It is said that the most advantageous of all branches of trade is that in which one exchanges manufactured goods for raw materials. For these raw materials are the staff of life for domestic labor.

Hence, the conclusion is drawn that the best tariff law would be the one that would most facilitate the importation of raw materials and would erect the most obstacles to the entry of finished goods.

There is, in political economy, no sophism more widely accepted than this. It is dear not only to the protectionist school but also, and above all, to the self-styled liberal school; and this is regrettable, for the worst thing that can happen to a good cause is, not to be skillfully attacked, but to be ineptly defended.

Freedom of exchange will probably share the fate of freedom in general: it will become a part of our laws only after having taken possession of our minds. But if it is true that a reform must be generally accepted in order to be firmly established, it follows that nothing can delay it so much as that which misleads public opinion; and what is better fitted to mislead it than works that, while advocating free trade, are themselves based on the doctrines of monopoly?

A few years ago three large French cities—Lyons, Bordeaux, and Le Havre—rebelled against the protectionist system. The nation—indeed, the whole of Europe—was stirred on seeing raised what they took for the banner of free trade. Alas, it was still the banner of monopoly—of a monopoly a little more grasping and a great deal more absurd than the one the rebels were apparently trying to overthrow. By using the sophism that I am going to try to unmask, the petitioners did nothing more than reproduce, with an additional inconsistency, the doctrine of protection for domestic labor.

What, really, is the protectionist system? Let us hear what M. de Saint-Cricq has to say on this subject:

“Labor constitutes the wealth of a nation, because labor alone creates the material objects that our wants demand, and because universal well-being consists in the abundance of these objects.” So much for the premise of the argument.

“But this abundance must be the product of domestic labor. If it were the product of foreign labor, domestic labor would at once be disemployed.” Here lies the error. (See the preceding chapter.)

“What, then, should an agricultural and industrial country do? Secure its market for the products of its own soil and its own labor.” This is the end to be attained.

“And, to this end, restrict by means of tariffs and, if need be, exclude entirely the products of the soil and the labor of other nations.” These are the means to be employed.

Let us compare this system with that proposed in the Bordeaux petition.

It divided goods into three classes.

“The first comprises food and raw materials on which no human labor has been bestowed. In principle, a wise economic system would require that this class of goods enter duty-free.” Here, as there is no labor, there is no need of protection.

“The second is composed of articles that have undergone preliminary fabrication. This preliminary fabrication warrants the levying of some duties.” Here protection begins, because, according to the petitioners, domestic labor starts contributing to the product.

“The third includes finished goods, which can in no way provide employment for domestic labor; we consider this class the most dutiable.” Here labor, and with it protection, reach their maximum.

It is clear that the petitioners are arguing that foreign labor harms domestic labor; this is the error of the protectionist system.

They are demanding that the French market be secured for French labor; this is the end aimed at by the protectionist system.

They are requiring that foreign labor be subjected to restrictions and taxes. This is the means employed by the protectionist system.

What difference, therefore, is it possible to detect between the petitioners from Bordeaux and M. de Saint-Cricq, the leader of the protectionist chorus?

Only one: the breadth of the meaning given the word labor.

M. de Saint-Cricq extends it to everything. Therefore he insists on protecting everything.

“Labor constitutes all the wealth of a nation,” he says; “protect agricultural industry, all agricultural industry; protect manufacturing industry, all manufacturing industry—that is the cry which will be heard again and again in this Chamber.”

The petitioners consider as labor only what is performed in connection with manufacturing; hence, they would confer the privileges of protection only on manufactured goods.

“Raw materials are those on which no human labor has been bestowed. In principle, they should not be dutiable. Finished goods can no longer provide employment for domestic labor; we consider them the most dutiable.”

It is not our task here to investigate whether protection for domestic labor is reasonable. On this point M. de Saint-Cricq and the Bordeaux petitioners agree, and we, as the reader has seen in previous chapters, differ with both of them.

Our task is to ascertain which of them—M. de Saint-Cricq or the Bordeaux petitioners—uses the word labor in its proper sense.

Now, on this ground, we must say that the position taken by M. de Saint-Cricq is a thousand times better founded, for here is the dialogue that might take place between them:

M. de Saint-Cricq: “You grant that the products of domestic labor should be protected. You grant that no products of foreign labor can be introduced into our market without destroying an equal quantity of job opportunities for our domestic labor. But you allege that there are many goods which are possessed of value, since they are sold, and on which, nevertheless, no human labor has been bestowed. And among these you include wheat, flour, meat, cattle, bacon, salt, iron, copper, lead, coal, wool, pelts, seeds, etc.

“If you will prove to me that the value of these things is not due to labor, I shall agree that it is useless to protect them.

“But, on the other hand, if I prove to you that there is as much labor in 100 francs’ worth of wool as in 100 francs’ worth of textiles, you will have to admit that protection is as obligatory for the one as it is for the other.

“Now, why is this sack of wool worth 100 francs? Is it not precisely because that is its sales price? And what is the sales price but the total amount that had to be paid out, in wages, salaries, interest, and profits, to all the workers and capitalists who cooperated in the production of the article?”

The Petitioners: “As regards the wool, you may be right. But can it be said that a sack of grain, an ingot of iron, a quintal of coal, are products of labor? Are they not created by Nature?”

M. de Saint-Cricq: “Undoubtedly, Nature creates the elements of all these things, but it is labor that produces their value. I myself was wrong in saying that labor creates material objects, and this faulty expression has led me into many other errors. It is not within the capability of man to create, to make something out of nothing, whether he is an industrialist or a farmer; and if by production is meant creation, all our labors must be considered unproductive, and yours, as merchants, more so than all the others, save perhaps my own.

“The farmer, then, cannot rightly claim to have created wheat, but he can rightly claim to have created its value—I mean, by his labor and that of his domestic servants, his cowherds, and his reapers, to have changed into wheat some substances that in no way resembled it. What more is there in the action of the miller who transforms it into flour, or of the baker who shapes it into bread?

“For man to be able to clothe himself, a great many operations are necessary. Prior to the application of any human labor, the real raw materials of clothing are air, water, heat, carbon dioxide, light, and the minerals that must enter into its composition. These are the raw materials of which it may truly be said that no human labor has been bestowed on them, since they have no value, and I should not dream of protecting them. But the first application of labor transforms these substances into fodder, a second into wool, a third into yarn, a fourth into cloth, and a fifth into a finished garment. Who will be so bold as to say that any part of this whole enterprise is not labor, from the first furrow cut by the farmer’s plow to the last stitch of the tailor’s needle?

“And because the labor involved is spread over several branches of industry for the sake of greater speed and better quality in the manufacture of the finished product, which in this case is a piece of clothing, do you want, by an arbitrary distinction, to rank the importance of these operations in terms of the order in which they follow one another, so that the first in the sequence does not deserve even the name of labor, while the last, which is pre-eminently worthy of the appellation, alone merits the privileges of protection?”

The Petitioners: “Yes, we are beginning to see that wheat, like wool, is not entirely a product on which no human labor has been bestowed. But the farmer has not, at least, like the manufacturer, done everything himself or with the assistance of his workers. Nature too has helped him; and if labor is involved in the production of wheat, it is not solely the product of labor.”

M. de Saint-Cricq: “But the value of everything resides exclusively in the labor needed to produce it. I am glad that Nature contributed to the physical production of the wheat. I could even wish that this were the achievement of Nature alone. But you must admit that I have, by my labor, compelled Nature to come to my assistance; and when I sell you wheat, please observe that it is not Nature’s labor that I ask you to pay for, but my own.

“Indeed, from your mode of reasoning it would follow that manufactured goods are not exclusively the products of labor either. For does not the manufacturer summon Nature to his assistance? Does he not assist the steam engine by availing himself of the weight of the atmosphere, just as I avail myself of its humidity to assist the plow? Are the laws of gravitation, of the transmission of energy, or of the affinity of chemical elements his handiwork?”

The Petitioners: “Very well. This case is analogous to that of wool. But coal is surely the work of Nature, and of Nature alone. It is really a product on which no human labor has been bestowed.”

M. de Saint-Cricq: “Yes, Nature created coal, but labor created its value. During the millions of years when it lay buried and unknown under a hundred feet of earth, the coal had no value. Someone had to go there and search for it: that was a form of labor. Someone had to bring it to the market: that too was a form of labor. Thus, as we have said, the price that you pay for it on the market is nothing but the remuneration for the labor involved in its extraction and transportation.”

It is evident that up to this point M. de Saint-Cricq has had the better of the argument; that the value of raw materials, like that of manufactured goods, represents the costs of production, that is, of the labor involved in rendering them marketable; that it is not possible to conceive of an object which has value but without having had any human labor bestowed on it; that the distinction the petitioners are making is futile in theory and would be iniquitous in practice, for the unequal distribution of economic advantages that would result from its application would permit the one-third of the French people that are engaged in manufacturing to enjoy the privileges of monopoly on the ground that they produce by laboring, whereas the other two-thirds—that is, the farm population—would be abandoned to competition, on the pretext that they produce without laboring.

 


This segment of Economic Sophisms is found at the Library of Economics and Liberty.
The original image used to make the cover was taken by Bryan Ledgard (CC BY 2.0).
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