The theory whose lines and contours I have tried to trace in this article needs to be developed more fully. I have discussed it as it relates to my subject, commercial freedom. But perhaps an attentive reader will have perceived the fertile seed, the growth and spread of which will necessarily stifle protection, along with protectionism, Fourierism,14 Saint-Simonism, communism, and all the schools whose object is to exclude the law of COMPETITION from the governance of the world. Considered from the point of view of producers,
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competition doubtless upsets our individual and immediate interests, but if you consider it from the point of view of the general aim of all production, of universal well-being, in a word, of consumption, you will find that competition accomplishes the same role in a moral world as equilibrium does in a material one. Competition is the foundation of genuine communism, true socialism, and the equality of well-being and conditions, so longed for these days, and if so many sincere political writers, so many reformers of good faith, demand this equality from arbitrary government power, it is because they do not understand freedom.
5. Our Products Are Weighed Down with Taxes
PUBLISHING HISTORY:
Original title: “Nos produits sont grevés de taxes.”
Place and date of first publication: JDE 11 (July 1845): 356–60.
First French edition as book or pamphlet: Economic Sophisms (First Series) (1846).
Location in Paillottet’s edition of OC: Vol. 4. Sophismes économiques. Petits pamphlets I, pp. 46–52.
Previous translations: 1st English ed., 1846; 1st American ed., 1848; FEE ed., 1964.
This is the same sophism. People demand that foreign products be taxed in order to neutralize the effects of the taxation that burdens our national products. This too, then, is about equalizing the conditions of production. The only observation we would want to make is that tax is an artificial obstacle with exactly the same result as a natural obstacle: it forces prices to rise. If this rise reaches the point at which a greater loss is incurred in creating the product itself than there is in bringing it in from outside and creating a countervalue for it, let it happen.1 Private interest will be fully capable of choosing the lesser of two evils. I could therefore refer the reader back to the preceding argument, but the sophism that I have to combat here recurs so often in the complaints and appeals, I might almost say the pressing claims, of the protectionist school, that it is well worth discussing it separately.
If we want to discuss one of those special taxes to which certain products
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are subject, I will readily agree that it is reasonable to subject foreign products to these also. For example, it would be absurd to exempt foreign salt from tax, not that from an economic point of view France loses anything, on the contrary. Whatever we say about this, principles are constant, and France would gain, just as she will always gain from avoiding a natural or artificial obstacle. However, here the obstacle has been established with a fiscal aim. This aim has to be achieved, and if foreign salt were to be sold in our market free of duty, the treasury would not recover its hundred million and would have to exact this amount from some other form of taxation. It would quite evidently be contradictory to put in the way of a specific policy an obstacle calculated to prevent it. It would have been better to address this other tax first of all and not tax French salt.2 These are the circumstances that I accept for inflicting a duty that is not protectionist but fiscal on a foreign product.
But to claim that a nation has to protect itself through tariffs against competition from a rival because it is subject to heavier taxes than a neighboring country, this is where the sophism lies, and this is what I intend to attack.
I have said several times that I intend only to set out a theory and go back, as far as I am able, to the sources of the protectionists’ errors. If I were indulging in polemics, I would say to them, “Why are you aiming tariffs principally against England and Belgium, the countries in the world that are most burdened with taxes? Am I not entitled to see in your argument only a pretext?” However, I am not one of those who believe that people are protectionist through interest and not through conviction. Protectionist doctrine is too popular not to be sincere. If the majority had faith in freedom, we would be free. Doubtless it is private interest that causes our tariffs to weigh down on us so heavily, but this is after it has acted on our convictions. “Will,” said Pascal, “is one of the principal organs of belief.”3 However, belief is no less real for having its roots in will and in the secret inspiration of egoism.
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Let us return to the sophism derived from taxation.
The state can make good or bad use of taxes; it makes good use of them when it provides the public with services that are equivalent to the flow of revenue the public contributes to it. It makes bad use of them when it squanders these resources without giving anything in return.
In the first case, to say that taxes put the country that pays them in a less favorable position with regard to production than one that does not pay them is a sophism. We pay twenty million for law and the police,4 it is true, but we have law and the police, the security they provide us, and the time they save us, and it is highly probable that production is neither easier nor more active in those nations, if they exist, where everyone carries out law and order for himself. We pay several hundred million for roads, bridges, ports, and railways, I agree.5 But we have these railways, ports, and roads, and unless we claim that we are making a bad bargain in building them, nobody can say that they make us inferior to those peoples who, it is true, do not contribute to a budget for public works but do not have any public works either. And this explains why, while accusing taxes of being one of the causes of inferior industrial capacity, we aim our tariffs precisely against those nations that are the most taxed. It is because taxes, when used well, far from damaging them, have improved the conditions of production of these nations. So we always come to the same conclusion, that protectionist sophisms not only depart from the truth but are also contrary, are the direct opposite, to the truth.
As for taxes that are unproductive, abolish them if you can. The strangest conceivable way of neutralizing their effects, however, is surely to add specific individual taxes to public ones. Spare us any such compensation! The state has taxed us too much, you say. Well then, all the more reason for our not taxing each other any further!
A protectionist duty is a tax aimed against a foreign product but which falls, and let us never forget this, on the national consumer. Now, the consumer
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is a taxpayer. And is it not ludicrous to say to him: “Since taxes are heavy, we are going to raise the prices of everything to you; since the state takes a part of your income, we are going to pay another part to the monopoly”?
But let us probe further a sophism so esteemed by our legislators, although it is rather extraordinary that it is precisely those who maintain unproductive taxes (the proposition I am drawing your attention to now) who are attributing our alleged industrial inferiority to them in order to make this good subsequently through other taxes and restrictions.
It appears obvious to me that, without changing its nature and effects, protection might have taken the form of a direct tax raised by the state and distributed through indemnity subsidies to privileged industries.
Let us assume that foreign iron can be sold in our market at 8 francs and no lower and French iron at 12 francs and not below this.
Under such circumstances, the state has two ways of ensuring that the national producer retains a dominant position in the market.
The first is to subject foreign iron to a duty of 5 francs. It is clear that foreign iron would be excluded since it could now be sold only at 13 francs, 8 francs