Montaigne, who lived in France during the 16th century, was a brilliant writer and philosopher who created a new literary genre: the essay. He explored a wide range of topics, from the spectacular story of the women that saved Lombardia from the siege of Emperor Conrad III, to an elegant disquisition about bowel diseases titled “Of Experience.”
“The Profit of One Man Is the Damage of Another” is the 21st essay in this edition. In essence, in less than 300 words, Montaigne argues that someone’s gains inevitably hurts someone else. No one can profit but at the expense of others. This is where the notion that “poor people exist because some others are wealthy” comes from.
Economists, politicians, professors, and activists, but especially those hominem unius libri, believe that the free market is a zero-sum game. This belief became a cornerstone of Marxist ideology and is frequently touted to advocate government intervention.
The late Austrian school economist Ludwig von Mises called this idea the “Montaigne dogma” in his magnum opus Human Action. Contrary to what Montaigne preached, Mises believed that in a free market the only way to make a profit is to provide goods or services that reduce or eliminate people’s unsatisfied wants.
Let’s take a modern example. Earlier this week, Apple announced it sold 13 million iPhones in just one week, generating considerable earnings for the tech company. Does that make the rest of us poorer? Definitely not.
If there is free exchange, all parties benefit. The consumer values more what he is receiving than what he is giving away and vice versa. If there is no coercion, trade is a win-win situation. This is the very reason why, in a world with scarce resources, strong entrepreneurial ethos is the key for wealth creation.
Why then are some countries poor? Basically, because they live under governments that limit and even block wealth creation. Their institutional framework infringes upon property rights and make it difficult for individuals to celebrate contracts, removing incentives to efficiently allocate scarce resources.
Nevertheless, the Montaigne dogma is true in one case: when government privileges enable some to force others to trade with them.
Businessmen often push for legislation that will favor them at the expense of someone else; they lobby for protectionist measures, and profit from contracts at times secured through bribes.
The more government intervention, the more commonplace this behavior is. It’s under highly interventionist regimes that politicians and businesses enrich themselves by forcing the people to buy goods and services they don’t value and by expanding the burden on taxpayers.
Ecuadorian President Rafael Correa said during his UN General Assembly speech that it is necessary to “redistribute wealth” and remove “illegitimate means of [wealth] accumulation.” The trained economist must have forgot that wealth only comes from putting scarce resources to good use. Robbing Peter to pay Paul only begets poverty and more scarcity.
The truly “illegitimate means” of acquiring wealth are precisely the protectionism and cronyism present in interventionist states like Ecuador.
Sadly, the Montaigne dogma is alive and well in politicians who perpetuate this misery.