The Development of Economic Doctrine: An Introductory Survey

CHAPTER III

MERCANTILISM

I. The Historical Background

IT has become an accepted phrase to speak of “mercantilist doctrine” and “mercantilist theory,” yet Mercantilism is a misleading and deceitful word, if it is interpreted as implying that at any time there was a group of writers who consciously advanced a body of mercantilist thought to which any canon of orthodoxy could be applied. A mere indication of the spatial and temporal frontiers of Mercantilism is a sufficient warning against the old vulgar error implicit in the view (which perhaps still survives) that Mercantilism was the current orthodoxy before it was attacked by the Physiocrats, and that both schools were subsequently superseded by Adam Smith. For if there be such a thing as Mercantilism, it had a three hundred years’ run, and it coloured the thought (and still more the action) of every country in Europe. Certain views indeed, bearing a strong similarity to each other, began to appear throughout Europe consequent on the portentous changes which marked the close of the Middle Ages. These views, based on certain common assumptions, were in marked contrast to the non-national, moral and other-worldly point of view which had characterized such a writer as St. Thomas Aquinas. These views emerged, at first in a crude form, about the end of the fourteenth or the beginning of the fifteenth centuries; despite refinements, variations and modifications, the family resemblance in the views currently held continued until the second half of the eighteenth century. Mercantilism indeed is still with us, and shows signs of a healthy and glorious resurrection. But it is clear that no general body of doctrine could have maintained itself unchanged for three centuries, especially when it is recalled that Mercantilism, so-called, prevailed not merely in France, England and Italy, but was likewise rampant in Scotland, Spain and Russia.

Mercantilism, therefore, varied, adapting itself to the changing conditions of time and to the circumstances of its local habitation. Yet if one can nowhere pick out the wholly complete and orthodox mercantilist, the common usage of the term has a certain convenience. Economic doctrine is everywhere the expression of the conditions of the time in which it emerges, and Europe from the end of the fifteenth century onwards was a very different place from the Europe of the twelfth and thirteenth centuries. Mercantilist writers may, and do, differ; but to a large extent they start from common postulates, and these postulates were imposed on them by the altered conditions of the Europe in the period which superseded the Middle Ages.

That Europe changed mightily as a result of the Renaissance, the Reformation, the invention of printing and the discovery of America, is a very familiar theme among those who prescribe essays and devise examination questions. A very brief survey of some of the changes which marked the age of transition will reveal the intimate connection between Mercantilism and the general tendencies of the time in the world of politics and of thought. First, and most fundamental, was the political change. It is not for us here to concern ourselves unduly with history, or the cause and course of events. It is sufficient to observe that in the countries of most importance, the mediaeval warring of turbulent barons, with a king doubtfully stronger than his leading subjects, gave way to the reality of a strong centralized State with an effective, and in some cases even an efficient, government. In English history the change is represented by the Tudors. The power of the King became not merely predominant; it became comprehensive. In short, England, France and Spain became definite entities, and not merely geographical expressions. Feudalism, linking society together by a chain of privileges and obligations, had emphasized loyalty to the overlord as the first obligation, and in doing so had stymied the possibility of national unity. With the barons put in their proper place, the King became, in theory, the “father of his people” England and all who lived in England were realized to have common interests, and it was the duty of the King and of the Government to watch over and to further these interests. It followed also from this emergence of “England,” and of “France” each as a definite entity with interests of its own, that the nations and states which had so emerged were at least in potential rivalry, if not in conflict with each other. The cosmopolitanism implicit in the non-national sentiment of the Middle Ages was gone. Unified states had come into being; these lived in rivalry in peace, and might at any time be pitted against each other in war. Wars doubtless there had been in the past, but it is significant to note in how large a proportion of instances these had arisen out of the complexities of the feudal system. If the King of England was at variance with the King of France, it was as likely as not that he went to war in his capacity of Duke of Normandy; from the English point of view the Scottish War of Independence was largely a matter of disciplining a feudal inferior. But in the new conditions the conflict of interests was definitely between states and nations.

Moreover, political thought, partly inspiring and in part interpreting development, tended in the same direction. For their relationship to the fundamentals of Mercantilism, two writers are indirectly of supreme importance. Machiavelli (1469-1527) in The Prince, with an admirable air of detachment and a scientific aloofness from moral considerations, discussed how in the Italy of his day a “principality” could be established and maintained. A book written with a specific purpose, its lessons were found applicable far beyond Italy. Machiavelli postulated that the times called for a strong prince, and in effect his book is an analysis of what must be done to create the strong state—conscience being hushed and all scruples ignored. Machiavelli thus became the unscrupulous despot’s guide to power. His significance lies in the facts, firstly that he freed—perhaps offensively freed—politics from all moral and ethical considerations; and secondly, that though originally and of design applicable to the Italian city state, his work served as an incentive to despotism everywhere. The other writer is Jean Bodin (1520-1596), who, analysing political conceptions, presented to the world the fruitful idea of sovereignty, which, though now creaking, has dominated all political thought until the present generation. The essence of the doctrine of sovereignty in its various forms is that there is, in every state, a supreme power, subject to no other power within the state itself, but to which all else is subject. The conception of sovereignty, unless handled with gingerly care and subtle refinement of statement, is thus apt to underline the importance of a strong centralized state; inevitably, also, it entails an element of irresponsibility in the sovereign power. Moreover, it irreconcilably confronts sovereignty with sovereignty in the international anarchy.

Mercantilism may not inappropriately be viewed as the economic equivalent of Machiavelli and Bodin. Bodin deduced that of necessity there was a supreme power in each state. Machiavelli in effect said: “If you want a strong state, you must do this, and avoid doing that.” Strong states were in demand, and the mercantilists, practical men confronted with practical problems, were concerned with the means whereby the State could be made strong. In the somewhat hackneyed phrase of Schmoller, Mercantilism is merely “state-making”—although it should be added that it is state-making on the economic side. From this analysis there follows further a consideration of the highest importance in explaining the varying shades of mercantilist doctrine. Mercantilism was never more than a means. The true end was political in its character—the creation of a strong state; Mercantilism was the sum total of the means on the economic side, appropriate to the attainment of this end. But while an end may be absolute, it is of the essence of means that they should be variable according to time and circumstance; and Mercantilism, in its various phases, reveals such variety.

These considerations explain the essential kernel of Mercantilism; they do not explain the particular form which mercantilist doctrines assumed. To carry the analysis to this further point, two further elements in the problem must be invoked. The first centres in the perpetual neediness and indigence of the prince; the second lies in the reactions, immediate and more remote, on European financial conditions occasioned by the discoveries of the precious metals in the New World. These two causes, mingling together, give Mercantilism its most characteristic outer features,

The King in his capacity of father of his people, the responsible custodian of the national interests, had perforce to incur heavy and onerous expenses. So long as there still remained in the air vague memories of the pleasing tradition that “the King should live of his own,” taxation inevitably lagged behind the needs of the situation. That the King should live of his own implied that he should live as other barons did, on the revenues of his private estates. It was indeed a relic of the time when he did not differ materially from other barons; but the doctrine was incompatible with the new conditions when the King was the defender of the safety and the welfare of his country. In short, taxation, which in an earlier age had spasmodically supplemented the King’s private revenue, had of necessity to be regularized and become permanent. Old wars might have been waged by retainers, as part of the universal system of payment in kind; the new age of standing armies was at hand, and this required money. Indeed pecunia nervus belli became one of the accepted maxims of the age. For all the purposes of government, the King required a revenue, thought of in terms of money, a steady and calculable revenue, unfortunately also an increasing revenue. How to increase this revenue became the first thought of those concerned with public policy.

The possibility of securing a revenue by taxation was itself, however, one of the indirect consequences of the geographical discoveries, and in particular of the discovery of America. What first commended the New World to the European was its promised store of precious metals. The influx of silver rapidly revolutionized the trade, commerce, and the finance of Europe. The consequence of the new discoveries of silver on the European price-level is one of the most familiar exemplifications of that dowdy platitude, the quantity theory of money. But more important than the nominal rise in the price of hens and sheep is the fact that the influx of the precious metals over a large part of the field resulted in the transition from a natural economy, based to a considerable extent on barter and the feudal ideal of services in kind, to a money economy. Taxation is no easy matter in a natural economy; when all things are thought of in terms of money, and when money is effectively used in all transactions, the possibilities of taxation are enormously facilitated. In an age when the engine of regular taxation was thus newly fashioned, the administration of the King’s, or the State’s, affairs became more akin to a merchant’s business. There was expenditure and there was income, both thought of in terms of money. Increased power rested on the attainment of a balance of revenue over expenditure, and thus inevitably the possibilities of increasing the sources of revenue were assiduously explored.

Wealth, as the source of a nation’s power, above all visualized as money—that form of wealth which endures, which is adaptable to all ends, which can be made to fetch and carry at command—had thus come into respect. But the picture would not be complete without some reference to the correspondingly changed view of the individual. Not merely was the State directed to the pursuit of wealth and the discovery of the sources of wealth, leading among other things to colonial acquisitions and colonial rivalries, the individual likewise was liberated from the restraining abstemiousness and asceticism which had marked the finest thought of the Middle Ages. Not so long ago it had been sinful, or at least perilous, to accumulate wealth—perhaps because in what was so largely a natural economy it had been so difficult and indeed “unnatural” to do so. In a money economy, the accumulation of wealth became meritorious and to some inevitable. Hitherto it had been held that a merchant could hardly be pleasing to God; now the proof of the pudding was in the eating thereof, and if merchandise yielded a profit, it was ipso facto justifiable and justified. On this side also deeper causes were operative. The Renaissance on one side was a frank bubbling up of delight in the enjoyment of life. Rabelais, perhaps more than any other, sums up the spirit of the Renaissance Waiving his philosophy, his name recalls vast uproarious laughter, unashamed delight in eating and drinking and whatever else may minister to a sense of satisfaction that it is a good thing to be alive. It is a far cry from St. Thomas Aquinas to that Rabelaisian Abbey of the Thelemites, living joyfully under the motto: “Fais ce que vouldras.” Here indeed is the ideal of reckless individualism, so markedly at variance with the mediaeval ideal of an individual swallowed up in his class, with duties and obligations imposed upon him by his status in life.

The Reformation in certain of its aspects doubtless encouraged a spirit of asceticism, but it was an asceticism which no longer viewed with horror the accumulation of wealth. Max Weber indeed has familiarized us with the idea that modern capitalism has its roots in Calvinistic theology. Protestantism, particularly in its Calvinistic form, is essentially individualistic in its outlook. Salvation is a matter between each individual and his Creator, even though the ultimate decision may be rather a onesided affair. But Calvin, or so Weber would have us believe, laid down in the economic sphere two cardinal injunctions; firstly the duty of working assiduously in one’s calling, and secondly the duty of refraining from pleasurable consumption of wealth. The only possible outcome of unrestrained activity, combined with a self-denying refusal to enjoy the fruits of that activity, is an accumulation of wealth. Indeed increased substance came to be regarded as a special sign of divine favour, and thus it was possible to grow rich to the greater glory of God. It is impossible here to consider the element of truth in Weber’s thesis; it is sufficient to note that Protestant asceticism, unlike mediaeval asceticism, so far from being hostile to the accumulation of wealth, tended rather to look upon it with favour.

These last considerations are perhaps on the fringe of our subject. But enough has been said to indicate that in the transition from the Middle Ages to the modern period, a multiplicity of causes tended to re-create Europe as a family of centralized states, living in uneasy rivalry, each struggling to be strong against possible competitors; that the conditions of the time attached a new importance to wealth, and that as the individual could now unashamedly pursue wealth, so also the State saw in wealth the secret of strength. Out of these conditions Mercantilism arose.

II. General Outline of Mercantilist Doctrine and Devices

It has been wisely noticed as worthy of remark that none of the mercantilist theoreticians approved of all the expedients which are ordinarily embraced under the designation of Mercantilism. The complete mercantilist, in fact, never existed. Even if, for this reason, any general statement of mercantilist views is apt to mislead, it may nevertheless be convenient to attempt something of the nature of a composite photograph of the mercantilist mind, it being clearly premised that this represents the views not of any individual mercantilist, or of the mercantilists of any particular country, but rather the general type to which mercantilists everywhere in greater or less degree tended to conform. One other caveat is necessary. Mercantilism was pre-eminently rooted in practice. Although, particularly in England, the movement is reasonably prolific in theoretical exponents, it is noticeable that these came rather late in the day. In its origins and by its very nature, Mercantilism was anything but a “system”; it was primarily the product of the minds of statesmen, civil servants, and of the financial and business leaders of the day. It follows also that in its earlier and cruder manifestations, Mercantilism is frequently best discovered as an inference from the terms of an Act of Parliament, in an obiter dictum inserted by a garrulous Parliamentary draftsman in the preamble of an Act, or in a memorandum or State paper, dealing with a specific administrative problem. Any attempt to state generally the essence of Mercantilism must be read in the light of these reservations.

Fundamental for the mercantilist was the strength of his country. This was the end to which all means were subservient. Moreover, in considering the prosperity and the strength of his country, the true mercantilist had always at the back of his mind a comparative standard. His country was engaged in a race with other countries, and in this race it must not be a loser. When the mercantilist came to look for a test of strength, he found it in the wealth of his country—above all in that portion of wealth which consisted of the precious metals. Herein, in a sense, they transferred to the State an idea which is entirely appropriate when applied to the individual citizen. The difference between a man of straw and a man of substance, between the man who can do and get what he wants and the man who cannot, can best be ascertained by consulting the banker who keeps their accounts. So also by a transference of ideas more permissible then than now, the king who could support a large army and maintain a powerful navy was the king who had behind him the treasure necessary for the purpose, that pecunia nervus belli. Hence the mercantilist attached preponderating importance to treasure and bullion as the most enduring, the most useful because the most generally acceptable, form of wealth. Adam Smith, who rather made the mercantilists a classical example of clotted economic nonsense, is responsible for the view so long prevalent that they confused money and wealth. Here Adam Smith was less than just. Despite incautious statements, it would probably be truer to say that they regarded money and bullion as the sign of wealth; and also, at least among the more enlightened, that they regarded the precious metals as beneficial because of their power to stimulate the economic activity of the country.

Assuming that bullion is in some sense wealth par excellence, how is a country to get it? If it has mines, or can acquire plantations with mines, well and good. Its task, then, is merely to prevent the silver and gold from flowing to other countries—if need be by “sanguinary laws,” to use Adam Smith’s phrase. But if a country has no mines, the desired silver and gold can only be obtained as the result of trade, and the whole trade of the country must accordingly be so ordered and conducted that as a result of its operations gold may come into the country. It is familiar doctrine that in respect of its exports—what a country sells to others—a country must receive payment, which will ultimately be in the form of silver or gold; on the other hand, what it buys in the form of imports will have to be paid for In a most rudimentary form of the equation of indebtedness, exports represent money coming into the country; imports represent money going out. In order that the supply of bullion in the country may increase, it is therefore necessary that there be a “favourable balance of trade,” represented by an excess of exports over imports, leading in its consequence to a balance of payment being due to the country. It is an easy further step to consider that the trade with any country should be cherished or discouraged, according as that trade, viewed in isolation, tends to render the balance favourable or unfavourable; and it is likewise easy to conclude that all exports are, in the nature of things, good and desirable, whereas all imports are evil and damnable. It was thus a primary principle of the typical mercantilist to maximize exports while minimizing imports.

While the conception of the balance of trade has become popularly almost synonymous with Mercantilism, the consequences of the doctrine were no less important than the doctrine itself. For if exports are to be increased, then every lawful industry which produces goods meet for exportation calls for encouragement. So also, if imports are to be restricted, then we must make shift to do without foreign wares, or alternatively we must, out of our existing resources, contrive to supply ourselves with what would otherwise have come from abroad. The country must be a hive of industry, primarily with an eye on the needs of other countries. There must be no waste; preferably there ought to be a certain austerity of life, so that there may be more for export. Complete use should be made of all the resources of the country. In a sense the nation’s life should, in current jargon, be “rationalized,” so that no economy may be missed, no opportunity for gain neglected.

A further consequence of the importance attached to the balance of trade lies in the fact that it naturally led in the mercantilist doctrine to a hierarchy of occupations. Least important was agriculture. Agriculture, it is true, might feed the population; intensive tillage of every waste strip, especially if exotic crops like tobacco were raised might render certain imports unnecessary. But in itself agriculture, as is indeed true of all domestic trade and industry, brought no money into the country, and therefore on the cruder mercantilist theories did not increase the country’s wealth. More important were industry and manufactures, where a definite excess could be created for the satisfaction of the needs of other countries, and the sale of which, therefore, was pure gain for the country. Most important of all, however, was trade. If a former age had doubted the acceptability of a merchant in the sight of the Almighty, the merchant had now come into his own, and was become the head-stone of the corner.

Such was the mercantilist programme and the mercantilist point of view; equally significant was the machinery whereby that programme was to be carried into effect. For in all their schemes the mercantilists looked to a benevolently paternal government, assumed wise enough to interfere everywhere. Mercantilism was a policy of ubiquitous and perpetual governmental activity. There was nothing the Government might not do; there was nothing it ought not to do, if thereby its activity was calculated to promote the general well-being. In regard to the primary matter of restraining imports and encouraging exports, the machinery was obviously at hand in the form of import duties to keep out foreign goods, and bounties to encourage exports. But when it comes to the remoter stage of encouraging enterprises which in their consequences will lead to a healthier balance of trade, no limit can be assigned to the list of expedients devised or prescribed. The issue of patents of monopoly in respect of the introduction of new processes, the direct importation of foreign workers in order to establish a new industry, the fixation of prices and wages (partly in the interests of production), the whole series of devices to encourage shipping and the Navy, of which the Navigation Acts are the most familiar and the prescription of fish days the most curious, the creation of privileged trading companies, the foundation of plantations in order to secure supplies of raw material as well as a market for the finished commodities—such are only some of the more outstanding examples of Mercantilism in practice, of devices tending to the greater glory of the King and the increased strength of the Realm. So, too, in certain of its phases, Mercantilism tended to incorporate a definite policy with regard to population. For increased population does, or should, mean both an increase in the potential number of soldiers and sailors and an increase in the number of productive workers; and consequently encouragements to increased population can almost claim to be an essential part of Mercantilism.

In its view regarding the functions of government activity there is an obvious kinship between Mercantilism and State Socialism. The mercantilist regarded the State as the appropriate instrument for promoting the well-being of his country. Moreover, in his view the country was regarded as a unit; there were national interests to be promoted, quite irrespective of the interests of particular sections or individuals. Indeed, the interest of the State might be in conflict with that of the individual, and in such a case obviously the interest of the whole was to be preferred. Mercantilism thus endeavoured to take a comprehensive view of the needs of society, and looked upon the State as the appropriate administrative machine to secure the satisfaction of these needs.

Until recently the mercantilists have suffered from the cloud cast over them by Adam Smith. Lately there has been a disposition to treat them with greater respect. They were certainly not such consummate fools as was apt to be assumed in the middle of the nineteenth century. The rather harsh traditional judgment rests on two misinterpretations, firstly that the balance of trade theory represented substantially the whole of their aims and doctrines, whereas in fact this was but one aspect of a larger and more comprehensive policy; and secondly, that they were guilty of the folly of Croesus in thinking that wealth consisted in gold and silver instead of the things that gold and silver could bring. A fair interpretation would probably be that they valued gold and silver as the avenues by which power and strength were to be attained, and a final judgment, moreover, should take into consideration how far their views were justified by the circumstances of the time. Yet, even so, they can scarcely be entirely acquitted of the suspicion that at times they confused the means and the end, and wrote as if bullion were possessed of some magic quality which made its acquisition the only worthy end of national policy. On two other grounds also criticism is permissible. In witnessing their intense desire to increase the national productivity, their zeal to make the best use of everything, one sometimes gets the impression that they regarded wealth, and labour that results in wealth, as the end to which man’s existence is subservient. In bustling too much, one forgets that the purpose of labour is rest, that wealth exists to be consumed, that man’s chief end is to glorify God and enjoy Him for ever. The second obvious line of criticism is that the mercantilists never thought out their theories to a logical conclusion. It was of the essence of their view that what one country gained, another lost; the idea of a mutually advantageous trade eluded them. The device of the favourable balance of trade was intended to ensure that it should be the other country that should lose. But clearly all countries could not have, in the mercantilist sense, a favourable balance of trade simultaneously. It was a device which all sought to practise, but which nevertheless could not be generalized. So also it is doubtful whether they ever asked themselves what would happen in a country which, in the delectable phrase of the Scottish Parliament, should find itself “stuffed with bullion” as a result of the application of mercantilist expedients, or what measures could effectively be taken to prevent the stuffing from coming out. But this is merely to say once again that the mercantilists were practical men and not a school of economists.

III. Four Representative Mercantilists

The previous section has perhaps been concerned with an attempt to define an unreality, to wit, the complete mercantilist who can only be imagined as resulting from the fusion, into one personality, of many mercantilists, each stressing different aspects of the problems of his age. It may be convenient to supplement this general composite representation by a brief reference to four typical mercantilist writers, representing four different nations. The authors so cited are not, however, to be regarded as necessarily the leading mercantilists; others with equal appropriateness might have been hailed for the purpose. They are merely examples from a cloud of witnesses, summoned to give precision to the foregoing account.

Montchrétien

From France a convenient representative may be found in Antoine de Montchrétien1 (1576-1621), who in 1615 dedicated his Traicté de l’Œconomie Politique to the King and the Queen Mother. This work derives a slight additional interest from the fact that it represents, so it is said, the earliest use of the phrase “Political Economy.” But let no one, beguiled by the title, imagine that he will here encounter a treatise on Political Economy in the modern sense. It is really a survey of the industries of trance, inspired by an exuberant and ebullient patriotism, and interwoven with much advice to the King on how matters may be improved. The book is divided into four parts, in which successively the author deals with the manufactures, the commerce and the navigation of France, and lastly of the “principal cares” of the Prince. Of the industries surveyed it is remarkable, and not wholly characteristic of mercantilist thought, that agriculture appears first. Indeed he writes here with something of Physiocratic enthusiasm. Agriculture—and he appeals to Aristotle and Cato—is to be regarded as the beginning of all wealth;2 if agriculture is depressed, it is not due to the infertility of the soil (a suggestion which would imply disloyalty to France) but to the poverty of the labourers, But, despite this, it is clear that Montchrétien’s real interests are engaged elsewhere in the other industries which he discusses.

The first point of general interest in Montchrétien—and here he is in the true mercantilist tradition—lies in the importance which he attaches to the principle that everyone should work, and in his antipathy to all kinds of idleness. Man, he says, is born to live in continual exercise and occupation; the policy of the State should be to secure that no section of the population remains idle.3 As a result of Eve’s remote offence, labour is imposed on us by a right of succession, so that life and labour are inseparably united. He never fails to react to the word l’oysivité with constant varying phrases of moral indignation. Men reduced to doing nothing are easily induced to do evil; idleness corrupts the vigour of men and the chastity of women. Idleness is a fatal pest to rich and flourishing states; it is the mother of all vices and the cause of all sins.4 Thus for Montchrétien, prosperity and morality alike demand the intensity of the bee-hive. If the happiness of man consists in wealth, then wealth consists in labour.

The second general characteristic of Montchrétien is, on the lyrical side, a glowing enthusiasm for France, which, when Montchrétien forgets that he is also a poet, becomes tainted with a rather rigid and chauvinistic exclusiveness. The object of the rulers of France, dowered as France is, should be to make the country rightly regarded as “incomparable.”5 A proud self-sufficiency is his ultimate aim. For France is a world in itself. “En un mot, la France est un monde; qui l’a toute veue, a tout veu ce qui se peut voir;”6 and it follows from this proud boast that it can dispense with what it receives from neighbouring countries; but neighbouring countries can in no wise do without her; it has infinite wealth, known and to be known.7

A country which is thus a world in itself ought to be in a position to maintain her children; “being born in France, it is right that they should live there,” but this they cannot do, if they lose their means of subsistence.8 Much of Montchrétien’s volume tends to be a dirge on the familiar theme of trade lost to the foreigner, who is represented as in process of strangling the industries of France. He enlarges on the unrestrained liberties which foreigners enjoy in France, compared with the restrictions imposed in the contrary case. His ideal, indeed, approaches the geschlossene Handelsstaat, except in so far as France may be able to export out of her pure superfluity. The arguments are on the usual lines—the folly of having made by another that which one’s self can produce, the evil economy of spending one’s substance on what can be obtained by one’s efforts. The argument, though not peculiar to Montchrétien, is put by him with unusual vigour:

“Premierement, je represente à vos Majestez que toute la quinquaillerie, à la fabrique de laquelle sont occupez, tant dedans que dehors le royaume, non des villes seules, mais des provinces entières, se peut faire abondamment et à prix tres raissonable dans le pays de vos Seigneuries, que d’y en admettre et recevoir d’estrangere c’est oter la vie à plusieurs milliers de vos subjects dont ceste industrie est l’heritage et ce travail le fonds de leur revenu; c’est diminuer d’autant vostre propre richesse, laquelle se fait et s’augmente de celle de vos peuples.”9

On this he accordingly exhorts the King: “Faites-nous donc jouissance du fruict de nostre industrie; c’est à dire, rendez nous à nous mesmes.” Such is the ideal of proud national self-sufficiency, and Montchrétien in his appeal does not disdain what would now be called sob-stuff, by invoking “the tender sighs of the women and the pitiable cries of the children of those whose labours have suffered from foreign competition.”10

For Monchrétien, the foreigner is in the main a person given to fraud and guile. Specifically “whatever is foreign corrupts us.”11 In particular, foreign books “poison our spirits and corrupt our manners,” and therefore their importation should be prohibited.12 Indeed Montchrétien approves of a vigorous all-round national exclusiveness, hinting at a divine ordinance which has assigned to the inhabitants of any area the use of the elements and the goods which it produces. Further, he cites with admiration the example of Lyons, which acted on the principle that “each town should have something particular and in reserve for its own children, in order that it may help them.”13 Montchrétien is thus a stout defender of the maxim which enjoins upon us the expediency of rendering to our own sea-maws their ancient and prescriptive dues.

On some other questions Montchrétien shows a departure from the mercantilist norm. His scheme of things would be almost destructive of international trade, and there is therefore little, if anything, of the doctrine of the balance of trade in Montchrétien. Likewise he appreciates the importance of internal trade, and in one place he argues, and doubtless with truth, that no country could excel France in happiness and wealth and glory, if it could only keep the whole of its internal trade to itself, and restrict its foreign trade to the export of what it produced in superabundance.14 He approves of the doctrine “que l’un ne perd jamais que l’autre n’y gagne,”15 but draws from the maxim the inference that in domestic trade between citizen and citizen, there can be no loss for the public such as he fears may result from foreign trade. Varying the familiar analogy which finds in a national debt a transfer from the right trouser pocket to the left, domestic trade is like a man with a jar in each hand, pouring a liquid from one to the other. Foreign trade is thus for Montchrétien something of a snare and a gamble; it may lead to loss, and from this danger domestic trade at least is free.

From all this it naturally follows that the bullionist aspect of Mercantilism is less prominent in Montchrétien. He approves, it is true, of the old dictum that money is the “nerve of war,” and adds on his own account that gold has often been shown to be more powerful than iron.16 But he never loses his head on this aspect of the question, and there is one remarkable passage—it is true a somewhat isolated passage—in which he seems to fly in the face of all mercantilist orthodoxy: “It is not the abundance of gold and silver, the quantities of pearls and diamonds which make states rich and opulent; it is the conveniency (accomodement) of things necessary to life, and fit for wearing; he who has more of these has more of wealth.” Then after contrasting the position in the time of Charles VI, when, if money was scarcer, prices were lower, he adds: “It is true we have become more abundant in gold and silver than our fathers were; but we are not therefore more comfortable and more rich.”17 It is such a passage as this that reveals the fatuity of endeavouring to make the mercantilists conform to a type. Montchrétien, in short, is the rather repellently patriotic patriot, contemptuous of other peoples. His vision is that of the isolated state, with France in acknowledged supremacy, supplying all her needs, and having in addition something left over for export, so that trade represents a system of one-way traffic. Domestically all are to work, and work incessantly; idleness is to be banished to foreign parts—where presumably it will do no harm.

Thomas Mun

Of the innumerable company of English mercantilist writers and pamphleteers, one has, by common consent, a pre-eminent claim to be chosen as spokesman of the somewhat heterogeneous group. It is not merely that Thomas Mun18 (1571-1641) approaches most nearly to a systematic statement of mercantilist principles; of no less importance is the fact that he wrote at a time when Mercantilism was yet scarcely exposed to the disintegrating forces which made the mercantilist of the middle and later periods in some respects anticipators of a more liberal policy. Mun is perhaps the nearest approach to the perfect mercantilist; yet even he was unnecessarily conscious of heterodoxy, and is at times involved in those contradictions which are inevitable in a school, one of whose characteristics it was to refuse to push their thoughts to their logical conclusions.

Mun’s book was written for the better upbringing and instruction of his son, and it only appeared posthumously in 1664. Its very title is a condensed summary of Mercantilism: England’s Treasure by Forraign Trade, or, The Ballance of Our Forraign Trade is the Rule of our Treasure. His opening statement, after he settles down to business, gives a precise statement of the theory of the balance of trade in its least compromising form. To increase our wealth and treasure we must ever observe this rule: “to sell more to strangers yearly than we consume of theirs in value.”19 This rule, moreover, will give us a precise index of the amount of precious metals entering or leaving the country. If exports are £2,200,000 and imports £2,000,000,

 

“we may rest assured that the Kingdom shall be enriched yearly two hundred thousand pounds, which must be brought to us in so much Treasure; because that part of our stock which is not returned to us in wares must necessarily be brought home in treasure.”20

 

Such being the situation, the secret of accumulation lies in choking off the imports and in the encouragement of exports, and the most valuable chapter in Mun is that in which he proceeds to enumerate twelve methods whereby these so desirable ends may be attained. This chapter (No. 3) is really a complete catalogue of mercantilist devices, as these were apprehended at the time when Mun wrote, and the programme he outlines gives so luminous an account of Mercantilism in its robuster days that it may be permissible to reproduce the main points of his programme.

Firstly, Mun recommends the cultivation of waste grounds (which he rashly says are infinite) in such a way as will not interfere with the revenues derived from already cultivated lands. Thus hemp, flax, cordage and tobacco could be grown and the corresponding imports cut off.

Secondly, we should “soberly refrain from excessive consumption of foreign wares in our diet and rayment”; also from unnecessary change of fashion, “which vices at this present are more notorious amongst us than in former ages.”

Thirdly, with regard to exports, “we must consider our neighbours’ necessities.” Where they cannot get elsewhere the wares they require, we must sell them as dear as possible; but if they can supply their wants elsewhere, “we must in this case strive to sell as cheap as possible we can, rather than to lose the utterance of such wares.”

Fourthly, the value of exports could be increased by confining these to our own ships, as then we should gain not merely the price of our wares, but also the merchants’ gains—the invisible exports of modern theory.

Fifthly, by frugally expending our natural wealth, we might have more left for export. If we insist on being prodigal, it should be with the manufactures of our own country, so that the poor may be employed. This, how ever, Mun clearly regards as only a second-best; it would be still better if the poor were employed for the use of strangers.

Sixthly, the fishing in the adjacent seas should be developed, instead of allowing the Dutch to serve many places in Christendom with our fish.

Seventhly, a Staple, for the encouragement of the entrepôt trade, should be established, making England a distributing centre, thus increasing shipping, trade, and the King’s customs.

Eighthly, Mun recommends, in curious contrast to Smith later, that we should especially cherish trade with far countries. The reasoning is curious and fallacious; if pepper is 2s. the pound in London, it may be 2od. at Amsterdam; but the merchant may get it in the East Indies at 3d., “which is a mighty advantage.”

The ninth device Mun regards as a heresy in himself, and therefore postpones it for further consideration; it is that in certain cases it would be beneficial to allow the export of money itself.

The tenth and eleventh points are akin. Mun recommends that manufactures of foreign materials (velvets, silks, etc.) should be allowed to be exported free. This would furnish employment, increase exports, and by encouragement of imports with a view to manufacture, would increase His Majesty’s Customs. So also native commodities should not be burdened with too great customs, lest their enhanced price diminish their sale abroad. Logically, of course, this would lead to a system of bounties to encourage exports.

The twelfth and last injunction is vague and comprehensive; it is that “we must endeavour to make the most we can of our own.” Such is Mun’s programme, and it will be seen that taken in its entirety, it represents a policy of abstemious frugality, shunning all waste, and despising no opportunity of gain; leaving it to the foreigner to enjoy life, provided we enjoy the turnover.

All of this, except the ninth point, is of the mercantilist scheme of things. On the question of the exportation of money, Mun recognizes that his view is contrary to the common opinion; his argument in favour of allowing money to go is, briefly, that “money begets trade and trade encreaseth money.”21 He argues—and here true Mercantilism begins to crumble—that merely keeping the money in the kingdom will not make a quick and ample trade; that depends on the need other countries have for our wares. Indeed, he realizes that abundance of money raises prices, and “dear wares decline their use and consumption,” thus leading to a diminution in the volume of trade. It is therefore necessary to have faith that our moneys sent out in trade will come back again in treasure.

Like all mercantilists of yesterday and to-day, Mun is scathing in his condemnation of the idleness of his countrymen, contrasted with the industry of the foreigner. For him, the Dutch were, morally, the good boys of Europe. In contrast with them

 

“we leave our wonted exercises and studies, following our pleasures, and of late years besotting ourselves with pipe and pot, in a beastly manner, sucking smoak, and drinking healths, until death stares many in the face.”22

 

Not the least interesting point in Mun is that even here, in the citadel of Mercantilism, there are signs of dismemberment. Thus in contradistinction to the rigour of the programme outlined in the third chapter, later on he will not allow all kinds of bounty and pomp to be avoided. If we use few or no foreign wares,

 

“how shall we then vent our own commodities? what will become of our Ships, Mariners, Munitions, our poor Artificers and many others? doe we hope that other Countreys will afford us money for All our wares without buying or bartering for Some of theirs?”23

 

These are indeed searching questions!

And on another equally fundamental point he says this:

 

“For although Treasure is said to be the sinews of the War, yet this is so because it doth provide, unite and move the power of men, victuals, and munition where and when the cause doth require; but if these things be wanting in due time, what shall we then do with our mony?”24

 

“What shall we do with our money? “What indeed? This, some would suggest, is precisely the question which the mercantilists refused to answer, and which they could not have faced without devastating effects on their scheme of thought. On the other hand, that such a person as Mun gets so far as to ask the question may also indicate that the mercantilists were not quite so muddle-headed as has frequently been assumed.

It is not possible here to consider representatives of later English Mercantilism; but even at the risk of repetition, it should be again emphasized that, increasingly, although the postulate of national power remains, there are doubts and divergencies from the original mercantilist system of thought. Thus Josiah Child (1630-1699), after correctly defining the mercantilist conception of the balance of trade, refers to the practical difficulties of ascertaining what that balance may be, and concludes that the whole conception is “ too doubtful and uncertain as to our general trade, and in reference to particular trades fallible and erroneous.” For him the best test is to be found in the volume of trade as revealed in the increase of shipping, and the greatest stimulator lies in an abatement of the rate of interest.

Serra

To spread the net wider, one earlier mercantilist from Italy may be glanced at. Like Mun, Antonio Serra epitomizes the mercantilist creed in the title of his short pamphlet, published in 1613 under the title: A Brief Treatise on the Causes which can make Gold and Silver Abound in Kingdoms where there are no Mines.25 Serra begins by assuming as a proved proposition the importance of a kingdom abounding in gold and silver, the contrary belief being indeed an indication of doubtful sanity. Apart from those blessed countries which possess gold and silver “naturally,” the presence of the precious metals is due to collateral causes. Certain causes may be peculiar to a given country, such as its situation; otherwise Serra finds four main factors to which the presence of gold and silver may be attributed. These are the quantity of industry, the quality of the population, extensive trading operations and the regulations of the sovereign. With regard to the first point Serra gives reasons for the mercantilist’s preference of industry to agriculture. Firstly, it is safer; the artisan is more sure of a profit than is the peasant. The peasant depends on the weather, and his efforts may therefore result in a loss.

“But in industry there is always a certainty of gain, provided labour is expended.” To-day this sounds rather naïve. Secondly, although of course he does not use the phrase, industry is subject to increasing returns, whereas agriculture is not. Industry can always be multiplied two-fold or two-hundredfold, and with proportionately less expense (con minor proporzione di spesa). The third reason is that industry has a sure market. Produce is difficult to keep; but the fruits of industry can be preserved for a long time. They can therefore be held up for a better market, or exported. (Serra was not familiar with the canning industry.) Lastly, there is more profit in industry than in “produce.” The other causes leading to abundance of gold and silver may be disposed of summarily. The inhabitants must be diligent, eager to build up trade, without as well as within the country. The country should possess a great trade preferably in the produce of other places rather than its own. On the fourth cause, the regulations to be made by the sovereign—the essential point of Mercantilism in operation—Serra is feeble. It may be honest, but it is not helpful to say that “it is not easy to know how to arrange this factor well,” or that it is necessary to attend to more than one cause, since the same cause may produce different effects in different cases (as a light whistle rouses dogs and quiets horses). Such instructions are hardly calculated to produce the great civil servant. When the Chancellor of the Exchequer whistles lightly, who are the dogs and who are the horses?

Much of the remainder of Serra’s pamphlet is occupied with a consideration of the reasons which make gold and silver abound at Venice, and why, on the other hand, Naples is poor; also—a characteristic of Italian Mercantilism—with questions relating to rates of exchange. It is perhaps noteworthy that, like Mun, Serra disapproves of the prohibition of the export of money. If money is exported, it must be with an object, and therefore “if money is exported for any purpose whatever, it must return with a profit into the kingdom from which it was sent”—perhaps a rather large assumption, which incidentally would rather tend to make Mercantilism as a whole much talk about nothing.

Von Hornick

To preserve the balance a fourth and last mercantilist, this time from Austria, may be cited. Philipp W. von Hornick26 (1638-1712), the author of Oesterreich über alles wann es nur will, is amusing by reason of his uncompromising vigour and a certain quaint naïveté. His definition of policy rests on what is regarded as an axiomatic truism, which is in itself an interesting statement of mercantilist faith. It is to the effect that the might and eminence of a country consist in its surplus of gold and silver, and all other things necessary or convenient for its subsistence, derived from its own resources without dependence on other countries. For the attainment of this end Hornick lays down, after the manner of Mun, a sequence of rules which are “especially serviceable.” These rules are nine in number, and naturally present a considerable degree of similarity to Mun’s points, though there are interesting variations in emphasis. Briefly, Hornick’s programme of Mercantilism comprises the following points: (1) The most is to be made of the country’s soil; not a clod of earth is to be unconsidered; every form of plant is to be experimented with; above all, if possible, gold and silver are to be discovered. (2) Commodities are to be worked up in the country. (3) Population is to be encouraged, and people turned from idleness (the populationist element, it may be observed, is a peculiar characteristic of German Mercantilism). (4) Gold and silver, once in the country, are under no circumstances to be taken out for any purpose; equally, however, they are not to be hoarded, but are to remain in circulation. (5) The inhabitants are to get along with their own domestic products, and do without foreign products as far as possible. (6) When absolutely essential to obtain goods from the foreigner, these should be obtained in exchange for other wares, and not by the payment of gold and silver. (7) In the event of the unavoidable importation of foreign goods, they should be imported in unfinished form, and worked up in the country. (8) Per contra, opportunity is to be sought night and day to sell superfluous goods to the foreigner, but these should be sold in a finished form, and for gold and silver. (9) No imports should be allowed whenever there is a sufficient supply of the relevant commodity in the country, and this even if the home article is of inferior quality and of higher price.

The condensed reproduction of this programme will not be merely vain repetition if the juxtaposition of the 8th point alongside the 6th and 7th serves to bring out the one-sided character of Mercantilism, and the failure of the mercantilists to realize that in the international clash, a State inspired by a Hornick might encounter a rival inspired by a Mun. For the rest, Hornick is a mercantilist of pronounced jusquauboutist tendencies. His essential maxim from which all others flow is the fifth in this enumeration, and as a first step to the realization of the ideal of self-sufficiency he recommends the prohibition of the four chief groups of foreign imports—silk, woollen, linen and French wares. In respect of these alone, the Austrians throw away to the foreigner every year at least ten million thalers. Think how the lifeless body of Austria would revive if this sum were saved even for one year! If it were saved for twenty years, what country in Europe would equal Austria? His fundamental doctrine is that it is better to pay for an article two thalers which remain in the country than only one which goes out. As he dolefully and fatalistically says: “What once goes out, stays out.” Moreover, it is surprising to note how the other precepts will be automatically observed if this first measure is adopted. Take, for instance, population. Prohibition of these imports will throw many foreigners out of work; artisans go where they can get a living; they will therefore be compelled to come to Austria, and the population problem is solved. On other questions, Hornick speaks with the authentic voice of Mercantilism. Will there be any danger that, in the absence of foreign competition, prices will be unduly raised? Not if the Government supervises things as it should, and checks wantonness; further, the philosophically minded may reflect that it is better to be a victim to one’s own countrymen than to a stranger. Then again, what about Dame Fashion, for surely we must dress like other nations? “It would be a good thing,” quoth Hornick, “if we sent Dame Fashion to the Devil, her father.” An excellent sentiment with which to conclude a chapter.

 

___________

27 Born at Fallaise about 1576; led an adventurous life, punctuated by duels. A tragic poet and a manufacturer of hardware. Shot in a kind of battle in 1621.

28 Reprint of 1889 edited by Funck-Brentano, p. 41.

29 Ibid., pp. 21-22.

30 See, e.g., Ibid., pp. 65, 74, 101.

31 Ibid., p. 23.

32 Ibid., p. 147.

33 Ibid., p. 24.

34 Ibid., p. 73.

35 Ibid., pp. 51-52.

36 Ibid., p. 73.

37 Ibid., p. 241.

38 Ibid., p. 92.

39 Ibid., pp. 114-115.

40 Ibid., p. 146 .

41 Ibid., p. 161.

42 Ibid., pp. 141-142.

43 Ibid., p. 241.

44 Born in London, 1571; engaged for most of his life in mercantile affairs in connection with Italy and the Levant. A member of the Committpp of the East India Company. Died 1641

45 England’s Treasure, chap. 2.

46 Ibid., chap. 2.

47 Ibid., chap. 4

48 Ibid;., chap. 19.

49 Ibid. chap. 15.

50 Ibid., chap. 18,

51 A selection is given in Monroe’s Early Economic Thought. The whole pamphlet will be found in the Economisti del Cinque et Seicento, edited by Graziani. The only fact that appears to be known with regard to Serra is that his celebrated tract on how to secure an abundance of money was written in prison (in 1613) while Serra was undergoing sentence for coining. Or is this addition to the legend merely the happy invention of a later humorist?

52 Born at Mainz, 1638; studied law nnd practised at Vienna-later in the service of the Cardinal of Passau.

• 1The Republic, Jowett’s translation, p. 49.
• 2Ibid., Book III, p. 106.
• 3Beer, Social Struggles in Antiquity, p. 97.
• 4The Republic, Jowett’s translation, p. 154.
• 5Ibid., p. 127.
• 6Ibid., p. 124.
• 7Ibid., p. 401.
• 8Laistner, Greek Economics, p. 16; Ways and Means, etc.
• 9The Laws, Jowett’s translation, p. 121.
• 10Ibid., p. 87.
• 11Ibid., Book I, chaps. 5 and 6.
• 12Ibid., p. 92.
• 13Ibid., p. 230.
• 14Ibid., Book II, chap. 5, p. 48.
• 15Ibid., p. 517.
• 16Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 17Ibid., Book I, chaps. 3 and 8.
• 18Ad Helviam Matrem de Consolatione, chap. 9.
• 19Ibid., Book II, chap. 5, p. 49.
• 20Ibid., Book I, chap. 8.
• 21Ibid., Book I, chap. 6, Welldon, p. 13.
• 22Ibid., p. 153.
• 23Ibid., Book I, chap. 9.
• 24Ecclesiasticus xxxviii. v. 32, 33. The corresponding passage on the same subject in Xenophon (Œconomicus IV, 2, 3) is interesting, inasmuch as the writer assigns reasons for the contempt of the illiberal arts: “They utterly ruin the bodies of workers and managers alike, compelling men, as they do, to lead sedentary lives and huddle indoors, or in some cases to spend the day before a fire. Then as men’s bodies become enervated, so their souls grow sicklier. And these vulgar crafts involve complete absence of leisure and hinder men from social and civic life; consequently men such as these are bad friends and indifferent defenders of their country. Moreover, in some states, particularly in those accounted warlike, no full citizen is permitted to practise the vulgar arts.” (As translated in Laistner’s Greek Economics, pp. 39, 40. See also Loeb edition, P. 391).
• 25Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 26Politics, Book III, chap. 5, Welldon, p. 113.
• 27So far as economic theory is concerned, it is in Plato that Greek thought advances beyond the level of such wise saws as may be extracted from Hesiod and others, and arrives at some consecutiveness. Yet Plato is the supreme example of the classical tendency to regard economics as a minor subsection of ethics and politics. It is above all in The Republic, and to a lesser extent in The Laws, where he indulges in “an old man’s game,” that Plato turns to economic questions. The former is primarily a discussion on Justice, and it is because the essential nature of Justice may perhaps be most easily discerned in the State—since for the short-sighted the larger letters may be more easily read—that the disputants turn aside in the second book to discuss the State and its origin, and are thus led to construct from the foundation an ideal polity. It is noticeable that the origin of the State is attributed wholly to economic considerations: “A state arises out of the needs of mankind; no one is self-sufficing, but all of us have many wants,” and moreover, Plato indicates that no other origin of a state can be imagined. This line of argument, after a consideration of the essential needs of mankind, leads to Plato’s discussion of division of labour, which has so often been compared with the famous chapter in Adam Smith. The essential needs of mankind are food, dwelling and clothing, so that the barest notion of a state must include four or five men—a husbandman, a builder, a weaver, and perhaps a shoemaker or a representative of some other similar occupation. Each of these is, moreover, to confine himself to his own calling. The governing considerations in the application of the principle of division of labour, as conceived by Plato, are then, firstly, that there are “diversities of natures among us which are adapted to different occupations,” and secondly, and as a consequence of this, that “all things are produced more plentifully and easily, and of a better quality, when one man does one thing which is natural to him and does it at the right time, and leaves other things.” It is in order that this principle may be satisfied that Plato then extends his State to include a considerable diversity of other crafts—sailors, traders, retailers and others.
• 28Thus we arrive at the guardians, who practise an art which is not to be combined with any other occupation, since one man cannot practise many arts with success. The guardians require careful selection; likewise very careful education. They must combine apparently contradictory qualities, inasmuch as they must be dangerous to their enemies and gentle to their friends. We are not here concerned with the lengthy discussion of the education of the guardians, nor with the subsequent distinction between “guardians in the fullest sense” (the real rulers) and the auxiliaries, but the words in which communism is enacted are of importance in specifying both the scope and the purpose of the communism prescribed. The guardians are to look round for a spot where they can best suppress insurrections within and defend the State from enemies without, and they are to encamp there. Further, in order to ward off the danger that they may become enemies instead of friends of the citizens, their whole mode of life is to be such that they will not be tempted to prey upon the other citizens. Consequently they are devoted to an ascetic method of life; they are to have no property beyond what is necessary; they are to receive a fixed rate of pay, sufficient to meet expenses and no more: “Should they ever acquire homes or lands or moneys of their own, they will become housekeepers and husbandmen instead of guardians, enemies and tyrants instead of allies of the other citizens.”
• 29Firstly, as to the scope of Plato’s communism, it is clear from the whole argument that it is prescribed only for the limited class of the guardians, who are indeed throughout to live a semi-military life. It is, in fact, the communism of the camp. The contrary view has been argued along lines which need not here be indicated, and one authority has contended that “a superficial reading of The Republic gives the impression . . . that Plato recommends communism solely for these upper sections.” It is almost sufficient to note that Aristotle himself is one of these superficial readers; it is entirely sufficient that Plato expressly describes the regulations as “appointed by us for the guardians,” and even more conclusive is his statement that if the guardians depart from their communistic life, they will become housekeepers and husbandmen.
• 30Then secondly, as to the purpose of the guardians’ communism, it is noticeable that Plato in his motives is poles asunder from other communistic dreamers. Elsewhere the cry for communism arises from an aggrieved sense of the injustice and monstrous inequality of the world. It is not so in Plato. For his guardians, communism is an act of ascetic renunciation; it is the condition on which alone they can efficiently discharge their duties. The work they have to do is so important that they may only do it properly on condition that they remain free of the snares and the entanglements of this world. In its motive therefore it is akin to the celibacy of the Roman Catholic priesthood. The object of Plato’s communism is in no way to establish a right to equal enjoyment; rather it is a part of the price that must be paid by a class on whom special responsibilities have been imposed. An interesting, if trivial sidelight, illustrative of the fact that the whole arrangements with regard to the guardians are designed to free them from the ordinary troubles of life, is furnished by the provision that when a woman guardian has a child, the process of suckling shall not be protracted too long: “the mothers will have no getting up at night or other trouble, but will hand over all this sort of thing to the nurses and attendants.”
• 31A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 32A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 33The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 34The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 35A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 36Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 37Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 38For Monchrétien, the foreigner is in the main a person given to fraud and guile. Specifically “whatever is foreign corrupts us.” In particular, foreign books “poison our spirits and corrupt our manners,” and therefore their importation should be prohibited. Indeed Montchrétien approves of a vigorous all-round national exclusiveness, hinting at a divine ordinance which has assigned to the inhabitants of any area the use of the elements and the goods which it produces. Further, he cites with admiration the example of Lyons, which acted on the principle that “each town should have something particular and in reserve for its own children, in order that it may help them.” Montchrétien is thus a stout defender of the maxim which enjoins upon us the expediency of rendering to our own sea-maws their ancient and prescriptive dues.
• 39Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 40Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 41The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 42When we turn to Aristotle, we are confronted with a writer who, by his analytical frame of mind, went further than any other thinker in antiquity in the direction of detaching a separate science of economics. This is not the place to consider his political theories, but his starting point that man is by nature a political animal enthroned for him the science of politics, so that ethics and economics alike were viewed by him from a political angle. Two points are of peculiar interest to the economist. The first is his destructive criticism of Plato’s communism in the second book of the Politics, and the other is his analysis of the household, leading to a discussion of the economic bases of society. On the former point, with the arguments of all the ages ringing in our ears, Aristotle’s contentions may appear hackneyed. What he says about the snares inherent in community of wives need not detain us; it never has been, and is not now (it may be hoped) an urgent question. But his arguments on the general question of community of property might date from the present year of grace. It is still true that “people pay most attention to their own private property and less to that in which they have but a part interest”—as witness the carved hieroglyphics on the seats in any public park contrasted with the reverence paid to the domestic Chesterfield.
• 43Apart from the dispute regarding communism, the main part of Aristotle’s economic teaching is to be found in the first book of the Politics. The place which this discussion occupies in his general treatment flows from his general theory of the State. The State has in all cases a natural existence; it is the complete development of the earlier associations, the household and the village, and Aristotle accordingly proceeds to consider, as the logical first step, the economy of the household. Here there are three fundamental relationships to be borne in mind, that of master and slave, of husband and wife, and of parent and children. The fourth and last of the parts of Domestic Economy is the art of finance, which is not to be confused with Domestic Economy, since it is the business of finance to provide and of Domestic Economy to use that which is provided.
• 44Seneca’s views on economic matters are not in the main of great interest. Money (and not merely the love of money) is emphatically the root of most evils. Envy and greed are the sources of all injustice. But in the midst of much in this train of thought which, even if true and well-expressed, has ill-founded claims to originality, there is one thought that is significant, namely that the various quarters of the earth have been differently endowed in such a manner that the peoples of the world would appear to have been called to enter into intercourse with each other for the mutual satisfaction of their needs.
• 45Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 46Coming to the question of acquisition or wealth-getting,Aristotle is concerned to show how far it is or is not a part of Domestic Economy. Clearly part of wealth-getting must belong to Domestic Economy, since the household requires to be supplied with what is necessary, if this is not already provided. This leads to the rather curious distinction between true or genuine wealth to which there is a limit, and another unnatural kind of acquisition (finance in the bad sense) to which there is no limit. Nature supplies men with the means of subsistence which are gathered in various ways, so that men’s lives may be classified as those of the nomad, the husbandman, the brigand, the fisherman and the hunter. Property which so arises is “assigned by Nature,” and such property and such alone constitutes genuine wealth. Apart from the odd appearance of the brigand in this galley, this is merely, in the main, an anticipation of Physiocratic thought. Here also, so far as concerns real wealth, that is to say the acquisition of the means of subsistence, there is a definite limit assigned, since wealth in this sense must be limited by the needs and the purpose of the household and the State.
• 47Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 48Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 49As against this, there is another kind of finance, which does not have a natural existence and which is ultimately based on the distinction, familiar long afterwards as that between value in use and value in exchange. Every object has two uses; the shoe has a use as a covering for the feet; it has also a use as an article of exchange. So long as we are in the region of primitive barter, we are still concerned with what is natural, but this has ceased when we come to retail trading, where exchange is “carried beyond the point of satisfying mere requirements.” Out of mere simple barter to satisfy a real need, the evil art of finance—retail trading—develops as a natural consequence after the introduction of a system of currency, the successive stages of which are noted with a fair approximation to the discussion in Jevons’s textbook. Finance, in the natural sense, is a part of Domestic Economy. Unnatural finance is not; it produces money merely by means of exchange, and here wealth is unlimited. The one, the healthy, might be described as the acquisition of the means of living, the securing of the “pre-requisites which Nature ought to provide”; the other is merely money-making. The one is laudable; the other enriches one party at the expense of the other. But of all evil forms of finance, the worst is usury, since here money produces the gain itself, and is diverted from the purpose for which it was devised.
• 50One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 51Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 52One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”