Harmony from Liberty

Contributing editor Norman Barry is professor of social and political theory at the University of Buckingham in the UK. He is the author of An Introduction to Modern Political Theory (St. Martin’s Press).

As we celebrate the 200th anniversary of the birth of Frédéric Bastiat we are reminded once again of how much contemporary economic liberals owe to writers of the past: monetary economics did not begin in Chicago or Vienna (it started in sixteenth-century Salamanca), trade-cycle theory long predates Mises and Hayek, many philosophers had intimated a uniform theory of liberty (including economic freedom) before Rothbard, public choice was discovered (without sophistication and needless complexity) a long time before the Virginia school, and doctrines of rights have a formidable ancestry. Bastiat can claim to have had a hand in most of these innovations; and while Schumpeter may have, contemptuously, said that he was no economic theorist, he did admit that he was the greatest economic journalist of all time.

In a relatively short life, the last ten years of which produced a prodigious number of crucially important publications, Bastiat was an active participant in French public affairs, first in the unsuccessful battle for free trade and later in the struggle against the dangerous and burgeoning socialist movement in Paris. In these momentous events he proved to be a brilliant commentator whose message was by no means limited to the ephemera of the moment, but provided lessons for all time. The policy flaws he so expertly diagnosed turn up with depressing frequency today. But unlike our somewhat dour commentators, his political economy was expressed with an unsurpassed wit and a rare gift for parody.

If there is an overall message it is that there is an inevitable harmony in the world if only politicians would get out of the way and allow free individuals to coordinate their activities subject to a minimum of rules (derived from natural law). It is no accident that one of his most famous works was called Economic Harmonies. The important point is that Bastiat did not limit spontaneous order merely to the market, but saw it as a phenomenon produced by liberty across the whole of society, a view he expressed eloquently in his final paean to freedom, The Law.

At the time that he was writing, the harmony-inducing features of the market were under critical scrutiny, first by Malthus and later, and more importantly, by Ricardo. In the prognostications of the English Classical school, population pressure would drive wages down to subsistence, returns to capital would be close to zero in the stationary state, and the bulk of national income would be absorbed by rent to landowners. The French market tradition, beginning with Bastiat’s mentor Jean-Baptiste Say, was much more optimistic, largely because it identified the entrepreneur as the driving force of economic progress and recognized the market’s immense fecundity in the creation of endless opportunities for improving human well-being.

But Bastiat’s achievements do not derive from pure theory; his theory of value was based on labor services and was not much different from the English orthodoxy. Since he had no conception of the margin, he could not resolve the familiar diamond-and-water paradox.^[1] His theory of land rent, which described the lucky inheritor of vast estates as being productive, was a gift for Henry George and the “single taxers.” His genius, however, was to demonstrate with common-sense logic that uncoerced exchanges between free agents were the source of wealth and that all politically inspired inhibitions with this were either motivated by faulty economics and ethics or, more likely, the desire of some people to live at the expense of others (rent-seeking).

Bastiat did not deny that we are all governed by self-interest,^[2] but he recognized its Janus-like features: when individuals are not privileged by politics they will use self-interest to benefit themselves and mankind, but when the same persons control the law they will simply plunder the products created by others.^[3] The only difference between the rent-seeker and the highwayman is that the former’s actions have become “legal.”

Economic Interrelationships

What Bastiat demonstrated was that economic events are interrelated. We should not look for the immediate effects of economic policy, which may appear benign, but explore its long-term consequences. When that policy is the result of government action, the consequences are almost always malign. This is shown in one of his most brilliant essays, “What Is Seen and What Is not Seen.”^[4] Here, using the fallacy of the broken window as an example, he shows that the destruction of an asset might lead to a temporary increase in employment, but it simply reduces expenditure elsewhere and a reduction in long-term economic coordination.

The same reasoning applies to public spending: we should not prop up industries for which the market has decreed there is no future. In a manner that anticipates perfectly Milton Friedman’s onslaughts against Keynesianism, Bastiat argues that public spending simply replaces private spending with no overall increase in economic activity and, just as Public Choice was later to prove, such expenditure will actually reduce output and increase the supply of unproductive public servants. In this essay Bastiat also showed his understanding of the “middleman,” or entrepreneur.^[5] It is a concept essential for an explanation of how economic society is not to be conceived in rigid class terms, an implication of Ricardo’s theory, but rather in terms of enterprising individuals, always alert to the possibility of doing things differently. It is also a pointer to the impossibility of over-production, a twentieth-century economic illusion: for Bastiat, following Say, easily showed how the entrepreneurs would always find use for allegedly unwanted goods and services.

It is for his belief in the virtues of free trade that today’s history of economic thought textbooks chiefly remember Bastiat. As he recognized, strictly speaking, trade has no borders and what we now call the “extended order” is a method of bringing economic prosperity, via the international division of labor and productive specialization, to a theoretically unlimited number of people. He is withering about the absurd rationalizations made by those who would limit such trade. Some people, it is said, have unfair advantages that make it impossible for others to compete. Bastiat wittily recognizes the cruelty and arbitrariness of nature and demands that the unfair advantages that the sun has in the provision of light should be eliminated.^[6] We should be compelled to draw our curtains and close our doors to redress this grotesque imbalance. Think how many jobs that would create for candlemakers, he muses. The “law factory” in Paris is the last refuge for producers frightened of competition.

Although Bastiat was active in founding free-trade organizations in France, and was very close to the British campaigner Richard Cobden, the cause was lost after about 1848. The French were less developed industrially than Britain, and the workers had a short-run advantage in uniting with their employers in demanding protectionism (just as they do today). Furthermore, there was no obvious target in France, as there was in Britain with its Corn Laws (repealed in 1846). This egregious impediment to free trade actually united (temporarily) manufacturers and workers there.

Although the last two years of Bastiat’s life were spent in fighting the socialism that threatened his country, the logic was the same—a demonstration of the inefficiency and immorality of state plunder. This requires a full understanding of his prescience about the state and an explication of his broadly correct theory of law.

Bastiat on the State and Politics

Although Bastiat was no anarchist, indeed his thought can be located in the correct republican tradition in France, he had a healthy distrust of the state. In a brilliant essay he produced a stunning definition: the state is “that great fictitious entity by which everyone seeks to live at the expense of everyone else.”^[7] It may have a public-good function, yet even that is analyzed in purely individualist terms; but Bastiat is scornful of another tradition, which was to dominate nineteenth-century European thought. This conceived of the state as some superhuman institution, which was the embodiment of virtue, and was something that no rational person could recommend that we do without. In the absence of its extensive role, market society would degenerate into egoistic chaos. For Bastiat, the state must be analyzed in purely economic terms. Because of its power to tax and coerce, it became the main agent of plunder and it naturally attracted people who wanted an extra-market income. But as Bastiat insisted, the state has no income and it “can give nothing to the citizens that it has not first taken from them.”^[8]

The reason for the state’s success is that it has a rough hand (which hurts people through taxation and other forms of coercion) and a gentle hand, which rewards them through subsidies and privileges. Bastiat’s experience of France’s socialistic experiments of 1848, when Louis Blanc embarked on absurd nationalization schemes and impossible guarantees of a right to work, convinced him that all this was the biggest danger facing Europe. He grimly foresaw a time in which all welfare, education, and economic production would be controlled by the government. The protagonists of this cause failed to make a distinction between government and society: the latter is the spontaneous ordering of people interacting and voluntarily exchanging their labor and goods. This process would provide all that was desired. The government was a coercive instrument that had a specified and limited role.

In mid-nineteenth-century France everything looked like the responsibility of government. As Bastiat often said, if there were no tariffs there would be no socialism because their existence fostered the illusion that the state was the source of society’s wealth. In reality, however, the state in market society is the dispenser of privilege, from which everybody ultimately suffers. It was also the author of a usually bizarre redistribution of income.

The state was certainly not required to order the otherwise moral chaos of individualistic society (a deceit instigated by rent-seeking German Hegelian philosophers) for it is natural society that is harmonious and the state that is the source of disorder precisely because it sets one group against another in the desperate struggle for rents. The state does not produce anything—except bureaucracy, which, as Bastiat perceptively noted, expands in a Malthusian fashion.

Market society benefited from the creative powers of freedom, and in this Bastiat recognized its essential component—property. The link here was not merely utilitarian or empirical for as he said: “I question whether it is possible even to conceive of the notion of property without freedom.”^[9] Competition, which property and freedom produce, does have a clear utilitarian justification, though it also has a clear moral imperative. The exchange process, despite its being the source of riches for some, produces an outcome that is far superior to communism even in the generation of equality.

Statists were under the illusion that if certain things were not produced by the state they would not be produced at all. Bastiat was particularly scathing about aid for the arts: Saying that those who oppose it are philistines is like saying that those who object to the state’s involvement in religion are atheists.

However, his most sustained attack on the state’s capture of civil society concerned education. In a brilliant and iconoclastic essay on classical education, Bastiat’s target was not merely the inefficiency and perverse redistribution produced by the state, but also the much more exciting topic of what is taught in state universities and schools.^[10] He loathed the predominance of classical education. He had contempt for ancient Greece and Rome, and even more for those intellectuals who lionized Plato and Aristotle. For Bastiat, the theorists and historians of the classical world justified slavery, venerated the anticommercial ethic, lauded the unfree and authoritarian social structure of Sparta, and glamorized a form of republicanism that valued the public world of political participation over privacy and individualism. It is an attitude that, in a sanitized form, communitarianism encourages today.

The fact that he (reluctantly!) said people should be allowed to pay for such socially dangerous education is a comment on Bastiat’s libertarianism, rather than a sign of his respect for doctrines that had captured the European mind for centuries. Whereas Benjamin Constant’s famous essay, “The Liberty of the Ancients Compared with that of the Moderns,” was evenhanded and terribly sensible in its evaluation, Bastiat was provocatively, and correctly, in favor of the modern variety. Classical education was simply the historical and philosophical validation of socialism.

The Law

In the last year of his life, while dying from tuberculosis, Bastiat wrote a sustained treatise on political philosophy, The Law. Although it is a short work, it encapsulates succinctly what every libertarian has wanted to say about the relationship among legal processes, the economy, and politics: all within an individualistic morality. Yet The Law is really a brilliant distillation of the things he had been saying for some years in essay form. It is in many ways a melancholy tale of the collapse of proper legal standards in his own county. As he put it in “Plunder and the Law”: “The law is no longer the refuge of the oppressed, but the arm of the oppressor. The law is no longer a shield but a sword!”^[11] But the book is also an eloquent statement of the high ideals of legality that had been lost through politics, unrestrained democracy, and the contagious effect of mistaken ideas.

Bastiat is firmly in the tradition of natural law and is especially concerned that contemporary perversions of legality now have all the dignity and status of law properly called. The tragedy of modernity is that socialism proceeds by the law even though it has the same effect as straight robbery. There is, however, a moral order that precedes the dictates of positive, or enacted, law. And this natural law encompasses negative justice, basic human rights, and a very limited role for legitimate government. It covers “life, faculties, production—in other words, individuality, liberty, property . . . . [T]hese three gifts from God precede all human legislation and are superior to it.”^[12]

Since every individual has the moral right to defend his person and property, the law can only derive the rationale for its right to deliver the defense services from individuals. The law is simply an efficient public organization for the protection of natural rights: it has nothing in addition to those that inhere in private persons. When individuals organize themselves successfully into groups to do more than this, “the law has acted in direct opposition to its own purpose.” This is precisely what has happened, and instead of law protecting the basic minimal rights, it has allowed persons to acquire rights, which even in Bastiat’s day were beginning to include the right to work, to welfare, and to a share of other people’s legitimately created property.

In Bastiat’s jurisprudence there is no disharmony between law and justice. For the latter is interpreted entirely negatively. Fractious individuals may not agree on what justice is, and it would be folly for the law to attempt to enforce an inevitably contested conception. But there can be agreement about injustice (which is a breach of individual personal and property rights). Only if the law is limited to the enforcement of fundamental moral principles can there be unanimous agreement on its range. Indeed, those arguments about the proper extent of the suffrage would be resolved if the law kept to its morally assigned limits. Then each person would have an equal interest in its impartial application and permanent preservation.

But in mid-nineteenth-century France, law came to be used by rival groups for their selfish advantage; the tension between voters and nonvoters then heightened. This could only result in “fighting at the door of the Legislative Palace.” A firm critic of unrestrained majority rule, Bastiat would subject any procedural arrangement to the most searching of moral scrutiny. Even the United States, a country whose Constitution he generally admired, is rightly condemned for plunder in two areas—slavery and the tariff.

The malaise of French political life largely stemmed from two pernicious features of the human condition—greed and false philanthropy.^[13] Mistaken institutional arrangements, often derived from the misapplication of the contract model to human affairs, have simply exaggerated the malign effects of these. Self-interest is benign when it operates in markets, but when it is allowed full sway in the political world it is socially destructive; it converts our natural tendency to harmony, via market transactions, to a cacophony that ends in violence. False philanthropy, or moral vanity, occurs when people’s natural desire to do good is manifested in the political realm: redistributive taxation and compulsory welfare produces a kind of costless virtue that quickly turns out to be extremely burdensome. It enervates the productivity of the economy and drains the genuine morality of the people.

All these errors had their origin in mistaken ideas, and a large part of The Law is an eloquent critique of the French intellectual tradition, from before the Revolution and after. Bastiat would never let national pride divert him from the task of subjecting some of the great names in his own country’s literary history to withering assault.

Once again the classical inheritance is his target, for his convincing argument is that modern errors ultimately stem from the abject adoption of ancient ideals. Of particular importance is his demonstration that the ancients had a distrust of ordinary people and their capacity for self-organization; this was carried to extremes by the revolutionaries. People needed a legislator to guide them to virtue, because he is apparently immune to the push and pull of desire and aversion and can be trusted always to act disinterestedly for the public good. This idea was peddled with typical literary flamboyance by Rousseau and carried out in the real world with deadly effect by Robespierre. In an image often used, the people were clay to be shaped by the potter for his own purposes. The worst offender was Mably, who openly admitted that the people must be coerced into virtue. The quotations that Bastiat provides from this writer are indeed chilling. Even Montesquieu, who predates the Revolution and is often admired by classical liberals for his argument about the pacific features of commerce, does not escape Bastiat’s wrath: he recommended a mild redistributive scheme that was an invitation to plunder.

Bastiat in Our Time

It was a tragedy for French intellectual history that Bastiat’s legacy has been neglected. In the century after his death France became statist to a degree that would have horrified him, though no doubt the policy errors that are repeatedly produced—nationalization, protection, maximum working hours, and more—would have brought from him a cynical chuckle and an apposite quip. He would have fun with the protectionist and regulatory nightmare world of the European Union. I am sure he would recommend jurisdictional competition here as a possible method of restoring liberty and relieving the people of the stranglehold of the politicians and bureaucrats.

Classical liberals, perhaps under the influence of Hayek, have forgotten that France once led the world in free-market thought. Bastiat’s near-contemporary, de Molinari, actually produced the first serious anarcho-capitalist theory, but he is scarcely known outside specialist circles. Yet whenever we read of the stultifying effects of protectionism, of rent-seeking politicians, of the illiberal effects of majority rule, and the relentless power of pressure groups to disrupt the efficiency of the market, we should remember that Bastiat was there first: without the diagrams and equations but with plenty of mordant exegeses and outrageous examples, both true and invented.

Notes

1. Before the marginalist revolution in economics, people could not explain why water, so vital to life, is cheaper than diamonds.
2. See “Property and the Law,” in Selected Essays on Political Economy, trans. Seymour Cain, ed. George B. de Huszar, with introduction by F.A. Hayek (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995 [1964]), p. 106.
3. See “Property and Plunder,” in Ibid., pp. 152-93.
4. Ibid., pp. 1-50.
5. Ibid., pp. 19-21.
6. “A Petition,” in Economic Sophisms, trans. and ed. Arthur Goddard, with introduction by Henry Hazlitt (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996 [1845]), pp. 56-60.
7. “The State,” in Selected Essays, p. 144.
8. “Property and Plunder,” p. 183.
9. Ibid., p. 171.
10. “Socialism and Academic Degrees,” in Selected Essays, pp. 240-93.
11. “Plunder and the Law,” p. 235.
12. The Law, trans. Dean Russell, with introduction by Walter E. Williams and foreword by Sheldon Richman (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996 [1850]), p. 1.
13. Ibid. pp. 20-22.