Abundance vs. Scarcity by Frederic Bastiat

Which is best for man and for society, abundance or scarcity? What! you exclaim, can that be a question? Has anyone ever asserted, or is it possible to maintain, that at the foundation of human well-being?

Yes, this has been asserted, and is maintained every day; and I do not hesitate to affirm that the theory of scarcity is the most popular by far. It is the life of conversation, of the newspapers, of books, and of political oratory; and, strange as it may seem, it is certain that political economy will have fulfilled its practical mission when it has established beyond question, and widely disseminated, this very simple proposition: "The wealth of men consists in the abundance of commodities."

Do we not hear it said every day: "The foreigner is about to inundate us with his products?" Then we fear abundance.

Did not Mr. Saint-Cricq exclaim: "Production is excessive"? Then he feared abundance.

Do workmen break machines? Then they fear an excess of production, or abundance.

Has not Mr. Bugeaud pronounced these words: "Let bread be dear, and agriculturists will get rich"? Now, bread can only be dear because it is scarce. Therefore Mr. Bugeaud extols scarcity.

Does not Mr. d'Argout urge as an argument against sugar-growing the very productiveness of that industry? Does he not say: "Beetroot has no future, and its culture cannot be extended, because a few acres devoted to its culture in each department would supply the whole consumption of France"? Then, in his eyes, good lies in sterility, in dearth, and evil in fertility and abundance.

La Presse, Le Commerce, and the greater part of the daily papers, have one or more articles every morning to demonstrate to the legislative chamber and the government that it is sound policy to raise legislatively the price of all things by means of tariffs. And do the chamber and the government not obey the injunction? Now tariffs can raise prices only by diminishing the supply of commodities in the market! Then the journals, the chamber, and the minister put into practice the theory of scarcity, and I am justified in saying that this theory is by far the most popular.

How does it happen that in the eyes of workmen, of publicists, and statesmen abundance should appear a thing to be dreaded and scarcity advantageous? I propose to trace this illusion to its source.

We remark that a man grows richer in proportion to the return yielded by his exertions, that is to say, in proportion as he sells his commodity at a higher price. He sells at a higher price in proportion to the rarity, to the scarcity, of the article he produces. We conclude from this that, as far as he is concerned at least, scarcity enriches him. Applying successively the same reasoning to all other producers, we construct the theory of scarcity. We next proceed to apply this theory and, in order to favor producers generally, we raise prices artificially, and cause a scarcity of all commodities, by prohibition, by intervention, by the suppression of machinery, and other analogous means.

The same thing holds of abundance. We observe that when a product is plentiful, it sells at a lower price, and the producer gains less. If all producers are in the same situation, they are all poor. Therefore it is abundance that ruins society. And as theories are soon reduced to practice, we see the law struggling against the abundance of commodities.

This fallacy in its more general form may make little impression, but applied to a particular order of facts, to a certain branch of industry, to a given class of producers, it is extremely specious; and this is easily explained. It forms a syllogism that is not false, but incomplete. Now, what is true in a syllogism is always and necessarily present to the mind. But incompleteness is a negative quality, an absent datum, which it is very possible, and indeed very easy, to leave out of account.

Man produces in order to consume. He is at once producer and consumer. The reasoning I have just explained considers him only in the first of these points of view. Had the second been taken into account, it would have led to an opposite conclusion. In effect, may it not be said:

The consumer is richer in proportion as he purchases all things cheaper; and he purchases things cheaper in proportion to their abundance; therefore it is abundance that enriches him. This reasoning, extended to all consumers, leads to the theory of plenty.

It is the notion of exchange imperfectly understood that leads to these illusions. If we consider our personal interest, we recognize distinctly that it is two-sided. As sellers we have an interest in dearness, and consequently in scarcity; as buyers, in cheapness, or what amounts to the same thing, in the abundance of commodities. We cannot, then, found our reasoning on one or the other of these interests before inquiring which of the two coincides and is identified with the general and permanent interest of mankind at large.

If man were a solitary animal, if he labored exclusively for himself, if he consumed directly the fruit of his labor — in a word, if he did not exchange — the theory of scarcity would never have appeared in the world. It is too evident that in that case, abundance would be advantageous, from whatever quarter it came, whether from the result of his industry, from ingenious tools, from powerful machinery of his invention, or whether due to the fertility of the soil, the liberality of nature, or even to a mysterious invasion of products brought by the waves and left by them upon the shore. No solitary man would ever have thought that in order to encourage his labor and render it more productive, it was necessary to break in pieces the instruments that lessened it, to neutralize the fertility of the soil, or give back to the sea the good things it had brought to his door. He would perceive at once that labor is not an end, but a means; and that it would be absurd to reject the result for fear of doing injury to the means by which the result was accomplished. He would perceive that if he devotes two hours a day to providing for his wants, any circumstance (machinery, fertility, gratuitous gift, no matter what) that saves him an hour of that labor, the result remaining the same, puts that hour at his disposal, and that he can devote it to increasing his enjoyments; in short, he would see that to save labor is nothing else than progress.

But exchange disturbs our view of a truth so simple. In the social state, and with the separation of employments to which it leads, the production and consumption of a commodity are not mixed up and confounded in the same individual. Each man comes to see in his labor no longer a means but an end. In relation to each commodity, exchange creates two interests, that of the producer and that of the consumer; and these two interests are always directly opposed to each other.

It is essential to analyze them and examine their nature.

Take the case of any producer whatever, what is his immediate interest? It consists of two things; first, that the fewest possible number of persons should devote themselves to his branch of industry; second, that the greatest possible number of persons should be in quest of the article he produces. Political economy explains it more succinctly in these terms: Supply very limited, demand very extended; or, in other words still, Competition limited, demand unlimited.

What is the immediate interest of the consumer? That the supply of the product in question should be extended, and the demand restrained.

Seeing, then, that these two interests are in opposition to each other, one of them must necessarily coincide with social interests in general, and the other be antagonistic to them.

But which of them should legislation favor, as identical with the public good — if, indeed, it should favor either?

To discover this, we must inquire what would happen if the secret wishes of men were granted.

In as far as we are producers, it must be allowed that the desire of every one of us is antisocial. Are we vinedressers? It would give us no great regret if hail should shower down on all the vines in the world except our own: this is the theory of scarcity. Are we iron-masters? Our wish is that there should be no other iron in the market but our own, however much the public may be in want of it; and for no other reason than this want, keenly felt and imperfectly satisfied, shall ensure us a higher price: this is still the theory of scarcity. Are we farmers? We say with Mr. Bugeaud: Let bread be dear, that is to say, scarce, and agriculturists will thrive: always the same theory, the theory of scarcity.

Are we physicians? We cannot avoid seeing that certain physical ameliorations, improving the sanitary state of the country, the development of certain moral virtues, such as moderation and temperance, the progress of knowledge tending to enable each man to take better care of his own health, the discovery of certain simple remedies of easy application, would be so many blows to our professional success. In so far as we are physicians, then, our secret wishes would be antisocial. I do not say that physicians form these secret wishes. On the contrary, I believe they would hail with joy the discovery of a universal panacea; but they would not do this as physicians, but as men and as Christians. By a noble abnegation of self, the physician places himself in the consumer's point of view. But as practicing a profession, from which he derives his own and his family's subsistence, his desires, or, if you will, his interests, are antisocial.

Are we manufacturers of cotton goods? We desire to sell them at the price most profitable to ourselves. We should consent willingly to an interdict being laid on all rival manufactures; and if we could venture to give this wish public expression, or hope to realize it with some chance of success, we should attain our end, to some extent by indirect means; for example, by excluding foreign fabrics in order to diminish the supply, and thus produce, forcibly and to our profit, a scarcity of clothing.

In the same way, we might pass in review all other branches of industry, and we should always find that the producers, as such, have antisocial views. "The shopkeeper," says Montaigne, "thrives only by the irregularities of youth; the farmer by the high price of corn, the architect by the destruction of houses, the officers of justice by lawsuits and quarrels. Ministers of religion derive their distinction and employment from our vices and our death. No physician rejoices in the health of his friends, nor soldiers in the peace of their country; and so of the rest."

Hence it follows that if the secret wishes of each producer were realized, the world would retrograde rapidly toward barbarism. The sail would supersede steam, the oar would supersede the sail, and general traffic would be carried on by the carrier's wagon; the latter would be superseded by the mule, and the mule by the peddler. Wool would exclude cotton, cotton in its turn would exclude wool, and so on until the dearth of all things had caused man himself to disappear from the face of the earth.

Suppose for a moment that the legislative power and the public force were placed at the disposal of Mineral's committee, and that each member of that association had the privilege of bringing in and sanctioning a favorite law, is it difficult to divine to what sort of industrial code the public would be subjected?

If we now proceed to consider the immediate interest of the consumer, we shall find that it is in perfect harmony with the general interest, with all that the welfare of society calls for. When the purchaser goes to market he desires to find it well stocked. Let the seasons be propitious for all harvests; let inventions, more and more marvellous, bring within reach a greater and greater number of products and enjoyments; let time and labor be saved; let distances be effaced by the perfection and rapidity of transit; let the spirit of justice and of peace allow of a diminished weight of taxation; let barriers of every kind be removed — in all this the interest of the consumer runs parallel with the public interest. The consumer may push his secret wishes to a chimerical and absurd length, without these wishes becoming antagonistic to the public welfare. He may desire that food and shelter, the hearth and the roof, instruction and morality, security and peace, power and health, should be obtained without exertion and without measure, like the dust of the highways, the water of the brook, the air that we breathe; and yet the realization of his desires would not be at variance with the good of society.

It might be said that, if these wishes were granted, the work of the producer would become more and more limited, and would end with being stopped for want of sustenance. But why? Because on this extreme supposition, all imaginable wants and desires would be fully satisfied. Man, like Omnipotence, would create all things by a simple act of volition. Well, on this hypothesis, what reason should we have to regret the stoppage of industrial production?

I made the supposition not long ago of the existence of an assembly composed of workmen, each member of which, in his capacity of producer, should have the power of passing a law embodying his secret wish, and I said that the code that would emanate from that assembly would be monopoly systematized, the theory of scarcity reduced to practice.

In the same way, a chamber in which each should consult exclusively his own immediate interest as a consumer, would tend to systematize liberty, to suppress all restrictive measures, to overthrow all artificial barriers — in a word, to realize the theory of plenty.

Hence it follows:

That to consult exclusively the immediate interest of the producer is to consult an interest that is antisocial;

That to take for basis exclusively the immediate interest of the consumer would be to take for basis the general interest.

Let me enlarge on this view of the subject a little, at the risk of being prolix.

A radical antagonism exists between seller and buyer.

The former desires that the subject of the bargain should be scarce, its supply limited, and its price high.

The latter desires that it should be abundant, its supply large, and its price low.

The laws, which should be at least neutral, take the part of the seller against the buyer, of the producer against the consumer, of dearness against cheapness, of scarcity against abundance.

They proceed, if not intentionally, at least logically, on this datum: a nation is rich when it is in want of everything.

For they say, it is the producer that we must favor by securing him a good market for his product. For this purpose it is necessary to raise the price, and in order to raise the price we must restrict the supply; and to restrict the supply is to create scarcity.

Just let us suppose that at the present moment, when all these laws are in full force, we make a complete inventory, not in value but in weight, measure, volume, quantity, of all the commodities existing in the country, that are fitted to satisfy the wants and tastes of its inhabitants — corn, meat, cloth, fuel, colonial products, etc.

Suppose, again, that next day all the barriers that oppose the introduction of foreign products are removed.

Lastly, suppose that in order to test the result of this reform they proceed three months afterwards to make a new inventory.

Is it not true that there will be found in France more corn, cattle, cloth, linen, iron, coal, sugar, etc., at the date of the second than at the date of the first inventory?

So true is this that our protective tariffs have no other purpose than to hinder all these things from reaching us, to restrict the supply, and prevent low prices and abundance.

Now I would ask, Are the people who live under our laws better fed because there is less bread, meat, and sugar in the country? Are they better clothed because there is less cloth and linen? Better warmed because there is less coal? Better assisted in their labor because there are fewer tools and less iron, copper, and machinery?

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But it may be said, If the foreigner inundates us with his products he will carry away our money.

And what does it matter? Men are not fed on money. They do not clothe themselves with gold, or warm themselves with silver. What does it matter whether there is more or less money in the country if there is more bread on our sideboards, more meat in our larders, more linen in our wardrobes, more firewood in our cellars.

Restrictive laws always land us in this dilemma: Either you admit that they produce scarcity, or you do not. If you admit it, you avow by the admission that you inflict on the people all the injury in your power. If you do not admit it, you deny having restricted the supply and raised prices, and consequently you deny having favored the producer.

What you do is either hurtful or profitless, injurious or ineffectual. It never can bring any useful result.

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Must Free Trade Be Reciprocal?

We have just seen that whatever increases the expense of conveying commodities from one country to another — in other words, whatever renders transport more onerous — acts in the same way as a protective duty; or if you prefer to put it in another shape, that a protective duty acts in the same way as more onerous transport.

A tariff, then, may be regarded in the same light as a marsh, a rut, an obstruction, a steep declivity — in a word, it is an obstacle, the effect of which is to augment the difference between the price the producer of a commodity receives and the price the consumer pays for it. In the same way, it is undoubtedly true that marshes and quagmires are to be regarded in the same light as protective tariffs.

There are people (few in number, it is true, but there are such people) who begin to understand that obstacles are not less obstacles because they are artificial, and that our mercantile prospects have more to gain from liberty than from protection, and exactly for the same reason that makes a canal more favorable to traffic than a steep, roundabout, and inconvenient road.

But they maintain that this liberty must be reciprocal. If we remove the barriers we have erected against the admission of Spanish goods, for example, Spain must remove the barriers she has erected against the admission of ours. They are, therefore, the advocates of commercial treaties, on the basis of exact reciprocity, concession for concession; let us make the sacrifice of buying, say they, to obtain the advantage of selling.

People who reason in this way, I am sorry to say, are, whether they know it or not, protectionists in principle; only, they are a little more inconsistent than pure protectionists, as the latter are more inconsistent than absolute prohibitionists.

The following apologue will demonstrate this.

Stulta and Puera

There were, no matter where, two towns called Stulta and Puera. They completed at great cost a highway from the one town to the other. When this was done, Stulta said to herself, "See how Puera inundates us with her products; we must see to it." In consequence, they created and paid a body of obstructives, so called because their business was to place obstacles in the way of traffic coming from Puera. Soon afterwards Puera did the same.

At the end of some centuries, knowledge having in the interim made great progress, the common sense of Puera enabled her to see that such reciprocal obstacles could only be reciprocally hurtful. She therefore sent an envoy to Stulta, who, laying aside official phraseology, spoke to this effect: "We have made a highway, and now we throw obstacles in the way of using it. This is absurd. It would have been better to have left things as they were. We should not, in that case, have had to pay for making the road in the first place, nor afterwards have incurred the expense of maintaining obstructives. In the name of Puera, I come to propose to you, not to give up opposing each other all at once — that would be to act upon a principle, and we despise principles as much as you do — but to lessen somewhat the present obstacles, taking care to estimate equitably the respective sacrifices we make for this purpose." So spoke the envoy. Stulta asked for time to consider the proposal, and proceeded to consult, in succession, her manufacturers and agriculturists. At length, after the lapse of some years, she declared that the negotiations were broken off.

On receiving this intimation, the inhabitants of Puera held a meeting. An old gentleman (they always suspected he had been secretly bought by Stulta) rose and said, "The obstacles created by Stulta injure our sales, which is a misfortune. Those we have ourselves created injure our purchases, which is another misfortune. With reference to the first, we are powerless; but the second rests with ourselves. Let us, at least, get rid of one, since we cannot rid ourselves of both evils. Let us suppress our obstructives without requiring Stulta to do the same. Some day, no doubt, she will come to know her own interests better."

A second counselor, a practical, matter-of-fact man, guiltless of any acquaintance with principles, and brought up in the ways of his forefathers, replied: "Don't listen to that Utopian dreamer, that theorist, that innovator, that economist, that Stultomaniac. We shall all be undone if the stoppages of the road are not equalized, weighed, and balanced between Stulta and Puera. There would be greater difficulty in going than in coming, in exporting than in importing. We should find ourselves in the same condition of inferiority relatively to Stulta as Havre, Nantes, Bordeaux, Lisbon, London, Hamburg, and New Orleans are with relation to the towns situated at the sources of the Seine, the Loire, the Garonne, the Tagus, the Thames, the Elbe, and the Mississippi, for it is more difficult for a ship to ascend than to descend a river. (A Voice: Towns at the mouths of rivers prosper more than towns at their source.)

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"This is impossible. (Same Voice: But it is so.) Well, if it be so, they have prospered contrary to rules." Reasoning so conclusive convinced the assembly, and the orator followed up his victory by talking largely of national independence, national honor, national dignity, national labor, inundation of products, tributes, murderous competition. In short, he carried the vote in favor of the maintenance of obstacles; and if you are at all curious on the subject, I can point out to you countries where you will see with your own eyes road makers and obstructives working together on the most friendly terms possible, under the orders of the same legislative assembly, and at the expense of the same taxpayers, the one set endeavoring to clear the road, and the other set doing their utmost to render it impassable.

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Balance of Trade

Our adversaries have adopted tactics that are rather embarrassing. Do we establish our doctrine? They admit it with the greatest possible respect. Do we attack their principle? They abandon it with the best grace in the world. They demand only one thing — that our doctrine, which they hold to be true, should remain relegated to books, and that their principle, which they acknowledge to be vicious, should reign paramount in practical legislation. Resign to them the management of tariffs, and they will give up all dispute with you in the domain of theory.

"Assuredly," said Mr. Gauthier de Rumilly, on a recent occasion, "no one wishes to resuscitate the antiquated theories of the balance of trade." Very right, Mr. Gauthier, but please remember that it is not enough to give a passing slap to error, and immediately afterwards and for two hours at a time, reason as if that error were truth.

Let me speak of Mr. Lestiboudois. Here we have a consistent reasoner, a logical disputant. There is nothing in his conclusions that is not to be found in his premises. He asks nothing in practice but what he justifies in theory. His principle may be false; that is open to question. But at any rate, he has a principle. He believes, and he proclaims it aloud, that if France gives 10, in order to receive 15, she loses 5; and it follows, of course, that he supports laws that are in keeping with this view of the subject.

"The important thing to attend to," he says, "is that the amount of our importations goes on augmenting, and exceeds the amount of our exportations — that is to say, France every year purchases more foreign products, and sells less of her own. Figures prove this. What do we see? In 1842 imports exceeded exports by 200 million. These facts appear to prove in the clearest manner that national industry is not sufficiently protected, that we depend upon foreign labor for our supplies, that the competition of our rivals oppresses our industry. The present law appears to me to recognize the fact that the economists are wrong in saying that when we purchase we necessarily sell a corresponding amount of commodities. It is evident that we can purchase, not with our usual products, not with our revenue, not with the results of permanent labor, but with our capital, with products that have been accumulated and stored up, those intended for reproduction — that is to say, that we may expend, that we may dissipate, the proceeds of previous economies, that we may impoverish ourselves, that we may proceed on the road to ruin, and consume entirely the national capital. This is exactly what we are doing. Every year we give away 200 million francs to the foreigner."

Well, here is a man with whom we can come to an understanding. There is no hypocrisy in this language. The doctrine of the balance of trade is openly avowed. France imports 200 million more than she exports. Then we lose 200 million a year. And what is the remedy? To place restrictions on importation. The conclusion is unexceptionable.

It is with Mr. Lestiboudois, then, that we must deal, for how can we argue with Mr. Gauthier? If you tell him that the balance of trade is an error, he replies that that was what he laid down at the beginning. If you say that the balance of trade is a truth, he will reply that that is what he proves in his conclusions.

The economist school will blame me, no doubt, for arguing with Mr. Lestiboudois. To attack the balance of trade, it will be said, is to fight with a windmill.

But take care. The doctrine of the balance of trade is neither so antiquated, nor so sick, nor so dead as Mr. Gauthier would represent it, for the entire Chamber — Mr. Gauthier himself included — has recognized by its votes the theory of Mr. Lestiboudois.

I shall not fatigue the reader by proceeding to probe that theory, but content myself with subjecting it to the test of facts.

We are constantly told that our principles do not hold good, except in theory. But tell me, gentlemen, if you regard the books of merchants as holding good in practice? It appears to me that if there is anything in the world that should have practical authority when the question regards profit and loss, it is commercial accounts. Have all the merchants in the world come to an understanding for centuries to keep their books in such a way as to represent profits as losses, and losses as profits? It may be so, but I would much rather come to the conclusion that Mr. Lestiboudois is a bad economist.

Now, a merchant of my acquaintance having had two transactions, the results of which were very different, I felt curious to compare the books of the counting-house with the books of the customhouse, as interpreted by Mr. Lestiboudois to the satisfaction of our 600 legislators.

M.T. dispatched a ship from Havre to the United States, with a cargo of French goods, chiefly those known as articles from Paris, amounting to 200,000 francs. This was the figure declared at the customhouse. When the cargo arrived at New Orleans it was charged with 10 percent freight and 30 percent duty, making a total of 280,000 francs. It was sold with 20 percent profit, or 40,000 francs, and produced a total of 320,000 francs, which the consignee invested in cottons. These cottons had still for freight, insurance, commission, etc., to bear a cost of 10 percent; so that when the new cargo arrived at Havre it had cost 352,000 francs, which was the figure entered in the customhouse books. Finally M.T. realized upon this return cargo 20 percent profit, or 70,400 francs; in other words, the cottons were sold for 422,400 francs.

If Mr. Lestiboudois desires it, I shall send him an extract from the books of M.T. He will there see at the credit of the profit and loss account — that is to say, as profits — two entries, one of 40,000 another of 70,400 francs, and M.T. is very sure that his accounts are accurate.

And yet, what do the customhouse books tell Mr. Lestiboudois regarding this transaction? They tell him simply that France exported 200,000 francs' worth, and imported to the extent of 352,000 francs; from which the honorable deputy concludes "that she had expended and dissipated the profits of her previous economies, that she is impoverishing herself, that she is on the high road to ruin, and has given away to the foreigner 152,000 francs of her capital."

Some time afterwards, M.T. dispatched another vessel with a cargo also of the value of 200,000 francs, composed of the products of our native industry. This unfortunate ship was lost in a gale of wind after leaving the harbor, and all M.T. had to do was to make two short entries in his books, to this effect:

"Sundry goods due to X, 200,000 francs, for purchases of different commodities dispatched by the ship N."

"Profit and loss owed to sundry goods, 200,000 francs, in consequence of definitive and total loss of the cargo."

At the same time, the customhouse books bore an entry of 200,000 francs in the list of exportations; and as there was no corresponding entry to make in the list of importations, it follows that Mr. Lestiboudois and the Chamber will see in this shipwreck a clear and net profit for France of 200,000 francs.

There is still another inference to be deduced from this, which is that according to the theory of the balance of trade, France has a very simple means of doubling her capital at any moment. It is enough to pass them through the customhouse, and then pitch them into the sea. In this case the exports will represent the amount of her capital, the imports will be nil, and impossible as well, and we shall gain all that the sea swallows up.

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This is a joke, the protectionists will say. It is impossible we could give utterance to such absurdities. You do give utterance to them, however, and, what is more, you act upon them and impose them on your fellow-citizens to the utmost of your power.

The truth is, it would be necessary to take the balance of trade backwards (au rebours), and calculate the national profits from foreign trade by the excess of imports over exports. This excess, after deducting costs, constitutes the real profit. But this theory, which is true, leads directly to Free Trade. I make you a present of it, gentlemen, as I do of all the theories in preceding chapters. Exaggerate it as much as you please — it has nothing to fear from that test. Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.

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Nominal Prices

Do you desire to be in a situation to decide between liberty and protection? Do you desire to appreciate the impact of an economic phenomenon? Inquire into its effects upon the abundance or scarcity of commodities, and not upon the rise or fall of prices. Distrust nominal prices; they will only land you in an inextricable labyrinth.

Mr. Matthieu de Dombasle, after having shown that protection raises prices, adds:

"The enhancement of prices increases the expense of living, and consequently the price of labor, and each man receives, in the enhanced price of his products, compensation for the higher prices he has been obliged to pay for the things he has occasion to buy. Thus, if everyone pays more as a consumer, everyone receives more as a producer."

It is evident that we could reverse this argument, and say:

"If everyone receives more as a producer, everyone pays more as a consumer."

Now, what does this prove? Nothing but this, that protection displaces wealth uselessly and unjustly. In so far, it simply perpetrates spoliation.

Again, to conclude that this vast apparatus leads to simple compensations, we must stick to the "consequently" of Mr. de Dombasle, and make sure that the price of labor will not fail to rise with the price of the protected products. This is a question of fact that I remit to Mr. Moreau de Jonnes, that he may take the trouble to find out whether the rate of wages advances along with the price of shares in the coal mines of Anzin. For my own part, I do not believe that it does; because, in my opinion, the price of labor, like the price of everything else, is governed by the relation of supply to demand. Now, I am convinced that restriction diminishes the supply of coal, and consequently enhances its price; but I do not see so clearly that it increases the demand for labor, so as to enhance the rate of wages; and that this effect should be produced is all the less likely, because the quantity of labor demanded depends on the available capital. Now, protection may indeed displace capital, and cause its transference from one employment to another, but it can never increase it by a single farthing.

But this question, which is one of the greatest interest and importance, will be examined in another place. I return to the subject of nominal price; and I maintain that it is not one of those absurdities that can be rendered specious by such reasonings as those of Mr. de Dombasle.

Put the case of a nation that is isolated, and possesses a given amount of specie, and that chooses to amuse itself by burning each year one-half of all the commodities that it possesses. I undertake to prove that, according to the theory of Mr. de Dombasle, it will not be less rich.

In fact, in consequence of the fire, all things will be doubled in price, and the inventories of property, made before and after the destruction, will show exactly the same nominal value. But then what will the country in question have lost? If John buys his cloth dearer, he also sells his corn at a higher price; and if Peter loses on his purchase of corn, he retrieves his losses by the sale of his cloth. "Each recovers, in the extra price of his products, the extra expense of living he has been put to; and if everybody pays as a consumer, everybody receives a corresponding amount as a producer."

All this is a jingling quibble, and not science. The truth, in plain terms, is this: that men consume cloth and corn by fire or by using them, and that the effect is the same as regards money, but not as regards wealth, for it is precisely in the use of commodities that wealth or material prosperity consists.

In the same way, restriction, while diminishing the abundance of things, may raise their price to such an extent that each party shall be, pecuniarily speaking, as rich as before. But to set down in an inventory three measures of corn at 20s., or four measures at 15s., because the result is still 60s. — would this, I ask, come to the same thing with reference to the satisfaction of men's wants?

It is to this, the consumer's point of view, that I shall never cease to recall the protectionists, for this is the end and design of all our efforts, and the solution of all problems. I shall never cease to say to them: Is it, or is it not, true that restriction by impeding exchanges, by limiting the division of labor, by forcing labor to connect itself with difficulties of climate and situation, diminishes ultimately the quantity of commodities produced by a determinate amount of efforts? And what does this signify, it will be said, if the smaller quantity produced under the regime of protection has the same nominal value as that produced under the regime of liberty? The answer is obvious. Man does not live upon nominal values, but upon real products, and the more products there are, whatever be their price, the richer he is.

In writing what precedes, I never expected to meet with an anti-economist who was enough of a logician to admit, in so many words, that the wealth of nations depends on the value of things, apart from the consideration of their abundance. But here is what I find in the work of Mr. de Saint-Chamans (p. 210):

If fifteen million worth of commodities, sold to foreigners, are taken from the total production, estimated at fifty millions, the thirty-five million worth of commodities remaining, not being sufficient to meet the ordinary demand, will increase in price, and rise to the value of fifty millions. In that case the revenue of the country will represent a value of fifteen million additional.… There would then be an increase of the wealth of the country to the extent of fifteen million, exactly the amount of specie imported.

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This is a pleasant view of the matter! If a nation produces in one year, from its agriculture and commerce, a value of 50 million it has only to sell a quarter of it to the foreigner to be a quarter richer! Then if it sells the half, it will be one-half richer! And if it should sell the whole, to its last tuft of wool and its last grain of wheat, it would bring up its revenue to 100 million. What a way of getting rich, by producing infinite dearness by absolute scarcity!

Again, would you judge of the two doctrines? Submit them to the test of exaggeration.

According to the doctrine of Mr. de Saint-Chamans, the French would be quite as rich — that is to say, quite as well supplied with all things — had they only a thousandth part of their annual products, because they would be worth a thousand times more.

According to our doctrine, the French would be infinitely rich if their annual products were infinitely abundant, and consequently, without any value at all.

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Does Protection Raise Wages?

Let us inquire whether injustice is not done you by fixing legislatively the people from whom you are to purchase the things you have need of — bread, meat, linens, or cloth; and in dictating, if I may say so, the artificial scale of prices which you are to adopt in your dealings.

Is it true that protection, which admittedly makes you pay dearer for everything, and entails a loss on you in this respect, raises proportionately your wages?

On what does the rate of wages depend?

One of your own class has put it forcefully, thus: when two workmen run after one master, wages fall; they rise when two masters run after one workman.

For the sake of brevity, allow me to make use of this formula, more scientific, although, perhaps, not quite so clear. The rate of wages depends on the proportion that the supply of labor bears to the demand for it.

Now, on what does the supply of labor depend?

On the number of men waiting for employment; and on this first element protection can have no effect.

On what does the rate of wages depend?

On the disposable capital of the nation. But does the law which says, "We shall no longer receive such or such a product from abroad; we shall make it at home," augment the capital? Not in the least degree. It may force capital from one employment to another, but it does not increase it by a single farthing. It does not then increase the demand for labor.

We point with pride to a certain manufacture. Is it established or maintained with capital that has fallen from the moon? No; that capital has been withdrawn from agriculture, from shipping, from the production of wines. And this is the reason why, under the system of protective tariffs, there are more workmen in our mines and in our manufacturing towns, and fewer sailors in our ports, and fewer laborers in our fields and vineyards. I could expatiate at length on this subject, but I prefer to explain what I mean by an example.

A countryman was possessed of 20 acres of land, which he worked with a capital of £400. He divided his land into four parts and established the following rotation of crops: 1st, corn; 2nd, wheat; 3rd, clover; 4th, rye. He required for his own family only a moderate portion of the grain, meat, and milk that his farm produced, and he sold the surplus to buy oil, flax, wine, etc. His whole capital was expended each year in wages, hires, and small payments to the working classes in his neighborhood. This capital was returned to him in his sales, and even went on increasing year by year; and our countryman, knowing very well that capital produces nothing when it is unemployed, benefited the working classes by devoting the annual surplus to enclosing and clearing his land, and to improving his agricultural implements and farm buildings. He had even some savings in the neighboring town with his banker, who, of course, did not let the money lie idle in his till, but lent it to shipowners and contractors for public works, so that these savings were always resolving themselves into wages.

At length the countryman died, and his son, who succeeded him, said to himself, "My father was a dupe all his life. He purchased oil, and so paid tribute to Provence, whilst our own land, with some pains, can be made to grow the olive. He bought cloth, wine, and oranges, and thus paid tribute to Brittany, Medoc, and Hyeres, while we can cultivate hemp, the vine, and the orange tree with more or less success. He paid tribute to the miller and the weaver, while our own domestics can weave our linen and grind our wheat. In this way he ruined himself, and spent among strangers that money which he might have spent at home."

Misled by such reasoning, the restive youth changed his rotation of crops. His land he divided into 20 divisions. In one he planted olives, in another mulberry trees, in a third he sowed flax, in a fourth he had vines, in a fifth wheat, and so on. By this means he succeeded in supplying his family with what they required, and felt himself independent. He no longer drew anything from the general circulation, nor did he add anything to it.

Was he the richer for this? No; for the soil was not adapted for the cultivation of the vine, and the climate was not fitted for the successful cultivation of the olive; and he was not long in finding out that his family was less plentifully provided with all the things they wanted than in the time of his father, who procured them by exchanging his surplus produce.

As regarded his workmen, they had no more employment than formerly. There were five times more fields, but each field was five times smaller; they produced oil, but they produced less wheat; he no longer purchased linens, but he no longer sold rye. Moreover, the farmer could expend in wages only the amount of his capital, and his capital went on constantly diminishing. A great part of it went for buildings, and the various implements needed for the more varied cultivation in which he had engaged. In short, the supply of labor remained the same, but as the means of remunerating that labor fell off, the ultimate result was a forcible reduction of wages.

On a greater scale, this is exactly what takes place in the case of a nation that isolates itself by adopting a prohibitive system. It multiplies its branches of industry, I grant, but they become of diminished scale; it adopts, so to speak, a more complicated industrial rotation, but it is not so productive, because its capital and labor have now to struggle with natural difficulties. A greater proportion of its circulating capital, which forms the wages fund, must be converted into fixed capital. What remains may have more varied employment, but the total mass is not increased. It is like distributing the water of a pond among a multitude of shallow reservoirs — it covers more ground, and presents a greater surface to the rays of the sun, and it is precisely for this reason that it is all the sooner absorbed, evaporated, and lost.

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The amount of capital and labor being given, they create a smaller amount of commodities in proportion as they encounter more obstacles. It is beyond doubt that when international obstructions force capital and labor into channels and localities where they meet with greater difficulties of soil and climate, the general result must be, fewer products created — that is to say, fewer enjoyments for consumers. Now, when there are fewer enjoyments on the whole, will the workman's share of them be augmented? If it were augmented, as is asserted, then the rich — the men who make the laws — would find their own share not only subject to the general diminution, but that diminished share would be still further reduced by what was added to the laborers' share. Is this possible? Is it credible? I advise you, workmen, to reject such suspicious generosity.

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Theory vs. Practice by Frederic Bastiat

As advocates of free trade, we are accused of being theorists, and of not taking practice sufficiently into account. "What fearful prejudices were entertained against Mr. Say," says Mr. Ferrier,

by that long train of distinguished administrators, and that imposing phalanx of authors who dissented from his opinions; and Mr. Say was not unaware of it. Hear what he says: It has been alleged in support of errors of long standing that there must have been some foundation for ideas which have been adopted by all nations. Ought we not to distrust observations and reasonings which run counter to opinions which have been constantly entertained down to our own time, and which have been regarded as sound by so many men remarkable for their enlightenment and their good intentions? This argument, I allow, is calculated to make a profound impression, and it might have cast doubt upon points which we deem the most incontestable, if we had not seen, by turns, opinions the most false, and now generally acknowledged to be false, received and professed by everybody during a long series of ages. Not very long ago all nations, from the rudest to the most enlightened, and all men, from the street-porter to the savant, admitted the existence of four elements. No one thought of contesting that doctrine, which, however, is false; so much so that even the greenest assistant in a naturalist's class-room would be ashamed to say that he regarded earth, water and fire as elements.[1]

On this Mr. Ferrier remarks,

If Mr. Say thinks to answer thus the very strong objection which he brings forward he is singularly mistaken. That men, otherwise well informed, should have been mistaken for centuries on certain points of natural history is easily understood, and proves nothing. Water, air, earth and fire, whether elements or not, are not the less useful to man.… Such errors are unimportant: they lead to no popular commotions, no uneasiness in the public mind; they run counter to no pecuniary interest; and this is the reason why without any felt inconvenience they may endure for a thousand years. The physical world goes on as if they did not exist. But of errors in the moral world can the same thing be said? Can we conceive that a system of administration, found to be absolutely false and therefore hurtful, should be followed out among many nations for centuries, with the general approval of all well-informed men? Can it be explained how such a system could coexist with the constantly increasing prosperity of nations? Mr. Say admits that the argument which he combats is fitted to make a profound impression. Yes, indeed; and the impression remains; for Mr. Say has rather deepened than done away with it.

Let us hear what Mr. de Saint-Chamans says on the same subject:

It was only in the middle of the last century, of that eighteenth century which handed over all subjects and all principles without exception to free discussion, that these speculative purveyors of ideas, applied by them to all things without being really applicable to anything, began to write upon political economy. There existed previously a system of political economy not to be found in books, but which had been put in practical operation by governments. Colbert, it is said, was the inventor of it, and it was adopted as a rule by all the nations of Europe. The singular thing is that, in spite of contempt and maledictions, in spite of all the discoveries of the modern school, it still remains in practical operation. This system, which our authors have called the mercantile system, was designed to … Impede, by prohibitions or import duties, the entry of foreign products which might ruin our own manufactures by their competition. Economic writers of all schools[2] have declared this system untenable, absurd, and calculated to impoverish any country. It has been banished from all their books, and forced to take refuge in the practical legislation of all nations. They cannot conceive why, in measures relating to national wealth, governments should not follow the advice and opinions of learned authors, rather than trust to their experience of the tried working of a system which has been long in operation. Above all, they cannot conceive why the French government should in economic questions obstinately set itself to resist the progress of enlightenment, and maintain in its practice those ancient errors, which all our economic writers have exposed. But enough of this mercantile system, which has nothing in its favor but facts, and is not defended by any speculative writer.[3]

Such language as this would lead one to suppose that in demanding for everyone the free disposal of his property, economists were propounding some new system, some new, strange and chimerical social order, a sort of phalanstere, coined in the mint of their own brain, and without precedent in the annals of the human race. To me it would seem that if we have here anything factitious or contingent, it is to be found, not in liberty, but in protection; not in the free power of exchanging, but in customs duties employed to overturn artificially the natural course of remuneration.

But our business at present is not to compare, or pronounce between, the two systems — but to inquire which of the two is founded on experience.

The advocates of monopoly maintain that the facts are on their side, and that we have on our side only theory.

They flatter themselves that this long series of public acts, this old experience of Europe, which they invoke, has presented itself as something very formidable to the mind of Mr. Say; and I grant that he has not refuted it with his characteristic sagacity. For my own part, I am not disposed to concede to the monopolists the domain of facts, for they have only in their favor facts that are forced and exceptional; and we oppose to these, facts that are universal, the free and voluntary acts of mankind at large.

What do we say; and what do they say?

We say, "You should buy from others what you cannot make for yourself but at a greater expense."

And they say, "It is better to make things for yourself, although they cost you more than the price at which you could buy them from others."

Now, gentlemen, throwing aside theory, argument, demonstration — all which seem to affect you with nausea — which of these two assertions has on its side the sanction of universal practice?

Visit your fields, your workshops, your forges, your warehouses; look above, below, and around you; look at what takes place in your own houses; note your own everyday acts; and say what is the principle that guides these laborers, artisans, and merchants; say what is your own personal practice.

Does the farmer make his own clothes? Does the tailor produce the corn he consumes? Does your housekeeper continue to have your bread made at home, after she finds she can buy it cheaper from the baker? Do you resign the pen for the brush to save your paying tribute to the shoeblack? Does the entire economy of society not rest upon the separation of employments, the division of labor — in a word, upon exchange? And what is exchange but a calculation which we make with a view to discontinuing direct production in every case in which we find that possible, and in which indirect acquisition enables us to effect a saving in time and in effort?

It is not you, therefore, who are the men of practice, since you cannot point to a single human being who acts upon your principle.

But you will say, we never intended to make our principle a rule for individual relations. We perfectly understand that this would be to break up the bond of society, and would force men to live like snails, each in his own shell. All that we contend is that our principle regulates de facto the relations that obtain between the different agglomerations of the human family.

Well, I affirm that this principle is still erroneous. The family, the commune, the canton, the department, the province, are so many agglomerations, which all, without any exception, reject practically your principle, and have never dreamt of acting on it. All procure themselves, by means of exchange, those things that it would cost them dearer to procure by means of production. And nations would do the same, did you not hinder them by force.

We, then, are the men of practice and of experience; for we oppose to the restriction you have placed exceptionally on certain international exchanges the practice and experience of all individuals and of all agglomerations of individuals, whose acts are voluntary and can consequently be adduced as evidence. But you begin by constraining, by hindering, and then you lay hold of acts that are forced or prohibited, as warranting you to exclaim, "We have practice and experience on our side!"

You inveigh against our theory, and even against theories in general. But when you lay down a principle in opposition to ours you perhaps imagine you are not proceeding on theory. Clear your heads of that idea. You, in fact, form a theory as we do; but between your theory and ours there is this difference:

Our theory consists merely in observing universal facts, universal opinions, calculations, and ways of proceeding that universally prevail; and in classifying these and rendering them coordinate, with a view to their being more easily understood.

Our theory is so little opposed to practice that it is nothing else but practice explained. We observe men acting as they are moved by the instinct of self-preservation and a desire for progress, and what they thus do freely and voluntarily we denominate political or social economy. We can never help repeating that each individual man is practically an excellent economist, producing or exchanging according as he finds it more to his interest to produce or to exchange. Each, by experience, educates himself in this science; or, rather, the science itself is only this same experience accurately observed and methodically explained.

But on your side you construct a theory in the worst sense of the word. You imagine, you invent, a course of proceeding that is not sanctioned by the practice of any living man under the canopy of heaven; and then you invoke the aid of constraint and prohibition. It is quite necessary that you should have recourse to force, for you desire that men should be made to produce those things that they find it more advantageous to buy; you desire that they should renounce this advantage, and act upon a doctrine that implies a contradiction in terms.

I defy you to take the doctrine, which you acknowledge would be absurd in the relations of individuals, and extend it, even in speculation, to transactions between families, communities, or provinces. By your own admission it is only applicable to international relations.

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This is the reason why you are forced to keep repeating, "There are no absolute principles, no inflexible rules. What is good for an individual, a family, a province, is bad for a nation. What is good in detail — namely, to purchase rather than produce, when purchasing is more advantageous than producing — that same is bad in the gross. The political economy of individuals is not that of nations" — and other nonsense of the same kind.

And to what does all this tend? Look at it a little closer. The intention is to prove that we, the consumers, are your property! — that we are yours body and soul! — that you have an exclusive right over our stomachs and our limbs! — that it belongs to you to feed and clothe us on your own terms, whatever be your ignorance, incapacity or rapacity!

No, you are not men of practice; you are men of abstraction — and of extortion.

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