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Robbery by Subsidy

Mises Daily: Friday, November 23, 2012 by

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[The Bastiat Collection (2011); originally from the second series of Economic Sophisms (1848)]

This little book of fallacies is found to be too theoretical, scientific, and metaphysical. Be it so. Let us try the effect of a more trivial and hackneyed, and if necessary, a ruder style. Convinced that the public is duped in this matter of protection, I have endeavored to prove it. But if outcry is preferred to argument, let us vociferate, "King Midas has a snout, and asses' ears."[1]

A burst of plain speaking has more effect frequently than the most polished circumlocution. You remember Oronte, and the difficulty that the Misanthrope had in convincing him of his folly.[2]

Alceste.

On s'expose a jouer un mauvais personnage.

Oronte.

Est-ce que vous voulez me declarer par la Que j'ai tort de vouloir.…

Alceste.

Je ne dis pas cela. Mais.…

Oronte.

Est-ce que j'ecris mal?

Alceste.

Je ne dis pas cela. Mais enfin.…

Oronte.

Mais ne puis-je savoir ce que dans mon sonnet?

Alceste.

Franchement, il est bon a mettre au Cabinet.

To speak plainly, Good Public! you are robbed. This is speaking bluntly, but the thing is very evident. It is crude, but clear.

The words theft, to steal, robbery, thief, may appear ugly words to many people. I ask such people, as Harpagon asks Elise,[3] "Is it the word or the thing that frightens you?"

"Whoever has possessed himself fraudulently of a thing that does not belong to him is guilty of theft."[4]

To steal: To take by stealth or by force.[5]

Thief: He who exacts more than is due to him.[6]

Now, does not the monopolist, who, by a law of his own making, obliges me to pay him 20 francs for what I could get elsewhere for 15, take from me fraudulently 5 francs that belonged to me?

Does he not take them by stealth or by force?

Does he not exact more than is due to him?

He takes, purloins, exacts, it may be said; but not by stealth or by force, which are the characteristics of theft.

When our bulletins de contributions have included in them 5 francs for the premium that the monopolist takes, exacts, or abstracts, what can be more stealthy for the unsuspecting? And for those who are not dupes, and who do suspect, what savors more of force, seeing that on the first refusal the tax-gatherer's bailiff is at the door?

But let monopolists take courage. Premium thefts, tariff thefts, if they violate equity as much as theft a l'Americaine, do not violate the law; on the contrary, they are perpetrated according to law and if they are worse than common thefts, they do not come under the cognizance of the magistrate.

Besides, willingly or unwillingly, we are all robbed or robbers in this business. The author of this volume might very well cry "Stop, thief!" when he buys; and with equal reason he might have that cry addressed to him when he sells;[7] and if he is in a situation different from that of many of his countrymen, the difference consists in this, that he knows that he loses more than he gains by the game, and they don't know it. If they knew it, the game would soon be given up.

Nor do I boast of being the first to give the thing its right name. Adam Smith said 60 years ago that "when manufacturers hold meetings, we may be sure a plot is hatching against the pockets of the public." Can we be surprised at this, when the public says nothing?

Well, then, suppose a meeting of manufacturers deliberating formally, under the title of general councils. What takes place, and what is resolved upon?

Here is a very abridged report of one of their meetings:

SHIPOWNER: Our shipping is at the lowest ebb. That is not to be wondered at. I cannot construct ships without iron. I can buy it in the market of the world at 10 francs; but by law the French ironmaster forces me to pay him 15 francs, which takes 5 francs out of my pocket. I demand liberty to purchase iron wherever I see proper.

IRONMASTER: In the market of the world I find freights at 20 francs. By law I am obliged to pay the French shipowner 30; he takes 10 francs out of my pocket. He robs me, and I rob him; all quite right.

STATESMAN: The shipowner has arrived at an unwise conclusion. Let us cultivate the union that constitutes our strength. If we give up a single point of the theory of protection, the whole theory falls to the ground.

SHIPOWNER: For us shipowners protection has been a failure. I repeat that shipping is at its lowest ebb.

SHIPMASTER: Well, let us raise the surtax, and let the shipowner who now exacts 30 francs from the public for his freight charge 40.

A MINISTER: The government will make all the use they can of the beautiful mechanism of the surtax; but I fear that will not be sufficient.

A GOVERNMENT FUNCTIONARY: You are all very easily frightened. Does the tariff alone protect you? and do you lay taxation out of account? If the consumer is kind and benevolent, the taxpayer is not less so. Let us heap taxes upon him, and let the shipowner be satisfied. I propose a premium of 5 francs to be levied from the public taxpayers, to be handed over to the shipbuilder for each cwt. of iron he shall employ.

Confused voices: Agreed! Agreed! An agriculturist: Three francs premium upon each hectoliter of wheat for me! A manufacturer: Two francs premium on each yard of cloth for me! etc., etc.

THE PRESIDENT: This then is what we have agreed upon. Our session has instituted a system of premiums, and it will be its eternal honor. What branch of industry can possibly henceforth be a loser, since we have two means, and both so very simple, of converting our losses into gains — the tariff and the premium? The sitting is adjourned.

I really think some supernatural vision must have foreshadowed to me in a dream the near approach of the premium (who knows but I may have first suggested the idea to Mr. Dupin?) when six months ago I wrote these words:

It appears evident to me that protection, without changing its nature or the effects it produces, might take the form of a direct tax, levied by the state, and distributed in premiums of indemnification among privileged branches of industry.

And after comparing a protective duty to a premium, I added:

I confess candidly my preference for the last system. It seems to me juster, more economical, and more fair. Juster, because if society desires to make presents to some of its members, all ought to bear the expense; more economical, because it would save a great deal in the cost of collection, and do away with many of the trammels with which trade is hampered; more fair, because the public would see clearly the nature of the operation, and act accordingly.

Since the occasion presents itself to us so opportunely, let us study this system of plunder by premium; for all we say of it applies equally to the system of plunder by tariff; and as the latter is a little better concealed, the direct may help us to detect and expose the indirect system of cheating. The mind will thus be led from what is simple to what is more complicated.

But it may be asked, Is there not a species of theft which is more simple still? Undoubtedly — there is highway robbery, which lacks only to be legalized, and made a monopoly of, or, in the language of the present day, organized.

I have been reading what follows in a book of travels:

When we reached the kingdom of A., all branches of industry declared themselves in a state of suffering. Agriculture groaned, manufactures complained, trade murmured, the shipping interest grumbled, and the government was at a loss what to do. First of all, the idea was to lay a pretty smart tax on all the malcontents, and afterwards to divide the proceeds among them after retaining its own quota; this would have been on the principle of the Spanish lottery. There are a thousand of you, and the State takes a piastre from each; then by sleight of hand it conveys away 250 piastres, and divides the remaining 750 in larger and smaller proportions among the ticketholders. The gallant Hidalgo who gets three-fourths of a piastre, forgetting that he had contributed a whole piastre, cannot conceal his delight, and rushes off to spend his fifteen reals at the alehouse. This is very much the same thing as we see taking place in France. But the government had overrated the stupidity of the population when it endeavored to make them accept such a species of protection, and at length it lighted upon the following expedient.

The country was covered with a network of highways. The government had these roads accurately measured; and then it announced to the agriculturist: 'All that you can steal from travelers between these two points is yours; let that serve as a premium for your protection and encouragement.' Afterward it assigned to each manufacturer, to each shipowner, a certain portion of road, to be made available for their profit, according to this formula:

Dono tibi et concedo
Virtutem et puissantiam
Volandi,
Pillandi,
Derobandi,
Filoutandi,
Et escroquandi,
Impune per totam istam
Viam.

Now it has come to pass that the natives of the kingdom of A. have become so habituated to this system, that they take into account only what they are enabled to steal, not what is stolen from them, being so determined to regard pillage only from the standpoint of the thief that they look upon the sum total of individual thefts as a national gain, and refuse to abandon a system of protection, without which they say no branch of industry could support itself.

You demur to this. It is not possible, you exclaim, that a whole people should be led to ascribe an increase of wealth to mutual robbery.

And why not? We see that this conviction pervades France, and that we are constantly organizing and improving the system of reciprocal robbery under the respectable names of premiums and protective tariffs.

We must not, however, be guilty of exaggeration. As regards the mode of levying, and other collateral circumstances, the system adopted in the kingdom of A. may be worse than ours; but we must at the same time admit that, as regards the principle and its necessary consequences, there is not an atom of difference between all these species of theft, which are organized by law for the purpose of supplementing the profits of particular branches of industry.

Note also that if highway robbery presents some inconveniences in its actual perpetration, it has likewise some advantages which we do not find in robbery by tariff.

For example, it is possible to make an equitable division among all the producers. It is not so in the case of customs duties. The latter are incapable of protecting certain classes of society, such as artisans, shopkeepers, men of letters, lawyers, soldiers, laborers, etc.

It is true that the robbery by premium assumes an infinite number of shapes, and in this respect is not inferior to highway robbery; but, on the other hand, it leads frequently to results so arbitrary and awkward that the natives of the kingdom of A. may well laugh at us.

What the victim of a highway robbery loses the thief gains, and the articles stolen remain in the country. But under the system of robbery by premium, what the tax exacts from the Frenchman is conferred frequently on the Chinese, on the Hottentots, on the Caffres, etc., and here is the way in which this takes place:

A piece of cloth, we will suppose, is worth 100 francs at Bordeaux. It cannot be sold below that price without a loss. It is impossible to sell it above that price because the competition of merchants prevents the price rising. In these circumstances, if a Frenchman desires to have the cloth, he must pay 100 francs, or do without it. But if it is an Englishman who wants the cloth, the government steps in, and says to the merchant, "Sell your cloth, and we will get you 20 francs from the taxpayers." The merchant who could not get more than 100 francs for his cloth, sells it to the Englishman for 80. This sum, added to the 20 francs produced by the premium theft, makes all square. This is exactly the same case as if the taxpayers had given 20 francs to the Englishman, upon condition of his buying French cloth at 20 francs discount, at 20 francs below the cost of production, at 20 francs below what it has cost ourselves. The robbery by premium, then, has this peculiarity, that the people robbed are resident in the country that tolerates it, while the people who profit by the robbery are scattered over the world.

Verily, it is marvelous that people should persist in maintaining that all that an individual steals from the masses is a general gain. Perpetual motion, the philosopher's stone, the quadrature of the circle, are obsolete myths long abandoned; but the theory of progress by plunder is still held in honor. A priori, we should have thought that, of all imaginable puerilities, it was the least likely to survive.

Some people will say, You are partisans, then, of the laissez-faire economists of the school of Smith and Say? You do not desire the organization of labor. Yes, gentlemen, organize labor as much as you choose, but have the goodness not to organize theft.

Another, and a more numerous, set keep repeating, premiums, tariffs, all that has been exaggerated. We should use them without abusing them. A judicious liberty, combined with a moderate protection, that is what discreet and practical men desire. Let us steer clear of fixed principles.

This is precisely what the traveler tells us takes place in the kingdom of A. "Highway robbery," say the sages, "is neither good nor bad in itself; that depends upon circumstances. All we are concerned with is to weigh things, and see our functionaries well paid for the work of weighing. It may be that we have given too great latitude to pillage; perhaps we have not given enough. Let us examine and balance the accounts of each man employed in the work of pillage. To those who do not earn enough, let us assign a larger portion of the road. To those who gain too much, we must limit the hours, days or months of pillage."

Those who talk in this way gain a great reputation for moderation, prudence, and good sense. They never fail to attain to the highest offices in the state.

Those who say, Repress all injustice, whether on a greater or a smaller scale, suffer no dishonesty, to however small an extent, are marked down for ideologues, idle dreamers, who keep repeating over and over again the same thing. The people, moreover, find their arguments too clear, and why should they be expected to believe what is so easily understood?

Notes

[1] "Auriculas asini Mida rex habet." — Persius, sat. i. The line as given in the text is from Dryden's translation. — Translator.

[2] See Moliere's play of The Misanthrope.

[3] See Moliere's play of L'Avare.

[4] C. Pen., art. 379.

[5] Dictionnaire de l'Aca-demie.

[6] Ibid.

[7] Possessing some landed property, on which he lives, he belongs to the protected class. This circumstance should disarm criticism. It shows that if he uses hard words, they are directed against the thing itself, and not against men's intentions or motives.