First Series, Chapter 8
First Series, Chapter 7
From the Manufacturers of Candles, Tapers, Lanterns, Candlesticks, Street Lamps, Snuffers, and Extinguishers, and from the Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.
To the Honorable Members of the Chamber of Deputies.
You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.
We come to offer you a wonderful opportunity for applying your—what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, and, as for principles, you deny that there are any in political economy; therefore we shall call it your practice—your practice without theory and without principle.
We are suffering from the ruinous competition of a foreign rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly that we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.47*
We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds—in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.
Be good enough, honorable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.
First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?
If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.
If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.
Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.
The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honor of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.
But what shall we say of the specialties of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.
There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.
It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.
We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle that guides your entire policy.
Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?
We have our answer ready:
You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.
Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, "Yes," you reply, "but the producer has a stake in their exclusion." Very well! Surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.
"But," you may still say, "the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods." Very well! If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.
Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?
But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else's would be tantamount to accepting the equation: +×=+–; in other words, it would be to heap absurdity upon absurdity.
Labor and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labor that constitutes value and is paid for.
If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.
Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.
Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: "How can French labor withstand the competition of foreign labor when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?" But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.
To take another example: When a product—coal, iron, wheat, or textiles—comes to us from abroad, and when we can acquire it for less labor than if we produced it ourselves, the difference is a gratuitous gift that is conferred upon us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!
Notes for this chapter
["Perfidious Albion" is England, along with a typically French jibe at the English fog, which keeps the sun from interfering with artificial light in England as much as it does in France. During the 1840's, Franco-English relations were occasionally very tense.—TRANSLATOR.]
First Series, Chapter 8
End of Notes
First Series, Chapter 8
An impoverished farmer of the Gironde48* had lovingly tended a vine slip. After much fatigue and toil he finally had the good fortune to harvest enough grapes from it to make a cask of wine, and he forgot that each drop of this precious nectar had cost his brow a drop of sweat. "I shall sell it," he told his wife, "and with the price I shall buy enough material to enable you to furnish a trousseau for our daughter."
The honest peasant took his cask of wine to the nearest town, and there he met a Belgian and an Englishman. The Belgian said to him: "Give me your cask of wine, and I will give you fifteen parcels of yarn in exchange."
The Englishman said: "Give me your wine, and I will give you twenty parcels of yarn; for we English spin it at lower cost than the Belgians."
But a customs officer who was there said: "My good man, trade with the Belgian, if you wish, but my orders are to keep you from trading with the Englishman."
"What!" exclaimed the countryman. "You want me to be content with fifteen parcels of yarn from Brussels, when I could have twenty from Manchester?"
"Certainly; do you not see that France would lose if you received twenty parcels instead of fifteen?"
"I find that hard to understand," said the vineyardist.
"And I find it hard to explain," replied the customs official; "but it is a fact; for all our deputies, cabinet ministers, and journalists agree that the more a nation receives in exchange for a given quantity of its products, the poorer it becomes."
The farmer had to make his bargain with the Belgian. The farmer's daughter got only three-quarters of her trousseau, and these good people are still wondering how it happens that a person is ruined by receiving four parcels of yarn instead of three, and why a person is richer with three dozen towels than with four dozen.
Notes for this chapter
[A department of southwestern France along the estuary of the Gironde River, famed for such wines as Médoc, Sauternes, and Graves.—TRANSLATOR.]
First Series, Chapter 10
End of Notes
First Series, Chapter 9
An Immense Discovery!
At a time when everyone is trying to find a way of reducing the costs of transportation; when, in order to realize these economies, highways are being graded, rivers are being canalized, steamboats are being improved, and Paris is being connected with all our frontiers by a network of railroads and by atmospheric, hydraulic, pneumatic, electric, and other traction systems; when, in short, I believe that everyone is zealously and sincerely seeking the solution of the problem of reducing as much as possible the difference between the prices of commodities in the places where they are produced and their prices in the places where they are consumed; I should consider myself failing in my duty toward my country, toward my age, and toward myself, if I any longer kept secret the wonderful discovery I have just made.
Although the daydreams of inventors have been proverbially optimistic, I feel positively certain that I have discovered an infallible means of bringing to France the products of the whole world, and vice versa, at a considerable reduction in cost.
But its being infallible is only one of the advantages of my astounding discovery.
It requires neither plans nor estimates nor preparatory studies nor engineers nor mechanics nor contractors nor capital nor stockholders nor government aid!
It presents no danger of shipwreck, explosion, collision, fire, or derailment!
It can be put into effect in a single day!
Finally, and this will doubtless recommend it to the public, it will not add a centime to the budget; quite the contrary. It will not increase the staff of government officials or the requirements of the bureaucracy; quite the contrary. It will cost no one his freedom; quite the contrary.
It was not chance, but observation, that put me in possession of my discovery. Let me tell you how I was led to make it.
I had this question to resolve:
"Why should a thing made in Brussels, for example, cost more when it reaches Paris?"
Now, it did not take me long to perceive that the rise in price results from the existence of obstacles of several kinds between Paris and Brussels. First of all, there is the distance; we cannot traverse it without effort or loss of time, and we must either submit to this ourselves or pay someone else to submit to it. Then come rivers, marshes, irregularities of terrain, and mud; these are just so many more impediments to overcome. We succeed in doing so by raising causeways, by building bridges, by laying and paving roads, by laying steel rails, etc. But all this costs money, and the commodity transported must bear its share of the expenses. There are, besides, highway robbers, necessitating a constabulary, a police force, etc.
Now, among these obstacles between Brussels and Paris there is one that we ourselves have set up, and at great cost. There are men lying in wait along the whole length of the frontier, armed to the teeth and charged with the task of putting difficulties in the way of transporting goods from one country to the other. They are called customs officials. They act in exactly the same way as the mud and the ruts. They delay and impede commerce; they contribute to the difference that we have noted between the price paid by the consumer and the price received by the producer, a difference that it is our problem to reduce as much as possible.
And herein lies the solution of the problem. Reduce the tariff.
You will then have, in effect, constructed the Northern Railway without its costing you anything. Far from it! You will effect such enormous savings that you will begin to put money in your pocket from the very first day of its operation.
Really, I wonder how we could have ever thought of doing anything so fantastic as to pay many millions of francs for the purpose of removing the natural obstacles that stand between France and other countries, and at the same time pay many other millions for the purpose of substituting artificial obstacles that have exactly the same effect; so that the obstacle created and the obstacle removed neutralize each other and leave things quite as they were before, the only difference being the double expense of the whole operation.
A Belgian product is worth twenty francs at Brussels, but thirty francs when taken to Paris, because of transportation charges. The same article made in Paris is worth forty francs. How do we handle the problem?
First, we impose a customs duty of at least ten francs on the Belgian product, in order to raise its sales price at Paris to forty francs, and we pay numerous inspectors to see that it does not escape this tariff; with the result that, in transit, it is charged ten francs for transportation and ten francs for the tax.
Having done this, we reason as follows: This transportation charge of ten francs from Brussels to Paris is excessive. Let us spend two or three hundred millions for railroads, and we shall cut it in half. Yet clearly, all that we shall gain is that the Belgian product will be sold in Paris for thirty-five francs, to wit:
Now, should we not have achieved the same result by lowering the tariff to five francs? We should then have:
And this proceeding would save us the 200 millions the railroads would cost us, plus the costs of customs inspection, which will necessarily be reduced, since the lower tariff will constitute less of an incentive to smuggle.
But, it will be said, the tariff is necessary to protect Parisian industry. So be it; but do not, then, destroy its effectiveness by your railroad.
For if you persist in demanding that the Belgian product, like that of Paris, cost forty francs, you will have to raise the tariff to fifteen francs, so as to have:
But then, I venture to ask, what, in that case, is the good of the railroad?
Frankly, is it not somewhat humiliating for the nineteenth century to provide future ages with the spectacle of such childish behavior carried on with such an air of imperturbable gravity? To be hoodwinked by someone else is not very agreeable; but to use the vast apparatus of representative government to hoodwink ourselves, not just once, but twice over—and that, too, in a little matter of arithmetic—is surely something to temper our pride in being the century of enlightenment.
First Series, Chapter 10
We have just seen that whatever makes transportation more expensive acts in the same way as a protective tariff; or, if you prefer, that a protective tariff acts in the same way as anything that makes transportation more expensive.
It is thus accurate to say that a protective tariff is like a marsh, a rut, a gap in the route, or a steep hill—in a word, it is an obstacle whose effect is to increase the difference between the price the producer receives and the price the consumer pays. It is likewise incontestable that marshes and bogs are, in effect, protective tariffs.
There are people (a small number, it is true, but there are some) who are beginning to understand that obstacles are no less obstacles for being artificial, and that we have more to gain from free trade than from a policy of protectionism, for precisely the same reason that a canal is more favorable to traffic than a "hilly, sandy, difficult road."49*
But, they say, free trade must be reciprocal. If we lowered the barriers we have erected against the admission of Spanish goods, and if the Spaniards did not lower the barriers they have erected against the admission of ours, we should be victimized. Let us therefore make commercial treaties on the basis of exact reciprocity; let us make concessions in return for concessions; let us make the sacrifice of buying in order to obtain the advantage of selling.
People who reason in this way, I regret to say, are, whether they realize it or not, protectionists in principle; they are merely a little more inconsistent than the pure protectionists, just as the latter are more inconsistent than the advocates of total and absolute exclusion of all foreign products.
The following fable will demonstrate my point.
Stulta and Puera50*
Once upon a time there were, no matter where, two cities, Stulta and Puera. At great expense they built a highway from one to the other. When it was completed, Stulta said to herself: "Here is Puera flooding us with her products; we must do something about it." Consequently, she created and salaried a corps of Obstructors, so called because their function was to set up obstacles in the way of traffic from Puera. Soon afterward, Puera also had a corps of Obstructors.
At the end of several centuries, during which there had been great advances in knowledge, Puera became sufficiently enlightened to see that these mutual obstacles could only be mutually harmful. She sent a diplomat to Stulta, who, except for official phraseology, spoke in this wise: "First we built a highway, and now we are obstructing it. That is absurd. It would have been better to have left things as they were. We should not, in that case, have had to pay, first for the highway, and then for the obstructions. In the name of Puera, I come to propose to you, not that we remove all at once the obstacles we have erected against each other—for that would be acting in accordance with a principle, and we despise principles as much as you do—but that we lessen these obstacles a little, taking care to balance equitably our respective sacrifices in this regard."
Thus spoke the diplomat. Stulta asked for time to consider the proposal. She consulted by turns her manufacturers and her farmers. Finally, after several years, she declared that she was breaking off the negotiations.
On receiving this news, the inhabitants of Puera held a meeting. An old man (it has always been suspected that he was secretly in the pay of Stulta) rose and said: "The obstacles created by Stulta are a hindrance to the sale of our goods to her. That is a misfortune. Those that we ourselves have created are a hindrance to our purchases from her. That too is a misfortune. There is nothing we can do about the first situation, but we can do something about the second. Let us deliver ourselves at least from that one, since we cannot eliminate them both. Let us remove our Obstructors without demanding that Stulta do the same. Some day, no doubt, she will come to know her own interests better."
A second councillor, a practical man of affairs, undefiled by principles and reared on the venerable experience of his ancestors, replied: "Do not listen to this dreamer, this theorist, this innovator, this utopian, this economist, this Stultophile. We should all be lost if the obstacles on the highway between Stulta and Puera were not equalized and kept in perfect balance. It would be more difficult to go than to come, and to export than to import. We should be, in relation to Stulta, in the same situation of inferiority in which Le Havre, Nantes, Bordeaux, Lisbon, London, Hamburg, and New Orleans find themselves in relation to the cities located at the headwaters of the Seine, the Loire, the Garonne, the Tagus, the Thames, the Elbe, and the Mississippi; for it is more difficult to go upstream than downstream."
A voice: "The cities at the mouths of rivers have prospered more than those at the headwaters."
"That is impossible."
Same voice: "But it is a fact."
"Very well, then they have prospered against the rules."
Reasoning so conclusive convinced the assembly. The orator followed up his victory by speaking of national independence, national honor, national dignity, domestic industry, inundation by foreign products, tribute paid to foreigners, and murderous competition; in short, his motion in favor of the maintenance of obstacles was carried; and if you are at all curious about the matter, I can take you into a certain country where you will see with your own eyes highway maintenance men and obstructors working side by side in the most friendly way in the world, under laws enacted by the same legislative assembly, and at the expense of the same taxpayers, the former to clear the road, and the latter to block it.
Notes for this chapter
[This is a partial quotation from La Fontaine's fable, The Coach and the Fly (Le Coche et la mouche): "Over a sandy, hilly, and difficult road, / Exposed to the sun on all sides / Six strong horses were drawing a coach."—TRANSLATOR.]
[These names contain the roots of the Latin words meaning "foolish" and "childish."—TRANSLATOR.]
First Series, Chapter 11
End of Notes
First Series, Chapter 11
Do you wish to decide between free trade and protectionism? Do you wish to appreciate the significance of an economic phenomenon? Inquire into the extent of its effects upon the abundance or the scarcity of commodities, and not upon a rise or a fall in prices. Beware of thinking in terms of money prices; they will only lead you into an inextricable labyrinth.
M. Mathieu de Dombasle,51* having proved that a policy of protectionism makes things more expensive, adds:
The increase in price raises the cost of living and consequently the price of labor, and everyone receives from the increase in the price of what he sells compensation for the increase in the cost of what he buys. Thus, if everyone pays more as a consumer, everyone also receives more as a producer.
It is clear that one could reverse the argument and say: "If everyone receives more as a producer, everyone pays more as a consumer."
Now, what does this prove? Nothing, except that a policy of protectionism uselessly and unjustly redistributes wealth. Plunder does the same thing.
Nevertheless, before we can argue that such an elaborate mechanism has this simple counterbalancing effect, we must accept M. de Dombasle's "consequently" and be sure that the price of labor does actually rise with the price of protected commodities. This is a question of fact in regard to which I defer to M. Moreau de Jonnès;52* let him be good enough to ascertain whether wage rates have advanced as much as the price of shares in the mines of the Anzin Company. I, for my part, do not think so; for I believe that the price of labor, like all other prices, is governed by the relation between supply and demand. Now, it is clear to me that restrictive measures diminish the supply of coal and, as a result, raise its price; but it is not so clear to me that they increase the demand for labor and thereby result in higher wage rates. What renders such consequences unlikely is the fact that the quantity of labor demanded depends on the amount of capital available. Now, protection may well be able to redistribute capital by shifting it from one industry to another, but it cannot increase the total amount of capital by a single centime.
But this question, which is of the greatest interest, will be examined elsewhere. So far as money prices are concerned, I maintain that there are no absurdities that one cannot render plausible by reasoning such as that of M. de Dombasle.
Let us assume that there is an isolated nation, possessing a given quantity of specie, that amuses itself every year by burning half of all the commodities that it produces. I shall undertake to prove, using M. de Dombasle's theory, that it will not as a consequence be any the less rich.
In fact, as a result of the fire, everything that remains will double in price; so that an inventory taken after the disaster will show exactly the same nominal value as one taken before. But, in that case, who will have lost? If John buys cloth at a higher price, he also sells his wheat at a higher price; and if Peter loses on the purchase of wheat, he recovers his loss by the sale of his cloth. "Everyone receives from the increase in the price of what he sells [I shall say] compensation for the total increase in the cost of what he buys; and if everyone pays more as a consumer, everyone also receives more as a producer."
All this is sheer rigmarole, and not science. The truth, reduced to its simplest terms, is this: Whether men destroy cloth and wheat by burning them or by using them, the effect on prices is the same, but not on wealth; for it is precisely the potentiality of using things that constitutes wealth or well-being.
Similarly, restrictive measures, while reducing the abundance of things, can raise their prices to such an extent that, if you will, every person is, in monetary terms, just as rich as he was before. Whether an inventory shows three hectoliters of wheat at twenty francs, or four hectoliters at fifteen francs, the result will be sixty francs in either case; but are the two quantities the same from the point of view of their ability to satisfy wants?
This is the point of view of the consumer, and it is the consumer's point of view that I shall never cease calling to the attention of the protectionists; for consumption is the goal of all our efforts, and it is only by adopting the point of view of the consumer that we shall find the solution to all our problems.53* The argument I address to them will always be the same: Is it not true that restrictive measures, by impeding exchange, by limiting the division of labor, by forcing workers to compensate for hardships due to geographic situation and climatic conditions, ultimately diminish the quantity produced by a given amount of labor? And what difference does it make that the lesser quantity produced under the protective system has the same nominal value as the greater quantity produced under conditions of free trade? Man does not live on nominal values, but on commodities actually produced; and the more he has of these commodities, regardless of their price, the richer he is.
I did not expect, in writing the foregoing, that I should ever come upon an antieconomist logically consistent enough to conclude explicitly that the wealth of nations depends upon the monetary value of things apart from their abundance. Yet here is what I find in the book of M. de Saint-Chamans54* (page 210):
If fifteen million francs' worth of goods sold abroad are taken from the normal production, estimated at fifty million francs, the remaining thirty-five million francs' worth of goods, being no longer capable of satisfying normal demand, will increase in price and rise to the value of fifty million francs. In that case, the income of the country will increase by fifteen million..... There will thus be an increase in the national wealth of fifteen million francs, exactly the amount of the specie imported.
This is a really delightful way of looking at things! If a nation's agriculture and industry produce annually fifty million francs' worth of goods, it has only to sell a quarter of these products abroad to be a fourth richer! Thus, if it sold half of them, it would increase its fortune by half; and if it exchanged for cash its last thread of wool and its last kernel of wheat, it would raise its income to 100 millions! What a singular way of enriching oneself, by producing infinitely high prices by means of absolute scarcity!
Do you still insist on making a comparison between the two doctrines? Submit them to the test of exaggeration.
According to the doctrine of M. de Saint-Chamans, the French would be just as rich—that is to say, as well provided with everything—with a thousandth part of their present annual output, because it would be worth a thousand times as much.
According to our doctrine, the French would be infinitely rich if their annual output were infinitely abundant, and consequently had no monetary value at all.55*
Notes for this chapter
[Christophe Joseph Alexandre Mathieu de Dombasle (1777-1843), a farmer and agronomist noted for his developments of farm machinery, and the author of various works on taxation setting forth his protectionist ideas.—TRANSLATOR.]
[Alexandre Moreau de Jonnès (1778-1870), a French economist, statistician, and author, Director of the Statistical Bureau in the Ministry of Trade, 1834-1852.—TRANSLATOR.]
[This thought often recurs in the author's writings. In his eyes it was of capital importance, and it led him, four days before his death, to make this recommendation: "Tell M. de F.* to treat economic questions always from the consumer's point of view, for the interest of the consumer is identical with that of mankind."—EDITOR.]
[Auguste, Vicomte de Saint-Chamans (1777-1861), a Deputy and Councillor of State, a protectionist, and a proponent of the balance of trade. The quotation is from his Du Système impôt fondé sur les principes d'économie politique.—TRANSLATOR.]
[Cf. infra, Second Series, chap. 5, and Economic Harmonies, chap. 4.—EDITOR.]
First Series, Chapter 12
End of Notes
First Series, Chapter 12
Does Protectionism Raise Wage Rates?
An atheist was railing against religion, against priests, and against God. "If you keep on like this," said one of his listeners, who was not very orthodox himself, "you are going to make a pious man of me."
Similarly, when I hear our callow scribblers, our novelists, our reformers, our perfumed, mincing pamphleteers, gorged with ices and champagne, stuffing their portfolios with gilt-edged securities,56* or getting richly paid for their tirades against the egoism and individualism of our age; when I hear them declaiming against the harshness of our institutions and bewailing the lot of wage earners and proletarians; when I see them raising to the heavens eyes full of tears at the sight of the poverty of the toiling masses—a poverty with which they never have any contact except to paint lucrative pictures of it; I am tempted to tell them: "If you go on like this, you are going to make me indifferent to the fate of the workers."
Oh, what affectation! It is the nauseating malady of our age! Workers, if a serious man, a sincere humanitarian, paints a true picture of your misery, and if his book makes any impression at all, a mob of reformers at once pounces on it. They turn it this way and that; they exploit it; they distort it; they exaggerate it; they carry its ideas to ridiculous or disgusting extremes. They have a remedy for all your woes, and they are always ready to prescribe for you with big words like "association" or "organization"; they flatter you and fawn upon you so obsequiously that soon you will be in the same predicament as the slaves: earnest men will be ashamed to embrace your cause openly, for how can anyone introduce some sensible ideas in the midst of these mawkish declamations?
But I refuse to adopt an attitude of such cowardly indifference, which could not be justified even by the affectation that provokes it.
Workers, yours is a strange situation! People plunder you, as I shall show in a moment..... No; I take back that word. Let us banish from our language every violent and possibly false expression—false, that is, in the sense that plunder, enveloped and disguised by sophisms, is carried on, one is constrained to believe, against the will of the plunderer and with the consent of the plundered. But after all, people do rob you of what is justly due you for your labor, and nobody concerns himself with seeing that you receive justice. Oh, if all you needed to console you was a clamorous appeal for philanthropy, for ineffectual charity, for degrading alms; if only big words—organization, communism, phalanstery—were enough, people would not stint themselves on your behalf. But justice, pure and simple justice, that is something no one dreams of giving you. And yet would it not be just if, after a hard day's ill-paid work, you could exchange the little you had received for the greatest amount of satisfaction that you could obtain freely from any man on the face of the earth?
Some day, perhaps, I shall speak to you also about association and organization, and we shall then see what you can expect of these idle fancies that you have allowed to lead you astray.
Meanwhile, let us see whether people are not doing you an injustice by passing laws that specify not only the persons from whom you are to buy the things you must have, such as bread, meat, linens, and woolens, but the price you are to pay for them.
Is it true that the policy of protectionism, which admittedly makes you pay higher prices for everything and in that respect harms you, also brings about a proportional increase in your wages?
What do wage rates depend on?
One of your fellow workers has put it very neatly: When two workers run after one employer, wages fall; they rise when two employers run after one worker.
For the sake of brevity, let me state this more scientifically, though perhaps not quite so clearly: Wage rates depend upon the supply of and the demand for labor.
Now, what does the supply of workers depend on?
On the number that there are on the market; and protectionism has no control over this.
What does the demand for labor depend on?
On the amount of domestic capital available for investment. But does the amount of capital increase because the law says: "People shall no longer get such and such a product from abroad; they shall make it at home"? Not in the least. It may force capital out of one branch of production and into another, but it does not add a centime to the total capital available. Therefore, it does not increase the demand for labor.
People point with pride to a certain factory. Did the capital that established it and that maintains it fall from the moon? No, it had to be withdrawn from agriculture, from shipping, or from wine production. And that is why, since we have had protective tariffs, there have been more workers in our mines and in the suburbs of our industrial cities, but there have been fewer sailors in our ports, and fewer farmers and vineyardists in our fields and on our hillsides.
I could expatiate at length on this subject, but I prefer to elucidate my meaning by way of an example.
A countryman had a farm of twenty arpents,57* in which he invested 10,000 francs. He divided his land into four parts and rotated his crops on them in the following order: first, corn; second, wheat; third, clover; fourth, rye. He and his family needed only a very modest share of the grain, meat, and dairy products that the farm provided, and he sold the surplus to buy oil, flax, wine, etc. The whole of his capital was spent each year on wages and payments to hired hands living in the neighborhood. This investment was recovered in the proceeds from his sales, and his capital even grew from year to year; and our countryman, well aware that money produces nothing unless it is put to work, benefited the working classes by devoting these annual surpluses to fencing off and clearing land and to improving his agricultural implements and buildings. He even had some savings on deposit with the banker in the neighboring town, but the latter did not let these funds lie idle in his vaults; he lent them to shipowners and to entrepreneurs engaged in useful industries, so that the money was constantly being paid out in the form of wages.
In the meantime, the countryman died; and his son, as soon as he came into his inheritance, said to himself: "It must be confessed that my father was victimized all his life. He bought olive oil and thus paid tribute to Provence, whereas our land could, in a pinch, be made to grow olive trees. He bought flax, wine, and oranges, and paid tribute to Brittany, Médoc, and the Hyères Islands,58* whereas hemp, vines, and orange trees could, somehow or other, be made to yield some produce in our own fields. He paid tribute to the miller and the weaver, when our servants could easily weave our linen and grind our wheat. He ruined himself, and, besides, he let outsiders earn the wages that it would have been so easy for him to distribute here at home."
Fortified by this logic, the rash young man changed the system of crop rotation on the farm. He divided it into twenty fields. On one he cultivated olive trees; on another, mulberry trees; on a third, flax; on a fourth, grapes; on a fifth, wheat; etc., etc. In this way he succeeded in providing his family with everything they needed and in making himself independent. He no longer took anything out of the general circulation of goods, but he no longer put anything into it either. Was he any the richer on that account? No, because his land was unsuited for the cultivation of grapes; the climate was unfavorable for the successful growing of olive trees; and, in the long run, the family was less well provided with all the things it needed than in the days when the father acquired them by way of exchange.
As for the hired hands, there was no more work for them than before. There were, to be sure, five times as many fields to cultivate, but they were only one-fifth as large; the farm produced olive oil, but less wheat was raised on it; the farmer no longer bought flax, but he no longer sold rye. Moreover, he could pay out in wages no more than the amount of his capital; and his capital, far from increasing as a result of the new system of crop rotation, kept on steadily decreasing. A great part of his capital was invested in buildings and the large assortment of agricultural implements necessary for carrying on a complex operation of this kind. As a result, the supply of labor remained the same, but as there was less money to pay the workers with, wages inevitably fell.
This is a picture, on a small scale, of what happens when a country isolates itself behind tariff walls. Granted that it multiplies the number of its industries, it at the same time diminishes their importance. It adopts, so to speak, a system of industrial rotation that is more complicated, yet no more fruitful. Indeed, the contrary is the case, since the same amount of capital and labor has to contend with a greater number of natural difficulties. A larger share of its circulating capital, which constitutes the wages fund, must be converted into fixed capital. No matter how varied the employment given to the remainder, its total quantity is not increased, any more than the water of a pond becomes more abundant when it is distributed in a number of reservoirs; precisely because it covers more ground and presents a greater surface to the sun, more water is absorbed, evaporated, and lost.
The productivity of a given quantity of capital and labor is inversely proportional to the obstacles with which both are confronted. It is indubitable that as international barriers force capital and labor in each country into channels where they encounter greater difficulties of climate and temperature, the general result must be a diminution in production, or—what amounts to the same thing—fewer goods capable of satisfying the wants of the consumers. Now, if there is a general reduction in the quantity of goods capable of satisfying people's wants, how is the share of the workers to be increased? Is it to be supposed that the wealthy, who make the law, will arrange things in such a way that they will not only share proportionately in the total diminution, but will even allow their already diminished share to be reduced still further by all that is added, they say, to the workers' share? This is hardly possible or credible. Such suspect generosity the workers would be wise to reject.59*
Notes for this chapter
[Bastiat here refers by name to certain securities that enjoyed wide public confidence at the time: those of the Comptoir Ganneron, a bank in which, at the height of the speculation, almost four hundred million francs were invested; those of the fur-trading company founded by Sir Alexander MacKenzie and later amalgamated with the original Hudson's Bay Company; and those of the Northern Railway of France.—TRANSLATOR.]
[An old French measure of area differing in value according to locality but being about an acre.—TRANSLATOR.]
[Provence is an old province of southeastern France along the Mediterranean. Médoc is a farming district southwest of the Gironde River. The Hyères Islands are in the Mediterranean off Provence.—TRANSLATOR.]
[Cf. Economic Harmonies, chap. 14.—EDITOR.]
First Series, Chapter 13
End of Notes
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