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Free Trade

Don Quixote and Sancho when visiting the villa of Count Frederic Bastiat enter into a lively argument on fair trade. Sancho explains that a good trade is favorable to both parties, even when one producer has an advantage of lower cost materials or labor. Each party will benefit so long as each has something that the other wants. In the classic argument of the candlemakers seeking edicts against the sun, as other where recorded by Frederic Bastiat, Sancho demonstrates that "full-employment" is false prosperity if the labor is not gainful. He argues that leisure or time for other activities rather than work is an honorable reward of trade. Fair trade is recognition that you never get something for nothing, you must have something to offer that the other desires. The exception being, perhaps a hole in your stocking from going around in circles.

Don Quixote and his squire were enjoying their visit in the spacious villa by the sea, and the fruits of other men's labor. They were the guest of the Count and Countess and were entertained nightly by visiting minstrels as well as by special invitation, the members of the King's own staff of advisors. In particular, these men of knowledge were seeking council from this well read and worldly knight of the realm. Special invitation may be a bit too strong a wording as they were in fact dispatched by his Highness to obtain word as to how the kingdom was to respond to an offer by Portugal to exchange certain commodities in fair trade.

The king having amassed much gold still saw his peoples as lacking the necessities of life and was concerned that if the Portugese offer was rejected, the rulers of that kingdom, might see the gold as too worthy a goal to not seize outright, and his subjects, the serfs and lesser ones would not rise to the defense of Spain, seeing that they had nothing to lose and perhaps something to gain.

So it was that the party sat enjoying the fruits of the new world, overfull cups of wine and the best that our host had to offer. Count Frederic Bastiat, for that was his name, prodded Don Quixote to cast light on to the problem so that it could be better understood and resolved.

Stretching himself to his full height, unburdened by his armor and threadbare raiments which were substituted for by clothes from the Count's own closet, the knight errant cleared his throat and cast a disapproving eye on Sancho who appeared to be making a bit of a show of himself with one of the maids of the Countess. Don Quixote began, "Let us consider the issue by placing it on the terms which we can best understand. The lands wherein we dwell are not the most productive and it requires much time and labor to gain meat and vegetables for the table.

Portugal our neighboring kingdom has made an interesting offer. The Portugese have said, "In Portugal, game and fish are much more plentiful than here in Spain, but alas, horticulture is quite unknown to their people, who continue to be dependent on the sea for much of their daily foods. It would be an easy matter for them to bring to the market four baskets of meat and fish, if we would give, in exchange two baskets of vegetables.""

At these words, Sancho having filled his abundant stomach with the bounty of the table, felt that he must offer a counter point to that which he was sure the Knight was about to make and so he asked: "What of this suggestion from the Portugese?"

Quixote, taken aback by this abrupt interjection into his realm as the center of attention, brushed off Sancho's rude interruption and continued; "If we accept the Portugese proposal, we are ruined."

Squire: "Are you sure of that? Let us consider."

Knight: (Now much annoyed): "The case is clear. Crushed by competition from the Portugese, hunting and the production of meat as a branch of our agriculture will be annihilated."

Squire: "What matters it, if we have meat and fishes?"

Knight: "You speak rubbish, what you offer is theory, and something of which you know nothing! The meat will no longer be the product of our labour."

Squire: "I beg your pardon, sir; for in order to have meat for our tables we must part with our vegetables."

Knight: "Then what shall we gain?"

Squire: "The four baskets of game and sweet meats cost us six hour's work. The foreigner gives us them in exchange for two baskets of vegetables which cost us only three hours' work. This places three hours at our disposal."

Knight: "Say, rather, which are subtracted from our exertions. There is our loss. Labor is wealth and if we lose a fourth part of our time, we shall be less rich by a forth."

Squire: "You are greatly mistaken, my good master. We shall have as much meat, and the same quantity of vegetables, and three hours at our disposal in the bargain. This is progress, or there is no such thing in the world."

Knight: "You lose yourself in generalities! What should we make of these three hours?"

Squire: "We would do something else."

Knight: "Ah! I understand you. You cannot come to particulars. Something else, something else - that is easily said."

Squire: "We can fish, we can ornament our cottage, we can read the Bible."

Knight: "Utopia! Is there any certainty that we should do either the one or the other?"

Squire: "Very well, if we have no wants to satisfy we can rest. Is repose nothing?"

Knight: "Of course, from you, rest is everything! But while we repose we may die of hunger."

Squire: "My dear friend, you have got into a vicious circle. I speak of a repose which will subtract nothing from our supply of game and vegetables. You always forget that by means of our foreign trade nine hours' labour will give use the same quantity of provisions that we obtain at present with twelve."

Knight: "It is very evident, squire, that you have not been educated, read the fine books of my library, in particular Moniteur Industriel, a classic of France, or paid attention to the lessons of our village priest. If you had, you would have learned; that all time saved is sheer loss. The important thing is not to eat or consume, but to work. All we consume, if it is not the direct produce of our own labour, goes for nothing. You want a kingdom; a gift which I have promised you. Do you want to know whether you are rich? Never consider the enjoyments you obtain, but the labour you undergo. This is what the books would teach you. That is why you serve in my employ. For myself, I have no pretensions to be a theorist, the only thing I look at is the loss of our hunting."

Squire: "What a strange turning upside down of ideas! But ..."

Knight: "No buts. Moreover, there are political reasons for rejecting the interesting offers of the perfidious stranger."

Squire: "Political reasons!"

Knight: "Yes, he only makes us these offers because they are advantageous to him."

Squire: "So much the better, since they are for our advantage likewise."

Knight: "Then by this traffic we should place ourselves in a situation of dependence upon him."

Squire: "And he would place himself in dependence on us. We should need his game, and he our vegetables, and we should live on terms of friendship."

Knight: "Friendship indeed! The flat of my sword across your backside is what you deserve, fortunate for you we are in good company. Do you want me to shut your mouth?"

Squire: "I have as yet heard no good reason."

Knight: "Suppose the foreigner learns to cultivate a garden, and that his kingdom should provide more fertile than ours, after all they after have guano from the sea birds which we lack. Do you see the consequence?"

Squire: "Yes, our relations with the foreigner would cease. He would take from us no more vegetables, since he could have them at home with less labour. He would bring us no more fresh meat, since we should have nothing to give him in exchange, and we should then be in precisely the same situation that you find us in now."

Knight: "Improvident tiller of the soil, I should never have made you a squire to do my bidding! You don't see that after having annihilated our meat industries by inundating us with game and fish from his kingdom, he would annihilate our gardening as well by inundating us with vegetables."

Squire: "But this would only last so long as we were in a situation to give him something else; that is to say, so long as we found something else which we could produce with economy of labor for ourselves and which he would desire. Failing that he would cease to trade with us."

Knight: "Something else, something else and trade! You always come back to that. You are at sea, my good squire; there is nothing practical in your views."

The night grew long as the two engaged in the discourse much to the amusement of their host and the visitors from the King's court. But, Quixote, having the power of his greater knowledge contained within his books as well as being the provider (or at least the promise of wealth) to his squire, prevailed (or so it seemed).

In summary, the weary Don Quixote said, "If a stranger so offers to supply the kingdom with meat, let us tell him -
For us to accept your offer, we must be assured to two things;
The first of which is, that your kingdom be no better stocked with meat animals than ours, with that assurance, we will be on equal footing (if meat be a weapon of adversity).
The second being, that you will not gain by the bargain, but instead will lose to us the advantage, as in every exchange there is of necessity a winning and a losing party. We would be dupes if you were not the loser."

Sancho rose from his couch in anger, "Sire, you ask too much and you mind has cobwebs where there should be grey matter. How could anyone bargaining with an ass accept such terms. My sainted Grandmother taught us that you must always leave something for the other side and a bargain too hard driven will gain no fruit from the vine! Let me tell a story that will clear the air after which, let us all retire to our closets for a rest in the cool of what remains of the night."

He began; "What we speak of is competition, that is the relationship between those who offer up a product perhaps of better, equal or lesser quality, price or convenience. It is not enough to desire commodities; to possess one or more, one must have something to offer in exchange. The Portugese know the value of trade very well as they have lived by their wits in this arena for centuries. We are just learning the ways of the market. On the matter of trade, it is well to consider that everyone is trading. If you are a farmer and have gold, then it is gold that you trade for the meat for your table. Having received gold, the gamesman now can use the gold in fair exchange for clothes in which to make him most comfortable when pursuing the rabbit or wild boar. The tailor now takes the gold and buys bread for his table from the baker taking his gold now buys grain from the farmer. The farmer in turn has traded his labor for the grain and the gold.

Now let no one think that his labor is the standard for perfection. There will always be someone who will offer something for less. What my good master is suggesting is that competition is an evil. No! I must insist, it is what makes for the enjoyments of life. Consider if you will, who will share the straw with the fair maiden who waits the table. Competition for her merriment is a noble effort. How sad it would be if no means of distinction were provided.

Now I ask for you to think of those of us who are suffering from the intolerable competition of a foreign rival, placed, it would seem, in a condition so far superior to ours for the production of light that he absolutely inundates our national market with it a price fabulously reduced. The moment he shows himself, their trade leaves them. All consumers apply to him; and a branch of our native industry, having countless ramifications, is all at once rendered completely stagnant.

This rival who is known to us all, wages war to the knife against our peoples of commerce. And as surely as the sun rises in the East, we suspect that our perfidious(?) neighbors to the West play no small part in the haughty circumspection which he dispenses in our case. Columbus and others tell us that the sun always seems to shine more brightly on Portugal.

What our merchants and craftsmen pray, if it please the King, for an edict be laid on the land ordering the shutting up of all doors, windows, skylights, dormer-windows, outside and inside shutters, curtains, blinds, bulls-eyes; in a word, all openings, holes, chinks, clefts, and fissures, by or through which the light of the sun has been in use to enter houses, to the prejudice of the meritorious manufactures with which we flatter ourselves we have accommodated our country - a country which, in gratitude, ought not to abandon us now to a strife so unequal.

Who are we? We are the candlemakers who practice our art with skill and great labour and the enemy, that is the competition, is the sun. We trust Sire, that you do not regard this our request as a satire, no refuse it without at least previously hearing the reasons which we have to urge in its support.

And, first, if you shut up as much as possible all access to natural light, and create a demand for artificial light, and create a demand for artificial light, which of our Spanish manufacturers will not be encouraged by it?

If more tallow is consumed, then we shall have an extended cultivation of the poppy, of the olive, and of rape. These rich and exhausting plants come at the right time to enable us to avail ourselves of the increased fertility which the raising of additional cattle, will impart to our lands.

Our heaths will be covered with resinous trees. Numerous swarms of bees will, on the mountains, gather perfumed treasures, now wasting their fragrance on the desert air, like the flowers from which they emanate. No branch of agriculture but will exhibit a cheering development.

The same remark applies to navigation. Thousands of vessels will proceed to the whale fishery; and, in a short time, we shall posses a navy capable of maintaining the honour of Spain (and crushing the dastardly island peoples of the North Sea.), and gratifying the patriotic aspirations of your petitioners, the candlemakers and others.

But what shall we say of the manufacture of articles of beauty. Henceforth you will behold gildings, bronzes, crystals, in candlesticks, in lamps, in lustres, in candelabra, shining forth, in spacious warerooms, compared with which those of the present day can be regarded as mere shops.

No, poor resiner from his heights on the seacoast, no coalminer from the depth of his sable gallery, but will rejoice in higher wages and increased prosperity.

Only have the goodness to reflect, kind sires, and you will be convinced that there is, perhaps, no Spanish man, from the wealthy coalmaster, to the humblest vendor of lucifer matches, whose lot will not be ameliorated by the success of our petition.

We foresee your objections, Gentlemen, but we know that you can oppose us none but such as you have picked up from the effete works of the partisans of Free Trade. We defy you to utter a single word against us which will not instantly rebound against our great King and the entire policy.

You will tell us that, if we gain by the protection which we seek, the country will lose by it, because the consumer must bear the loss.

We answer:

You have ceased to have any right to invoke that interest of the consumer; for whatever his interest is found opposed to that of the producer, you sacrifice the former. You have done so for the purpose of encouraging labour and increasing employment. For the same reason you should do so again.

You have yourselves obviated this objection. When you are told that the consumer is interested in free importation of iron, corn, textile fabrics ^s, you reply, but the producer is interested in exclusion. Well, be it so; if consumers are interested in the free admission of natural light, the producers of artificial light are equally interested in its production.

But again, you may say that the producer and consumer are identical. If the manufacturer gain by protection, he will make the agriculturist also a gainer; and if agriculture prosper, it will open a vent to manufacturers. Very well: if you confer upon us a monopoly of furnishing light during the day, first of all we shall purchase quantities of tallow, coals, oils, resinous substances, wax, alcohol, silver, iron, bronze, crystal to carry on our manufactures; and then we and those who furnish us with such commodities, having become rich will consume a great deal, and impact prosperity to all the other branches of our national industry.

If you urge that the light of the sun is a gratuitous gift of nature, and that to reject such gifts is to reject wealth itself under pretense of encouraging the means of acquiring it, we would caution you against giving a death-blow to your own policy. Remember that hitherto you have always expelled foreign products, because they approximate more nearly than home products to the character of gratuitous gifts. To comply with the exactions of other monopolist, you have only half a motive; and to repulse us simply because we stand on a stronger vantage-ground than others would be to adopt the equation that two positive multiplied together gives a negative. In other words, it would be to heap absurdity upon absurdity.

Nature and human labour cooperate in various proportions (depending upon the countries and climates) in the production of commodities. The part which nature executes is always gratuitous; it is the part executed by human labour which constitutes value, and is paid for.

If a Lisbon orange sells for half the price of a Seville orange, it is because natural, and consequently gratuitous, heat does for the one what artificial, and therefore expensive heat must do for the other.

When an orange comes to us from Portugal, we may conclude that it is furnished in part gratuitously, in part for an onerous consideration; in other words, it comes to us at half-price as compared to those in Seville.

Now, it is precisely the gratuitous half (pardon the word) which we contend should be excluded. You say, How can national labour sustain competition with a foreign labour; when the former has all the work to do, and the latter only does one-half, the sun supplying the remainder? But if this half, being gratuitous, determines you to exclude competition, how should the whole, being gratuitous, induce you to admit competition? If you were consistent, you would, while excluding as hurtful to native industry what is half gratuitous, exclude bravely and with double zeal, that which is altogether gratuitous.

So you see that when products such as meat and fish or iron, coal, corn, and foreign fabrics are sent from us from afar, and we can acquire them with less labour than if we harvested it ourselves, the difference is a free gift conferred upon us. The gift is more or less considerable in proportion as the difference is more or less great. It amounts to a quarter, a half, or three-quarters of the value of the product, when the Portugese only ask us for three-fourths, a half or a quarter of the price we should otherwise pay. It is a perfect and complete as it can be when the donor like the sun furnishing us light asks us for nothing. The question, we ask if formally put is this: Do you desire for our country the benefit of gratuitous consumption, or the pretended advantages of onerous production?

Make your choice, but be logical; for as long as you exclude, as you do meat and fish or iron, coal, corn, and foreign fabrics, in proportion as their price approximates to zero, what inconsistency it would be to admit the light of the sun, the price of which is already zero during the entire day!"

Having held the attention of his host and hostess as well as the other guest for the moment, Sancho felt that he had overstepped his position as manservant to Don Quixote and the time was the Knight's that he had preempted. Such was his surprise when the Man of La Mancha, grasp his right arm and said, "well done, we are persuaded. The King shall have his Portugese rabbit, side-meat and fish. We shall retire to our closets. And sly-one, I trust your gambit has earned you the attention of the fair maid."

And he said in a voice that only Sancho could hear, "As for the King's men; giving counsel to the King is like throwing water in the sea, but we must give free trade a chance."

[Perhaps if Jesse Helms had been in attendance, he might have learned something from Sancho regarding the merchandising of fabrics and the employment of labour. Regardless of whether the competition is across the seas or across state lines.]

*** It would appear that Sancho had spent some time in Don Quixote's library. How else would he have been able to counter the arguments of the famous knight. One may see great similarity between the dialogs recorded by Mahtrow and a conversation between Robinson Crusoe and his man Friday, as reported by a later day Frederic Bastiat as Something Else and his parable of the Petition of the Candlemakers. both chapters in Economic Fallacies (Sophisms)(1) which was written in 1847. Old stories often passed down from generation to generation, sometimes written and other times remembered as oral history. Such it may well be in this case as the "modern-day" Frederic Bastiat would be some six or more generations removed from the Count of this story. Of course there may be a bit of a problem with the calendar, but Mahtrow doesn't address these issues as he writes of the Famous Knight and his Humble Squire.

(1) Frederic Bastiat, Economic Fallacies, R. J. Deachman, Ottawa, Canada, 1934. Something Else (Dialog between Robinson Crusoe and Friday) pp 157, and Petition of the Candlemakers (pp 47).
The Library of Sterling College, Sterling, Kansas made the book available by interlibrary loan for which I am very appreciative.

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August 4, 2001