003 - What is a Loan What is Capital

Frédéric Bastiat, a pioneering 19th-century French economist and statesman, passionately defended common sense in his essays against the rising tide of socialist thought following the French Revolution. Central to his arguments were critical questions about wealth creation, resource allocation, and the role of government—issues that remain relevant today. In this insightful essay, Bastiat tackles the misconception that capital should be freely accessible, dismissing the notion of interest as usury. He emphasizes that capital arises from savings, enabling the common man to prosper through borrowing. By illustrating the law of supply and demand, he shows that interest rates decrease as capital availability rises. Bastiat argues that without a leisure class—those with surplus resources—neither individuals nor society can thrive. Translated by Horace White of Chicago, this essay has been divided into segments for easier understanding. - Summary by Michele Fry