In the period after the French Revolution, there was political turmoil that consisted of multiple power grabs from different political parties and individuals, each with different goals and ideas of how the country should be run. Immediately after the Revolution, the National Assembly established the First Republic, until Napoleon led a coup and crowned himself emperor. After his fall from power, the Bourbon Kings, constitutional monarchs, ruled until 1848, when the Second Republic was formed. The Second Republic was ruled by an elected president, Napoleon’s nephew, until he also led a coup and named himself emperor in 1852. Bastiat wrote The Law in 1850, between the Second Republic and Louis-Napoleon’s coup. He had experienced many rulers try to develop new ways to run the country and fall from power in this period of political turmoil. Below are how the six foundational principles of entrepreneurship are addressed in Bastiat’s works.
Power Balance
Bastiat believed in decreasing the power of the government and increasing individual power. In pre-revolutionary France, nobles were mostly exempt from paying taxes, and lower-class citizens were often taxed highly to make up for their lavish spending. France had a history of over-taxation to benefit the state instead of the public. Napoleon also taxed citizens highly to benefit the elite. Both monarchs and emperors in France had created a centralized government that neglected the needs of regular French citizens. Bastiat was weary of this pattern in French history, and warned against the high amount of power in the French government. In this period of turmoil when the country was changing leaders and ruling parties at a fast rate, the balance of power was changing with it.
Property Rights
Bastiat was a firm believer that people should have the right to their own individuality, liberty, and property. He has passionate views on the legal plunder that had been taking place in France. This legal plunder involved taking the property of one person and giving it to another or if the law allows something that a regular person cannot perform without committing a crime. This is what socialism can do to citizens who own private property, such as a business. Taking away the ability to own a business and making the means of production public would be taking the property of one person and giving it to others, which is legal plunder, according to Bastiat. This legal plunder also involved high taxes and tariffs, which were also very common in France at the time. France had a history of increasing taxes to benefit the state or the monarch, whichever was in power at the time. This high rate of taxes that did not benefit the people was another example of legal plunder.
Competitive Markets
In another of Bastiat’s works, Petition, Bastiat pretends to be writing a letter from all the people involved in the industry of artificial light in France. In the satirical letter, the light manufacturers ask that the government restrict or eliminate a foreign competitor that is threatening their business. the foreign competitor, which is the sun, is able to make light much cheaper than the manufacturers, and their businesses are struggling. This satirical piece shows Bastiat’s opinion on the elimination of competition. By forcing people to pay higher prices for local or domestic goods instead of paying for cheaper international imports, there is a higher cost for everyone. In certain industries, the domestic products did not have competitive advantage, so placing more money in them was a waste of resources.
Specialization and Division of Labor
With the rules of protectionism, the whole country of France was having to produce all of the goods they needed. Without foreign imports, there was no specialization because they were forced to produce everything they needed. Costs and labor would have been lower if the country chose to specialize in fewer items, and imported the other necessary products from other countries. With the country trying to produce everything they needed, there was a higher amount of effort and higher prices than were necessary.
Free Exchange and Alignment of Incentives
Bastiat was very opposed to protectionism, which includes reducing imports, restricting trading between France and other countries, and overall making trade and exchange more difficult. Bastiat worked in his family’s exporting business as a teenager, where he witnessed the effects of protectionism. In the town where he worked, he saw the diminishing population, warehouses that were going out of business, and a higher rate of unemployment and poverty produced by the strict restrictions on imports and exports (DiLorenzo). With this experience, Bastiat could see that protectionism was not helping communities, as it was supposed to. The inability to exchange freely was increasing poverty and unemployment rates instead of encouraging the internal trade that socialism and protectionism were attempting to create. This also applies to the misaligned incentives that were taking place in France. The policies that encouraged protectionism and the decrease of international trade were forcing citizens to spend more money than they needed to. The goal of reducing international imports was to create more business and value in French production. However, this caused higher costs for citizens, because importing goods would be cheaper. The policies that were supposed to improve societal well-being created adverse effects because of the higher costs and the loss of jobs in the import and export industries.
Image Source: https://oll.libertyfund.org/page/resources-on-bastiat
Sources
DiLorenzo, Thomas. “Biography of Frederic Bastiat (1801-1850): Between the French and Marginalist Revolutions | Thomas J. DiLorenzo.” Mises Institute, 18 Aug. 2014, mises.org/library/biography-frederic-bastiat-1801-1850-between-french-and-marginalist-revolutions. Accessed 2 Feb. 2023.