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01-11-2008: BASTIAT AND THE LAW

As we celebrate the 200th anniversary of the birth of Frédéric Bastiat we should remember that France once had a vibrant tradition of market economics. While it is true that Marxist social philosophy has dominated French intellectual life for at least the past fifty years, and even today a form of interventionism resists the allure of Anglo-American individualism, early in the nineteenth century the French theoretical laissez-faire tradition defended a form of the market more efficaciously than did the English classical school (from Adam Smith to Ricardo). Friedrich Hayek somewhat traduced this legacy when, in a famous essay, he claimed that the whole of the French intellectual tradition was infected with a form of rationalism which rejected the market explanation of spontaneous order.

But historically the English classical school had degenerated under the influence of Ricardo. He had assumed that the free market was inherently vulnerable to certain necessary processes: rising population would drive down wages to subsistence, the returns to capital would fall and income would be increasingly absorbed by land rent in the ‘stationary state’. In this class theory of society, workers, capitalists and landowners were engaged in a struggle for returns. In this rigid, deterministic model there is no room for the entrepreneur, the fecundity of the market and the creative powers of the free individual.

But the French market theorists were different. Already Jean Baptiste Say had discovered the entrepreneur and distinguished his return (profit) from that of the capitalist, who simply earned interest from his investment. And it was the entrepreneur who used the creative powers of individual liberty to drive the market process towards new discoveries and fresh opportunities for profit. Bastiat took up these ideas and demonstrated the fundamental harmony produced by the exchange process. While Bastiat’s ventures into pure theory, for example in the explanation of value and in the defence of land rent, were either misleading or plain wrong, his informal arguments for the market and private property were formidable.

He anticipated many of the insights of public choice theory, demonstrated the superiority of decisions by the impersonal market as against politics (he recognised from an early stage that politicians do not represent the public interest but only that of a coalition of rent-seeking interest groups), produced intellectually brilliant, as well as witty, arguments on behalf of free trade (in which he was a close collaborator of Richard Cobden who was instrumental in the repeal of the Corn Laws in 1846) and provided arguments against socialism that are still relevant to today’s still statist world. In a sentence of stunning clarity yet profound intelligence, he declared that the ‘state is that fictitious institution by which everybody tries to live at the expense of everybody else’.

But his arguments for the market are nested comfortably in a highly plausible theory of law and morality. Towards the end of his life he seemed to have lost the battle for free trade in France and his country had been afflicted with various forms of socialistic experimentation in 1848.4 Bastiat spent the last few years of his life producing articles and tracts against the new collectivist menace. But he knew that economics was not enough; that the theory of a free society needed an account of law, a theory of legitimate property and a proper explanation of the limits of government. He knew on utilitarian grounds that socialism does not work, but he wanted to show that collectivism was destructive of freedom, human dignity and the proper moral constraints that should govern human action.

The result of his labours was The Law. This work, written while Bastiat was dying of tuberculosis, was published as a pamphlet in June 1850. It elaborated the moral ideas already implicit in his economic work and constitutes his main contribution to political theory. He noticed quite early in his literary career that the legal system had developed some deleterious features during the nineteenth century. The law had become an instrument of politics, not the handmaiden of freedom.

Accordingly, he wrote: ‘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.’ Bastiat argued that government, using the ‘law’, had become an active participant in the economy, and in so doing had stopped protecting life, liberty and free exchange. It had become merely an instrument of power, and hence it was in danger of losing the respect that it should have in a civilised society. It had ceased to be a system of impartial and general rules, which individuals need for stability and predictability in an uncertain world, but was becoming the ‘legal’ embodiment of a series of arbitrary decrees issued by governments in pursuit of collective plans.

Of course, the situation has become much worse today and Bastiat’s analysis of proper legal processes has a resonance that applies universally. The problem that exercised Bastiat was that modern governments were using the dignity and ethical status that we attach to the word law for purposes that were antithetical to the correct understanding of legality, which must be derived from an objective, individualistic ethic.

It is important to stress, then, that Bastiat was no legal positivist, prepared to use the word law for any formally valid utterance of a legislative assembly. In his view, the law had to fulfil certain moral criteria if it were to be used correctly. The main features of that morality which Bastiat stressed were liberty, justice and property. Law understood in the context of morality was a harmonious whole, as self-consistent and as self-correcting as the parts in an economic system.

Consistent with this natural law doctrine is the claim that positive law does not create property and that liberty is not a gift of the legislature. Both are intrinsic features of human action that is free from coercion. Freedom is being left alone, subject to the constraint that it is impermissible to undermine the equal rights of others. If the positive law enforces this then the harmony is complete: law is justice. It is all derived from an accurate account of man: ‘Life, faculties, production (…). this is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation and are superior to it.’

The powers of the positive law are morally limited to the powers of each individual. Law is the collective organisation for the individual right of self-defence and it cannot possess, or perform, what individuals cannot possess or perform. Although Bastiat declared the aims of the socialists are inconsistent with economic science, he recognised that these goals were actually more likely to come about if legislators simply left the market to itself. Natural competition would produce equality, as workers moved automatically to more productive, higher-paying occupations and in the long run rates of interest would be identical as capital moved to the most propitious venues. Whatever inequality remained after competition merely reflects the different productivity of labour, and is ‘eternally just’. But law and justice are understood negatively: ‘Justice is achieved only when injustice is absent.’ In the modern world, ‘social justice’, or some arbitrarily determined level of income, has become the aim of legislators. For Bastiat, this was inefficient; and immoral.

The law becomes perverted when the state takes on things outside its permissible range of activity. Bastiat seemed aware that there is so little agreement about the content of an expanded notion of justice that only dissent and disharmony will follow the state’s attempt to implement the socially just society. The same applies to that other concept of the French Revolution, fraternity. Apart from the natural reciprocity and automatic sociability that arise from friendship and market exchange, the concept has no descriptive features. According to Bastiat, socialist politicians merely seized the idea of fraternity and enforced it on people. But compulsory cooperation is no cooperation at all: it is forced conformity. While Bastiat was a firm believer in natural rights, he was disturbed that the extension of the law into inappropriate areas introduced a new concept of acquired rights, which distorted the basic idea of rights. Acquired rights arise from the expansion of government rather than from the natural moral relationships between individuals.

Under this new concept the right to work no longer meant the prohibition of man-made impediments to the search for jobs, but rather the artificial creation of non-economic employment by government. As well as making no economic sense, such ventures attenuated the clarity and determinacy of genuine rights claims. One can imagine Bastiat’s reaction to the endless manufacture of social and economic rights by democratic governments today. He would have been the first to notice that the multiplication of rights claims reduces their value (the ambitious morality of modern democratic politics cannot repeal the laws of economics). Rights should be negative, as is justice. It was a feature of the socialist agitation of 1848 that the traditional language of liberal politics was perverted and twisted towards collectivist ends by people like Louis Blanc.

Behind the distortion of the meaning of modern law, Bastiat detected the influence of the ancient classical tradition with its anti-individualism and implicit totalitarianism. In The Law he paid special attention to Mably, one of the most sinister of the extreme republicans of the Revolution. Mably’s open identification of virtue with terror was not only a kind of moral licence for the infliction of cruelty and suffering, but it also represented a complete reversal of traditional ways of moral thinking. Ethical principles are no longer rules and conventions that expand our liberty and enable us to exchange in peace; they are now the instruments of dictatorship. Men are being forced to die for an idea that emanates exclusively from the head of the Legislator. Although he regularly voted with the Left in the Assembly, Bastiat was never a party man. He always voted according to his conscience. The fact that this sometimes placed him on the same side of an issue as the socialists was due to the practical reality that there were enough moral issues on which he could agree with them. Characteristically, when his bitter economic enemy Louis Blanc was tried by the Assembly for conspiracy and insurrection against the state, Bastiat defended him and voted for his acquittal. A thorough examination of the evidence convinced him that the charges were groundless.

Bastiat also voted in 1849 against proposed laws to prohibit labour unions; they were part of the backlash against the working-class excesses of the previous year. Bastiat’s belief in the principle of liberty impelled him to support the right not to work. There was, however, a tactical explanation for his actions. He did not want the government to be blamed for any unemployment. He knew perfectly well that unions cannot raise pay above (marginal) productivity, but he did not want the public to be deceived about the true causes of low pay and unemployment. If workers’ organisations were banned, that action itself would be held to be the cause of any distress. Despite his voting record, Bastiat never departed from his economic principles. He insisted that socialism was legalised plunder, that it could not possibly work and that it would be the antithesis of the free society.

To the end he insisted on the conceptual link between freedom and property. When the state takes someone’s possessions the crime is not exhausted by their removal but also by denial of the moral agency of the victim. In a sense, the identity of the person is established by his property, by which Bastiat meant property in the person. One’s natural abilities are as much a part of his property as one’s physical goods. In this respect Bastiat followed principles espoused by John Locke. And at one level it is certainly true, for if a person did not possess property in his own skills and capacities, he could not exercise his economic liberty; he could not, for example, be an entrepreneur.

For indisputable utilitarian reasons one can easily demonstrate the futility of high taxation and other types of government-inspired plunder, but Bastiat wanted to go further than this: he wanted to place property and freedom firmly in the tradition of western morality. While we have earlier expressed some doubts about the morality of exclusive land ownership, in all other respects Bastiat’s defence of property clearly resonates with modern libertarianism.

At his death, much of what Bastiat had fought for throughout his life seemed threatened. The free-trade movement in France was virtually finished (though there was some belated and diluted recognition of his work in the Anglo-French commercial treaty of 1860) and various forms of collectivism seemed to have a grip on the French psyche. The optimistic free-market movement to which he belonged withered as the country embarked on a clear collectivist course that prospered as time went on. It is thriving today. It is true that his cohort, Gustave de Molinari, took up his ideas and developed them in an anarcho-capitalist direction, but Molinari had little impact on the course of events, and is virtually unknown today outside specialist circles.

Despite the events of history, Bastiat’s legacy is impressive and lasting. His arguments provide formidable artillery in any contemporary attack on statism. His legacy has special relevance in his native France. Riddled by enormously costly welfare, ruinously high taxation and an open contempt for the free-market capitalism of the Anglo-American tradition, which is now going through something of a minor revival, contemporary France would drive Bastiat to despair. Although most French intellectuals have given up on outright collectivism, a form of European ‘capitalism’ has developed which would have provoked Bastiat’s scorn. One can imagine Bastiat’s mordant response to the recent French government’s imposition of a maximum 35-hour working week, justified on the grounds that it would save jobs. ‘Why not ten hours?’ he would probably have said. ‘Think how many jobs that would save.’

Bastiat’s ideas are also capable of extension. One issue that would have excited him is the possibility of going beyond the market for regular goods and services and exploring the idea of competitive jurisdictions. People do often migrate to areas where taxation and regulation are less oppressive. In the modern, global economy the costs of exit are lower than they were even ten years ago. However, the European Union with its desire to centralise and regulate internationally is rapidly reducing the possibility of such competition. The politicians who run the Union are the world’s most assiduous rent-seekers and they know perfectly well that jurisdictional competition would severely reduce these rents. That is why a stream of regulations and directives from Brussels has systematically expunged variety and competition from European nations. What is the point in emigrating if the laws are much the same wherever you go? It is a situation that would have enraged Bastiat, but I am sure he would have relished the intellectual combat it provokes.

And the truly impressive thing about The Law is that it is a book whose central message can be used in a variety of different circumstances. Because it deals with both economics and politics its fundamental principles have a timeless quality about them.

Gepubliceerd door Norman Barry op 01-11-2008

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