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Subject Area: Economics
Topic: Free Trade

CHAPTER I: COLBERTISM AND ITS EFFECTS - Yves Guyot, The Comedy of Protection [1906]

Edition used:

The Comedy of Protection, trans. M.A. Hamilton (London: Hodder and Stoughton, 1906).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


CHAPTER I

COLBERTISM AND ITS EFFECTS

The Colbertist formula—Tariffs of 1664 and 1667—Colbertism and the Dutch war—The Balance of Trade: hoard up treasure and ruin others—The delegates of 1701—All except Rouen demand freedom—Melon, and the export of money abroad—Orry, the Royal Treasurer, refutes the Balance of Trade theory—How a country grows rich—“Laissez faire, laissez passer”—The Physiocrats—Mercier la Rivière’s question—Turgot, de Vergennes, and Pitt—Treaty of 1786.

In 1650, Colbert at the time assistant to Mazarin, was instructed to discover by what means commercial relations might be renewed between France and England, where, the year before, Charles I. had had his head cut off. In the memorial which he presented on this subject Colbert speaks of trade as “carrying from one province to another, and to foreign countries, the goods which the people in any place require.” In 1666, however, he formulated in the following words the system which M. Méline imagines himself to have invented: “It is advisable by raising duties to keep out articles of foreign manufacture, and to buy French goods rather than foreign ones even when they are rather inferior or more expensive, since the double advantage is secured when money does not go out of the country that it does not grow poorer, and that his Majesty’s subjects make a livelihood by stimulating industry.” He had begun in 1664 by setting up a fairly moderate tariff; but Protectionists have always been hard to satisfy, and in April, 1667, they got the duties on manufactures doubled, i.e., on English and Dutch textiles, wool, and lace, and a duty of 2s. per ton placed on foreign vessels to encourage the French navy. After some fruitless negotiations England retaliated by retroactive duties on wines and brandies. Holland threatened: in 1670 their ambassador submitted a memorandum to Louis XIV. in which, after putting commerce under the care of Providence, he said: “Those who facilitate trade, facilitate national happiness and prosperity; those who impede it, stopping its passage by taxes so heavy as to prohibit traffic in the goods on which they are levied, not only prevent their subjects from enjoying the things which grow elsewhere, but even from selling in exchange for them the things they grow at home. By one stroke they compel people to keep the goods of which they already have too much and prevent their obtaining those that they require.” Such ideas clashed with Colbertism. Holland, therefore, placed prohibitive duties on wine brandies, and very heavy ones on French silks and other manufactured goods. France retaliated by again raising the duties on herrings and groceries imported from Holland and prohibiting the export of brandies in Dutch vessels. This led to the war of 1672. Six years later, at the peace of Nymeguen, Holland enforced a return to the tariff of 1664. When hostilities broke out again in 1668, Louis XIV. reimposed the tariff of 1667, but the Peace of Riswyck in 1697 restored the tariff of 1664, which, slightly modified, formed that of 1699. At the end of the War of Succession, which, breaking out in 1702, was likewise a commercial war, England and Holland, in the Peace of Utrecht, revived the 1664 tariff, but the English Parliament threw out the Bill and the tariff applied to Holland only. Colbertism had thus produced one result—war with Holland.

In a memorandum on Colbertism, read before the Royal Economic Society of Florence in 1791, Francis Menzotti showed that in order to incline the Balance of Trade in its favour a nation must get money from others by selling to them without buying, by which means it aggrandises its own treasury at their expense. The practical application of Colbertism under Louis XIV. left France nerveless and exhausted; every treaty obliged her to abandon the tariff which had originally provoked the war.

An order of June 29, 1700, constituted a general Board of Trade, to be composed of twelve leading merchants chosen from the great trade centres of the kingdom. Nine from among the memoranda issued in 1701 have been preserved. Only one, that of the Rouen delegate, is in favour of a high restrictive tariff. The deputy from Nantes declares liberty to be the soul and substance of all trade; the deputy from Bordeaux seeks for final causes: “God has distributed His bounties in order to compel men to love one another. He has willed that the earth should not everywhere produce the same things, in order that its inhabitants should seek out and help one another by interchange of the goods which they severally possess.” The deputy from Lyons declares: “We must abandon the theory of M. Colbert that France can be independent of the rest of the world. Trade ceases to exist when in return for our commodities and manufactures we only receive coin from abroad.” In an essay on Trade, published in 1734, Melon, a former farm inspector from Bordeaux, said: “Do people imagine that a present is being made to the foreigner when they talk of the danger of sending money out of the country?” Mollien, in his Memoirs, quotes some notes made by Orry, Finance Minister and Royal Treasurer from 1736 to 1745, which contain a complete refutation of the Balance of Trade fallacy:—

“When a home product is bought at a price much above that which would be paid for the same commodity manufactured abroad, even though no money goes out of the country, there is a loss to the consumer in the fact that he has incurred a greater expense, and thereby lost the opportunity of saving the surplus or satisfying another want with it. The consumer’s money ought to go to the best producer. No industries can acquire a position and expand except in a rich country. The richness of a country is not to be measured by the high prices which it pays for its own products, but by what it has left after its needs are satisfied. True capital, which is of such advantage to a country in the development of its resources, is the result of savings gradually amassed out of yearly income. If a manufacturer grows rich because his rivals have been removed by prohibitive legislation, it must be at the expense of a much more than proportionate loss to the consumers whom he supplies, and consequently to the country at large.”

Gournay, a retired merchant, Quesnay, and the Physiocrats uttered the formulas, “Laissez faire, laissez passer”; “As much competition as possible”; “The merchants of other countries are the right people for us to trade with.” Mercier la Rivière asked those who talked about the Balance of Trade what would happen to a nation fortunate enough to exchange all its raw material and all its foodstuff for money. The edict of 1764 on the corn trade showed that, thanks to the economists, some progress had been effected; and in 1774, Turgot, who had laid down the lines of his programme in a panegyric of Gournay uttered in 1759, was made Controller-General of Finance. He said in the preceding year, in a letter to the Abbé Terray: “Those who carry on trade always try to rid themselves of competition; they always produce some sophistical arguments to prove that it is to the interest of the State to rid them at least of foreign competition, which they have no difficulty in representing as the enemy of national trade.”

Turgot tried to break the power of the corporations, and those interested in maintaining them denounced him to the King and the people as an enemy. But in 1776 Adam Smith’s great “Wealth of Nations” appeared, of which Buckle declared that there was no book in the world so important. Although Turgot had been overthrown he had left disciples, and one of them, M. de Vergennes, wrote on February 1, 1783, to the French Ambassador in London: “There is an ancient prejudice that a natural incompatibility exists between the two nations. Every nation must aim at attaining the maximum prosperity for itself, but in so far as such prosperity is exclusive it leads to its own negation. One cannot grow rich when other nations are destitute.” In 1786 he succeeded in concluding a commercial treaty with Pitt, which abolished those prohibitive duties which led to nothing but smuggling. When it was opposed in Parliament, Pitt defended the treaty in terms as valid now as they were then. “Is a good understanding between these two kingdoms so derogatory to our honour that its opprobrium is not removed even by the extension of our trade? . . . I have no hesitation in opposing the opinion, too often expressed, that France is necessarily an irreconcilable foe to England, a doctrine which my understanding rejects as monstrous and impossible.” The Rouen Chamber of Commerce, always Protectionist, protested against the invasion of English goods.

It would appear that the collection of Customs dues was singularly arbitrary. Nevertheless, in 1826 the Duke of Pasquier said that “the competition opened by the treaty of 1786 did more to encourage industry than all the prohibitions that it repealed.”