Frederic Bastiat on “Restraint of Trade”

Mr. Protectionist (it was not I who gave him that name; it was M. Charles Dupin) devoted his time and his capital to converting ore from his lands into iron. Since Nature had been more generous with the Belgians, they sold iron to the French at a better price than Mr. Protectionist did, which meant that all Frenchmen, or France, could obtain a given quantity of iron with less labor by buying it from the good people of Flanders. Therefore, prompted by their self-interest, they took full advantage of the situation, and every day a multitude of nailmakers, metalworkers, cartwrights, mechanics, blacksmiths, and plowmen could be seen either going themselves or sending middlemen to Belgium to obtain their supply of iron. Mr. Protectionist did not like this at all.

His first idea was to stop this abuse by direct intervention with his own two hands. This was certainly the least he could do, since he alone was harmed. I’ll take my carbine, he said to himself. I’ll put four pistols in my belt, I’ll fill my cartridge box, I’ll buckle on my sword, and, thus equipped, I’ll go to the frontier. There I’ll kill the first metalworker, nailmaker, blacksmith, mechanic, or locksmith who comes seeking his own profit rather than mine. That’ll teach him a lesson!

At the moment of leaving, Mr. Protectionist had a few second thoughts that somewhat tempered his bellicose ardor. He said to himself: First of all, it is quite possible that the buyers of iron, my fellow countrymen and my enemies, will take offense, and, instead of letting themselves be killed, they might kill me. Furthermore, even if all my servants marched out, we could not guard the whole frontier. Finally, the entire proceeding would cost me too much, more than the result would be worth.

Mr. Protectionist was going to resign himself sadly just to being free like everyone else, when suddenly he had a brilliant idea.

He remembered that there is a great law factory in Paris. What is a law? he asked himself. It is a measure to which, when once promulgated, whether it is good or bad, everyone has to conform. For the execution of this law, a public police force is organized, and to make up the said public police force, men and money are taken from the nation.

If, then, I manage to get from that great Parisian factory a nice little law saying: “Belgian iron is prohibited,” I shall attain the following results: The government will replace the few servants that I wanted to send to the frontier with twenty thousand sons of my recalcitrant metalworkers, locksmiths, nailmakers, blacksmiths, artisans, mechanics, and plowmen. Then, to keep these twenty thousand customs officers in good spirits and health, there will be distributed to them twenty-five million francs taken from these same blacksmiths, nailmakers, artisans, and plowmen. Organized in this way, the protection will be better accomplished; it will cost me nothing; I shall not be exposed to the brutality of brokers; I shall sell the iron at my price; and I shall enjoy the sweet pleasure of seeing our great people shamefully hoaxed. That will teach them to be continually proclaiming themselves the precursors and the promoters of all progress in Europe. It will be a smart move, and well worth the trouble of trying!

So Mr. Protectionist went to the law factory. (Another time, perhaps, I shall tell the story of his dark, underhanded dealings there; today I wish to speak only of the steps he took openly and for all to see.) He presented to their excellencies, the legislators, the following argument:

“Belgian iron is sold in France at ten francs, which forces me to sell mine at the same price. I should prefer to sell it at fifteen and cannot because of this confounded Belgian iron. Manufacture a law that says: ‘Belgian iron shall no longer enter France.’ Immediately I shall raise my price by five francs, with the following consequences:

“For each hundred kilograms of iron that I shall deliver to the public, instead of ten francs I shall get fifteen; I shall enrich myself more quickly; I shall extend the exploitation of my mines; I shall employ more men. My employees and I will spend more, to the great advantage of our suppliers for miles around. These suppliers, having a greater market, will give more orders to industry, and gradually this activity will spread throughout the country. This lucky hundred-sou piece that you will drop into my coffers, like a stone that is thrown into a lake, will cause an infinite number of concentric circles to radiate great distances in every direction.”

Charmed by this discourse, enchanted to learn that it is so easy to increase the wealth of a people simply by legislation, the manufacturers of laws voted in favor of the restriction. “What is all this talk about labor and saving?” they said. “What good are these painful means of increasing the national wealth, when a decree will do the job?”

And, in fact, the law had all the consequences predicted by Mr. Protectionist, but it had others too; for, to do him justice, he had not reasoned falsely, but incompletely. In asking for a privilege, he had pointed out the effects that are seen, leaving in the shadow those that are not seen. He had shown only two people, when actually there are three in the picture. It is for us to repair this omission, whether involuntary or premeditated.

Yes, the five-franc piece thus legislatively rechanneled into the coffers of Mr. Protectionist constitutes an advantage for him and for those who get jobs because of it. And if the decree had made the five-franc piece come down from the moon, these good effects would not be counterbalanced by any compensating bad effects. Unfortunately, the mysterious hundred sous did not come down from the moon, but rather from the pocket of a metalworker, a nailmaker, a cartwright, a blacksmith, a plowman, a builder, in a word, from James Goodfellow, who pays it out today without receiving a milligram of iron more than when he was paying ten francs. It at once becomes evident that this certainly changes the question, for, quite obviously, the profit of Mr. Protectionist is counterbalanced by the loss of James Goodfellow, and anything that Mr. Protectionist will be able to do with this five-franc piece for the encouragement of domestic industry, James Goodfellow could also have done. The stone is thrown in at one point in the lake only because it has been prohibited by law from being thrown in at another.

Hence, what is not seen counterbalances what is seen; and the outcome of the whole operation is an injustice, all the more deplorable in having been perpetrated by the law.

But this is not all. I have said that a third person was always left in the shadow. I must make him appear here, so that he can reveal to us a second loss of five francs. Then we shall have the results of the operation in its entirety.

James Goodfellow has fifteen francs, the fruit of his labors. (We are back at the time when he is still free.) What does he do with his fifteen francs? He buys an article of millinery for ten francs, and it is with this article of millinery that he pays (or his middleman pays for him) for the hundred kilograms of Belgian iron. He still has five francs left. He does not throw them into the river, but (and this is what is not seen) he gives them to some manufacturer or other in exchange for some satisfaction—for example, to a publisher for a copy of the Discourse on Universal History by Bossuet.

Thus, he has encouraged domestic industry to the amount of fifteen francs, to wit:

10 francs to the Parisian milliner
5 francs to the publisher

And as for James Goodfellow, he gets for his fifteen francs two objects of satisfaction, to wit:

1. A hundred kilograms of iron
   2. A book

Comes the decree.

What happens to James Goodfellow? What happens to domestic industry?

James Goodfellow, in giving his fifteen francs to the last centime to Mr. Protectionist for a hundred kilograms of iron, has nothing now but the use of this iron. He loses the enjoyment of a book or of any other equivalent object. He loses five francs. You agree with this; you cannot fail to agree; you cannot fail to agree that when restraint of trade raises prices, the consumer loses the difference.

But it is said that domestic industry gains the difference.

No, it does not gain it; for, since the decree, it is encouraged only as much as it was before, to the amount of fifteen francs.

Only, since the decree, the fifteen francs of James Goodfellow go to metallurgy, while before the decree they were divided between millinery and publishing.

The force that Mr. Protectionist might exercise by himself at the frontier and that which he has the law exercise for him can be judged quite differently from the moral point of view. There are people who think that plunder loses all its immorality as soon as it becomes legal. Personally, I cannot imagine a more alarming situation. However that may be, one thing is certain, and that is that the economic results are the same.

You may look at the question from any point of view you like, but if you examine it dispassionately, you will see that no good can come from legal or illegal plunder. We do not deny that it may bring for Mr. Protectionist or his industry, or if you wish for domestic industry, a profit of five francs. But we affirm that it will also give rise to two losses: one for James Goodfellow, who pays fifteen francs for what he used to get for ten; the other for domestic industry, which no longer receives the difference. Make your own choice of which of these two losses compensates for the profit that we admit. The one you do not choose constitutes no less a dead loss.

Moral: To use force is not to produce, but to destroy. Heavens! If to use force were to produce, France would be much richer than she is.