Leiden, a.d. V Id. Oct. MMDCCLXIX A.U.C.,
Bastiat lived during the first half of the 19th century in France, a politically very unstable time for France, with many revolutions and regime changes. He was a classical-liberal, who also influenced libertarianism (in fact I would call him a libertarian avant la lettre). He also developed the notion of opportunity costs (if I buy ice cream, I cannot buy apple pie with that same money), that alone makes him a respectable economist. The 90 page copy of ‘Justice and Solidarity’ I borrowed from a friend in fact contains two essays, ‘Justice and Solidarity’, and ‘That Which Is Seen and That Which Is Not Seen’. I will discuss both, in the order in which they appear in the book.
Justice and Solidarity
Bastiat’s main point in this essay is that the state’s goal should be maintaining justice, while leaving solidarity to society. This to him is the biggest difference between the (liberal) ‘economists’ like him and the socialists, who think the government has the task to ensure solidarity between individuals. A state based on justice, to Bastiat, is a night watch state, in which the government only prevents injustice by protecting property and enforcing contracts. A solidary government would actively take measures to try to make its citizens happy.
He provides several arguments for why the state should only enforce justice. Firstly, solidarity cannot be mandated, because solidarity entails a voluntary sacrifice. If the government forces people to make sacrifices to each other, the voluntary aspect disappears, and so does solidarity. Therefore the government cannot provide solidarity in society. This play of words is not very convincing to me: if the government can save lives through redistributing some income, I do not care how ‘solidary’ that is, it is the lives saved I am interested in.
Moreover, Bastiat paints the world very black and white. Or the government tries to maintain justice, or the government tries to provide everyone with anything they want. This last assertion is based on a slippery slope argument, which lays the foundation for a straw man fallacy. It is simply untrue that governments try to do everything as soon as they accept certain tasks beyond upholding justice. In fact, social and liberal democracies with some form of a welfare state have effectively prevented communist revolts leading to governments which usurped society. Similarly, Bastiat argues that government spending will always end up benefiting the politically well connected, as politicians decide who receives government spending. This also is a dubious claim, although it is very much true that in many regimes government spending does benefit the well connected. So, while Bastiat’s argument against a government taking over all economic tasks is very much justified, his argument that therefore the government should not take on any ‘solidary’ tasks at all is not justified.
More convincing is Bastiat’s argument to be wary of a government which wants to take care of everything, or of too much. Bastiat’s arguments against the utopian views of the early socialists and the later Marxists and Communists clearly lay bare the naivety of those views. Firstly, if we ask ‘the State’ to take care of all of us, we are asking ourselves to take care of all of us. If the State does everything, it is in fact the population, or a share thereof, doing everything for itself and for others. We would be transferring resources from some of us, to others of us via the ‘greedy and wasteful’ hands of bureaucrats.
This means that any socialist system requires a general lack of selfishness. People will only work for each other without compensation if they are not selfish. This is a very unrealistic assumption, given the human tendency to be egotistic. So we need a system which incentivizes people to work as efficient as possible for each other. However, the government does not include a mechanism which forces everyone to work as efficient as possible in the way the free market does. This argument to me seems sufficient proof that the government cannot take care of all of us and of all our wishes. A sufficient many of us should be self-proficient, that is, capable of producing enough goods or services to survive, and if possible trade with others to use our comparative advantages. In general markets are better at this, so the government should not do everything.
Secondly, it is true that just because the government starts taxing citizens, and starts spending, we have no guarantee that this expenditure is directed to those who need it most. In fact, very often such expenditure has been directed to those who are politically connected, in fact leading to redistribution from the middle class to the upper class. Moreover, there is always the chance that bureaucrats take some of the resources for their own benefit.
However, Bastiat moves to the total opposite of the spectrum, by arguing that the government should do nothing but protecting property rights and maintaining public safety. He even calls government intervention plundering, which is a bit of an overreaction to me, just a bit. Meanwhile, his views about this libertarian utopia are extremely optimistic. He does not entertain the thought of market failure, and he ignores how a free market will maintain large inequalities if the starting position is one of large inequalities (exactly because large inequalities allow the rich to lobby unopposed).
So, this essay is interesting, but to me it fails to meet its goal. If the goal had been to convince that an all-encompassing government will fail, the essay would have been very convincing. However, the goal is to convince that any attempt by a government to do more than protect property rights and safety, and to enforce contracts will lead to failure, I am not convinced.
That Which Is Seen and That Which Is Not Seen
We cannot create something out of nothing, and neither can the State. This means that for every government intervention there are winners and losers. However, often it is very obvious who the winners are, while it is less obvious who the losers are. This means that for every government intervention we need to figure out who the winners and losers are. Only then we can make fair decisions about economic policy. Moreover, it means that we should never propose a government intervention because it will create jobs, or will increase Gross Domestic Product (GDP).
For instance, the government can decide to build a road. Roads are often very useful, in which case building that road can be the right decision for the government. However, building a road for the sake of employment and GDP, rather than to solve logistic problems, is incorrect. It is true that if the government spends $100.000 on the road, this feeds 2 workers building that road, and increases GDP with $100.000. That is what we see. What we do not see is that the government had to tax citizens first in order to get the $100.000. They could have spent this money on other products, such as three cars, part of their house, education for their children, etc. In other words, because of the government intervention we now have a road, but not three cars. If people would have preferred the three cars over the new road, society is now less well off than it could have been. Seeing how many people still seem to believe that government intervention comes at no price, I think Bastiat’s advise to look at what you see, but also to try to find out what you do not see is still very relevant.
Bottom Line: The book is interesting for those interested in economic history, for Bastiat was praised by Schumpeter and Hayek. The second essay is still quite relevant, however, the first essay did not convince me at all, although it gives an excellent overview of libertarian thinking.