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

Jean-Baptiste Say

Found in A Treatise on Political Economy

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

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

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