A Biography of A.R.J. Turgot – Part 1 – LAISSEZ-FAIRE AND FREE TRADE

Turgot’s mentor in economics and in administration was his great friend Jacques Claude Marie Vincent, Marquis de Gournay (1712-1759). It is fitting, then, that Turgot developed his laissez-faire views most fully in one of this early works, the “Elegy to Gournay” (1759), a tribute offered when the Marquis died young after a long illness. Turgot made it clear that the network of detailed mercantilist regulation of industry was not simply intellectual error, but a veritable system or coerced cartelization and special privilege conferred by the State. For Turgot, freedom of domestic and foreign trade followed equally from the enormous mutual benefits of free exchange. All the restrictions “forget that no commercial transactions can be anything other than reciprocal,” and that it is absurd to try to sell everything to foreigners while buying nothing from them in return.

Turgot then goes on, in his “Elegy,” to make a vital pre-Hayekian point about the uses of indispensable particular knowledge by individual actors and entrepreneurs in the free market. These committed, on-the-spot participants in the market process know far more about their situations than do intellectuals aloof from the fray.

In proceeding to a more detailed analysis of the market process, Turgot points out that self-interest is the prime mover of the process, and that individual interest in the free market must always coincide with the general interest. The buyer will select the seller who will give him the lowest price for the most suitable product, and the seller will sell his best merchandise at the highest competitive price. Governmental restrictions and special privileges, on the other hand, compel consumers to buy poorer products at higher prices. Turgot concludes that “the general freedom of buying and selling is therefore . . . the only means of assuring, on the one hand, the seller of a price sufficient to encourage production, and, on the other hand, the consumer of the best merchandise at the lowest price.” Turgot concluded that government should be strictly limited to protecting individuals against “great injustice” and the nation against invasion. “The government should always protect the natural liberty of the buyer to buy, and the seller to sell.”

It is possible, Turgot conceded, that, on the free market, there will sometimes be “a cheating merchant and a duped consumer.” But then, the market will supply its own remedies: “the cheated consumer will learn by experience and will cease to frequent the cheating merchant, who will fall into discredit and thus will be punished for his fraudulence.” Turgot, in fact, ridiculed attempts by government to insure against fraud or harm to consumers.

To expect the government to prevent such fraud from ever occurring would be like wanting it to provide cushions for all the children who might fall. To assume it to be possible to prevent successfully, by regulation, all possible malpractices of this kind is to sacrifice to a chimerical perfection the whole progress of industry.

Turgot added that all such regulations and inspections “always involve expenses, and that these expenses are always a tax on the merchandise, and as a result overcharge the domestic consumer and discourage the foreign buyer.” Turgot concludes with a splendid flourish:

“To suppose all consumers to be dupes, and all merchants and manufacturers to be cheats, has the effect of authorizing them to be so, and of degrading all the working members of the community.”

Turgot goes on once more in the Hayekian theme of greater knowledge by the particular actors in the market. Gournay’s entire laissez-faire doctrine, he points out, “is grounded on the continuous inspection of a multitude of transactions which by their immensity alone could not be fully known, and which, moreover, are continually dependent on a multitude of ever changing circumstances which cannot be managed or even foreseen.” Turgot concludes his elegy to his friend and teacher by noting Gournay’s belief that most people were “well disposed toward the sweet principles of commercial freedom,” but prejudice and a search for special privilege often bar the way. Every person, Turgot pointed out, wants to make an exception to the general principle of freedom, and “this exception is generally based on their personal interest.”

Turgot’s final writings on economics were written while he was intendant at Limoges, in the years just before becoming Controller-General in 1774. They reflect his embroilment in a struggle for free trade within the royal bureaucracy. In his last work, the “Letter to the Abbe Terray [the Controller-General] on the Duty of Iron” (1773), Turgot trenchantly lashes out at the system of protective tariffs as a war of all against all using State monopoly privilege as a weapon, at the expense of the consumers.

Turgot indeed, in anticipation of Bastiat 75 years later, calls this system a “war of reciprocal oppression, in which the government lends its authority to all against all.” He concludes that “Whatever sophisms are collected by the self-interest of a few merchants, the truth is that all branches of commerce ought to be free, equally free, and entirely free.”3

Turgot was close to the physiocrats, not only in advocating freedom of trade, but also in calling for a single tax on the “net product” of land. Even more than in the case of the physiocrats, one gets the impression with Turgot that his real passion was in getting rid of the stifling taxes on all other walks of life, rather than in imposing them on agricultural land. Turgot’s views on taxes were most fully, if still briefly, worked out in his “Plan for a Paper on Taxation in General” (1763), an outline of an unfinished essay he had begun to write as intendant at Limoges for the benefit of the Controller-General. Turgot claimed that taxes on towns were shifted backward to agriculture, and showed how taxation crippled commerce, distorted the location of towns, and led to the illegal evasion of duties. Privileged monopolies, furthermore, raised prices severely and encouraged smuggling. Taxes on capital destroyed accumulated thrift and hobbled industry. Turgot’s eloquence was confined to pillorying bad taxes rather than elaborating on the alleged virtues of the land tax. Turgot’s summation of the tax system was trenchant and hard-hitting: “It seems that Public Finance, like a greedy monster, has been lying in wait for the entire wealth of the people.”

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