Political Economy by J.C.L. Simonde de Sismondi (1815)
Political economy is the name given to an important division of the science of government. The object of government is, or ought to be, the happiness of men, united in society; it seeks the means of securing to them the highest degree of felicity compatible with their nature, and at the same time of allowing the greatest possible number of individuals to partake in that felicity. But man is a complex bring; he experiences moral and physical wants; therefore his happiness consists in his moral and physical condition. The moral happiness of man, so far as it depends on his government, is intimately connected with the improvement of that government; it forms the object of civil policy, which ought to diffuse the happy influence of liberty, knowledge, virtue, and hope, over all classes of the community. Civil policy should point out the means of giving to nations a constitution, the liberty of which may elevate the souls of the citizens; an education which may form their hearts to virtue and open their minds to knowledge; a religion which may present to them the hopes of another life, to compensate for the sufferings of this. It should seek not what suits one man or one class of men, but what may impart most happiness by imparting most worth to all the men living under its laws.
The physical well-being of man, so far as it can be produced by his government, is the object of Political Economy. All the physical wants of man, for which he depends on his equals, are satisfied by means of wealth. It is this which commands labour, which purchases respectful service, which procures all that man has accumulated for use or pleasure. By means of it health is preserved, and life maintained; the wants of infancy and old age are supplied; food, and clothing, and shelter, are placed within the reach of all. Wealth may therefore be considered as representing all that men can do for the physical well-being of each other; and the science which shows to governments the true system of administering national wealth is an important branch of the science of national happiness.
Government is instituted for the advantage of all the Persons subject to it; hence it ought to keep the advantage of them all perpetually in view. And as in respect of civil policy it should extend to every citizen the benefits of liberty, virtue, and knowledge, so it ought likewise, in respect of political economy, to watch over all the advantages of the national fortune. Abstractly considered, the end of government is not to accumulate wealth in the state, but to make every citizen participate in those enjoyments of physical life which wealth represents. Government is called to second the work of providence, to augment the mass of felicity on earth and not to multiply the beings who live under its laws, faster than it can multiply their chances of happiness.
Wealth and population are not, indeed, absolute signs of prosperity in a state; they are only so in relation to each other. Wealth is a blessing when it spreads comfort over all classes; population is an advantage when every man is sure of gaining an honest subsistence by his labour. But a country may be wretched, though some individuals in it are amassing colossal fortunes; and if its population, like that of China, is always superior to its means of subsistence; if it is contented with living on the refuse of animals; if it is incessantly threatened with famine, this numerous population, far from being an object of envy, is a calamity.
The improvement of social order is generally advantageous to the poor as well as to the rich; and political economy points out the means of preserving this order by correction, but not of overturning it. It was a beneficent decree of Providence, which gave wants and sufferings to human nature; because out of these it has formed the incitements, which are to awaken our activity, and push us forward to develop our whole being. If we could succeed in excluding pain from the world, we must also exclude virtue; if we could banish want, we must also banish industry. Hence it is not the equality of ranks, but happiness in all ranks, which the legislator ought to have in view. It is not from the division of property that he will procure this happiness, but from labour and the reward of labour. It is by maintaining the activity and hopes of the mind; by securing to the poor man as well as to the rich, a regular subsistence and the sweets of life, in the performance of his task.
The title given by Adam Smith to his immortal work, on the science we are now engaged with, 'The Nature and Causes of the Wealth of Nations' forms at the same the most precise definition of that science. It presents a much more exact idea than the term political economy, afterwards adopted. The latter designation, at least, requires to be understood according to the modern acceptation of the word economy, not according to its etymology. In its present sense economy denotes the preservative, administrative, and the management of property; and it is because we use the somewhat tautological phrase domestic economy for the management of a private fortune, that we have come to use the phrase political economy for the management of the national fortune.
From the time when men first entered into social union, they must have occupied themselves with the common interests originating in their wealth. From the beginning of societies, a portion of the public wealth was set apart to provide for the public wants. The levying and management of this national revenue, which no longer pertained to each, became an essential part in the science of statesmen. It is what we call finance.
Private fortunes, on the other hand, made the interests of each citizen more complex; being exposed to the attacks of cupidity and fraud, their wealth required to be defended by the public authority, according to the fundamental article of the social contract, which had combined the strength of individuals to protect each with power of all. The rights over property, the divisions of it, the means of transmitting it, became one of the most important branches of civil jurisprudence; and the application of justice to the distribution of national property, formed an essential function of the legislator.
But no inquiry concerning the nature and causes of national wealth had occupied the speculations of our ancestors. They had not ascended to the principles of political economy, in order to deduce from that source their systems of finance and civil jurisprudence, which ought, however, to be nothing more than corollaries from those principles. They had abandoned the development of public wealth to the result of individual efforts, without examining their nature; and thus property had accumulated silently, in each society, by the labour of each artisan to procure his own subsistence, and afterwards his own comforts - before the manner of acquiring and preserving it became an object of scientific speculation. The philosophers of antiquity were engaged in proving to their disciples, that riches are useless for happiness; not in pointing out to governments the laws by which the increase of those riches may be favoured or retarded. The attention of thinking men was at length directed to national wealth by the requisitions of states, and the poverty of the people. An important change which occurred in the general politics of Europe, during the sixteenth century, almost every where overturned public liberty; oppressed the smaller states; destroyed the privileges of the towns and provinces; and conferred the right to dispose of national fortunes on a small number of sovereigns, absolutely unacquainted with the industry by which wealth is accumulated or preserved. Before the reign of Charles V, one half of Europe, lying under the feudal system, had no liberty or knowledge, and no finance. But the other half, which had already reached a high degree of prosperity, which was daily increasing its agricultural riches, its manufactories, and its trade, was governed by men who, in private life, had attended to the study of economy, when, in acquiring their own property, had learned what is suitable in that of states; and who, governing free communities to which they were responsible, guided their administrations, not according to their own ambition, but according to the interest of all. Till the fifteenth century wealth and credit were no where to be found in the republics of Italy, and of the Hanseatic league; the imperial towns of Germany; the free towns of Belgium and Spain, and perhaps also in some towns in France and England, which happened to enjoy great municipal privileges. The Magistrates of all those towns were men constantly brought up in business, and without having brought political economy to the form of a science, they had yet the feeling as well as the experience of what would serve or injure the interests of their fellow-citizens.
The dreadful wars which began with the nineteenth century, and altogether overturned the balance of Europe, transferred a nearly absolute monarchy to three or four all-powerful monarchs, who shared among them the government of the civilized world. Charles V united, under his dominion, all the counties which had hitherto been celebrated for their industry and wealth, - Spain, nearly all Italy, Flanders, and Germany; but he united after having ruined them; and his administration, by suppressing all their privileges, prevented the recovery of former opulence. The most absolute kings can no more govern by themselves, than kings whose authority is limited by laws. The former transmit their power to ministers whom they themselves select, in place of taking such as would be nominated by the popular confidence. But they find them among a class of persons different from that in which free governments find them. In the eyes of an absolute king, the first quality of a statesman is his being in possession of a rank so high that he may have lived in noble indolence, or at least in absolute ignorance of domestic economy. The ministers of Charles V, whatever talents they show for negotiation and intrigue, were all equally ignorant of pecuniary affairs. They ruined the public finances, agriculture, trade, and every kind of industry, from one end of Europe to the other; they made the people feel the difference, which might indeed have been anticipated, between their ignorance and the practical knowledge of republican magistrates.
Charles V, his rival Francis I, and Henry VIII, who wished to hold the balance between them, had engaged in expenses beyond their incomes; the ambition nf their successors, and the obstinacy of the house of Austria, which continued to maintain a destructive system of warfare during more than a hundred years, caused those expenses, in spite of the public poverty, to go on increasing. But as the suffering became more general, the friends of humanity felt more deeply the obligation laid on them to undertake the defence of the poor. By an order of sequence opposite to the natural progress of ideas, the science of political economy sprung from that of finance. Philosophers wished to shield the people from the speculations of absolute power. They felt that, to obtain a hearing from kings, they must speak to them of royal interests, not of justice or duty. They investigated the nature and causes of national wealth, to show governments how it might be shared without being destroyed.
Too little liberty existed in Europe to allow those who first occupied themselves with political economy to present their speculations to the world; and finances were enveloped in too profound a secrecy to admit of men, not engaged in public business, knowing facts enough to form the basis of general rules. Hence the study of political economy began with ministers, when once it had fortunately happened that kings put men at the head of their finances, who combined talents with justice and love of the public weal. Two great French ministers, Sully under Henry IV, and Colbert under Louis XIV, were the first who threw any light on a subject till then regarded as a secret of state, in which mystery had engendered and concealed the greatest absurdities. Yet, in spite of all their genius and authority, it was a task beyond their power to introduce any thing like order, precision, or uniformity into this branch of government. Both of them, however, not only repressed the frightful spoliations of the revenue farmers, and by their protection communicated some degree of security to private fortunes; but likewise dimly perceived the true sources of national prosperity, and busied themselves with efforts to make them flow more abundantly. Sully gave his chief protection to agriculture. He used to say that pasturage and husbandry wee the two beasts of the state. Colbert, descended from a family engaged in the cloth trade, studied above all to encourage manufactures and commerce. He furnished himself with the opinion of merchants, and asked their advice on all emergencies. Both statesmen opened roads and canals to facilitate the exchange of commodities: both protected the spirit of enterprise, and honoured the industrious activity which diffused plenty over their country.
Colbert, the latter of the two, was greatly prior to any of the writers who have teated political economy as a science, and reduced it to a body of doctrines. He had a system, however, in regard to national wealth: he required one to give uniformity to his plans, and delineate clearly before his view the object he wished to attain. His system was probably suggested by the merchants whom he consulted. It is now generally known by the epithet mercantile, sometimes also by the name Colbertism. Not that Colbert was its author, or unfolded it in any publication; but because he was beyond comparison the most illustrious of its professors; because, notwithstanding the errors of his theory, the applications he deduced from it were highly advantageous; and because, among the numerous writers who have maintained the same opinion, there is not one who has shown enough of talent even to fix his name in the reader's memory. It is but just, however, to separate the mercantile system altogether from the name of Colbert. It was a system invented by trading subjects, not by citizens; it was a system adopted by all the ministers of absolute governments, when they happened to take the trouble of thinking on finance, and Colbert had no other share in the matter than that of having followed it without reforming it.
After long treating commerce with haughty contempt, governments had at length discovered in it one of the most abundant sources of national wealth. All the great fortunes in their states did not indeed belong exclusively to merchants; but when, overtaken by sudden necessity, they wished to levy large sums at once, merchants alone could supply them. Proprietors of land might possess immense revenues, manufacturers might cause immense labours to be executed; but neither of them could dispose of any more than their income or annual produce. In a case of need merchants alone offered their whole fortune to the government. As their capital was entirely represented by commodities already prepared for consumption, by merchandise destined for the immediate use of the market to which it had been carried, they could sell it at an hour's warning, and realise the required sum with smaller loss than any other class of citizens. Merchants therefore found means to make themselves be listened to, because they had in some sort the command of all the money in the state, and were at the same time nearly independent of authority - being able, in general, to hide from the attacks of despotism a property of unknown amount, and transport it, with their persons, to a foreign country, at a moment's notice.
Governments would gladly have increased the merchant's profit, on condition of obtaining a share of it. Imagining that nothing more was necessary than to second each other's views, they offered him force to support industry. and since the advantage of the merchant consists in selling dear and buying cheap, they thought it would be an effectual protection to commerce, if the means were afforded of selling still dearer and buying still cheaper. The merchants whom they consulted eagerly grasped at this proposal; and thus was founded the mercantile system. Antonio de Leyva, Fernando de Gonnzago, and the Duke of Alva, viceroys of Charles V and his descendants - the rapacious inventors of so many monopolies - had no other notion of political economy. But when it was attempted to reduce this methodical robbery of consumers into a system; when deliberative assemblies were occupied with it; when Colbert consulted corporations; when the people at last began to perceive the true state of the case, it became necessary to find out a more honourable basis for such transactions; it became necessary not only to study the advantage of financiers and merchants, but also that of the nation: for the calculations of self-interest cannot show themselves in open day, and the first benefit of publicity is to impose silence on base sentiments.
Under these circumstances the mercantile system was moulded into a plausible form; and doubtless it must have been plausible, since, even till our own times, it continued to seduce the greater part of practical men employed in trade and finance. Wealth, said those earliest economists, is money: the two words were received into universal use as almost entirely synonymous; no one dreamed of questioning the identity of money and wealth. Money, they said, disposes of men's labour and of all its fruits. It is money which produces those fruits; it is by means of money that industry continues in a nation; to its influence each individual owes his subsistence and the continuation of his life. Money is especially necessary in the relation of one state to another. It supports war and forms the strength of armies. The state which has it, rules over that which has it not. The whole science of political economy ought, therefore, to have for its object the increase of money in a nation. But the money possessed by a nation cannot be augmented in quantity, except by the working of mines, if the nation has any; or by foreign trade, if it has none. All the exchanges carried on within a country, all the purchases and sales which take place among Englishmen, for instance, do not increase the specie contained within the shores of England by a single penny. Hence it is necessary to And means of importing money from other countries; and trade alone can do this by selling much to foreigners and buying little from them. For in the same way as each merchant in settling with his correspondent, sees at the year's end whether he has sold more than he has bought, and Ands himself accordingly creditor or debtor by a balance account which must be paid in money; so likewise a nation, by summing up all its purchases and all its sales with each nation, or with all together, would find itself every year creditor or debtor by a commercial balance which must be paid in money. If the country pay this balance, it will constantly grow poorer; if it receive the balance, it will constantly grow richer.
For a century, the mercantile system was universally adopted by cabinets; universally favoured by traders and chambers of commerce; universally expounded by writers, as if it had been proved by the most unexceptionable demonstration, no one deeming it worth while to establish it by new proofs; when, after the middle of the eighteenth century, Quesnay opposed to it his Tableau Economique, afterwards expounded by Mirabeau and the Abbe de Riviere, enlarged by Dupont de Nemours, and adopted by a numerous sect which arose in France, under the name of Economists. In Italy too this sect gained some distinguished partisans. Its followers have written more about the science than those of any other sect; yet they have admitted Quesnay's principles with such blind confidence, and maintained them with such implicit fidelity, that one is at a loss to discover any difference of principle, or any progress of ideas in their several productions.
Thus Quesnay founded a second system in political economy, still named the territorial system, or more precisely the system of the economists. He begins by asserting that gold and silver, the signs of wealth, the means of exchange, the price of all commodities, do not themselves constitute the wealth of states; and that no judgment can be formed concerning the prosperity of a nation, from the abundance of its precious metals. He next proceeds to survey the different classes of men, all of whom, occupied in gaining money, and causing wealth to circulate, even when acquiring it for themselves, are not, according to him, occupied with any thing besides exchange. He endeavours to distinguish the classes possessed of a creative power; it is amongst them that wealth must originate, all the transactions of commerce appearing to be nothing else but the transmission of that wealth from hand to hand.
The merchant who carries the productions of both hemispheres from one continent to the other, and on returning to the ports of his own country, obtains, at the sale of his cargo, a sum double of that with which he began his voyage, does not, after all, appear, in the eyes of Quesnay, to have performed any thing but an exchange. If, in the colonies, he has sold the manufactures of Europe at a higher price than they cost him, the reason is, they were in fact worth more. Together with their prime cost, he must also be reimbursed for the value of his time, his cares, his subsistence, and that of his sailors and agents during the voyage. He has a like reimbursement to claim on the cotton or sugar he brings back to Europe. If, at the end of his voyage, any profit remains, it is the fruit of his economy and good management. The wages allowed him by consumers, for the trouble he has undergone, are greater than the sum he had expended. It is the nature of wages, however, to be entirely expended by him who earns them; and had this merchant done so, he would have added nothing to the national wealth, by the labour of his whole life; because the produce which he brings back does nothing more than exactly replace the valuE of the produce given for it, added to his own wages, and the wages of all that were engaged with him in the business.
Agreeably to this reasoning, the French philosopher gave to transport trade the name of economical trade, which it still retains. This species of commerce, he asserts, is not destined to provide for the wants of the nation that engages in it, but merely to serve the convenience of two foreign nations. The carrying nation acquires from it no other profit than wages, and cannot grow rich except by the saving which economy enables it to make on them.
Quesnay, next adverting to manufactures, considers them an exchange, just the same as commerce; but instead of having in view two present values, their primitive contract is, in his opinion, an exchange of the present against the future. The merchandise produced by the labour of the artisan is but the equivalent of his accumulated wages. During his labour, he had consumed the fruits of the earth, and the work produced by him is nothing but their value.
The economist next directs his attention to agriculture. The labourer appears to him to be in the same condition as the merchant and the artisan. Like the latter, he makes with the earth an exchange of the present against the future. The crops produced by him represent the accumulated value of his labour; they pay his hire, to which he has the same right as the artisan to his wages, or the merchant to his profit. But when this hire has been deducted, there remains a net revenue, which was not be found in manufactures and commerce; it is what the labourer pays the proprietor for the use of his land. This revenue, Quesnay thinks, is of a nature quite different from any other. It is not wages; it is not the result of an exchange; it is the price of the earth's spontaneous labour, the fruit of nature's beneficence; and since it does not represent pre-existent wealth, it alone must be the source of every kind of wealth. Tracing the value of all other commodities, under all its transformations, Quesnay still discovers its first origin in the fruits of the earth. The labours of the husbandman, of the artisan, of the merchant, consume those fruits in the shape of wages and produce them under new forms. The proprietor alone receives them at their source from the hands of nature herself, and by means of them is enabled to pay the wages of all his countrymen, who labour only for him.
This ingenious system totally supplanted that of the merchants. The economists denied the existence of that commercial balance to which their antagonists attached so much importance; they asserted the impossibility of that accumulation of gold and silver which the others expected from it; throughout the nation, they could see only proprietors of land, the sole dispensers of the national fortune; productive workmen, or labourers producing the revenue of the former. and a hired class, in which they ranked merchants also denying to them, as to the artisans, the faculty of producing any thing.
The plans, which these two sects recommended to governments, differed not less than their principles. While the mercantilists wished authority to interfere in every thing, the economists incessantly repeated laissez faire et laissez passer (let every man do as he pleases, and every thing take its course;) for as the public interest consists in the union of all individual interests, individual interest will guide each man more surely to the public interest than any government can do.
An excessive ferment was excited in France by the system of the economists. The government of that nation allowed the people to talk about public affairs, but not to understand them. The discussion, of Quesnay's theory was sufficiently unshackled; but none of the facts or documents in the hands of the administration, were presented to the public eye. In the system of the French economists, it is easy to discern the effects produced by this mixture of ingenious theory and involuntary ignorance. It seduced the people, because they were now for the first time occupied with their own public affairs. But, during these discussions, a free nation, possessed of the right to examine its own public affairs, was producing a system not less ingenious, and much better supported by fact and observation; a system which, after a short struggle, at length cast its predecessors into the shade; for truth always triumphs in the end, over dreams, however brilliant.
Adam Smith, author of this third system, which represents labour as the sole origin of wealth, and economy as the sole means of accumulating it, has, in one sense, carried the science of political economy to perfection, at a single step. Experience, no doubt, has disclosed new truths to us; the experience of late years, in particular, has forced us to make sad discoveries: but in completing the system of Smith, that experience has also confirmed it. Of the various succeeding authors, no one has sought any other theory. Some have applied what he advanced to the administration of different counties; others have confirmed it by new experiments and new observations; some have expanded it by developments, which flow from the principles laid down by him; some have even here and there detected errors in his work; but it has been by following out the truths which he taught and rectifying them by light borrowed from its author. Never did philosopher effect a more complete revolution in any science: for those even who dissent from his doctrine acknowledge his authority; sometimes they attack, solely because they do not understand him; most commonly, they flatter themselves with the belief of still following, even while they contradict him. We shall devote the rest of this article to explain the science which he taught us, though in an order different from his. We shall arrange it under the six following heads: Formation and Progress of Wealth: Territorial Wealth; Commercial Wealth; Money; Taxes; and Population.
contents | next section | Political Economy Archive