Thursday, March 26, 2015

Gustave de Molinari’s Final Words

By Louis Rouanet
In spite of a seemingly endless number of examples to the contrary, we continue to be confronted, even in 2015, with the widespread idea that technological innovation can destroy jobs and wealth. Each new labor-saving technology leads to worried speculations by those who fear any challenge to the status quo.
Astute economists and observers in every era have debunked this idea again and again. Writing in 1911, for example, the French economist and philosopher Gustave de Molinari addressed this issue in his final book, Ultima Verba : Mon Dernier Ouvrage (Ultima Verba: My Last Work). At that time, Molinari was ninety-one years old and had only one more year to live. However, he was still writing with great lucidity and his book is a merciless attack against protectionism, taxation, the military-industrial complex, and government privilege.

In Ultima Verba, Molinari address the common argument claiming new technologies are destroying wealth and jobs — an argument which had been refuted by Frédéric Bastiat more than sixty years before in Economic Sophisms.
Molinari asks the question: “is an automobile wealth?” This question, today, seems completely absurd. Unless one is a radical environmentalist, one is extremely unlikely to conclude that an automobile does not have value. The enormous number of people worldwide who own automobiles have already demonstrated their disagreement.
However, as it happens for almost each new technology, some people — and intellectuals in particular— have often thought cars were harmful, that they did not improve economic conditions, but rather destroyed jobs and prosperity.
One skeptic of innovation — or at least of automobiles — was the economist Charles Gide. He wrote:
It is certain that the automobile is extremely successful, it created around it many riches; we owe it huge and active factories, employing thousands of workers; its trade is abundant and wealthy ... but there are disadvantages. The money that goes to automobiles does not go elsewhere. …
Even from a psychological point of view, there are objections to be made; everyone can enjoy in his life a limited amount of sensations; the time devoted to those of motoring (and I believe them to be very large) is taken at the expense of others: theaters, museums, reading.1
Charles Gide’s fuzzy rationale against innovation is, of course, preposterous. It is noteworthy that, according to him, the automobile — which was at the time a luxury good — leads to less culture (i.e., reading, museums, etc.). This is the same old argument according to which capitalism leads to more consumerism and less culture. To this argument, Molinari answered that the opposite is likely to happen: theaters and museums, because they now compete with automobiles, have to adapt their supply to consumer preferences which will lead to animprovement of culture. However, Gustave de Molinari’s major point in favor of innovation is not about culture, it is the following:
What made this extraordinary, if uneven, increase of population and wealth [during the last century]? It is obvious that human work has become more productive. It means that in exchange for the very same amount of effort and pain man was able, using new equipment provided by inventors, to create an incomparably greater quantity of products that he previously obtained with coarse material that had been bequeathed him over the centuries.2
Then, Molinari explained that the rise of productivity decreased the prices but also freed resources for consumers. Resources which can be spent somewhere else in the economy. In the case of the automobile, it is not only money but also time which is saved — and can presumably be spent reading and visiting museums. Furthermore, said Molinari, in the case of automobiles, there are many beneficial indirect effects. For example, cars entered into competition with train companies which were forced to adapt by reducing their prices and increasing the speed of their locomotives. Finally, remarked Molinari, the improvement in the transport industry fostered the division of labor by making new markets accessible and therefore increasing their size.
It is fascinating that Molinari, a ninety-one year old man, at the very beginning of the twentieth century, wasn’t afraid of innovation, whereas the fear of change today is common, particularly among politicians. Despite his advanced age, Molinari, reflecting the liberalism and optimism of the French Bell Epoque in which he was immersed, did not succumb to conservatism.
The same, unfortunately cannot be said for France today. This modern conservatism in France has led to economic sophisms and bad economic policies. In the 1990s, the French government considered outlawing the internet — an alleged symbol of American imperialism — in order to create national internet. More recently, some French politicians have stated that Amazon destroys jobs. But Amazon destroys no more jobs than the consumer who chooses to buy on Amazon. If bookstores go bankrupt, it is only because they don’t respond well enough to consumer preferences.
Similarly, if motorists prefer driving to visiting museums and theaters, these are choices they have freely made. Charles Gide and his modern followers may object to such decisions, but in fact, the greater productivity in labor and travel provided by automobiles allows consumers more time and more money to spend on a trip to the theater. If consumers still elect to avoid reading and the fine arts in such cases, well, the automobile haters will have to find something other than the automobiles to blame.
The above originally appeared at
1. Translation by the author. The original version is : “Il est certain que l'automobile est extrêmement prospère, qu'elle a créé autour d'elle de nombreuses prospérités; on lui doit des usinés immenses et actives, elle emploie des milliers d'ouvriers ; son commerce est abondant et fortuné... mais il y a des contre-coups. L'argent qui va vers elle ne va pas ailleurs. […] Ce qu'on a pris pour elle, on l’a enlevé à d'autres obligatoirement. ... Oui, mais il y a les exportations, dira-t-on. C'est de l'argent qui entre. Qui entre, oui, mais on oublie celui qui est sorti. […] Même au point de vue psychologique, il y a des réserves à faire; chacun ne peut goûter dans sa vie qu'une somme limitée de sensations ; le temps consacré à celle de l'automobilisme (et je les crois très grandes) est pris au détriment de certaines autres : les théâtres, les musées, la lecture…”
  • 2. Translation by the author. The original version is the following: “A quoi tient cette augmentation extraordinaire, mais inégale, de la population et de la richesse [depuis un siècle]? C'est évidemment à ce que le travail de l'homme est devenu plus productif, c'est à ce qu'en échange de là même somme d'efforts et de peine, il a pu, en employant le nouvel outillage que lui fournissaient les inventeurs, créer une quantité incomparablement plus considérable des produits qu'il obtenait auparavant à l'aide du matériel grossier que lui avaient légué les siècles. 

1 comment:

  1. Once more all together now: Jobs exist for the consumer, not the worker. Turned on its head, we get chaos, you pinko hippy freak.