforts which has ever sprung from the womb of the revolutionary idea and it must become one of the primary demands of Social-Democracy.”

This is exactly the type of market cry of the master Proudhon himself, whose cackling was always in inverse ratio to the size of the eggs laid.

And now imagine the fine state of things if each worker, petty bourgeois and bourgeois were compelled by paying annual installments to become first part owner and then full owner of his dwelling! In the industrial districts in England, where there is large-scale industry but small workers’ houses and each married worker occupies a little house of his own, there might possibly be some sense in it. But the small-scale industry in Paris and in most of the big towns on the continent is accompanied by large houses in each of which ten, twenty or thirty families live together. On the day of the world-delivering decree, when the redemption of rent dwellings is proclaimed, Peter is working in an engineering works in Berlin. A year later he is owner of, if you like, the fifteenth part of his dwelling consisting of a little room on the fifth floor of a house somewhere in the neighborhood of Hamburger Tor. He then loses his work and soon finds himself in a similar dwelling on the third floor of a house in the Pothof in Hanover with a wonderful view on to the courtyard. After five months’ stay there he has just acquired 1/36 of this property when a strike sends him to Munich and compels him by a stay of eleven months to take on himself ownership in exactly 11/180 of a rather gloomy property on the street level behind the Ober-Angergasse. Further removals such as nowadays so often occur to workers saddle him further with 7/360 of a no less desirable residence in St. Gallen, 23/180 of another one in Leeds, and 347/56223, to reckon it out exactly in order that “eternal justice” may have nothing to complain about, of a third dwelling in Seraing. And now what is the use for our Peter of all these shares in dwellings? Who is to give him the real value of these shares? Where is he to find the owner or owners of the remaining shares in his various one-time dwellings? And what exactly are the property relations of any big house whose floors hold, let us say, twenty dwellings and which, when the redemption period has elapsed and rented dwellings are abolished, belongs perhaps to three hundred part owners who are scattered in all quarters of the globe. Our Proudhonist will answer that by that time the Proudhonist exchange bank will exist and will pay to anyone at any time the full labour proceeds for any labour product, and will therefore pay out also the full value of a share in a dwelling. But in the first place we are not at all concerned here with the Proudhonist exchange bank since it is nowhere even mentioned in the articles on the housing question, and secondly it rests on the peculiar error that if someone wants to sell a commodity he will necessarily also find a buyer for its full value and thirdly it has already gone bankrupt in England more than once under the name of Labour Exchange Bazaar, before Proudhon invented it.

The whole conception that the worker should buy his dwelling rests in its turn on the reactionary basic outlook of Proudhonism, already emphasized, according to which the conditions created by modern large-scale industry are diseased excrescences, and that society must be led violently, i.e., against the trend which it has been following for a hundred years, to a condition in which the old stable handicraft of the individual is the rule, which as a whole is nothing but the idealized restoration of small-scale enterprise, which has been ruined and is still being ruined. If the workers are only flung back into these stable conditions, if the “social whirlpool” has been happily abolished, then the worker naturally could also again make use of property in “hearth and home,” and the above redemption theory appears less ridiculous. Proudhon only forgets that in order to accomplish all this he must first of all put back the clock of world history by a hundred years, and that thereby he would make the present-day workers into just such narrow-minded, crawling, sneaking slaves as their great-grandfathers were.

As far, however, as this Proudhonist solution of the housing question contains any rational and practically applicable content it is already being carried out today, but this realization does not spring from “the womb of the revolutionary idea,” but from the big bourgeois himself. Let us listen to an excellent Spanish newspaper, La Emancipacion, of Madrid of March 16, 1872:

“There is still another means of solving the housing question, the way proposed by Proudhon, which dazzles at first glance, but on closer examination reveals its utter impotence. Proudhon proposed that the tenants should be converted into purchasers by installments, so that the rent paid annually would be reckoned as an installment on the payment of the value of the dwelling, and, after a certain time, the tenant would become the owner of the dwelling. This means, which Proudhon considered very revolutionary, is being put into operation in all countries by companies of speculators who thus secure double and treble payment of the value of the houses by raising the rents. M. Dollfus and other big manufacturers in Northeastern France have carried out this system not only in order to make money, but in addition, with a political idea at the back of their minds.

“The cleverest leaders of the ruling class have always directed their efforts towards increasing the number of small property owners in order to build an army for themselves against the proletariat. The bourgeois revolutions of the last century divided up the big estates of the nobility and the church into small properties, just as the Spanish republicans propose to do today with the still existing large estates, and created thereby a class of small landowners which has since become the most reactionary element in society and a permanent hindrance to the revolutionary movement of the urban proletariat. Napoleon III aimed at creating a similar class in the towns by reducing the size of the individual bonds of the public debt, and M. Dollfus and his colleagues sought to stifle all revolutionary spirit in their workers by selling them small dwellings to be paid for in annual installments, and at the same time to chain the workers by this property to the factory in which they work. Thus we see that the Proudhon plan has not merely failed to bring the working class any relief, it has even turned directly against it.” *

[How this solution of the housing question by means of chaining worker to his own “home” is arising spontaneously in the neighborhood of big or growing American towns can be seen from the following passage of a letter by Eleanor Marx-Aveling, Indianapolis, November 28, 1886: “In, or rather near Kansas City we saw some miserable little wooden huts, containing about three rooms each, still in the wilds; the land cost 600 dollars and was just enough to put the little house on it; the latter cost a further 600 dollars, that is together about 4,800 marks [£240] for a miserable little thing, an hour away from the town, in a muddy desert.” In this way the workers must shoulder heavy mortgage debts in order to obtain even these houses and thus they become completely the slaves of their employers; they are bound to their houses, they cannot go away, and they are compelled to put up with whatever working conditions are offered them. — Note by F. Engels to the second German edition.]

How is the housing question to be solved then? In present-day society just as any other social question is solved: by the gradual economic adjustment of supply and demand, a solution which ever reproduces the question itself anew and therefore is no solution. How a social revolution would solve this question depends not only on the circumstances which would exist in each case, but is also connected with still more far-reaching questions, among which one of the most fundamental is the abolition of the antithesis between town and country. As it is not our task to create utopian systems for the arrangement of the future society, it would be more than idle to go into the question here. But one thing is certain: there are already in existence sufficient buildings for dwellings in the big towns to remedy immediately any real “housing shortage,” given rational utilization of them. This can naturally only take place by the expropriation of the present owners and by quartering in their houses the homeless or those workers excessively overcrowded in their former houses. Immediately the proletariat has conquered political power such a measure dictated in the public interests will be just as easy to carry out as other expropriations and billetings are by the existing state.

However, our Proudhonist is not satisfied with his previous achievements in the housing question. He must raise the question from the level ground into the sphere of the higher socialism in order that it may prove there also an essential “fractional part of the social question:”

“Let us now assume that the productivity of capital is really taken by the horns, as it must be sooner or later, for instance by a transitional law which fixes the interest on all capitals at one per cent, but mark you, with the tendency to make even this rate of interest approximate more and more to the zero point so that finally nothing more would be paid than the labour necessary to turn over the capital. Like all other products, houses and dwellings are naturally also included within the framework of this law.... The owner himself would be the first one to agree to a sale because otherwise his house would remain unused and the capital invested in it would be simply useless.”

This passage contains one of the chief articles of faith of the Proudhonist catechism and offers a striking example of the confusion prevailing in it.

The “productivity of capital” is an absurdity that Proudhonism takes over uncritically from the bourgeois economists. The bourgeois economists, it is true, also begin with the statement that labour is the source of all wealth and the measure of value of all commodities; but they also have to explain how it comes about that the capitalist who advances capital for an industrial or handicraft business receives back at the end of it not only the capital which he advanced, but also a profit over and above it. In consequence they are compelled to entangle themselves in all sorts of contradictions and also to ascribe to capital a certain productivity. Nothing proves more clearly how deeply Proudhon remains entangled in the bourgeois ideology than the fact that he has taken over this phrase about the productivity of capital. We have already seen at the beginning that the so-called “productivity of capital” is nothing but the quality attached to it (under present-day social relations, without which it would not be capital at all) of being able to appropriate the unpaid labour of wage workers.

However, Proudhon differs from the bourgeois economists in that he does not approve of this “productivity of capital,” but, on the contrary, finds it a violation of “eternal justice.” It is this which prevents the worker from receiving the full proceeds of his labour. It must therefore be abolished. But how? By lowering the rate of interest by compulsory legislation and finally by reducing it to zero. And then, according to our Proudhonist, capital would cease to be productive.

The interest on loaned money capital is only a part of profit; profit, whether on industrial or commercial capital, is only a part of the surplus value taken by the capitalist class from the working class in the form of unpaid labour. The economic laws which govern the rate of interest are as independent of those which govern the rate of surplus value as could possibly be the case between laws of one and the same social form. But as far as the distribution of this surplus value among the individual capitalists is concerned, it is clear that for those industrialists and business men who have large quantities of capital in their businesses advanced by other capitalists, the rate of their profit must rise – all other things being equal – to the same extent as the rate of interest falls. The reduction and final abolition of interest would therefore by no means really take the so-called “productivity of capital” “by the horns”; it would do no more than re-arrange the distribution among the individual capitalists of the unpaid surplus value taken from the working class; it would not, therefore, give an advantage to the worker as against the industrial capitalist, but to the industrial capitalist as against the rentier.

Proudhon, from his legal standpoint, explains interest, as he does all economic facts, not by the conditions of social production, but by the state laws in which these conditions receive their general expression. From this point of view, which lacks any inkling of the inter-relation between the state laws and the conditions of production in society, these state laws necessarily appear as purely arbitrary orders which at any moment could be replaced just as well by their exact opposite. Nothing is therefore easier for Proudhon than to issue a decree – as soon as he has the power to do so – reducing the rate of interest to one per cent. And if all the other social conditions remained as they were, then indeed this Proudhonist decree would exist on paper only. The rate of interest will continue to be governed by the economic laws to which it is subject today, despite all decrees. Persons possessing credit will continue to borrow money at two, three, four and more per cent, according to circumstances, just as much as before, and the only difference will be that the financiers will be very careful to advance money only to persons from whom no subsequent court proceedings might be expected. Moreover this great plan to deprive capital of its “productivity” is as old as the hills; it is as old as-the usury laws which aimed at nothing else but limiting the rate of interest, and which have since been abolished everywhere because in practice they were continually broken or circumvented, and the state was compelled to admit its impotence against the laws of social production. And the reintroduction of these mediaeval and unworkable laws is now “to take the productivity of capital by the horns?” One sees that the closer Proudhonism is examined the more reactionary it appears.

When, now, in this fashion the rate of interest has been reduced to zero, and interest on capital therefore abolished, then “nothing more would be paid than the labour necessary to turn over the capital.” This means that the abolition of interest is equivalent to the abolition of profit and even of surplus value. But if it were possible really to abolish interest by decree what would be the consequence? The class of rentiers would no longer have any inducement to loan out their capital in the form of advances, but would invest it industrially themselves or in joint-stock companies on their own account. The mass of surplus value extracted from the working class by the capitalist class would remain the same; only its distribution would be altered, and even that not much.

In fact, our Proudhonist fails to see that, even now, no more is paid on the average in commodity purchase in bourgeois society than “the labour necessary to turn over the capital” (it should read, necessary for the production of the commodity in question). Labour is the measure of value of all commodities, and in present-day society – apart from fluctuations of the market – it is absolutely impossible that on a total average more should be paid for commodities than the labour necessary for their production. No, no, my dear Proudhonist, the difficulty lies elsewhere: it is contained in the fact that “the labour necessary to turn over the capital” (to use your confused terminology) is not fully paid! How this comes about you can look up in Marx (Capital pp. 128-60).

But that is not enough. If interest on capital is abolished, house rent is also abolished with it; for, “like all other products, houses and dwellings are naturally also included within the framework of this law.” This is quite in the spirit of the old Major who summoned one of the new recruits and declared:

“I say, I hear you are a doctor; you might report from time to time at my quarters; when one has a wife and seven children there is always something to patch up.”

Recruit: “Excuse me, Major, but I am a doctor of philosophy.”

Major: “That’s all the same to me; one sawbones is the same as another.”

Our Proudhonist behaves just like this: house rent or interest on capital, it is all the same to him. Interest is interest; sawbones is sawbones.

We have seen above that the rent price commonly called house rent is composed as follows:

  1. a part which is ground rent;
  2. a part which is interest on the building capital, including the profit of the builder;
  3. a part which is for costs of repairs and insurance;
  4. a part which has to amortize the building capital inclusive of profit in annual deductions according to the rate at which the house gradually depreciates.

And now it must have become clear even to the blindest that

“the owner himself would be the first one to agree to a sale because otherwise his house would remain unused and the capital invested in it would be simply useless.”

Of course. If the interest on loaned capital is abolished then no house owner can obtain a penny piece in rent for his house, simply because house rent is spoken of as interest and because the rent contains a part which is really interest on capital. Sawbones is sawbones. Though it was only possible to make the usury laws relating to ordinary interest on capital ineffective by circumventing them, yet they never touched even remotely the rate of house rent. It was reserved for Proudhon to imagine that his new usury law would without more ado regulate and gradually abolish not only simple interest on capital, but also the complicated house rents of dwellings. Why then the “simply useless” house should be purchased for good money from the house owner, and how it is that under such circumstances the house owner would not also pay money himself to get rid of this “simply useless” house in order to save himself the cost of repairs, we are not told.

After this triumphant achievement in the sphere of higher socialism (Master Proudhon called it super-socialism) our Proudhonist considers himself justified in flying still higher:

“All that has now to be done is to draw some conclusions in order to cast complete light from all sides on our so important subject.”

And what are these conclusions? They are things which follow as little from what has been said before, as that dwelling houses would become valueless on the abolition of interest. Deprived of the pompous and solemn phraseology of their author, they mean nothing more than that, in order to facilitate the business of redemption of rented dwellings, what is desirable is: 1. exact statistics on the subject; 2. a good sanitary inspection force; and 3. co-operatives of building workers to undertake the building of new houses. All these things are certainly very fine and good, but, despite all the clothing of quack phrases, they by no means cast “complete light” into the obscurity of Proudhonist mental confusion.

One who has achieved so much feels he has the right to deliver the following serious exhortation to the German workers:

“In our opinion, such and similar questions are well worth the attention of Social-Democracy.... Let them therefore, as here in connection with the housing question, seek to become clear on other and equally important questions such as credit, state debts, private debts, taxation,” etc.

Thus, our Proudhonist here faces us with the prospect of a whole series of articles on “similar questions,” and if he deals with them all as thoroughly as the present “so important subject,” then the Volksstaat will have copy enough for a year. But we are in a position to anticipate: – it all amounts to what has already been said: interest on capital is to be abolished and with that the interest on public and private debts disappears, credit will be gratis, etc. The same magic formula is applied to every subject and in each separate case the same astonishing result is obtained with inexorable logic, namely, that when interest on capital has been abolished no more interest will have to be paid on borrowed money.

They are fine questions, by the way with which our Proudhonist threatens us: Credit! What credit does the worker need apart from that from week to week, or the credit he obtains from the pawnshop? Whether he gets this credit free or at interest, even at the usurious interests of the pawnshop, how much difference does that make to him? And if he did, generally speaking, obtain some advantage from it, that is to say, if the costs of production of labour power were reduced, would not the price of labour power necessarily fall also? But for the bourgeois, and in particular for the petty bourgeois, credit is an important matter and it would therefore be a very fine thing for them, and in particular for the petty bourgeois, if credit could be obtained at any time and, in addition, without payment of interest. “State debts!” ‘The working class knows very well that it did not make the state debt, and when it comes to power it will leave the payment of it to those who did make it. “Private debts!” – see credit. “Taxes!” Matters that interest the bourgeoisie very much, but the worker only very little. What the worker pays in taxes goes in the long run into the costs of production of labour power and must therefore be compensated for by the capitalist. All these things which are held up to us here as highly important questions for the working class are in reality of essential interest only to the bourgeoisie, and in particular to the petty bourgeoisie, and, despite Proudhon, we assert that the working class is not called upon to look after the interests of these classes.

Our Proudhonist has not a word to say about the great question which really concerns the workers, that of the relation between capitalist and wage worker, the question of how it comes about that the capitalist can enrich himself from the labour of his workers. His lord and master it is true, did occupy himself with it, but introduced absolutely no clearness into it, and even in his latest writings he has got essentially no farther than he was in his Philosophie de la Misère [Philosophy of Poverty] which Marx disposed of so conclusively in all its emptiness in 1847.

It was bad enough that for twenty-five years the workers of the Latin countries had almost no other socialist mental nourishment than the writings of this “Socialist of the Second Empire,” and it would be a double misfortune if Germany were now to be inundated with the Proudhonist theory. However, there need be no fear of this. The theoretical standpoint of the German workers is fifty years ahead of that of Proudhonism, and it will be sufficient to make an example of it in this one question of housing in order to save any further trouble in this respect.