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First Series, Chapter 21: Raw Materials - Frédéric Bastiat, Economic Sophisms [1845]

Edition used:

Economic Sophisms, trans. Arthur Goddard, introduction by Henry Hazlitt (Irvington-on-Hudson: Foundation for Economic Education, 1996).

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


First Series, Chapter 21

Raw Materials

It is said that the most advantageous of all branches of trade is that in which one exchanges manufactured goods for raw materials. For these raw materials are the staff of life for domestic labor.

Hence, the conclusion is drawn that the best tariff law would be the one that would most facilitate the importation of raw materials and would erect the most obstacles to the entry of finished goods.

There is, in political economy, no sophism more widely accepted than this. It is dear not only to the protectionist school but also, and above all, to the self-styled liberal school; and this is regrettable, for the worst thing that can happen to a good cause is, not to be skillfully attacked, but to be ineptly defended.

Freedom of exchange will probably share the fate of freedom in general: it will become a part of our laws only after having taken possession of our minds. But if it is true that a reform must be generally accepted in order to be firmly established, it follows that nothing can delay it so much as that which misleads public opinion; and what is better fitted to mislead it than works that, while advocating free trade, are themselves based on the doctrines of monopoly?

A few years ago three large French cities—Lyons, Bordeaux, and Le Havre—rebelled against the protectionist system. The nation—indeed, the whole of Europe—was stirred on seeing raised what they took for the banner of free trade. Alas, it was still the banner of monopoly—of a monopoly a little more grasping and a great deal more absurd than the one the rebels were apparently trying to overthrow. By using the sophism that I am going to try to unmask, the petitioners did nothing more than reproduce, with an additional inconsistency, the doctrine of protection for domestic labor.

What, really, is the protectionist system? Let us hear what M. de Saint-Cricq has to say on this subject:

"Labor constitutes the wealth of a nation, because labor alone creates the material objects that our wants demand, and because universal well-being consists in the abundance of these objects." So much for the premise of the argument.

"But this abundance must be the product of domestic labor. If it were the product of foreign labor, domestic labor would at once be disemployed." Here lies the error. (See the preceding chapter.)

"What, then, should an agricultural and industrial country do? Secure its market for the products of its own soil and its own labor." This is the end to be attained.

"And, to this end, restrict by means of tariffs and, if need be, exclude entirely the products of the soil and the labor of other nations." These are the means to be employed.

Let us compare this system with that proposed in the Bordeaux petition.

It divided goods into three classes.

"The first comprises food and raw materials on which no human labor has been bestowed. In principle, a wise economic system would require that this class of goods enter duty-free." Here, as there is no labor, there is no need of protection.

"The second is composed of articles that have undergone preliminary fabrication. This preliminary fabrication warrants the levying of some duties." Here protection begins, because, according to the petitioners, domestic labor starts contributing to the product.

"The third includes finished goods, which can in no way provide employment for domestic labor; we consider this class the most dutiable." Here labor, and with it protection, reach their maximum.

It is clear that the petitioners are arguing that foreign labor harms domestic labor; this is the error of the protectionist system.

They are demanding that the French market be secured for French labor; this is the end aimed at by the protectionist system.

They are requiring that foreign labor be subjected to restrictions and taxes. This is the means employed by the protectionist system.

What difference, therefore, is it possible to detect between the petitioners from Bordeaux and M. de Saint-Cricq, the leader of the protectionist chorus?

Only one: the breadth of the meaning given the word labor.

M. de Saint-Cricq extends it to everything. Therefore he insists on protecting everything.

"Labor constitutes all the wealth of a nation," he says; "protect agricultural industry, all agricultural industry; protect manufacturing industry, all manufacturing industry—that is the cry which will be heard again and again in this Chamber."

The petitioners consider as labor only what is performed in connection with manufacturing; hence, they would confer the privileges of protection only on manufactured goods.

"Raw materials are those on which no human labor has been bestowed. In principle, they should not be dutiable. Finished goods can no longer provide employment for domestic labor; we consider them the most dutiable."

It is not our task here to investigate whether protection for domestic labor is reasonable. On this point M. de Saint-Cricq and the Bordeaux petitioners agree, and we, as the reader has seen in previous chapters, differ with both of them.

Our task is to ascertain which of them—M. de Saint-Cricq or the Bordeaux petitioners—uses the word labor in its proper sense.

Now, on this ground, we must say that the position taken by M. de Saint-Cricq is a thousand times better founded, for here is the dialogue that might take place between them:

M. de Saint-Cricq: "You grant that the products of domestic labor should be protected. You grant that no products of foreign labor can be introduced into our market without destroying an equal quantity of job opportunities for our domestic labor. But you allege that there are many goods which are possessed of value, since they are sold, and on which, nevertheless, no human labor has been bestowed. And among these you include wheat, flour, meat, cattle, bacon, salt, iron, copper, lead, coal, wool, pelts, seeds, etc.

"If you will prove to me that the value of these things is not due to labor, I shall agree that it is useless to protect them.

"But, on the other hand, if I prove to you that there is as much labor in 100 francs' worth of wool as in 100 francs' worth of textiles, you will have to admit that protection is as obligatory for the one as it is for the other.

"Now, why is this sack of wool worth 100 francs? Is it not precisely because that is its sales price? And what is the sales price but the total amount that had to be paid out, in wages, salaries, interest, and profits, to all the workers and capitalists who cooperated in the production of the article?"

The Petitioners: "As regards the wool, you may be right. But can it be said that a sack of grain, an ingot of iron, a quintal of coal, are products of labor? Are they not created by Nature?"

M. de Saint-Cricq: "Undoubtedly, Nature creates the elements of all these things, but it is labor that produces their value. I myself was wrong in saying that labor creates material objects, and this faulty expression has led me into many other errors. It is not within the capability of man to create, to make something out of nothing, whether he is an industrialist or a farmer; and if by production is meant creation, all our labors must be considered unproductive, and yours, as merchants, more so than all the others, save perhaps my own.

"The farmer, then, cannot rightly claim to have created wheat, but he can rightly claim to have created its value—I mean, by his labor and that of his domestic servants, his cowherds, and his reapers, to have changed into wheat some substances that in no way resembled it. What more is there in the action of the miller who transforms it into flour, or of the baker who shapes it into bread?

"For man to be able to clothe himself, a great many operations are necessary. Prior to the application of any human labor, the real raw materials of clothing are air, water, heat, carbon dioxide, light, and the minerals that must enter into its composition. These are the raw materials of which it may truly be said that no human labor has been bestowed on them, since they have no value, and I should not dream of protecting them. But the first application of labor transforms these substances into fodder, a second into wool, a third into yarn, a fourth into cloth, and a fifth into a finished garment. Who will be so bold as to say that any part of this whole enterprise is not labor, from the first furrow cut by the farmer's plow to the last stitch of the tailor's needle?

"And because the labor involved is spread over several branches of industry for the sake of greater speed and better quality in the manufacture of the finished product, which in this case is a piece of clothing, do you want, by an arbitrary distinction, to rank the importance of these operations in terms of the order in which they follow one another, so that the first in the sequence does not deserve even the name of labor, while the last, which is pre-eminently worthy of the appellation, alone merits the privileges of protection?"

The Petitioners: "Yes, we are beginning to see that wheat, like wool, is not entirely a product on which no human labor has been bestowed. But the farmer has not, at least, like the manufacturer, done everything himself or with the assistance of his workers. Nature too has helped him; and if labor is involved in the production of wheat, it is not solely the product of labor."

M. de Saint-Cricq: "But the value of everything resides exclusively in the labor needed to produce it. I am glad that Nature contributed to the physical production of the wheat. I could even wish that this were the achievement of Nature alone. But you must admit that I have, by my labor, compelled Nature to come to my assistance; and when I sell you wheat, please observe that it is not Nature's labor that I ask you to pay for, but my own.

"Indeed, from your mode of reasoning it would follow that manufactured goods are not exclusively the products of labor either. For does not the manufacturer summon Nature to his assistance? Does he not assist the steam engine by availing himself of the weight of the atmosphere, just as I avail myself of its humidity to assist the plow? Are the laws of gravitation, of the transmission of energy, or of the affinity of chemical elements his handiwork?"

The Petitioners: "Very well. This case is analogous to that of wool. But coal is surely the work of Nature, and of Nature alone. It is really a product on which no human labor has been bestowed."

M. de Saint-Cricq: "Yes, Nature created coal, but labor created its value. During the millions of years when it lay buried and unknown under a hundred feet of earth, the coal had no value. Someone had to go there and search for it: that was a form of labor. Someone had to bring it to the market: that too was a form of labor. Thus, as we have said, the price that you pay for it on the market is nothing but the remuneration for the labor involved in its extraction and transportation."79

It is evident that up to this point M. de Saint-Cricq has had the better of the argument; that the value of raw materials, like that of manufactured goods, represents the costs of production, that is, of the labor involved in rendering them marketable; that it is not possible to conceive of an object which has value but without having had any human labor bestowed on it; that the distinction the petitioners are making is futile in theory and would be iniquitous in practice, for the unequal distribution of economic advantages that would result from its application would permit the one-third of the French people that are engaged in manufacturing to enjoy the privileges of monopoly on the ground that they produce by laboring, whereas the other two-thirds—that is, the farm population—would be abandoned to competition, on the pretext that they produce without laboring.

No doubt the reply to this will be that it is more advantageous for a nation to import what are called raw materials, whether produced by labor or not, and to export manufactured goods.

This is an opinion very often expressed and widely accepted.

"The more abundant raw materials are," says the Bordeaux petition, "the more manufacturing will multiply and expand."

"Raw materials," it adds, "provide unlimited opportunities for employment for the inhabitants of the country into which they are imported."

"Since raw materials are essential for labor," says the Le Havre petition, "they must be subjected to different treatment and gradually admitted at the lowest customs rates."

The same petition holds that protection for manufactured goods should be reduced, not gradually, but after an indefinite lapse of time; not to the lowest rate, but to twenty per cent.

"Among other items that must be cheap and abundant," says the Lyons petition, "the manufacturers include all raw materials."

All this is based on an illusion.

We have seen that all value represents labor. Now, it is quite true that manufacturing labor multiplies tenfold, sometimes a hundredfold, the value of an unfinished product; that is, it distributes ten times, or even a hundred times, more in earnings throughout the nation. Hence, people are led to reason as follows: The production of a quintal of iron earns only fifteen francs for all classes of workers. The transformation of this quintal of iron into watch springs raises their earnings to 10,000 francs. Will anyone venture to say that the nation does not have a greater interest in receiving 10,000 francs than fifteen francs for its labor?

This mode of reasoning disregards the fact that exchange, whether international or interpersonal, is not carried on in terms of equal quantities of weight or measure. People do not exchange a quintal of iron ore for a quintal of watch springs, or a pound of unwashed wool for a pound of cashmere shawls; but rather a certain value of one of these things for an equal value of another. Now, to exchange a value for an equal value is to exchange a quantity of labor for an equal quantity of labor. Hence, it is not true that the nation that sells textiles or watch springs for 100 francs gains more than one that sells wool or iron for 100 francs.

In a country where no law may be voted and no tax may be levied save with the consent of those whom the law is to govern and upon whom the tax is to fall, the public can be robbed only if it is first deceived. Our ignorance is the raw material of every extortion that is practiced upon us, and we may be certain beforehand that every sophism is the precursor of an act of plunder. My friends, when you detect a sophism in a petition, get a good grip on your wallet, for you may be sure that this is what the petitioners are aiming at.

Let us see, then, just what is the ulterior motive of the shipowners of Bordeaux and Le Havre and the manufacturers of Lyons that they are concealing behind their distinction between agricultural products and manufactured goods.

"It is mainly this first class [that comprising raw materials, on which no human labor has been bestowed]," say the Bordeaux petitioners, "that constitutes the chief support of our merchant marine..... In principle, a wise economic system would require that this class be duty-free..... The second [semifinished goods] can be taxed to a certain extent. The third [finished goods requiring no further labor], we regard as the most dutiable."

The Le Havre petitioners are of the opinion "that it is imperative for us to reduce gradually the duties on raw materials to the lowest rate, so that industry can successively put to work the maritime facilities that will provide it with the primary and indispensable means for the employment of its labor."

The manufacturers were not long in returning the shipowners' courtesy. Accordingly, the Lyons petition demands the duty-free entry of raw materials "in order to prove," as it says, "that the interests of manufacturing cities are not always opposed to those of maritime cities."

No; but it must be said that the interests of both, understood in the sense in which the petitioners use the term, are directly opposed to the interests of farmers and of consumers in general.

This, gentlemen, is what you are really aiming at! This is the actual goal of your nice economic distinctions! You want the law to keep finished goods from crossing the ocean, so that the far more costly transportation of raw materials in the coarse state in which a good part of their bulk still consists of impurities and wastes may provide more employment for your merchant marine and put your maritime facilities to work on a larger scale. This is what you call a wise economic system.

Why not, then, on the same principle, demand that pine trees be brought from Russia with their branches, bark, and roots; gold from Mexico in its mineral state; and hides from Buenos Aires still attached to the bones of their stinking carcasses?

I shortly expect to see railroad stockholders, as soon as they manage to gain a majority in the Chambers, pass a law forbidding the production at Cognac of the brandy that is consumed in Paris. Would not a law requiring the transportation of ten barrels of wine for every barrel of brandy furnish Parisian industry with the indispensable means for the employment of its labor and, at the same time, put our locomotive resources to work?

How long will people shut their eyes to such a simple truth?

Industry, maritime facilities, and labor have as their goal the general welfare, the common good; to create useless industries, to favor superfluous transportation facilities, to foster needless labor, not for the good of the public, but at the expense of the public, is to begin at the wrong end of the stick. What is desirable in itself is not labor, but consumption; all nonproductive labor is a dead loss. Paying sailors for carrying useless wastes across the seas is like paying them for skimming pebbles over the surface of the water. Thus, we reach the conclusion that all economic sophisms, despite their infinite variety, are alike in confusing the means with the end and in enlarging the one at the expense of the other.80*

[80.][Cf., in Vol. I (of the French edition), the brief work dated 1834, entitled: "Reflections on the Petitions from Bordeaux, from Le Havre, etc."—EDITOR.]