Sophisms of the Protectionists — 04 - First Series Part 4

V. OUR PRODUCTIONS ARE OVERLOADED WITH TAXES.

This is but a new wording of the last Sophism.

The demand made is, that the foreign article should be taxed, in order to neutralize the effects of the tax, which weighs down national produce.

It is still then but the question of equalizing the facilities of production.

We have but to say that the tax is an artificial obstacle, which has exactly the same effect as a natural obstacle, i. e. the increasing of the price.

If this increase is so great that there is more loss in producing the article in question than in attracting it from foreign parts by the production of an equivalent value, let it alone.

Individual interest will soon learn to choose the lesser of two evils.

I might refer the reader to the preceding demonstration for an answer to this Sophism; but it is one which recurs so often in the complaints and the petitions, I had almost said the demands, of the protectionist school, that it deserves a special discussion.

If the tax in question should be one of a special kind, directed against fixed articles of production, I agree that it is perfectly reasonable that foreign produce should be subjected to it.

For instance, it would be absurd to free foreign salt from impost duty; not that in an economical point of view France would lose any thing by it; on the contrary, whatever may be said, principles are invariable, and France would gain by it, as she must always gain by avoiding an obstacle whether natural or artificial.

But here the obstacle has been raised with a fiscal object.

It is necessary that this end should be attained;

and if foreign salt were to be sold in our market free from duty, the treasury would not receive its revenue, and would be obliged to seek it from some thing else.

There would be evident inconsistency in creating an obstacle with a given object, and then avoiding the attainment of that object.

It would have been better at once to seek what was needed in the other impost without taxing French salt.

Such are the circumstances under which I would allow upon any foreign article a duty, _not protecting_ but fiscal.

But the supposition that a nation, because it is subjected to heavier imposts than those of another neighboring nation, should protect itself by tariffs against the competition of its rival, is a Sophism, which it is now my purpose to attack.

I have said more than once, that I am opposing only the theory of the protectionists, with the hope of discovering the source of their errors.

Were I disposed to enter into controversy with them, I would say: Why direct your tariffs principally against England and Belgium, both countries more overloaded with taxes than any in the world?

Have I not a right to look upon your argument as a mere pretext?

But I am not of the number of those who believe that prohibitionists are guided by interest, and not by conviction.

The doctrine of Protection is too popular not to be sincere.

If the majority could believe in freedom, we would be free.

Without doubt it is individual interest which weighs us down with tariffs; but it acts upon conviction.

The State may make either a good or a bad use of taxes; it makes a good use of them when it renders to the public services equivalent to the value received from them; it makes a bad use of them when it expends this value, giving nothing in return.

To say in the first case that they place the country which pays them in more disadvantageous conditions for production, than the country which is free from them, is a Sophism.

We pay, it is true, twenty millions for the administration of justice, and the maintenance of the police, but we have justice and the police; we have the security which they give, the time which they save for us; and it is most probable that production is neither more easy nor more active among nations, where (if there be such) each individual takes the administration of justice into his own hands.

We pay, I grant, many hundred millions for roads, bridges, ports, railways; but we have these railways, these ports, bridges and roads, and unless we maintain that it is a losing business to establish them, we cannot say that they place us in a position inferior to that of nations who have, it is true, no taxes for public works, but who likewise have no public works.

And here we see why (even while we accuse internal taxes of being a cause of industrial inferiority) we direct our tariffs precisely against those nations which are the most taxed.

It is because these taxes, well used, far from injuring, have ameliorated the _conditions of production_ to these nations.

Thus we again arrive at the conclusion that the protectionist Sophisms not only wander from, but are the contrary--the very antithesis of truth.

As to unproductive imposts, suppress them if you can; but surely it is a most singular idea to suppose, that their evil effect is to be neutralized by the addition of individual taxes to public taxes.

Many thanks for the compensation!

The State, you say, has taxed us too much;

surely this is no reason why we should tax each other!

A protective duty is a tax directed against foreign produce, but which returns, let us keep in mind, upon the national consumer.

Is it not then a singular argument to say to him, "Because the taxes are heavy, we will raise prices higher for you; and because the State takes a part of your revenue, we will give another portion of it to benefit a monopoly?"

But let us examine more closely this Sophism so accredited among our legislators; although, strange to say, it is precisely those who keep up the unproductive imposts (according to our present hypothesis) who attribute to them afterwards our supposed inferiority, and seek to re-establish the equilibrium by further imposts and new clogs.

It appears to me to be evident that protection, without any change in its nature and effects, might have taken the form of a direct tax, raised by the State, and distributed as a premium to privileged industry.

Let us admit that foreign iron could be sold in our market at eight francs, but not lower; and French iron at not lower than twelve francs.

In this hypothesis there are two ways in which the State can secure the national market to the home producer.

The first, is to put upon foreign iron a duty of five francs.

This, it is evident, would exclude it, because it could no longer be sold at less than thirteen francs; eight francs for the cost price, five for the tax;

and at this price it must be driven from the market by French iron, which we have supposed to cost twelve francs.

In this case the buyer, the consumer, will have paid all the expenses of the protection given.

The second means would be to lay upon the public a tax of five francs, and to give it as a premium to the iron manufacturer.

The effect would in either case be equally a protective measure.

Foreign iron would, according to both systems, be alike excluded; for our iron manufacturer could sell at seven francs, what, with the five francs premium, would thus bring him in twelve.

While the price of sale being seven francs, foreign iron could not obtain a market at eight.

In these two systems the principle is the same; the effect is the same.

There is but this single difference; in the first case the expense of protection is paid by a part, in the second by the whole of the community.

I frankly confess my preference for the second system, which I regard as more just, more economical and more legal.

More just, because, if society wishes to give bounties to some of its members, the whole community ought to contribute; more economical, because it would banish many difficulties, and save the expenses of collection; more legal, lastly, because the public would see clearly into the operation, and know what was required of it.

But if the protective system had taken this form, would it not have been laughable enough to hear it said, "We pay heavy taxes for the army, the navy, the judiciary, the public works, the schools, the public debt, etc. These amount to more than a thousand million.

It would therefore be desirable that the State should take another thousand million, to relieve the poor iron manufacturers; or the suffering stockholders of coal mines; or those unfortunate lumber dealers, or the useful codfishery."

This, it must be perceived, by an attentive investigation, is the result of the Sophism in question.

In vain, gentlemen, are all your efforts;

you cannot _give money_ to one without taking it from another.

If you are absolutely determined to exhaust the funds of the taxable community, well; but, at least, do not mock them; do not tell them, "We take from you again, in order to compensate you for what we have already taken."

It would be a too tedious undertaking to endeavor to point out all the fallacies of this Sophism.

I will therefore limit myself to the consideration of it in three points.

You argue that France is overburthened with taxes, and deduce thence the conclusion that it is necessary to protect such and such an article of produce.

But protection does not relieve us from the payment of these taxes.

If, then, individuals devoting themselves to any one object of industry, should advance this demand: "We, from our participation in the payment of taxes, have our expenses of production increased, and therefore ask for a protective duty which shall raise our price of sale;" what is this but a demand on their part to be allowed to free themselves from the burthen of the tax, by laying it on the rest of the community?

Their object is to balance, by the increased price of their produce, the amount which _they_ pay in taxes.

Now, as the whole amount of these taxes must enter into the treasury, and the increase of price must be paid by society, it follows that (where this protective duty is imposed) society has to bear, not only the general tax, but also that for the protection of the article in question.

But it is answered, let _every thing_ be protected.

Firstly, this is impossible; and, again, were it possible, how could such a system give relief?

_I_ will pay for you, _you_ will pay for me; but not the less, still there remains the tax to be paid.

Thus you are the dupes of an illusion.

You determine to raise taxes for the support of an army, a navy, the church, university, judges, roads, etc. Afterwards you seek to disburthen from its portion of the tax, first one article of industry, then another, then a third; always adding to the burthen of the mass of society.

You thus only create interminable complications.

If you can prove that the increase of price resulting from protection, falls upon the foreign producer, I grant something specious in your argument.

But if it be true that the French people paid the tax before the passing of the protective duty, and afterwards that it has paid not only the tax, but the protective duty also, truly I do not perceive wherein it has profited.

But I go much further, and maintain that the more oppressive our taxes are, the more anxiously ought we to open our ports and frontiers to foreign nations, less burthened than ourselves.

And why?

In order that we may share with them, as much as possible, the burthen which we bear.

Is it not an incontestable maxim in political economy, that taxes must, in the end, fall upon the consumer?

The greater then our commerce, the greater the portion which will be reimbursed to us, of taxes incorporated in the produce, which we will have sold to foreign consumers; whilst we, on our part, will have made to them only a lesser reimbursement, because (according to our hypothesis) their produce is less taxed than ours.

Again, finally, has it ever occurred to you to ask yourself, whether these heavy taxes which you adduce as a reason for keeping up the prohibitive system, may not be the result of this very system itself?

To what purpose would be our great standing armies, and our powerful navies, if commerce were free?

VI. BALANCE OF TRADE.

Our adversaries have adopted a system of tactics, which embarrasses us not a little.

Do we prove our doctrine?

They admit the truth of it in the most respectful manner.

Do we attack their principles?

They abandon them with the best possible grace.

They only ask that our doctrine, which they acknowledge to be true, should be confined to books; and that their principles, which they allow to be false, should be established in practice.

If we will give up to them the regulation of our tariffs, they will leave us triumphant in the domain of theory.

"Assuredly," said Mr. Gauthier de Roumilly, lately, "assuredly no one wishes to call up from their graves the defunct theories of the balance of trade."

And yet Mr. Gauthier, after giving this passing blow to error, goes on immediately afterwards, and for two hours consecutively, to reason as though this error were a truth.

Give me Mr. Lestiboudois.

Here we have a consistent reasoner!

a logical arguer!

There is nothing in his conclusions which cannot be found in his premises.

He asks nothing in practice which he does not justify in theory.

His principles may perchance be false, and this is the point in question.

But he has a principle.

He believes, he proclaims aloud, that if France gives ten to receive fifteen, she loses five; and surely, with such a belief, nothing is more natural than that he should make laws consistent with it.

He says: "What it is important to remark, is, that constantly the amount of importation is augmenting, and surpassing that of exportation.

Every year France buys more foreign produce, and sells less of its own produce.

This can be proved by figures.

In 1842, we see the importation exceed the exportation by two hundred millions.

This appears to me to prove, in the clearest manner, that national labor _is not sufficiently protected_, that we are provided by foreign labor, and that the competition of our rivals _oppresses_ our industry.

The law in question, appears to me to be a consecration of the fact, that our political economists have assumed a false position in declaring, that in proportion to produce bought, there is always a corresponding quantity sold.

It is evident that purchases may be made, not with the habitual productions of a country, not with its revenue, not with the results of actual labor, but with its capital, with the accumulated savings which should serve for reproduction.

A country may spend, dissipate its profits and savings, may impoverish itself, and by the consumption of its national capital, progress gradually to its ruin.

_This is precisely what we are doing.

We give, every year, two hundred millions to foreign nations_."

Well!

here, at least, is a man whom we can understand.

There is no hypocrisy in this language.

The balance of trade is here clearly maintained and defended.

France imports two hundred millions more than she exports.

Then France loses two hundred millions yearly.

And the remedy?

It is to check importation.

The conclusion is perfectly consistent.

It is, then, with Mr. Lestiboudois that we will argue, for how is it possible to do so with Mr. Gauthier?

If you say to the latter, the balance of trade is a mistake, he will answer, So I have declared it in my exordium.

If you exclaim, But it is a truth, he will say, Thus I have classed it in my conclusions.

Political economists may blame me for arguing with Mr. Lestiboudois.

To combat the balance of trade, is, they say, neither more nor less than to fight against a windmill.

But let us be on our guard.

The balance of trade is neither so old, nor so sick, nor so dead, as Mr. Gauthier is pleased to imagine; for all the legislature, Mr. Gauthier himself included, are associated by their votes with the theory of Mr. Lestiboudois.

However, not to fatigue the reader, I will not seek to investigate too closely this theory, but will content myself with subjecting it to the experience of facts.

It is constantly alleged in opposition to our principles, that they are good only in theory.

But, gentlemen, do you believe that merchants' books are good in practice?

It does appear to me that if there is any thing which can have a practical authority, when the object is to prove profit and loss, that this must be commercial accounts.

We cannot suppose that all the merchants of the world, for centuries back, should have so little understood their own affairs, as to have kept their books in such a manner as to represent gains as losses, and losses as gains.

Truly it would be easier to believe that Mr. Lestiboudois is a bad political economist.

A merchant, one of my friends, having had two business transactions, with very different results, I have been curious to compare on this subject the accounts of the counter with those of the custom-house, interpreted by Mr. Lestiboudois with the sanction of our six hundred legislators.

Mr. T...

despatched from Havre a vessel, freighted, for the United States, with French merchandise, principally Parisian articles, valued at 200,000 francs.

Such was the amount entered at the custom-house.

The cargo, on its arrival at New Orleans, had paid ten per cent.

expenses, and was liable to thirty per cent.

duties; which raised its value to 280,000 francs.

It was sold at twenty per cent.

profit on its original value, which being 40,000 francs, the price of sale was 320,000 francs, which the assignee converted into cotton.

This cotton, again, had to pay for expenses of transportation, insurance, commissions, etc. , ten per cent.

: so that when the return cargo arrived at Havre, its value had risen to 352,000 francs, and it was thus entered at the custom-house.

Finally, Mr. T...

realized again on this return cargo twenty per cent.

profits; amounting to 70,400 francs.

The cotton thus sold for the sum of 422,400 francs.

If Mr. Lestiboudois requires it, I will send him an extract from the books of Mr. T...

He will there see, _credited_ to the account of _profit and loss_, that is to say, set down as gained, two sums; the one of 40,000, the other of 70,000 francs, and Mr. T ...

feels perfectly certain that as regards these, there is no mistake in his accounts.

Now what conclusion does Mr. Lestiboudois draw from the sums entered into the custom-house, in this operation?

He thence learns that France has exported 200,000 francs, and imported 352,000; from whence the honorable deputy concludes "_that she has spent, dissipated the profits of her previous savings; that she is impoverishing herself and progressing to her ruin; and that she has squandered on a foreign nation_ 152,000 _francs of her capital_."

Some time after this transaction, Mr. T...

despatched another vessel, again freighted with domestic produce, to the amount of 200,000 francs.

But the vessel foundered after leaving the port, and Mr. T ...

had only farther to inscribe on his books two little items, thus worded: "_Sundries due to X_, 200,000 francs, for purchase of divers articles despatched by vessel N. "_Profit and loss due to sundries, 200,000 francs, for final and total loss of cargo.

_" In the meantime the custom-house inscribed 200,000 francs upon its list of _exportations_, and as there can of course be nothing to balance this entry on the list of _importations_, it hence follows that Mr. Lestiboudois and the Chamber must see in this wreck _a clear profit_ to France of 200,000 francs.

We may draw hence yet another conclusion, viz.

: that according to the Balance of Trade theory, France has an exceedingly simple manner of constantly doubling her capital.

It is only necessary, to accomplish this, that she should, after entering into the custom-house her articles for exportation, cause them to be thrown into the sea.

By this course, her exportations can speedily be made to equal her capital; importations will be nothing, and our gain will be, all which the ocean will have swallowed up.

You are joking, the protectionists will reply.

You know that it is impossible that we should utter such absurdities.

Nevertheless, I answer, you do utter them, and what is more, you give them life, you exercise them practically upon your fellow citizens, as much, at least, as is in your power to do.

The truth is, that the theory of the Balance of Trade should be precisely _reversed_.

The profits accruing to the nation from any foreign commerce should be calculated by the overplus of the importation above the exportation.

This overplus, after the deduction of expenses, is the real gain.

Here we have the true theory, and it is one which leads directly to freedom in trade.

I now, gentlemen, abandon you this theory, as I have done all those of the preceding chapters.

Do with it as you please, exaggerate it as you will; it has nothing to fear.

Push it to the farthest extreme; imagine, if it so please you, that foreign nations should inundate us with useful produce of every description, and ask nothing in return; that our importations should be _infinite_, and our exportations _nothing_.

Imagine all this, and still I defy you to prove that we will be the poorer in consequence.