POLITICAL ECONOMY. 



POLITICAL ECONOMY. 



7, the results of machinery; 8, the circulating medium, or currency; 

 9, the nature and conditions of commerce, or exchange of commodities. 

 Most of these subjects are treated in this work under the heads 

 ACCUMULATION, BALANCE OF TRADE, BULLION, CONSUMPTION, CUR- 

 RENCY, EXCHANGE, PROFIT, RENT, WAGES, WEALTH. 



History of the Science. The great nations of antiquity, the Greeks 

 and Romans, had no notion of what we understand by political 

 economy. They sought to increase their wealth chiefly by war, by 

 conquering and plundering weaker nations, and appropriating to their 

 own use part of the produce of their industry. They considered 

 handicraft and trade as degrading to a citizen, and left those pursuits 

 to be exercised by slaves or freedmen. The Romans, in the earlier 

 ages of the republic, held agriculture in more esteem ; but after they 

 had extended their conquests beyond the limits of Latiurn, the 

 business of agriculture also was mainly conducted by slaves. The 

 consequences of this system are well known ; agriculture declined, and 

 the people of Rome were obliged to be fed by corn from the provinces. 

 It is evident that in such a state of society there will be no room for 

 the consideration of some of the most important questions of political 

 economy, which are based upon the principles of free labour and com- 

 petition. It appears that the Romans considered gold not as the 

 representative of wealth, but as wealth itself, for we find that the 

 senate forbade its exportation. (Cicero, ' Pro Flacco,' 28.) 



After the fall of the Roman empire, the free towns that rose in the 

 middle ages, Pisa, Venice, Florence, Genoa, and the Hanseatic towns, 

 were essentially commercial, and with them the " mercantile " system, 

 as it is called, may be said to have originated, at least in practice ; 

 for it was not expounded and reduced to rules until centuries after. 

 This system consisted in looking to foreign trade as the source of 

 wealth, selling dear 'and buying cheap, and thereby realising, by the 

 exchange, a surplus in bullion, which surplus was employed in 

 increasing the quantity of produce to be sold. Shipping, foreign marts, 

 colonies or factories abroad, were the means employed for these objects. 

 But as each mercantile nation sought a monopoly of trade, restrictions 

 were resorted to in order to favour its own commerce and impede or 

 depress that of others. This led to jealousies and wars, which ended 

 with the ruin of one or the other of the contending parties. This 

 system was narrow and exclusive : it considered only one state, and 

 built the prosperity of that state on the depression of others. It was 

 affected by the same error as the military system of conquerors, who 

 wish to exalt and enrich one country by subjugating and plundering 

 another, overlooking the fact that the prosperity of other countries is 

 part of the general prosperity of the world, in which our own country 

 must share. The principle that " the whole world as to trade is but as 

 one 'nation or people, and therein nations are as persons " (Sir Dudley 

 North's 'Discourses on Trade,' 1661), was not known as yet, and 

 indeed it may be said to be acknowledged, even now, by comparatively 

 few in any country. 



Another mistake of the states of the middle ages was that of con- 

 sidering gold and silver as constituting the exclusive wealth of a 

 country ; their attention was fixed on money not as a means, but as 

 the end of trade, 'and as the most beneficial surplus, which they 

 endeavoured to retain in their coffers by enacting severe penalties 

 against its exportation. Hence the earlier Italian writers on commerce 

 treat exclusively of money, its standard, and the evils of tampering 

 with it. Gasparo Scaruffi, of Reggio near Modena, wrote, in 1579, 

 ' Diacorso sopra le Monete, e della vera propomone f rh 1'oro e 1'argento.' 

 In 1588 Bernardo Davanzati of Florence wrote a short treatise, ' Suite 

 Monete,' and another ' Sui Cambj,' or ' The Exchanges.' Antonio 

 Berra, a native of Coaenza in Calabria, published, in 1613, ' Breve 

 Trattato delle Cause che possono far abbondare i Regni d'Oro e d'Ar- 

 gento.' Looking upon gold and silver as constituting the wealth of a 

 state, Serra investigates the means of making them flow abundantly 

 into a country. Among these means he reckons manufactures, " which 

 afford a much greater return than agriculture ; " and maritime com- 

 merce. But " these means," adds Serra, " are of no avail without fixed 

 laws, order, and security for persons and property, for there can be no 

 prosperity where there are continual changes of dynasties and laws." 

 Thin shows that Serra, considering the age and country in which he 

 lived, had formed some correct and extended notions of political 

 economy. His book however remained unnoticed, and the author, 

 being implicated, as it seems, in some conspiracy against the Spanish 

 rulers of Naples, was imprisoned for ten years, and underwent the 

 torture seven times. It is not known when and where he died. 

 Turbolo of Naples wrote several treatises on the coinage and the state 

 of money in the kingdom of Naples ; ' Diacorsi e Relazione sulle 

 Monete del Regno di Napoli," 1616, 1618, 1623, and 1629. Ueminianu 

 Montanari of Modena published, in 1680, Trattato Mercantile delle 

 Monete,' and afterwards, ' Trattato del Valore delle Monete in tutti gli 

 Stati,' in which he lays down sound principles for regulating the coinage. 



The first writers on the subject of commerce at large appeared hi 

 England. Raleigh wrote, in 1595, his ' Essay on Trade ; ' Edward 

 Misselden wrote his 'Circle of Trade,' in 1623, and Louis Roberts his 

 'Treasure of Traffic,' in 1641. Thomas Mun wrote, in 1621, his 

 ' 1 1. iirnce of the East India Trade,' in which he exploded the notion 

 that money exclusively constituted wealth. He compared the expor- 

 tation nl gold and silver wherewith to buy goods for importation, with 

 the eed wbicii the husbandman throws into the earth that he may 



reap a plentiful harvest; and in his 'Treasure of Foreign Trade,' 

 published in 1664, Mun advocates the same principle. But Sir 

 William Petty went further than any of his predecessors or con- 

 temporaries in asserting enlarged views of political economy. In his 

 treatise ' On Taxes and Contributions,' published in 1667, he was the 

 first to state, though in an incidental manner, that " it was the labour 

 required for the production of commodities which determined their 

 value." He also wrote his ' Quantulumcunque,' a treatise on money, 

 in which he condemned the laws regulating the rate of interest, and 

 combated the notion that a country may be drained of cash by au 

 unfavourable balance of trade. [PETTY, SIR WILLIAM, in BIOG. Div.] 



In France, the minister Colbert, a contemporary of Sir William 

 Petty, was a great promoter of the mercantile system in all its exclu- 

 siveness [COLBERT in BIOG. Div.], and the principles of that system 

 continued to prevail in France after his death till the time of Quesnay. 

 Pierre le Pesant, Seigueur de Bois Guibert, published, in 1695, his 

 ' Detail sur la France,' in which he treated both of commerce and 

 money, but the author was banished because some of his propositions 

 reflected upon feudal rights and ecclesiastical privileges. Twelve years 

 later Vauban published his ' Dixme Royale,' in which he proposed a 

 new plan of taxation. 



In England, Locke, in his ' Essay on Civil Government ' (b. xi., 40- 

 43), argued at length to prove that " labour is the constituent principle 

 of value." There is something to the same purpose in Hobbes's 

 ' Leviathan' (ch. 24). But these were incidental remarks, and not 

 professed investigations on the subject of political economy. 



In a tract published in 1677, entitled ' England's Great Happiness," 

 the notion of the balance of trade is examined and its fallacy exposed. 

 [BALANCE OF TRADE.] Sir Dudley North wrote ' Discourses on 

 Trade,' 1691, which contain more clear and comprehensive notions 

 on trade than had yet been published. Among other propositions, he 

 lays it down as a magim that " there can be no trade unprofitable to 

 the public ; for if any prove so, men soon leave it off, and wherever the 

 traders thrive, the public, of which they are a part, thrive also." It 

 is worthy of notice, by way of contrast, that Montesquieu in the 

 following century wrote a chapter entitled ' To what Nations Com- 

 merce is prejudicial.' ('Esprit des Lois,' b. xx., ch. 21.) In 1696 

 Davenant wrote on ' the Commerce and Revenue of England.' In the 

 next century Sir Matthew Decker wrote an ' Essay on the Causes of 

 the Decline of Foreign Trade,' 1744. 



A change of opinion was in the meantime taking place on the Con- 

 tinent with respect to the so-called "mercantile system." Fraufois 

 Quesnay, born in 1694, a medical man by profession, and surgeon to 

 Louis XV., being struck by the distressed condition of the French 

 peasantry, endeavoured to draw the attention of the government 

 towards relieving that numerous and ill-used class of people. He 

 proposed the abolition of custom-houses between province and province, 

 the free circulation of corn throughout the kingdom, the suppression 

 of the corv^es, and other similar reforms, which were effected after his 

 death by Turgot. Quesnay went further : he assumed as a principle 

 that the earth, or in other words, agriculture, was the only source of 

 wealth, in opposition to Colbert's mercantile system, which fixed that 

 source exclusively in trade. Quesnay allowed that manufactures and 

 merchants were highly useful, but he contended that as they realised 

 no net surplus in the shape of rent, they did not add any greater value 

 to the raw material of the commodities which they manufactured or 

 carried from place to place, than was just equivalent to the value of 

 the capital or stock consumed by them during the time that they were 

 engaged in those operations. He divided society into three classes : 1, 

 a productive class, consisting of farmers and agricultural labourers, who 

 subsist on a portion of the produce of the laud, reserved to them as 

 wages of labour and as a reasonable profit on their capital ; 2, a pro- 

 prietary class, namely, those who live on the rent of the land, or the 

 net surplus produce raised by the cultivators, after the necessary 

 expenses have been deducted ; 3, an unproductive class, consisting of 

 manufacturers, merchants, servants, and handicraftsmen, " whose 

 labour, though useful, adds nothing to the national wealth, and who 

 subsist entirely on the wages paid to them by the other two classes." 

 (Quesnay, ' Physiocratie, ou Constitution Naturelle des Gouverne- 

 mens,' 1768.) As a corollary to these positions, Quesnay and his 

 disciples concluded that all taxes ought to fall upon the land. 



Quesnay is considered as the head of the school called the school of 

 the " Economistes," which reckoned amongst its members the Marquis 

 <le Mirabeau, father of the celebrated Mirabeau, Mercier de la Rivi6re, 

 Dupont de Nemours, Condorcet, Raynal, Turgot, Necker, and other 

 distinguished men. 



Quesnay's principal work on political economy is the ' Physiocratie ' 

 already mentioned ; but he published other tracts, especially an article 

 ' Sur les Grams," which was inserted hi the ' EncyclopeVfie,' and in 

 which he advocates the same principles. Though Quesnay considered 

 agriculture as the only source of wealth, he did not advocate any ex- 

 clusive protection for it, but rather a principle of freedom in all 

 branches of trade. The " Economistes " originated the " Cadastre," 

 which was a survey and valuation of all real property, made by order 

 of the government, for the purpose of assessing the " contribution 

 fonciere," or property tax, which they considered as the only legitimate 

 tax. And this principle has prevailed in France and other continental 

 countries, where even now the tax on land aiid houses forms the mam 



