Balance of Trade
Balance of Trade
Wednesday, September 05, 2012
by Frederic Bastiat
Our adversaries have adopted tactics that are rather embarrassing. Do
we establish our doctrine? They admit it with the greatest possible
respect. Do we attack their principle? They abandon it with the best
grace in the world. They demand only one thing — that our doctrine,
which they hold to be true, should remain relegated to books, and that
their principle, which they acknowledge to be vicious, should reign
paramount in practical legislation. Resign to them the management of
tariffs, and they will give up all dispute with you in the domain of
"Assuredly," said Mr. Gauthier de Rumilly, on a recent occasion, "no
one wishes to resuscitate the antiquated theories of the balance of
trade." Very right, Mr. Gauthier, but please remember that it is not
enough to give a passing slap to error, and immediately afterwards and
for two hours at a time, reason as if that error were truth.
Let me speak of Mr. Lestiboudois. Here we have a consistent reasoner,
a logical disputant. There is nothing in his conclusions that is not to
be found in his premises. He asks nothing in practice but what he
justifies in theory. His principle may be false; that is open to
question. But at any rate, he has a principle. He believes, and he
proclaims it aloud, that if France gives 10, in order to receive 15, she
loses 5; and it follows, of course, that he supports laws that are in
keeping with this view of the subject.
"The important thing to attend to," he says, "is that the amount of
our importations goes on augmenting, and exceeds the amount of our
exportations — that is to say, France every year purchases more foreign
products, and sells less of her own. Figures prove this. What do we see?
In 1842 imports exceeded exports by 200 million. These facts appear to
prove in the clearest manner that national industry is not sufficiently
protected, that we depend upon foreign labor for our supplies, that the
competition of our rivals oppresses our industry. The present law
appears to me to recognize the fact that the economists are wrong in
saying that when we purchase we necessarily sell a corresponding amount
of commodities. It is evident that we can purchase, not with our usual
products, not with our revenue, not with the results of permanent labor,
but with our capital, with products that have been accumulated and
stored up, those intended for reproduction — that is to say, that we may
expend, that we may dissipate, the proceeds of previous economies, that
we may impoverish ourselves, that we may proceed on the road to ruin,
and consume entirely the national capital. This is exactly what we are
doing. Every year we give away 200 million francs to the foreigner."
Well, here is a man with whom we can come to an understanding. There
is no hypocrisy in this language. The doctrine of the balance of trade
is openly avowed. France imports 200 million more than she exports. Then
we lose 200 million a year. And what is the remedy? To place
restrictions on importation. The conclusion is unexceptionable.
It is with Mr. Lestiboudois, then, that we must deal, for how can we
argue with Mr. Gauthier? If you tell him that the balance of trade is an
error, he replies that that was what he laid down at the beginning. If
you say that the balance of trade is a truth, he will reply that that is
what he proves in his conclusions.
The economist school will blame me, no doubt, for arguing with Mr.
Lestiboudois. To attack the balance of trade, it will be said, is to
fight with a windmill.
But take care. The doctrine of the balance of trade is neither so
antiquated, nor so sick, nor so dead as Mr. Gauthier would represent it,
for the entire Chamber — Mr. Gauthier himself included — has recognized
by its votes the theory of Mr. Lestiboudois.
I shall not fatigue the reader by proceeding to probe that theory, but content myself with subjecting it to the test of facts.
We are constantly told that our principles do not hold good, except
in theory. But tell me, gentlemen, if you regard the books of merchants
as holding good in practice? It appears to me that if there is anything
in the world that should have practical authority when the question
regards profit and loss, it is commercial accounts. Have all the
merchants in the world come to an understanding for centuries to keep
their books in such a way as to represent profits as losses, and losses
as profits? It may be so, but I would much rather come to the conclusion
that Mr. Lestiboudois is a bad economist.
Now, a merchant of my acquaintance having had two transactions, the
results of which were very different, I felt curious to compare the
books of the counting-house with the books of the customhouse, as
interpreted by Mr. Lestiboudois to the satisfaction of our 600
M.T. dispatched a ship from Havre to the United States, with a cargo
of French goods, chiefly those known as articles from Paris, amounting
to 200,000 francs. This was the figure declared at the customhouse. When
the cargo arrived at New Orleans it was charged with 10 percent freight
and 30 percent duty, making a total of 280,000 francs. It was sold with
20 percent profit, or 40,000 francs, and produced a total of 320,000
francs, which the consignee invested in cottons. These cottons had still
for freight, insurance, commission, etc., to bear a cost of 10 percent;
so that when the new cargo arrived at Havre it had cost 352,000 francs,
which was the figure entered in the customhouse books. Finally M.T.
realized upon this return cargo 20 percent profit, or 70,400 francs; in
other words, the cottons were sold for 422,400 francs.
If Mr. Lestiboudois desires it, I shall send him an extract from the
books of M.T. He will there see at the credit of the profit and loss
account — that is to say, as profits — two entries, one of 40,000
another of 70,400 francs, and M.T. is very sure that his accounts are
And yet, what do the customhouse books tell Mr. Lestiboudois
regarding this transaction? They tell him simply that France exported
200,000 francs' worth, and imported to the extent of 352,000 francs;
from which the honorable deputy concludes "that she had expended and
dissipated the profits of her previous economies, that she is
impoverishing herself, that she is on the high road to ruin, and has
given away to the foreigner 152,000 francs of her capital."
Some time afterwards, M.T. dispatched another vessel with a cargo
also of the value of 200,000 francs, composed of the products of our
native industry. This unfortunate ship was lost in a gale of wind after
leaving the harbor, and all M.T. had to do was to make two short entries
in his books, to this effect:
"Sundry goods due to X, 200,000 francs, for purchases of different commodities dispatched by the ship N."
"Profit and loss owed to sundry goods, 200,000 francs, in consequence of definitive and total loss of the cargo."
At the same time, the customhouse books bore an entry of 200,000
francs in the list of exportations; and as there was no corresponding
entry to make in the list of importations, it follows that Mr.
Lestiboudois and the Chamber will see in this shipwreck a clear and net
profit for France of 200,000 francs.
There is still another inference to be deduced from this, which is
that according to the theory of the balance of trade, France has a very
simple means of doubling her capital at any moment. It is enough to pass
them through the customhouse, and then pitch them into the sea. In this
case the exports will represent the amount of her capital, the imports
will be nil, and impossible as well, and we shall gain all that the sea
This is a joke, the protectionists will say. It is impossible we
could give utterance to such absurdities. You do give utterance to them,
however, and, what is more, you act upon them and impose them on your
fellow-citizens to the utmost of your power.
The truth is, it would be necessary to take the balance of trade backwards (au rebours),
and calculate the national profits from foreign trade by the excess of
imports over exports. This excess, after deducting costs, constitutes
the real profit. But this theory, which is true, leads directly to Free
Trade. I make you a present of it, gentlemen, as I do of all the
theories in preceding chapters. Exaggerate it as much as you please — it
has nothing to fear from that test. Suppose, if that amuses you, that
the foreigner inundates us with all sorts of useful commodities without
asking in return — that our imports are infinite and exports nil. I defy
you to prove to me that we should be poorer on that account.
Included in The Bastiat Collection (2011), this article appeared in Economic Sophisms (1845).
Frédéric Bastiat was the great French proto-Austrolibertarian whose
polemics and analytics run circles around every statist cliché. His
primary desire as a writer was to reach people in the most practical way
with the message of the moral and material urgency of freedom
Copyright © 2012 by the Ludwig von Mises Institute. Permission to
reprint in whole or in part is hereby granted, provided full credit is
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