All Commentary
Monday, July 1, 1985

A Reviewers Notebook: Government And Legal Plunder

Early on in his book about Bastiat, Government and Legal Plunder: Bastiat Brought Up to Date (Foundation for Economic Education, 120 pp., $4.95, paperback), Dean Russell quotes what he calls “the most damning definition of government ever penned.” It is the statement made by Frederic Bastiat to his fellow legislators in France of the 1840s. “The State,” said Bastiat, “is the great fiction by which everybody tries to live at the expense of everybody else.”

The French of Bastiat’s day, of course, failed to comprehend what he was talking about. But in the England of the free traders, Cobden and Bright, he did have a hearing. Bastiat, after all, was blood brother to the Britishers’ own John Locke, who laid it down in 1688, the year of the Glorious Revolution, that the State’s only legitimate function was to defend the individual’s rights to life, liberty and property. Where Locke’s compatriots were satisfied to call these the “rights of Englishmen,” a phrase that found favor with the American colonists, the universalists, of whom Bastiat was one, deemed them the natural rights of all men.

With great clarity Dean Russell explores Bastiat’s sharp distinctions. Life, liberty and property preceded government. The reason for government was to establish laws that would prevent one individual from plundering his neighbors. In a world of nationalisms there were collective aspects to this—armies were necessary to defend borders. But this did not mean that government had the right to push collective action beyond the rules necessary to protect individuals in their natural rights. Bastiat’s colleagues in the 1840s, who believed in majority rule, made the mistake of confusing legality with morality. It did not follow, said Bastiat, that something became moral just because 51 per cent of the people supported it. We need constitutions to set certain things beyond the pale of the legislative process. Slavery, for example, would not be justified by a majority vote calling for its establishment.

There is an endearing quality in Dean Russell’s rueful account of how he has attempted to apply Bastiat’s principles to his own life. When he was a student at the Columbia University Graduate School of Journalism, Russell had no answer to those who twitted him about his doubts about majority rule. He had to admit that he believed in democracy. It was not until years later that he found a satisfactory come-back by asking his own question, “Majority rule for what?”

The Broken Window

As a teacher of economics Russell has recited Bastiat’s story of the “broken window” to thousands of students. Yes, as Bastiat explained, a broken window in a baker’s shop made work for glaziers. But it probably kept the proprietor of the baker’s shop from buying a new suit of clothes. The tailor, in turn, lost the chance to buy something. Henry Hazlitt used the broken window fallacy to great effect in his Economics in One Lesson. Dean Russell brought the fallacy home to his students at the University of Wisconsin in La Crosse by taking the State’s decision to build a new graduate school of veterinary medicine as an unnecessary expense comparable to the replacement of a window.

Wisconsin had been paying its neighboring state of Minnesota to allow 35 students a year to attend the Minnesota College of Veterinary Medicine. The expense created an “unfavorable balance of trade” between the two states. “Why,” so a Wisconsin businessman asked, “not keep the currency in Wisconsin?” Money invested in a local veterinary college would create new jobs. A new school would need a full staff, which would incidentally provide a market for Wisconsin cheese and beer.

Dean Russell gave an “A” to any student who could detect the fallacy in the businessman’s idea that money spent across state lines is inevitably a loss. The Minnesotans obviously could use Wisconsin money to buy Wisconsin cheese. But when it came to giving himself an “A” Dean Russell went to the trouble of arguing the whole matter of job-creation with a fellow professor. This professor had counted more than 100,000 new jobs coming from the construction of the veterinary college. Bulldozers and wreckers had to be brought in to knock down old buildings. Trucks had to haul away the debris. International Harvester and General Motors both profited. When the new construction was completed, the electricians and the plumbers moved in at more than $50 per hour. Russell had to admit that his fellow professor had made a good case.

But then he went home to contemplate, on his unscreened and mosquito-plagued patio, about his own tax contribution to the building of the veterinary college. As he drank his cheap Brand-X beer he wished he could afford the good beer that some of his vanished tax money might have supplied. His wife came out to mention their shabby furniture and stained drapes. The roof, she said, needed repair. As for Dean Russell himself, he needed a new suit and a decent pair of shoes.

After reviewing the situation Dean Russell decided that the $6,000 he had paid in taxes to Wisconsin would have gone to create just as many jobs as any $6,000 allocated to the veterinary college.

Trade Barriers

Russell enjoys bringing Bastiat home in spates of rueful analysis. But there is nothing rueful about the “story examples” used by Bastiat to expose the fallacy of trying to improve the domestic economy by restricting foreign imports. Tariffs always cause higher prices and a decrease in products and services.

To illustrate the inanity of trade restrictions Dean Russell takes his students to Japan for a look at the “orange situation.” The Japanese insist on paying four times as much for their inferior domestic oranges as they would have to pay for California’s superior fruit. This information caused students to become angry at Japanese “inscrutability.” But Russell turned the anger into somewhat different channels by pointing out that Americans insist on forcing themselves to pay at least 50 per cent more for an American car than the Japanese are willing to charge for a better model. Russell might have mentioned that our refusal to sell the Japanese oil from Alaska, which we could replace with oil from Mexico or elsewhere at sayings all around, is just as stupid as the Japanese “inscrutability” about oranges.

Bastiat never heard the word “entitlements.” One trembles to think about what he would have to say if he could only be present in Washington in 1985. We have only begun to struggle with the consequences of disregarding his warnings about making legal plunder a way of life for the millions. Dean Russell has done a masterful job in indicating the enormity of the task that faces us in trying to go back to Bastiat.

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.