Economic Sophisms

by Frédéric Bastiat

It appears evident to me that the nature and effects of protection would not be changed, were the State to levy a direct tax and distribute the money afterwards in premiums and indemnities to the privileged branches of industry.

Suppose that while foreign iron cannot be sold in our market below eight francs, French iron cannot be sold for less than twelve francs.

On this hypothesis, there are two modes in which the State can secure the home market to the producer.

The first mode is to lay a duty of five francs on foreign iron. It is evident that that duty would exclude it, since it could no longer be sold under thirteen francs, namely, eight francs for the cost price, and five francs for the tax, and at that price it would be driven out of the market by French iron, the price of which we suppose to be only twelve francs. In this case, the purchaser, the consumer, would be at the whole cost of the protection.

Or again, the State might levy a tax of five francs from the public, and give the proceeds as a premium to the ironmaster. The protective effect would be the same. Foreign iron would in this case be equally excluded; for our ironmaster can now sell his iron at seven francs, which, with the five francs premium, would make up to him the remunerative price of twelve francs. But with home iron at seven francs the foreigner could not sell his for eight, which by the supposition is his lowest remunerative price.

Between these two modes of going to work, I can see only one difference. The principle is the same; the effect is the same; but in the one, certain individuals pay the price of protection; in the other, it is paid for by the nation at large.

I frankly avow my predilection for the second mode. It appears to me more just, more economical, and more honourable; more just, because if society desires to give largesses to some of its members, all should contribute; more economical, because it would save much expense in collecting, and get us rid of many restrictions; more honourable, because the public would then see clearly the nature of the operation, and act accordingly.

But if the protectionist system had taken this form, it would have been laughable to hear men say, "We pay heavy taxes for the army, for the navy, for the administration of justice, for public works, for the university, the public debt, etc.—in all exceeding a milliard [£40,000,000 sterling]. For this reason, the State should take another milliard from us, to relieve these poor ironmasters, these poor shareholders in the coal-mines of Anzin, these unfortunate proprietors of forests, these useful men who supply us with cod-fish."

Look at the subject closely, and you will be satisfied that this is the true meaning and effect of the sophism we are combating. It is all in vain; you cannot give money to some members of the community but by taking it from others. If you desire to ruin the tax-payer, you may do so. But at least do not banter him by saying, "In order to compensate your losses, I take from you again as much as I have taken from you already." To expose fully all that is false in this sophism would be an endless work. I shall confine myself to three observations. You assert that the country is overburdened with taxes, and on this fact you found an argument for the protection of certain branches of industry. But we have to pay these taxes in spite of protection. If, then, a particular branch of industry presents itself, and says, "I share in the payment of taxes; that raises the cost price of my products, and I demand that a protecting duty should also raise their selling price," what does such a demand amount to? It amounts simply to this, that the tax should be thrown over on the rest of the community. The object sought for is to be reimbursed the amount of the tax by a rise of prices. But as the Treasury requires to have the full amount of all the taxes, and as the masses have to pay the higher price, it follows that they have to bear not only their own share of taxation but that of the particular branch of industry which is protected. But we mean to protect everybody, you will say. I answer, in the first place, that that is impossible; and, in the next place, that if it were possible, there would be no relief. I would pay for you, and you would pay for me; but the tax must be paid all the same.

You are thus the dupes of an illusion. You wish in the first instance to pay taxes in order that you may have an army, a navy, a church, a university, judges, highways, etc., and then you wish to free from taxation first one branch of industry, then a second, then a third, always throwing back the burden upon the masses. You do nothing more than create interminable complications, without any other result than these complications themselves. Show me that a rise of price caused by protection falls upon the foreigner, and I could discover in your argument something specious. But if it be true that the public pays the tax before your law, and that after the law is passed it pays for protection and the tax into the bargain, truly I cannot see what is gained by it.