Economic Sophisms/Chapter 4
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To Equalize the Conditions of Production
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TO EQUALIZE THE CONDITIONS OF PRODUCTION.
IT has been said … but in case I should be accused of putting sophisms into the mouths of the protectionists, I shall allow one of their most vigorous athletes to speak for them.
"It has been thought that protection in our case should simply represent the difference which exists between the cost price of a commodity which we produce and the cost price of the same commodity produced by our neighbours.… A protective duty calculated on this basis would only ensure free competition …; free competition exists only when there is equality in the conditions and in the charges. In the case of a horse race, we ascertain the weight which each horse has to carry, and so equalize the conditions; without that there could be no fair competition. In the case of trade, if one of the sellers can bring his commodity to market at less cost, he ceases to be a competitor, and becomes a monopolist.… Do away with this protection which represents the difference of cost price, and the foreigner invades our markets and acquires a monopoly."
"Every one must wish, for his own sake, as well as for the sake of others, that the production of the country should be protected against foreign competition, whenever the latter can furnish products at a lower price."
This argument recurs continually in works of the protectionist school. I propose to examine it carefully, and I solicit earnestly the reader's patience and attention. I shall consider, first of all, the inequalities which are attributable to nature, and afterwards those which are attributable to diversity of taxation.
In this, as in other cases, we shall find protectionist theorists viewing their subject from the producer's stand-point, whilst we advocate the cause of the unfortunate consumers, whose interests they studiously keep out of sight. They institute a comparison between the field of industry and the turf. But as regards the latter, the race is at once the means and the end. The public feels no interest in the competition beyond the competition itself. When you start your horses, your end, your object, is to find out which is the swiftest runner, and I see your reason for equalizing the weights. But if your end, your object, were to secure the arrival of some important and urgent news at the winning-post, could you, without inconsistency, throw obstacles in the way of any one who should offer you the best means of expediting your message? This is what you do in commercial affairs. You forget the end, the object sought to be attained, which is material prosperity; you disregard it, you sacrifice it to a veritable petitio principii; in plain language, you are begging the question.
But since we cannot bring our opponents to our point of view, let us place ourselves in theirs, and examine the question in its relations with production.
I shall endeavour to prove,
1st, That to level and equalize the conditions of labour, is to attack exchange in its essence and principle.
2d, That it is not true that the labour of a country is neutralized by the competition of more favoured countries.
3d, That if that were true, protective duties would not equalize the conditions of production.
4th, That liberty, freedom of trade, levels these conditions as much as they can be levelled.
5th, That the least favoured countries gain most by exchange.
I. To level and equalize the conditions of labour is not simply to cramp exchanges in certain branches of trade, it is to attack exchange in its principle, for its principle rests upon that very diversity, upon those very inequalities of fertility, aptitude, climate, and temperature, which you desire to efface. If Guienne sends wine to Brittany, and if Brittany sends corn to Guienne, it arises from their being placed under different conditions of production. Is there a different law for international exchanges? To urge against international exchanges that inequality of conditions which gives rise to them, and explains them, is to argue against their very existence. If protectionists had on their side
sufficient logic and power, they would reduce men, like snails, to a state of absolute isolation. Moreover, there is not one of their sophisms which, when submitted to the test of rigorous deductions, does not obviously tend to destruction and annihilation.
II. It is not true, in point of fact, that inequality of conditions existing between two similar branches of industry entails necessarily the ruin of that which is least favourably situated. On the turf, if one horse gains the prize, the other loses it; but when two horses are employed in useful labour, each produces a beneficial result in proportion to its powers; and if the more vigorous renders the greater service, it does not follow that the other renders no service at all. We cultivate wheat in all the departments of France, although there are between them enormous differences of fertility; and if there be any one department which does not cultivate wheat, it is because it is not profitable to engage in that species of culture in that locality. In the same way, analogy shows us that under the régime of liberty, in spite of similar differences, they produce wheat in all the countries of Europe; and if there be one which abandons the cultivation of that grain, it is because it is found more for its interest to give another direction to the employment of its land, labour, and capital. And why should the fertility of one department not paralyze the agriculturist of a neighbouring department which is less favourably situated? Because the economic phenomena have a flexibility, an elasticity, levelling powers, so to speak, which appear to have altogether escaped the notice of the protectionist school. That school accuses us of being given up to system; but it is the protectionists who are systematic in the last degree, if the spirit of system consists in bolstering up arguments which rest upon one fact instead of upon an aggregation of facts. In the example which we have given, it is the difference in the value of lands which compensates the difference in their fertility. Your field produces three times more than mine. Yes, but it has cost you ten times more, and I can still compete with you. This is the whole mystery. And observe, that superiority in some respects leads to inferiority in others. It is just because your land is more fertile that it is dearer; so that it is not accidentally, but necessarily, that the equilibrium is established, or tends to be established; and it cannot be denied that liberty is the régime which is most favourable to this tendency.
I have referred to a branch of agricultural industry; I might as well have referred to industry in a different department. There are tailors at Quimper, and that does not hinder there being tailors also in Paris, though the latter pay a higher rent, and live at much greater expense. But then they have a different set of customers, and that serves not only to redress the balance, but to make it incline to their side.
When we speak, then, of equalizing the conditions of labour, we must not omit to examine whether liberty does not give us what we seek from an arbitrary system.
This natural levelling power of the economic phenomena is so important to the question we are considering, and at the same time so fitted to inspire us with admiration of the providential wisdom which presides over the equitable government of society, that I must ask permission to dwell upon it for a little.
The protectionist gentlemen tell us: Such or such a people have over us an advantage in the cheapness of coal, of iron, of machinery, of capital—we cannot compete with them.
We shall examine the proposition afterwards under all its aspects. At present, I confine myself to the inquiry whether, when a superiority and an inferiority are both present, they do not possess in themselves, the one an ascending, the other a descending force, which must ultimately bring them back to a just equilibrium.
Suppose two countries, A and B. A possesses over B all kinds of advantages. You infer from this, that every sort of industry will concentrate itself in A, and that B is powerless. A, you say, sells much more than it buys; B buys much more than it sells. I might dispute this, but I respect your hypothesis.
On this hypothesis, labour is much in demand in A, and will soon rise in price there.
Iron, coal, land, food, capital, are much in demand in A, and they will soon rise in price there.
Contemporaneously with this, labour, iron, coal, land, food, capital, are in little request in B, and will soon fall in price there.
Nor is this all. While A is always selling, and B is always buying, money passes from B to A. It becomes abundant in A, and scarce in B.
But abundance of money means that we must have plenty of it to buy everything else. Then in A, to the real dearness which arises from a very active demand, there is added a nominal dearness, which is due to a redundancy of the precious metals.
Scarcity of money means that little is required for each purchase. Then in B a nominal cheapness comes to be combined with real cheapness.
In these circumstances, industry will have all sorts of motives—motives, if I may say so, carried to the highest degree of intensity—to desert A and establish itself in B.
Or, to come nearer what would actually take place under such circumstances, we may affirm that sudden displacements being so repugnant to the nature of industry, such a transfer would not have been so long delayed, but that from the beginning, under the free régime, it would have gradually and progressively shared and distributed itself between A and B, according to the laws of supply and demand—that is to say, according to the laws of justice and utility.
And when I assert that if it were possible for industry to concentrate itself upon one point, that very circumstance would set in motion an irresistible decentralizing force, I indulge in no idle hypothesis.
Let us listen to what was said by a manufacturer in addressing the Manchester Chamber of Commerce (I omit the figures by which he supported his demonstration):—
"Formerly we exported stuffs; then that exportation gave place to that of yarns, which are the raw material of stuffs; then to that of machines, which are the instruments for producing yarn; afterwards to the exportation of the capital with which we construct our machines; finally, to that of our workmen and our industrial skill, which are the source of our capital. All these elements of labour, one after the other, are set to work wherever they find the most advantageous opening, wherever the expense of living is cheaper and the necessaries Economic Sophisms/Chapter 41 Economic Sophisms/Chapter 42 Economic Sophisms/Chapter 43 Economic Sophisms/Chapter 44 Economic Sophisms/Chapter 45 Economic Sophisms/Chapter 46 Economic Sophisms/Chapter 47 Economic Sophisms/Chapter 48 Economic Sophisms/Chapter 49 Economic Sophisms/Chapter 50
- M. le Vicomte de Romanet.
- Matthieu de Dombasle.