Economic Sophisms

Robbery by Subsidy
36*

Second Series, Chapter 9

People are finding my little book of
Sophisms too theoretical, scientific, and metaphysical. Very well. Let us try the effect of a trivial, banal, and, if need be, a ruder style of writing. Convinced that the public has been
duped into accepting the policy of protectionism, I have tried to prove it by an appeal to reason. But the public prefers to be shouted at. Therefore, let us vociferate:

Midas, King Midas, has the ears of an ass!
37*

A burst of plain speaking often works better than the most polished of circumlocutions. You remember Oronte and the difficulty that the misanthrope, utterly misanthropic though he is, has in convincing him of his fatuity.

ALCESTE:	One takes the chance of making oneself look ridiculous.
ORONTE:	And are you trying to tell me by these words That I am wrong in wanting …. ?
ALCESTE:			I don’t say that.
	But …..
ORONTE:		Do I write badly …. ?
ALCESTE:			I don’t say that.
	But after all ….
ORONTE:	But can’t I find out just what in my sonnet ….?
ALCESTE:	Frankly, you ought to hide it somewhere and forget it. 38*

Frankly, dear public, you
are being robbed. This may be put crudely, but at least it is clear.

The words
robbery, rob, and robber, may appear to many people to be in bad taste. I should ask them, as Harpagon asked Élise: “Is it the word or the thing that makes you afraid?”
39*

“Whoever by fraud has taken possession of a thing that does not belong to him is guilty of robbery.” (Penal Code, art. 379.)

To rob: To appropriate by stealth or by force. (Dictionary of the Académie française.)

Robber: He who exacts more than his due.
(Ibid.)

Now, does not the monopolist who, by means of a law of his own making, makes it necessary for me to pay him twenty francs for what I could buy elsewhere for fifteen, take from me, by fraud, five francs that belong to me?

Does he not appropriate them by stealth or by force?

Does he not exact more than his due?

He does, indeed, it may be said, take; he does appropriate; he does exact; but not at all
by stealth or
by force, which are the characteristics of robbery.

When our tax accounts contain a charge of five francs for the subsidy that the monopolist takes, appropriates, or exacts, what could be more
stealthy, since so few of us suspect it? And for those who are not dupes, what could be more
forced, since at the first sign of refusal the bailiff’s man is at our door?

Still, the monopolists need have no anxiety on that score. Robberies
by subsidy or
by tariff, though they violate equity quite as much as highway robbery does, do not violate the law; on the contrary, they are perpetrated by means of the law; this fact only makes them worse, but the
magistrates have no quarrel with them.

Besides, willy-nilly, we are all both
robbers and
robbed in this respect. The author of this volume may well cry, “Stop thief!” when he buys, but people could just as well address the same cry to him when he sells;
40* if he differs very much from his fellow countrymen, it is only in the fact that he knows that he loses more at the game than he wins, and they do not; if they knew it, they would soon bring the game to an end.

Nor do I boast of being the first to call this practice by its proper name. Here is what Smith said of it more than sixty years ago:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
41*

Should this surprise us, when the public shows no concern about it? Let us suppose that a council of industrialists is formed and holds a meeting for the purpose of setting a
general policy. What takes place, and what decisions are reached?

Here, greatly abridged, are the minutes of the meeting.

“A SHIPOWNER: Our merchant marine is in a desperate situation [outburst of indignation]. No wonder! I can’t build without iron. I find plenty of it at ten francs
on the world market; but, by law, the French ironmaster compels me to pay fifteen francs for it; so there go five francs that he takes from me. I demand the freedom to buy where I think best.

“AN IRONMASTER:
On the world market, I can have freight shipped for twenty francs. By law, the shipowner exacts thirty; so there go ten francs that he
takes from me. He plunders me, and I plunder him; everything is as it should be.

“A STATESMAN: The shipowner has come to a most unwise conclusion. Let us, rather, encourage the close harmony that gives us our strength; if we yield even a single point in the theory of protectionism, we may as well say farewell to the whole of it.

“THE SHIPOWNER: But protectionism has failed us; I repeat that our merchant marine is in desperate straits.

“A SHIPMASTER: Very well! Let us raise the
surtax, and the shipowner, who is taking thirty francs from the public for their freight, can take forty.

“A CABINET MINISTER: The government will make the utmost possible use of the beautiful mechanism of the
surtax, but even that, I am afraid, will not suffice.
42*

“A GOVERNMENT OFFICIAL: Here you are, all completely stymied by a minor detail. Is there no salvation except in the tariff? Are you not forgetting taxation? The consumer may be generous, but the taxpayer is no less so. Let us heap taxes upon him, and the shipowner will be content. I propose that a five-franc subsidy be paid to the shipwright out of the public treasury for every quintal of iron he uses.

“CONFUSION OF VOICES: Second the motion! Second the motion!

“A FARMER: A three-franc subsidy per hectoliter of wheat for me!

“A TEXTILE MANUFACTURER: A two-franc subsidy per meter of cloth for me! Etc., etc.

“THE CHAIRMAN: Then it’s agreed; our meeting has instituted the system of
subsidies, and that shall be its eternal glory. What industry can ever again suffer losses, now that we have two such simple means of converting losses into profits—the tariff and the subsidy? The meeting is adjourned.”

Some supernatural intuition must have given me a premonition, in a dream, of the imminent appearance of the
subsidy (who knows but that I may even have first suggested the idea to M. Dupin?) when, a few months ago, I wrote the following words:

It seems clear to me that neither the essence nor the consequence of protectionism would in any way be altered if it took the form of a direct tax levied by the state and distributed as subsidies to privileged industries by way of indemnification.

And, after comparing a protective tariff to a subsidy:

I frankly confess my preference for the latter system. It seems to me more just, more economical, and more honest: more just, because if society wants to pay bounties to certain of its members, everybody should contribute to them; more economical, because it will save much of the cost of collection and will eliminate many restrictions; finally, more honest, because the public would then see clearly the nature of the operation and realize what it is being made to do.
43*

Let us study this system of
robbery by subsidy, since the opportunity for doing so has been so kindly offered to us. What can be said about it is equally applicable to
robbery by tariff; and since the latter is a little better disguised, the system of direct pocket-picking will help us to understand the system of indirect pocket-picking. The mind will thus be led from the simple to the complex.

But is there not a type of robbery that is simpler still? Yes, indeed; there is
highway robbery; it requires only to be legalized and monopolized, or—as they say today—
organized.

Now, here is what I find in a book of travels I have been reading:

When we arrived in the kingdom of A…. , all branches of industry were saying that they were in a doleful state. The farmers were bewailing their lot, the manufacturers were complaining, the merchants were protesting, the shipowners were grumbling, and the government did not know whom to listen to. At first, it had the idea of levying a heavy tax on all the malcontents and then dividing the proceeds among them, after deducting a share for itself, very much on the same principle as that of the Spanish lottery that is so dear to us. There are a thousand of you, and the state takes one piaster from each; then it craftily skims off 250 piasters, and divides the remaining 750, in larger or smaller shares, among the players. The worthy hidalgo who receives three-fourths of a piaster, forgetting that he has contributed a whole piaster, cannot contain himself for joy and rushes off to spend his fifteen reals
44* at the nearest pothouse. This would have been something like what is happening in France. Be that as it may, uncivilized though the country was, the government did not think that the inhabitants were so stupid that they could be relied on to accept such strange methods of protection, and so it finally adopted the following plan.

The country was covered with a network of roads. The government had the kilometers marked off on them very exactly, and then it told the farmers: “Everything you can steal from those traveling between these two markers is yours; let it serve as your
subsidy, your protection, your incentive.” Then it assigned each manufacturer and each shipowner a portion of the road to exploit, according to the following formula:

I give and grant you

Power and authority to

Steal,

Plunder,

Thieve,

Cheat,

And swindle,

With impunity along this whole

Road.
45*

Now, it has come to pass that the natives of the kingdom of A…. have today become so used to this system, so accustomed to taking into account only what they have stolen, and not what is stolen from them, so thoroughly addicted to viewing plunder only from the viewpoint of the plunderer, that they regard the sum total of all individual thefts as
gross national profit and refuse to give up a system of
protection in the absence of which, they say, there is not a single branch of industry that could fend for itself.

Do you find this hard to believe? It is not possible, you protest, that a whole nation should agree in seeing an
increase in wealth in what the inhabitants steal from one another.

And why not? We have completely accepted this view in France, and are continually devising and improving methods of
reciprocal robbery under the name of subsidies and protective tariffs.

Still, let us not exaggerate. Let us agree that, with regard to the
method of collection and all attendant circumstances, the system of the kingdom of A…. may be worse than ours; but we must at the same time acknowledge that, with respect to the essential principle and its necessary consequences, there is not an iota of difference among all these species of robbery instituted by law to provide additional profits for the various branches of industry.

It should also be observed that, if there are certain inconveniences in the perpetration of
highway robbery, it also has advantages that are not to be found in
robbery by tariff.

For example, it is possible to make an equitable division of its proceeds among all the producers. The same cannot be done in the case of customs duties. These by their very nature are incapable of protecting certain classes of society, such as artisans, tradesmen, men of letters, lawyers, military personnel, laborers, etc.

It is true that
robbery by subsidy also lends itself to infinite subdivision of the proceeds, and in this respect is no less effective than
highway robbery; but, on the other hand, it often leads to such bizarre and absurd consequences that the natives of the kingdom of A…. might well regard it as ridiculous. What the victim of a highway robbery loses, the robber gains. The stolen object at least remains in the country. But, under the system of
robbery by subsidy, what the tax takes away from the French is often conferred upon the Chinese, the Hottentots, the Kaffirs, or the Algonquins. This is how it works:

Suppose a piece of cloth is worth a
hundred francs at Bordeaux. It is impossible to sell it for less without a loss, and it is impossible to sell it for more, because
competition among the sellers prevents the price from rising any higher. Under these circumstances, if a Frenchman wants to buy this cloth, he will have to pay a
hundred francs or do without it. But if it is an Englishman who wants to buy the cloth, then the government intervenes and tells the merchant: “Sell your cloth; I shall make the taxpayers give you
twenty francs.” The merchant, who neither demands nor can get more than a hundred francs for his cloth, sells it to the Englishman for eighty francs. This sum added to the twenty francs which
robbery by subsidy has extorted makes his account exactly even. The result is, therefore, precisely the same as if the taxpayers had given twenty francs to the Englishman on condition that he buy French cloth at a twenty-franc discount, at twenty francs below the cost of production, at twenty francs below what it would cost us ourselves. Thus,
robbery by subsidy has this peculiarity, that its
victims live in the country that tolerates it, while the
robbers are scattered over the face of the earth.

It is really astonishing that people still persist in considering it as an established truth that
everything that the individual steals from the common fund represents a general gain. Perpetual motion, the philosopher’s stone, the squaring of the circle, have long since ceased to occupy men’s minds; but the theory of
progress through robbery is still held in esteem. Yet a priori one might have thought that of all puerilities this was the least likely to survive.

There are those who ask us: “Are you, then, advocating a policy of
laissez passer?46* Are you one of the economists of the superannuated school of Smith and Say? Is that why you are opposed to the
organization of industry?” Well, gentlemen, organize industry as much as you please. But we, for our part, will take care to see that you do not organize
robbery.

Others, more numerous, keep repeating:
“Subsidies and
tariffs have been allowed to go too far. They must be used with discretion, and not abused. What
judicious, practical men advocate is a sensible amount of free trade combined with a moderate amount of protectionism. Let us beware of
absolute principles.”

This, according to the Spanish traveler, is exactly what was being said in the kingdom of A…. “Highway robbery,” the wise men said, “is neither good nor bad in itself; that depends on circumstances. All that needs to be done is to keep things
evenly balanced and to pay us government officials well for this labor of balancing. Perhaps pillage has been allowed too much latitude; perhaps it has not been allowed enough. Let us see, let us examine, let us balance the account of each worker. To those who do not earn enough, we shall give a little more of the road to exploit. For those who earn too much, we shall reduce the hours, days, or months during which they will be allowed to pillage.”

Those who spoke in this way acquired for themselves a great reputation for moderation, prudence, and wisdom. They never failed to rise to the highest offices in the state.

As for those who said: “Let us eliminate every injustice, for there is no such thing as a partial injustice; let us tolerate no
robbery, for there is no such thing as a
half-robbery or a
quarter-robbery,” they were regarded as idle visionaries, tiresome dreamers who kept repeating the same thing over and over again. Besides, the people found their arguments too easy to understand. How can one believe that what is so simple can be true?