Business property influences man only by the positive gain it procures him or promises him. It puts in his life less order, more artificiality, and less fixity than landed property. The operations of the businessman are often made up of fortuitous transactions. His successes are more rapid, but chance plays a greater part therein. Business property does not have that necessary element of slow and sure progression which gives man the habit and soon the need for uniformity. Business property does not make him independent of other men. On the contrary, it makes him dependent on them. Vanity, that fertile seed of political agitation, is constantly wounded in him. It almost never is in agriculture. 11 The latter case calculates in peace the order of the seasons, the nature of the soil, the character of the climate. The elements of the calculations of the businessman are whims, passions, pride, the luxury of his fellows. A farm is a native land in miniature. One is born there, raised there, grows up with the trees which surround it. Business property excludes these sources of sweet sensation. The objects of speculation pile up on one another; but everything within them is static. Nothing carries the impress of natural development. Nothing speaks to the imagination nor to memory, nothing to the moral part of man. People say my ancestors’ fields, my parents’ cabin. People never say my parents’ workshop or shop counter. The improvements of landed property cannot be separated from the soil which receives them and of which they become part. Business property is not susceptible to improvement but to growth, and that growth can be moved around freely. The landowner rarely gains, except in an indirect way, from what his competitors lose. It is never in his power to contribute to their loss. The tillage farmer cannot by his speculations threaten his neighbor’s harvest. The businessman gains directly from what others lose. Often it lies with him to add to their losses, and in many circumstances this is his most adroit speculation, his most assured advantage. In terms of intellectual faculties, the cultivator is greatly superior to the artisan. Agriculture demands a sequence of observations, of experiences which form and develop judgment. 12 From this peasants derive that just and accurate sense which astonishes us. Industrial jobs are, for the most part, limited by the division of labor to mechanical operations. Landed property binds man to the country he lives in, puts obstacles in the way of displacement of people, creates patriotism through interests. Business makes all countries much the same, facilitates displacements, separates interests from patriotism. 13 This advantage of landed property, this drawback of business property, in political terms increases as the value of the property diminishes. An artisan loses almost nothing in being displaced. A small landowner is ruined when he has to move. Now it is above all by the class of smaller proprietors that one must judge the effects of different types of property, since these classes are the most numerous.
Independently of this moral preeminence of landed property, it is favorable to public order by the very situation in which it puts those who possess it. Workmen concentrated in the towns are at the mercy of factions. Cultivators, spread around the country districts, are almost impossible to unite and therefore to be led to rebel. Business proprietors, it has been said, must be much more attached to order, stability, and public peace than landed proprietors, because they lose much more during upheavals. Burn the harvest of a cultivator and he still has the field. He loses only a year’s income. Pillage a merchant’s shop and his assets are destroyed. But the loss is not made up solely of the instantaneous damage the proprietor experiences. We have to consider the degradation which happens to the property. Now, a pillaged shop can be full again of the kind of wealth that was stolen within twenty-four hours. But a farm burnt down, a soil impoverished for lack of cultivation, can be reestablished only by a long sequence of work and care. This becomes more striking still, when it is a question of poor proprietors. Seditionaries could in a single day compensate all the workers in a town, even if this was only in leaving them to plunder the rich. But nature alone can compensate, with her accustomed slowness, the cultivators of a district. These truths were felt by Aristotle. He contrived to bring out, very forcefully, the distinctive characters of the agricultural and mercantile classes, and he decided without hesitation in favor of the former. 14 Doubtless, business property has its advantages. Industry and commerce have created a new means of defense for liberty, namely credit. Landed property guarantees the stability of institutions; business property assures the independence of individuals. Therefore the refusal of political rights to these capitalists and business people, whose activity and opulence double the prosperity of the countries they live in, this refusal, if it were absolute, in my view would be an injustice and moreover an imprudence. It would be to do that of which we have already shown the danger above. It would put wealth in opposition to power.
If one reflects, however, one will easily perceive that the exclusion will not hit in any way those businessmen it would be a pity to exclude. What could be easier for them than to acquire a property in the country which would make them citizens? If they refused, I would not reckon much for their attachment to their country, or rather to their government. For it always is the fault of governments when men do not love their native soil. Such business proprietors as will not be able to buy landed property will be men whom a necessity which your institutions will never circumvent commits to mechanical work. These are therefore men lacking all means of educating themselves, likely with the purest intentions to make the State carry the cost of their inevitable errors. These men must be protected, respected, guaranteed against any harassment by the rich. We must brush aside any obstacles impeding their work and make their laborious lives as smooth as possible. They must not be transferred, however, to a new situation for which their calling does not equip them, where their participation would be pointless, or where their strong feelings would be threatening, or where their very presence would become fearfully disturbing for the other social groups, a cause for suspicion and for this very reason of hostile defensive measures and of flagrant injustices.
The property which has been entitled intellectual has been defended in a rather ingenious way. A distinguished professional man, it has been said, a legal expert, for example, is no less strongly attached to the country he lives in than the landed proprietor. It is easier for this latter to alienate his patrimony than it would for the former to move his reputation. His fortune is the confidence he inspires. This derives from a number of years of work, from intelligence, skill, the services he has rendered, the habit people have acquired of consulting him in difficult circumstances, and the local understanding his long experience has formed. Expatriation would deprive him of these advantages. He would be ruined by the single fact of having to present himself as an unknown in a foreign land.
This property called intellectual, however, resides only in public opinion. If all are allowed to attribute it to themselves, doubtless all will demand it. For political rights will become not only a social advantage but a proof of talent, and to refuse them to oneself would be a rare act at once of disinterestedness and of modesty. If it is the opinion of others which has to confer this intellectual property, that opinion is made plain only by the success and wealth which are the necessary result. Thus there will be distinguished men in the professions, like opulent capitalists. Nothing will be easier for them than acquiring the landed property required.
There are, however, considerations of higher significance to be weighed. The professions require more than any other job perhaps, if their influence in political discussion is not to be fatal, to be joined with landed property. The professions, so praiseworthy in so many ways, do not always number among their good qualities the putting into ideas of that practical accuracy necessary for pronouncing on men’s positive interests. We saw during our Revolution writers, mathematicians, and chemists lending themselves to the most exaggerated opinions, not because in other respects they were not enlightened and estimable, but because they had lived apart from men. Some had been accustomed to indulging their imagination, others to taking into account only rigorous evidence, a third lot to seeing nature in its reproduction of human beings, paving the way to destruction. They had arrived by different routes at the same result, namely disdaining considerations drawn from facts, scorning the real sensible world, and reasoning like visionaries on the social condition, like geometers on our passions and like doctors on our human sorrows.
If these mistakes have been the portion of superior men, what will the errors of inferior candidates and defective applicants be? How very necessary it is to put a brake on wounded amour propre, on sour vanity, on all the causes of bitterness, agitation, and dissatisfaction, against a society in which people find themselves displaced, of hatred against men who seem unjust in their evaluations! All intellectual works are no doubt honorable. All must be respected. Our first attribute, our distinctive faculty, is thought. Whoever makes use of it has the right to our esteem, even independently of success. Whoever outrages or rebuffs it abdicates the name human and puts himself outside the human race. Every science, however, gives to the mind of him who cultivates it an exclusive slant, which becomes dangerous in matters political, unless it is counterbalanced. Now, the counterweight can be found only in landed property. This alone establishes uniform ties between men. It puts them on guard against the imprudent sacrifice of the happiness and peace of others by enveloping within this sacrifice their own well-being, by obliging them to reckon on their own account. It makes them come down from lofty, chimerical theories and inapplicable exaggerations by establishing between them and other members of the society numerous complicated relations and common interests.
Let it not be thought, though, that this safeguard is useful only for maintaining order. It is no less so for maintaining freedom. By a bizarre coming together, the sciences which, during political upheavals, sometimes incline men to impossible ideas of freedom, render them at other times indifferent and servile under despotism. Scholars proper are rarely bothered by power, even unjust power. It is only reflective thought such power hates. It likes the sciences well enough as tools for the governors and the fine arts as distractions for the governed. Thus the road followed by men whose studies have no connection with the active interests of human life protects them from the harassments of a government which never sees them as rivals. They often display too little anger at abuses of power which weigh only on other groups.
The present situation of the great states of Europe has created in our times a new kind of property, that of public funds. This property does not at all tie its possessor to the soil, as does landed property. It demands neither assiduous work nor difficult speculations, like business property. It does not suppose distinguished talents, like the property we have termed intellectual.
The state’s creditor is interested in the wealth of his country only as any creditor is in the wealth of his debtor. Provided the latter pays him, he is satisfied, and the dealings whose purpose is to assure his payment always seem fair enough, however costly they may be. The right he has all the time to sell his holding makes him indifferent to the probable but distant chance of national ruin. There is not a corner of land, not a manufacture, not a source of production whose impoverishment he does not contemplate with insouciance, as long as there are other resources which defray the payment of his income and which sustain the market value of his capital in the public mind. 15
Some writers have considered the establishment of the public debt as a cause of prosperity. Among the sophisms with which they have propped up this bizarre opinion, they have got across a consideration well tuned to seduce governments, namely that a State’s creditors are the natural supports of government. Associated with its fortunes, they have to defend it with all their might, as the sole guarantee of the capital due to them. What seems true to me is that in all circumstances, a lasting force, equally favorable to the worst and best of institutions, has at the very least as many drawbacks as advantages. It has to be added, however, that a body of men which depends on government only out of a desire to see its assets secured is always ready to break off the instant anxiety affects its hopes. Now, is it a good thing for a realm that there should be a group of individuals who consider government only in purely pecuniary terms, sustaining it despite its abuses when it pays them and declaring themselves its bitter enemies the second it stops paying them?
Doubtless the bad faith of the administration and its slackness in the fulfillment of its promises imply a neglect of justice which must extend to many other things. Free governments have always been distinguished by their scrupulous reliability. 16 England has never put the creditors of its immense debt through the least worry or delay. America, since the consolidation of its independence, has scrupulously observed the same principles of trustworthiness. Holland has deserved the same praise for as long as it has existed. It is not thus with states subject to despotic governments. The fact is, only free governments can in no circumstances separate their interests from their duties. In this respect, the creditors of national debts must desire like all other citizens that freedom be established and maintained.
I confess to preferring that they be animated by nobler motives. It might happen that a despotic government, aware of the danger of annoying its creditors, came to put all its efforts into pleasing them, and succeeded for a more or less long period in weighing the nation down with excessive taxes. In this case the holders of the national debt, cut off from the rest of the nation, would remain faithful to a government treating only them justly. Property in public funds is of an essentially egotistical and solitary nature, one easily becoming aggressive, because it exists only at others’ expense. By a remarkable effect of the complex organization of modern societies, while the natural interest of any nation is that taxation be lowered to the least possible, the creation of a national debt gives one part of each nation an interest in increasing it. 17
We could muster many other arguments, furthermore, against a theory which, in reality, like many other theories, is only an excuse, disguised as a precept. In thinking of the existence of a public debt as morally and politically unfortunate, however, I do envisage it at the same time, in the present situation of society, as an inevitable evil for the large States. Those which habitually make subventions to national expenditure out of taxation are almost always forced to anticipate, and their anticipations constitute debt. Moreover, at the first out-of-the-way happening they are all obliged to borrow. As for those which have adopted the loan system, in preference to the tax system, establishing taxes only to service their loans (today this is virtually the English system), a public debt is inseparable from their existence. Thus to recommend modern States to relinquish the resources that credit offers them would be a pointless exercise. But precisely because public debt creates a new kind of property, whose effects are very different from those of other kinds of property and above all from those of landed property, landed property must be given all the more importance to counterbalance the bad effects of this new kind.
This is what the English constitution has done effortlessly. The owners of a debt of fifteen billion have less political influence than the proprietors of land whose total income would not pay the interest on that debt. 18 This explains why it has not corrupted British public-spiritedness. National representation, founded in large part on landed property, has maintained the integrity of that public spirit—an admirable result of well-managed freedom! The outlooks brought about by state rentiers in France conspired to overthrow the French monarchy, because under that monarchy there was no other center of legal and lasting public opinion. The State’s creditors in England identify with national feeling, because political organization, there taking as its base landed property, as its means of action the people’s rights, 19 and for its limits the most important individual rights, 20 has been able thereby to render salutary the very features of the case whose natural tendencies seem most dangerous.
Despite my wish to steer clear of details, I must add a few words on the amount of property which should be required.
A property can be so confined that he who owns it is a proprietor only in appearance. According to the writer I have cited above, 21 anyone whose income from land is not sufficient to see him through the year, without having to work for other people, is not fully a proprietor. In terms of the proportion of property he is lacking, he is back among the wage-earning class. Proprietors are masters of his life, for they can refuse him work. Therefore only he who has the necessary income to exist independently of any other party’s will, can exercise political rights. A lesser property condition is illusory, a higher one unjust. Given the necessary minimum, independence is entirely relative, a matter of character and impartiality. The advantages of landed property come more from its nature than its magnitude.
The economists have had the idea of linking land to political rights in such a way that landowners would have more or fewer votes according to the extent of their holdings. This idea would distort property. It would soon turn it into an oligarchy, which would become narrower every day, because the tendency of large properties is to swallow small ones. Once the minimum land holding carrying citizenship rights is fixed, the big proprietors must not have any legal superiority over the others. The division of powers applies in a way to the government of property owners, as to all forms of government; and just as in all free constitutions an attempt is made to endow the subordinate powers with the ability to resist the encroachments of the superior, and an interest in so doing, so small owners must be given an interest in opposing the aristocracy of the large and the ability so to do. This happens naturally if all proprietors enjoying true independence have equal rights.
Is there a fear that proprietors, as sole holders of political powers, may make these weigh heavily on the deprived class? The nature of property is enough to dispel this fear. Since the birth of commerce, 22 proprietors have no longer formed a distinct class, separated from the rest of men by lasting prerogatives. The membership of this class renews itself constantly. Some people leave, others enter it. If property were immobile and always stayed in the same hands, it would be a most improper institution. It would split the human race in two. One part would be everything, the other nothing. Such is not the essence of property, however. In defiance of those who possess it, it tends to a continual changing of hands. The eventuality to be studiously avoided, as I will say presently, is anything which could stop this salutary changing of hands.
If the law favors the accumulation of property, rendering it inalienable in certain families or classes, the government of proprietors becomes tyrannical. It is the circulation of property which guarantees the justice of the institution. This circulation is in the nature of things. It suffices not to hinder it.
Moreover, in the present state of civilization, the interest of proprietors is not separate from that of the industrial or wage-earning classes. A very great number of proprietors belong to one or the other of these classes. What hurts them falls on the proprietors themselves.
For these two reasons proprietors always eschew vexatious laws. If these laws were directed solely at nonproprietors, they would doubly menace their own authors.
Among certain ancient peoples, in Rome for example, proprietorial government involved abuse of power. This was due to circumstances which have not been remarked upon. Among the ancients the poor were always indebted to the rich, because the latter used only their slaves for work. In modern times it is normally the rich who are indebted to the poor. In the former case the rich demanded from the poor what the latter lacked completely, that is to say, money. That demand, needing violence to be satisfied, and, despite the violence, being mostly unsatisfied, there was a source of hatred and continual opposition between these two classes. In modern societies the rich demand from the poor what the latter can always supply in plenty, their labor, and from this there results much better agreement.
Even were someone to prove to me that today there are still abuses in proprietorial government, I should not abandon my view. I would undertake to show that these abuses, vestiges of less enlightened centuries, do more harm every day to the proprietors themselves. I include an example in a note. 23 I would hope for the rectification of these abuses simply through progress by way of education and experience, and I would see far fewer drawbacks in putting up with them temporarily than in giving nonproprietors political rights, that is to say, power. Once one is convinced that property is indispensable to the prosperity of the social State, one must, as has already been said, 24 guarantee it come what may, and its only sufficient means of guarantee is the power of the owners. One has to will the institutions one establishes, and any institution which supports property is on a suicide course when it gives power to nonproprietors.
It would be a mistake for merchants and manufacturers to fear the government of landowners. It is not the latter who have passed laws disastrous for commerce and industry. Such laws have been caused either by universal ignorance of the first principles of political economy, an ignorance common once to all classes, or by the ferocious violence of the propertyless, or by the private calculations and passing interests of traders. These last above all have been deadly. Monopolies, prohibitions, and privileges, by supplying some particular industry with disproportionate means and destroying the competition, are fatal to production in general. These contrivances are mercantile. Commerce is the child of freedom, yet the trader can enrich himself by the constraints with which he surrounds his competitors. Used as he is to speculating on everything, he is often given to speculating on the laws themselves. Unchecked, he will make laws to favor his business, instead of being content to make sure that his business enjoys the safeguard of the law.
Adam Smith’s wise commentator has said: “as much as the influence of manufacturers, merchants, and capitalists on legislation expresses itself in narrow outlooks, complicated rules, and oppressive constraints, so the proprietorial dispensation is to be recognized in fair intentions, simple arrangements, and the free and easy flow of all types of circulation.” 25
Precisely in the interest of commerce, it is therefore useful that legislative power be entrusted to landowners, whose activity is less restless and whose calculations are less volatile.
In all this our hypothesis assumes a society without privileged castes. Castes of this type, being means for conserving and moreover for acquiring property, corrupt it. If owners possess improper powers, they will be enemies of freedom and justice, not as owners, but as privileged persons. If they are not privileged, they will be their most faithful supports.
Hereditary privileges have been compared to property. Property’s enemies have adopted this comparison with alacrity. Privileges having become an odious thing, they have wanted this disfavor to fall on property. The friends of privilege have taken up this comparison for a contrary motive. Property being indispensable, they wanted to justify privileges as provenly necessary. This comparison would be right only if property did not change hands. Only then would it resemble privilege. Then it would also be, however, the most oppressive usurpation, as we said earlier. If property is the constant interest of the majority across the generations, this is because anyone can aspire to it and be assured of getting it through work. Hereditary privileges, however, are only, and can never be other than, the interest of the few. They exclude all who do not belong to the favored caste. They bear not only on the present but on the future and deprive generations unborn. Property stirs emulation; privilege rebuffs and discourages it. Property puts a value on all social relations, all social conditions. Privileges hold themselves aloof. Property communicates and thus improves itself. Privileges surround themselves with defenses and in communication lose their advantages. The more proprietors there are in a country, the more property is respected and the more people are affluent. The more privileged people there are, the more privileges are depreciated and the more people are for all that oppressed. For it is on them that the immunities of the privileged bear down. It is hard, even when we extend our conjectural sphere as far as possible, to imagine a tolerable social condition without property. America shows us a wise and peaceful government without privileged institutions. 26 Privileges and society are always at war. The latter wants a rule; the former want exceptions. If property has its drawbacks sometimes, they come from privileges, which, as a result of their diverse combinations, make the acquisition of property often impossible and always difficult for the nonprivileged class. Entails, primogeniture, and all the regulations which make property immobile and troublesome are in the nature of privileges, in fact their emanations.
In our era a number of men, having abolished hereditary privileges, went on to undermine property. We should not conclude that these things are intimately linked. In all questions there is a point where the mad and the sane split. The latter stop after the overthrow of prejudices which it was important to destroy. The former want to extend the destruction to things worth keeping. 27
When it is suggested that property is a convention of the same kind as hereditary privileges, we need to separate these two ideas again, in the countries where these privileges have been discredited. Nothing harms useful things more than their resting on improper things. The two collapse together. The relationship between privileges and property is like that between superstition and morality. Superstition can give morality a meretricious succor. If superstition loses its force, however, morality itself is undermined.
Privileges and proscriptions are social errors of the same kind. They likewise take citizens away from the law, either by abitrary punishments or arbitrary favor.
Montesquieu is often quoted in favor of privileges. But he examines rather than judges the laws. He explains the reasons for them, assigning causes without justifying institutions. He wrote, moreover, under a government mild in practice, though arbitrary by nature. Now, under such a government, privileges can be useful. 28 Where rights have disappeared, privileges can be a defense. For all their drawbacks, they are better than the absence of any intermediary power. To do without privileges, a constitution has to be excellent. Under despotism equality becomes a scourge.
What has happened to the privileged castes in our times in France obliges me to enter here some explanation of my opinion on the matter. I would not wish to be confused with men who sought in the abolition of improprieties only a means of satisfying their hatred and long-wounded vanity.
The destruction of hereditary privileges in France was an inevitable consequence of the progress of civilization. From the time the nobility had ceased being feudal, it had become a brilliant ornament but without a definite purpose, agreeable to its possessors, humiliating to those who did not possess it, but without real means and above all without power. Its advantages consisted more in exclusions for the lower orders than in prerogatives for the preferred class. The nobles obtained improper favors but were not invested with any legal power. They did not constitute an intermediary body which kept the people in order and the government in check. They formed an almost imaginary corporation, which for everything which was not just recollection or prejudice, depended on the government. Heredity in England does not confer on its members a contested power, arbitrary and vexatious, but a specified authority and constitutional functions. Its prerogatives, being legal in nature and created for a definite purpose, are less wounding for those who do not enjoy them and give more power to those who do. Therefore, this heredity is less exposed to attack at the same time as it is more readily defended. The nobility in France, however, invited attack from every vain and worthless thing and armed almost no interest to defend itself. It had no base, no fixed position in the community. There was nothing to guarantee its survival. Quite the contrary: everything conspired to its ruin, even the education and individual superiority of its own members. This is why it was destroyed almost without commotion. It vanished like a shadow, being only an indefinable memento of a half-destroyed system. Therefore its abolition cannot be the object of justified censure. Everything the leaders of our Revolution have added to this measure, however, has been unjust and insane.
One cause which has not been sufficiently noted contributed, if I am not mistaken, to the mingling of wise principles with odious and unreasonable means. We can count the origins of hereditary privileges among the differences between us and the ancients.
Among the peoples of antiquity, civilized by colonies without being conquered by them, inequalities in rank had their origin solely in superiority, either physical or moral. You will be conscious that I am not speaking of slaves, who have to be counted for nothing in the social system of the ancients. Among them, the privileged were a class of compatriots, come to wealth or esteem because their ancestors had acquired merit in the youthful society, teaching it either the first principles of government, or the ceremonies of religion, or discoveries necessary to life’s needs and the elements of civilization. Among the moderns, by contrast, inequalities of rank have their basis in conquest. The civilized peoples of the Roman empire were shared out like cheap cattle among ferocious aggressors. European institutions have for centuries borne the imprint of military force. Overcome by the sword, the conquered have also been kept in servitude by it. Their masters did not deign to disguise the origin of their power by ingenious fables or make it respectable by well or badly founded claims to superior wisdom. The two races reproduced themselves, for a long time with no other relationship than bondage on the one hand and oppression on the other. Everything from the fourth to the fifteenth century served to remind a Europe civilized but overrun, of the scourge it had received from the north. The superiority of the ancient peoples derives from this cause. They walked free from all domination, on land that no proud foot of a conqueror had ever trampled on. The moderns, a race debased and dispossessed, went wrong following a single conquest.
From this difference between the ancients and us has resulted a striking difference in the intellectual systems of the friends of liberty in the two eras. Despite the drawbacks of hereditary privilege, even among the ancients, almost all the publicists of antiquity want power concentrated in the hands of the upper classes. Aristotle makes this an essential part of a well-constituted democracy. 29 By contrast, since the Renaissance of learning, the supporters of political freedom have never believed its establishment possible without the destruction of the predominant castes. Those whom Aristotle sees as our guides, Machiavelli sees as victims who must be sacrificed. 30 From the fifteenth century until our times, those who have taken a position in the matter have written in favor of equality, and acted or spoken on behalf of the descendants of the oppressed and against the descendants of the oppressors. In proscribing not only hereditary privileges but also their possessors, they have themselves without knowing been dominated by hereditary prejudices. At the foundation of the Republic in France, the aim was more, as in the Italian republics, the rebuffing of conquerors than the giving of equal rights to citizens. Scanning the laws against the nobles in Italy, especially Florence, you would think yourself reading the laws of the Convention. 31 These eighteenth-century nobles have been depicted like fifteenth-century barons. Hateful men have skillfully blended all the centuries to rekindle and maintain hatred. Just as we once went back to the Franks and Goths when we wanted to be oppressors, they now revisited the Franks and Goths in the search of pretexts for the opposite oppression. Puerile vanity once searched for noble titles in archives and chronicles. A harsher and more vindictive vanity now drew on them for the wherewithal of accusations. A little reflection, however, must convince us that privileges of a naturally improper kind can be a means of leisure, of improvement and enlightenment, for their possessors. Great independent wealth is usually a guarantee against several kinds of baseness and vice. Knowing one is respected saves one from that thin-skinned and restless vanity which sees insult and imagines scorn everywhere, those violent, implacable feelings which take revenge in the ill they do, on the sorrows they undergo. Being given to gentle ways and accustomed to very refined nuances gives the outlook a delicate susceptibility, and the mind a ready flexibility.
These precious qualities had to be put to good advantage. The spirit of chivalry had to be circled with barriers it could not transgress, without its being excluded from the careers open to everyone. Thus would be formed that class of men which the ancient lawmakers regarded as destined by nature for government. It would be formed by the enlightened section of the commoners and the enlightened section of the nobility.
Woe betide the men who have prevented this amalgam, as easy as it is necessary. They did not want to take account of the centuries, nor to distinguish between nuances, nor to reassure apprehensions, nor to pardon fugitive vanities, nor to let pointless complaints subside and foolish menaces evaporate. They have recorded the doings of wounded pride. In treating all nobles as enemies of freedom, they made countless enemies for freedom. Nobility was restored by a new distinction, persecution, and strong in this privilege, fought the better against the so-called free institutions, in whose names it was being oppressed. It found in its proscription legitimate reasons for resistance and infallible means of attracting interest to its cause. To accompany the abolition of improprieties with injustices, is not to put obstacles to their returning, but to offer them the hope of coming back along with justice.
The surest and easiest way of giving proprietors great political influence has already been indicated by Aristotle: “To combine your laws and institutions in such a way,” he says, “that the high positions cannot be the object of a calculated interest. Without that, the masses, which, it must be said, are affected little by exclusion from honors, because they like to get on with their own business, will envy honors and profit. All the safeguards are fine, if the magistracy is not a temptation to greed. The poor will prefer lucrative occupations to difficult and unpaid ones. The rich will fill the magistracy, because they will not need payment.” 32
These principles are probably not applicable to all the jobs in the modern State apparatus, because there are some which require wealth beyond any individual holding. Nothing stops their being applied, however, to legislative positions, which increase only slightly the routine expenditures of those in whom they are invested.
Thus it was in Carthage. All the magistratures appointed by the people discharged their functions without payment. Other jobs were salaried. It is the same in England. I think myself on strong ground when I take as my proof that home of liberty. In this country people often denounce the corruption of the House of Commons. Just compare what this corruption, even in difficult circumstances, has done for the crown with what elsewhere other assemblies, largely paid, have done for a thousand successive tyrants.
In a free constitution, where nonproprietors have no political rights, it is outrageously contradictory to keep the people out of representation, as if only the rich ought to represent them, and then to make them pay their representatives, as if the latter were poor.
I do not like strong property requirements. I have given my reason elsewhere. 33 Independence is entirely relative. As soon as a man has the necessary minimum, he need only elevate his soul to do without superfluities. It is desirable, however, that legislative positions be in general filled by wealthy men. Now, on declaring them unpaid, we place power in the hands of the leisured class, without refusing a fair chance to all the legitimate exceptions.
When sizeable payments are attached to legislative positions, these payments become the main objective. Mediocrity, ineptitude, and baseness perceive in these august duties only a miserable speculation of chance, whose success is guaranteed them by silence and servility. The corruption which is the product of ambitious designs is far less deadly than that which results from ignoble calculations. Ambition is compatible with a thousand generous qualities: probity, courage, impartiality, and independence. Avarice is compatible with none of these. If we cannot keep ambitious men out of public positions, at least let us keep the greedy out. This way we will diminish the number of competitors considerably, and those we drive away will be precisely the least worthy.
Paying the people’s representatives is not to give them an interest in fulfilling their functions well, but in exercising them a long time.
Two conditions are necessary for representative duties to be unpaid. The first is that they be important. No one would want to take on, unpaid, jobs rendered puerile by their insignificance, or which would be shameful if they ceased being puerile. But, it must be added, under such a constitution, it would be better were there no legislative positions at all.
The second condition is that reelection be possible indefinitely. 34 The impossibility of reelection under a representative government is in all respects a great mistake. Only the chance of uninterrupted reelection offers merit a fitting reward and lodges in the public mind a body of imposing and respected names. Far from any free people should be both those shameful prejudices which demand distinctions of birth giving access to positions and their exclusive exercise, and also those prohibitive laws which prevent the people reelecting those who have not lost its trust. The influence of individuals is not destroyed by jealous institutions. In every era such influence of this sort as exists freely is always indispensable. The influence of individuals diminishes of its own accord with the spread of enlightenment. Let us not meddle therein with envious laws. Individuals naturally lose their supremacy when a larger number are educated to the same level. Let us not dispossess talent by arbitrary exclusions. There are in the assemblies weak men, who cannot be reelected, men who want either the goodwill of government, in order to obtain some compensation, or to make as few enemies as possible, in order to live in peaceful retirement. If you put obstacles in the way of indefinite reelection, you deprive talent and courage of their due and prepare a comfortable and secure shelter for cowardice and ineptitude. You put on the same level the man who has faced every danger and him who has bent his degraded head under tyranny. Reelection favors righteous calculation. Such calculations alone have lasting success, but to obtain it, they need time. Upright and brave men versed in public affairs are not so numerous that one can reject those who have already merited public esteem. New talents will appear too. The people tend to welcome them. Do not impose any constraint on them in this matter. Do not force them at each reelection to choose newcomers, ones still with their fortunes to make in matters of self-esteem and hell-bent on fame. Nothing costs a nation more dearly than the creation of reputations. Look at America. The people’s votes have never stopped supporting the founders of liberty. Look at England. There famous names have become a sort of popular property, in an unbroken series of reelections. Happy those nations which offer like examples and know how to trust durably!
The reader will have been able to spot that among the considerations we have advanced for upholding the high place property must have in our political life, none has been drawn from the metaphysical nature of property itself. We have treated it only as a social convention.
We have seen, however, that this viewpoint does not stop us seeing property as a thing society must surround with every protection. Our axiom is always that it would be better not to set up property than to make it a subject of struggle and bitterness, and that this danger can be avoided only by giving it inviolability on the one hand and power on the other.
Like considerations will guide us in our efforts to determine the limits of political jurisdiction over property.
Property, to the extent it is a social convention, falls within the scope of political jurisdiction. Society has rights over property it definitely does not have over the freedom, lives, and opinions of its members.
Property, however, has intimate links with other aspects of human existence, some of which are not subject at all to collective jurisdiction while the remaining ones are so only in a limited way. Society must therefore restrain its jurisdiction over property, because it could not be exercised to its full extent without menacing things which are not subject to it. Political authority must never, as part of its action over property, offend inviolable rights. Society must also restrict its jurisdiction over property so as not to give individuals an interest in eluding the law. Such an interest is morally adverse, firstly in that it entails the habit of hypocrisy and fraud, and secondly in that it requires the encouragement of informing. We dealt with this earlier. 35 Since this observation applies, however, to almost all the things government wants to take action on, necessarily it recurs often in our theorizing.
The property laws can be of two kinds. They can be intended to favor its accumulation and perpetuate it in the same hands, the same families or individual classes. Such is the origin of lands declared inalienable, of the exempting of certain classes from taxation, of entailments, of primogeniture—in sum, of all the feudal or noble customs.
This legal system, taken in all its extent and the severity it had in the past throughout Europe, takes away from property its true character and greatest advantage. It makes it a privilege. It disinherits the class finding itself without property. It transforms passing chance, which the next moment would have put right, into a permanent injustice. If the country is commercial and industrious, this system of property undermines it, because it forces individuals in commerce or industry to seek refuge or property in a more hospitable country. If the country is purely agricultural, this system brings in the most oppressive despotism. A terrible oligarchy forms. The peasants are reduced to the condition of serfs. The landowners themselves are corrupted by the improprieties which benefit them. They develop a ferocious, almost savage mentality. They need for their perpetuation to banish all enlightenment, to repel all improvement in the poor man’s lot, to oppose the formation of that intermediary class which, bringing together the advantages of education and the absence of prejudices which the privileged condition entails, is among all peoples the depository of just ideas, of useful knowledge, of impartial opinion and the hopes of humanity.
Today there are few countries where this system continues in its entirety; but almost everywhere we find vestiges of it, not without drawbacks. Such laws, when they are only partial, have, indeed, a new disadvantage. The group forbidden to acquire certain properties is angry at this exclusion, which is anyway always accompanied by other humiliating distinctions, since one abuse never stands alone. The excluded group takes advantage of what it possesses to demand the rights it is denied. It encourages discontent and exaggerated opinions in all nonproprietors. It prepares troubles, struggles, and revolutions to which everybody afterwards falls victim.
In the countries where these oppressive laws continue in undiminished rigor, it has been claimed, as always in such cases, that the classes they oppress recognize the advantages therein. It has been said that serfdom, a natural consequence of this system of property, was felicitous for the peasants and examples were given. Nobles one could suspect of hypocrisy and who should at least be accused of lack of foresight, have offered their vassals freedom. This is to say that they proposed to men brutalized by ignorance, without energy or capability or ideas, that they leave their fields and cabins, to go freely with their infirm parents and children of tender years, in search of a subsistence they had no means of procuring. These vassals preferred their chains, from which it was concluded that serfdom was agreeable. What, however, does such experience show? What we knew, that for men to be given freedom, they must not have been degraded to a subhuman condition by slavery. Then, freedom is doubtless only an illusory and deadly gift, just as the daylight becomes sorrowful for him whose view is enfeebled by the shadows of a dungeon. This truth holds for all types of servitude. Men who have never known freedom’s advantages may well enthusiastically submit to the yoke: reject their sheepish and deceptive witness. They have no right to make depositions in so holy a cause. As to freedom, listen to those ennobled by its blessings. Only they should be heard, only they consulted. 36
I would add that all governments today are working, commendably, to eliminate the last traces of this barbarous legislation. Alexander I is one prince in particular who seems to have brought to the throne the love of humanity and justice and who puts his renown not to driving his people back into barbarism but to preparing them by instruction for freedom, encouraging on his vast lands the freeing of the serfs and the dissemination of landownership. 37
The thing about the inalienability of goods is something common to everything human. Its intention was reasonable in the era which gave it birth; but the institution has outlived its usefulness. When there was no public justice and force was the sole guarantee against robbery, this force being found only in sizeable properties, which provided numerous vassals ready to defend their master, the inalienability of property was a means of security. Today, when social conditions are quite different, this inalienability is an evil for agriculture and pointless to boot. The owner of very large properties inevitably neglects a large proportion of his property. As Smith says in The Wealth of Nations, Book III, Ch. 2, to convince oneself of this, one need only compare big estates which have stayed in the same family continuously since the days of feudal anarchy, with the small holdings surrounding them. What is true of States is true of properties. Excessive smallness deprives them of the most efficient means of improvement. Excessive size makes them liable to careless management, haste, and negligence. 38
He who wants to sell proves he lacks the means or motivation for improvement. He who wants to buy proves he has will and means. Entailments and all types of inalienability force the former to keep that which is a burden on him and prevent the latter acquiring what would be advantageous to him. To society this is a double loss, since amelioration of property constitutes national wealth.
We must observe, in finishing this section, that the order of ideas has forced us to invert the facts. It was not at all by way of laws forbidding the wider distribution of property that the feudal oligarchy was established, but by conquest. It was then that this oligarchy, to perpetuate itself, had recourse to these prohibitive laws. Thus it would be wrong to fear a like result from proprietorial government. This government, when it rests on the principles established above, 39 will stay true to them because proprietors have no interest in replacing the legitimate enjoyment they are assured of by property they know they can guard, if they so choose, by impediments which would add nothing to their enjoyment and offend their wishes. Proprietorial government has nowhere produced a feudal one; rather, feudal government has corrupted proprietorial government.
The laws can have an opposite tendency. They can purpose the widest possible spread of ownership. Such is the avowed motive of the agrarian laws, of the dividing up of lands, of the ban on wills, and of that host of regulations aimed at preventing people managing to make light of these laws.
This activity of government, above all that which bears on the right to make wills—for the agrarian laws are sufficiently discredited—seems at first more legitimate and in keeping with egalitarian principles than the contrary action. In fact, it is superfluous. It wants to force what would happen naturally. Property tends to split up. If the government leaves it to itself, it will no sooner be acquired than you will see it dispersed. The proof of this is the proliferating laws necessary under all aristocratic governments to keep it in the same families. The accumulation of property is always a consequence of institutions.
It follows that the simplest and surest means of encouraging the widening ownership of property would be to abolish all the laws which oppose it.
Since governments, however, never content themselves with negative actions, they have usually gone further. They have not only abrogated vicious institutions, but combated the effects of the habits, recollections, and prejudices which might have survived these institutions with positive regulations.
What has happened is what naturally must happen when government arbitrarily restrains men’s freedom. The laws on this matter have been evaded. Further laws were needed to curb these infractions. From this followed innumerable obstacles to the transfer, disposal, and transmission of property.
These restrictions having entailed further inconveniences, people accused each other of having violated them. Greed armed itself with what was intended to check it.
During our Revolution a host of circumstantial safeguards were built up into eternal principles. Legislators who imagined they had the deepest outlooks and widest perspectives have always fixed their gaze on the possibility of a small refractory minority. To get at this they have borne down on all the French. Blind legislators, to make laws not for their fellow citizens but against their enemies! Insane legislators, under whose rule the law was no longer the shelter of all but an offensive arm against the few!
Freedom is constantly attacked by reasoning applicable only to constraint. Thus in our time the free transmission of property has been attacked with arguments which were valid only against the restrictions put on such transmission by the laws of old. The right to make wills and primogeniture have been confused, when the latter is on the contrary an encroachment on and the destruction of the right to make wills.
On this question, I will not stop to refute other sophisms drawn from an obscure and abstract metaphysics. People have argued that death entails annihilation, holding it absurd to let a man dispose of goods which were no longer his and to lend a fictitious existence to his will when he no longer existed. These arguments are fundamentally unsound. They could be applied to all men’s transactions; for if their intentions must cease to have effect once their lives are ended, long-term debts, leases, and all operations which have to be completed only by some fixed, far-off date would end by law with their deaths.
The question of wills, it seems to me, furnishes a striking example of the good which the absence of government intervention in a matter could sometimes do, without pain or effort, whenever this good is obtained only in an imperfect and artificial way, one hampered by two contradictory laws.
Legislators in several free societies, on the one hand seeing the dispersal of property as favorable to freedom and on the other paternal power as necessary to morality, have consequently made laws to impede the accumulation of property and have tried out a thousand institutions in support of paternal power. Now, these laws and institutions have been at loggerheads and their twin purposes have failed. Properties have not undergone the dispersal the law intended because fathers, jealous of their disputed rights, have used every deception which might promote either their own individual interests or that tendency, natural to man, to elude the regulations which hurt him. This has not in the least stopped paternal power weakening. The sons, jealously guarding the equal rights the law gave them, regarded the fathers’ attempts to strip them of part of the enjoyment of these as wicked contrivances.
If the legislator had abstained from all such commands in this matter, paternal power would have found a solid basis in the right to make wills. Fatherly fair play, which, whatever is said about it, is overwhelmingly the norm, would have given the dispersal of property a far more secure guarantee than is to be found in all the precautionary measures of positive law. Governments, however, when they think both that it is their duty and that it serves their renown to have a useful purpose in view for all things, make partial laws at cross-purposes, which cancel each other out and create only harassment.
Restrictions on the free disposition of properties after their owners’ deaths have the drawback we have called attention to in so many other laws, that of inviting fraud, of existing only to be eluded, of entailing inquisition, suspicion, and informing. They have the further drawback, however, that the vices they lead to reach right into families. It is not solely the citizens but the parents who are at war with one another. Not just social relations but nature itself is poisoned. Parents are made no less unjust but are also in bad faith. Children whose ingratitude is authorized think themselves likewise authorized to a sort of inspection of their parents’ actions. The domestic sanctuary, which ought to be a refuge of calm and of peaceful affections, becomes the shameful site of domestic struggle between a legally supported filial independence and the resentment of fathers, who punish this surveillance as they strive to elude the laws.
The legitimate jurisdiction of government over the transmission of property is extremely limited. It should guarantee the latter and leave it alone, establishing some procedures for determining owners’ real wishes, without placing restrictions or impediments on those wishes.
Tolerate partial injustices, which are inevitable among men, but much less frequent than you like to believe in order to give yourself pretexts for perpetual interference. If you want to remedy them, you will be throwing yourself into an endless course of action, upsetting yourself pointlessly over it; and without managing to block individual injustices, you will succeed only in becoming an unjust creature yourself.
Every time that an abuse exists, the rest of the social institutions encourage it. Unable to destroy it, they make room for it and set themselves up, so to speak, around it. Formerly, the right to make wills felt the effects of hereditary privileges, but only because it was sacrificed to these.
When institutions have done harm, and this goes on after the institutions are destroyed, it is better to put up with the inconvenience caused by the traces of these defective institutions, than to hasten to remedy this with further institutions which might also have unforeseen drawbacks.
The same considerations which inspired the restrictions on the free transmission of property have led governments to progressive taxation, compulsory borrowings, and taxes directed solely against the wealthy. These measures have been so fully rebuked by experience, however, that it is almost superfluous to demonstrate their futility and danger. They are in direct opposition to the present trends in society. They condemn wealth to lying. They put it at loggerheads with our institutions. Now, what could be more pernicious and absurd than stirring up war between governmental power and wealth, the most instantly disposable power, the one most serving of every interest, and therefore much more real and genuinely obeyed! Government is a threat, wealth a reward. You get away from government by deceiving it. To gain wealth’s blessings, you have to serve it. The latter must prevail.
Furthermore, it is a mistake to imagine that the poor gain what is taken thus from the rich. He who has not will always depend, whatever we do, on him who has. If you upset the rich man, he will concentrate more on his pleasures, his speculation, his fantasies. As far as possible he will withdraw his capital from circulation, and the poor man will feel the effects of this.
The nature of this work does not allow profound research into the theory of taxation, nor into the best type of taxes one might set up. Such research would involve us in details which belong only in treatises devoted solely to this question. Our only aim must be to determine the respective rights of governors and governed in this matter.
The government, having to provide for the internal defense and external security of the State, has the right to ask individuals to sacrifice a portion of their substance to defray the expenses which the accomplishment of these duties necessitates.
The governed have the right for their part to demand of the government that the sum of all taxes does not exceed what is necessary for the purpose it must attain. This condition can be fulfilled only by political arrangements which put limits on the demands and thereby on the prodigality and greed of the governors. Traces of such arrangements can be found in the institutions of the most untrammeled monarchies, such as most of the German principalities or the hereditary States of the House of Austria; and the principle is solemnly recognized by the French constitution. 1
The details of these arrangements are not within our purview, yet I think one observation must not be omitted.
The right to say yea or nay to taxes can be considered from two viewpoints, as a limit on government or as a tool of financial economy. It has been said a thousand times that a government being unable to wage war, or even survive domestically, without its necessary expenses being defrayed, the ability to refuse taxes puts into the people’s hands or into those of their representatives, a most efficacious weapon, which, used bravely, empowers them to make the government not just keep the peace with its neighbors but also respect the freedom of the governed. Those reasoning thus forget that what seems at first glance compelling at the theoretical level is often impossible practically. When a government has begun a war, even an unjust one, to deny it the resources to sustain it is not to punish only the government but also the nation, innocent of its faults. It is the same with refusing taxation on the grounds of domestic malpractices or harassment. The government indulges in despotic acts. The legislative body thinks it can be disarmed if no monies are voted. Even supposing, however, which is difficult, that in this extreme crisis everything happens constitutionally, on whom will this struggle rebound? The influence of the executive will secure it temporary wherewithal, in funds already put at its disposal, in loans from those who, profiting from its favors or even its injustices, will not wish it reversed, and from yet further people who, believing it will win, will be speculating in its present requirements. The first victims will be lower-grade workers, entrepreneurs of all types, the State’s creditors, and as a side effect the creditors of all these groups. Before the government succumbs or gives way, all private wealth will have been badly hit. The result will be universal hatred of Parliament, which the government will accuse of all the personal privations of citizens. The latter will not examine the reason for Parliament’s resistance and without giving their attention, amid their hardship, to questions of law or political theory, they will blame it for their indigence and misfortune.
The right to reject taxation is not, then, on its own, a sufficient guarantee for the curbing of excessive executive power. We can consider this right as an administrative means of ameliorating the nature of the taxes or as an economizing device for diminishing their volume. For Parliaments to be able to protect liberty, however, there have to be many other prerogatives. A nation can have so-called representatives endowed with this illusory right and yet be groaning the while in the most complete slavery. If the body charged with this function does not enjoy great prestige and independence, it will become the agent of the executive power, and its assent will be only a vain and illusory formula. For the freedom to vote on taxation to be other than a frivolous ceremony, political freedom must exist in its entirety, just as in the case of the human body, all the parts must be healthy and well constituted if the functions of a given one are to take place regularly and fully.
A second right of the governed with regard to taxes is that their nature and mode of collection should cause as little hardship as possible for the taxpayers, tending neither to harass nor to corrupt them and not giving rise, by way of pointless expenditures, to further taxation.
From this right it follows that the governed may also demand that taxes fall equally on all, proportionately to their wealth, that they leave nothing uncertain nor arbitrary as to their incidence or mode of collection, that they do not render any property or industry unproductive, that they are wholly cost-efficient, and finally that their basis is reasonably stable.
Setting up a new tax always causes a perturbation which spreads from taxed activities to untaxed ones too. Much labor and capital flow into the latter to escape the impositions hitting the former. Profits fall in the former because of the tax and in the latter because of the competition. Equilibrium is restored only slowly. Whatever change takes place is therefore irksome for a given period.
It is by applying these rules to diverse forms of taxation that one can judge which are and which are not admissible.
It is not within our brief to examine all of them. We will choose only certain examples to convey a sense of the mode of reasoning which seems to us the best.
Some enlightened men in the last century recommended taxes on land as the most natural, simplest, and fairest. They even wanted to make them the sole form of taxation. Taxing the land is indeed a very seductive idea, one which speaks for itself and seems to rest on an incontestable truth. Land is the most obvious and durable source of wealth. Why pursue indirect, contrived, and complicated measures instead of going straight to this source?
If this doctrine has not been practiced, this has a lot less to do with people thinking they saw evils in land tax than with their feeling that even in raising it to the highest level, they could not draw from it the sums they wished to extract from the people. Other taxes have been combined with it; but in most of the countries of Europe, it has continued to be the most important one of all and in some sense the basis of the financial system.
This approach has meant that rejecting the principle has certainly not entailed, as it ought to have done, rejecting all its consequences. To reconcile the contradictions in this procedure, some people have had recourse to a theory whose outcomes are almost the same as those of the partisans of taxes on land. The latter claimed that in the last analysis all taxes bore on the land, while some of their opponents claimed that in the final analysis they were all paid by the consumer. While the former, arguing that taxes, so to speak, passed by way of the consumer before getting to the land, concluded from this that from the start taxes should be spared this detour and be imposed straight on the land, the latter, imagining that an opposite movement took taxes settled on the land back up to the consumer, thought it pointless to free the land of a burden which in reality it was not carrying.
If we apply the rules we have established to the land tax, we will be led to very different conclusions.
On the one hand it is not true that all taxes on consumption fall on the land. Taxes on postal services do not fall on landowners qua owners. A landowner who takes neither tea nor tobacco pays no part of the taxes on these commodities at the points of their dispatch, their transportation, or sale. The taxes on consumption in no way fall on those groups which neither produce nor consume the items taxed. 2
It is likewise false that the land tax has an effect on the price of the commodity, one borne by the purchaser. What determines the price of a commodity is not always what it costs to produce, but the demand for it. When demand exceeds supply, the price of the commodity rises. It falls when supply exceeds demand. Now land taxes, when they diminish production, ruin the producer, and when they do not diminish it, in no way increase demand. Here is the proof.
When a tax bears on the land, one of two things happens. Either it removes the whole of net product; that is, the production costs of the commodity exceed its sales revenue, and cultivation is necessarily abandoned, with the producer who abandons cultivation getting no advantage from the imbalance this may create between overall demand and the amount of the commodity he is no longer producing. Or the tax does not remove the whole net product; that is to say that the sales revenue of the commodity still exceeds costs, and the proprietor continues to cultivate. In this case, however, supply being the same after the tax as it was before, the balance between supply and demand remains the same and price cannot rise.
A tax on land therefore bears and—whatever may have been said—continues to bear, on the landed proprietor. The consumer pays no part of it, unless because of the gradual impoverishment of the farmer, the products of the land diminish so far as to occasion famine. This calamity, however, cannot be an element in the calculations of a tax system.
The land tax, such as it exists in many countries, is therefore not consistent with the first rule we have enunciated. It does not bear equally on all, but falls especially on one group.
Secondly, this tax, whatever its amount, always blights part of the farmland in any country.
There are lands which by reason of the soil or the situation yield nothing and are therefore left fallow. There are those which produce only the tiniest bit more than nothing. This progression mounts until you have lands which yield the most remarkable output possible. Imagine it as a series of numbers running from 1 to 100. Imagine 1 represents a level of output so small it is indivisible. The tax on land removes part of the output of each of these holdings. Even if it is the smallest conceivable, it will not be less than 1. Therefore, all the holdings which yielded only 1, and would have been cultivated in the absence of the tax, are put among the nonproductive holdings by the tax, and join the class of uncultivated ones. If the tax goes up to 2, all the holdings yielding only 2 suffer the same fate and so on. Thus, if the tax rose to 50, all holdings up to 50 would remain idle. It is therefore clear that when the tax goes up, it removes from cultivation a portion of the holdings proportionate to the increase, and when it falls, it restores a portion proportionate to the fall. If the counterargument is that the land tax is not fixed but proportional, this will not resolve my objection. The proportional tax bears on gross production. Now, costs constituting a more or less great part of gross production, it always follows that if you fix the tax at an eighth of gross output, lands which cost 9 to cultivate in order to yield 10 will be rendered idle by the tax. If the tax is fixed at a quarter, those which cost 8 to yield 10 will suffer the same fate and so on.
That the tax has this effect is proved precisely by the actual precautionary measures taken by governments. The more enlightened, like the English and Dutch, have exempted all rented land below a certain rent value from all taxation. 3 The most brutal have declared all lands their proprietors have left uncultivated, confiscated. What owner would leave his holding unworked, however, if he stood to gain from working it? None, since the rich man himself would either lease it or give it to the poor man. Lands are left idle only for the reasons developed above or because they are incapable of yielding output or because taxation takes away the output they could produce. Thus governments punish individuals for ills they themselves have done to them. This law of confiscation is as odious as it is unjust, as absurd as it is pointless. The fact is, in whatever hands the government places confiscated lands, if the costs of working them exceed the revenue therefrom, someone may well try and cultivate them; but assuredly he will not continue thus. In this second case, the land tax strays again from one of the conditions necessary if a contribution is to be justifiable, in that it makes individuals’ property unproductive.
Thirdly, the tax on landed property rests on the foresight of the cultivator, who, in order to be in a condition to pay it, has to put aside in advance some largish sums. The working class just do not have this foresight; and they cannot struggle constantly against the temptations of the moment. Many a one who will pay off his taxes daily, in detail, almost without knowing, if they are intertwined with his habitual purchases, will never accumulate in a given period the sum needed to pay things off en masse. The gathering of the land tax, though elementary, is therefore by no means easy. The coercive measures required make it very expensive. From this last point of view, the land tax is vicious, in that it incurs collection costs which another mode of taxation might avoid.
I do not conclude from this that the land tax should be done away with. As there are taxes on consumption which landowners can avoid, they should properly carry some share of public taxation, in their capacity as property holders. Since, however, the other groups in society do not pay any land taxes, the amount landowners pay should not exceed their proper due proportion. There is no justice therefore in making the land tax the sole or even the main tax.
We have just said that the land tax taken beyond a certain point blights the property of its owners. A tax on patents makes industry unproductive. By removing freedom to work it establishes a rather ridiculous vicious circle. The man who is not working cannot pay anything, yet if people have previously not paid, the government forbids them the work they are suited for. The tax on patents is therefore an attack on the rights of individuals. It does not take away from them only a portion of their profits. It also dries up the source of their livelihood, unless they possess prior means of maintaining this, a quite unjustified supposition.
This tax may nevertheless be bearable if it is restricted to jobs which by their nature imply a certain prior affluence. This is then an advance the individual makes to the government, one he compensates himself for out of the returns to his own efforts. This is like the merchant who pays duties on the commodity he trades in, includes them then in the price of the commodity and gets the consumer to pay them. Aimed at trades marked by poverty, however, the tax on patents is revoltingly iniquitous.
Indirect taxes, bearing on consumer goods, get mixed up with that consumption. The consumer who pays them when he buys what he needs or likes does not experience, amid the feeling of satisfaction he is procuring himself, the repugnance the paying of direct taxation inspires. He pays them at his convenience. These taxes adapt themselves to times and circumstances, to various options, to individual tastes. They divide into imperceptible fractions. 4 The same weight we bear easily when it is shared across the whole body would become intolerable bearing on a single part. Just so the weight of the air spread across the whole body of a man exceeds thirty thousand liters. He can take it without noticing, while a much lighter weight trained on a single part of the body would be unendurable. 5 The incidence of indirect taxation organizes itself, so to speak, by way of consumption, which is voluntary. Considered in this light, indirect taxes in no way offend the rules we have established. They do have three grave drawbacks, however. First, they are liable to be multiplied indefinitely, in an almost imperceptible way. Second, their collection is difficult, vexatious, and often corrupting in several respects. Thirdly, they create an artificial crime, smuggling.
The first drawback can be remedied by the authority which votes the taxes. If you suppose the authority independent, it will be able to block the growth of pointless taxes. If it is not independent, whatever the nature of the tax, do not hope to limit the sacrifices which will be demanded of the people. It will be defenseless in this respect, and in all others.
The second drawback is more difficult to prevent. Even so, I find in the first one itself some proof that the second can be prevented. For if one of the vices of indirect taxes is their ability to grow almost imperceptibly, then their collection must be organized in such a way that they are not insupportable. As to the third, I am more disposed than anyone to lessen it. I have said more than once that artificial duties tended to drive men to abandon real ones. Those who break the laws against smuggling soon break those against theft and murder. They run no more danger and their conscience gets used to the revolt against the social order.
If we think about it carefully, however, we will see that the real cause of smuggling is less in indirect taxes than in prohibitions. Governments sometimes disguise their prohibitions as taxes. They hit goods whose entry they wish to prevent with duties disproportionate to their value. If all prohibitive systems were abolished, this disproportion would never occur. Then smuggling, that apprenticeship in crime, that school of lies and intrepidity, all the more dire in that it gains a certain nobility from its likeness to soldiering and from the credit which skill and courage give rise to, would not find encouragement and irresistible temptation in the huge profits this disproportion leads it to expect.
Taxes become contrary to individual rights when by definition they authorize the harassment of citizens. One example is Spain’s Alcavala, which enforces its duties on the sale of all things, transferable or fixed, each time they change hands.
Taxes also become contrary to individual rights when they bear on objects which are easy to hide from the knowledge of the authority charged with their collection. In aiming the tax against objects which are easily purloined, you make visits and inquisitions necessary. You are led to demand from the citizens spying and reciprocal denunciations. You reward these shameful actions and your tax falls into the category of those which are inadmissible because their collection is morally harmful.
It is the same with taxes so high they invite fraud. The ease, more or less great, with which an object can be kept from the knowledge of the authorities, is constituted by material facility, which can derive from the nature of the object, and by the interest people have in such concealment. When profits are considerable they can be divided among more hands and the cooperation in the fraud of a greater number of agents makes up for any physical difficulty the collecting agent would have been able to count on. When the object the tax bears on does not permit this kind of evasion, the tax sooner or later annihilates the branch of business or the type of transaction on which it presses. It must, then, be rejected as contrary to the rights of property or industry.
It is obvious that individuals have the right to limit their consumption according to their means and wills and to forgo objects they do not want to consume or cannot do so. Consequently, indirect taxes become unjust when instead of resting on voluntary consumption, they are based on enforced consumption. What was odious about the gabelle, which was so absurdly intended to blend in with the salt tax, was its ordering citizens to consume a given quantity of this commodity. This harassment excited in them a just and natural indignation against a government which prescribed their lives even to the extent of needs they ought to have.
To establish a tax on a commodity, one should never forbid industry or an individual establishment 6 to produce that commodity, as formerly happened in some parts of France, in relation to salt, and as happens in several European countries today in relation to tobacco. This is a manifest violation of property and an unjust harassment of industry. To secure compliance with these interdictions severe penalties are required, and these penalties prove repulsive both for their severity and their iniquity.
Indirect taxes must bear as little as possible on commodities which are basic necessities, otherwise all their advantages disappear. The consumption of these commodities is not voluntary. It does not fit itself to the situation or proportion itself to the wealth of the consumer.
It is not true, as has too often been said, that taxes on basic necessities, by making them dearer, increase the price of labor. On the contrary, the more expensive commodities needed for subsistence are, the more the need to work grows. The competition of those whose labor is on offer exceeds the demand from employers and the price of labor falls, at the very moment it should be better paid so that workers can live. Taxes on basic necessities produce the same effect as years of sterility and dearth. 7
There are taxes which are easy to collect and yet have to be rejected because they tend directly to the corruption and perversion of men. No tax, for example, is so pleasurably paid as the lottery. Government needs no coercive force to guarantee the collection of this revenue. But lotteries, offering a way to wealth which does not derive from industry, work, and prudence, throw into people’s calculations the most dangerous sort of disorder. The many opportunities delude people over the improbability of winning. The cheapness of the betting encourages repeated attempts. Trouble, financial embarrassment, ruin, and crime are the results. The lower orders of society, victims of the seductive dreams with which they are intoxicated, commit crimes against the property within their reach, deluding themselves that a favorable outcome will permit them to hide their baseness by correcting it. No fiscal logic can justify institutions which entail such consequences.
From the fact that individuals have the right to demand that the way taxes are collected be the least onerous possible for those who pay them, it follows that governments must not adopt an essentially oppressive and tyrannical mode of administration in this matter. I want to speak about the practice of contracting out collection. This puts the governed at the mercy of certain individuals who do not have even as much interest as the government in treating them considerately. It is to create a class of men who, sanctioned by the force of law and supported by government, whose cause they seem to uphold, daily invent new harassments and call for the most sanguinary measures. Tax farmers in all countries are, so to speak, the natural representatives of injustice and oppression. 8
Whatever the kinds of taxes a country adopts, they must bear on income and never encroach upon capital. This is to say that they must never confiscate more than part of annual production and never touch previously accumulated assets. These assets are the sole means of reinvestment, of feeding the workers, of generating abundance. 9
Though governments and many writers fail to recognize it, this proposition can be proved evidentially.
If taxes are trained on capital rather than on income alone, the result will be capital diminished each year by a sum equal to what the tax extracts. By this very fact annual reinvestment is diminished proportionately to the diminution of assets. This diminution in reinvestment, diminishing incomes and the tax remaining the same, every year a larger sum of assets will be confiscated and therefore every year a smaller sum of incomes will be reinvested. This double progression is exponential.
Imagine a landowner who makes his property worthwhile. He needs three things: his land, his personal industry, and his capital. If he had no land, his capital and his industry would be pointless. 10 Without his industry, his land and capital would be unproductive. If he had no capital, his industry would be pointless and his land sterile, since he would not be able to supply the funding indispensable to his production; he would not have the wherewithal for farming, fertilizing, sowing, or livestock. These are all the things which constitute his capital. Therefore whichever of these three things you attack, you impoverish the taxpayer equally. If, instead of taking away from him each year some of his capital, you take away some of his land, equivalent to some given sum, what will happen? In the next year, in taking away from him the same amount of land, you will deprive him of a relatively larger part of his property and so on and on, until he finds himself utterly dispossessed. The same happens when you tax his capital. The effect is less obvious but no less inevitable.
For any individual, whatever work he does, his capital is to him what a plough is to the farmer. Now, if you take from the farmer a sack of wheat he has just gathered, he goes back to work and produces another the following year. If you take his plough, however, he cannot produce more wheat.
Let it not be thought that the economizing of individuals can remedy this setback, creating capital stocks afresh. If you tax capital, you diminish individual incomes by taking away the means of replenishing these incomes. On just what are they then supposed to economize?
Let it not be said either that capital reproduces itself. Capital is only accumulated assets, gradually taken out of income. The more you encroach on capital, the more income declines, the less asset accumulation can happen, and the less capital can reproduce itself.
The State which taxes capital therefore prepares the ruin of individuals. It gradually takes away their property. Now, the security of that property being one of the State’s obligations, it is apparent that individuals have the right to reassert that obligation against a system of taxation with results contrary to that end.
Let us now show that the interest of the State in matters of taxation is consistent with individual rights. For unfortunately it is not enough to show what is just. One has also to convince government that what is just is no less functional.
We have shown the iniquity of the land tax when it exceeds the level necessary to make landowners contribute their due part in the payment of taxes. The same tax is hurtful to government both by being expensive to collect and by its effects on agriculture. It keeps the majority of the working class in poverty. It keeps a crowd of workers employed only to collect it in barren activity. It soaks up assets which, not being reinvested, are removed from individual wealth and lost to public wealth. Our costs of enforcement, our innumerable deputy bailiffs, the armed force spread over the countryside to effect the gathering of overdue taxes should have convinced us of these truths. It has been shown that the raising of 250 million via this mode of taxation entailed 50 million just in enforcement costs. As a result the nation most famous for its adroit financial management, so far from making the land tax the basis of its revenue, does not take it any further than to a twelfth of total taxation. 11
We have condemned taxes on patents as assaults on the sacred rights of work, assaults aimed at the occupations the poor man can engage in. By reason of its organization, this tax is one of the least easy to collect and involves the most unproductive efforts, that is to say the most losses to the exchequer.
We have said 12 that taxes became contrary to individual rights when they authorized persecutory investigations. We cited the Alcavala in Spain, a tax which subjected every sale of any article, whether transferable assets or real estate, to a charge. Don Ustariz considers it the cause of the decay of Spanish finances. 13
We have rejected taxes which encourage fraud. Is there any need to show how deadly this struggle between government and citizens is? And can one not see at a glance that it is ruinous even in financial terms? We added that when excessive taxes wiped out a branch of commerce, this was an attack on industry. Spain was punished for just such an attack. Several of her mines in Peru remain undeveloped because the tax due to the King absorbs the whole output of their proprietors. This hurts both the treasury and individual people. 14
We condemned lotteries, though their revenue is easily collected, because they have the effect of corrupting men. Governments themselves, however, pay the penalty for that corruption. First of all, the harm lotteries do to production diminishes reinvestment and therefore national wealth. Secondly, the crime they cause among the working class is, when we put all moral questions to one side and think of it only in fiscal terms, a public expense. Thirdly, minor officials let themselves be seduced by the spell of lotteries, and the costs fall on governments. There were under the Directory in a single year twelve million francs’ worth of bankruptcies among tax collectors, and it was shown that about two-thirds of these collectors had been ruined by the lottery. Finally, the gathering of a tax of this sort, though easy, is nonetheless expensive. To make lotteries pay, you must multiply the temptations, and to multiply the temptations you must also multiply the offices. Hence the high collection costs. In M. Necker’s day, income from the lotteries stood at 11,500,000. Collection cost 2,400,000 or close to 21 percent, such that the most immoral tax was at the same time the most costly to the state. 15
We showed lastly that taxes should never bear on anything save incomes. When they cut into capital, first of all they ruin individuals and then the government. The reason is simple.
All men with some idea of political economy know that expenditures fall into two types: the productive and unproductive. The first are those which create wealth, and the second those which create nothing. A forest which is cut down to build ships or a town is used up as much as one consumed by a fire. In the first case, however, the fleet or city which has been built more than replaces the forest which has disappeared; in the second only ashes remain.
Unproductive expenditures can be necessary. Each person commits part of his income to food. This expenditure is unproductive but indispensable. A state of war with neighboring countries consumes a part of public resources for the subsistence of the armed forces and so that they may be supplied with the war munitions needed for attacking and defending. This is not wasted expenditure though it is an unproductive one. Even so, if unproductive expenditures are often necessary to secure the lives or security of individuals and nations, it is only productive expenditures which can augment the wealth of either. That which is consumed unproductively is always an excusable and legitimate loss when the need requires it, but crazy and inexcusable when it does not.
The money called into play between all productions as a medium of exchange has served to spread a certain obscurity on this question. Since money is used without destroying itself, it has been believed that however it was used, it came to the same thing. It ought to have been thought that money could be used for reinvestment or it could be used without producing anything. If a government spends ten million making an army march in different directions or on giving magnificent parties, spectacles, illuminations, dances, firework displays, the ten million thus consumed is not destroyed. The nation is not made poorer by ten million. Yet this ten million has produced nothing. The society retains only the ten million it originally possessed. If, on the contrary, this ten million has been used to build factories or buildings suitable for any kind of manufacturing or industry, to improve land, in brief, to reinvest in some commodity, the nation would have had on the one hand the ten million consumed in this way and on the other the assets this ten million would have produced.
I would like to expand somewhat on this important subject, since there is a disastrous viewpoint which holds that all the uses of capital are the same. This opinion is popularized by all those who benefit from government squandering and by those who repeat on trust maxims they do not understand. Doubtless money, the sign of wealth, does no more in all cases than pass from one hand to another. But when it is used in reinvestment expenditures, then its value is twofold; when the expenditure is nonproductive, there is only one value. Since in order to be dissipated in unproductive expenditures, money is snatched away from the class which would have used it productively, the nation, if not made poorer in money terms, is deprived of all the production which has not taken place. The nation keeps the sign but loses the reality. The Spanish example is sufficient instruction to us that the sign of money is anything but real wealth.
It is therefore certain that the only means of prosperity for a nation is the use of capital in productive expenditures.
Now, even the wisest governments cannot use funds taken from individuals except in unproductive expenditures. The costs of the salaries of public functionaries of all sorts, the maintenance of order, of the law courts, of war finance, of all branches of the civil service, are expenditures of this type. When the State uses only a part of income for these expenditures, the assets remaining in the hands of individuals secure the necessary reinvestment. If the State deflects assets from their intended purpose, however, reinvestment shrinks, and since it becomes necessary then every year, as we have shown above, to confiscate proportionately more assets, reinvestment will finish by ceasing completely and State and individuals alike will be ruined.
“Just as the wastrel who consumes beyond his income,” says Ganilh in his history of public revenue, 16 “diminishes his property by the whole amount by which he has exceeded his income and soon sees income and property disappear, the State which taxes property 17 and consumes its product like income, is marching to certain and fast-approaching decadence.”
So then, in matters of taxation as in all things, the laws of equity are the best ones to follow, even were one to think of them only in terms of their utility. The government which violates justice in the hope of some wretched gain pays dearly for this violation; and the rights of individuals should be respected by governments even when these have only their own interests in mind.
In indicating, as we have done in this section, necessarily in a very abbreviated way, some of the rules regarding taxation, our intention was to suggest to the reader ideas he could enlarge on, rather than develop any of them. This task would have taken us well beyond the confines we have set ourselves. One incontestable axiom no sophism can obfuscate is that any tax, of any sort, always has a more or less unfortunate influence. 18 If the use of the tax sometimes produces a benefit, its levying always produces an ill. 19 The ill may be necessary. Like all such ills, however, it must be rendered as small as possible. The more resources are left at the disposal of individual activity, the more a State prospers. A tax, just because it takes some portion or other of these resources away from those efforts, is inevitably harmful. The more money is taken away from the various nations, says M. de Vauban in The Royal Tithe, 20 the more it is taken away from commerce. The best-employed money in the realm is that which stays in the hands of individuals, where it is never pointless nor idle.
Rousseau, who was uninformed in things financial, followed many others in saying that in monarchies the excessive surplus of the subjects must be consumed in the opulence of the prince, because it was better that this surplus be absorbed by government than dissipated by individuals. 21 This doctrine reveals an absurd mix of monarchical prejudices and republican opinions. The prince’s opulence, far from discouraging that of individuals, gives it encouragement and example. It must not be thought that in despoiling them he is reforming them. He can plunge them into poverty; but he cannot bring them back to innocence. All that happens is that the poverty of some occurs in combination with the opulence of others, the most deplorable of all combinations.
Equally inconsequent arguments have concluded that because the most heavily taxed countries, such as England and Holland, are also the richest, they are richest because most heavily taxed. They take the effect for the cause. “People are not rich because they contribute. They contribute because they are rich.” 22
“Everything which goes beyond real needs,” says a writer of incontestable authority on this subject, 23 “loses its legitimacy. The only difference between personal violations and those of the sovereign, is that the injustice of the former results from straightforward ideas which everybody can easily distinguish, while the latter are linked to mixed causes as vast as they are complicated, such that no one can judge them other than conjecturally.”
Everywhere that the constitution of the State does not block the arbitrary proliferation of taxes, everywhere the government is not held up by insurmountable barriers to its ever growing demands, as when no one ever contests them, neither justice, nor morality, nor individual freedom can be respected. Neither the government which takes away from the laboring classes their hard-won subsistence, nor these oppressed classes who see that subsistence snatched away to enrich greedy masters, can stay faithful to the laws of equity in this scandalous struggle of weakness against violence, of poverty against greed, of want against theft. Any pointless tax is a theft which the force accompanying it renders no more legitimate than any other outrage of this nature. It is a theft all the more odious in being carried out with all the solemnity of the law. It is a theft all the more culpable in that it is the rich who carry it out against the poor. It is a theft all the more cowardly in that it is committed by an armed government against the unarmed individual. Government itself will not have to wait long to be punished for it.
The people in the Roman provinces, says Hume, 24 were so oppressed by the tax gatherers, that they threw themselves joyfully into the arms of the barbarians, happy that these coarse, plain masters offered them a domination less greedy and rapacious than the Romans.
It would be yet a further mistake to suppose that the disadvantages of excessive taxation are limited to the poverty and privation of the people. A greater evil results, one which it seems to me has till now not been sufficiently remarked on.
The possession of great wealth inspires in individuals immoderate desires, whims, and fantasies which they would not have felt in more modest and restrained circumstances. It is the same with governments. Excessive opulence intoxicates them, as does excessive power, because opulence is a kind of power, indeed the most real kind. From this flow your unreal public squares, your immoderate ambitions, your gigantic projects, which a government with only basic resources would never think of. Thus the people are not poor only in that they are taxed beyond their means, but poorer still from the use their government makes of their taxes. Their sacrifices turn against them. They no longer pay taxes to have peace assured by a good system of defense. They pay them to have war, because the government, proud of its huge wealth, invents a thousand pretexts for spending this in ways it calls glorious. The people pay, not so that good domestic order will be maintained, but on the contrary so that an insolent government, 25 enriched with its spoils, can with impunity disturb public order with its harassments. In this way a nation which has no safeguard against the proliferation of taxes, purchases by its privations misfortune, trouble, and danger. The father pays for his son to be snatched out of his arms and sent to die far from his country. The farmer pays so that his fields will be devastated by a mob fed on the money he has contributed. In this situation the government is corrupted by its wealth and the people by its poverty.
In the enumeration of inalienable individual rights at the beginning of this work, 1 I did not include the freedom of economic activity. The most enlightened philosophers of the last century, however, have shown the whole evidential case against the injustice of the restrictions experienced by this freedom in almost all countries. They likewise showed, just as clearly in my view, that these restrictions were as pointless and misconceived as they were unfair.
This last point nevertheless still seems doubtful to many people. One would need volumes to clarify the case in a way that would seem satisfactory to them. The principles of economic freedom rest on a multitude of facts, and each fact which seems contrary to it demands, in order to give way to its correct perspective, a long and detailed discussion. 2 Freedom of commerce is useful only when it is scrupulously observed. A single violation, spreading uncertainty through the whole system, destroys all its benefits, and governments then turn their very faults to advantage in order to justify their intervention. They argue from the imperfect, sometimes dire results of precarious and restricted freedom, against the invariably salutary results of full and well-established freedom. Consequently, I did not wish, although all questions of this kind are interlinked, to put commercial freedom and civil freedom at the same level, for fear that the men who would disagree about the former might be just as likely to dispute the important principles on which the felicity of civil society and the security of citizens are based. Nevertheless, certain moral considerations struck me which return to the subject of this work and which in moral terms decide the issue in favor of freedom, as well as yet further observations and facts which also decide in the same way in the case of economic activity. I thought I ought not to hold these back. But I beg the reader not to forget, though, that this section is not a treatise in commercial economy and contains just some general reflections which I expressly separate from the rest of my research, so that my mistakes, if I have made any, or the disagreement my opinions in this matter might encounter, will not bear on the other questions I have discussed. I could be wrong in my claims about freedom of production and trade without my principles of religious, intellectual, and personal freedom being weakened by this.
Society having no political prerogatives over individuals except when these prevent them harming each other, likewise economic activity, unless taken to be injurious, is subject to no such jurisdiction. But one man’s economic activity cannot hurt his peers, as long as he does not invoke in favor of his own activity and against theirs, help of another sort. It is in the nature of business to struggle against rivals, by way of perfectly free competition and efforts to attain an intrinsic superiority. All other types of means it might try to use constitute not economic activity but oppression or fraud. Society would be in the right, indeed, even obliged, to stop this. From this right which society possesses, however, it follows not at all that it has the right to use against the economic activity of one person, in favor of another’s, means which it must forbid equally to all.
All the objections brought together in Book X against the obstacles put in the way of property’s being possessed or transferred acquire a double force when they are applied to production. These objections are based for the most part on the ease with which prohibitive laws are eluded and on the corruption entailed by the opportunities men get to disobey the laws. Now, the nature of economic activity offers far more openings to secret and unpunished transgressions than the nature of landed property.
Government intervention with regard to economic activity can be divided into two branches: prohibitions and supports. Privileges must not be separated from prohibitions, because necessarily they imply them.
Since we want to give examples here rather than examine all parts of the economic system, we will take at random some of the prohibitions most used by most governments, ones which consequently at least have in their favor the support of the governing class. We will not say anything about those whose absurdity, long denied, is now generally recognized.
What is a business privilege? It is the use of the power of political authority to pass to some men advantages which it is the aim of society to guarantee to everyone. England did this when before the union of Ireland with that kingdom, she banned the Irish from almost all forms of foreign trade. This is what she does today when she forbids all English people to set up in the Indies any trade independent of the company which has seized that vast monopoly. This is what the Zurich bourgeoisie did, before the Swiss revolution, by forcing those in the surrounding countryside to sell, only to them, almost all their commodities and all their manufactures.
This is manifestly injustice in principle. Is there any value in the practice? If the privilege is extended only to a few, doubtless some value accrues to these few. It is value of the kind, however, which goes with all spoliation. This is not what we intend or not at least admit to intending. Does it have any value for the nation? Undoubtedly not, since in the first place the vast majority of the nation is excluded from the benefit. There is therefore uncompensated loss for this majority. In the second place, the branch of industry or trade which receives the privilege is being taken care of more negligently and less economically by those whose gains are secured by the simple effect of the monopoly than would be the case if competition obliged all the rivals to outdo each other in their application and skill. Thus the national wealth does not derive from this economic activity the whole benefit it could. Therefore there is relative loss for the whole nation. Finally, the means which government must use to keep the privilege going and forcibly keep people not privy to it from competing are inevitably oppressive and vexatious. Once again, therefore, the entire nation suffers a loss of freedom. Thus we have three real losses which this type of prohibition entails, and compensation for these losses is reserved for a mere handful of privileged people.
The trite excuse made for privileges is the inadequacy of individual resources and the value of encouraging combinations to make up for this. People make too much of this inadequacy, however, just as they do of this need. 3 If individual resources are insufficient, perhaps some individuals will be ruined, but a small number of examples will enlighten all the citizens, and a few private misfortunes are much better than the incalculable mass of misfortune and public corruption which privileges bring in. If the State wished to oversee individuals in all the operations through which they might potentially harm each other, this would amount to restricting almost all freedom of action. Once having set itself up as the citizens’ guardian, it would soon become their tyrant. If combinations are necessary for a vital branch of production or long-distance commerce, combinations will form and individuals will not struggle against them, but try to join them in order to share their advantages. If existing combinations refuse this, we will soon see new combinations forming, and the ensuing rival competition will be more active. Let government intervene only to maintain both combinations and individuals in their respective rights and within the limits of justice; freedom will see to the rest, and successfully at that.
It is a mistake, moreover, to look on commercial companies as beneficial by their very nature. Any powerful company, says an author well versed in this matter, 4 even when it trades only in competition with individual enterprises, ruins them first of all by lowering the prices of merchandise; then, when they are ruined, this company, now the only one in business or almost such, ruins the country by raising prices. Afterward, its excessive profits leading its employees into negligence, it ruins itself. We see in Smith, Book V, ch. 1, 5 through numerous incontestable examples, that the more English companies were exclusive and granted large privileges and the more they were rich and powerful, the more drawbacks marked their histories and the more they ended badly. By contrast, the only ones which succeeded or sustained themselves were companies limited to a modest capital, made up of a small group of individuals, employing only a few workers, that is to say, in their administration and resources coming as close as can be to small firms. The Abbé Morellet in 1780 counted fifty-five companies set up since 1600, invested with exclusive privileges in different European countries, which had all finished up bankrupt. 6 Companies which are too powerful are like all forces which are too strong, as with States which are too strong. They begin by devouring their neighbors and then their subjects, and then destroy themselves.
The only circumstance which justifies the establishment of a company is when individuals come together to set up, at their own peril and risk, a new branch of trade with distant and barbarous peoples. The State may then grant them, as compensation for the dangers they face, a few years of monopoly. Once the term expires, however, the monopoly must be abolished and free trade be reestablished. 7
One can cite isolated facts in favor of privileges, and these facts seem all the more conclusive in that we never see what would have happened if these privileges had never existed. I affirm in the first place, however, that if we bring time into the reckoning—something which we seek vainly to dispense with—and do not give way to puerile impatience, freedom always ends up producing, uncontaminated by any evil, the same good we might strain to force into place by way of privileges bought at very harmful cost. Secondly, I declare that if there existed a branch of industry which could not be developed except by our bringing in privileges, then its drawbacks are such for the morals and freedom of the nation that no advantage would compensate for them. 8
Too many writers before me have denounced wardenships, guild masters, and apprenticeships for me to enter into long detail on the subject. These institutions are privileges of the most iniquitous and absurd type, most iniquitous because the individual is permitted the work which keeps him from crime only at the good pleasure of another; most absurd because under the pretext of the perfecting of crafts, obstacles are put in the way of competition, the surest spur to such perfecting. The interest of buyers is a much safer guarantee of the quality of production than arbitrary regulations, which, coming from a government which inevitably confuses everything, does not distinguish clearly between the various trades and prescribes apprenticeships as long for the easiest as for the most difficult. It is bizarre to imagine the public a bad judge of the workers it employs and to think that government, with so much else to do, will be better informed as to what dispositions must be made in order to appraise their merits. It has no choice save to rely on men who, forming an organized group within the State, have a different interest from the mass of the people and who, working on the one hand to reduce the number of producers and on the other to raise the price of the goods, render them at once more faulty and more expensive. Experience has everywhere pronounced against the alleged value of this mania for regulation. The English towns where trade is most active, which have experienced in a very short time the greatest growth and where production has been carried to the highest degree of perfection, are those which have no charters 9 and where there exist no corporations. 10
Even more outrageous and vexatious, because it is more direct and undisguised, is the rigging 11 of daily wages. Smith says this rigging is the sacrifice of the greater to the smaller party. I will add that it is the sacrifice of the poor to the rich party, of the hardworking party to the idle, at least comparatively, of the party which already suffers from society’s harsh laws, to the party which chance and social institutions have favored. One could not without pity take stock of this struggle of poverty against greed, where the poor man, already burdened with his needs and those of his family, having no hope save in his work, and unable to wait for an instant without his very life and the lives of his loved ones being threatened, meets the rich man, not only strong in his wealth and in his power to constrain his adversary by refusing him that work which is his only resource, but reinforced still further by oppressive laws, which fix earnings without regard to the circumstances, the skill or the zeal of the workman. And let no one think this rigging necessary to put down exorbitant claims and the rise in labor costs. Poverty has humble demands. Does not the workman have hunger pressing at his back, leaving him scarcely an instant to discuss his rights and disposing him all too readily to sell his time and effort below their worth? Does not competition settle the price of labor at the lowest level compatible with physical subsistence? In Athens, just as in France today, the journeyman’s wage was equivalent to four people’s food. Why impose regulations when the nature of things settles the case, without oppression or violence?
The rigging of the price of labor, so fatal to the individual, absolutely does not work to the public advantage. Between the public and the workman there stands a pitiless class, the masters. They pay as little and demand as much as possible and thereby profit uniquely at once from the needs of the workers and of the leisured class. What a strange complication in social institutions! There exists an abiding source of equilibrium between the price and the value of labor, one which acts without force, in such a way that all calculations are reasonable, and all interests happy. This source is competition. But it is thrust aside. Obstacles are put in competition’s way by unjust regulations. Then people want to restore equilibrium by equally unjust regulations, ones which have to be maintained by punishments and harsh controls.
Governments resemble Molière’s doctors in almost everything they do. When they are told of what has been established and organized by nature, they endlessly reply: we have changed all that . 12
The laws against products of foreign manufacture are designed to get or constrain the inhabitants of a country to make themselves what they would otherwise buy abroad. These laws are necessary therefore, in the actual understanding of the government which imposes them, only when such products could be acquired more cheaply abroad than they can be produced. For in the case of the opposite supposition, personal interest on its own suffices to ensure that individuals will manufacture themselves what would cost them more if they bought it ready-made. Even when prices are equal, a country’s own products have a great advantage. “Sale,” says an author of repute, 13 “is a kind of prize for winning the race, and foreign goods start from further off.”
Is it an advantage, however, for a nation to set up manufactures on its own territory which, in order to furnish it with a certain money income and quantity of production, absorb more funds than the purchase of these products would have required? We can reply in the affirmative only in supposing that if these funds were not thus employed, they would not be employed at all. Now, this supposition is clearly absurd. If these funds were not employed in this way, they would be employed in some other way and more advantageously. This is to say that with a portion of these resources one would buy products which the whole lot of them is now used in producing, while the remainder would be redirected to some other branch of production which it would vitalize. Governments, in forcing their subjects to manufacture themselves things they would not voluntarily have manufactured, force them to employ their resources inefficiently. They diminish the output of their capital and their labor. They therefore diminish their wealth and thereby the national wealth.
Adam Smith’s ingenious comparison in this regard has often been cited. 14 I cite it again, because the evidence with which he has enveloped this truth seems scarcely to have convinced those in charge of States. In Scotland, one could, he says, by using hothouses, forcing beds, and glass frames, make very good grapes grow, from which one could also make extremely good wine, thirty times dearer than one can buy from abroad. If that seems absurd, it is equally so to require the manufacture in a country of something that manufactured thus would cost twice as much again, as much again, or even half as much again, as the same thing coming from abroad. The absurdity seems stronger because the sum strikes us more; but the principle is equally insane. 15
Is it feared that free importation of foreign merchandise may encourage a nation into laziness by relieving it from the necessity to work to procure what it needs? But what it does not procure for itself by direct work, it must obtain by an outlay of funds, and to acquire funds it must work. Only full freedom will permit it to choose the most profitable types of production and perfect itself therein, in dedicating itself to them more exclusively. For the division of labor has the same result for the products of nations as for those of individuals. The prohibition of foreign goods tends to deprive a people of the advantages of the division of labor. This people then resembles an individual who, far from devoting himself solely to a job which would make him rich, wishes on his own, and through his own work, to make his tools, fashion his clothes, prepare his food, build his house. Splitting himself thus between various jobs, in order to take away from the workers in each one of them the benefit they deserved, he would stay wretched and poor in the midst of his fruitless, interrupted efforts.
Among a people still in the infancy of civilization, frequent recourse to manufactures from outside can retard the establishment of home manufactures. But since it is very probable that the government of such a people will itself be extremely ignorant, there is little to hope for from its efforts in support of business. One should resign oneself and wait. There is no case of a nation which was not industrious having been made forcibly so by government. There is a very good reason for this. The government which forces men toward any end whatsoever is an arbitrary and vicious government and can do nothing well.
As for industrious nations, it suffices to leave each individual perfectly free in the deployment of his capital and his labor. He will discern better than any government the best use he can make of them. If such economic activity is advantageous, he will not let foreigners reap its profits. If he does abandon some other comparable economic activity to them, this is because he has found a third which is more profitable.
Barriers against the importation of foreign goods are ill-advised for yet another reason. If you stop foreigners from selling to your subjects, with what do you expect them to buy from them? The richer a people are, the more the nation maintaining commercial relations with them gains by these relations. But to stop a people selling their products is to do all one can to impoverish them. It is therefore to do all one can to diminish the profits one could extract from trading with this people.
But when foreigners refuse to take our country’s products, must we, someone will say, allow the free importation of theirs? When a people close their territory to your goods, this is either to make them themselves, or to favor some other nation. In the first case, one of two things happens. Either they manufacture these goods more cheaply than they would buy them from you, and then the prohibition is without effect since your products would always be at a disadvantage, or they will manufacture them more expensively and pay more for goods of lower quality. Yours, better and cheaper, will be smuggled in. The nation which wanted to keep them out impoverishes itself because it diverts funds from profitable uses into manufacturing objects it would be better to buy elsewhere. It imposes on itself constraints which hurt it in a thousand ways. The State struggles vainly against a smuggling which frustrates all its efforts. Individuals suffer from the obstacles they encounter at almost every step. The vices of such a system soon make themselves felt; and if you have kept to one based on complete freedom, beyond all doubt the nation which had deviated from this will find it in its interest to come back.
If this nation rejects your goods in favor of merchandise from another country, the question is once again almost the same. Either the products of the favored nation are better than yours, with the same outcome as would obtain without the prohibitions, or these productions are inferior and yours will prevail sooner or later.
The drawback to reciprocal action is that it engages people’s pride and in this way prolongs the stresses and the uneasiness. It no longer suffices that he who was first in error sees this and corrects himself. It calls for a coming together of two wills not able to agree in the swift succession of events. Injustice leads on to injustice; reciprocal prohibitions perpetuate prohibitions.
There are few questions on which governments talk as much nonsense as they do on reciprocity. The argument here constantly serves them in the maintaining of laws whose fatal consequences they cannot dispute. The law of aubaine 16 is proof of this. Because neighboring countries have made a law preventing our fellow citizens from settling among them, we quickly make a law stopping our neighbors from settling among us. 17 A marvelous vengeance this! If on the contrary we had not stupidly followed their example, we would gain from their bad law, since our fellow citizens, driven from their place, would stay with us, wealth and all. And we would profit even more from not having made a similar law, because our neighbors, welcomed by us, would freely bring us their business and their assets.
Be just with the just. You owe it them. But be just even to those who are unjust. It is the best way to get them to bear the pain of their injustice, while leaving them free to repair it.
The same motives which have led governments to put barriers to the importation of foreign products have led them to ban the export of gold or silver specie. Just as a number of philosophers have taken words, the signs of ideas, for ideas themselves, administrators have mostly taken money, the sign of wealth, for wealth itself.
It would nevertheless be easy to show that specie is exported from a country only when this is advantageous to it. In fact, it is exported only when it provides a means of acquiring externally, by exchange, a greater value than the same volume of specie would purchase internally. Now, it is clear that by this operation one enriches the country into which this greater value is made to enter. 18
When there is too little specie in a country, it is useless to prohibit its exportation. For the specie being worth more in this country than in any other, individuals have an interest in not having it exported. When, on the contrary, there is in a country more specie than the needs of commerce and circulation demand, it is fatal to forbid its exportation. What results from this is that all goods and activities cost proportionately more in this country than everywhere else. Then this State can only buy and never sell. 19 It can buy because in buying it can tolerate the loss occasioned by the low value of its money. But it cannot sell, because it cannot find purchasers willing to resign themselves to tolerating that loss. In that way the enforced superabundance of the specie is fundamentally harmful to economic progress.
If we consider specie in the most usual way, that is, as a medium of exchange, its exportation must remain free. It will not be exported unprofitably, and if it is exported to advantage, the total of public wealth increasing by the amount the individual gains, the whole nation will benefit. We can also, however, think of specie as a manufacture, and as such, as something whose exportation is worth encouraging.
Among almost all peoples, the manufacture of money not being costless, its exportation is as advantageous to the State which mints it as that of any other manufactured good. How singularly illogical are our statesmen-financiers! The trade in jewelry is regarded as lucrative, although it dispatches gold and silver abroad, and the exportation of money, whose production brings a return of the same kind, and which, therefore, is nothing other than a national manufacture, is envisaged as a calamity. It has to be said that governments, until now, have not had the first idea about the questions on which they have piled up law after law.
It must readily be acknowledged, however, that some governments find it convenient rigorously to prohibit the exportation of specie. These are governments so unjust, so arbitrary, that each man works secretly to escape their yoke. Then, no doubt, specie is exported without any advantage coming back to the country thus governed. It is exported at any price, even at loss, because everyone acts as if in a fire, randomly hurling the furniture he wants to save, far from the blaze, without troubling himself over the damage it will suffer from its fall, certain that he will conserve only what he has been able to get away from the devastating element. In this case, no doubt, frontiers must be watched, so individuals can be stripped of their sad and last possession. The exit of specie must be stopped, as must the exit of persons. Just so must the privacy of letters be violated, and in a word all the faculties, all the rights, all the freedoms of man be interfered with. All these faculties, freedoms, and rights are, unwittingly, in permanent conflict with oppression. And as everything in nature tends to free itself from despotism, despotism cannot permit anything, cannot leave anything free in nature.
Governments have made two kinds of laws prohibiting commerce in grain. The first kind express their wish that the trade in this commodity be made directly between producer and consumer, without a group able to intervene between them, buying from the former and reselling to the latter. Hence the regulations against speculators. The second kind express the wish that no exportation of food products shall happen. Hence the severe penalties in some countries attaching to the export of grain.
The pretext for the first kind of laws was probably that a middleman class between consumer and producer, having to find a profit in the trade it was undertaking, tended to raise the price of the commodity, and being able easily to take advantage of circumstantial difficulties, had the dangerous ability to push prices disastrously high.
The reason for the second kind of laws was fear that undue exportation might entail famine.
In both cases the intentions of governments were praiseworthy; but in both cases they took wrong means and failed in their purposes.
All the advantages of the division of labor are found in the establishment of a middleman class, placed between the grain producer and the consumer. These middlemen have more funds than the producer and more resources for setting up warehouses. Dealing solely with this trade, they can study better the needs they undertake to meet. They free the farmer from having to get involved in speculations which absorb his time, divert his resources, and drive him into the middle of towns, where he loses his morals and dissipates his savings, a quadruple loss for agriculture. No doubt the middlemen have to be paid for their trouble. But the farmer himself has to be paid for this same trouble, which he takes less effectively and skillfully, since it is not his main activity, and at greater cost consequently. This extra expense comes back to the consumer, whom people thought they were helping. The middlemen who are proscribed as the cause of famine and high prices are precisely those who put obstacles in the way of high prices becoming excessive. They buy corn in the years of overabundance and thereby prevent its falling too low in price, or its being squandered or frittered away. 20 They withdraw it from the market when its oversupply, occasioning a disastrous price fall for the farmer, would discourage the latter and lead him to neglect or imprudently limit production the following year. When the need makes itself felt, they put back what they have amassed into the market. In this way they come to the help, at one time of the producer, in sustaining his commodity at a reasonable price, at another of the consumer, by reestablishing plentiful supply of this commodity at the point where its market price exceeds certain limits. 21
They produce, in a word, the effect one hopes for from state-instituted warehouses, with the difference that warehouses managed and watched over by individuals, whose sole business they are, are sources neither of abuses nor waste, unlike everything which is publicly managed. They perform all this good out of personal interest, no doubt, but the fact is that under freedom’s dispensation, personal interest is the most enlightened, constant, and useful ally of the general interest.
The talk is of hoarding, of machinations, of coalitions between hoarders. Who cannot see, however, that freedom alone supplies the remedy to these ills? The remedy is competition. There would be no more hoarding if everyone had the right to hoard. Those who held back their commodities to get an excessive price for them would be victims of their calculation, as absurd as it is wicked, since others would reestablish a state of plenty, contenting themselves with a modest return. The laws remedy nothing, because they are eluded. Competition remedies everything, because personal interest cannot stop competition when the government allows it. But as laws lead to their authors being talked about, people always want them, and as competition is a thing which speaks for itself and no one sings its praises to governments, governments despise and misunderstand its advantages.
If there have been hoarding and monopolies, this is because the commerce in grain has always been hit with regulations and surrounded by fears. Therefore it has never been other than a suspect commerce, mostly a clandestine one. Now, in things commercial, everything which is suspect, everything clandestine, becomes vicious; everything authorized, everything public, becomes honest again.
To be sure, one has scarcely grounds for astonishment that an economic activity proscribed by government, stigmatized by an erroneous and violent public opinion, menaced by severe, unjust legal punishments, and yet further menaced by the rifling and pillaging of a mistaken populace has to this day been an activity undertaken only by stealth, by greedy and vile men, who, seeing society in arms against them, have made it pay, whenever they could, in times of crisis, for the ignominies and dangers with which it surrounded them. Access to a natural and vital activity has been closed to all merchants who care about their safety and honor. How could so mistaken a policy not have issued in a premium for adventurers and rogues? At the first sign of dearth, on the first suspicions of government, the warehouses were broken into, the grain was carried off and sold below market price, with confiscation and fines and with the death penalty pronounced against proprietors. 22 Did not proprietors have to indemnify themselves against these obstacles, by pushing to excess all the profits they could extract by fraud, in the midst of the perpetual hostility exercised against them? With nothing assured in their legitimate profit, they had to turn to illegitimate kinds, by way of indemnity. Society had to pay the penalty for its folly and rage. 23
The question of grain exports is even more delicate to deal with than that of the warehouses. Nothing is easier than painting a touching picture of the misfortune of the poor and the hardness of the rich, with a whole nation dying of hunger, while greedy speculators export grain, the fruit of their labor and sweat. There is a slight drawback to this way of considering things, namely that everything sayable about the danger of free exportation, which is only one of the functions of property, can be said with no less force and just as much foundation, against property itself. True, nonowners are in all respects at the mercy of owners. If one wants to assume that the latter have a strong interest in crushing, oppressing, and starving the former, an abundance of the most pathetic pictures will result from that supposition.
That is so true, that the opponents of freedom of exports have always been forced to offer some insults in passing to the proprietors. Linguet called them monsters 24 whose prey must be snatched from them, without our being upset by their howling; and the most enlightened, the most virtuous, and the most respectable of defenders of the prohibitive system ended by comparing proprietors and those who spoke in their favor to crocodiles. 25
I would wish to envisage this matter from a point of view such as to push to one side all the ranting and thereby move forward on a principle all interests might adopt. Now, the principle is this, if I am not mistaken.
For wheat to be plentiful, there must be as much of it as possible. For there to be as much as possible, we must encourage production. Everything which encourages production of wheat favors abundance. Everything which discourages this production calls directly or indirectly to famine.
Now, if you wished to encourage production of a manufacture, what would you do? Would you reduce the number of buyers? Certainly not. You would increase them. The maker, sure of his sales, would increase his production, insofar as this increase were in his power. If, on the contrary, you diminish the number of buyers, the maker would cut his production. He would not wish it to exceed the amount he could get rid of. He would calculate, therefore, with scrupulous exactness, and as it would be much more annoying to him to have too few buyers than too many, he would cut his production in such a way that it fell short of rather than beyond the strict minimum.
Which is the country where most watches are made? I think it is the one where the watchmakers export the most. If you forbade the exportation of watches, do you think more would stay in the country? No; but there would be fewer made.
The case with grain, as to production, is the same as with other things. The mistake made by apologists for prohibitions is to have considered grain as an object only of consumption, not production. They have said: the less is consumed, the more is left. False reasoning, in that grain is not a preexisting commodity. They ought to have seen that the more limited consumption is, the more production will be restrained, and that in consequence the latter will soon become insufficient for the former.
For grain production differs from that of ordinary manufactures in that it depends not solely on the manufacturer but also on the seasons. The producer, however, forced to limit his production, can calculate only on an average year basis. The result of his limiting his output to the strict minimum is that if the harvest falsifies his calculations, his output, thus limited, is inadequate. The majority of farmers, no doubt, do not limit their production deliberately. But these very people are put off by the idea that their work, should it be favored by nature, may not be profitable, that their commodity may not find buyers and therefore be a liability to them. Though they do not form any plan according to such considerations, they are more negligent in their cultivation. Earning less accordingly, they have fewer funds to put into their cultivation, and so production falls.
In preventing the export of wheat, therefore, you do not ensure that the surplus wheat necessary to the provisioning of a country stays in it, you ensure that it does not get produced. Now, since it can happen through the inclemency of nature that this surplus becomes necessary, you are ensuring that the minimum is missing.
To forbid exporting is to forbid selling, at least above a certain measure, since, once the home market is provided for, there are no buyers for the surplus. Now, to forbid selling is to forbid producing, since it takes away from the producer his reason for acting. Forbidding exports is therefore in other words forbidding production. Who could believe that this is the chosen way to keep production ever abundant?
I cannot leave this subject. Obstacles to exporting are an attack on property. Everybody agrees. Now, is it not clear that if property is less well respected, when it is associated with grain, than with any other commodity, then for purposes of sale people will prefer to hold a surplus of any other commodity rather than of grain?
If by turns you allow and forbid exportation as you please, then your permission, never bearing except on existing production and always subject to your revocation, will never constitute a sufficient encouragement to future production.
I wish to reply to an objection. I said elsewhere 26 that the high price of indispensable primary commodities seemed to me fatal to the people, because daily earnings did not rise proportionately. Will not the export of wheat, someone will say, bring about an increase in the price of the commodity? It will probably prevent the price falling very low. If, on the other hand, however, the prohibition of exports stops the grain from being produced, may not the price increase perhaps be more inevitable and excessive?
Do you think you can enforce the production of grain? I should like to see you try. You will prevent owners from taking their land out of wheat production. Straightaway this is another surveillance. But will you oversee how they cultivate too? Will you oblige them to arrange the funding, dress the soil, get hold of the requisite manures, and all to produce a commodity, which if it is abundant will be impossible for them to sell and costly even to keep? When a government wants its own way to be done in a single thing, it soon finds itself reduced to doing everything.
I have not put forward other reasons for free exportation because they have been developed a thousand times. If wheat is dear, people will not export it, since at the same price, it is better to sell it on the spot than to export it. People will export it, therefore, only when it is good to do so. You can suppose universal dearth, with famine in your own country or in neighboring ones. Then you will need singular laws for a singular disaster. An earthquake which threw all farm holdings into confusion would demand special legal arrangements for a new sharing out of real estate. One takes special measures for distributing subsistence food in a beseiged town. But to make habitual legislation for a calamity which has not taken place naturally once in two centuries is to turn legislation into a habitual calamity.
Nature is not reckless with her hardships. If we compared the number of dearths which have been caused by truly bad years with those caused by regulations, we would be pleased at how little ill comes to us from nature, and we would tremble at the ill which comes to us from men.
I would have liked to take a middle course on this question. There is a certain credit for a moderation which it is pleasant to attribute to oneself and which it is not hard to acquire, provided one is not very sincere. One testifies in this way in one’s own favor for having properly looked at both sides of questions, turning one’s hesitation into a discovery. Instead of being right against a single view, one appears to be in the right against two. So I would have preferred to find as a result of my investigations that the government can be left the right to allow or forbid exportation. In trying to determine the rules according to which it should act, however, I felt I was plunging again into the chaos of prohibitions. How will the government judge, for each province, at a huge distance, and remote from others, circumstances which can change before knowledge of them gets to it? How will it stop fraud by its agents? How will it guard itself against the danger of taking a momentary blockage for a real dearth, or a local difficulty for a universal disaster? Lasting general arrangements based on brief and partial difficulties produce the ill we want to prevent. 27 The men most lively in recommending this versatile legislation do not know how to go about it when it comes to the means of carrying it out. 28
If there are drawbacks in everything, leave things be. At least the people’s suspicions and the injustices of government will not be joined with nature’s calamities. Out of three scourges you will have two less, and you will have moreover this advantage—that you will get men used to not regarding violation of property as a resource. 29 Then they will seek and find other ones. If on the contrary they notice the former, they will always come back to it because it is the swiftest and the most convenient.
If you justify, as being in the public interest, the obligation imposed on owners to sell in a particular place, that is to say, to sell at a loss, given that they could sell better elsewhere, you will end up fixing the prices of their commodities. The one will be no more unjust than the other and will easily be represented as equally necessary.
Therefore I admit only very few exceptions to the complete freedom of commerce in grain, as in any other commodity; and these exceptions are purely circumstantial.
The first is the situation of a small country, without territory, obliged to maintain its independence against powerful neighbors. This little country could establish warehouses so that others did not seek to subjugate it by starving it, and since the administration of such a country is like that of a family, the abuses of these warehouses would be largely avoided.
The second exception is a sudden and general famine, the effect of some unforeseen cause, natural or political. I have already spoken of this above.
The third is at once the most important and the most difficult to resign oneself to. Its necessity results from popular prejudices nourished and sacralized by the rooted habit of error. It is certain that in a country where the commerce in grain has never been free, sudden freedom produces a fatal disturbance. Opinion revolts, and its blind and violent action creates the ills which it fears. Therefore we need, I admit, to exercise great care to bring the people around on this subject to the principles closest to justice and truth. The shocks are painful, on the right road as well as the wrong; but the government which does this decent thing often only with regret does not devote much zeal to the prevention of these shocks, and educated men, when they succeed in dominating it by force of enlightenment, too often believe they are engaging it more by dragging it into precipitate measures. They are not aware that this is to furnish it with specious pretexts for retrogressing. This is what happened in France around the middle of the last century.
The question of the rate of interest is perhaps the one which for some time had been best argued. In our times, some men, probably tired of seeing people agreeing on this question, have begun considering it again from a theological viewpoint. 30 I hardly feel inclined to see it in this light. I will say, though, that even religiously the prohibition of all interest is an absurd precept, because it is an unjust and moreover inoperable one. Religion does not at all fault the owner of land for living on the income it yields. How can it forbid the owner of capital to live off its income? This would be ordering him to die of hunger.
If you then turn the precept into advice, this change will have only one advantage, that people will no longer think themselves so guilty for disobeying it. Lending without interest might be an act of charity, like almsgiving; but this can never be other than an individual act, and you cannot make it a habitual rule of human conduct. It is useful for society that funds be employed. It is therefore useful that those who do not use them themselves lend them to others to use them. But if funds do not yield any income when they are lent, people would rather bury them than lend them, since they avoid the dangers of the loan.
Government has only three things it can do in this regard. It must stop fraud, that is, prevent abuse of youth, inexperience, or ignorance, stop people lending to children, minors, and any whom the law regards as incapable of watching over their own interests. For this purpose it suffices that government does not recognize any contracts such persons may enter into.
Secondly, it must guarantee legitimate compacts and ensure their carrying out. The easier and more assured this is, the more the rate of interest will come down. For lenders always get themselves paid for the risks they incur.
Finally, government must determine a legal rate of interest just for the case where the debtor, depositary, holder of a sum does not make it good by the time and on the conditions agreed. This legal interest rate must be as high as possible, for if it were less than the ordinary rate of interest, the fraudulent debtor would find himself enjoying resources retained against all justice, more advantageously than the honest debtor who had borrowed it with its owner’s consent. 31
All further intervention in this matter by government is iniquitous and off target. Restricting the charging of interest promotes usury. Capitalists need, on top of the natural rate of profit for the funds they lend, a “risk premium” against the laws they infringe. This rule of nature has made itself respected in all eras, in spite of all regulations. Popular power in Rome, religious power among Christians and Moslems have equally failed against it. 32
I find two errors on this subject in the work of two equally famous and estimable writers, Adam Smith and M. Necker.
The former says that the legal rate of interest 33 must not be raised too high, or the bulk of the money lent will go to spendthrifts, only they being willing to pay so dear. In this way the country’s resources will be taken out of hardworking hands and passed over to men unable to do other than dissipate and destroy them.
This author forgets, however, that spendthrifts who dissipate the funds they borrow are rarely in shape to pay them back after they have dissipated them. Consequently the vast majority of lenders will always prefer to high but precarious returns, lower, safer ones. They will entrust their funds, therefore, to the hardworking, thrifty class who, borrowing only to engage in profitable speculation, can meet obligations by the due date.
M. Necker too 34 approves of government fixing the legal rate of interest. “Lenders are in general,” he says, “only inactive proprietors. Borrowers, on the contrary, have a purpose, an activity from which society benefits in some way. So when there are conflicts over the rate of interest, the government ought to want the advantage to belong to them.” But if the advantage belongs to borrowers, when the rate of interest is disputed, lenders will have themselves compensated for the disadvantage to their side. The borrowers we believed we were helping will carry the burden. This is inevitable and will work against the purpose M. Necker wishes the government to have in mind. He feels this himself, since he adds: “since the relationships which determine the interest rate are more powerful than government, sovereigns can never hope to control it by way of imperious laws.” 35 But how else other than by laws will government intervene in the contestations between lenders and borrowers? “The profits of agriculture,” he continues, “and those of all enterprises which are not unique and privileged, cannot bear the expense of an interest rate above ordinary usages, and it is absolutely no help to production to favor the position of the lenders.” 36 Is it not clear, however, that those who borrow for farming or industrial enterprises will not be tempted to pay an interest rate greater than their profits? And will those who borrow for dissipation be checked by laws which are easy to elude? Regulations are superfluous for the former, illusory for the latter.
When interest is banned, it takes all sorts of forms. It disguises itself as capital. What else is selling dearer on credit than having oneself paid the interest on one’s money?
Except in the circumstance we spoke of above, that of capital illegally retained by a debtor, the rate of interest must not be fixed. The rate, like the price of all goods, should be regulated by demand. To fix the rate of interest is to fix the maximum price of capital, and a maximum price of capital has the same effect as one for commodities. It causes the flight of what can be placed elsewhere and makes what is sold in contravention of the law more expensive.
Without doubt there is a moral element in this question. But opinion alone can pronounce on this moral element, and it always does so wisely. Solon 37 did not want to fix the interest rate in Athens. Those who demanded unreasonable rates of interest there, however, were regarded as infamous.
You fear the excesses of clandestine usury. Yet it is your prohibitions which bring it to this level. Let all transactions be out in the open. Public scrutiny will moderate them.
Prohibitions in the matter of industry and commerce, like all other prohibitions and more than all the others, put individuals at odds with the government. They form one nursery for men preparing for every kind of crime by accustoming themselves to violate the laws, and another for men familiarizing themselves with wickedness, by living off the misfortune of their fellows. 38 Not only do commercial prohibitions create artificial crimes, but they encourage the committing of these crimes by the profit which they attach to the fraud which is successful in deceiving them. This is a drawback on top of those which other prohibitive laws have. 39 They tend to be traps for the poor, that class already surrounded by irresistible temptations, of which it has rightly been said that all its actions are hasty, 40 because want presses on it, its poverty robs it of any enlightenment, and obscurity frees it from the force of opinion.
I said at the start of Book XII that I did not place the same importance on freedom of production as on other types of freedom. Nevertheless, the restrictions obtaining here involve laws so cruel that all others feel their effects. Look at the riots in Portugal occasioned first by the privileged position of the Company of Wines, riots requiring barbarous punishments, whose spectacle discouraged commerce, riots leading finally to a succession of constraints and cruelties which brought a host of proprietors to tear up their vines themselves, destroying in their despair the source of their riches, so that these would no longer furnish a pretext for all kinds of harassment. 41 Look at the severity in England, the violence and the despotic acts which the exclusive privileges of the East India Company 42 entail to keep themselves going. Open up the statutes of this otherwise humane and liberal nation. There you will see the death penalty multiply for actions impossible to consider criminal. 43 When we examine the history of English settlements in North America, we see, so to speak, every special privilege followed by the emigration of the nonprivileged. The colonists fled in the face of commercial restrictions, leaving lands they had scarcely finished clearing, to regain their freedom in the forest, asking from a savage nature a refuge from the persecutions of society. 44
If the system of prohibitions has not destroyed all the enterprise of the nations it harasses and torments, this is, as Smith remarks, 45 because each individual’s natural effort to improve his lot is a repairing principle, which in many respects remedies the bad effects of administrative regulation, just as the life force struggles, often successfully, in the physical organization of man, against the illnesses which flow from his passions, intemperance, or laziness.
It is all the more important that these truths make some breakthrough in the outlooks of government, in that each category of proprietors, makers, and manufacturers endlessly begs the intervention of government against everything which diminishes its immediate profit, whether by useful discoveries or some kind of new production; and it has to be feared that the governors may take the interests of these groups to be those of society. These two sets of interest are, for all that, almost always mutually opposed. 46
The demands addressed to government by those in trade, to prevent competition, the installation of equipment, improvement in communications, and proliferation of commodities, could be translated thus: allow us alone to buy or sell such and such an object, so that we can sell it to you dearer. Is it not odd that such demands have been welcomed so often?
When profits fall, business people are inclined to complain of the decline of trade. The diminution in profits is, however, the natural effect of progressive prosperity. Business profits fall: 1. Because of competition. 2. Because earnings rise, as a result of competition which increases labor prices. 3. By the increased flow of capital into commerce, which lowers the rate of interest. Now, these three causes of the diminution in profits are three signs of prosperity. This, however, is when business people complain and appeal about it to government, for special intervention, 47 such that in the event, business people call for the intervention of government against commercial prosperity.
When the commercial mind mingles with the administrative one and dominates it, a thousand errors and ills ensue. Nothing is more dangerous than the habit and means used by individual interest to attain its purposes transported into the administration of public affairs. Doubtless, the general interest is only the joining of all private ones. It is the joining of all these interests, however, by the cutting off of that part of each one which hurts the others. Now, it is precisely this part to which each private interest attaches the most value, because this is what in each circumstance is the most profitable to it. It follows from this that the private interest, which is very enlightened when it reasons on what matters to it and on what it must do, is a very bad guide when people want to generalize its reasonings and make them the basis of an administrative system. We see an individual enriching himself through a monopoly, and without reflecting on the fact that this is at the nation’s expense, we establish monopolies precisely as a means of wealth for the nation in question, when the reality is that they impoverish and despoil it. This is because governments are ordinarily steered toward these stances by men imbued with mercantile prejudices; and by a singular contradiction, but one they do not notice, by basing their prohibitive measures on the blindness or harmful tendency of special interests, they constantly institutionalize the calculations of special interest, as rules of their public conduct.
What we say about the business outlook does not apply solely to the group which is called “business” to distinguish it from other groups. This outlook becomes common to all people in society who harvest, produce, or accumulate in order to sell. Thus farmers contract the business outlook when it comes to selling grain, and we see them drawn into the same errors as men involved in purely mercantile speculation. Did not the owners of vineyards in France ask the King’s Council in about 1731 to forbid the plantation of new vineyards? 48 Did not landowners in counties near London petition the House of Commons, for no large roads to be opened to the more distant areas, for fear that the wheat from these areas, arriving more easily in the capital, might lower the price of theirs? 49 If rentiers dared, they would speak about falling interest rates the way business people do of falling profits. A rentier, having for long lent his money at ten percent and now finding he can place it only at five percent, would ask nothing better than to say that the country he lived in was going to ruin because he was finding himself less well off there. He would most readily solicit the government for measures to stop interest rates falling. It is nevertheless incontestable that a fall in interest rates proves the prosperity of a country and a rise proves its bad financial situation.
In industry, prohibitions are the type of arbitrary measure which some men can use against others; and just as in civil disagreements they seek to seize arbitrary power instead of destroying it, in the cause of trade they seek to seize control of arbitrary regulations. They almost never protest against prohibitions in general, but strive to have them put to their advantage. Following the introduction of silk manufacture, under Henry IV, the cloth manufacturers demanded these manufactures be banned. 50 Following the introduction of cotton stuffs, the silk manufacturers called for a prohibitive law against them. Following the invention of prints, cotton manufacturers represented them as a frightful calamity. 51 If all this pleading had been listened to, France would have neither silks, nor cottons, nor prints. Each manufacture, like each newborn religion, claims freedom. Each manufacture, like each established religion, preaches persecution.
What is most fatal in regulations is that motivated by necessity which does not exist, they sometimes create it. Men arrange their calculations and their habits according to regulations, which then become as dangerous to revoke as they are troublesome to maintain. 52
M. de Montesquieu, as a judicious writer observes, 53 had only very superficial ideas about political economy. We must avoid taking him for a guide in this matter. Everything he explained as regards institutions he believed he justified; the discovery of the motive made him indulgent of the institution, because it made him pleased with himself. Speaking of the system of prohibitions in England, he said, “they obstruct the trader, but this is in favor of the trade”; 54 he would have been more correct to say: they obstruct the trade in favor of some traders. 55
A regime of subsidies and various supports has fewer disadvantages than one based on monopolies. It seems to me dangerous, though, in several respects.
First, one must fear that government, once it has arrogated to itself the right to intervene in the affairs of business, if only through supports, may soon be pushed, if the incentives are not enough, to have recourse to measures of constraint and harshness. Government rarely resigns itself to not taking revenge for failed policies. It runs after its money like some gambler. While the latter appeals to luck here, however, government often appeals to force.
Secondly, there is also the worry that government, by its unwonted incentives, may deflect funds from their natural usage, which is always the most profitable one. Funds move of their own accord to their most profitable employment. To attract them there, there is no need for supports. For those which would stand to lose, supports would be fatal. Any industry which cannot stand independently of government help finishes up second-rate. 56 The government then pays individuals to work at a loss, and thus seems to be indemnifying them. Since the indemnity cannot be drawn other than from taxation, however, it is, in a word, private individuals who bear the burden. Finally, government supports seriously attack the morality of the working classes. Morality is constructed from the natural sequence of causes and effects. To upset that sequence is to damage morality. Anything which brings chance among men corrupts them. Anything which is not the direct, necessary, and habitual effect of a cause, pertains more or less to hazard. What makes work the most efficacious cause of morality is the independence of other men in which the working man finds himself, and the way he depends on his own conduct, on the order, continuity, and regularity he puts in his life. Such is the real cause of the morality of those groups busy with routine work, and of the immorality so common among beggars and gamblers. These last are of all men the most immoral, since of all men they count the most on chance.
Supports and help for business by government are a kind of game. It is impossible to suppose that government never grants its help and its supports to men who do not deserve them nor never grants more of these than the objects of this favor deserve. A single mistake of this kind turns supports into a lottery. A single eventuality is enough to bring hazard into all calculations and therefore to destabilize them. The probability of the chance does not matter, since imagination trumps the calculation. Even the distant, uncertain hope of government help casts into the life and reckoning of the hardworking man an element quite different from the rest of his existence. His situation changes, his interests become complicated. His condition becomes open to a sort of speculation. This is not your peaceful merchant or manufacturer, who made his prosperity depend on the wisdom of his speculations, on the quality of his products and the approval of his fellow citizens, accorded for the regularity of his conduct and in recognition of his sobriety. This is a man whose immediate interest and pressing desire is to attract government attention to himself. The nature of things, for the good of the human race, once put an almost insurmountable barrier between the great mass of peoples and those who held power. Only a small number of men were condemned to run hither and thither in the political sphere, to speculate in favor, to grow rich on corruption. The rest followed their road peacefully, asking government only to guarantee their peace, and the exercise of their faculties. If government, however, discontented with this salutary function and committed through generosity or promises made in the presence of all, provokes hopes and creates passions which did not exist before, then everything is turned upside down. Without doubt this will spread a new activism among the business class. This is a vicious activism, though, one more concerned with the external effect it produces than with the solid basis of its own work, which pursues publicity rather than success, because success is seen as possible even from a meretricious publicity, an activism which in short turns the whole nation reckless, restless, greedy, rather than thrifty and hardworking as it would have been.
And do not imagine that in substituting for financial incentives, motives drawn from vanity, you will be acting less harmfully. Only too often governments number charlatanism among their means. It is easy for them to believe that their mere presence, like that of the sun, vivifies the whole of nature. So they display themselves, they talk and smile, and in their view their performance should be honored for centuries. This is once again, however, to take those who must work for their livelihood away from their natural employment. It is to give them the need for credit. It is to inspire in them the desire to exchange their commercial relationships for supple ones, those of a clientele. They will learn courtly vices without at the same time the elegance which at least veils them.
The two hypothetical situations most favorable to a regime of government incentives or supports are, without question, on the one hand when one is establishing a branch of production as yet unknown in a country, one demanding large prior investments, on the other the help which has to be given to certain business or farming classes, when unforeseen calamities have considerably diminished their resources.
I am not sure, however, whether even in these two cases, except perhaps for some very rare circumstances, for which it is impossible to establish fixed rules, government intervention is not more harmful than advantageous.
In the first case, the new branch of production, protected thus, will undoubtedly establish itself sooner and more widely; but resting more on the help of government than on calculated management by individuals, its foundations will be weaker. The individuals involved, indemnified in advance for potential losses, will not bring the same zeal and care as if they had been left to their own devices and could not expect any success save what they deserved. They will rightly flatter themselves that the government, in a way committed by the first sacrifices it has agreed to, will come to their help once more, if they fail, so as not to lose the fruits of its sacrifices; and this lurking thought, different in nature from that which must act as a spur to business, will always more or less damage their activity and efforts in a perceptible way.
Moreover, in countries used to the meretricious help of government, it is assumed much too readily that such and such an enterprise exceeds individual means. This is a second cause of the slackening off of the particular industry. It waits for the government to supply the stimulus, because it is used to the government’s making the first move.
In England scarcely does a discovery become known before numerous subscriptions provide the inventors with all the means of development and application. The whole point is that these subscribers examine the promised advantages much more carefully than a government could, since the interest of all those in business on their own account is not to let themselves be deceived, while that of most of those who bank speculatively on government help is to deceive the government. Work and success are the only means open to the former. Exaggeration or patronage are for the latter a much more certain and above all swifter way. Systematic reliance on supports is immoral in principle in this respect too.
True, individual effort, deprived of all outside help, sometimes comes to a halt in the face of obstacles. But first it will turn to other projects and secondly it will assuredly regroup its resources to return to the attack, sooner or later, and overcome the difficulty. Now, my assertion is that this partial and short-lived difficulty will be nothing like as disadvantageous as the general disorder and discontinuity which any artificial aid brings into ideas and calculations.
Almost identical reasoning applies in the case of the second hypothesis, which at first glance seems even more legitimate and favorable. In coming to the help of the business or farming classes, their resources depleted by unforeseen and inevitable calamities, the government first of all weakens in them the feeling which gives most energy and morality to man: that of total obligation to oneself and of putting hope only in one’s own resources. Secondly, the hope of such help encourages classes in distress to exaggerate their losses and conceal their resources, in this way giving them an interest in lying. I agree that this help may be distributed prudently and parsimoniously. But what may not hold for its effect on people’s affluence may hold for the effect on their morals. The government will nonetheless have taught them to rely on others instead of on themselves alone. It will go on to disappoint their hopes; but their work will still have slackened as a result of all this, and their veracity will still have suffered a change. If they do not get government help, this will be because they have not learned a sufficiently skillful deception. Finally, government runs the risk of finding itself deceived by unreliable agents. It cannot follow in detail the carrying out of its orders, and cunning is always more skillful than surveillance. Frederick the Great and Catherine II used a system of supports for agriculture and industry. They frequently visited in person the provinces they thought they had helped. Well-dressed, well-fed men were put along their route, in apparent proof of the affluence resulting from their generosity, but assembled to this effect by the distributors of their grace, while the true inhabitants of these regions were groaning in the depths of their huts, in their age-old poverty, ignorant even of the intentions of the monarchs who thought themselves their benefactors.
In countries with free constitutions, the question of a regime of incentives and supports can moreover be considered from another point of view. Is it salutary that the government should attach to itself certain groups of those it governs by handouts which even were they wisely distributed are intrinsically arbitrary? Is it not to be feared that these groups, seduced by immediate and positive advantage, might become indifferent to violations of individual freedom or justice? One would then be right to think of them as suborned by government.
To read a number of writers, you would be tempted to think that nothing could be more stupid, less enlightened, or more careless than individual interest. They gravely inform us sometimes that if the government does not promote agriculture then all labor will turn toward manufacturing and the fields will lie fallow, sometimes that if the government does not promote manufactures, then all labor will stay in the countryside, that the product of the land will be far more than is needed, and that the country will languish without trade or industry. 57 As if it were not clear on the one hand that agriculture will always take account of a people’s needs, since artisans and manufacturers must always have the means of feeding themselves, while on the other that manufactures will always increase as soon as agricultural products are sufficiently plentiful, since individual interest will push people into applying themselves to something more lucrative than increasing commodity production, where quantity will reduce price. Governments can change nothing with respect to men’s physical needs. The output and prices of products, of whatever sort, always comply with the demands arising from these needs. It is absurd to believe that when those who take up a line of work find it useful, this will not itself suffice to increase the scale of production. If there is more labor than is needed to release the fertility of the soil, the people will naturally turn their labor to other branches of production. They will feel, without the government warning them about it, that beyond a certain point competition destroys the advantages of the job. Individual interest will by its very nature be sufficiently stirred, without government support, to seek out some more profitable job. If the nature of the terrain requires a large number of cultivators, artisans and manufacturers will not become more numerous, because a people’s first need is to subsist. A people never neglects its subsistence. Moreover, the farming sector being more crucial, it will for that very reason be more lucrative than any other. When there is no improper privilege such as may invert the natural order, the value of a line of work always comprises its absolute usefulness and its relative scarcity. The real stimulus for all types of work is how much they are needed. Freedom in itself suffices to keep them all in a salutary and accurate balance.
Outputs always tend to move to the level of needs, without government getting involved. 58 When one kind of product is scarce, its price rises. With price rising, production, being better paid, attracts to itself activity and funds. The result is that supply becomes more plentiful. With supply increasing, price falls. With price falling, some activity and some funds go elsewhere. Then with production shrinking, price rises again and activity returns, until output and price have attained a perfect equilibrium.
What misleads many writers is their being struck by the listlessness or malaise which the nation’s working classes experience under despotic governments. They do not go back to the cause of the evil, but delude themselves that it could be remedied by a direct action by the government in favor of the afflicted classes. Thus in the case of farming, for example, when unjust and oppressive institutions expose farmers to harassment by the privileged classes, country areas are soon fallow because they are depopulated. The farming classes flock as fast as they can to the towns to escape from their servitude and humiliation. Then idiotic theorizers recommend positive and preferential supports for farmers. They do not see that everything is interconnected in human societies. Rural depopulation results from bad political organization. Neither help to a few individuals, nor any other artificial and fleeting palliative, will cure it. Our only resource is in freedom and justice. Why do we always delay seizing it as long as possible?
Sometimes it is said that we should ennoble agriculture, lift it up again, render it honorable as the source of the prosperity of nations. Rather enlightened men have developed this idea. One of the most penetrating but most bizarre minds of the last century, the marquis de Mirabeau, repeated it endlessly. Others have said as much for manufacturing. But ennobling is done only by way of distinctions, if indeed ennobling happens at all, by way of distinctions thus deliberately contrived. Now, if work is useful, since it will be profitable, many will pursue it. What distinction do you want to accord to something commonplace? Moreover, the necessary work is always simple. Now, it does not lie within government discretion to influence opinion such that it will attach special merit to what everyone can do equally well.
The only truly imposing distinctions are those which indicate power, because they are real, and the power they embellish can act for good or ill. Distinctions based on merit are always contested by opinion, because opinion always reserves to itself alone the right to decide what merit is. Power it must recognize, like it or not. Merit, however, it can deny. This is why the cordon bleu commanded respect. 59 It established that whoever bore it was a great lord, government being very well able to judge that this or that man is a great lord. The cordon noir on the contrary was ridiculous. It declared the man decorated with it a man of letters, a distinguished artist. 60 Now, governments cannot pronounce on writers and artists.
Honorary distinctions for farmers, artisans, and manufacturers are even more illusory. These groups want to reach affluence or wealth through work and peace of mind by the rule of law. They want none of your artificial distinctions, or if they do aspire to them, it is because you have perverted their intelligence by filling their heads with meretricious ideas. Leave them to enjoy in peace the fruits of their labors, the equality of rights, and the freedom of action which belong to them. You will serve them much better by not showering them either with favors or injustices, than in harassing them on the one hand or seeking on the other to honor them.
I want to finish by showing that government intervention in questions of production is equally harmful whether it orders something or forbids the same thing. The example I use is the division of labor.
The division of labor has immense advantages. It facilitates increased output of all products, it economizes greatly on time and labor, it leads man to a perfection he cannot attain without it. It gives the businessman’s speculations a clarity, a precision and accuracy which simplify his operations and make his calculations more confident. It is therefore certain that government does harm when it opposes the division of labor with prohibitive laws. This is what it did, as we explained earlier, 61 with the commerce in grains, in forbidding the farmer to sell his wheat in bulk to those who wanted to hold it in warehouses. This resulted in countless difficulties for this trade, difficulties which often led to real famines or false alarms as troublesome as real famines.
If you conclude from this, however, that government, far from putting obstacles or limits to the division of labor, must actually prescribe it, what will happen? Along with its advantages, the division of labor has great drawbacks. It circumscribes and thereby narrows the intellectual faculties. It reduces man to the level of a simple machine. He can resign himself to this when his interest dictates this voluntarily. He would be hurt, however, by government action which, seeming to him against his interest, would appear gratuitously offensive and degrading. Nothing could be more unjust than preventing a skillful workman who can successfully combine two jobs from doing both or passing freely between them. It is clear, therefore, that the government does wrong to drive the division of labor by its regulations. This is what it did with the system of guild leaders and master craftsmen, 62 which condemns the individuals in this or that job to follow no other. Everywhere we have seen these institutions harm the economy, encourage fraud, and even retard the progress of jobs whose perfecting they proposed to promote.