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In the mid 19th century, Algeria was an overseas colony of France. French politicians would advocate for the expenditure of tax revenues in Algeria to build roads and ports and divert "to a distance the surplus of our population." This activity would presumably encourage the industries in Marseilles (a port city on the south coast of France), and increase wages as workmen became more scarce. According to its proponents, such spending "would be profitable in every way." Bastiat points out that such an assertion misses a vital element:
Yes, it is all very true, if you take no account of the fifty million until the moment when the State begins to spend them; if you only see where they go, and not whence they came; if you look only at the good they are to do when they come out of the tax gatherers bag, and not at the harm which has been done, and the good which has been prevented, by putting them into it."
Bastiat once again returns to the idea that the State cannot spent funds without first taking them from the tax payer. Discussion of the benefit of tax spending must take into account the benefit John Q Citizen was deprived of when the taxes were gathered, because when John Q earned that money, "if he took the trouble to earn it, it was because he expected the satisfaction of using it." He may have fertilized his garden, expanded his house, invested in his business, better provided for his family, or even given to charity, with the funds he pays in taxes. Bastiat's object is to point out that "in every public expense, behind the apparent benefit, there is an evil which is not so easy to discern."
Expenditures of tax dollars, whether on infrastructure, defense, or otherwise, need to be evaluated on the inherent merit and intrinsic worth of the object of the spending, and not on the illusionary notion of increasing employment. When John Q Citizen goes to the trouble of earning money, he does so with the expectation of enjoying some gratification as a result. He rightfully expects the State to supply a justification for denying him this gratification when it levies a tax on him. If the State says to him, "With these taxes we will stimulate employment," John Q is likely to respond, "With this money I might stimulate employment myself."
However, if the State says to John Q, "With this money, we will pay police to protect you and your property, and outfit the military to secure us from invasion, and build roads to facilitate commerce and travel," he will have little to complain of, for these functions of the State render him a benefit in kind for his tax dollars. The State would, however, encounter resistance if it was candid in how other tax dollars were spent:
But if the State were to say to him, "I take this [money] so I may give you a little prize in case you cultivate your field well; or so I may teach your son something that you have no wish for him to learn; or so the Minister may add another to his score of dishes at dinner"... I think I hear poor John Q exclaim, "This system of law is very much like a system of cheat!"
In order to avoid such an objection, the State intermixes all the above reasoning, attributing to both valuable and wasteful government spending that fallacious attribute of encouraging labour. John Q Citizen is dupped, because he has failed to take into account the unseen consequences of such spending. The State creates an artificial boost of employment in a limited sphere, and points to this as success. Had the taxes remained in the pockets of the taxpayers, the benefits would go unnoticed because they would be dispersed among the population. These benefits would, however, be greater, not only in an economic sense, but also in that such benefits would harmonize with the ideas of liberty and justice.
Read the previous article, Credit, the next article, Frugality and Luxury, or return to the Intro.
More Info: That Which is Seen and That Which is Not Seen, also available in the Bastiat Collection.
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