Economic Sophisms/Chapter 11
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Does Protection Raise the Rate of Wages?→ |
Do you desire to be in a situation to decide between liberty and protection? Do you desire to appreciate the bearing of an economic phenomenon? Inquire into its effects upon the abundance or scarcity of commodities, and not upon the rise or fall of prices. Distrust nominal prices;[1] and they will only land you in an inextricable labyrinth.
M. Matthieu de Dombasle, after having shown that protection raises prices, adds—
"The enhancement of price increases the expense of living, and consequently the price of labour, and each man receives, in the enhanced price of his products, compensation for the higher prices he has been obliged to pay for the things he has occasion to buy. Thus, if every one pays more as a consumer, every one receives more as a producer."
It is evident that we could reverse this argument, and say—
"If every one receives more as a producer, every one pays more as a consumer."
Now, what does this prove? Nothing but this, that protection displaces wealth uselessly and imjustly. In so far, it simply perpetrates spoliation.
Again, to conclude that this vast apparatus leads to simple compensations, we must stick to the "consequently" of M. de Dombasle, and make sure that the price of labour will not fail to rise with the price of the protected products. This is a question of fact which I remit to M. Moreau de Jonnés, that he may take the trouble to find out whether the rate of wages advances along with the price of shares in the coal-mines of Anzin. For my own part, I do not believe that it does; because, in my opinion, the price of labour, like the price of everything else, is governed by the relation of supply to demand. Now, I am convinced that restriction diminishes the supply of coal, and consequently enhances its price; but I do not see so clearly that it increases the demand for labour, so as to enhance the rate of wages; and that this effect should be produced is all the less likely, because the quantity of labour demanded depends on the disposable capital. Now, protection may indeed displace capital, and cause its transference from one employment to another, but it can never increase it by a single farthing.
But this question, which is one of the greatest interest and importance, will be examined in another place.[2] I return to the subject of nominal price; and I maintain that it is not one of those absurdities which can be rendered specious by such reasonings as those of M. de Dombasle.
Put the case of a nation which is isolated, and possesses a given amount of specie, and which chooses to amuse itself by burning each year one half of all the commodities that it possesses. I undertake to prove that, according to the theory of M. de Dombasle, it will not be less rich.
In fact, in consequence of the fire, all things will be doubled in price, and the inventories of property, made before and after the destruction, will show exactly the same nominal value. But then what will the country in question have lost? If John buys his cloth dearer, he also sells his corn at a higher price; and if Peter loses on his purchase of corn, he retrieves his losses by the sale of his cloth. "Each recovers, in the extra price of his products, the extra expense of living he has been put to; and if everybody pays as a consumer, everybody receives a corresponding amount as a producer."
All this is a jingling quibble, and not science. The truth, in plain terms, is this: that men consume cloth and corn by fire or by using them, and that the effect is the same as regards price, but not as regards wealth, for it is precisely in the use of commodities that wealth or material prosperity consists.
In the same way, restriction, while diminishing the abundance of things, may raise their price to such an extent that each party shall be, pecuniarily speaking, as rich as before. But to set down in an inventory three measures of corn at 20s., or four measures at 15s., because the result is still sixty shillings,—would this, I ask, come to the same thing with reference to the satisfaction of men's wants?
It is to this, the consumer's point of view, that I shall never cease to recall the protectionists, for this is the end and design of all our efforts, and the solution of all problems.[3] I shall never cease to say to them: Is it, or is it not, true that restriction, by impeding exchanges, by limiting the division of labour, by forcing labour to connect itself with difficulties of climate and situation, diminishes ultimately the quantity of commodities produced by a determinate amount of efforts? And what does this signify, it will be said, if the smaller quantity produced under the régime of protection has the same nominal value as that produced under the régime of liberty? The answer is obvious. Man does not live upon nominal values, but upon real products, and the more products there are, whatever be their price, the richer he is.
In writing what precedes, I never expected to meet with an anti-economist who was enough of a logician to admit, in so many words, that the wealth of nations depends on the value of things, apart from the consideration of their abundance. But here is what I find in the work of M. de Saint-Chamans (p. 210):—
"If fifteen millions' worth of commodities, sold to foreigners, are taken from the total production, estimated at fifty millions, the thirty-five millions' worth of commodities remaining, not being sufficient to meet the ordinary demand, will increase in price, and rise to the value of fifty millions. In that case the revenue of the country will represent a value of fifteen millions additional.… There would then be an increase of the wealth of the country to the extent of fifteen millions, exactly the amount of specie imported."
This is a pleasant view of the matter! If a nation produces in one year, from its agriculture and commerce, a value of fifty millions, it has only to sell a quarter of it to the foreigner to be a quarter richer! Then if it sells the half, it will be one-half richer! And if it should sell the whole, to its last tuft of wool and its last grain of wheat, it would bring up its revenue to 100 millions. Singular way of getting rich, by producing infinite dearness by absolute scarcity!
Again, would you judge of the two doctrines? Submit them to the test of exaggeration.
According to the doctrine of M. de Saint-Chamans, the French would be quite as rich—that is to say, quite as well supplied with all things—had they only a thousandth part of their annual products, because they would be worth a thousand times more.
According to our doctrine, the French would be infinitely rich if their annual products were infinitely abundant, and, consequently, without any value at all.[4]
- ↑ I have translated the expression des prix absolus, nominal prices, or actual money prices, because the English economists do not, so far as I remember, make use of the term absolute price.—See post, chap. v. of second series where the author employs the expression in this sense.—Translator.
- ↑ See post, ch. v., second series.—TRANSLATOR.
- ↑ To this view of the subject the author frequently reverts. It was, in his eyes, all important; and, four days before his death, he dictated this recommendation:—"Tell M. de F. to treat economical questions always from the consumer's point of view, for the interest of the consumer is identical with that of the human race."—EDITOR.
- ↑ See post, ch. v. of second series of Sophismes; and ch. vi. of Harmonies Économiques.