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Jean-Baptiste regards regulations which favor producers as a form of political privilege at the expence of the community (1803)

The French industrialist and economist Jean-Baptiste Say (1767-1832) witnessed first hand attempts by manufacturers to get special privileges from the government to limit competition in their favor and at the expence of ordinary consumers:

But personal interest is no longer a safe criterion, if individual interests are not left to counteract and control each other. If one individual, or one class, can call in the aid of authority to ward off the effects of competition, it acquires a privilege to the prejudice and at the cost of the whole community; it can then make sure of profits not altogether due to the productive services rendered, but composed in part of an actual tax upon consumers for its private profit; which tax it commonly shares with the authority that thus unjustly lends its support.

I can hardly suppose any government will be bold enough to object, that it is indifferent about the profit, which might be derived from a more advantageous production, because it would fall to the lot of individuals. The worst governments, those which set up their own interest in the most direct opposition to that of their subjects, have by this time learnt, that the revenues of individuals are the regenerating source of public revenue; and that, even under despotic and military sway, where taxation is mere organized spoliation, the subjects can pay only what they have themselves acquired.

The maxims we have been applying to agriculture are equally applicable to manufacture. Sometimes a government entertains a notion, that the manufacture of a native raw material is better for the national industry, than the manufacture of a foreign raw material. It is in conformity to this notion, that we have seen instances of preference given to the woollen and linen above the cotton manufacture. By this conduct we contrive, as far as in us lies, to limit the bounty of nature, which pours forth in different climates a variety of materials adapted to our innumerable wants. Whenever human efforts succeed in attaching to these gifts of nature a value, that is to say, a degree of utility, whether by their import, or by any modification we may subject them to, a useful act is performed, and an item added to national wealth. The sacrifice we make to foreigners in procuring the raw material is not a whit more to be regretted, than the sacrifice of advances and consumption, that must be made in every branch of production, before we can get a new product. Personal interest is, in all cases, the best judge of the extent of the sacrifice, and of the indemnity we may expect for it; and, although this guide may sometimes mislead us, it is the safest in the long-run, as well as the least costly.

But personal interest is no longer a safe criterion, if individual interests are not left to counteract and control each other. If one individual, or one class, can call in the aid of authority to ward off the effects of competition, it acquires a privilege to the prejudice and at the cost of the whole community; it can then make sure of profits not altogether due to the productive services rendered, but composed in part of an actual tax upon consumers for its private profit; which tax it commonly shares with the authority that thus unjustly lends its support.

The legislative body has great difficulty in resisting the importunate demands for this kind of privileges; the applicants are the producers that are to benefit thereby, who can represent, with much plausibility, that their own gains are a gain to the industrious classes, and to the nation at large, their workmen and themselves being members of the industrious classes, and of the nation. [54]

FN54: No one cries out against them, because very few know who it is that pays the gains of the monopolist. The real sufferers, the consumers themselves, often feel the pressure, without being aware of the cause of it, and are the first to abuse the enlightened individuals, who are really advocating their interests.

About this Quotation:

Jean-Baptiste Say, along with many 19th century French classical liberals who admired his work, thought the state was essentially a parasitic body which preyed upon the productive activity of the “industrious class”. As he notes at the beginning of the quotation, governments recognise this important fact and are forced to permit the tax paying public some freedom to produce the wealth upon which the state depends. In earlier societies, where this principle was less well respected, taxation was “mere organized spoliation (plunder)”. In his own day, the plundering of the ordinary consumer took a more sophisticated form. For example, domestic manufacturers argued to the government that their particular business was essential to the well-being of the nation and that they should be protected from foreign competition by the granting of special favors and privileges by the government. Say, and in particular his later follower Frédéric Bastiat, regarded these trading privileges as just another form of plunder which benefited a small and well organised class of people at the expense of consumers. In a footnote which might be easily overlooked, Say explains why this system of privilege continues to flourish in France. He realises that the benefits of the privilege are highly concentrated in the hands of a small and powerful group of individuals who have a strong incentive to lobby for its continuance, while the costs are widely dispersed and not readily visible to the large number of consumers who pay this hidden “tax”. The consumers are also bamboozled by the propaganda of those who receive the benefits as they argue that they are essential for the “national interest.” It was this self-interested propaganda or “economic sophism” which Bastiat was to devote the last years of his life to combatting.

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