The state might also have imposed a tax of 5 francs on the public and given it as a subsidy to ironmasters. The protectionist effect would have been the same. Foreign iron would have been equally excluded, since our ironmaster would have sold at 7 francs which, with the subsidy of 5 francs, would give him his profitable price of 12 francs. However, faced with iron at 7 francs, foreigners would not be able to deliver theirs at 8.
I can see only one difference between these two systems: the principle is the same and the effect is the same, except that in one case protection is paid for by a few and in the other by all.
I admit frankly my preference for the second system. It seems to me more just, more economic, and more straightforward. More just because if society wants to give handouts to a few of its members, everyone has to contribute; more economic because it would save a great deal in collection costs and would cause a great many restrictions to disappear; and finally, more straightforward since the public would see clearly how the operation worked and what they were being made to do.
If the protectionist system had taken this form, however, would it not be rather risible to hear it said, “We pay heavy taxes for the army, navy, law and
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order, public works, the university, the national debt, etc., and this exceeds a billion.6 For this reason, it would be a good thing if the state took another billion from us to ease the situation of these poor ironmasters, these poor shareholders of Anzin,7 these unfortunate owners of forests, and these cod fishermen who are so useful.”
If you look closely, you will see that this is what the significance of the sophism I am combating is reduced to. Whatever you do, sirs, you can give money to some only by taking it from others. If you genuinely wish to drain taxpayers dry, go ahead, but at least do not mock them and say to them, “I am taking from you to compensate you for what I have already taken from you.”
We would never reach the end of it if we wished to note everything that is false in this sophism. I will limit myself to three considerations.
You win acceptance for the fact that France is burdened with taxes in order to infer that such and such an industry ought to be protected. But we have to pay these taxes in spite of protection. If therefore an industry comes forward and says, “I contribute to the payment of taxes; this raises the cost price of my products and I demand that a protectionist duty should also raise the sales price,” what else is it demanding than to discharge its tax onto the rest of the community? It claims to be recouping the increase in tax it has paid by raising the price of its products. So, as all taxes have always to be paid to the treasury, and as the masses have to bear this increase in price, they pay both their taxes and those of this industry. “But,” you will say, “everyone is being protected.” Firstly, this is impossible and, even if it were possible, where would the relief be? I am paying for you and you for me; but the tax still needs to be paid.
In this way, you are being fooled by an illusion. You want to pay taxes to have an army, a navy, a religion, a university, judges, roads, etc., and then you want to relieve of its share of taxes first one industry, then a second, and then a third, always by sharing the burden among the masses. But you are doing nothing other than creating interminable complications, with no other result than these complications themselves. Prove to me that the increase in price resulting from protection falls on foreigners, and I will be able to see something specious in your argument. But if it is true that the French public paid
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the tax before the law and that after the law it paid both the protection and the tax, then I really do not see what it gains by this.
I will even go much further; I say that the heavier our taxes are, the more we should be in a hurry to open our ports and frontiers to foreigners who are less taxed than us. Why? In order to pass on to them a greater part of our burden. Is it not an undeniable axiom in political economy that, in the long run, taxes fall on the consumer? The more our trading transactions are increased, the more foreign consumers will reimburse us the taxes included in the products we sell them, while we would have to make them in this respect only a lesser restitution, since according to our hypothesis their products are less taxed than ours.
In sum, have you never asked whether these heavy taxes that you use in argument to justify the protectionist regime are not caused by this regime itself? I would like to be told what the great standing armies and the powerful navies would be used for if trade were free8 … But this is a question for politicians,
And let us not confuse, by going too deeply,
Their business with ours.9
PUBLISHING HISTORY:
Original title: “Balance du commerce.”
Place and date of first publication: JDE 12 (October 1845): 201–4.
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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. 52–57.
Previous translations: 1st English ed., 1846; 1st American ed., 1848; FEE ed., 1964.
Our opponents have adopted a tactic which we cannot help feeling embarrassed about. Are we getting our views across? They accept them with the utmost respect. Are we attacking their fundamental approach? They abandon it with the best grace in the world. They ask for only one thing, which is that our views, which they hold to be true, should be relegated to books and that their approach, which they acknowledge to be faulty, should reign over the carrying out of business. Leave them the handling of tariffs and they will not dispute your having the domain of theory.
“Certainly”, said M. Gaulthier de Rumilly1 recently, “none of us wants to resurrect the old theories on the balance of trade.” Very well, but M. Gaulthier, it is not enough just to administer a slap in the face to error as you pass by; you must also desist from reasoning immediately afterward and for two hours at a time as though this error was the truth.
Talk to me about M. Lestiboudois.2 Here is someone who reasons consistently, a logician who can debate. There is nothing in his conclusions that is not in his premises: he asks nothing of practice that he cannot justify in theory. His basic ideas may be false, and that is indeed the dispute. But at least he has some basic ideas. He believes and proclaims loudly that if France pays ten to receive fifteen it is losing five, and he quite straightforwardly makes laws in this light.
“What is important,” he says, ”is that the figure for imports is constantly increasing and exceeds that for exports, that is to say, each year France purchases more foreign products and sells fewer products produced nationally. The figures are there to prove it. What do we see? In 1842, we see imports
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exceed exports by 200 million.3 These facts appear to me to prove with utter clarity that national work is not sufficiently protected, that we let foreign work take care of our needs and that competition from our rivals is beating our industry down. The law currently in force appears to sanction the fact that it is not true, contrary to what economists say, that when we buy we sell of necessity a corresponding portion of goods. It is obvious that we can buy things, not with our customary products, not with our income, not with the fruit of ongoing production but with our capital, with products that have been accumulated and saved and those used for making more, that is to say, we can spend and dissipate the profits of previous savings, that we can grow poorer and march toward our ruin and that we can consume the national capital in its entirety. This is exactly what we are doing. Each year, we give 200 million to foreigners.”
Well then, here is a man with whom we can agree.