To actually understand this quote, it's important to understand that Proudhon drew a very important line betweeen property and ownership. Property was something that you owned on paper, and derived profit from somebody else using, like a landlord being the proprietor of a tenement or a capitalist of a factory. Ownership, on the other hand, referred to something that you used to make a living or from day to day, like a farmer owns his plow. Ownership was okey-dokey, property was, of course, theft.

Proudhon's typically French metaphor was this: the wife is the property of the husband, but two lovers own each other.

Here are some excerpts from Pierre-Joseph Proudhon's 1840 essay What is Property? regarding his view of property as theft.
In the proverbial nutshell, Proudhon believed that the value of property (which narzos partially defines above) is created by labor but then monopolized by "owners". Therefore, the wealth and/or value generated by labor was stolen by the owners. For example, the profits of a corporation only exist by virtue of the labor of the workers, yet the majority of that profit is hoarded by the CEO and the other extremely well paid executives/board members/major shareholders. They are, in effect, stealing that wealth (which they did not create) from the workers. Proudhon gets at this at the very end of my excerpts, in the bold type.
Proudhon, like many writing about politics in the mid- nineteenth century, tends toward the verbose and flowery. You may also detect a streak of hubris in what follows, but he himself addressed this by saying "the matters of which I must speak to you are so simple, so palpable, that you will be stunned that you never noticed them, and will say to yourself 'I never thought about that'." So what may appear as arrogance is more accurately zeal about his discovery and his desire to teach his ideas. The essay is partly straight narrative and partly pseudo-Socratic dialogue. The shifts can be confusing, but I'm sure you can follow it.
Had I to answer the following question: What is slavery? and answer with a single word - Murder - my reasoning would be grasped immediately. I would not need any protracted discourse to demonstrate that the power to strip man of his mind, his will, his personality, is a power over life and death, and that making a man a slave is tantamount to murder. So why cannot I answer this other query: What is property? in similar vein - Theft - without being assured that I would not be heeded, even though this second proposition is merely a recasting of the first?

One writer teaches that property is a civil right, sprung from occupancy and sanctioned by law; another contends that it is a natural right, its source in labor, and those teachings, contradictory as they may seem, are encouraged and applauded. My contention is that neither labor nor occupancy nor law can create property; that it is a cause-less effect: am I to be held reprehensible?

If our preoccupations would but let us hear it, this definition, Property is theft, which sounds to you such a blasphemy, would act as a lightning conductor; but how many are the interests and prejudices that oppose it! Philosophy will not, alas!, alter the course of events: destinies will be worked out regardless of prophecy; moreover, should justice not be done and our education completed?

-Property is theft! What an inversion of human ideas! Proprietor and thief were forever contradictory terms, just as the entities the describe are antipathetic; every language has articulated this contradiction in terms. So on what authority would you assail this universal convention and throw down the gauntlet to the human race? Who are you to refute the reasoning of peoples and ages?

Yes, all men hold and repeat that equality of circumstance is the same thing as equality of rights: that property and theft are synonymous terms; that all social pre-eminence, awarded or, more properly usurped on the pretext of superior talent and service, is iniquity and banditry; all men, I say, bear witness to these truths in their souls: it is simply a matter of making them cognizant of them.

QXZ note: Unfortunately, the rest of of this essay is a digression into Proudhon's explication of Anarchism as the best natural, inevitable political fate of humanity. He does not specifically return, in this writing, to the equation of property and theft. However, he does say more about it in another essay entitled Confessions d'un révolutionnaire in which he references a two volume work he'd previously authored, entitled Système des contradictions économiques ou Philosophie de la misère:
Property, considered as encompassing the range of social institutions has, so to speak, a double-entry record: one is the record of the benefits that it brings and which derive directly from its essence: the other is the entry for the drawbacks it entails, the expenses it causes, these also deriving, like the benefits, directly from its nature.

In respect of property...harm and abuse cannot be dissevered from the good, and more than debit can from asset in double-entry bookkeeping. The one necessarily spawns the other. To seek to do away with the abuses of property is to destroy the thing itself; just as the striking of a debit from an account is tantamount to striking it from the credit record. The best that can be done against the abuses or drawbacks of property, is to amalgamate, synthesize, organize or balance them with a contrary factor, which is to it what the creditor is to the debtor, the investor to the director, etc., (as in, say community (QXZ note: by "community" Proudhon refers to Communism, to which he was strongly opposed)), so that, without the two principles' altering or destroying each other, the advantages of the one can compensate for the disadvantages other, just as - in accounting, the entries - once matched one against the other, give a final result, which is either entirely loss or entirely profit.

The solution to the poverty problem thus consists of taking the bookkeeper's expertise to fresh heights, setting down the entries for society, recording the credits and debits of each institution, with the general accounts or divisions in the social ledger being...those of the philosophy of legislation and politics, like competition and monopoly, property and community, citizen and State, man and God, etc.

The property-owners wish a fatal illness upon me for having said that property, alone and of itself, is theft; as if property did not derive the whole of its value (rent) from the traffic in products and thus were not dependent upon a phenomenon higher than itself, the collective strength and solidarity of labor.

Translation from the French by Paul Sharkey.

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