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Friday, May 10, 2013

Boisguilbert and laissez-faire

The best known of the late seventeenth century French advocates of laissez-faire is Pierre le Pesant, Sieur de Boisguilbert (1646–1714). Born in Rouen into a high-born Norman family of judicial officers, and a cousin of the poet-dramatist Corneille brothers, Boisguilbert was educated by the Jesuits, and eventually purchased two judicial offices at Rouen. He served there as lieutenant-general of the court from 1690 until his death. Boisguilbert was also a large landowner, businessman, litterateur, translator, attorney and historian.

Boisguilbert was a combination of genius and crank. His first and most important work, Le Detail de la France (A Detailed Account of France), published in 1695, was revealingly subtitled La France ruinée sous le règne de Louis XIV (France Ruined Under the Rule of Louis XIV).10 Boisguilbert penned innumerable letters to successive controllers-general of France on the virtues of free trade and laissez-faire, and on the evils of government intervention. After 1699, Boisguilbert kept hammering away at controller-general Michel Chamillart for years, but to no effect. Chamillart kept refusing him permission to print his tomes, but Boisguilbert published them anyway, finally printing his collected works under the title Le Detail de la France in 1707. In that year, the same year that Vauban's Dixme Roy ale was censored, Boisguilbert's work was also outlawed, and its author sent into brief exile. He returned under promise of silence, but promptly reprinted his book four times between 1708 and 1712.

Arguing for laissez-faire, Boisguilbert denounced the mercantilist preoccupation with amassing specie, pointing out that the essence of wealth is in goods not coin. Money, Boisguilbert explained, is just a convenience. Thus the influx of bullion from the New World in the sixteenth century only served to raise prices. If nature were left to herself, all men would enjoy plenty and the government's attempts to improve upon nature only caused havoc. The simple remedy for the manifold evils under which France was suffering was, as Professor Keohane puts it: ‘for the government to stop interfering with natural patterns of trade and commerce, and laissez faire la nature. No superhuman effort for reform was needed, only the cessation of ill-considered effort’.

Collective or social harmony, Boisguilbert wrote, arises from the efforts of innumerable individuals to advance their self-interest and their happiness. If the government removed all artificial restrictions upon trade, all participants would have incentive to produce and exchange, and self-interest would then be free to do its constructive work. Only the use of coercion or state privilege pits one self-interest against another, whereas submission to the wise natural order would ensure harmony between individual greed and universal benefit. As Keohane summarizes Boisguilbert, ‘So long as we do not interfere with her [Nature's] workings, our attempts to get as much as we can for ourselves will maximize everybody's happiness in the long run’.12 It is not, then, that individuals aim at the general good while pursuing their own self-interest. On the contrary, it is the glory of the natural order that, while individuals aim at their own ‘private utility’, they will also promote the interests of all. Although individuals may try to subvert the laws and gain at the expense of their neighbours, the natural order of liberty and laissez-faire will maintain peace, harmony, and universal benefit. As Boisguilbert declares, ‘But nature alone can introduce that order and maintain the peace. Any other authority spoils everything by trying to interfere, no matter how well-intentioned it may be’. In the free market established by the natural order, ‘the pure desire for profit will be the soul of every market for buyer and seller alike; and it is with the aid of that equilibrium or balance that each partner to the transaction is equally required to listen to reason, and submit to it’.

The natural order of the free market prevents any exploitation from taking place. Thus: ‘Nature or Providence [had]... so ordered the business of life  that, provided it is left alone (on le laisse faire) it is not within the power of the most powerful in buying goods from some poor wretch to prevent the sale from providing the subsistence of the latter’. Everything works out all right ‘provided that nature is left alone (on laisse faire la nature)...[i.e..] provided that it is left free and that no one meddles with this business save to grant protection in it to all and to prevent violence’.

Boisguilbert also specifically demonstrated the counterproductive results of government intervention. Thus, when the French government tried to alleviate hunger by lowering grain prices and controlling trade, all it accomplished was to diminish the cultivation and production of grain, and hence to intensify the very hunger that the government was trying to relieve. Such intervention, in the summary of Professor Keohane,

would make sense only if grain, like manna or mushrooms, sprang up without human effort, since it ignores the effects of low prices on the habits of cultivators. If government simply ceased tampering, the French economy, like a city from which a siege is lifted, would regain its health. Free to set their own price for grain, and to import grain freely throughout the land, Frenchmen would be plentifully supplied with bread.14

In illustrating the nature and advantages of specialization and trade, Boisguilbert is one of the first economists to begin with the simplest hypothetical exchange: two workers, one producing wheat and the other wool, and then to extend the analysis to a small town, and finally to the entire world. This method of ‘successive approximation’, of beginning with the simplest, and then extending the analysis step by step, would eventually prove to be the most fruitful way of developing an economic theory to analyse the economic world.

Graphically illustrating the respective workings of power and market, Boisguilbert supposes a tyrant who tortures his subjects by tying them up within sight of each other, each surrounded by an abundance of the particular good that he produces: food, clothing, liquor, water, etc. They would be made instantly happy if the tyrant were to remove their chains and allow them to exchange their surplus goods for those of one another. But if the tyrant says, no he can only remove the chains of his people when some war or other is settled, or at some future time, he is only adding ridicule and mockery to their grievous torture. Here, Boisguilbert was bitterly mocking the reply that Louis XIV and his ministers habitually made to the pleas of reformers and oppositionists: ‘We must wait for the peace’.

Again, like the other oppositionists, war was exposed as the standard excuse for maintaining the crippling interventions of government.

Like Belesbat, Boisguilbert had no patience with inconsistent reformers who tried to make an exception to laissez-faire in luxury products. To Boisguilbert, natural wealth was not just biological necessities; rather ‘true wealth consists of a full enjoyment, not only of the necessaries of life, but even of all the superfluities and all that which can give pleasure to the senses’.

In addition, Boisguilbert was perhaps the first to integrate discussion of fiscal policy with his general economic doctrines. Adopting Vauban's proposal for the elimination of all taxes and their substitution by a single direct tax of 10 per cent on all incomes, Boisguilbert analysed and bitterly denounced the effects of indirect taxes on agriculture. Heavy taxes on grain, he pointed out, have raised costs and crippled grain production and trade. For four decades, he argued, the French government had virtually declared war on consumption and trade by its monstrous taxation, resulting in severe depression in every area of the economy.

On the free market, in contrast, everyone benefits, for ‘trade is nothing but reciprocal utility; and all parties, buyers and sellers, must have an equal interest or necessity to buy or to sell’.

Hence, with Belesbat and Boisguilbert, the focus of the classical liberal attack on statism shifted from moralistic denunciation of luxury or pernicious Machiavellism to meeting mercantilist doctrine on its own utilitarian grounds. Even setting aside classical morality, then, utility and general happiness require the private property and laissez-faire of the natural order. In a sense, old-fashioned natural law had been extended to the economic sphere and to the meshing of individual utility and self-interest through the working of the free market. In contrast to devout mystics like Fenelon, Belesbat and Boisguilbert were in harmony with the new mechanistic cosmologies of Isaac Newton and others of the late seventeenth century. God had created a set of natural laws of the world and of society; it was the task of man's reason, a reason universal to all, regardless of nation or custom, to understand those laws and to achieve their self-interest and happiness within them. In the economy, free trade and free markets, through the harmony of reciprocal benefits, advanced the interest and happiness of all by each seeking his own personal utility and self-interest. The Golden Rule, and absence of violence, was the natural moral law that uncovered the key to social harmony and economic prosperity. While such analysis was not in itself anti-Christian, it certainly replaced the ascetic aspects of Christianity with an optimistic, more man-centred, creed; and also it was consistent with the rising religion of deism, in which God was the creator, or clock-winder, who created the mechanism of the universe and its self-subsistent natural laws, and then retired from the scene.
As Professor Spengler has pointed out:

the eighteenth century conceptualized the economic (or social) universe. It made the hidden processes of the social order visible even as the seventeenth had become aware of those of the physical order and made them visible; it generalized to the realm of man the notion of the ‘frame’ hidden behind ‘the most common Phenomena’ and the ‘Invisible Hand’ by which ‘Nature works’ in ‘all things’.

As for Boisguilbert, his contribution was to be

among the first, if not the first, to conceive, albeit imperfectly, of the system of relations that underlies the economic order... His contribution consisted in his sequestering (however imperfectly) the economic order from the total societal system, in becoming aware of the comparatively autonomous character of this order, in discovering the essentially mechanical and psychological connections binding men together in an economic order and in drawing attention to the manner in which the economic order was subject to disturbances by impulses originating in the political order.15

It should also be mentioned that it surely seemed easier to convince the king and his ruling elite of the general utility of private property and the free market, than to convince them that they were behaving as the heads of an immoral and criminal system of organized theft. So that the basic strategy of trying to convert the king led inexorably to at least a broadly utilitarian approach to the problems of freedom and government intervention.

Austrian Perspective on the History of Economic Thought (2 volume set)

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