Wednesday, November 14, 2012

Raw Materials by Frederic Bastiat

It is said that the most advantageous of all branches of trade is that which supplies manufactured commodities in exchange for raw materials. For these raw materials are the aliment and support of national labor.
Hence the conclusion is drawn that the best law of customs is that which gives the greatest possible facility to the importation of raw materials, and which throws most obstacles in the way of importing finished goods.
There is no fallacy in political economy more widely disseminated than this. It is cherished not only by the protectionist school but also, and above all, by the school that dubs itself Liberal; and it is unfortunate that it should be so, for what can be more injurious to a good cause than that it should be at the same time vigorously attacked and feebly defended?
Commercial liberty is likely to have the fate of liberty in general; it will only find a place in the statute book after it has taken possession of men's minds and convictions. But if it be true that a reform, in order to be solidly established, should be generally understood, it follows that nothing can so much retard reform as that which misleads public opinion. And what is more calculated to mislead public opinion than works that, in advocating freedom, invoke aid from the doctrines of monopoly?
Some years ago three of the great towns of France — Lyons, Bordeaux, and Havre — united in a movement against the restrictive regime. All Europe was stirred on seeing raised what they took for the banner of liberty. Alas! it proved to be also the banner of monopoly — of a monopoly a little more niggardly and much more absurd than that of which they seemed to desire the overthrow. By the aid of the fallacy that I have just endeavored to expose, the petitioners did nothing more than reproduce the doctrine of protection to national industry, tacking to it an additional inconsistency.
It was, in fact, nothing else than the system of prohibition. Just listen to Mr. de Saint-Cricq:
"Labor constitutes the wealth of a nation, because labor alone creates those material objects which our wants demand; and universal ease and comfort consist in the abundance of these things." So much for the principle.
"But this abundance must be produced by national labor. If it were the result of foreign labor, national labor would be immediately brought to a stand." Here lies the error. (See the preceding chapter.)
"What course should an agricultural and manufacturing country take under such circumstances? Reserve its markets for the products of its own soil and of its own industry." Such is the end and design.
"And for that purpose restrain by duties, and, if necessary, prohibit importation of the products of the soil and industry of other nations." Such are the means.
Let us compare this system with that which the Bordeaux petition advocates.
Commodities are there divided into three classes:
"The first includes provisions, and raw materials upon which no human labor has been bestowed. In principle, a wise economy would demand that this class should be free of duties." Here we have no labor, no protection.
"The second consists of products that have, to some extent, been prepared. This preparation warrants such products being charged with a certain amount of duty." Here protection begins, because here, according to the petitioners, begins national labor.
"The third comprises goods and products in their finished and perfect state. These contribute nothing to national labor, and we regard this class as the most taxable." Here labor, and protection along with it, reach their maximum.
We thus see that the petitioners profess their belief in the doctrine that foreign labor is injurious to national labor; and this is the error of the prohibitive system.
They demand that the home market should be reserved for home industry. That is the design of the system of prohibition.
They demand that foreign labor should be subjected to restrictions and taxes. These are the means employed by the system of prohibition. What difference, then, can we possibly discover between the Bordeaux petitioners and the Corypheus of restriction? One difference, and one only: the greater or less extension given to the word labor.
Mr. de Saint-Cricq extends it to everything, and so he wishes to protect all.
"Labor constitutes all the wealth of a people," he says; "to protect agricultural industry, and all agricultural industry; to protect manufacturing industry, and all manufacturing industry, is the cry which should never cease to be heard in this Chamber."
The Bordeaux petitioners take no labor into account but that of the manufacturers; and for that reason they would admit them to the benefits of protection.
"Raw materials are commodities upon which no human labor has been bestowed. In principle, we should not tax them. Manufactured products can no longer serve the cause of national industry, and we regard them as the best subjects for taxation."
It is not our business in this place to inquire whether protection to national industry is reasonable. Mr. de Saint-Cricq and the Bordeaux gentlemen are at one upon this point, and, as we have shown in the preceding chapters, we on this subject differ from both.
Our present business is to discover whether it is by Mr. de Saint-Cricq, or by the Bordeaux petitioners, that the word labor is used in a correct sense.
Now, in this view of the question, we think that Mr. de Saint-Cricq has very much the best of it; and to prove this we may suppose them to hold some such dialogue as the following:
MR. DE SAINT-CRICQ: You grant that national labor should be protected. You grant that the products of no foreign labor can be introduced into our market without superseding a corresponding amount of our national labor. Only you contend that there are a multiplicity of products possessed of value (for they sell), but upon which no human labor has been bestowed (virgin material). And you enumerate, among other things, wheat, flour, meat, cattle, tallow, salt, iron, copper, lead, coal, wool, hides, seeds, etc.
If you will only prove to me that the value of these things is not due to labor, I will grant that it is useless to protect them.
But, on the other hand, if I demonstrate to you that there is as much labor worked up in 100 francs worth of wool as in 100 francs worth of textile fabrics, you will allow that the one is as worthy of protection as the other.
Now, why is this sack of wool worth 100 francs? Is it not because that is its cost price? And what does its cost price represent but the aggregate wages of all the labor and profits of all the capital which have contributed to the production of the commodity?
THE BORDEAUX PETITIONERS: Well, perhaps as regards wool you may be right. But take the case of a sack of corn, a bar of iron, a hundredweight of coal — are these commodities produced by labor? Are they not created by nature?
MR. DE SAINT-CRICQ: Undoubtedly nature creates the elements of all these things, but it is labor that produces the value. I was wrong myself in saying that labor created material objects, and that unfortunate form of expression has led me into other errors. It does not belong to man to create, to make anything out of nothing, be he agriculturist or manufacturer; and if by production is meant creation, all our labor must be marked down as unproductive, and yours, as merchants, more unproductive than all others, excepting perhaps my own.
The agriculturist, then, cannot pretend to have created wheat but he has created value; I mean to say, he has, by his labor and that of his servants, laborers, reapers, etc., transformed into wheat substances which had no resemblance to it whatever. The miller who converts the wheat into flour, the baker who converts the flour into bread, do the same thing.
In order that man may be enabled to clothe himself a multitude of operations are necessary. Prior to all intervention of human labor the true raw materials of cloth are the air, the water, the heat, the gases, the light, the salts, that enter into its composition. These are the raw materials upon which, strictly speaking, no human labor has been employed. They are virgin materials; and since they have no value, I should never dream of protecting them. But the first application of labor converts these substances into grass and fodder, a second into wool, a third into yarn, a fourth into a woven fabric, a fifth into clothing. Who can assert that the whole of these operations, from the first furrow laid open by the plough to the last stitch of the tailor's needle, do not resolve themselves into labor?
And it is because these operations are spread over several branches of industry, in order to accelerate and facilitate the accomplishment of the ultimate object, which is to furnish clothing to those who have need of it, that you desire, by an arbitrary distinction, to rank the importance of such works in the order in which they succeed each other, so that the first of the series shall not merit even the name of labor, and that the last, being labor par excellence, shall be worthy of the favors of protection?
THE PETITIONERS: Yes, we begin to see that wheat, like wool, is not exactly a product of which it can be said that no human labor has been bestowed upon it; but the agriculturist has not, at least, like the manufacturer, done everything himself or by means of his workmen; nature has assisted him, and if there is labor worked up in wheat it is not the simple product of labor.
MR. DE SAINT-CRICQ: But its value resolves itself exclusively into labor. I am happy that nature concurs in the material formation of grain. I could even wish that it were entirely her work; but you must allow that I have constrained this assistance of nature by my labor, and when I sell you my wheat you will remark this: That it is not for the labor of nature that I ask you to pay, but for my own.
But, as you state the case, manufactured commodities are no longer the exclusive products of labor. Is the manufacturer not beholden to nature in his processes? Does he not avail himself of the assistance of the steam-engine, of the pressure of the atmosphere, just as, with the assistance of the plough, I avail myself of its humidity? Has he created the laws of gravitation, of the transmission of forces, of affinity?
THE PETITIONERS: Well, this is the case of the wool over again; but coal is assuredly the work, the exclusive work, of nature. It is indeed a product upon which no human labor has ever been bestowed.
MR. DE SAINT-CRICQ: Yes, nature has undoubtedly created the coal, but labor has imparted value to it. For the millions of years during which it was buried 100 fathoms under ground, unknown to everybody, it was destitute of value. It was necessary to search for it — that is labor; it was necessary to send it to market — that is additional labor. Then the price you pay for it in the market is nothing else than the remuneration of the labor of mining and transport.[1]
Thus far we see that Mr. de Saint-Cricq has the best of the argument; that the value of raw materials, like that of manufactured commodities, represents the cost of production, that is to say, the labor worked up in them; that it is not possible to conceive of a product possessing value, that has had no human labor bestowed on it; that the distinction made by the petitioners is futile in theory; that, as the basis of an unequal distribution of favors, it would be iniquitous in practice, since the result would be that one-third of our countrymen, who happened to be engaged in manufactures, would obtain the advantages of monopoly, on the alleged ground that they produce by labor, while the other two-thirds — namely, the agricultural population — would be abandoned to competition under the pretext that they produce without labor.
The rejoinder to this, I am quite sure, will be that a nation derives more advantages from importing what are called raw materials, whether produced by labor or not, and exporting manufactured commodities. This will be repeated and insisted on, and it is an opinion very widely accredited.
"The more abundant raw materials are," says the Bordeaux petition, "the more are manufactures promoted and multiplied."
"Raw materials," says the same document in another place, "open up an unlimited field of work for the inhabitants of the countries into which they are imported."
"Raw materials," says the Havre petition, "constituting as they do the elements of labor, must be submitted to a different treatment, and be gradually admitted at the lowest rate of duty."
The same petition expresses a wish that manufactured products should be admitted, not gradually, but after an indefinite lapse of time, not at the lowest rate of duty, but at a duty of 20 percent.
"Among other articles, the low price and abundance of which are a necessity," says the Lyons petition, "manufacturers include all raw materials."
All this is founded on an illusion.
We have seen that all value represents labor. Now, it is quite true that manufacturing labor increases tenfold, sometimes a hundredfold, the value of the raw material; that is to say, it yields ten times, a hundred times, more profit to the nation. Hence men are led to reason thus: The production of a hundredweight of iron brings in a gain of only 15 shillings to workmen of all classes. The conversion of this hundredweight of iron into the mainsprings of watches raises their earnings to £500; and will anyone venture to say that a nation has not a greater interest to secure for its labor a gain of £500 than a gain of 15 shillings? We do not exchange a hundredweight of un-wrought iron for a hundredweight of watchsprings, nor a hundredweight of unwashed wool for a hundredweight of cashmere shawls; but we exchange a certain value of one of these materials for an equal value of another. Now, to exchange equal value for equal value is to exchange equal labor for equal labor. It is not true, then, that a nation that sells five pounds' worth of wrought fabrics or watch-springs gains more than a nation that sells five pounds' worth of wool or iron.
In a country where no law can be voted, where no tax can be imposed, but with the consent of those whose dealings the law is to regulate, and whose pockets the tax is to affect, the public cannot be robbed without first being imposed on and misled. Our ignorance is the raw material of every extortion from which we suffer, and we may be certain beforehand that every fallacy is the precursor of an act of plunder. My good friends! when you detect a fallacy in a petition, button up your wallet-pocket, for you may be sure that this is the mark aimed at. Let us see, then, what is the real object secretly aimed at by the shipowners of Bordeaux and Havre, and the manufacturers of Lyons, and which is concealed under the distinction they attempt to draw between agricultural and manufactured commodities.
"It is principally this first class (that which comprises raw materials, upon which no human labor has been bestowed) which affords," say the Bordeaux petitioners, "the principal support to our merchant shipping.… In principle, a wise economy would not tax this class.… The second (commodities partly wrought up) may be taxed to a certain extent. The third (commodities which call for no more exertion of labor) we regard as the fittest subjects of taxation."
The Havre petitioners "consider that it is indispensable to reduce gradually the duty on raw materials to the lowest rate, in order that our manufacturers may gradually find employment for the shipping interest, which furnishes them with the first and indispensable materials of labor."
The manufacturers could not remain behindhand in politeness toward the shipowners. So the Lyons petition asks for the free introduction of raw materials, "in order to prove," as they express it, "that the interests of the manufacturing are not always opposed to those of the maritime towns."
No; but then the interests of both, understood as the petitioners understand them, are in direct opposition to the interests of agriculture and of consumers.
Well, gentlemen, we have come at length to see what you are aiming at, and the object of your subtle economical distinctions. You desire that the law should restrain the transport of finished goods across the ocean, in order that the more costly conveyance of raw and rough materials, bulky, and mixed up with refuse, should afford greater scope for your merchant shipping, and more largely employ your marine resources. This is what you call a wise economy.
On the same principle, why do you not ask that the pines of Russia should be brought to you with their branches, bark, and roots; the silver of Mexico in its mineral state; the hides of Buenos Aires sticking to the bones of the putrefying carcasses from which they have been torn?
I expect that railway shareholders, the moment they are in a majority in the Chambers, will proceed to make a law forbidding the manufacture of the brandy that is consumed in Paris. And why not? Would not a law enforcing the conveyance of ten casks of wine for every cask of brandy afford Parisian industry the indispensable materials of its labor, and give employment to our locomotive resources?
How long will men shut their eyes to this simple truth?
Manufactures, shipping, labor — all have for end the general, the public good; to create useless industries, to favor superfluous conveyances, to support a greater amount of labor than is necessary, not for the good of the public, but at the expense of the public — is to realize a true petitio principii. It is not labor that is desirable for its own sake; it is consumption. All labor without a commensurate result is a loss. You may as well pay sailors for skipping pebbles on the surface of the water as pay them for transporting useless refuse. Thus, we arrive at the result to which all economic fallacies, numerous as they are, conduct us, namely, confounding the means with the end, and developing the one at the expense of the other.

The Bastiat Collection

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