[Date: Nov. 14, 2015; Revised Nov. 17, 2015]
Frédéric Bastiat (1801-1850)
Title Page of the 1st edition of What is Seen and What is Not Seen (July 1850)
For more information about Frédéric Bastiat see the following:
This pamphlet will be in the Collected Works of Bastiat, vol. 3. Until the book is published, we have included this HTML version of the final edit in this collection as a temporary measure. The Glossaries and some other items indicated in some of the endnotes are not present at the moment.
Source: T.259 (1850.07) What is seen and what is not seen (Ce qu'on voit et ce qu'on ne voit pas). Published as a separate pamphlet. Contains as the first chapter "The Broken Window". [OC5, pp. 336-92.] [CW3]
First edition: Ce qu'on voit et ce qu'on ne voit pas, ou l'Économie politique en une leçon. Par M. F. Bastiat, Représentant du peuple à l'Assemblée nationale, Membre correspondant de l'Institut (Paris: Guillaumin, 1850).
We still have the old FEE edition of this pamphlet in the main OLL collection:
Frédéric Bastiat, 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). </titles/956>.
Paillottet tells us that WSWNS was published in July 1850 barely 6 months before Bastiat was to die from his throat condition. It was over 12 months late because he had lost the manuscript in a house move and had to rewrite it. He was unhappy with the serious tone of the second version and threw that into the fire before writing the third and final version which we have here.
It was published as a 79 page pamphlet by Guillaumin and was reissued in this format in 1869 (4th ed.) and 1879 (5th ed.). It was also part of the collected works of Bastiat which appeared in 1854 (vol. 5 of Oeuvres complètes (1st ed. 1854)), and twice in 1863 (vol. 5 of Oeuvres complètes (2nd ed. 1863) and also vol. 2 of Oeuvres choisies). It was quickly translated into English by William Ballantyne Hodgson in 1852 and published in popular newspapers and circulated among ordinary working people in cheap editions. See the “Note on the Publishing History” for details.
1 (Paillottet’s note) This pamphlet, published in July 1850 was the last one written by Bastiat. It had been promised to the public for more than a year. The following is the reason for its delayed publication. The author lost the manuscript when he moved house from the Rue de Choiseul to the Rue d’Alger. After a long and fruitless search he decided to rewrite the work completely, and selected as the principal basis for his arguments, speeches recently made in the National Assembly. Once he had completed this task, he blamed himself for being too serious, threw the second manuscript into the fire and wrote the one we are publishing here. The subtitle was part of the first edition but it was usually dispensed with in most of the later editions.] [The rue de Choiseul was the headquarters of the French Free Trade Society.]
2 See “A Publishing History of the Economic Sophisms” for a more detailed discussion.
In the sphere of economics an action, a habit, an institution or a law engenders not just one effect but a series of effects. Of these effects only the first is immediate; it is revealed simultaneously with its cause, it is seen. The others merely occur successively, they are not seen;3 we are lucky if we foresee them.
The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect while the good one takes account both of the effect one can see and of those one must foresee.
However, the difference between these is huge, for it almost always happens that when the immediate consequence is favorable the later consequences are disastrous, and vice versa. From which it follows that a bad Economist will pursue a small current benefit that is followed by a large disadvantage in the future, while a true Economist will pursue a large benefit in the future at the risk of suffering a small disadvantage immediately.4
This distinction is also true, moreover, for hygiene and the moral code. Often, the sweeter the first fruit of a habit, the more bitter are those that follow. Examples of this are debauchery, laziness and prodigality. So when a man, touched by some effect that can be seen, has not yet learnt to discern those that are not seen, he gives way to disastrous habits, not just through inclination but deliberately.
This explains the inexorably painful evolution of the human race. Ignorance surrounds its cradle; it therefore makes up its mind with regards to its acts according to their initial consequences, the only ones it is able to see originally. It is only in the long run that it learns to take account of the others.5 Two masters, very different from one another, teach it this lesson: experience and foresight. Experience governs effectively but brutally. It teaches us all the effects of an action by having us feel them and we cannot fail to end up learning that fire burns, by burning ourselves. For this rough teacher, I would like, as far as possible to substitute a gentler one: foresight. This is why I will be seeking the consequences of certain economic phenomena by opposing those that are not seen to those that are seen.
3 Bastiat’s first use of these concepts is most likely in ES1 XX “Human Labor and Domestic Labor” (c. 1845) where he contrasts “immediate and transitory effects” and “general and definitive consequences.”
4 During the course of 1849 when Bastiat repeatedly rewrote this pamphlet as he could not decide on the appropriate style to use, whether serious or satirical, he had developed his thinking on two ideas which were of great concern to him for the previous few years. These were firstly, the immediately observable and obvious consequences of an economic act (“the seen”) and the longer term and less apparent consequences (“the unseen”), and secondly the “ricochet” or flow on effects of economic actions which may or may not have positive or negative consequences. This pamphlet is an extended exploration of the former set of ideas. See the glossary entry on "The Double Incidence of Loss" and the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
5 (Paillottet’s note) See chapter XX in vol. VI. [This is a reference to Chap. XX “Responsibility” in the Economic Harmonies.]
Have you ever witnessed the fury of the good bourgeois Jacques Bonhomme7 when his dreadful son succeeded in breaking a window? If you have witnessed this sight, you will certainly have noted that all the onlookers, even if they were thirty in number, appeared to have agreed mutually to offer the unfortunate owner this uniform piece of consolation: “Good comes out of everything. Accidents like this keep production moving. Everyone has to live. What would happen to glaziers if no window panes were ever broken?”
Well, there is an entire theory in this consoling formula, which it is good to surprise in flagrante delicto8 in this very simple example, since it is exactly the same as the one that unfortunately governs the majority of our economic institutions.
If you suppose that it is necessary to spend six francs to repair the damage, if you mean that the accident provides six francs to the glazing industry and stimulates the said industry to the tune of six francs, I agree and I do not query in any way that the reasoning is accurate. The glazier will come, do his job, be paid six francs, rub his hands and in his heart bless the dreadful child. This is what is seen.
But if, by way of deduction, as is often the case, the conclusion is reached that it is a good thing to break windows, that this causes money to circulate and therefore industry in general is stimulated, I am obliged to cry: “Stop!” Your theory has stopped at what is seen and takes no account of what is not seen.
What is not seen is that since our bourgeois has spent six francs on one thing, he can no longer spend them on another What is not seen is that if he had not had a window to replace, he might have replaced his down-at-heel shoes or added a book to his library. In short, he would have used his six francs for a purpose that he will no longer be able to.
Let us therefore draw up the accounts of industry in general.
As the window was broken, the glazing industry is stimulated to the tune of six francs; this is what is seen.
If the window had not been broken, the shoemaking industry (or any other) would have been stimulated to the tune of six francs; this is what is not seen.
And if we took into consideration what is not seen, because it is a negative fact, as well as what is seen, because it is a positive fact, we would understand that it makes no difference to national output and employment, taken as a whole, whether window panes are broken or not.
Let us now draw up Jacques Bonhomme’s account.9
In the first case, that of the broken window, he spends six francs and enjoys the benefit of a window neither more nor less than he did before.
In the second, in which the accident had not happened, he would have spent six francs on shoes and would have had the benefit of both a pair of shoes and a window.
Well, since Jacques Bonhomme is a member of society, it has to be concluded that, taken as a whole and comparing what he has to do with his benefits, society has lost the value of the broken window.
From which, as a generalization, we reach the unexpected conclusion: “Society loses the value of objects destroyed to no purpose”, and the aphorism that will raise the hackles of protectionists: “Breaking, shattering and dissipating does not stimulate the national employment”, or more succinctly: “Destruction is not profitable”.
What will Le Moniteur industriel say,10 and what will the opinion be of the followers of the worthy Mr. de Saint-Chamans,11 who has so accurately calculated what productive activity would gain from the burning of Paris because of the houses that would have to be rebuilt?12
It grieves me to upset his ingenious calculations, especially since he has introduced their spirit into our legislation. But I beg him to redo them, introducing into the account what is not seen next to what is seen.
The reader must take care to note clearly that there are not just two characters, but three, in the little drama that I have put before him. One, Jacques Bonhomme, represents the Consumer, reduced by the breakage to enjoy one good instead of two. The second is the Glazier, who shows us the Producer whose activity is stimulated by the accident. The third is the Shoemaker (or any other producer) whose output is reduced to the same extent for the same reason. It is this third character that is always kept in the background and who, by personifying what is not seen, is an essential element of the problem. He is the one who makes us understand how absurd it is to see profit in destruction. He is the one who will be teaching us shortly that it is no less absurd to see profit in a policy of trade restriction, which is after all, nothing other than partial destruction. Therefore, go into the detail of all the arguments brought out to support it and you will merely find a paraphrase of that common saying: “What would happen to glaziers if window were never broken?”13
6 The American journalist Henry Hazlitt played an important role in bringing the work of Bastiat to the attention of Americans in the immediate post-World War Two period. In his preface to his book Economics in One Lesson (1946) he acknowledged his debt to Bastiat’s pamphlet “What is Seen and What is no Seen”: “My greatest debt, with respect to the kind of expository framework on which the present argument is being hung, is to Frédéric Bastiat’s essay Ce qu’on voit et ce qu’on ne voit pas, now nearly a century old. The present work may, in fact, be regarded as a modernization, extension, and generalization of the approach found in Bastiat’s pamphlet” (p. 9). Hazlitt’s first chapter was entitled “The Broken Window” which is a reference to one of Bastiat’s better known Sophisms and the very title of Hazlitt’s book probably is drawn from the subtitle used in the printed edition of the pamphlet by the Guillaumin publishing firm, “ou l’économie politique en une leçon” (or, political economy in one lesson). See Henry Hazlitt, Economics in One Lesson (1st edition Harper and Brothers, 1946). The edition used for the quote is New York: Manor Books Inc, 1974.
7 “Jacques Bonhomme” (literally Jack Goodfellow) is the name used by the French to refer to “everyman,” sometimes with the connotation that he is the archetype of the wise French peasant. Bastiat uses the character of Jacques Bonhomme frequently in his constructed dialogues in the Economic Sophisms as a foil to criticise protectionists and advocates of government regulation. The name Jacques Bonhomme was given to the small magazine that Bastiat and Molinari published and handed out on the street corners of Paris in June and July 1848. See the glossary entry "Jacques Bonhomme [person]."
8 "In flagrante delicto" is a Latin phrase which means literally "in blazing offence". It is used in legal circles to mean that someone has been caught in the act of committing an offence.
9 In drawing up this account Bastiat was keen to introduce some mathematical precision into his calculations. He was first inspired by the work of the anti-corn law advocate Colonel Perronet Thompson (1783-1869) who between 1834-36 developed the idea of a calculable “double incidence of loss” by which he meant "the (part) of the sum gained to the monopolists and lost twice over by the rest of France, - (viz. once by a corresponding diminution of business to some other French traders, and once more by the loss to the consumers, who are the nation)... The understanding of the misery of this basis, depends upon a clear comprehension of the way in which the gain to the monopolist is lost twice over by other parties; or what in England has been called the double incidence of loss." [See footnote above, pp. ??? for details]. Bastiat took up this idea and made it the basis for two sophisms beginning with ES3 IV. "One profit vs. Two Losses" (7 May 1847). Later that month he wrote an appeal to one of the leading physicists in France, François Arago (1786-1853), who was active in liberal politics to assist him in making these arguments more rigorous mathematically and thus “invincible.” See "Two Losses vs. One Profit" (30 May 1847) above, pp. ??? See also the glossary entries on “François Arago,” “Perronet Thompson,” “The Double Incidence of Loss,” and the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
10 Le Moniteur industriel was the journal of the protectionist "Association pour la défense du travail national" (Association for the Defense of National Employment) founded by Mimerel de Roubaix in 1846. See the glossary entries on “Le Moniteur industriel,” “Mimerel,” and “Association for the Defense of National Employment”.
11 Saint-Chamans was a deputy (1824-27) and a Councillor of State. He advocated protectionism and a mercantilist theory of the balance of trade. See the glossary entry on “Saint-Chamans."
12 Bastiat misremembers Saint-Chamans’ argument in this passage. In his Traité d’économie politique (1852), which was a reworking of a previous work on Nouvel essai sur la richesse des nations (1824), Saint-Chamans argues against the free market economist Joseph Droz (1773-1850) who stated that that a sudden loss of a large amount of accumulated capital in Europe would cause severe hardship and would take considerable time to overcome. Saint-Chamans countered this by arguing that the Great Fire of London in 1666 (so not Paris) destroyed a huge amount of the capital stock which was quickly replaced and was thus a net gain for the nation of some one million pounds stirling (or 25 million francs) (see above, pp. ???). See M. le vicomte de Saint-Chamans, Traité d’économie politique suivi d’un apercu sur les finances de la France (Paris: Dentu et Ledoyen, 1852), vol. 1. See the glossary entry for “Saint-Chamans.”
13 (Paillottet’s note) See pages 100 et seq. of chapter XX of the first series of Sophisms in Tome IV. . This is a reference to Chap. XX "Travail humain, travail national" (Human Labor and Domestic Labor" in Economic Sophisms Part I.]
The same rules apply to a nation as to a single man. When a nation wishes to acquire some economic benefit or other , it is up to that nation to see whether it is worth what it costs. For a nation, Security is the greatest asset. If, in order to acquire it, one hundred thousand men have to be drafted and one hundred million spent, I have nothing to say.14 It is a benefit purchased at the price of a sacrifice.
Let no one therefore make any mistake about the significance of my thesis.
Imagine that a deputy proposes to discharge a hundred thousand men from the army to lessen the burden on taxpayers to the tune of a hundred million.15
If we limit ourselves to giving him the reply that “These hundred thousand men and this hundred million francs are essential to national security; they are a sacrifice, but without this sacrifice France would be torn apart by factions or invaded by foreigners,” then I have no rebuttal to make at this point to this argument, which may be true or false, but theoretically does not encompass any economic heresy. The heresy begins when you wish to represent the sacrifice itself as an advantage because it benefits someone.
Well, unless I am much mistaken, the author of the proposal will no sooner have come down from the rostrum than another speaker will leap on to it to say:
“Dismiss a hundred thousand men! Do you really mean this? What will become of them? What will they live on? Work? But do you not know that there is a shortage of work everywhere? That there are no vacancies in any trade? Do you wish to cast them into the street to increase competition and depress earnings? Just when it is so difficult to eke out a meager livelihood, is it not fortunate that the State is providing bread to these hundred thousand people? What is more, consider that the army consumes wine, clothing, and weapons, and thus provides activity for factories and in garrison towns, and that in fact it is the very salvation of its countless numbers of suppliers. Do you not tremble at the thought of abolishing this huge engine of industrial activity?”
As we can see, this speech concludes that the hundred thousand men should be retained, taking no account of the indispensability of the service, on economic grounds. It is these considerations alone that I have to refute.
One hundred thousand men who cost the taxpayer one hundred million, live and provide a living for their suppliers to the extent that one hundred million can be spread: that is what is seen.
But one hundred million, extracted from the pockets of taxpayers, interfere with the economic lives of these taxpayers and their suppliers to the tune of that one hundred million: that is what is not seen. Do the calculation, cost it and tell me where the profit lies for the mass of the people?
As for me, I will tell you where the loss lies, and to keep it simple, instead of talking about one hundred thousand men and one hundred million francs, let us base our reasoning on one man and a thousand francs.
Here we are, in the village of “A.” Recruiters are doing the rounds and have carried off one man. The tax collectors are doing their rounds and have carried off one thousand francs. The man and the money are taken to Metz16, one intended to provide a living for the other for a year without doing anything. If you take only Metz into consideration, you are right indeed a hundredfold; the measure is very beneficial. However, if your eyes turn to the village of A you would think otherwise, for unless you are blind you will see that this village has lost one worker and the thousand francs that rewarded his work as well as the activity which, through the expenditure of these thousand francs, he spread around him.
At first sight it would appear that there is compensation for this. The phenomenon that occurred in the village now occurs in Metz, that is all. But this is where the loss lies. In the village, one man dug and ploughed: he was a worker. At Metz, he turns his head left and right: he is a soldier. The money and its circulation are the same in both cases, but on one, there were three hundred days of productive work; in the other there are three hundred days of unproductive work, always supposing that part of the army is not essential to public security.
Now, discharge comes. You point out to me a glut of one hundred thousand workers, stimulated competition and the pressure that it exerts on rates of pay. This is what you see.
But here is what you do not see. You do not see that discharging one hundred thousand soldiers is not to annihilate one hundred million, it is to return this sum to the taxpayers. You do not see that casting one hundred thousand workers onto the market is at the same time to cast the one hundred million intended to pay for their work onto the same market. As a result, the same measure that increases the supply of labor also increases the demand, from which it follows that your decrease in earnings is an illusion. You do not see that before, as after the discharge of the soldiers, there are in the country one hundred million francs that correspond to one hundred thousand men, and that the entire difference lies in this: before, the country paid one hundred thousand men one hundred million to do nothing; after, it pays them this sum to work. Finally, you do not see that when a taxpayer hands over his money, either to a soldier in return for nothing or to a worker in return for something, all the subsequent consequences of the circulation of this money are the same in both cases, with the sole difference that in the second case, the taxpayer receives something while in the first he receives nothing. The result: a net loss for the nation.
The sophism that I am combating here does not stand up to the test of progressive application, which is the touchstone of principles. If, everything paid for, and all interests considered, there is a benefit to the nation in increasing the army, why do we not enroll under the flag the entire male population of the country?
14 To maintain its armed forces at the level of about 400,000 with a five year period of enlistment the French state had to recruit or conscript about 80,000 men each year. See the glossary entry on “The French Army and Conscription.”
15 To get some idea of what Bastiat was calling for here with 100,000 immediate dismissals from the French Army (Armée de terre) it should be kept in mind that, according to the budget passed on 15 May 1849 the size of the French army was 389,967 men and 95,687 horses. [This figure rises to 459,457 men and 97,738 horses for the entire French military (including foreign and colonial forces).] The expenditure on the Army in 1849 was fr. 346,319,558 and for the Navy and Colonies was fr. 119,206,857 for a combined total of fr. 465,526,415. Total government expenditure in 1849 was fr. 1.573 billion with expenditure on the armed forces making up 29.6% of the total budget. In these passages Bastiat roughly estimates that 100,000 soldiers cost the French state fr. 100 million. An immediate cut of 100,000 would be 25.6% of the total size of the French Army. An equivalent cut in the size of the US Armed Forces would be about 373,000 men and women [in 2012 there were 1,456,862 active personnel and a FY2011 budget of $549.4 billion.] As vice-president of the National Assembly's finance committee in 1848-49 Bastiat had access to the most recent figures. See Projet de loi pour la fixation des recettes et des dépenses de l'exercice 1850. IIIe volume. Budget des dépenses du Ministère de la guerre. Budget des dépenses du Ministère de la marine et des colonies (Paris: Imprimerie nationale, 1849), pp. 13-14; Alphonse Courtois, “Le budget de 1849” in Annuaire de l’économie politique et de la statistique pour 1850 par MM. Joseph Garnier. 7e année (Paris: Guillaumin, 1850), pp. 18-28. See the glossary entry on “The French Army.”
16 Metz is a city in the north-east of France with an important army garrison.
Have you ever happened to hear the following?
“Taxes are the best investment; they are a life-giving dew. See how many families gain a livelihood from them; work out their ricochet or flow on effects17 on industry; this is beyond measure, it is life.”
To combat this doctrine, I am obliged to repeat the preceding refutation. Political economy knows full well that its arguments are not amusing enough for people to say of them: Repetita placent. Repetitions are pleasing. For this reason, like Basile18, it has arranged the proverb to suit itself, fully convinced that in its mouth Repetita docent. Repetitions teach.
The advantages that civil servants find in drawing their salaries are what is seen. The benefit that results for their suppliers is again what is seen. It is blindingly obvious to the eyes.
However, the disadvantage felt by taxpayers in trying to free themselves is what is not seen and the damage that results for their suppliers is what is not seen either, although it is blindingly obvious to the mind.
When a civil servant spends one hundred sous too much for his own benefit, this implies that a taxpayer spends one hundred sous too little for his own benefit. However, the expenditure of the civil servant is seen because it is carried out whereas that of the taxpayer is not seen as, alas! he is prevented from carrying it out.
You compare the nation to an arid land and tax to bountiful rain. So be it. But you should also ask yourself where the sources of this rain are, and if it is not taxes themselves that absorb the humidity from the earth and dry it out.
You ought to ask yourself as well if it is possible for the earth to receive as much of this precious water through rain as it loses through evaporation.
What is obvious is that, when Jacques Bonhomme counts out one hundred sous to the tax collector, he receives nothing in return. When, subsequently, a civil servant, in spending these hundred sous, gives them back to Jacques Bonhomme, it is in return for an equal value in wheat or labor. The end result is a loss of five francs19 for Jacques Bonhomme.
It is very true that often, or in the majority of cases, if you prefer, the civil servant renders an equivalent service to Jacques Bonhomme. In this case, there is no loss on either side; there is merely an exchange. For this reason, my line of argument is not directed against useful activity. What I say is this: if you wish to create any such activity, prove its utility. Demonstrate that the services rendered to Jacques Bonhomme are worth what they cost him. But putting on one side this intrinsic utility, do not use as an argument the advantage it gives to the civil servant, his family and his suppliers; do not claim that it stimulates employment.
When Jacques Bonhomme gives one hundred sous to a civil servant in return for a genuinely useful service, it is exactly the same as when he gives one hundred sous to a shoemaker for a pair of shoes. Give and take, tit for tat. But when Jacques Bonhomme hands over one hundred sous to a civil servant and then receives no services or even suffers aggravation in return, it is as though he is handing this money to a thief. It is no good saying that the civil servant will spend these hundred sous for the general benefit of national output; the thief would have done the same with them. So would Jacques Bonhomme if he had not met on his way either the extra-legal parasite or the legal one.
Let us therefore acquire the habit of not judging things merely by what is seen, but also by what is not seen.
Last year I was a member of the Finance Committee,20 for under the Constituent Assembly members of the opposition were not systematically excluded from all Committees; in this the Constituent Assembly acted wisely. We heard Mr. Thiers21 say: “I have spent my life combating the men of the Legitimist Party and the Priests’ Party.22 Since the time that a common danger brought us together, since the time I have been seeing a lot of them and becoming acquainted with them, since we have been speaking frankly to one another, I have noticed that they are not the monsters I took them to be.”
Yes, mistrust is compounded and hatred aroused between parties that do not mix, and if the majority allowed a few members of the minority to become Committee members, perhaps it would be acknowledged on both sides that their ideas are not as far apart and, in particular, their intentions not as perverse as people suppose.
Be that as it may, last year I was a member of the Finance Committee. Each time that one of our colleagues spoke of setting at a moderate level the remuneration of the President of the Republic, ministers or ambassadors, he was told:
“For the very good of the service, certain roles have to be surrounded by an aura of brilliance and dignity. It is a means of attracting men of worth. Very many men who are short of funds seek the ear of the President of the Republic and it would place him in an uncomfortable position if he were obliged always to refuse them. A certain presence in ministerial and diplomatic salons is part of the wheels of constitutional government, etc. etc.”
Although arguments like this can be debated, they certainly warrant close examination. They are based on public interest, whether this is correctly or incorrectly appreciated, and for my part, I take more notice of them than many of our Catos23 who are moved by a narrow spirit of stinginess or jealousy.
However, what revolts my conscience as an economist and makes me blush for the intellectual reputation of my country is when the argument is reduced (and this invariably happens) to the following absurd banality, which is always favorably received:
“Besides, the luxurious living of high government officials encourages the arts, industry and labor in general. The Head of State and his ministers cannot give feasts and gala evenings without making life circulate in every vein of the social body. Reducing their remuneration is to starve productive activity in Paris, and by extension throughout the nation.”
Please, Sirs, show some respect at least to arithmetic, and do not stand before the National Assembly of France to say that addition produces a different sum depending on whether one adds the figures from top to bottom or from bottom to top, because you fear that this shameful Chamber will not support your measure unless you do.
What! I am going to reach an agreement with a laborer to have a ditch dug in my field at a cost of one hundred sous. Just when the agreement is about to be finalized, the tax collector takes my hundred sous and passes them on to the Minister of the Interior. My agreement falls apart but the Minister will have an extra dish for his dinner. On which basis, you dare to claim that this official expenditure is an addition to national output! Do you not understand that this is just a simple displacement of utility and labor? A minister has a better-laden table, it is true, but a farmer has a field that is less well drained, and this is just as true. A caterer in Paris has earned one hundred sous, I grant you, but you should grant me that a laborer in the provinces has failed to earn five francs. All that can be said is that the official dish and a satisfied caterer is what is seen; the flooded field and the laborer with no work is what is not seen.
Good God! What a lot of trouble to prove that, in political economy, two and two are four and if you succeed in doing this, the cry is heard: “This is so obvious, it is boring. ”And then they vote as though you had proved nothing at all.
17 By the “ricochet (or flow on) effect” Bastiat means the indirect consequences of an economic action which flow or knock on to other parties (potentially numbering in their thousands or even millions), sometimes with positive results (as with the invention of printing or steam powered ships) but more often with negative results (as with tariffs, subsidies, and taxes). This insight was an elaboration of his earlier idea of the "Double Incidence of Loss" which he used to great effect in WSWNS. See the glossary entry on "The Double Incidence of Loss" and the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
18 Don Basile is a character from Beaumarchais’ play The Barber of Seville (1775). Basile is a singing teacher who says to Dr. Bartholo that when he is unable to understand an argument he resorts to using proverbs such as “What is good to take, is good to keep.” He then says that “Yes, I arrange several little proverbs with variations, just like that.” Act IV, p. 254. Théâtre de Beaumarchais. Précédé d’une Notice sur sa vie et ses ouvrages, par M. Auger (Paris: Librairie de Firmin Didot Frères, 1844).
19 One hundred sous = five francs. See the glossary entry on “French Currency.”
20 Bastiat’s work on the Finance Committee of the National Assembly is a topic which has been scarcely explored in any detail and needs to be more fully researched. We know that he was nominated to be its vice-president and was required to present its reports officially to the Chamber of Deputies from time to time. He was re-appointed to this position 8 times such was the regard his peers had for his economic knowledge. Needless to say, his advice about cutting taxes and balancing the budget were not often heeded and he became a bit like the resident “Utopian” on the Committee. See the ES2 XI. “The Utopian” (17 January 1847) and the Appendix “Bastiat’s Activities in the National Assembly 1848-1850.”
21 Adolphe Thiers (1797-1877) was a lawyer, historian, politician, and journalist who served briefly as Prime Minister and Minster of Foreign Affairs in 1836 and 1840. After the 1848 revolution and the creation of the Second Empire he was elected deputy representing Rouen in the Constituent Assembly. See the glossary entry on “Thiers.”
22 The main political groups in the late 1840s when Bastiat was writing and becoming politically active include the Doctrinaires who were moderate royalists, the Legitimists (also known as the “Party of Order” in 1849) who were supporters of the descendants of Charles X, the Republicans who were a diverse and poorly organized group, the Montagnards who were radical socialists, the Orléanists who were supporters of the overthrown Louis Philippe, and the Bonapartists who were supporters of Napoleon, both the Emperor Napoleon I and then his nephew Louis Napoleon. All of the political groups were protectionist to one degree or the other, and the socialists were both protectionist and extremely interventionist as well. Free traders like Bastiat were very much in the minority and could draw upon only a few luke-warm supporters in the Doctrinaire and Bonapartist groups. See the glossary entry on “Political Parties.”
23 Cato the Younger (Cato Minor) was a politician in the late Roman Republic and a noted defender of "Roman Liberty" and opponent of Julius Caesar. See the glossary entry on “Cato the Younger.”
Should the State subsidize the arts?24
There is certainly much to say both For and Against.25
In favor of the system of subsidies, it might be said that the arts expand and elevate the soul of a nation and make it more poetic, that they tear it away from material preoccupations, give it an appreciation of Beauty and thus have a beneficial effect on its manners, customs, habits and even its industry. The question might be asked where music would be in France without the Théâtre Italien and the Conservatoire, dramatic art without the Théâtre Français and painting and sculpture without our collections and museums.26 We may go even further and ask ourselves whether, without the centralization and consequent subsidization of the fine arts, that exquisite taste that is the imposing mark of French work and makes its products attractive around the world, would have developed. Faced with these results, would it not be extremely rash to abandon this modest contribution from all of its citizens who, in the end, have succeeded in establishing their superiority and shining reputation in Europe?
These reasons and many others whose validity I do not question may be countered by others that are just as powerful. First of all, it may be said, there is the question of distributive justice. Does the right of the legislator go so far as to make inroads into the earnings of artisans to supply extra income to artists? Mr. Lamartine 27 said: “If you remove the subsidy from a theatre, how far will you go down this road, and would you not logically be led to abolishing your Universities, Museums, Institutes and Libraries?” The answer to this might be: “If you wish to subsidize everything that is good and useful, how far will you go down this road, and would you not logically be led to establishing a civil list for farming, industry, trade, benevolent activities and education?” Moreover, is it certain that subsidies encourage the progress of art? This is a question that is far from being answered and we can see with our own eyes that the theatres that prosper are those that generate their own life. Finally, raising our considerations to a higher level, we can point out that needs and desires are born one from another, and rise to levels that are increasingly refined28 as public wealth makes it possible to satisfy them; that the government has no need to become involved in this interaction, since in a given state of current wealth it would be unable to stimulate luxurious lines of production through taxes without upsetting essential ones, thus turning upside down the natural progress of civilization. It might be pointed out that these artificial displacements of needs, taste, production and populations puts nations in a precarious and dangerous situation whose foundation is no longer solid.
These are just a few reasons put forward by those who oppose State intervention with respect to the priorities according to which citizens believe that they ought to satisfy their needs and desires and consequently direct their activity. I must admit that I am one of those who think that choice and impulse has to come from below, not above, from citizens, not the legislators, and a doctrine to the contrary seems to me to lead to the abolition of human freedom and dignity.
However, through a deduction that is as false as it is unjust, do you know what economists are accused of? It is that when we reject subsidies we are rejecting the very thing that is to be subsidized and are the enemies of all these types of activity since we want these activities to be free and at the same time pay their own way. Thus, if we demand that the State not intervene in religious matters through taxation, we are atheists; if we demand that the State not intervene in education through taxation, we are against enlightenment. If we say that that State ought not to give an artificial value to land or a particular sector of the economy through taxation, we are enemies of property and labor. If we think that the State ought not to subsidize artists, we are barbarians who think that art is of no use.
I protest here as forcefully as I can against these deductions. Far from entertaining the absurd notion of abolishing religion, education, property, production and the arts, when we demand that the State protect the free development of all these kinds of human activity without having them in its pay at the citizens’ mutual expense, we believe on the contrary that all these life-giving forces in society would develop harmoniously under the influence of freedom, that none of them would become, as we see today, a source of unrest, abuse, tyranny and disorder.
Our adversaries believe that an activity that is neither in the pay of the State nor regulated is an activity that has been destroyed. We believe the contrary. Their faith lies in the legislator, not in humanity; ours lies in humanity, not in the legislator.
Thus, Mr. Lamartine said: “In the name of this principle, we should abolish the public exhibitions that constitute the honor and wealth of this country.”29
My reply to Mr. Lamartine is:
“Your point of view is that failing to subsidize is to abolish, since, according to this notion that nothing exists other than through the will of the State, you conclude that nothing lives outside the things kept alive through taxes. But I am turning against you the example you have chosen and point out to you that the greatest and most noble of exhibitions, the one conceived in the most liberal and universal, and I might even use the word humanitarian, thought, which is no exaggeration in this context, is the exhibition being prepared in London, the only one in which no government is involved and where no tax is being used to pay for it.”30
To return to the Fine Arts, it is possible, I repeat, to put forward powerful reasons for and against the system of subsidies. The reader will understand that, in accordance with the particular aim of this article, my job is neither to set out these reasons nor decide between them.
But Mr. Lamartine has put forward an argument that I cannot allow to pass without comment, as it comes precisely within the sphere of this economic study.
He has said:
“The economic question with regard to theatres can be summed up in a single word: it is production. The nature of this production matters little; it is an activity that is as fecund and productive as any other type of project in a nation. As you know, in France theatres feed and pay no fewer than eighty thousand workers of all types, painters, masons, decorators, costume makers, architects, etc., who are the very lifeblood and dynamism of several districts of this capital city and, for this reason, should be given your sympathy.”
Your sympathy! In translation, your subsidy.
And further on:
“The pleasures of Paris lie in the output and consumption taking place in its departments and the luxury of the wealthy constitutes the earnings and bread of two hundred thousand workers of all sorts who earn a living from the various industries of the theatres over the entire surface of the Republic and who receive from these noble pleasures that make France illustrious, the food to keep them alive and the necessities required by their families and children. It is to them that you are giving these 60,000 francs (Hear! Hear! A host of approving gestures.)”
For my part, I am obliged to say: No! No! Restricting, of course, the scope of this judgment to the economic argument we are dealing with here.
Yes, it is to the workers in the theatres that these 60,000 francs in question will go, at least in part. 31 A few trifling sums may well be lost in transit. If you give the matter close scrutiny, actually, you may discover that things work out quite differently, such that fortunate are those workers if a few scraps are left to them! However, I am willing to accept that the entire subsidy will go to the painters, decorators, costume makers, hairdressers, etc. This is what is seen.
But where has it come from? This is the other side of the question that is just as important to examine as its face. Where is the source of these 60,000 francs? And where would they go if a legislative vote did not initially send them to the Rue de Rivoli and from there to the Rue de Grenelle32? That is what is not seen.
Certainly no one will dare to claim that the legislative vote has caused this sum to blossom in the voters’ urn, that it is a pure addition to national wealth, and that without this miraculous vote these sixty thousand francs would have remained forever invisible and intangible. It has to be admitted that all that the majority has been able to do is to decide that they will be taken from somewhere to be sent somewhere else, and that they are given one destination only by being taken from another.
Since things are like this, it is clear that the taxpayer who has been taxed one franc will no longer have this franc available to him. It is clear that he will be deprived of satisfaction to the value of one franc and that the worker, whoever he may be, who would have provided it to him will be deprived of pay to the same extent.
Let us therefore not harbor this puerile illusion of believing that the vote on 16 May33 adds anything at all to national well-being and work. It displaces enjoyment and displaces pay; that is all.
Will people say that for one type of expenditure and one type of production, more urgent, more moral and more reasonable expenditure and production have been substituted? I might make a stand here. I might say: “By snatching 60,000 francs from taxpayers, you are reducing the earnings of ploughmen, laborers, carpenters and blacksmiths, and you are increasing the earnings of singers, hairdressers, decorators and costume makers by the same amount. Nothing proves that this latter class is more worthy than the other. Mr. Lamartine does not claim this. He himself says that the work of theatres is (just as fertile, just as productive and not more) than any other, which might itself still be contested, since the best proof that the second category is not as fertile as the first is that the first is called upon to subsidize the second.
But this comparison between the value and intrinsic merit of the diverse forms of production is not part of my present subject. All that I have to do here is to show that Mr. Lamartine and the people who applauded his line of argument saw with one eye the earnings of the suppliers of actors and ought to have seen with the other the earnings lost by the suppliers of taxpayers. By not doing so, they exposed themselves to the nonsense of taking a displacement for a gain. If they were consistent with their doctrine, they would demand an infinite number of subsidies, for what is true for one franc and 60,000 francs is true in identical circumstances for a billion francs.
When it is a question of taxes, gentlemen, let us prove their utility using reasons based on fundamentals, but never resort to the wretched argument that “Public expenditure provides a livelihood for the working class.” This makes the mistake of concealing an essential fact, that is to say, that public expenditure always takes the place of private expenditure and that, consequently, it provides a livelihood for one workman instead of another, but adds nothing to the lot of the working class taken as a whole. Your line of argument is very fashionable, but it is too absurd for reason not to get the better of it.
24 Music, art, theatre, and other forms of fine art were heavy regulated by the French state. They could be subsidized, granted a monopoly of performance, the number of venues and prices of tickets were regulated, and they were censored and often shut down for overstepping the bounds. In the 1848 budget the relatively small amount of fr. 2.6 million was spent in the category of "Beaux-Arts" (within the Ministry of the Interior) which included art, historical monuments, ticket subsidies, payments to authors and composers, subsidies to the royal theatres and the Conservatory of Music [out of total budget of fr. 1.45 billion.] By far the biggest parts of budget expenditure went for servicing the pubic debt (384 million), the Ministry of War (305 million), the Navy and Colonies (120 million), and the Ministry of the Interior (116 million). See, "Documents extraits de l'enquête sur les théâtres", JDE July 1850, T. XXVI, pp. 409-12; and the Appendix on the Budgets for 1848 and 1849. See the Appendix on French Government Finances 1848-1849.”
25 Bastiat's friend and colleague Gustave de Molinari (1819-1912) was a great fan of the theatre and wrote extensively about it, criticising both its subsidies from and its censorship by the state. He has an extended discussion of this question in one the chapters in Conversations on Saint Lazarus Street (1849), “8th Evening” (Liberty Fund, forthcoming). See also his article on "Théâtres" in DEP, vol. 2, pp. 731-33. See the glossary entry on "Molinari."
26 The Théâtre-Italien (also known as the Opéra-Comique) after several false starts in the 17th century was formally re-established in 1716 under the patronage of the Duc d'Orléans. The Conservatory of Music in Paris has experienced a large number of changes over the centuries as regimes and musical tastes changed. Louis XIV created the Académie royale de musique by royal patent in 1669 and by 1836 it was known as the Conservatoire de musique et de déclamation. The Comédie-Français (also known as the Théâtre-Français) was founded in 1680 by Louis XIV. He also founded the Opéra de Paris in 1669.
27 Alphonse de Lamartine (1790-1869) was a poet turned statesmen who was a member of the provisional government and Minister of Foreign Affairs in June 1848. See glossary entry on “Lamartine”.
28 (Paillottet’s note) See chapter III in vol. VI. [This is a reference to chap. III "Des besoins de l'homme" (The Needs of Mankind) in Economic Harmonies.]
29 The following quotations come from Lamartine, "Sur la subvention du Théâtre-Italien (Discussion du Budget) Assemblée National. - Séance du 16 avril 1850," pp. 160-66, in Alphonse de Lamartine, La France parlementaire: 1834-1851. Oeuvres oratoires et écrits politiques. Précédée d'une étude sur la vie et les oeuvres de Lamartine par Louis Ulbach. Troisième série: 1847-1851. Tome sixième (Paris: A. Lacroix, Verboeckhoven, 1865). Specific quotes can be found on pp. 163, 161, 166.]
30 The "Great Exhibition of the Works of Industry of all Nations" (The Great Exhibition, or the Crystal Palace Exhibition) was an international trade and industry exhibition held in Hyde Park, London, between May and October 1851. The Economists were very excited about the Exhibition because of the way in which it showcased the achievements of the industrial revolution as well as the possibilities which could be opened up by international free trade. The Exhibition was planned and organized privately by the members of the Royal Society for the Encouragement of Arts, Manufactures and Commerce under the patronage of Prince Albert, the husband of Queen Victoria. The French had begun the practice of holding international industrial exhibitions in 1798 and held others in 1819, 1823, 1827, 1834, 1839, and in Paris in 1844. It was this latter exhibition in Paris which probably inspired the London Exhibition of 1851. An exhibition was planned for Paris in 1849 but the Revolution in 1848 meant that it was only a shadow of the previous ones. See Blanqui, "Expositions," DEP, vol. 1, pp. 746-51.
31 In April 1850, a deputy asked for a subsidy of 60,000 francs for the Théatre des Italiens. Since 1801, this theater had had a permanent troupe and had performed the masterpieces of Italian music before French audiences. Lamartine warmly supported the proposition.
32 The Ministry of Finances was located in the Rue de Rivoli, and the Ministry of Education and Fine Arts in the Rue de Grenelle.
33 In April 1850, a deputy asked for a subsidy of 60,000 francs for the Théatre des Italiens. It was voted on 16 May (and not 16 April as Bastiat mistakenly says).
That a nation, after having ascertained that a great enterprise will be of benefit to the community, has it carried out using resources raised by general subscription, is perfectly normal. But I have to admit that I lose patience when I hear the following glaring economic error claimed in support of a resolution of this nature: “What is more it is a means of creating employment for the workers.”
The State opens a road, constructs a palace, repairs a street or digs a canal; in doing this it provides work for certain workmen, that is what is seen, but it deprives certain other workmen of employment, and that is what is not seen.
Here is the road in the process of being built. A thousand workmen come every morning and go home every evening, taking their pay; that is certain. If the road had not been decided upon, if the funds had not been voted for, these good people would not have found either work or pay at this place; that is also certain.
But is this all? Does the overall operation not involve something else? At the time when Mr. Dupin34 pronounces the sacramental words: “Passed by the Assembly”, do the millions miraculously slide down a moonbeam into the coffers of Messrs. Fould35 and Bineau36? In order for the change to be complete, as they say, does the State not need to organize the collection of taxes as well as their expenditure? Does it not need to send its tax collectors into the field and make the taxpayers pay their taxes?
Let us then examine both sides of the question. While noting the purpose intended by the State for the millions voted, let us not fail to note also the uses to which taxpayers would have put and can no longer put these same millions. You will then understand that a public enterprise is a two-sided coin. On one side, there is an employed worker with the motto “This is what is seen”; on the other, a worker out of work with the motto “This is what is not seen”.
The sophism that I am combating in this article is all the more dangerous when applied to public works if it serves to justify the wildest enterprises or excesses. When a railway or a bridge are genuinely useful, invoking this utility is enough. But if you cannot do this, what do you do? You resort to the following grossly misleading statement: “Work has to be found for the workers”.37
Once this is said, why not construct and demolish the terraces on the Champ de Mars?38 As we know, the great Napoleon considered he was performing a philanthropic act by digging and filling in ditches. He also said: “What does the result matter? All you have to see is the wealth spread around the working classes”.
Let us go to the heart of things. Money deludes us. Requesting a contribution in the form of money from all citizens for a work of common interest is in fact asking them for a contribution in kind, for each of them through work obtains for himself the sum on which he is taxed. Now, if all the citizens were to brought together in order to carry out some work useful to everybody, as part of their compulsory community obligation,39 this would be understandable; their compensation would be the results of the work itself. But if, after they have been brought together, they are subjected to making roads where no one will go and palaces in which no one will live on the pretext of procuring work for them, this would be absurd, and they would certainly have reason to object: “We have no need of work like this; we would prefer to work on our own behalf”.
The procedure that consists in making citizens contribute money and not work does not alter these general results one jot. The only thing is that using the second procedure the loss is shared by all, whereas using the first, those employed by the State escape their share of the loss, adding it to the loss their fellow citizens have already had to bear.
There is an article of the Constitution which says:
“Society favors and encourages the development of labor … through the establishment by the State, the departments and communes of public works suitable for employing idle hands.”40
As a temporary measure in times of crisis, or during a severe winter, this intervention by the taxpayers may have good results. It acts in the same way as insurance. It adds nothing either to labor or to pay, but it takes the labor and wages earned in good times and pays them out in difficult times, admittedly with some loss.
As a permanent, general and systematic measure, this is nothing less than a ruinous deception, an impossibility, a contradiction that gives the appearance of a little labor which has been stimulated, that is seen, and hides a great deal of labor which has been prevented, that is not seen.
34 Charles Dupin (1784-1873) was a pioneer in mathematical economics and worked for the statistical office of France. In 1828 he was elected deputy for Tarn, was made a Peer in 1830, and served in the Constituent and then the National Assemblies during the Second Republic. See glossary entry on “Charles Dupin.”
35 Achille Fould (1800-1867) served as Minister of Finance in the Second Republic and then Minister of State in the Second Empire. He was a personal financial advisor to Napoleon III and played an important part in the imperial household. See the glossary entry on “Fould.”
36 Jean Martial Bineau (1805-1855) was an engineer by training and a politician who served as Minster of Public Works in 1850 and then Minister of Finance in 1852 during the Second Empire. See the glossary entry on“Bineau.”
37 Napoléon did not seem to have a well thought out economic theory but his scattered remarks recorded in his Mémoires (1821) show him to be an economic nationalist and strong protectionist. His most direct comments about tariffs and protection for French industry come in a discussion of the Continental System he introduced in November 1806 to weaken the British economy by preventing the sale of British goods in Europe. In the Mémoires Napoleon is very proud of his economic accomplishments and believed that the system of protection he introduced stimulated French industry enormously. "Experience showed that each day the continental system was good, because the State prospered in spite of the burden of the war… The spirit of improvement was shown in agriculture as well as in the factories. New villages were built, as were the streets of Paris. Roads and canals made interior movement much easier. Each week some new improvement was invented: I made it possible to make sugar out of turnips, and soda out of salt. The development of science was at the front along with that of industry." See Mémoires de Napoléon Bonaparte: manuscrit venu de Sainte-Hélène (Paris: Baudouin, 1821), pp. 95-99. See the glossary entry on "Napoléon."
38 The Champs de Mars (Field of Mars) is a large public park in the 7th Arrondisement in Paris. Before the Revolution it had been a a military parade ground but during the Revolution it was used for a variety of purposes including public ceremonies as well as executions. In May 1848 it was site for a large revolutionary Festival of Concord. It the latter part of the 19th century it was the site for several World Exhibitions, especially that of 1889 for which the Eiffel Tower was built at his north east corner.
39 Bastiat uses the term "par prestation" (compulsory or required service) which has a powerful connotation to the Economists as it referred to the common 18th century practice of compulsory community labour ("la corvée"). The corvée was abolished by Turgot in 1776 but it survived in various forms being renamed "prestation" in 1802. They were abolished once again in 1818 only to revived again in 1824 when an obligation to work 2 days a year on local roads was introduced. This was raised to 3 days in 1836 but with the added improvement of being able to be commuted to a cash payment in lieu of physical work. See Courcelle Seneuil, "Prestation," DEP, vol. 2, pp. 428-30, and “French Taxation” in Appendix 3 "Economic Policy and Taxation."
40 Chapter 2, Article 13, of the Constitution of November 4, 1848 states “The Constitution guarantees citizens the liberty of work and industry. Society favours and encourages the development of work by means of free primary education, professional education, equality of relations between employers and workers, institutions of insurance and credit, agricultural institutions, voluntary associations, and the establishment by the state, the departments and the communes of public works suitable for employing idle hands; it provides assistance to abandoned children, to the sick and the old without means, which their families cannot help.” This article raises the problem which concerned Bastiat deeply of the difference between the free market idea of “the liberty of work and industry” (la liberté du travail et de l’industrie) and the socialist idea of the “right to a job” (la liberte au travail) which increasingly became an issue during the Revolution. The Constitution of November 1848 specifically refers to the former but also seems to advocate the latter with the phrase “public works suitable for reemploying the unemployed”. The creation and then the abolition of the National Workshops is an example of this confusion. See “Opinion de M. Frédéric Bastiat" (on "le droit au travail") in Le droit au travail à l'Assemblée nationale. Recueil complet de tous les discours prononcés dans cette mémorable discussion par MM. Fresneau, Hubert Delisle, Cazalès, Gaulthier de Rumilly, Pelletier, A. de Tocqueville, Ledru-Rolin, Duvergier de Hauranne, Crémieux, M. Barthe, Gaslonde, de Luppé, Arnaud (de l'Ariège), Thiers, Considerant, Bouhier de l'Ecluse, Martin-Bernard, Billault, Dufaure, Goudchaux, et Lagrange (texts revue par les orateurs), suivis de l'opinion de MM. Marrast, Proudhon, Louis Blanc, Ed. Laboulaye et Cormenin; avec des observations inédites par MM. Léon Faucher, Wolowski, Fréd. Bastiat, de Parieu, et une introduction et des notes par M. Joseph Garnier (Paris : Guillaumin, 1848), pp. 373-376.] See the discussion on “The Right to Work.”
Society is the set of services that men render each other, either by force or voluntarily, i.e. public services and private services.
Public services, imposed and regulated by law, which is not always easy to change when it would be advisable, may, with the help of that law, far outlive their real usefulness and retain the name of public services, even when they are no longer services at all or even when they are nothing more than public vexations. Private services lie in the field of voluntary action and individual responsibility. Each person renders and receives what he wants or what he can, following face to face discussion. They are always characterized by the presumption of genuine utility, accurately measured by their comparative value.
This is why public services are so often characterized by immobility while private services conform to the law of progress.
While the excessive development of public services tends to constitute within society, through the wastage of energy that it entails, a disastrous form of parasitism, it is singularly notable that several modern schools of thought, attributing this tendency to free and private services, seek to transform all jobs into state functions.41
These thinkers savagely attack what they describe as middlemen. They would happily abolish capitalists, bankers, speculators, entrepreneurs, merchants and traders, accusing them of coming between production and consumption and holding both to ransom without adding value to either. Or rather they would like to transfer to the State the work they do, given that this work cannot be abolished.
The sophism of the socialists on this point consists in showing the public what they are paying middlemen in return for their services and hiding from them what they would have to pay the State. It is a constant struggle between what is obvious at a glance and what can be perceived only by the mind, between what is seen and what is not seen.
It was above all in 1847 and during the subsequent famine42 that the socialist schools sought and succeeded in popularizing their disastrous theory. They knew full well that the most absurd propaganda always has some chance of success with men who are suffering; malesuada fames43.
Therefore, with the aid of high sounding words: the exploitation of man by man, speculation on hunger, monopolies, they set about denigrating trade and casting a veil over its benefits.
“Why”, they said, “leave traders the task of importing the necessities of life from the United States and the Crimea?44 Why do the State, the departments and districts not organize a system of procurement and some storage warehouses? They would sell at cost price, and the people, the poor people, would be free of the tribute they pay to free trade, that is to say trade that is selfish, individualistic and anarchic.”
The tribute that the people pay to trade is what is seen. The tribute that the people would pay to the State or its agents under the socialist system is what is not seen.
In what does the alleged tribute that the people pay to trade consist? In this: two men render each other mutual service45 in total freedom under the pressure of competition and at an agreed price.
When a stomach that is hungry is in Paris and the wheat that is able to satisfy it is in Odessa, suffering will cease only when the wheat is brought to the stomach. There are three ways of bringing about this coming together: 1. The starving men can go to seek the wheat themselves; 2. They can delegate this task to those who have specialized in it; 3. They can have themselves taxed and entrust this operation to civil servants.
Of these three alternatives, which is the most advantageous?
In every age and in all countries, especially where they enjoyed greater freedom and were more enlightened and experienced, men have voluntarily chosen the second alternative, which I must admit is enough in my view to attribute the benefit of doubt to this choice. My mind refuses to admit that humanity in the mass would make a mistake on a point that has such a direct effect on it.46
Nevertheless, let us examine the question.
That thirty-six million citizens leave to go to Odessa to look for the wheat they need is obviously impracticable. The first alternative is valueless. Consumers cannot act on their own behalf; they have to resort to intermediaries, civil servants or traders.
However, we should note that this first alternative would be the most natural. Basically, it is up to the person who is hungry to go to find his wheat. This is a task that concerns him; a service that he owes himself. If another person, for whatever reason renders him this service and undertakes this task on his behalf, this person is entitled to compensation. What I am saying here serves to emphasize that the services of middlemen involves a principle of remuneration.
Be that as it may, since it is necessary to resort to someone the socialists call a parasite, which one, a trader or a civil servant, is the less demanding parasite?
Trade (I assume it to be free, otherwise how could I reason?), trade, as I say, out of its own interest tends to examine the seasons and note on a daily basis the state of the harvest, gather information from all corners of the globe, anticipate need and take the necessary precautions beforehand. It has ships ready, correspondents everywhere and its immediate interest is to buy at the best possible price, make savings on each detail of the operation and achieve the best results with the least effort. It is not only French traders, but traders the world over who are involved in procurement for France against her day of need, and if self-interest drives them invariably to fulfill their task at the least cost, the competition they wage with each other leads them no less invariably to allow consumers to benefit from all the savings achieved. Once the wheat arrives, it is in the interest of trade to sell it as soon as it can to minimize its risks, realize its funds and start again if necessary. Driven by a comparison of prices, it distributes foodstuffs around the whole country, always starting with the most expensive point, i.e. where the need is most pressing. It is therefore not possible to imagine an organization more in line with the interests of those who are hungry, and the beauty of such an organization, not noticed by the socialists, results precisely from the fact that it is free. In truth, consumers are obliged to reimburse trade with the cost of its transport, its transshipments, its storage and commissions, etc., but under what system does he who eats the wheat not have to reimburse the expenditure required to bring it to him? In addition the service rendered has to be paid for, but with regard to its proportion, this is reduced to the minimum possible by competition, and, as for its justice, it would be strange for the artisans in Paris not to work for the traders in Marseilles when the traders in Marseilles work for the artisans in Paris.
What would happen if the State took the place of trade in accordance with the socialist schema? Would someone please tell me where the saving would be for the public? Would it be in the purchase price? Just picture to yourself the delegates of forty thousand communes arriving in Odessa on a given day and at a time of need; just imagine the effect on prices. Would the saving lie in the costs? Would we need, however, fewer ships, fewer sailors, less transshipment, less warehousing or would we be relieved of having to pay for all of these things? Would it lie in the profits of the traders? Would your delegates and civil servants go to Odessa for nothing? Would they travel and work in accordance with the principle of fraternity? Do they not have to live? Does their time not need to be paid for? And do you think that this will not exceed a thousand times the two or three percent that the trader earns, a rate he is ready to work for?
And then, think of the difficulty of raising so many taxes and distributing so much food. Think of the injustice and abuse that is inseparable from an enterprise of this nature. Think of the responsibility that would weigh on the government.
The socialists, who have invented such folly and who, on days of misfortune, instill them into the minds of the masses, freely award themselves the accolade of progressive men, and it is not without danger that custom, that tyrant of languages, endorses the expression and the opinion it implies. Progressive! This implies that these fine fellows are more farsighted than the common man, that their sole error is to be too far ahead of their century and that if the time has not yet come to abolish certain free services that are alleged to be parasitic, the fault lies with the public, which lags behind socialism. For me, both in soul and conscience it is the contrary that is true, and I do not know to which barbaric century you would have to return to find the present level of socialist understanding in this respect.
Modern sectarians constantly contrast association47 with the current form of society. They do not appreciate that under a regime of liberty, society is a genuine association far better than all those that their fertile imagination engenders.
Let us illustrate this by an example:
In order for a man, when he gets out of bed, to be able to put on a suit of clothes, a piece of land has to have been fenced, cleared, drained, ploughed and sown with a specific type of plant. Flocks have to have grazed there and given their wool, this wool has to have been spun, woven, dyed and made into cloth and this cloth has to have been cut, sewn and made into a garment. And this series of operations implies a host of others, for it requires the use of farming machinery, sheepfolds, factories, coal, machines, vehicles, etc.
If society were not a genuine association, the man who wanted a suit of clothes would be reduced to working in isolation, that is to say, he would have to carry out himself the many tasks in this series, from the first blow of the pick that initiates it to the final stitch of the needle that completes it.
However, thanks to the sociability that is the distinctive characteristic of our species, these operations are shared out among a host of workers, and they are increasingly subdivided for the common good, until a point is reached where a single specialized task can support an entirely new industry as consumption becomes more intense. Then comes the distribution of the income generated according to whatever value each person has contributed to the total operation. If this is not association, I do not know what is.
Note that none of the workers having been able to draw even the minutest thing of substance from nothing, they have limited themselves to providing each other with mutual services,48 helping each other in line with a common goal, and that all may be considered as middlemen with regard to one another. If, for example, during an operation, transport became important enough to occupy one person, spinning another and weaving a third, why would the first be regarded as more parasitic than the two others? Is transport not necessary? Does he who carries it out not devote time and trouble to it? Does he not spare his associates this time and trouble? Do his associates do more than him or simply other things? Are they not all equally subject to the law of a freely negotiated price with regard to their pay, that is to say for their share of the product? Is it not in total freedom and for the common good that this separation of tasks is carried out and these arrangements made? Why then do we need a socialist to come to destroy our voluntary arrangements on the pretext of organization, stop the division of labour, substitute isolated effort for joint effort and cause civilization to take a backward step?
Is association, as I describe it here, any less an association because each person enters into it and leaves it of his own volition, chooses his own place in it, is responsible for his own judgements and stipulations, and brings to it the stimulus and guarantee of personal interest? For it to merit this name, is it necessary for a would-be reformer to come and impose on us his formula and will and concentrate humanity, so to speak, in himself?
The more we examine these progressive schools, the more we are convinced that there is just one thing at their root: ignorance proclaiming itself infallible and laying claim to despotism in the name of this infallibility.
I beg the reader to excuse this digression. It is perhaps not without point at a time when declarations against Middlemen have escaped from books by the Saint-Simonians, phalansterians and icarians,49 and invaded journalism and the public platform, causing a serious threat to freedom of work and exchange.
41 This was true for the followers of the socialists Louis Blanc, Charles Fourier, and the Montagnard faction in the Chamber in 1848. It was not true for the socialist anarchist Proudhon. See the glossary entries on “The Socialist School,” “Blanc,” “Fourier,” and “Proudhon.”
42 Crop failures in 1846, especially in Ireland with the spread of the potato blight, cause considerable hardship and a rise in food prices in 1847 across Europe. Some historians also believe this was a contributing factor to the outbreak of revolution in 1848. The Economists believed that this could have been alleviated if there had been international free trade in grain and other food stuffs which would have allowed surpluses from some areas to be sold in areas where there were shortages. The successful repeal of the Corn Laws in Britain in May 1846 (but which not take full effect until 1849) by Richard Cobden and the Anti-Corn Law League was a first step in this direction. See glossary entries on “Cobden,” “Anti-Corn Law League,” and “The Corn Laws.” See Vanhaute, Eric, C. O'Grada & R. Paping, "The European subsistence crisis of 1845-1850. A comparative perspective." in: Vanhaute E., C. O'Grada & R. Paping (eds.), When the potato failed. Causes and effects of the 'last' European subsistence crisis, 1845-1850. Turnhout: Brepols Publishers, 2007:15-42.
43 The Latin phrase "malesuada Fames" (ill-councelling famine) is from Virgil's Aeneid (VI, 276). In John Dryden's translation it is rendered as "Famine’s unresisted rage". See Virgil’s Aeneid, trans. John Dryden with Introduction and Notes (New York: P.F. Collier and Son, 1909). THE SIXTH BOOK OF THE ÆNEIS </title/1175/217545>.
44 Four factors led to the opening up of world trade in agricultural products after the "Hungry 1840s": the rise in European prices caused by the crop failures of the late 1840s, the freeing up of grain markets in Britain and then other European countries, the reduction in shipping costs, and the rise of large grain markets in the United States and the port of Odessa in the Crimea. From zero wheat imports from the United States to Britain in 1846, the level rose to 1,000 metric tonnes per annum by 1862.
45 Bastiat uses the phrase “se rendent réciproquement service” See the glossary entry on “Servie for Service”.
46 (Paillottet’s note) The author has often invoked the presumption of truth that is attached to the universal agreement shown by the practice followed by men. See in particular page 79 of chapter XIII of the Sophisms in Tome IV followed by page 441, then the appendix to chapter VI entitled the Morality of Wealth in Tome VI. . The reference is to chap. XIII "Théorie, Pratique" (Theory and Practice) in the Economic Sohphisms Part I, and the pamphlet "Propriété et Spoliation" (Property and Plunder) in OC vol. 4; and to chapter VI "Richesse" (Wealth) in Economic Harmonies in OC vol. 6.
47 Bastiat is using the word "association" in its socialist sense as it had become a slogan used by socialist critics of the free market during the 1840s. See the glossary entry on "Association and Organization."
48 Bastiat uses the phrase “se rendre des services réciproques.” See the glossary entry on “Servie for Service”.
49 Saint-Simonians, phalansterians and icarians: followers of Saint-Simon, Charles Fourier, and Étienne Cabet respectively. See the glossary entries on "Saint-Simon," "Fourier," and "Cabet".
Mr. Prohibant 50 (it is not I who have given him this name, it is Mr. Charles Dupin51 who since the, … but then …) devoted his time and his capital to transforming the ore on his land into iron. As nature had been more prodigal toward the Belgians, they supplied iron to the French cheaper than Mr. Prohibant, which means that all Frenchmen or France herself were able to obtain a given quantity of iron with less labor by buying it from the honest Flemings. Driven by their self-interest, they did not fail to do so, and every day you could see a host of nail-makers, blacksmiths, wheelwrights, mechanics, farriers and ploughmen going on their own account or through middlemen to obtain supplies from Belgium. This did not please Mr. Prohibant at all.
First of all, the idea came to him to stop this abuse using his own forces. This was certainly the least he could do, since he alone was harmed by the abuse. “I will take my rifle,” he said to himself, “I will put four pistols in my belt, I will fill my cartridge pouch, I will buckle on my sword and, thus equipped, I will go to the border. There, I will kill the first blacksmith, nail-maker, farrier, mechanic or locksmith who comes to do business with them and not with me. That will teach him how to conduct himself properly.”
When he was about to leave, Mr. Prohibant had second thoughts, which mellowed his bellicose ardor somewhat. He said to himself: “First of all, it is not totally out of the question that my fellow-citizens and enemies, the purchasers of iron, will take this action badly, and instead of letting themselves be killed they will kill me first. Next, even if I marshal all my servants, we cannot guard all the border posts. Finally, this action will cost me a great deal, more than the result is worth.”
Mr. Prohibant was about to resign himself sadly to being merely as free as anyone else when a flash of inspiration shone in his brain.
He remembered that in Paris there was a great law factory.52 “What is a law?” he asked himself. “It is a measure to which everyone is required to comply once it has been decreed, whether it is good or bad. To ensure the execution of the aforesaid, a public force is organized, and in order to constitute the said public force, men and money are drawn from the nation.
If, therefore, I succeeded in obtaining from the great law factory a tiny little law that said: “Iron from Belgium is prohibited,” I would achieve the following results: the government would replace the few servants I wanted to send to the border by twenty thousand sons of my recalcitrant blacksmiths, locksmiths, nail-makers, farriers, artisans, mechanics and ploughmen. Then, in order to keep these twenty thousand customs officers53 in good heart and health, it would distribute twenty five million francs taken from these same blacksmiths, nail-makers, artisans and ploughmen. The security would be better done, it would cost me nothing, I would not be exposed to the brutality of the dealers, I would sell iron at my price and I would enjoy the sweet recreation of seeing our great nation shamefully bamboozled. That would teach it to claim incessantly to be the precursor and promoter of all progress in Europe. Oh! That would be a smart move and is worth trying.”
Therefore, Mr. Prohibant went to the law factory. Perhaps on another occasion I will tell you the story of his underhand dealings; right now I merely want to talk about his very visible actions. He put the following consideration to the venerable legislators:
“Belgian iron is being sold in France for ten francs, which obliges me to sell mine at the same price. I would prefer to sell it at fifteen and cannot do so because of this God damned Belgian iron.54 Please manufacture a law that says: ‘Belgian iron will no longer come into France.’ I will immediately raise my price by five francs and the result will be:
For each quintal55 of iron I deliver to the public, instead of receiving ten francs, I will receive fifteen. I will become richer faster and will expand my operation, giving work to more workmen. My workers and I will spend more money to the great benefit of our suppliers for several leagues around. As these suppliers will have more markets, they will give more orders to various other producers, and from one sector to another the entire country will increase its activity. This fortunate hundred sou coin that you drop into my coffer will radiate outwards to the far corners of the country an infinite number of concentric circles, just like a stone thrown into a lake.”56
Pleased to hear this speech and delighted to learn that it is so easy to increase the wealth of a nation by means of the law, the lawmakers voted for the restriction. “What do people say about work and economics?” they said, “What use are these painful means of increasing national wealth where one Decree suffices?”
And in fact, the law produced all the consequences forecast by Mr. Prohibant. The trouble was that it also produced others for, to do him justice, he had not reasoned falsely but incompletely. Petitioning for a privilege, he had pointed out those of its effects that are seen, leaving those that are not seen in the shadows. He presented two people only, when there are three in the cast.57 It is up to us to put right this involuntary or perhaps premeditated oversight.
Yes, the écu thus diverted by law to the coffers of Mr. Prohibant constitutes a benefit for him and for those whose work he is bound to stimulate. And if the decree had caused this écu to come down from the moon, these beneficial effects would not be counterbalanced by any compensating bad effects. Unfortunately, it is not from the moon that the mysterious hundred sou coin comes, but rather from the pockets of a blacksmith, nail-maker, wheelwright, farrier, ploughman or builder, in short from the pocket of Jacques Bonhomme,58 who will now pay it without receiving one milligram more of iron than he did at the time when he paid ten francs. At first sight you have to see that this changes the question considerably, since very clearly the Profit made by Mr. Prohibant is offset by the Loss made by Jacques Bonhomme, and everything that Mr. Prohibant is able to do with this écu to encourage national production, Jacques Bonhomme could also have done. The stone is merely cast into a particular point on the lake because it has been prevented by law from being cast into another.
Therefore, what is not seen offsets what is seen and up to now in the remainder of the operation, there remains an injustice, and what is deplorable is that it is an injustice perpetrated by the law.
Nor is this all. I have said that a third person is always left in the shadow. I must bring him forward here so that he can show us a second loss of five francs. Then we will have the result of the entire operation.
Jacques Bonhomme is the possessor of 15 francs, the fruit of his labors. We are still in the period in which he is free. What does he do with his 15 francs? He buys a fashionable article for 10 francs, and with this fashionable article he pays (or the middleman pays on his behalf) for the quintal of Belgian iron. Jacques Bonhomme still has 5 francs left. He does not throw them into the river59 but (and this is what is not seen) gives them to a businessman in one productive sector or another in exchange for a particular purchase he desires, for example, to a bookseller for the ‘Discourse on Universal History’ by Bossuet.60
Thus, with regard to national output, it is stimulated to the extent of 15 francs, as follows:
10 francs for the Parisian article;
5 francs for the book.
As for Jacques Bonhomme, for his 15 francs, he obtains two objects of his preference, as follows:
1. One quintal of iron;
2. A book.
Now the decree comes into force.
What happens to Jacques Bonhomme’s situation? What happens to national production?
When Jacques Bonhomme hands over his 15 francs down to the last centime to Mr. Prohibant for one quintal of iron, he is limited to whatever economic satisfaction is provided by this quintal of iron. He loses the benefit provided by a book or any other equivalent object. He loses 5 francs. We agree on this; we cannot fail to agree on this, we cannot fail to agree that, where a policy of trade restriction raises the price of things, consumers lose the difference.
But, you will say, national production gains this difference.
No it does not for, following the decree, it is merely stimulated as it was before, to the extent of 15 francs.
The only thing is that, following the decree, Jacques Bonhomme’s 15 francs go to the iron industry, whereas before the decree they were shared between the fashionable article and the bookshop.
The violence exercised at the border by Mr. Prohibant himself or that which he has exercised through the law may be considered to be very different from the moral point of view. Some people think that plunder loses all its immorality when it is legal. For my part, I cannot imagine a circumstance that is worse. Be that as it may, what is certain is that the economic results are the same.
View the matter from whatever angle you wish, but keep a sagacious eye and you will see that nothing good ever comes from plunder, whether legal or illegal. We do not deny that a profit of 5 francs results for Mr. Prohibant or his industry or, if you wish, for national production. But we do claim that two losses also result, one for Jacques Bonhomme who pays 15 francs for what he had for 10 and the other for national production, which no longer receives the balance. Choose whichever of these two losses you please to set against the profit that we acknowledge. The other will be no less of a dead loss.
The Moral: The use of violence is not to produce but to destroy. Oh! If the use of violence was to produce, our France would be much richer than she is.
50 Bastiat borrows the made up name “M. Prohibant” [from “prohiber” to prohibit; “prohibant” prohibiting, thus “Mr. Trade Prohibiter” or “Mr. Protectionist”] from a popular work written by the Baron Charles Dupin (1784-1873) in the late 1820s Le petit producteur français, in 7 vols. (1827). This was an early attempt to dispel similar economic sophisms to those Bastiat was addressing in 1845 onwards. Dupin states in the “Dedication” to vol. 4 (entitled “Le petit commerçant français”) to the “students of the Business schools of Paris, Lyon, and Bordeaux” that he was dedicating this work to them “with the aim of refuting the long term and entrenched errors concerning the interests of commerce”. Dupin uses the made up person of M. Prohibant to represent those who continue to cling to anti-free trade and anti-free market sentiments. (pp. ix-x). It is of course interesting to note that Bastiat also dedicates his Economic Harmonies (1850) to the “Youth of France” for similar reasons. Dupin’s work might also be compared to other attempts by free market supporters to appeal to a popular audience, such as Jane Marcet and Harriet Martineau. See the glossary entries for “Dupin,” “Marcet,” and “Martineau.”
51 Charles Dupin (1784-1873) was a pioneer in mathematical economics and worked for the statistical office of France. In 1828 he was elected deputy for Tarn, was made a Peer in 1830, and served in the Constituent and then the National Assemblies during the Second Republic. See the glossary entry on “Dupin.”
52 Bastiat calls the Chamber “la grande fabrique de lois” (the great law factory).
53 Horace Say, like Bastiat, calls those who work for the Customs Service “une armée considérable” (a sizable army) which numbered 27,727 individuals (1852 figures). This army is composed of two “divisions” - one of administrative personnel (2,536) and the other of “agents on active service” (24,727). See Horace Say, “Douane”, DEP, vol. 1, pp. 578-604 (figures from p. 597). According to the Budget papers for 1848 the Customs Service collected fr. 202 million in customs duties and salt taxes and their administrative and collection costs totalled fr. 26.4 million or 13% of the amount collected. See Appendix 4 "French Government Finances 1848-1849."
54 Bastiat uses the expression “que Dieu maudisse” (what God would damn) which is much stronger than the other occasion he uses the word "damned" in the title of his essay on money "Damned Money!" (April 1849). See vol. 4 of the Collected Works (forthcoming). In the following article, “Machines,” he begins with the exclamation “Malédiction sur les machines!” (a curse on machines!).
55 A quintal weighed 100 pounds under the Old Regime and 100 kilogrammes (220 pounds) in post-revolutionary France. See “Weights and Measures” in Appendix 3 "Economic Policy and Taxation."
56 This is a reference to Bastiat’s notion of the “ricochet” or flow on effect by which he meant the indirect consequences of an economic action which flow or knock on to third parties, sometimes with positive results but more often with negative results. In several of his statements of this Bastiat uses the analogy of stones or pebbles being dropped in bodies of water thus causing ripples which spread outwards to thousands of third parties who are affected. He also talks about lines of radiation which stretch out to infinity. See the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
57 This is a reference to Bastiat's principle of the "double incidence of loss" which he developed in ES3 IV. “"One Profit versus Two Losses" in May 1847 and took further in the pamphlet "What is See and What is Not Seen" (July 1850). By this he meant that, for example, claims that tariffs result in a profit for one industry hides the fact that two other groups suffer losses: an equal loss for another industry and an equal loss for the consumer, resulting in a net "double incidence of loss" to the nation as a whole. See the glossary on “The Double Incidence of Loss” and the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
58 “Jacques Bonhomme” (literally Jack Goodfellow) is the name used by the French to refer to “everyman,” sometimes with the connotation that he is the archetype of the wise French peasant. Bastiat uses the character of Jacques Bonhomme frequently in his constructed dialogues in the Economic Sophisms as a foil to criticise protectionists and advocates of government regulation. The name Jacques Bonhomme was given to the small magazine that Bastiat and Molinari published and handed out on the street corners of Paris in June and July 1848. See the glossary entry "Jacques Bonhomme [person]."
59 In the words of the English campaigner against the Corn Laws, Perronet Thompson (1783-1869) who influenced Bastiat in his thinking on this topic, remarks that the French tariff laws were tantamount to an order that every Frenchman throw every “third franc into the sea.” See “A Running Commentary on Anti-Commercial Fallacies” (1834), p. 189. See the glossary entry on “Perronet Thompson.”
60 Jacques Bénigne Bossuet (1627-1704) was bishop of Meaux, an historian, and tutor to the son of Louis XIV. In politics he was an intransigent Gallican Catholic, opponent of Protestantism, and a supporter of the idea of the divine right of kings. He wrote a Discours sur l'histoire universelle (1681). Bastiat is having a joke here as this book is not what Jacques would probably buy if he had any spare cash.
“May machines be cursed!61 Every year their increasing power consigns to Poverty millions of workers by taking away their work, and with work their pay and with their pay their Bread! May machines be cursed!”
This is the cry of the popularly held Prejudice whose echo resounds around the journals.
But to curse machines is to curse the human mind.
What staggers me, though, is that there can be a single man who feels at ease with a doctrine like this.62
For in the end, if it is true, what is the logical consequence of this? It is that there is no activity, well-being, wealth or happiness possible other than for people that are stupid or afflicted with mental immobility, to whom God has not given the disastrous gift of thinking, observing, putting things together, inventing or obtaining the greatest results using the least means. On the contrary, rags, dreadful hovels, poverty and starvation are the inevitable fate of any nation that seeks and finds in iron, fire, wind, electricity, magnetism, the laws of chemistry and mechanics, in a word in the forces of nature, a complement to his own strength and it is therefore appropriate to say with Rousseau: “Any man who thinks is a depraved animal.”63
That is not all. If this doctrine is true, since all men think and invent, since they all in fact from the first to the last and at every moment of their existence seek the co-operation of the forces of nature, to do more with less, to reduce either their labor or the labor for which they are paying, to achieve the greatest amount of economic satisfaction possible with the least amount of work, it has to be concluded that the entire human race is being drawn toward its downfall, precisely through this intelligent aspiration to progress that torments each of its members.
This being so, it ought to be verified by statistics, that the inhabitants of Lancaster are fleeing from this land of machines and are going to seek work in Ireland where machines are unknown; and by history, that barbarism darkened the eras of civilization and that civilization shines in times of ignorance and savagery.
Obviously, in this heap of contradictions there is something that stands out and warns us that the problem hides the element of a solution that has not been sufficiently clarified.
This is the entire secret: behind what is seen lies what is not seen. I will endeavor to shed light on it. My case can be only a repetition of the preceding one, since the problem involved is identical.
Men are naturally inclined, if they are not forcibly prevented from this, to seek low prices, that is to say, to seek that which, for an equal amount of satisfaction, saves them work, whether these low prices result from a skillful foreign producer or an efficient mechanical producer.
The theoretical objection made to this preference is the same in both cases. In both of them it is blamed for seeming to paralyze labor. In fact, what determines this preference for low prices is precisely the fact that labor is not made idle but more readily available.
And this is why in both cases the same practical obstacle is put in its way, namely violence. Legislators prohibit foreign competition and forbid mechanical competition. For what other means can there be to stop a natural preference in all men other than to deprive them of their liberty?
It is true that in many countries legislators strike just one of these two forms of competition and limit themselves to complaining about the other. This proves one single thing, which is that in these countries legislators are inconsistent.
We should not be surprised at this. When taking the wrong road, people are always inconsistent, otherwise the human race would be annihilated. An erroneous principle has never been seen and will never be seen to be taken to its logical conclusion. I have said elsewhere that inconsistency is the limit of absurdity. I might have added that it is at the same time proof of it.
Let us proceed with our argument; it will not take much time.
Jacques Bonhomme had two francs, which he paid two workers he had hired.
What does he do, however, but devise a system of ropes and weights that reduces the work by half.
He therefore obtains the same satisfaction, saves one franc and dismisses one worker.
He dismisses one worker; that is what is seen.
And if this is all that is seen, it is said: “This is how poverty follows civilization, this is why freedom is fatal to equality. The human mind has made an advance and a worker immediately falls into the abyss of poverty. Alternatively, it may happen that Jacques Bonhomme continues to employ the two workers but now pays them just ten sous each, for they will compete with each other and offer their services at a discount. This is how the rich grow ever richer and the poor ever poorer. We must reform society.”
What a fine conclusion and one worthy of its introduction!
Fortunately, both introduction and conclusion are entirely wrong, since behind the half of the phenomenon that is seen there is the other half that is not seen.
What is not seen is the franc saved by Jacques Bonhomme and the necessary effects of this saving.
Since Jacques Bonhomme now spends just one franc on labor in order to achieve a given level of satisfaction as a result of his invention, he still has one more franc.
If therefore there is a worker anywhere in the world who offers his idle hands, there is also somewhere in the world a capitalist who offers his unused franc. These two elements come together and join forces.
And it is as clear as daylight that between the supply and demand for work, between the supply and demand for pay, the relationship has changed not one whit.
The invention and one worker, paid for with the first franc, now carry out the work that two workers did before.
The second worker, paid with the second franc, brings into existence a new job.
What has changed in the world then? There is now an additional nation-wide satisfaction, in other words the invention, which is a free advance and a free source of profit for the human race.
From the structure I have given my argument, this conclusion could be drawn:
“It is the capitalist who gathers all the benefits of machines. The wage-earning class, while experiencing momentary suffering, never benefit from them, since according to your own premises machines displace part of the national output, without reducing it, it is true, but also without increasing it.”
It is not in the scope of this short article to reply to all the objections. Its sole aim is to combat a popularly held prejudice, one that is highly dangerous and very widespread. I wanted to prove that a new machine makes not only a certain number of workers available but also, and inevitably, the money needed to pay for them. These workers and this pay come together to produce what it was impossible to produce before the invention, from which it follows that the final result it produces is an increase in the amount of satisfaction for an equal input of labor.
Who benefits from this extra economic satisfaction?
Who? First of all, the capitalist, the inventor, the first person who successfully uses the machine which is the reward for his genius and audacity. In this case, as we have just seen, he achieves a saving on the production costs which, however it is spent (and it is always spent), makes use of as much labor as the machine has caused to be laid off.
However, competition soon obliges him to lower his sales price to the extent of this saving itself.
And when this happens, it is no longer the inventor who benefits from the invention, but the purchaser of the product, the consumer, the general public, including the workers, in a word, the human race.
And what is not seen is that the Saving procured for all consumers forms a fund from which wages are paid, replacing those eliminated by the machine.
Thus, using the above example, Jacques Bonhomme obtains a product by spending two francs on workers’ wages.
Thanks to his invention labor now costs him only one franc.
As long as he sells the product at the same price, there is one less worker employed in making this particular product; that is what is seen. However, there is one worker more employed using the franc that Jacques Bonhomme has saved; that is what is not seen.
When, in the natural progress of things, Jacques Bonhomme is reduced to lowering the price of the product by one franc, he will no longer be making any saving; he will then no longer have a franc with which to make some new demand upon national output. However, in this respect, the purchaser of Jacques’ product takes his place, and this purchaser is the human race. Whoever buys the product pays one franc less for it, saves one franc and of necessity makes this saving available to the fund which finances wages; that is also what is not seen.
This problem concerning machines has been given another solution based on facts.
It has been said: Machines reduce production costs and the price of the product. The reduced price of the product triggers an increase in consumption, which requires an increase in production, and in the end the employment of as many workers or more, after the invention, as were needed before. In support of this, mention is made of the printing industry, spinning, the press, etc.
This argument is not scientific.
We would need to conclude that if the consumption of a particular product remains static or nearly so, machines would damage the demand for labor. This is not so.
Let us suppose that in a particular country all men wear hats. If, using a machine, people succeeded in reducing their price by half, it would not necessarily result that men would buy twice as many.
Would it then be said in this instance that part of national production had been rendered inert? Yes, according to the popular argument. No, according to mine; for while in this country no one would buy a single extra hat, the entire fund for wages would remain no less safe. The reduction in the flow of funds to the hat-making industry would reappear in the Savings made by all consumers, and from there would go on to finance all the labor that the machine had made redundant, and stimulate new development across all industries.
And this is what happens. I have seen journals that used to cost 80 francs, which now cost 48. This is a saving of 32 francs for subscribers. It is not certain, or at any rate, not inevitable, that these 32 francs continue to go into journalism. What is certain and essential is that, if they do not go in this direction, they go in another. One person will use them to buy more journals, another to eat better, a third to clothe himself better and a fourth to buy better furniture.
In this way, industries are interdependent. They form a huge entity in which every part communicates with every other part through hidden channels. What is saved in one benefits all.64 What is important is to understand fully that never, ever, are savings made at the expense of labor and pay.65
61 Bastiat uses the word “malédiction”. See the previous note on Luddites, pp. ??? below. See the glossary entry on “Luddites.”
62 (Paillottet’s note) See pages 86 and 94 of chapters XIV and XVIII of the first series of the Sophisms and the reflections addressed to Mr. Thiers on the same subject in Tome VI and chapter XI hereafter in this volume. . This is a reference to chap. XIV "Conflit de principes" (Conlict of Principles) and chap. XVIII "Il n'y a pas de principes absolus" (There are no Absolute Principles) in Economic Sophisms Part I in vol. 4 OC (Paillottet is incorrect in stating that these are in vol. VI); and to Reflections addressed to Thiers (p. 538 vol. ???); and to chap. XI "Éparges et luxe" (Savings and Luxury) of "What is Seen" in vol. 5 OC.
63 From the First Part of Rousseau’s Discourse on Inequality (1754): “most of our ills are of our own making, and that we might have avoided nearly all of them if only we had adhered to the simple, unchanging and solitary way of life that nature ordained for us. If nature destined us to be health, I would almost venture to assert that the state of reflection is a state contrary to nature, and that the man who meditates is a depraved animal.” See Jean-Jacques Rousseau, A Discourse on Inequality (Penguin, 1984), p. 84, or Oeuvres politiques (Ehrard 1975), p. 45. See the glossary entry on “Rousseau.”
64 This a key passage in which Bastiat summarizes his thoughts on the interdependence of all industries in the economy, and how information is transmitted from one place to another via “canaux secrets” (secret or hidden channels) in a pre-Hayekian insight into how prices transmit information to dispersed economic actors. See also the Appendices "Bastiat and the Ricochet Effect" and "The Sophism Bastiat never wrote: the Sophism of the Ricochet Effect."
65 (Paillottet’s note) See chapters III and VIII in vol V.
In all ages, but especially in the last few years, people have thought of making wealth universal by making credit universally available.66
I do not think I am exaggerating when I say that, since the February Revolution, presses in Paris have vomited out more than ten thousand brochures recommending this solution to the Social Problem.
Alas, this solution is based on a pure optical illusion, if an illusion can be said to constitute a base.
People start by confusing money with products and then they confuse paper-money with cash, and then from these two forms of confusion they claim to be plucking out something real.67
With respect to this question, it is absolutely essential to forget money, coins, notes and other instruments by means of which products are passed from hand to hand, in order to see just the products themselves, which are the true basis of lending.
For when a ploughman borrows fifty francs to buy a plough, he is not really being lent fifty francs but a plough.
And when a merchant borrows twenty thousand francs to buy a house, it is not twenty thousand francs that he owes, it is the house.
Money is there only to facilitate the agreement among several parties.
Pierre may not be willing to lend his plough and Jacques may be willing to lend his money. What does Guillaume do then? He borrows Jacques’ money, and with this money he buys the plough from Pierre.
But in fact, no one borrows money for its own sake. One borrows money to obtain products.
Now, in no country can more products change hands than there are products available.
Whatever the sum of specie and paper in circulation, the total number of borrowers cannot receive more ploughs, houses, tools, provisions or raw materials than the entire group of lenders is able to supply.
So we should get it firmly into our heads that any borrower implies a lender and any borrowing a loan.
This having been said, what good can institutions of credit do? They can facilitate the means for borrowers and lenders to locate each other and enter into agreement. But what they cannot do is to increase instantly the quantity of objects borrowed and lent.
This is what would be necessary, however, if the aims of the Reformers were to be achieved, since they aspire to nothing less than putting ploughs, houses, tools, provisions and raw materials in the hands of all those who want them.
And what have they dreamt up to do this?
They propose the provision of a State guarantee for loans.
Let us go deeper into the question, for there is something in it that is seen and something that is not seen. Let us endeavor to see both of these.
Let us suppose that there is just one plough in the world and that two ploughmen would like to have it.
Pierre owns the only plough available in France. Jean and Jacques want to borrow it. Jean, through his probity, property and good reputation, offers guarantees for it. He is believed in; he has credit. Jacques does not inspire confidence, or inspires less confidence. Naturally, Pierre will lend his plough to Jean.
But now, under socialist inspiration, the State intervenes and tells Pierre: “Lend your plough to Jacques and I will guarantee its repayment; this guarantee is worth more than Jean’s for he has only himself to speak for himself while I, I have nothing it is true, but I control the wealth of all the taxpayers, and it is with their money that I will pay you the principal and interest if need be.”
Consequently, Pierre lends his plough to Jacques: that is what is seen.
And the socialists rub their hands together, saying: “See how our plan has succeeded. Through the intervention of the State, poor Jacques has a plough. He will no longer be forced to dig the earth; he is now on the road to wealth. It is an asset for him and a benefit for the nation taken as a whole.”
No, Sirs! It is not a benefit for the nation, for here is what is not seen.
What is not seen is that the plough has been allocated to Jacques only because it has not been allocated to Jean.
What is not seen is that if Jacques ploughs instead of digging, Jean will be reduced to digging instead of ploughing.
As a result, what was desired as an increase in lending is merely a displacement of lending.
What is more, what is not seen is that this displacement implies two profound forms of injustice: an injustice to Jean who, after deserving and acquiring credit through his probity and activity, sees himself dispossessed; and an injustice to taxpayers who risk paying a debt that does not concern them.
Will it be said that the government offers Jean the same facilities as Jacques? But since there is just one plough available, two cannot be lent. The argument always returns to the claim that, thanks to the intervention of the State, more borrowing will occur than there are loans available, for the plough represents here the mass of capital available.
It is true that I have reduced the operation to its simplest level, but use the same touchstone to test the most complicated governmental institutions of credit and you will be convinced that this is the only result they can produce: displacing credit and not increasing it. In a given country and time there is just a certain sum of capital available, and all of it is invested. By guaranteeing those that are insolvent, the State may well increase the number of borrowers, thus raising the rate of interest (always to the disadvantage of the taxpayer), but what it cannot do is to increase the number of lenders and the total amount of lending.
Let no one attribute to me, however, a conclusion from which may God preserve me. I say that the Law should not artificially favor borrowings, but I do not say that it should artificially hinder them. If, in our mortgage system or elsewhere, there are obstacles to the dissemination and application of credit, let them be removed; nothing would be better or more just. But this is all, with freedom, that should be demanded of the Law by Reformers worthy of the name.68
66 This is a reference to the debate between Bastiat and the socialist anarchist writer Proudhon on free credit which took place in Proudhon’s journal La Voix du people between October 1849 and March 1850 and which was later published in book form, firstly by Proudhon as Intérêt et principle (1850) and then by Bastiat with an additional concluding chapter as Gratuité du crédit (1850). See Collected Works, vol. 4, pp. ??? (forthcoming).
67 Bastiat makes a distinction between two types of “money” here, “numéraire” (cash or hard money backed by gold or silver) and “papier monnaie” (paper money). We have translated “numéraire” as “money” throughout the book except, as in this passage, where a clear distinction has to be made between the two. See also Bastiat’s most extended discussion of money in “Maudit l’argent!” (Damned Money!) (April 1849), CW vol. 4 (forthcoming). See also ES1 XI. “Nominal Prices” (October 1845), below, pp. ???
68 (Paillottet’s note) See the end of the 12th letter in Free Credit on page 282 et seq. of this volume.
But here are four speakers who struggle to control the rostrum. First of all, they all speak at the same time, then one after the other. What have they said? Certainly some very fine things on the power and grandeur of France, on the necessity of sowing in order to reap, on the brilliant future of our gigantic colony, on the advantage of sending off to distant places our surplus population,70 etc. etc. Magnificent examples of oratory which are always adorned with the following peroration:
“Vote in favor of fifty million (more or less) to build ports and roads in Algeria, in order to take settlers there, build them houses and clear fields for them. In doing this you will bring relief to French workers, stimulate work in Africa and expand trade in Marseilles. It is pure profit.”71
Yes, that is true, if you consider the said fifty million only from the time that the State spends it, if you look at where this money is going, not where it came from, if you take account only of the good it will do on leaving the coffers of the tax collectors and not of the harm that has been done nor of the good that has been prevented when it entered these coffers. Yes, from this limited point of view, it is pure profit. The house built on the Barbary coast, that is what is seen; the port dug in on the Barbary coast, that is what is seen; the work stimulated on the Barbary coast, that is what is seen; fewer workers in France, that is what is seen; a major flow of goods to Marseilles, that is also what is seen.
But there is another thing that is not seen. It is that the fifty million spent by the State cannot be spent, as they might have been, by taxpayers. From all the good attributed to public expenditure carried out we must deduct all the harm done by preventing private expenditure, unless we go so far as to say that Jacques Bonhomme would have done nothing with the hundred sous he had earned and that taxes had taken from him. This is an absurd assertion, for if he took the trouble to earn them it is because he hoped to have the satisfaction of spending them. He would have rebuilt the fence around his garden and can no longer do so, that is what is not seen. He would have had his field marled72 and can no longer do so, that is what is not seen. He would have added a floor to his cottage and can no longer do so, that is what is not seen. He would have bought more tools and can no longer do so, that is what is not seen. He would have fed himself better, clothed himself better, educated his sons better, increased his daughter’s dowry and can no longer do so, that is what is not seen. He would have joined the mutual aid society73 and can no longer do so, that is what is not seen. On the one hand various satisfactions are taken from him and the means of action destroyed in his very hands, and on the other the work by the laborer, carpenter, blacksmith, tailor or his village schoolmaster that he might have encouraged and that is now wiped out: all this too is what is not seen.
People count a great deal on the future prosperity of Algeria; so be it. But they should also take account of the doldrums into which, in the meantime, France is inevitably being sunk. I am being shown the trade in Marseilles, but if it is being achieved on the basis of taxes, I will always be able to show an equal volume of trade that has been destroyed in the rest of the country. It is being said: “Here is a settler who is being sent to the Barbary coast; this provides relief for the population remaining in the country.” My reply is: “How can this be so if, by transporting this settler to Algiers you are also transporting there two or three times the amount of capital which would have afforded him a living in France?74
My sole aim is to make the reader understand that, in any public expenditure, behind the apparent good there is a harm that is more difficult to perceive. As far as I am able, I would like to instill in him the habit of seeing both of these and taking account of both of them.
When an item of public expenditure is put forward, it must be examined on its own merits, setting aside the resulting stimulus claimed for production, for this stimulus is an illusion. What public expenditure does in this respect, private expenditure would also have done. Therefore the alleged interests of production are always irrelevant.
An appreciation of the intrinsic merit of public expenditure made for Algeria is not part of the aim of this article.
However, I cannot refrain from making a general observation. Presumption is always unfavorable to collective expenditure carried out through taxes. Why? This is why:
First of all, justice always suffers because of it. Since Jacques Bonhomme had sweated to earn his hundred sou piece with some kind of satisfaction in mind, it is at least unfortunate that the tax authorities intervene to remove this satisfaction from Jacques Bonhomme to give it to someone else. Certainly, it is then up to the tax authorities or those who direct them to give good reasons for this. We have seen that the State gives a detestable reason when it says: “With these hundred sous I will give work to workers”, since Jacques Bonhomme (as soon as he no longer entertains any blindness in this regard) will not fail to reply: “Good heavens! With one hundred sous, I will give them work myself!”
Setting aside this reason, other reasons are put forward in all their nakedness, making the argument between the tax authorities and poor Jacques Bonhomme extremely simple. If the State says to him: “I am taking one hundred sous from you to pay the gendarme who saves you from having to look after your own security, to pave the road you cross every day, to pay the magistrate who ensures respect of your property and freedom or to pay the soldier who defends our borders”, Jacques Bonhomme would pay without a word, unless I am much mistaken. But if the State tells him: “I am taking your hundred sous to give you a subsidy of one sou if you farm your field well, or in order to teach your son what you do not want him to learn, or for the cabinet minister to add the hundred and first dish to his dinner; I am taking them to build a cottage in Algeria subject to taking one hundred sous more from you each year to keep a settler there, in addition to a further hundred to keep a soldier to guard the settler and yet another hundred to keep a general to guard the soldier, etc. etc.”, I can almost hear poor Jacques cry: “This legal regime bears a strong resemblance to the legal regime which prevails in the Bondy Forest75!”, and as the State has foreseen the objection, what does it do? It mixes up everything; it produces this detestable argument, which should not have any influence on the matter; it talks about the effect the many hundred sous have on production; it refers to the minister’s cook and supplier, a settler, a soldier and a general all living off these five franc coins. It shows, in a word, what is seen, and as long as Jacques Bonhomme has not learnt to bring to the forefront what is not seen, he will be duped.76 This is why I am endeavoring to teach him to do this by means of frequent repetition.
Because public expenditure displaces production without increasing it, a second and serious presumption weighs against it. Displacing production is to displace workers and upset the laws of nature that govern the distribution of the population across the country. When 50 million is left to taxpayers, since taxpayers are everywhere, this sum stimulates work in the forty thousand communes in France. This money acts as a link to keep each person in his native area; it is spread to every possible worker and over all the forms of production imaginable. If the State withdraws this 50 million, gathers it together and spends it for a specific purpose, it attracts to this purpose a proportional quantity of displaced output, a corresponding number of uprooted workers, a floating population that has lost its position in society77 and is, I dare to say, dangerous once funds have run out! But the following happens (and here I return to my subject): this fevered activity, blown into a restricted space, in a manner of speaking, leaps to the eye, that is what is seen. The people applaud and marvel at the beauty and ease of the procedure and clamor for its continuation and extension. What is not seen is that an equal quantity of productive activity that is probably of a more sensible kind has been consigned to idleness throughout the rest of France.
69 See Bastiat's comments on Algeria and colonization in his address "To the Electors of the District of Saint-Sever" (1846) in Collected Works, vol. 1, pp. 363-65, where he describes the colonial system as “the most disastrous illusion ever to have led nations astray.” Algeria was conquered by France in 1830; the occupied parts were annexed to France in 1834; the new constitution of the Second Republic (1848) declared that Algeria was no longer a colony but an integral part of France (with three Départements) and that the emigration of French settlers would be officially encouraged and subsidized; Emperor Napoleon III returned Algeria to military control in 1858. In 1848 about 200,000 of the population out of 2.5 million were Europeans. See the glossary entry on “Algeria.”
70 This is a reference to the Malthusian notion that there was a “surplus” population which could not be fed at the current rate of agricultural production. Thus, the population had to be “limited” in some way, in the long term by the exercise of “moral restraint” in having smaller families, or in the short term with some people having to be moved elsewhere such as to the colonies. Bastiat rejected this aspect of Malthusianism with two arguments: that people constituted a valuable form of “human capital” (although he did not use this phrase) which was very productive if left free to be so, and that the free market and free trade could could produce far more than merely “arithmetic increases” in output. For these heretical views views Bastiat provoked vigorous debate in the Political Economy Society, most of whose members were strict Malthusians. See the chapter on “Population” in Economic Harmonies (1850-51) [CW, vol. 5, forthcoming] and the Appendix “Bastiat on Malthus.”
71 In a debate in the National Assembly in September 1848 (11th and 19th) a budget of fr. 50 million was allocated to the Ministry of War for the years 1848-51 to "establish agricultural colonies in the provinces of Algeria and for works of public utility intended to assure their prosperity" (p. 943). The exact number of colonists were not specified, although a figure of 12,000 for the year 1848 was mentioned. In a later Sophism Bastiat mentions the figure of fr. 100 million per year as the level of true expenditure on Algeria. The actual state subsidy granted to French colonists who wished to settle in Algeria is hard to determine. The pro-colonizer Gustave Vesian lobbied for a community of 10,000 colonists living in 3 towns who would get other state benefits such as irrigated land, a guaranteed market for their grain in the domestic market, seed and food (and wine) for 3 years to get established, and low interest loans. See Compte rendu des séances de l'Assemblée Nationale. Exposés des motifs et projets de lois présentés par le gouvernement; Rapports de MM. les Représentants. Tome troisième. Du 8 Août au 13 Septembre 1848. (Paris: Imprimerie de l'Assemblée Nationale (1850). Séance du 11 Septembre 1848, pp. 943-44; also Tome quatrième. Du 14 Septembre au 20 Octobre 1848 (1850), p. 117; and Gustave Vesian, De la colonisation en Algérie (Paris: Gabriel Roux, 1850). See the glossary entry on “Algeria.”
72 Marl or marlstone is a sedimentary rock consisting of a mixture of clay and limestone which historically had been crushed and used a fertilizer.
73 The Economists believed that “associations des secours mutuels” (mutual aid societies, or Friendly Societies) were an important way in which ordinary workers could improve their economic situation without state assistance. Bastiat mentions them in an earlier sophism ES2 IV. “The Lower Council of Labour” (c. 1845) where he points out that there are legal impediments put in the way of their formation. His friend and colleague Gustave de Molinari had championed the idea of labour exchanges as a way in which workers could inform themselves about the availability of jobs and rates of pay all across Europe.
74 (Bastiat's note) The Minister of War stated recently that each person transported to Algeria cost the State 8,000 francs. Well, it is a stated fact that the unfortunate people concerned would have lived very well in France on a capital of 4,000 francs. My question is, how is the population of France being relieved when it is being deprived of one man and the means of subsistence for two? [See the glossary entry on “Algeria.”]
75 The forest of Bondy is a large forest in the Département of Seine-Saint-Denis about 15 kilometres to the east of Paris. It was a notorious refuge for thieves and highwaymen. Hence one might translate Bastiat expression "le régime (légal) de la forét de Bondy" as "the law of the jungle" as does the FEE translator.
76 The words "duperie" (deceit) and "dupes" (those who are deceived) are key terms in Bastiat's theory of plunder ("spoliation"), according to which the plunderers ("les spoliateurs") deceive their victims by means of “la ruse” (deception, fraud) to justify and disguise what they are doing. By means of "Sophisms" (sophistical arguments and fallacies) the dupes are persuaded that the plundering of their property is necessary for the well-being of the nation and thus ultimately for their own good as well. See ES2 I. “The Physiology of Plunder” and the glossary entry on “Bastiat on Plunder.”
77 Bastiat uses the expression "déclassée" which literally means "declassed".
It is not only with reference to public expenditure that what is seen eclipses what is not seen. Leaving half the economic system in shadow as it does, this phenomenon ushers in a false moral code. It leads nations to consider their moral and material interests as antagonistic. Can anything be more demoralizing and sad? Let us see.
There can be no head of a household who does not see it as his duty to teach his children order, neatness, a sense of looking after things and economy and moderation in expenditure.
There is no religion that does not inveigh against ostentation and luxury. That is all very good, but on the other hand, what can be more popularly accepted than the following axioms:
“Hoarding dries up the veins of the people.”
“The luxury of the great leads to the prosperity of the humble.”
“Those who are prodigal ruin themselves but enrich the State.”
“It is on the excess of the rich that the bread of the poor is sown.”
Here, certainly, there is a flagrant contradiction between moral and social ideas. How many eminent minds rest in peace after having noted the conflict! This is what I have never been able to understand, as it seems to me that there is nothing more painful than to perceive two opposing tendencies in the human race. What! It is led to degradation by either of the two extremes! If it is thrifty, it falls into destitution; if it is prodigal, it ends up in the abyss of moral decay.
Fortunately, popularly accepted maxims show Thrift and Luxury in a false light as they take account only of their immediate consequences that are seen and not of the later effects that are not seen. Let us attempt to rectify this limited view of the matter.
Once Mondor and his brother Ariste,78 having shared their father’s inheritance, have each an income of fifty thousand francs. Mondor exercises the fashionable kind of philanthropy. He is what is known as a veritable executioner of money. He buys new furniture several times a year and a new wardrobe every month. The ingenious ways he comes up with to get through his inheritance sooner are the talk of the town: in short, he eclipses the high-livers of Balzac79 and Alexander Dumas.80
This being so, you ought to hear the chorus of praise which always surrounds him! “Tell us about Mondor! Long live Mondor! He is the benefactor of the workers and the Providence of the people. It is true that he wallows in orgies and splashes mud all over passers-by;81 his dignity and human dignity in general are somewhat diminished. But what does it matter! If he is not useful himself, he makes himself useful by his wealth. He keeps money in circulation; his courtyard is always full of suppliers who always go away satisfied. Is it not said that if a gold piece is round it is so that it rolls?”
Ariste has adopted a very different lifestyle. While he is not selfish, he is at least an individualist, since he uses reason to govern his expenditure, seeks only moderate and reasonable pleasures, thinks of the future of his children and, to use the dreaded word, he is thrifty.
And you ought to hear what is said of him by the populace!
“What use is this mean rich man, this evil usurer!82 Doubtless, there is something imposing and touching in the simplicity of his lifestyle; besides, he is humane, benevolent and generous, but he calculates. He does not consume all his income. His town house is not constantly splendid and buzzing with life. What gratitude does he generate among upholsterers, coachbuilders, horse dealers and confectioners?”
These assessments that are damaging to the moral code are based on the fact that there is one thing that catches the eye: the expenditure of prodigal brother, and another that escapes it: the equal and even greater expenditure of the brother who saves.
However, things are so admirably organized by the divine inventor of social order that in this as in everything, Political Economy and the Morality, far from being in conflict, are in agreement with one another, and Ariste’s wisdom is not only more dignified but also more profitable than Mondor’s folly.
And when I use the term profitable, I do not just mean that it is profitable to Ariste or even to society in general, but more beneficial to the workers of today and current productive activity.
To prove this, you need cast only your mind’s eye on the hidden consequences of human action that your physical eye does not see.
Yes, Mondor’s prodigality has effects that are visible to all. Everyone can see his carriages, landaus, phaetons, the dainty paintings on his ceilings, his rich carpets, and the splendor that radiates from his town house. Everyone knows that his thoroughbreds run in races. The dinners he gives at his town house in Paris draw crowds on the pavement and people say: “Here is a good man who, far from keeping back some of his income, probably is eating into his capital.” This is what is seen.
From the point of view of the workers’ interests, it is not as easy to see what happens to Ariste’s income. Let us follow it closely, however, and we will se that all of it, right down to the last obole, will provide work to workers, as certainly as Mondor’s income does. There is just one difference: Mondor’s wild expenditure is condemned to decrease constantly and come to an inevitable end, while Ariste’s wise expenditure will increase from year to year.
And if this is so, the public interest will certainly be in line with the morality.
Ariste spends twenty thousand francs a year on himself and his household. If this were not enough to make him happy, he would not deserve to be called a wise man. He is touched by the misfortunes that weigh on the poor classes; he believes that in all conscience he is called upon to contribute some relief to them, and he devotes ten thousand francs to charity. Among the traders, manufacturers and farmers, he has friends who are temporarily on hard times. He finds out about their situation in order to be able to help them prudently and effectively and allocates another ten thousand francs to this work. Finally, he does not forget that he has daughters to provide a dowry for and sons whose future he has to ensure, and consequently he sets himself the duty to save and invest ten thousand francs each year.
Here then is the way his income is used:
1. Personal expenditure 20,000 francs
2. Charity 10,000 francs
3. Help to Friends 10,000 francs
4. Savings 10,000 francs
Let us take each of these headings and we will see that not one single obole escapes the national output.
1. Personal expenditure. With regard to workers and suppliers, this has effects that are absolutely identical to an equal level of expenditure made by Mondor. This is self-evident; we will say no more about it.
2. Charity. The ten thousand francs devoted to this heading also go to stimulating productive activity: they go to the baker, the butcher and shops that sell clothes and furniture. The point is though that the bread, meat and clothing are not directly of use to Ariste, but to those he has substituted for himself. Well, this simple substitution of one consumer for another has not the slightest effect on general production. Whether Ariste spends one hundred sous or asks an unfortunate person to spend them in his stead is just the same.
3. Help to Friends. The friend to whom Ariste lends or gives ten thousand francs does not receive them in order to bury them; this would be repugnant to the whole conception. He uses this money to pay for goods or settle debts. In the first instance, productive activity is stimulated. Would people dare to say that such activity has more to gain from the purchase by Mondor of a thoroughbred for ten thousand francs than from the purchase by Ariste or his friend of ten thousand francs’ worth of fabrics? Or if this sum is used to pay a debt, the only thing that results is that a third person, the creditor who receives the ten thousand francs, appears on the scene; he will certainly use this money for some purpose in his trade, his factory or operation. It is one middleman more between Ariste and the workers. The names change but the expenditure remains, as does the stimulus given to production.
4. Savings. There remains the ten thousand francs that is saved, and this is where, from the point of view of encouraging the arts, industry, work, and the labor force, Mondor appears to be vastly better than Ariste, although from the moral point of view Ariste shows himself to be somewhat better than Mondor.
It is never without physical unease that borders on pain that I see the appearance of contradictions like this among the great laws of nature. If the human race was reduced to choosing between two parties, one of which injures its interests and the other its conscience, all that would be left to us would be to despair of its future. Fortunately, this is not so.83 And, in order to see Ariste regain his economic as well as his moral superiority, you just have to understand this consoling axiom that is no less true for appearing to be paradoxical: To save is to spend.
What is Ariste’s aim in saving ten thousand francs? Is it to bury two thousand hundred sou pieces in a hiding place in his garden? Certainly not, he means to increase his capital and income. Consequently, this money, which he is not using to purchase personal forms of satisfaction, he uses to buy land, a house, State bonds and shares in industry, or else he invests it with a trader or a banker. If you follow the écus in all these alternative uses, you will ascertain that, through the offices of salesmen or lenders, they will go to provide work as surely as if Ariste, following the example of his brother, had traded them for furniture, jewelry and horses.
The whole point is that when Ariste buys land or bonds for 10,000 francs, his choice is determined by the consideration that he has no need to spend these funds on consumption goods, this being what you are criticizing him for.
But, likewise, the person who sells him the land or the bond is guided by the belief that he needs to spend the ten thousand francs in some way or another.
This means that the expenditure is made come what may, whether by Ariste or those who take his place.
From the point of view of the working classes or the stimulation of employment, there is therefore just one difference between Ariste’s action and that of Mondor. As Mondor’s expenditure was made directly by him and around him, it is seen. As Ariste’s action is carried out in part by middlemen and at a distance, it is not seen. However, in fact, and for anyone capable of relating cause to effect, the cause that is not seen is just as certain as that which is seen. The proof of this is that in both cases the écus circulate and do not remain in the wise man’s strongbox any more than in that of the spendthrift.
It is therefore erroneous to say that Thrift is currently causing harm to industry. Seen from this angle, it is just as beneficial as Luxury.
But how much superior it is to the latter if the train of thought, instead of limiting itself to the hour that passes, encompasses a longer period!
Ten years have gone by. What has become of Mondor, his fortune and his great popularity? All of this has vanished; Mondor is ruined. Far from spreading sixty thousand francs84 each year around the social body, he is perhaps a burden on it. In any case, he no longer gives joy to his suppliers, he is no longer counted as a promoter of the arts and industry, he is no longer any use to workers any more than he is to his family which he has left in poverty.
At the end of this same ten-year period, not only has Ariste continued to put his entire income into circulation, but he puts an increasing level of income into it as the years go by. He increases the capital of the nation, that is to say, the fund out of which wages are paid, and as the demand for labor is based on the size of this fund he continues to increase the remuneration of the working class. Should he die, he will leave children whom he has made capable of carrying on this work of progress and civilization.
From a moral point of view, the Superiority of Thrift over Luxury is obvious. It is consoling to think that this is true from the economic point of view as well, at least for anyone who does not stop at the immediate effects of phenomena but is capable of extending his investigations right up to their final effects.
78 Bastiat often chose very carefully the names of the protagonists in the "constructed stories" which he used to illustrate economic ideas. Here he uses two brothers, Mondor and Ariste, to illustrate the moral problems to do with saving. Mondor is the spendthrift and Ariste is the "individualist" who saves his inheritance. The character "Mondor" is based upon one of the brothers Antoine and Philippe Girard who were street jugglers and tricksters in Paris in the early 17th century who sold patent medicines to passers-by. Philippe Girard's character was called “Mondor.” "Ariste" was one of the brothers in Molière's play L’École des maris (The School for Husbands) (1661) who tutored two orphaned sisters. The two brothers had very different philosophies of education. Ariste believed in granting his pupil considerable freedom and was tolerant towards her, his brother Sganarelle (played by Molière in the opening performance) was very strict and harsh. Bastiat first used the character Mondor in the pamphlet "Damned Money! in April 1849 which appears in vol. 4 of the Collected Works (forthcoming). See the glossary entry on "Mondor." See the glossary entries on “Mondor” and "Molière."
79 Honoré de Balzac (1789-1850). Balzac was a prolific author who was a leading member of the realist school because of his detailed depiction of everyday life in France during the July Monarchy. His collection of novels and stories were called "The Human Comedy" and numbered nearly 90 titles. Although he was a conservative and supporter of the monarchy his depiction of ordinary people endeared him to readers from across the political spectrum. See especially The Chouans (Les Chouans, 1829); Old Goriot (le père Goriot, 1835); The Government Clerks (Les Employés, 1838); Lost Illusions (Illusions Perdues, 1843); A Man of Business (Un homme d'affaires, 1846); The Lesser Bourgeoisie (Les Petits Bourgeois, 1854).
80 Dumas. Alexandre Dumas (1802-70). Dumas was a prolific author of plays and historical novels. Although born into poverty his grandfather was a noblemen who served in the Artillery in Haiti and had a child with an ex-slave. His father (of mixed race) was a general in Napoleon's army who fell out of favour with regime. Dumas participated in the 1830 overthrow of the restored monarchy and was an active supporter of the July Monarchy. His first literary successes came from writing plays and then novel which were serialised in the emerging popular press of the period. He earned a great deal of money from his writing but he was often impoverished because of his high living. He is best known for historical novels such as The Three Musketeers (Les Trois Mousquetaires, 1844) and The Count of Monte Cristo (Le Comte de Monte-Cristo, 1845–1846).
81 Bastiat uses the word "éclabousser" which means to splash or splatter somebody with something, often with mud. This could be a reference to the reckless way Mondor drives about town in his carriage splashing pedestrians with mud from the streets. In the pamphlet "Damned Money! (April 1849) refers to the profligate Croesus who loved to drive his ostentatiously decorated chariots very recklessly splashing mud on the onlookers. He could be making a similar comment about Mondor here.
82 Bastiat uses the term "le fesse-matthieu" which is a course expression for a usurer or money lender. It is a combination of the word "la fesse" (buttock) and Matthew, a reference to the fact that Saint Matthew was a tax collector and money lender before he became of disciple of Christ.
83 (Paillottet’s note) See the note on page 369. . This is a reference to the earlier footnote which states: This is a reference to chap. XIV "Conflit de principes" (Conlict of Principles) and chap. XVIII "Il n'y a pas de principes absolus" (There are no Absolute Principles) in Economic Sophisms Part I in vol. 4 OC (Paillottet is incorrect in stating that these are in vol. VI); and to Reflections addressed to Thiers (p. 538 vol. ???); and to chap. XI "Éparges et luxe" (Savings and Luxury) of "What is Seen" in vol. 5 OC.
84 Bastiat makes a mistake here. The amount he stated earlier in the article was fifty thousand francs per year.
“Brothers, tax yourselves in order to provide me with work at your price.” That is the Right to Work, Elementary Socialism or the first stage of socialism.
“Brothers, tax yourselves in order to supply me with work at my price.” That is the Right to Profit, Refined Socialism or the second stage of socialism.
Both live as a result of effects that are seen. They will die as a result of the effects that are not seen.
What is seen is the work and profit generated by taxes levied on society. What is not seen are the work and profits that would be generated by this same amount if it were left in the hands of the taxpayers.
In 1848, the Right to Work was displayed for a time under both its aspects. This was enough to cause its downfall in public opinion.
Millions every day moved from the Rue de Rivoli89 to the National Workshops. This was the good side of the coin.
But here is the reverse side. In order for millions to leave the coffers, they have first to enter them. This is why the organizers of the Right to Work turned to the taxpayers.
Well, peasants in the countryside said: “I have to pay 45 centimes. I will therefore do without an item of clothing, I will not marl my field nor repair my house.”
And the laborers in the countryside said: “Since our bourgeois class is depriving itself of items of clothing, there will be less work for tailors; since it is not marling its fields, there will be less work for laborers; since it is not repairing its houses, there will be less work for carpenters and masons.”
It was then proved that you cannot profit twice from the same transaction and that work paid for by the government is carried out at the expense of work paid for by taxpayers. This was the death of the Right to Work, which appeared to be just as much of an illusion as it was an injustice.90
And yet, the Right to a Profit, which is just an exaggeration of the Right to Work, is still alive and is doing marvelously.
Is there not something shameful in the role that protectionists make society adopt?
Protectionists say to it:
“You have to give me work, and what is more, lucrative work. I was silly enough to choose a form of industry that leaves me with a loss of ten percent. If you inflict a contribution of twenty francs on my fellow citizens and hand it over to me, my loss will be converted into a profit. Well, Profit is a Right, and you owe it to me.”
The society that listens to this sophist, which saddles itself with taxes to satisfy him and which does not notice that the loss made by an industry is no less of a loss because others are obliged to compensate it, this society, as I say, deserves the burden inflicted on it.
Thus, this is seen in the many subjects I have dealt with: not to know Political Economy is to let oneself be be blinded by the immediate effect of a phenomenon; to know Political Economy is to take into consideration all the effects, both immediate and future.91
I might at this point submit a host of other questions to the same proof. However, I draw back from the monotony of an endlessly repetitive argument and will close by applying to Political Economy what Chateaubriand92 said about History:
“There are” he said, “two consequences in history; one that is immediate and known right away, the other more distant and not obvious at first sight. These consequences are often contradictory; some come from our recently acquired wisdom, the others from wisdom of long standing. A providential event appears after a human one. God arises behind men. You may deny as much as you like the supreme counsel, refuse to accept what it has done, query its choice of words and dismiss as the mere force of things or reason, what the common folk call Providence, as much as you like. But look to the end of an accomplished deed and you will see that it has always produced the opposite of what was expected of it, when it has not initially been based on morality and justice.”93 (CHATEAUBRIAND, Memoirs from Beyond the Grave)
85 The title pairs two things - "le droit au travail" and "le droit au profit". The first right, "le droit au travail" (the right to a job), was a slogan of the socialists during the Second Republic. They claimed that it was the duty of the government to provide every able-bodied Frenchman with a job and the job creation program initiated by the Constituent Assembly in the first days of the revolution, called the National Workshops, was designed to carry this out. Bastiat and the other Economists fiercely opposed this scheme and Bastiat used his position in the Finance Committee to argue against it. In May 1848 the Constituent Assembly formed a committee to discuss the matter as the burden of paying for the National Workshops scheme was becoming too much for the government to bear. Bastiat was one of the speakers and in his speech he distinguished between the right to work ("droit au travail," where "work" is used as a noun and thus might be rendered as the "right to a job") and the "right to work" (droit de travailler, where "work" is used as a verb). He was opposed to the former but supported the latter. The government closed down the National Workshops in June prompting riots in Paris which were brutally put down by the army with considerable loss of life. Although he had opposed the National Workshops from the very beginning, Bastiat went out on the streets in order to stop the bloodshed and to aid the injured. See the glossary entry on "The Right to Work"; and the discussion in the Collected Works, vol. 2, pp. 410-12.
86 Although he does not go into details here, Bastiat may well have had a similar distinction in mind with regard to profit, namely that between "le droit au profit" (the right to a [guaranteed] profit) and "le droit de profiter" (the right to seek profits).
87 The National Workshops were created on Feb 27, 1848 to employ unemployed workers. The workers got 2 francs a day, which was soon reduced to 1 franc because of the tremendous increase in their numbers (29 000 on March 5; 118 000 on June 15). Struggling with financial difficulties, irritated by the inefficiency of the workshops, the Assembly dissolved them on June 21. See glossary entry on “National Workshops”.
88 In the immediate aftermath of the February Revolution the government faced a budget crisis brought on by the decline in tax revenues and by the increased demands being placed upon it by new political groups. Louis-Antoine Pagès (Garnier-Pagès) (1803-1878), a member of the Provisional Government and soon afterwards Mayor of Paris, was able to pass a new "temporary" tax law on March 16, 1848 which increased direct taxes on things such as land, moveable goods, doors and windows, and trading license, by 45%. It was known as the "taxe de quarante-cinq centimes" (the 45 centimes tax) and was deeply unpopular, prompting revolts and protests in the south west of France. See the glossary entry on “French Taxes.”
89 The ministry of finances was located in Rue de Rivoli.
90 The National Assembly closed down the National Workshops government funded unemployment relief program on 21 June since its exploding cost was bankrupting the government. It had been vigorously opposed by Bastiat in the Finance Committee of which he was the vice-president. The closure of the National Workshops led to rioting in the streets of Paris by many workers during the so-called June Days (23-26 June) which was brutally put down by the Army under General Cavaignac with the lose of thousands of lives and the arrest and ultimate deportation of hundreds of protestors. Martial law was declared which was not lifted until October. Bastiat recounts how he and some colleagues went to the barricades to argue with the workers about their actions and when they witnessed what was happened to try to prevent the troops from firing on the protestors and to give them time to remove the bodies of the dead and injured from the streets. It was also during the June Days that bastiat and Molinari published their second revolutionary newspaper Jacques Bonhomme. See the glossary entries on “The National Workshops” and “Jacques Bonhomme [journal].”
91 (Paillottet’s note) (Unpublished note by the author) If all the consequences of an action were visited on its author, our education would be swift. But this does not happen. Sometimes the beneficial and visible consequences are in our favor and the harmful and invisible ones are for others to face, which makes them even more invisible. We then have to wait for a reaction from those who have had to bear the harmful consequences of the act. Sometimes this takes a long time and this is what preserves the reign of the error.
A man carries out an action that produces beneficial consequences worth 10 in his favor and harmful consequences worth 15 spread over 30 of his fellow men, so that what was borne by each of them was just ½. In all, there was a loss and the reaction was bound to come. We can see, however, that it will be all the slower since the harm is more widely spread over the mass and the benefit more concentrated on a single point.
92 Chateaubriand (1768-1848) was a novelist, philosopher, and supporter of Charles X. He served as Minister of Foreign Affairs from December 1822 to June 1824. He refused to take the oath to King Louis-Philippe after 1830 and spent his retirement writing Mémoires d’outre-tombe (1849-50). See the glossary entry on "Chateaubriand."
93 From Chateaubriand, Mémoires d’outre-tombe (Paris: Eugène et Victor Penaud, 1850), vol. 11, Conclusion. L’idée chrétienne est l’avenir du monde”, p. 491.
Last modified January 12, 2016