Seizing Factories, Spreading Fear: How to Impoverish a Continent

We are told that certain French firms, long established within Russia, awakened to find their operations transferred by decree to a new concern, managed not by merchants but by a general of the interior. At the same moment, European governments hear warnings that, should they send troops to Ukraine, Russia will treat it as a declaration of war, while the French president speaks of “hybrid” attacks on his country’s infrastructure. Thus, in a few days, we see property seized, commerce chilled, and fear industriously propagated. It is a short course, in miniature, in how to reduce the wealth of nations: unsettle expectations, darken the prospect, and teach every prudent man to hold back his capital.

When I wrote of the division of labour in the Wealth of Nations, I argued that it is limited by the extent of the market. Men refine their arts, not for the pleasure of subtle workmanship, but because a wide, secure market allows narrow specialisation to be rewarded. Confiscation of foreign enterprises and threats against those who would trade, lend, or ally with a neighbour do not merely vex a few capitalists; they contract the market itself. The distant investor, the engineer considering a new plant, the humble worker who might have served it, all discover that a line has been drawn across the map, beyond which calculation is no longer possible. Where the map grows dark, the division of labour retreats.

The immediate loss is borne, no doubt, by the French companies whose Russian operations have been placed under the management of a soldier. But the unseen cost, which is always the larger, falls upon three quieter classes. It falls upon Russian consumers, who will in time pay more, or receive worse, when enterprise is judged by its loyalty to the ministry rather than by its service to buyers. It falls upon workers in both countries, whose opportunities shrink when one more channel of trade is dammed. And it falls upon all future adventurers in commerce, who will now demand a premium for the risk that law may turn into weapon. A decree is read in Moscow, but the bill arrives, bit by bit, in the prices paid by the labouring poor from Brest to Vladivostok.

In The Theory of Moral Sentiments, I treated justice as the main pillar that upholds the whole edifice. To seize, not in open war but in administrative disguise, the assets that strangers have placed under the faith of one’s laws, is an injury that the impartial spectator cannot approve. It is not the stern exercise of a public necessity plainly avowed, but the convenient pretext of power displeased with the policies of another government. The same may be said of “hybrid” operations which, if these reports be accurate, aim to menace infrastructure and spread alarm in countries that have not attacked. Such conduct does not merely offend delicacy; it corrodes that mutual confidence without which neither trade nor peace can long subsist.

Some will reply that every state has a right, and perhaps a duty, to employ all instruments, commercial and covert, to secure its safety and advance its influence. I do not deny that defence is the first duty of the sovereign, nor that prudence may require the interruption of trade with a dangerous neighbour. But there is a wide difference between openly suspending intercourse on grounds of security, and pretending to welcome foreign capital while reserving a secret claim to appropriate it when politics sour. The former is a harsh but intelligible rule; the latter is a species of fraud practised, not by a single knave, but by the magistrate himself. When the guardian of the law joins the conspiracy against the public, the market must defend itself by flight.

Nor should we imagine that such measures chiefly injure foreigners. The ruling circles of any nation, like the merchants of whom I once wrote, are perpetually tempted to treat the rest of mankind as instruments for their own aggrandisement. They are secure in their incomes of office, in the rents of power and rank, while the artisan and peasant live from one sale to the next. To exchange the higgling and bargaining of merchants for the fiat of generals may gratify national pride and the love of command; it rarely improves the annual produce of the land and labour. The cannon may be domestick; the scarcity it occasions is universal.

Faced with shadowy attacks and open decrees of seizure, the governments of Europe now speak of protecting infrastructure, co‑ordinating energy policy, guarding critical works. These are, when soberly designed, the very sort of public measures which I acknowledged as duties of the sovereign: works and institutions of great utility, which no private undertaker could profitably maintain. The danger lies not in such defences themselves, but in the spirit in which they are pursued. If they harden into permanent corporatist privileges for favoured producers, or become the cloak of domestic monopolies, they will merely add a second conspiracy against the public to the first. If they are executed with self-command and a constant eye to the interest of the labouring poor, they may yet preserve that commercial order which arbitrary power on either side seems so determined to waste.

It remains uncertain how far these reported seizures and hybrid operations truly extend, and whether they mark a settled system or a passing excess.