Pierre-Joseph Proudhon is one of the major representatives of French socialism in the mid-19th century. He is especially famous for his statement, "Property is theft," as presented in "What is Property?" in 1840.

There is something logically absurd in this assertion. For if there were no legitimately acquired property, logically there could not be an act such as theft. That's why Proudhon would later clarify that it is the actual distribution of property, not property itself, that he considers theft. Instead, he describes property as a revolutionary force foundational to anarchist society.

But Proudhon is an individualist anarchist. He does not see the proletariat, nor the state, as legitimate sources of power. He harshly criticizes communism and advocates for worker mutualism, a form of structured cooperative solidarity that relies on the voluntary pooling of resources for mutual aid. It is less well known, but Bastiat was not opposed to this idea in principle. He simply feared that the state would turn it into a de facto monopolistic public service. History would prove him right.

On the other hand, it is well known that in "The Poverty of Philosophy," Marx would violently attack Proudhon and his socialism, which he called "utopian," in favor of a so-called "scientific" socialism.

In June 1848, Proudhon was elected to the National Assembly, alongside Bastiat. They were acquaintances and held each other in high regard. However, in 1849, in a resounding controversy, Bastiat exchanged fourteen letters with him in the columns of La Voix du Peuple. In this vigorous exchange, he clarified his stance on monetary and banking issues. The dispute boiled down to the following alternative: free credit or freedom of credit?

Proudhon viewed interest in capital as the primary cause of pauperism and social inequality. He advocated for unlimited monetary creation by a state bank (the Exchange Bank or People's Bank), and saw in the "free credit" the solution to the social problem. On the other hand, Bastiat was a proponent of the freedom of banks, meaning the regulation of monetary circulation through the freedom of access to the profession, coupled with a necessary responsibility over one's own funds, and the freedom of competition.

Bastiat refuted his opponent in several stages. First, he analyzed the perverse effects of free credit and monetary creation. Such a system could only encourage the riskiest and most reckless actions by banks and private actors because they know they are covered by the state, that is, by taxpayer money: "It is a serious matter to place all men in a situation where they say: Let's try our luck with someone else's property; if I succeed, so much the better for me; if I fail, too bad for others." A prescient statement, as it could apply to our era.

The policy of low interest rates practiced by central banks is a way to artificially create money. And the successive crises of the financial system over the last century, with the indebtedness of states, are its direct consequences.

Then Bastiat shows that it is possible to improve the purchasing power of the working classes, but by other means, more just and more effective. For him, reducing interest rates is also a key goal of a liberal policy. But it is through the liberation and accumulation of capital that this is achieved, not by the abolition of interest, that is, free credit.

Indeed, according to Bastiat, the progress of humanity coincides with the formation of capital. In his pamphlet titled "Capital and Rent," Bastiat illustrates this concept with Robinson Crusoe on his island.

Without accumulated capital or materials, Robinson would be doomed to death. He then explains that capital enriches the worker in two ways:

In modern society, capital serves as a force that equalizes opportunities. Indeed, Bastiat says:

In conclusion, both Proudhon and Bastiat recognized the importance of capital accumulation and the tendency of some men to exploit others. However, they did not draw the same conclusions. Proudhon, like Marx, anticipated an increasing impoverishment of the masses in capitalist countries. Bastiat believed that capitalism would lead to unprecedented prosperity across all classes and the development of an increasingly significant middle class. This is indeed what happened.