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third letter - Frédéric Bastiat, Selected Essays on Political Economy [1848]

Edition used:

Selected Essays on Political Economy, trans. Seymour Cain, ed. George B. de Huszar, introduction by F.A. Hayek (Irvington-on-Hudson: Foundation for Economic Education, 1995).

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third letter

Services are exchanged for services. I have to constrain myself to resist the temptation to show how simple, true, and fruitful this axiom is.

Once this axiom is clearly understood, what becomes of such subtle distinctions as use-value and exchange-value, material products and immaterial products, productive classes and unproductive classes? Manufacturers, lawyers, doctors, civil servants, bankers, merchants, sailors, soldiers, artists, workers, all of us, such as we are, except for the exploiters, render and receive services. Now, since these reciprocal services alone are commensurable with one another, it is in them alone that value resides, and not in the gratuitous raw materials and in the gratuitous natural resources that they put to work. Let it not be said, then, as is customary nowadays, that the merchant is a parasitic middleman. Does he or does he not take pains? Does he or does he not spare us labor? Does he or does he not render services? If he renders services, he, as well as the manufacturer, creates value.8

Just as the manufacturer, by means of the steam engine, takes advantage of the weight of the atmosphere and the expansibility of gases to make his spindles turn, so the merchant makes use of the direction of the winds and the fluidity of water to transport his goods. But neither the one nor the other charges us for these forces of Nature; for the more they are assisted by these forces, the more they are compelled to lower their prices. These forces, then, remain what God willed that they should be, a gratuitous gift, on condition that labor be applied to them, for all mankind.

Is it otherwise in agriculture? This is what I have to examine.

Imagine an immense island inhabited by a few savages. One of them conceives the idea of devoting himself to the cultivation of the soil. He prepares for it for a long time, for he knows that the enterprise will require many days' labor before yielding the slightest compensation. He accumulates provisions; he makes a few crude instruments. Finally, he is ready; he encloses and clears a piece of land.

This raises two questions:

Does this savage infringe upon the rights of the community?

Does he hurt its interests?

Since there is a hundred thousand times more land than the community could cultivate, he does no more injury to its rights than I do to those of my fellow countrymen when I take a glass of water out of the Seine to drink, or a cubic foot of air from the atmosphere to breathe.

Neither does he hurt its interests. Quite the contrary. Since he either quits hunting or hunts less, his companions have proportionately more hunting space; besides, if he produces more food than he can consume, there remains a surplus for him to exchange.

In that exchange, does he exercise the least coercion over his fellow men? No, since they are free to accept or to refuse.

Does he charge for the contribution of the land, the sun, and the rain? No, since everyone can resort, as he has, to these gratuitous means of production.

If he wants to sell his piece of land, what will he get for it? The equivalent of his labor, and that is all. If he said: “Give me first as much of your time as I have devoted to the working of the land, and then another portion of your time for the value of the virgin soil,” the reply would be: “There is virgin soil next to yours. I can compensate you only for your time; since, if I devoted an equal amount of time to the same task, nothing would prevent me from putting myself on the same footing as you.” It is exactly the same reply that we should make to a water carrier who would ask two sous of us for the value of his services and two more for the value of the water. Hence, it is evident that the land and the water have this in common, that both have great utility, and that neither has value.

If our savage wanted to rent out his field, he would still get nothing but compensation for his labor in another form. A demand for anything more would always be met with this inexorable reply: “There is farm land on the island,” a reply carrying greater finality than that of the miller of Sans-Souci: “There are judges in Berlin.”*9

Thus, originally, at least, the landowner, whether he sells the products of his land or his land itself, or whether he rents it, does nothing but render and receive services on an equal footing. It is these services which are compared and, consequently, which have value, value being attributed to the soil only by abbreviation or metonymy.

Let us see what happens as the island becomes populated and cultivated.

It is clearly evident that it becomes easier for everyone to procure raw materials, provisions, and labor, without special privileges for anyone, as is seen in the United States. There it is absolutely impossible for the landowners to put themselves in a more favorable position than other workers, since, because of the abundance of land, everyone has the choice of resorting to agriculture if it becomes more profitable than other vocations. This freedom suffices to maintain the equivalence of services. It also suffices to insure that the forces of Nature, which are used in a great number of industries as well as in agriculture, do not profit the producers as such, but the consuming public.

Two brothers separate. One goes whale fishing; the other goes to open up land in the Far West. Then they exchange whale oil for wheat. Does this mean that for one of the parties to the transaction the value of the soil counts for more than the value of the whale counts for the other? Comparison can be made only of services received and rendered. Hence, these services alone have value.

This is so true that if Nature has been very generous to the land, that is, if the harvest is abundant, the price of wheat drops, and it is the fisherman who profits from it. If Nature has been generous to the ocean, in other words, if the fishing has been good, it is the whale oil that is cheap, to the profit of the farmer. Nothing proves better that the gratuitous gift of Nature, although put to work by the producer, always remains free of charge for the consumers, on the sole condition that they pay him for putting it to work, that is, for his service.

Hence, as long as there is an abundance of uncultivated land in a country, the balance between reciprocal services will be maintained, and the landowners will be unable to enjoy any exceptional advantage.

It would not be thus if the landowners succeeded in forbidding all new land-clearing. In that case, it is quite clear that they would be in a position to impose their own terms on the rest of the community. As the population grew and the need for food made itself felt more and more insistently, it is clear that the landowners would be in a position to charge more dearly for their services, a fact which ordinary language expresses thus, by metonymy: The soil has more value. But the proof that this iniquitous privilege would confer an artificial value, not on raw materials, but on services, is to be found in France and in Paris itself. By a process similar to that which we have just described, the law limits the number of brokers, dealers in government bonds, solicitors, and butchers; and what is the result? In placing them in a position to put a high price on their services, the law creates in their favor a kind of capital that is not embodied in any material form. For the sake of brevity we say: “This practice, this office, this license, is worth so much,” and the metonymy is evident. The same is true of the soil.

Finally, we come to the last hypothesis, in which the soil of the whole island is individually owned and cultivated.

Here it seems that the relative position of the two classes is going to change.

In fact, the population continues to increase; it crowds into all fields of endeavor, except the one that has already been preempted. The landowner, then, will be in a position to set the terms of exchange. What limits the value of a service is never the will of the one who renders it. It is limited when the one to whom it is offered can forgo it or do it for himself or deal with others. The proletarian no longer has any of these alternatives. Formerly he could say to the landowner: “If you ask of me more than the remuneration for your labor, I will cultivate the land myself,” and the landowner was forced to submit. Today the landowner has this retort: “There is no more open land in the country.” Thus, whether value is ascribed to things or to services, the cultivator of the soil will profit from the absence of all competition; and as the landowners will be in a position to impose their terms on the tenant farmers and the farm laborers, they will, in effect, impose them on everyone.

This new situation evidently has as its sole cause the fact that the landless can no longer restrain the demands of the landowners by saying, “There is still uncleared land to be had.”

What must, then, happen for the equivalence of services to be maintained, for the existing situation to revert immediately to that which previously prevailed? Only one thing: that a second island emerge beside our island, or, better yet, whole continents not entirely given over to cultivation.

In that case, labor would continue to develop, distributing itself in proper proportions between agriculture and other industries, without any oppression being possible from one side or the other; since, if the landowner said to the artisan: “I will sell my wheat at a price above the normal remuneration of labor,” the latter would be quick to reply: “I will work for the landowners on the continent, who cannot make such demands.”

When that time comes, the true security of the masses consists in freedom of exchange, in the right to employment in the proper sense of the term.10

The right to employment consists in freedom, the right to own property. The artisan is the owner of the product of his labor, of his services, or of the price that he gets for them, just as much as the landowner. As long as, in virtue of this right, he can exchange them all over the world for agricultural products, he necessarily keeps the landowner in that position of equality which I have previously described, in which services are exchanged for services, without the possession of the soil conferring by itself an advantage independent of labor any greater than the possession of a steam engine or of the simplest tool.

But if, usurping the legislative power, the landowners prevent the proletarians from working for outsiders, then the balance of services is destroyed. Out of respect for scientific precision, I will not say that they thereby artificially raise the value of the soil or of the forces of Nature; but I will say that they artificially raise the value of their services. With less labor they pay for more labor. They oppress others. They do what all licensed monopolists do, and as the landowners who prohibited new clearings did: they introduce into society a cause of inequality and poverty; they pervert the ideas of justice and property; they dig an abyss under their own feet.11

But what relief can the landless find in the proclamation of the right to employment? In what respect will this new right increase the amount of food or the number of jobs available to the masses? Is not all capital employed in giving them work? Will it increase by passing through the public treasury? By taking it away through taxation, does not the state close at least as many sources of employment on one side as it opens on another?

And then, in whose favor do you establish this right? According to your theory, this would be in favor of whoever no longer has his share of the usufruct of the virgin soil. But bankers, merchants, manufacturers, lawyers, doctors, government officials, artists, and artisans are not landowners. Do you mean that the landowners are to be responsible for assuring employment for all these citizens? But all of them create job opportunities for one another. Do you mean only that the rich, whether landowners or not, should come to the aid of the poor? Then you are talking about the dole, and not about a right having its source in the ownership of land.

The right that must be demanded, because it is incontestable, inviolate, and sacred, is the right to employment in the true sense of the term, i.e., freedom, the right to ownership, not of the soil only, but of one's labor, one's intelligence, one's faculties, one's person—a right that is violated if one class can forbid to other classes the free exchange of their services whether abroad or at home. In so far as this freedom exists, landed property is not a privilege; it is, like any other freedom, only man's right to the fruits of his own labor.

It remains for me to draw a few conclusions from this doctrine.

[*][This is an allusion to an anecdote, The Miller of Sans-Souci (Le Meunier de Sans-Souci), recounted by Andrieux, an eighteenth-century wit, poet, and playwright. When Frederick the Great was making plans to construct his estate of Sans-Souci, he discovered that the view of one of the proposed avenues was blocked by a mill. He summoned the owner and offered to purchase the offending mill at a good price. The miller stubbornly refused to sell at any price. Becoming angry, Frederick said, “Don't you know that if I wanted to, I could take your mill away from you by force and not pay you anthing?”

“Ah, yes, you could do that,” replied the miller, “if there weren't any judges in Berlin.”

Highly amused at this naîveté, Frederick, according to Andrieux, allowed the miller to keep his mill. Bastiat evidently found this story an apt illustration, for he refers to it elsewhere.—Translator.]

[8.][On the question of middlemen, see section 2 of the pamphlet, “What Is Seen and What Is Not Seen" (chap. 1 of this volume), and the beginning of chap. 16 of Economic Harmonies.—Editor.]

[9.]We have recently heard it said that land rent is an illegitimate form of income. Without going that far, many people find it hard to understand why capital should yield a perpetual revenue in the form of interest. “How,” they say, “can capital, once formed, yield a perpetual revenue?” Here is the explanation of this perpetuity and of its legitimacy, illustrated by an example:

I have one hundred sacks of wheat. I could use them to live on while I devote myself to useful labor. Instead of that, I put them out on loan for a year. What does the borrower owe me? The full return of my hundred sacks of wheat. Does he owe me only that? In that case, I would have rendered a service without getting anything. He owes me, then, besides the simple return of my loan, a service, a remuneration whose amount will be determined by the laws of supply and demand: that is, interest. It is evident that at the end of the year I still have one hundred sacks of wheat to loan, and so on forever after. The interest is a small portion of the labor that my loan has put the borrower in a position to perform. If I have enough sacks of wheat so that the interest suffices for my existence, I can be a man of leisure without harming anyone; and it would be easy for me to show that the leisure thus achieved is itself one of the spurs to the progress of society.

[10.][This hypothesis was examined anew by the author in the last part of his letter to M. Thiers. See (in chap. 7 of this volume) the last twelve pages of “Protectionism and Communism.”—Editor.]

[11.][On landed property, see chap. 9 and chap. 13 of Economic Harmonies. See also, in Vol. II (of the French edition), the second parable in the speech delivered September 29, 1846, at Montesquieu Hall.—Editor.]