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Wednesday, August 29, 2012

Frédéric Bastiat on Legal Plunder

Frédéric Bastiat’s unwritten History of Plunder ranks alongside Lord Acton’s History of Liberty and the third volume of Murray Rothbard’s Austrian Perspective on the History of Economic Thought as the greatest libertarian books never written. Had he lived to a ripe old age, instead of dying at the age of 49 from throat cancer, Bastiat might have finished his magnum opus, Economic Harmonies, and completed his history of plunder. It should be noted that Karl Marx published the first volume of his magnum opus, Das Capital (1867), when he was 49 but lived another 16 years. Given the chance, Bastiat might well have fulfilled his great promise as an economic theorist and historian and become the Karl Marx of the nineteenth-century classical-liberal movement.

In the six brief years that Bastiat was active as a writer and a politician (1844–1850), he produced six large volumes of letters, pamphlets, articles, and books, which Liberty Fund is translating as part of its Collected Works of Frédéric Bastiat (2011–2015). What emerges from a chronological examination of his writings is his gradual realization that the State (which he often wrote as THE STATE) is a vast machine that is purposely designed to take the property of some people without their consent and to transfer it to other people. The word he uses with increasing frequency in this period to describe the actions of the State is “la spoliation” (plunder), although he also uses “parasite,” “viol” (rape), “vol” (theft), and “pillage,” which are equally harsh and to the point. In his scattered writings on State plunder written before the 1848 revolution, he identifies the particular groups that have had access to State power at different times in history in order to plunder ordinary people. These include warriors, slave owners, the Catholic Church, and more recently commercial and industrial monopolists. Each group and the particular way it used State power to exploit ordinary people for its own benefit was to have a separate section in his History of Plunder. Had he defined the State before the 1848 revolution, he might have written: “The State is the mechanism by which a small privileged group of people lives at the expense of everyone else.”

But the outbreak of the revolution in February 1848 in Paris changed the equation dramatically, which forced Bastiat to change his strategy for combating plunder by the State. Before the revolution small privileged minorities were able to seize control of the State and plunder the majority of the people for their own benefit: Slave owners were able to exploit their slaves; aristocratic landowners were able to exploit their serfs; privileged monopolists were able to exploit their customers; and thus it made some kind of brutal sense for a small minority to plunder and loot the majority. Bastiat’s strategy before 1848 had been to identify the special interests that benefited from their access to the State and to expose them to the public via his journalism, often with withering criticism and satire: the landed elites who benefited from tariff protection, the industrial elites who benefited from monopolies and State subsidies, and the monarchy and aristocratic elites who benefited from access to jobs in the government and the army.

The rise to power of socialist groups in 1848 meant that larger groups, perhaps a majority of voters if the socialist parties were successful, were now trying to use the same methods as these privileged minorities but for the benefit of “everyone” instead of a narrow elite. The problem, as Bastiat saw it, was that it was impossible for the majority to live at the expense of the majority. Since somebody had to pay the bills eventually, the majority would be paying the taxes as well as receiving the “benefits” of State handouts, with the State and its employees taking their customary cut along the way. This conundrum led him to put forward his famous definition in mid-1848: “The State is the great fiction by which everyone endeavours to live at the expense of everyone else.” Bastiat now had to change his strategy and try to convince ordinary workers that promises of government jobs, State-funded unemployment relief, and price controls were self-defeating and ultimately impossible to achieve.

Bastiat was not able to win this intellectual or political debate because of his death in December 1850, and the socialist forces were ultimately defeated temporarily by a combination of military and police oppression, as the “party of order” supported the rise of Louis Napoleon (soon to be self-appointed Emperor Napoleon III). However, the core weaknesses of the welfare state were clearly identified by Bastiat in 1848, and we are seeing the consequences of its economic contradictions and possible collapse in the protests on the streets of Athens today.

With this broader picture in mind, I would like to examine Bastiat’s theory of plunder so we can see more clearly what he had in mind and appreciate the power of his analysis.

Bastiat developed his theory in a dozen or so articles and chapters of books that he wrote between the end of 1845 and mid-1850. From these scattered writings I have reconstructed his theory of plunder as he might have done in his History of Plunder:

There exists an absolute moral philosophy which is based on natural law. Natural laws are partly discovered through the scientific, empirical observation of human societies (by means of economics and history) and partly through divine revelation [Bastiat drew on his deism and his moral Christianity]. This moral philosophy applies to all human beings without exception (especially to kings and politicians). There are only two ways by which wealth (property) can be acquired: first, through voluntary individual activity and freely negotiated exchange with others (“service for service”) by individuals called “the producers”; second, through theft (coercion or fraud) by a third party, which he called “the plunderers.” The existence of plunder is a scientific, empirical matter revealed by the study of history.The plunderers have historically organized themselves into States and have tried to make their activities an exception to the universal moral principles by introducing laws that “sanction” plunder and a moral code that “glorifies” it. The plunderers also deceive their victims by means of “la Ruse” (trickery, deception, fraud) and the use of “sophisms” (fallacies) to justify and disguise what they are doing. It is the task of political economists like Bastiat to expose the trickery, fraud, and fallacies used by the plunderers to hide what they do from their “dupes” (the ordinary people) and to eliminate organized plunder from society for good.

Let’s examine some of his theory in more detail.

As a supporter of the idea of natural law and natural rights, Bastiat believed there were moral principles that could be identified and elaborated by human beings and that had a universal application. In other words, there were not two moral principles in operation, one for the sovereign power and government officials and another for the rest of mankind. One of these universal principles was the notion of an individual’s right to own property, along with the corresponding injunction not to violate an individual’s right to property by means of force or fraud.

According to Bastiat: “There are only two ways of acquiring the things that are necessary for the preservation, embellishing and amelioration of life: PRODUCTION and PLUNDER.” (“The Physiology of Plunder” in Economic Sophisms II.)

A bit further into the essay he elaborates:

The genuine and equitable law governing man is “The freely negotiated exchange of one service for another.” Plunder consists in banishing by deception or force the freedom to negotiate in order to receive a service without rendering another in return.

Plunder by force is exercised as follows: People wait for a man to produce something and then seize it from him with weapons.

This is formally condemned by the Ten Commandments: Thou shalt not steal.

When it takes place between individuals, it is called theft and leads to prison; when it takes place between nations, it is called conquest and leads to glory.

He cites the Ten Commandments, the French Penal Code, and the Dictionary of the French Academy to define what theft is as clearly as he can and to note its universal prohibition. According to these definitions, in Bastiat’s mind the policies of the French government were nothing more than “theft by subsidy,” “theft by Customs duties,” “mutual theft” of all Frenchmen via subsidies and protective duties, and so on. Altogether they made up an entire system of “plunder,” which had been evolving for centuries.

Therefore, because of the ubiquity of plunder in human history it was essential for political economy to take it into account when discussing the operation of the market and its “disturbing factors”:

Some people say: “PLUNDER is an accident, a local and transitory abuse, stigmatized by the moral order, reproved by law and unworthy of the attentions of Political Economy.”

But whatever the benevolence and optimism of one’s heart one is obliged to acknowledge that PLUNDER is exercised on a vast scale in this world and is too universally woven into all the major events in the annals of humanity for any moral science, and above all Political Economy, to feel justified in disregarding it.

A key feature of plunder that distinguishes it from the acquisition of wealth by voluntary exchange is the use of violence plus what he called “la Ruse” (fraud or trickery). Within the category of “plunder” there are two main types that interested Bastiat: “illegal plunder”—which was undertaken by thieves, robbers, and highwaymen—and “legal plunder,” which was usually undertaken by the State under the protection of the legal system that exempted sovereigns and government officials from the usual prohibition against taking other people’s property by force. Illegal plunder was less interesting to Bastiat, as it was universally condemned and quite well understood by legal theorists and economists. Instead Bastiat concentrated on the latter form, as it was hardly recognized at all by economists as a problem although it had existed on a “vast scale” throughout history and was one of its driving forces. As he noted in his “final and important aperçu” that ended the “Conclusion” to Economic Sophisms I:

Force applied to spoliation is the backdrop of the annals of the human race. Retracing its history would be to reproduce almost entirely the history of every nation: the Assyrians, the Babylonians, the Medes, the Persians, the Egyptians, the Greeks, the Romans, the Goths, the Francs, the Huns, the Turks, the Arabs, the Mongols and the Tartars, not to mention the Spanish in America, the English in India, the French in Africa, the Russians in Asia, etc., etc.

In “The Physiology of Plunder” Bastiat sketched out the main types of plunder that had emerged in history: war, slavery, theocracy, and monopoly. Historically, societies and their ruling elites, which lived from plunder, had evolved through alternating periods of conflict. In a letter to Mme. Cheuvreux (June 23, 1850) Bastiat observed that “our history will be seen as having only two phases, the periods of conflict as to who will take control of the State and the periods of truce, which will be the transitory reign of a triumphant oppression, the harbinger of a fresh conflict.”

The immediate historical origins of the modern French State were the aristocratic and theological elites, which rose to dominance in the Old Regime and which were challenged for control of the State first by socialist-minded reformers under Robespierre during the Reign of Terror and then by the military elites under Napoleon. The defeat of Napoleon had led to a temporary return of the aristocratic and theological elites until they were again overthrown in another revolution, this time one in which Bastiat played an active role as elected politician, journalist, and economic theoretician.

In the period in which he was living, the modern State had evolved to the point where a large, permanent, professional class of bureaucrats carried out the will of the sovereign power—which was King Louis Philippe during the July Monarchy (1830–1848) and then the “People” in the Second Republic, following the Revolution of February 1848—to tax, regulate, and subsidize a growing part of the French economy. Three aspects of the growth of the State on which Bastiat had focused his opposition in the mid-to-late 1840s were protectionist tariffs on imported goods, taxation, and the government subsidization of the unemployed in the National Workshops during 1848. As the State expanded its size and the scope of its activities, it began supplying an ever larger number of “public services” funded by the taxpayers.

Bastiat had a stern view of these developments and saw any “public service” that went beyond the bare minimum of police and legal services as “a disastrous form of parasitism” (“The Middlemen” in “What Is Seen and What Is Not Seen”). Using his favorite stock figure, Jacques Bonhomme (John Everyman), to make his points, Bastiat compared the “forced sale” of “public services”—or “legal parasitism” of the French bureaucracy—to the actions of the petty thief who indulges in mere “illegal (or extralegal) parasitism” when he takes Jacques’s property by breaking into his house (“Taxes” in “What Is Seen and What Is Not Seen”).

Bastiat thought the modern bureaucratic and regulatory State of his day was based on a mixture of outright violence and coercion on the one hand, and trickery and fallacies (sophisms) on the other. The violence and coercion came from the taxes, tariffs, and regulations, which were imposed on taxpayers, traders, and producers; the ideological dimension that maintained the current class of plunderers came from a new set of “political” and “economic sophisms” that confused, misled, and tricked a new generation of “dupes” into supporting the system. The science of political economy, according to Bastiat, was to be the means by which the economic sophisms of the present would be exposed, rebutted, and finally overturned, thus depriving the current plundering class of its livelihood and power: “I have said enough to show that Political Economy has an obvious practical use. It is the flame that destroys this social disorder, Plunder, by unveiling Trickery and dissipating Error” (“Physiology of Plunder”).

In the following essay on “The Two Moralities,” Bastiat contrasts the role of “religious morality” and “economic morality” in bringing about this change in thinking: “Let religious morality therefore touch the hearts of the Tartuffes, the Caesars, the colonists, sinecurists and monopolists, etc. if it can. The task of political economy is to enlighten their dupes.” (In Molière’s play Tartuffe, or The Imposter, Tartuffe is a scheming hypocrite and Orgon is a well-meaning dupe.) It was Bastiat’s purpose in writing the essays that made up the two-volume collection Economic Sophisms to begin the long process of the intellectual demolition of the tricks, frauds, and fallacies used by the privileged elites to defend their vested interests and their systematic plundering of the ordinary people.

Bastiat was skeptical that religious morality would be successful in changing the views of those who held power because, as he asked on several occasions, how many times in history have ruling elites ever voluntarily given up their power and privileges? His preference was to strike at power from below by opening the eyes of the duped and tricked with the truths that political economy provided, to encourage doubt and mistrust in the justice of the rulers’ actions, and to mock the follies of the political elite by using sarcasm and the “sting of ridicule.” Bastiat summed up the job of the political economists as “opening the eyes of the Orgons, uprooting preconceived ideas, stimulating just and essential mistrust and studying and exposing the true nature of things and actions.”

This he did to brilliant effect in the writings of the last two years of his life, the lasting legacy of his contribution to classical-liberal political economy.