This semester—through the generosity of the Dean and Cam Williams Foundation to the Ludwig von Mises Institute for its book club program—the University of Mount Olive has been hosting a Book Club where we have been reading the collected works of Frédéric Bastiat. Recently, we looked at Bastiat’s famous article, “That Which is Seen, and That Which is Not Seen.” My students were surprised to see how relevant Bastiat’s 1850 article is in 2025, particularly on tariffs and government bureaucrats.
Bastiat is at his best when he takes a complex issue and frames it into a simple story. Tariffs are an issue that often resurfaces with strong feelings on both sides. The following is what my students and I discussed.
The Story
Bastiat begins with the French protagonist, Mr. Protectionist, who sees that Belgian iron sells for 10 francs, when he would rather sell iron for 15. Mr. P. gets so angry that he starts to arm himself to personally stop the iron from crossing the border. However, when he calms “his warlike ardor” and realizes that he cannot possibly stop all Belgian iron from crossing the border himself, he recalls that there is an institution which can do it on his behalf—the government. If he can get the government to hire 20,000 guards to patrol the border, then it can achieve his ends for him.
When Mr. P. makes his case before the government, he claims the reason for the government to protect France from Belgian iron is clear. The protection will benefit the French iron industry, all the ancillary industries that sell to the French iron producers, and the workers who labor in those industries. The revenues from selling at 15 francs will allow the factory owners to expand their businesses, hire more workers, and raise the workers’ wages. New buildings and equipment will need to be produced, and French industry will benefit from this increased demand. With higher wages, the workers will be able to improve their families’ lives and material well-being. All the items that the workers purchase must be produced, and the suppliers will be happy with the new business.
Who loses?
An important trait of an economist is the ability to engage in counterfactual reasoning. This skill is not unique to economists, but it is necessary for good economic reasoning. Essentially, counterfactual reasoning is the comparison of two hypothetical situations and distilling the benefits and costs of each. Bastiat calls this method comparing the seen with the unseen. In this story, the seen is Mr. P’s perspective. The concentrated benefits are usually easy to see. The more difficult task, and the skill that students need to train their minds for, is to see the unseen—to look for the dispersed costs.
In our book discussion, my students discovered five groups that were negatively impacted by Mr. P.’s plan. The most obvious group is the customers, those who buy iron either directly or indirectly. When the Belgians are in the market, consumers can purchase iron for 10 francs. However, with the protectionist restrictions, iron users must pay 50 percent more. Clearly, this gain by the French iron producers comes at the expense of the iron consumers. It is not a gain to society, but a wealth transfer from consumers to producers. As Bastiat points out, when a consumer saves 5 francs, “he does not throw them into the river, but (and this is what is not seen) he gives them to some tradesman in exchange for some enjoyment.” Bastiat suggests that the iron user could have used the 5 francs to buy a book. However, with protectionism, the bookseller loses that business because the money is redirected to the governmentally-protected iron industry. The bookseller represents all the third parties that are negatively affected by this protectionist measure. Bastiat further illustrates how these third parties would have made purchases to enhance their business and to benefit their families.
While Bastiat’s analysis ends there, the Book Club continued to look for further unseen consequences. In Bastiat’s story, the government would put an additional 20,000 guards on the border to stop the flow of Belgian iron. These guards would not be engaged in anything productive. There would be a lot standing and looking through boxes, but they would not be adding to the wealth of society. In fact, they would be bid away from the productive private sector and transferred to these unproductive activities. This transfer of labor is a net negative to society.
Furthermore, these guards and tariff agents would not be free. Their salaries, uniforms, guns, checkpoint buildings, and so forth, require the transfer of wealth from the productive private sector taxpayers. Again, these taxpayers could, instead, use that money to buy books and other pleasantries from other third parties. And again, these third parties are unable to make subsequent purchases.
Finally, there are the Belgians. They are hurt by being excluded from the French market. Thus, we see five groups that are hurt by this protectionist plan: the consumers of iron products, the bookstore owners and other third parties, society in general (from the reduction of output due to the transfer of labor into guarding the border), the taxpayers who fund the guards, and the Belgians.
The Application to USAID
The key to any lesson is the ability to apply it to another situation. Thus, Book Club took Bastiat’s analysis and applied it to the dismantling of USAID and other bureaucracies. What we discovered is that finding the unseen consequences is not that hard once we get used to it. Many people are sympathetic to the fired USAID workers. It is hard to watch people crying on TV because they have lost their jobs. What is unseen is that their job was similar to the guards stopping the Belgian iron.
Instead of increasing the wealth of the nation in the private sector, their jobs were net wealth drainers. By firing these bureaucrats, at least two positive effects emerge. The first is that less wealth is diverted from taxpayers. Secondly, to support themselves, these former bureaucrats will have to find employment in the private sector. In other words, they will have to start contributing to the net wealth of society. Murray Rothbard has often argued that there are two classes in society: net tax consumers and net taxpayers. When bureaucrats lose their jobs and go to work in the private sector, they switch from being net tax consumers to net taxpayers. In February 2025, there were over 23.6 million public sector employees. As more bureaucrats are released from the unproductive governmental sector and integrate into the productive private sector, we will experience a net increase in national well-being.
Additionally, there is a worry that, without government spending, GDP will fall, and the economy will slip into a recession. While we can debate the merits of using GDP at another time, the fear is well-founded. It is highly likely that—if it has not already done so—the economy will slip into a recession. The best path to a recovery is to increase the savings and the wealth of a society. The best way to increase our savings is to reduce consumption. Government spending is pure consumption. By firing bureaucrats and dismantling the bureaucracy, the nation shifts resources into the productive private sector and places the nation on the best path for economic growth.
The lessons found in Frédéric Bastiat’s writings are timeless. The value is obvious. Some of the best tools to teach others about how the economy really works are clear stories told with a biting wit which illustrate foundational economic principles. Thank you to the Mises Institute for funding the Book Club at The University of Mount Olive.
