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From this time, economic principles began to be better apprehended. It is to be noted that the first just observations arose from discussions upon money, and thence upon international trade. So far England has furnished the most acute writers: now France became the scene of a new movement. Marshal Vauban,[15] the great soldier, and Boisguillebert[16] both began to emphasize the truth that wealth really consists, not in money alone, but in an abundance of commodities; that countries which have plenty of gold and silver are not wealthier than others, and that money is only a medium of exchange. It was not, however, until 1750 that evidences of any real advance began to appear; for Law's famous scheme (1716-1720) only served as a drag upon the growth of economic truth. But in the middle of the eighteenth century an intellectual revival set in: the “Encyclopædia” was published, Montesquieu wrote his “l'Ésprit des Lois,” Rousseau was beginning to write, and Voltaire was at the height of his power. In this movement political economy had an important share, and there resulted the first school of Economists, termed the Physiocrats.

The founder and leader of this new body of economic thinkers was François Quesnay,[17] a physician and favorite at the court of Louis XV. Passing by his ethical basis of a natural order of society, and natural rights of man, his main doctrine, in brief, was that the cultivation of the soil was the only source of wealth; that labor in other industries was sterile; and that freedom of trade was a necessary condition of healthy distribution. While known as the “Economists,” they were also called the “Physiocrats,”[18] or the “Agricultural School.” Quesnay and his followers distinguished between the creation of wealth (which could only come from the soil) and the union of these materials, once created, by labor in other occupations. In the latter case the laborer did not, in their theory, produce wealth. A natural consequence of this view appeared in a rule of taxation, by which all the burdens of state expenditure were laid upon the landed proprietors alone, since they alone received a surplus of wealth (the famous net produit) above their sustenance and expenses of production. This position, of course, did not recognize the old mercantile theory that foreign commerce enriched a nation solely by increasing the quantity of money. To a physiocrat the wealth of a community was increased not by money, but by an abundant produce from its own soil. In fact, Quesnay argued that the right of property included the right to dispose of it freely at home or abroad, unrestricted by the state. This doctrine was formulated in the familiar expression, “Laissez faire, laissez passer.”[19] Condorcet and Condillac favored the new ideas. The “Economists” became the fashion in France; and even included in their number Joseph II of Austria, the Kings of Spain, Poland, Sweden, Naples, Catharine of Russia, and the Margrave of Baden.[20] Agriculture, therefore, received a great stimulus.

Quesnay had many vigorous supporters, of whom the most conspicuous was the Marquis de Mirabeau[21] (father of him of the Revolution), and the culmination of their popularity was reached about 1764. A feeling that the true increase of wealth was not in a mere increase of money, but in the products of the soil, led them naturally into a reaction against mercantilism, but also made them dogmatic and overbearing in their one-sided system, which did not recognize that labor in all industries created wealth. As the mercantile system found a great minister in Colbert to carry those opinions into effect on a national scale, so the Physiocrats found in Turgot[22] a minister, under Louis XVI, who gave them a national field in which to try the doctrines of the new school. Benevolently devoted to bettering the condition of the people while Intendant of Limoges (1751), he was made comptroller-general of the finances by Louis XVI in 1774. Turgot had the ability to separate political economy from politics, law, and ethics. His system of freeing industry from governmental interference resulted in abolishing many abuses, securing a freer movement of grain, and in lightening the taxation. But the rigidity of national prejudices was too strong to allow him success. He had little tact, and raised many difficulties in his way. The proposal to abolish the corvées (compulsory repair of roads by the peasants), and substitute a tax on land, brought his king into a costly struggle (1776), and attempts to undermine Turgot's power were successful. With his downfall ended the influence of the Economists. The last of them was Dupont de Nemours,[23] who saw a temporary popularity of the Physiocrats in the early years of the French Revolution, when the Constituent Assembly threw the burden of taxes on land. But the fire blazed up fitfully for a moment, only to die away entirely.

All this, however, was the slow preparation for a newer and greater movement in political economy than had yet been known, and which laid the foundation of the modern study as it exists to-day. The previous discussions on money and the prominence given to agriculture and economic considerations by the Economists made possible the great achievements of Adam Smith and the English school. A reaction in England against the mercantile system produced a complete revolution in political economy. Vigorous protests against mercantilism had appeared long before,[24] and the true functions of money had come to be rightly understood.[25] More than that, many of the most important doctrines had been either discussed, or been given to the public in print. It is at least certain that hints of much that made so astonishing an effect in Adam Smith's “Wealth of Nations” (1776) had been given to the world before the latter was written. To what sources, among the minor writers, he was most indebted, it is hard to say. Two, at least, deserve considerable attention, David Hume and Richard Cantillon. The former published his “Economic Essays” in 1752, which contained what even now would be considered enlightened views on money, interest, balance of trade, commerce, and taxation; and a personal friendship existed between Hume and Adam Smith dating back as far as 1748, when the latter was lecturing in Edinburgh on rhetoric. The extent of Cantillon's acquirements and Adam Smith's possible indebtedness to him have been but lately recognized. In a recent study[26] on Cantillon, the late Professor Jevons has pointed out that the former anticipated many of the doctrines later ascribed to Adam Smith, Malthus, and Ricardo. Certain it is that the author of the “Wealth of Nations” took the truth wherever he found it, received substantial suggestions from various sources, but, after having devoted himself in a peculiarly successful way to collecting facts, he wrought out of all he had gathered the first rounded system of political economy the world had yet known; which pointed out that labor was at the basis of production, not merely in agriculture, as the French school would have it, but in all industries; and which battered down all the defenses of the mediæval mercantile system. In a marked degree Adam Smith[27] combined a logical precision and a power of generalizing results out of confused data with a practical and intuitive regard for facts which are absolutely necessary for great achievements in the science of political economy. At Glasgow (1751-1764) Adam Smith gave lectures on natural theology, ethical philosophy, jurisprudence, and political economy, believing that these subjects were complementary to each other.

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15

“Dîme royale” (1707).

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16

“Factum de la France” (1707).

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17

When Quesnay was sixty-one years old he wrote the article, “Fermiers,” in the “Encyclopædia” (of Diderot and D'Alembert) in 1756; article “Grains,” in the same, 1757; “Tableau économique,” 1758; “Maximes générales du gouvernement économique d'un royaume”; “Problème économique”; “Dialogues sur le commerce et sur les travaux des artisans”; “Droit natural” (1768). “Collection des principaux économistes,” edited by E. Daire (1846), is a collection containing the works of Quesnay, Turgot, and Dupont de Nemours. See also Lavergne, “Les économistes françaises du 18e siècle” (1870); and H. Martin, “Histoire de France.” Quesnay's “Tableau économique” was the Koran of the school.

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18

From χράτησις τῆς φύσεως, as indicating a reverence for natural laws.

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19

The words were not invented by Quesnay, but formed the phrase of a merchant, Legendre, in addressing Colbert; although it was later ascribed, as by Perry, “Political Economy” (p. 46), and Cossa (p. 150), to one of the Economists, Gournay. (See Wolowski, in his Essay prefixed to “Roscher's Political Economy,” p. 36, American translation.)

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20

The Margrave Karl Friedrich was the author of “Abrégé des principes de l'économie politique” (1775), and applied the physiocratic system of taxation to two of his villages with disastrous results.

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21

He published a first work on “Population” (1756); the “Théorie de l'impôt” (1760); and “Philosophie rurale” (1763). In this latter work Mirabeau adopted the “Tableau économique” as the key to the subject, and classed it with the discovery of printing and of money.

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22

In 1742 Turgot, when scarcely twenty, appeared as a sound writer on Paper Money in letters to Abbé Cicé. The physiocratic doctrines were presented in a more intelligible form in his greater work, “Réflexions sur la formation et la distribution des richesses” (1766). Three works of Turgot, on mining property, interest of money, and freedom in the corn-trade, bear a high reputation. For works treating of Turgot, see Batbie, “Turgot, philosophe, économiste et administrateur” (1861); Mastier, “Turgot, sa vie et sa doctrine” (1861); Tissot, “Turgot, sa vie, son administration et ses ouvrages” (1862).

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23

He was the editor of the works of Quesnay and Turgot, and wrote a “Mémoire de Turgot” (1817). He opposed the issue of assignats during the French Revolution, and, falling into disfavor, he barely escaped the scaffold. Having been a correspondent of Jefferson's, when Napoleon returned from Elba, he came to America, and settled in Delaware, where he died in 1817. The connection between the Economists and the framers of our Constitution is interesting, because it explains some peculiarities introduced into our system of taxation in that document. The only direct taxes recognized by the Supreme Court under our Constitution are the poll and land taxes; and it is in this connection that the constitutionality of the income-tax (a direct tax) is doubted.

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24

One of the earliest is that of Roger Coke (1675), in which he argues for free trade, and attacks the navigation acts. Sir Dudley North's “Discourse on Trade” (1691) urges that the whole world, as regards trade, is but one people, and explains that money is only merchandise.

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25

Joseph Harris, an official in the London Mint, published a very clear exposition of this subject in his “Essay upon Money and Coins” (1757); but, eighty years before, Rice Vaughan had given a satisfactory statement in his “Treatise of Money.”

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26

“Contemporary Review,” January, 1881, “Richard Cantillon.” Adam Smith had quoted Cantillon on his discussion of the wages of labor, b. i, ch. viii, and evidently knew his book.

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27

Born in 1723, and died 1790; he was eleven years younger than Hume. A Professor of Logic (1751) and Moral Philosophy (1752) at Glasgow, he published a treatise on ethical philosophy, entitled the “Theory of Moral Sentiments” (1739). Dugald Stewart is the authority as to Smith's life, having received information from a contemporary of Smith's, Professor Miller (see Playfair's edition of Smith's works); for Adam Smith destroyed all his own papers in his last illness. His lectures on political economy at Glasgow outlined the results as they appeared in the “Wealth of Nations”; it was not until 1764 that he resigned his professorship, and spent two years on the Continent (twelve months of this in France). On his return home he immured himself for ten years of quiet study, and published the “Wealth of Nations” in 1776. (See also McCulloch's introduction to his edition of the “Wealth of Nations,” and Bagehot's “Economic Studies,” iii.)