The Development of Economic Doctrine: An Introductory Survey

CHAPTER VII

LAUDERDALE, RAE AND SISMONDI

WITH Adam Smith, Malthus and Ricardo, the structure of “classical” Political Economy is, in a sense, complete. From this point onwards, it is, for a time, by no means easy to decide in what sequence our chosen representatives of economic thought should be marshalled, or how best they should be grouped for purposes of exposition. The classical school had made certain assumptions with regard to the relationship existing between the individual and the State; they had in their later developments arrived at a generally pessimistic outlook, as exemplified in the “principle” of population and the Ricardian Law of Rent; their defence of laissez-faire and Free Trade had given them cosmopolitan sympathies; they had been hardened individualists. Against each of these aspects of the classical body of thought, reaction was inevitable; it was likewise inevitable that some should continue to croon, with modifications, the accepted and orthodox doctrine.

There are thus, in the next generation, critics of the excessive individualism of the classical school denying the assumptions on which laissez-faire is built. There are advocates of Protection. There are those who struggle towards a more optimistic view of the universe. There are those who plead the case of the nation against what they regard as a wishy-washy cosmopolitanism. On a larger canvas, these various lines of reaction against the classical school might be traced consecutively. Unfortunately, the authors concerned do not consistently group themselves along different lines of development; and therefore in the next four chapters a rough and ready grouping is all that is possible. In this chapter a brief account will be given of three early critics of Adam Smith, viz., Lauderdale, Rae and Sismondi. Lauderdale and Rae are largely concerned with what they regard as Smith’s erroneous views on the nature of wealth. Rae and Sismondi have this in common, that both are led to reject laissez-faire and to insist that extensive duties rest on the State. It is true that while this reaction leads Rae to a somewhat paternal state, it rather urges Sismondi in the direction of socialism. In the next chapter three German writers, Müller, List and von Thünen, will be considered. Müller and List have much in common, and represent the reaction to nationalism and Protection, though indeed Müller’s criticism of Smith is extensive and comprehensive. Von ThÜnen is rather a star that dwells apart, but he would probably be happier beside his German compatriots than anywhere else. In the ninth chapter, the reaction to optimism will be discussed (very briefly) as it is represented in Carey and Bastiat, though here again Carey might better be grouped with List as jointly representing, on the commonly accepted view, the leading exponents of Protection. Lastly, in the tenth chapter, the continuation of the orthodox school will be exemplified by Say, Senior, Mill and Cairnes.

Lauderdale

Of the group assigned to this chapter, two, it is to be noted, are Adam Smith’s own countrymen. Though they have not succeeded in retaining a large place in the general memory, they are noticeable for their fundamental criticisms of certain of the assumptions of Adam Smith. While Smith was the embodiment of common sense and shrewdness, these critics are, however, rather to be regarded as interesting and curious, if not indeed eccentric. Doubtless this eccentricity was more marked in James Maitland, eighth Earl of Lauderdale, than in John Rae.

Lauderdale1 (1759-1830) was in his time a striking figure, much given to entering protests in the journal of the House of Lords. His contribution to economic literature is to be found in a work of which the complete title is An Inquiry into the Nature and Origin of Public Wealth, and into the Means and Causes of its Increase, a book of commendable brevity and of few ideas, pushed home with much pertinacity and ingenuity, and indeed carried to the point of habitual paradox. In his “advertisement,” he claims that his views “are not only new, but even repugnant to received opinions.” The central point of Lauderdale’s theorizings is foreshadowed in the title of his treatise. “Public Oeconomy,” he tells us, “is of necessity in all stages of society, a subject of discussion, even amongst the most vulgar and illiterate, whose rude and erroneous conceptions must naturally lead to expressions founded on inaccuracy and pregnant with error.”2 Lauderdale throughout shows a truculent and carping spirit wherever Adam Smith is concerned,3 and the implication of the whole discussion is that Smith likewise is a victim of these rude and erroneous conceptions. The particular example of the Idol of the Market-Place with which Lauderdale is concerned is that which confuses the wealth of a nation with the riches of an individual, and which assumes that whatever increases the riches of an individual will pro tanto increase public wealth. Lauderdale, it may be observed, consistently uses the word “wealth” when the appropriate adjective is “public,” whereas in speaking of the individual, he uses the word “riches.” The passage in Smith which Lauderdale regards as particularly peccant is that in the third chapter of the second, book of The Wealth of Nations, wherein the “eminent philosopher” discusses the accumulation of capital. “As the capital of an individual,” says Smith in this passage, “can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner.” It is the concluding part of this dictum which particularly displeases Lauderdale. So far from it being possible to identify the capital (or wealth) of society with the sum total of the capital (or riches) of all the individuals, they are indeed fundamentally opposed. To find the basis for the distinction, indeed antagonism, between public wealth and private riches, we must follow Lauderdale into that unending morass where economists and others assiduously and eternally discuss the meaning of value, and find no end in wandering mazes lost. That value may be conferred on any commodity, two conditions are, he says, requisite: firstly, the commodity, as being useful or delightful to man, should be an object of his desire; and secondly, the commodity should exist “in a degree of scarcity.”4 If the circumstances with regard to demand remain the same, value will accordingly increase with scarcity, and be diminished with abundance. But if the individual’s “riches” are increased by scarcity (existing elsewhere), there must, argues Lauderdale, be an antagonism between public wealth and private riches, and the increase of the two must depend on different causes. The popular idea regards public wealth as the integration of all private wealth, and, as exemplified by Adam Smith, holds that parsimony, “the most usual means of increasing private fortune,” is likewise the “parent of public wealth.”5 In fact, as has been seen, private riches postulate scarcity, and “the common sense of mankind would revolt at a proposal for augmenting the wealth of a nation by creating a scarcity of any commodity generally useful and necessary to man.” He continues in a passage which has been frequently quoted:

“For example, let us suppose a country possessing abundance of the necessaries and conveniences of life, and universally accommodated with the purest streams of water:—what opinion would be entertained of the understanding of a man, who, as the means of increasing the wealth of such a country, should propose to create a scarcity of water, the abundance of which was deservedly considered as one of the greatest blessings incident to the community? It is certain, however, that such a projector would, by this means, succeed in increasing the mass of individual riches; for to the water, which would still retain the quality of being useful and desirable, he would add the circumstance of existing in scarcity, which of course must confer upon it value.”6

The converse case is also forcibly argued:

“Let us for a moment suppose it possible to create as great an abundance of any species of food as there exists of water: what would be thought of the advice of a man who should cautiously recommend, even at the moment of the pressure of scarcity, to beware of creating this boasted abundance? for, however flattering it might appear as a remedy for the immediate evil, it would inevitably diminish the wealth of the nation. Yet ridiculous as this opinion might appear, as everything which partakes of the abundance of water or air must at once cease to possess value, it follows that, by occasioning such an abundance, the sum-total of individual riches would most certainly be diminished, to an extent equal to the total value of that species of food whose value would by this means be destroyed.”7

There is thus complete antagonism between public wealth and private riches; the community is interested in abundance, the individual (who possesses) is interested in scarcity. Indeed Lauderdale goes so far as to affirm generally that “an increase of riches when arising from alterations in the quantity of commodities, is always a proof of an immediate diminution of wealth; and a diminution of riches is evidence of an immediate increase of wealth.”8 Thus Lauderdale arrives at his definition of wealth as consisting “of all that man desires, as useful or delightful to him,” while individual riches consist of “all that man desires as useful or delightful to him; which exists in a degree of scarcity.”9 As scarcity increases, the former diminishes, while the latter must increase.

In an elaborate discussion of the four causes which lead to variations in value (diminution and increase of quantity; diminution and increase of demand), Lauderdale is led to an analysis of what would now be known as the principle of elasticity of demand. Thus, taking the first of these causes, that of diminution of quantity (or scarcity), the effect of competition in raising value may be far beyond what might be expected. It will depend upon the extent to which people are willing to deprive themselves of a portion of other enjoyments, the governing consideration being the “desire of mankind to continue their usual enjoyments”; and their obstinacy in attempting to acquire the same quantity of any commodity as formerly is “proportioned to the degree of inclination which either necessity, habit or taste has created for it.” This explains the difference between the effects of scarcity on the value of different articles; in the case of necessities there may be a rise in value in the ratio of one to fifty, whereas articles of taste or luxury hardly ever rise to double or treble their usual value.10 As Lauderdale says in another part of the same discussion: “No rise in value can induce men to renounce the acquisition of the necessaries of life, provided any sacrifices they can make will procure them.”11

Lauderdale is also notable for his closer analysis of the function of capital in the production of wealth. Land, labour and capital are, he says, all three, original sources of wealth, though at different stages of development they contribute to this end in very different proportions. So far as the function of capital is concerned, the view which Lauderdale criticizes is that implicit in certain statements of Adam Smith (Book I, chap. 6) to the effect that the profit of stock is paid out of and derived from the value added by the workman to the raw material, a doctrine which, as interpreted by Lauderdale, seems to savour of Marxian doctrine. On this view, says Lauderdale, capital would not be an original source of revenue, since profit would be “only a transfer from the pocket of the labourer into that of the proprietor of stock.”12 As against this view, Lauderdale argues that the profit which capital receives is not a simple transfer of this nature; the profit it receives arises from its own independent services, that is to say “from its supplanting a portion of labour which would otherwise be performed by the hand of man; or from its performing a portion of labour which is beyond the reach of the personal exertion of man to accomplish.”13 A man with a spade can do the work of fifty people using their nails (surely an underestimate); this portion of capital, therefore, supplants the necessity of forty-nine people, who are thereby rendered superfluous. So with each and all of the five methods in which, according to Lauderdale, capital may aid production, the profit which accrues to capital arises essentially from the displacement of labour.14 So far from its being the case, then, that capital is profitable in putting labour into motion, or in “adding to the productive powers of labour,” its real function is to supplant labour. And the consequences of this view are far-reaching. On what, for convenience and following Lauderdale, may be taken as Smith’s view, labour is limited by and proportioned to the quantity of existing capital, and therefore an increase of capital is the “sovereign and unbounded means of augmenting wealth.” On Lauderdale’s view, a country cannot be benefited by the possession of a greater portion of capital than can be advantageously employed in supplanting labour.15

This leads, on the practical side, to the central point in Lauderdale, carried to the excess of paradox. It might reasonably have been inferred that wealth could only be increased by those means by which it is originally produced, but popular prejudice, confusing the means whereby an individual may properly increase his private riches with the policy proper for the increase of public wealth, has pointed to parsimony as the path of enrichment.16 But Lauderdale will have nothing to do with parsimony, “the baneful passion for accumulation”; nor does he support the orthodox and Smithian doctrine that every prodigal is a public enemy, and that every frugal man is a benefactor. In the more primitive agricultural state, when a man is in possession of as much capital as he can use, it is neither advantageous to himself nor to others that he should abridge consumption merely to obtain more than he can use, and at all times there is a point beyond which capital cannot be profitably increased.17 Hence the folly of sinking funds; hence also the importance of stimulating demand, on which industry depends. Lastly, Lauderdale strikes a note suggestive of much to come later when he argues that “great inequality of fortune ... has everywhere been the principal impediment to the increase of public wealth,” and that a proper distribution of wealth insures the increase of opulence by sustaining a regular progressive demand in the home market.18

Rae

John Rae19 (1786-1873) has many points in common with Lauderdale, and though a flabbier and less pungent writer, he is not so markedly a disgruntled voice et præterea nihil. In large measure he also is critical of the foundations on which Adam Smith builds, and in particular of two assumptions, firstly, that the national wealth can be increased by the accumulations of private wealth, and secondly, that there is a natural harmony between private and national interests. These are the views expounded in his chief work, New Principles on the Subject of Political Economy20 (1834). Individual accumulation, as a means of advancing the national capital, has, he argues, limits beyond which it cannot pass.21 There is, as in Lauderdale’s example, a limit to the number of flails a country can profitably use; Adam Smith, indeed, had in one place spoken to the same effect regarding pots and pans. Beyond this point, mere accumulation in itself will do no good; that the national capital may increase further, the nation must be hitched up to a higher level of development. Flails must be replaced by threshing machines; that is to say, there must be invention and progress.22

This, for Rae, is the fundamental point of distinction In a passage too long for quotation, he argues that individuals in general increase their capitals by acquiring a larger portion of the common funds. One grows rich, while another grows poor; but while one man may add house to house and farm to farm the national capital itself may remain but little changed. Neighbouring nations, on the other hand, advance and decline in wealth together. Thus, in a characteristic summary:

“As individuals seem generally to grow rich by grasping a larger and larger portion of the wealth already in existence, nations do so by the production of wealth that did not previously exist. The two processes differ in this, that the one is an acquisition, the other a creation.”23

It is a consequence of this view that Rae assigns to invention a place of primary importance in his scheme of things; indeed his work is largely a study of the place of invention in social development. Invention can alone be said to create, and as such it is an essential element in the process of the increase of national wealth; but, having regard to the distinction indicated between national and individual wealth, it cannot be assigned a similar place in the increase of individual wealth.24 Allied to this is his dissent from Adam Smith on the question of division of labour. Smith had noted the encouragement of invention as one of the consequences of division of labour; but this, argues Rae—not without cogency—is to invert the true order of events. Knowledge and discoveries mean the multiplication of instruments; and variety of tools means diversity of trades. It would be wasteful for all men to possess all tools, as in that case the great bulk of implements would in general be lying idle.25 Thus division of labour proceeds from, and is dependent on, the antecedent progress of invention; indeed, monotonous occupation, which is in part synonymous with division of labour, will rather tend to dull and cramp men’s faculties and so discourage further inventions in the victims of a monotonous regime. Here he is doubtless right in his readjustment of emphasis, as also perhaps in his inclination to minimize the place of “dexterity “in Smith’s theory of division of labour. For dexterity is of importance only in the beginning of art, and with progress “the hand does less, the instrument more.”26 Division of labour, in short, is for Rae not a cause but a result of progress; it is but the manifest consequence of that inventive faculty which raises society to a higher level.

The fact that on Rae’s view private accumulation rests largely on mere acquisition implies further that there is no natural identity between national and individual interests. “Do the labours of the cool, calculating gambler, or of the sharper, add to public wealth?” Does the spirit of keen bargaining add to public wealth? In these and countless other ways self-interest may not be guided by an invisible hand to the promotion of larger ends.27 Rae is thus led to a reasoned refutation of the doctrine of laissez-faire, to a plea for enlightened government interference. When men are united in large societies it is impossible for each to take an active part in what concerns the public good; this is the function of the legislator. On the theory of laissez-faire each individual, seeking his own good, unintentionally and indirectly increases the national wealth. Admittedly, then, it is only the legislator who can of design act with a view to increase the national opulence; but as his interference would disturb the course which events would otherwise take, this interference, being opposed to the course of Nature, is presumed, on laissez-faire principles, to be injurious.28

This presumption Rae holds to be unfounded; it is by no means demonstrable that the art of the legislator is powerless to promote the prosperity of nations, and indeed the assumption should rather be the other way.29 The example which bulks most largely in his mind is that of the passage of the useful arts from one country to another. These transplantations were originally due to violent causes; they were the consequences of war, revolution and exile. But if such evil influences no longer operate, must we also sacrifice the indirect good which such causes may have produced, or is it not rather the duty of “the intellectual part of our nature “to achieve the good and prevent the evil?30 The original violent methods of dissemination of the knowledge of the arts should therefore be replaced by the direct efforts of the legislator to draw them there. Thus the legislator is called upon to act, but to act cautiously; and the weapons which Rae places in his hands for this purpose are represented by premiums, bounties and duties.31 This argument Rae further buttresses by the contention that cases in which private effort succeeds in transferring an industry to a new country are very rare, and that it is scarcely ever likely to be profitable. “It would be more just and judicious,” he says, “that the necessary first cost of the scheme should be borne by the whole community” rather than that we should wait “till the miscalculations of some unfortunate projector confer on us a public benefit.”32 Thus does the infant industry argument gently crow from its cot.

Rae’s central doctrine is open to the criticism which must so often be passed on those who are determined to be critical. While he suggests useful correctives, his main contentions, when generalized, are as untenable as those which he attacks. It is curious to observe that he regards the theory which identifies increase of national wealth with accumulation of private capital as inconsistent with itself, merely because Adam Smith admits the importance of the introduction of the new arts.33 It would be equally logical to regard Rae’s theory as shipwrecked by his admission

“that individuals, as well as nations, acquire wealth from other sources than mere saving from revenue; that skill is as necessary, and consequently as valuable, a co-operator with the industry of both, as either capital or parsimony; and that therefore the expenditure which either may be called on to make to attain the requisite skill is very well bestowed.”34

This is an impeccable statement which even Adam Smith in his more obtuse moments might have accepted, but it somehow torpedoes the crisp distinction between the sources of national and individual wealth which elsewhere Rae attempts to draw.

Rae is an interesting study for those who are fascinated by the reaction of mind on mind. Perhaps in part owing to a common American environment, there is a good deal in him that foreshadows Carey, notably in his treatment of land as an instrument, indistinguishable from other instruments, and in a doctrine that approaches Carey’s theory of value as determined by cost of reproduction.35

So also there are hints of List, whose views likewise were moulded by his experiences and his study in America. When Rae emphasizes the importance of introducing a new industry to serve later as a source of wealth, and indicates that the legislator may “by means of a small expenditure, effect an increase of the productive powers of the community,” he is anticipating not merely the thought but the phraseology of the German economist. Lastly, if it be not too fanciful, his comments on luxury and vanity, and his conjunction of the words “conspicuous” and “consumption” are a curious anticipatory echo of Thorstein Veblen.36

Sismondi

Sismondi37 (1773-1842), as a writer of economics, is extremely difficult to “place.” This is due to the fact that his was a mind in transition; he never quite lost contact with his starting point, yet he never quite arrived at his natural destination. While having kinship with many schools, he is consequently at home with none. In his first important work, De la Richesse Commerciale38 (1803), his position is simple; he is, as becomes a young man, content to be a not very critical follower of Adam Smith. Moreover, there is a refreshing honesty about his dis-cipleship. Of certain chapters he tells us that they contain no ideas really new to anyone who has studied Adam Smith,39 and further that his object is to appropriate to France the counsels which Adam Smith had intended primarily for England.40 There is an engaging candour in his later confession that if in this book he did not make any discoveries, he was at least well aware of the fact.41

In the main, then, the central point of this first work is to be found in Sismondi’s restatement of the harmony of interests, the necessity of laissez-faire and the folly of Government interference. When commerce is left free, he explains in one place, capital naturally takes the direction which is most advantageous to the nation which possesses it,42 and there is more than an echo of the invisible hand in his assertion that “all men, in seeking their own interest, incessantly tend to serve the national interest.”43 Thus we arrive at the glowing optimistic conclusion that “the capitalist, who consults his own interest, always works for that of the nation”;44 and the sans cesse and the toujours stand forth brazenly without modification. He thus quotes as a noble réponse, the alleged reply of the British business world to a Government anxious to help them that the only favour they desired was “la grâce de nous oublier.”45 All this savours of the clotted cream of laissez-faire; but there are pointers in the direction of the later Sismondi, as when he exclaims that “no man of sensibility can without grief see the most interesting class in the nation, that which supports the whole by the fruit of its labours, deprived of its enjoyments in order to share it with people who are a charge upon it.”46

When Sismondi, after an interval of sixteen years spent in historical research, returned to economics in his Nouveaux Principes d’ Économie Politique47 (1819) he may be a respectful admirer of Adam Smith, but he is certainly no longer a meek disciple. In the interval he had seen the world in a period of rapid transition and industrialization, a world urged from every quarter to produce more, and to produce more cheaply. He had looked upon it, and had found little to admire. Behind all this feverish accumulation there lurked the teaching of orthodox political economy; but for the maturing Sismondi, political economy ought to be something else. It was “la théorie de la bienfaisance”;48 its object was to increase the physical well-being of man. But in the Europe of 1819, above all in the England of that day, what had happened to the enjoyment of life? In sombre phraseology, in contrast to which Malthus appears a radiant optimist, Sismondi describes a world, hungry, suffering, degraded, and he is tempted to curse division of labour and the invention of manufactures as the rock on which the human race has made shipwreck.49 To Sismondi, it appears appropriate to ask the disturbing question: “Where are we going?” Where are the happy people in this world in which everywhere one observes the progress of things, everywhere the suffering of men ? 50

Sismondi’s central theme is simple, and it is so omnipresent that he tends to be a man of one idea. That idea is to be found in his emphasis on the evils which flow from unrestrained competition, above all as evidenced in the excessive production of goods for which there is not, and cannot be, any demand. This over-production which so haunts Sismondi is, it will be observed, a general over-production of all commodities, and not merely overproduction of certain commodities relative to others. It is, in his view, a direct result of division of labour and large-scale production. In isolation, a man produces for himself and knows when to stop and “repose”; in society he is producing for others, and cannot know when enough has been produced.51 To the man in isolation there is therefore a clear limit to the extent to which he should amass. The purpose of accumulation is sub sequent enjoyment and rest, and it would be folly to accumulate in excess of the power to consume. With a complex society, the efforts of men are separated from their natural rewards, so that one man labours and another man rests. Yet, though thus obscured, it is as true of society as it is of the individual that there is a limit to the power of consumption. But as this limit is no longer obvious, men are urged on by the “zeal to produce which every writer stimulates and which every Government encourages.”52 Demand should precede production; but what, in fact, the producer considers is whether he is capable of producing more, not whether there will be a demand for the commodity when it is produced.53 Production, that is to say, is based on the extent of capital at the disposal of the producer. These evil consequences are accentuated by the fact (which has much later been no immaterial factor in the tendency to industrial combination) that it is always easier to expand than to contract, that it is indeed almost impossible, for a variety of reasons, to restrict the size of an undertaking or to close down.54 To Sismondi, looking around, the world everywhere presented the spectacle of overstocked markets, of production for which there were no consumers—the consequence of apportioning production not to demand but to available capital.55

Sismondi’s theory of distribution, on which the doctrine of over-production rests, is one of those things which are better left in their natural obscurity. His distinction between the annual production and the annual revenue, and his view that the annual production of any year is bought by the revenue of the preceding year, reveal a mind which was a stranger to strict reasoning. On this side Sismondi’s doctrines merely possess the value of antiquarian curiosities, and as such should not be withdrawn from the museum, even for purposes of examination.56 His strength lay in the force of his general contentions, not in the abstract reasoning on which these were based. Out of incomprehensible reasoning there emerges for Sismondi a sure conviction which is at least comprehensible, that there ought to be an equilibrium between production and consumption, and that nations may be ruined either by spending too much or too little.57 His is, in fact, a doctrine of under-consumption.

Probably the economic foundation is so tangled and uncertain because the main inspiration may have come from elsewhere. His view of man is that of the moralist; there is indeed an almost religious fervour in his denunciations. For Sismondi, man is a creature with whom rest, le repos, is a natural taste, and in the scheme of things this natural taste should also find its gratification.58 “L’homme travaille pour que l’homme se repose,” as he says with an air of benediction; but in the urge to produce, we forget the end of all labour and the purpose of life.

Inasmuch, then, as it is not merely accumulation of wealth that matters, but control of wealth and the direction of wealth to secure the increase of happiness, the blessedness of unlimited competition vanishes. Laissez-faire tends to incredible suffering, and it is therefore essential that there be a large measure of Government intervention.59 For the function of the State is to be the protector of the weak against the strong, the defender of the defenceless, the representative of the permanent interest of all against the temporary interest of each. And in the light of experience (since the days of Adam Smith, as he hints) it had become abundantly evident that there was need of such an authority “to prevent men being sacrificed to the progress of a wealth from which they will derive no profit.”60

The doctrine of the harmony of interests and of the potency of the invisible hand accordingly receives short shrift from the later Sismondi, and though he does not use the phrase, he realizes how laissez-faire may break down on inequality of bargaining power. There may be self-interest displayed in highway robbery, and self-interest may likewise dictate to the victim the expediency of offering no resistance, if acquiescence is calculated to increase his prospects of escaping unmurdered.61 The institutions of society have, argues Sismondi, given rise to a similar kind of restraint, though it may not be accompanied by such obvious violence. “It has as often as not placed the poor man under the necessity of submitting to increasingly onerous conditions, under the penalty of dying of hunger; in placing him in this perilous condition, it falls to society to undertake his defence.”62 Left to its natural course, the conflict of interests, since it may be to the interest of the weak not to resist, may lead to the triumph of injustice.63

Thus we arrive in the most general terms at the functions of government. Each individual, pursuing his interests, tends to increase the speed of the machine; the task of the Government should be to slow down and regularize its movement; to exercise, in the pursuit of wealth, “une action régulatrice et modératrice.”64 The difference between other economists and Sismondi, as he himself expressed it, was that while they had applauded the new industrial ardour, and had urged to greater rivalry and speed, he had felt merely alarm, and had summoned the friends of humanity to assist “in retarding the social chariot which, in its accelerated course, seems to be on the point of plunging us in the abyss.”65

Easy enough to speak of slowing down; but how? Take, for instance, the vexed question of inventions and machinery on which Sismondi has unusual views. In the main he detests inventions; they usually, though not necessarily, lead to evil consequences. Man loses in intelligence, in bodily vigour, in health and gaiety, all that he gains in increased power to produce wealth.66 Even children, it is true, may make stockings from their most tender years, before they have tasted any of the enjoyments of life. But at what an odious price are these things bought! The normal effect of inventions is to diminish the labour demanded, and thereby make the country poorer, even though this broad effect may be concealed by the operation of foreign trade which, while creating prosperity in the producing country, may concentrate elsewhere the real ruin created. Thus in the case of English manufacturers, “all the suffering has fallen on continental producers, all the enjoyment has remained with the English.”67 It is not, however, all inventions that are to be condemned; the criterion which Sismondi applies is to be found in the pre-existence of an unsatisfied demand. “Whenever demand for consumption surpasses the means of production, any new discovery is a benefit for society, because it provides the means of satisfying existing needs. On the contrary, wherever production is fully sufficient for consumption, any similar discovery is a calamity because it does not add to the enjoyment of the consumers anything else than that of satisfying their needs at a lower price, while it suppresses the very life of the producers.”68 The market must first be extended; if this is done, there is room for invention. Modifying the argument, Sismondi contends that when an invention extends the market by putting the commodity at the disposal of a poorer class, it is beneficial. But if the market cannot be extended, either because all needs are already supplied or because, no matter what reduction in price is made, the poor will never be consumers, then the discovery is a calamity for the human race, for in this case it will only advantage certain manufacturers at the cost of others—or, it may be, certain nations at the cost of others.69 So also, when Sismondi assumes the part of a laudator temporis acti, it is one of the marks of happier times that then men only thought of inventions when a new need had made itself felt.70

It remains to be considered what can be done to protect society and the worker against the rage of inventors. Here Sismondi does not get beyond a very tentative and curious suggestion. He realizes that it would be idle to forbid the use of a pernicious invention, if other countries were still free to make use of it. The sole measure of protection which he suggests is the suppression of the privileges accorded to the inventor; if all inventions are at once made known and available to all, then, as he says, revealing the individualist at his heart, “the zeal for such discoveries will grow cold.”71

With regard to population, that apple of discord which Malthus had lightly tossed to the economists, Sismondi’s views are likewise peculiarly his own. Population, he holds, is limited by revenue. In contradistinction to what Malthus had said, population never reaches and probably never will reach the limit of possible subsistence. It is checked because it becomes impossible to buy the means of subsistence, or because people are not allowed to work in order to produce it. The check thus comes, not from the means of subsistence, but from the “will” of man, above all of the landowner who will not allow others to work unless he receives a revenue for his assent.72 This, of course, is scarcely in opposition to Malthus; but in his further elaboration of the element of human volonté, his views as to the natural action of man differ profoundly from those of Malthus. The vital thing on which population depends is the demand for labour.73 Given employment and an assured revenue, people will marry and have children; the vice of the new society is that there is no security as to the worker’s revenue, and the worker being deceived as to his position, children are born for whom there is no provision. It is a firm article of faith with Sismondi that the worker will not marry until he can afford to marry, and that he will proportion his family to his revenue—that is, assuming there is stability and a fixed revenue. But if there is no stability, if the workers are displaced by machinery, how grave is their situation! The workers’ revenue is no longer within their calculation; it may be altered by others without their knowledge; the entrepreneur himself may miscalculate.74 So living from day to day, the “proletarians become content that their children should do the same”; moreover, do not the children become a title to charity, and may they not spasmodically earn wages from the age of seven? Thus the restraint on marriage disappears and children are born for whom society has made no provision.75 It is not then so much demand for work that is important, as regular and perpetual demand; for if the demand is Intermittent, it merely creates workers in order to condemn them to death.76

We are back, it will be observed, at the old point. Excessive population is the offspring of instability, which itself is the offspring of over-production and of all the devilish inventions of the era of the Industrial Revolution. His views, by way of suggested remedy, even if impracticable are of interest. He accepts as almost obvious the view that the obligations of celibacy rest on the married as soon as they have the family to which they are entitled—which would appear to be one boy and one girl. To have more would be unjust and cruel, since such a course is tantamount to depriving others, either of the joys of marriage in youth or of the comforts of children in old age.77 Beyond this, the remedies which Sismondi hints at, rather than suggests, are drastic78; he would be prepared to prohibit the marriage of the poor, or at least to require certain guarantees. The aim of the Government, so far as the agricultural population is concerned, should be to unite labour and property, and Sismondi’s suggestions would ultimately rest marriage on a property qualification. In the towns, though the task is not so easy, the end should be the same, namely, to abolish the precarious position in which the workers live, to make it possible for them to attain to a certain status, and to forbid marriage until that has been reached. This means among other things a guarantee from the employer; it means vesting in the employer the right to veto the marriage of his employees; it means, on the other side, that the worker is to be a permanent charge on his industry.79

In summary, Sismondi is a protesting voice, and it is from this point alone that he is significant. In so far as he presented a body of “doctrine” to the world, he is negligible. His chief obsession, that of a general overproduction of goods as an explanation of glutted markets and commercial crises, is obviously untenable, and the orthodox spokesmen have never had any difficulty in showing that while there may be over-production in respect of particular commodities, a uniform overproduction of all commodities simultaneously is unimaginable.80 Over-production, indeed, means disproportionate production; it means, within limits, that too much is produced, having regard to the volume of other products; that is to say, it involves under-production elsewhere. So also, in his doctrines with regard to machinery and improvements, and in his insistence on the existence of a previous demand before expansion is justified, Sismondi turns a blind eye to half the facts of economic life, and neglects the possible reactions which variations in the conditions of supply may exercise on demand. It is scarcely too much to say that none of the peculiar tenets of Sismondi has stood the test of time. Yet he is not thereby negligible. In an age when the protest was necessary, he affirmed that wealth was made for man and not man for wealth, as the “chrematistic” doctrine seemed to imply;81 in the darkest days of the Industrial Revolution he asked, very pertinently, where the world was going, and insisted on the importance for the worker of stability and status. But in truth he gets nowhere in particular. He never reached Socialism, though it would be easy to collect a nosegay of Socialist sentiments from his works, and it would be folly to ignore his influence on later Socialist writers. But his final attitude is rather one of helplessness and bewilderment before a problem of which he cannot find the solution.82 He is perhaps a moralist rather than an economist, reminding us, as certain of our own poets have done in these latter days, of the folly of those whose vision is machines for making more machines, of the poverty of a life which leaves no time to stand and stare. Righteous indignation, such as inspired Sismondi, is a noble passion, and the indignant prophet fulfils a useful purpose, even if indignation not infrequently leads to bad logic.

 

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83 Born 1759; entered Parliament 1780; succeeded to Scottish peerage in 1789, and in 1790 was elected a representative Scots peer. Politically he moved, during his lifetime, from the extreme left to the extreme right. In the language of his countrymen, “a crotchety body.”

84 Public Wealth, pp. 3-4.

85 e.g.: “There is no opinion that has been anywhere maintained on the subject of the sources of national wealth, which does not appear to have been adopted in different parts of the inquiry into the Wealth of Nations” (Public Wealth, p. 116)

86 Public Wealth, p. 12.

87 Ibid., p. 40.

88 Ibid., pp. 43-44.

89 Ibid., pp. 45-46.

90 Ibid., pp. 55-56.

91 Ibid., pp. 56-57.

92 Ibid., pp. 65-66.

93 Ibid., p. 76.

94 Ibid., p. 158. He also quotes from Book II, chap. 3, of The Wealth of Nations, a sentence which seems to be peculiarly susceptible of a Marxian interpretation: “The labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance and of his master’s profit.” “Manufacturer” has, of course, in this passage, its eighteenth century and true significance of one who does things with his hands.

95 Ibid., p. 161.

96 In a characteristic footnote, Lauderdale observes: “It is a strange confusion of ideas that has led Dr. Smith to describe the operation of capital as increasing the productive powers of labour. The same process of reasoning would lead a man to describe the effect of shortening a circuitous road between any two given places, from ten to five miles, as doubling thj velocity of the walker” (p. 185).

97 Ibid., pp. 203-205.

98 Ibid., p. 228.

99 Ibid., p. 208.

100Ibid., pp. 345 and 349.

101 Born at Footdee (or Fittie), Aberdeen, iri 1796; educated at Marischal College; later studied medicine at Edinburgh. He seems to have emigrated under the double spur of financial and matrimonial misfortune. Led a very miscellaneous life in Canada and elsewhere, teaching, doctoring, etc. He ended up, a rather pathetic exile, as a kind of administrator in the Sandwich Islands.

102 The full title is really much more cumbrously lengthy. Rae’s book was re-edited by Dr. Mixter in 1905, under the title The Sociological Theory of Capital. Unfortunately, in this edition, the contents have suffered a complete reshuffling in order to attain what the editor regards as a more logical arrangement. This is what Adam Smith would have called a “most unnecessary attention.” Reference is, however, made to this edition as being the most accessible.

103 Sociological Theory of Capital, p. 157.

104 Ibid., pp. 152-153.

105 Ibid., p. 383.

106 Ibid., p. 386.

107 Ibid., pp. 103-103.

108 Ibid., pp. 237-242.

109 Ibid., p. 345

110 Ibid., pp. 357, 362.

111 Rae’s analogy is interesting, if not wholly to the point: “If a number of people have occasion to pass frequently between two points, they will without design produce a natural footpath. Will this, which was no part of their intention, be a better footpath than one artificially and intentionally created by the community, acting as an organized unit?” (p. 362). An argument for the continued existence of the Parish Council.

112 Ibid., p. 365.

113 Ibid., pp. 369-370.

114 Ibid., p. 419.

115 Ibid., p. 407.

116 Ibid., p. 428.

117 Thus, in discussing “instruments,” he explains that “a field fitted for use is an instrument....The power which has made it an instrument is the agriculturalist’s labour” (p. 16). And again, “a portion of cultivated land, considered as an instrument actually subject to the operations of the husbandman, does not differ from any other instrument” (p. 40). On the question of value where articles are produced with less labour than formerly, they “procure for their owners less of other articles in exchange than they did before. They exchange, not for what labour has been actually wrought up in them, but for what is now required to make others similar to them” (p. 107).

118 Ibid., p. 245 et seq.

119 Born in 1773 in Geneva, where he also died. Spent a considerable time in Italy, where he engaged in agriculture and wrote his sixteen-volumed work on the history of the Italian Republics in the Middle Ages. Later also he embarked on a history of the French, of which twenty-nine volumes were written, and other works less markedly voluminous. He visited England in his youth and also later.

120 The full title is significant: De la Richesse Commerciale ou Principes d’Econotnie Politique appliqués à la Législation du Commerce.

121 De la Richesse Commerciale, Vol. I, p. xx.

122 Ibid., Vol. I, p. 12.

123 Nouveaux Principes, p. vii.

124 De la Richesse Commerciale, Vol. I, p. 267.

125 Ibid., Vol. I, p. 329.

126 Ibid., Vol. II, p. 152.

127 Ibid.. Vol. II, p. 143.

128 Ibid., Vol. I, p. 109.

129 The full title is again of interest: Nouveaux Principes d’Economie Politique, ou de la Richesse dans ses Rapports avec la Population.

130 Nouveaux Principes, Vol. II, p. 248; Vol. I, pp. 8-9.

131 Ibid ., Vol. II. p. 313.

132 Ibid., Vol. II, p. 329.

133 Ibid., Vol. I, p. 68.

134 Ibid., Vol. I, pp. 77-80.

135 Ibid., Vol. I, p. 317.

136 “Les producteurs ne se retireront point du travail, et leur nombre ne diminuera que lorsqu’une partie des chefs d’atelier aura fait faillite, et qu’une partie des ouvriers sera morte de misère” (ibid., Vol. I, p. 310).

137 Ibid., Vol. I, p. 338.

138 The reader who desires to fail to understand Sismondi may be referred to Book II, chapters 5 and 6 of the Nouveaux Principes, on “The division of the national revenue between the various classes of citizens,” and on “The reciprocal determination of production by consumption and of expenditure by revenue.”

139 Ibid., Vol. I, pp. 120, 122.

140 Ibid., Vol. I, p. 78.

141 “Nous invoquons presque constamment, pour surveiller le progres de la richesse, cette intervention qu’ Adam Smith repoussait”(ibid., Vol. I, p. 54).

142 Ibid., Vol. I, p. 55.

143 Ibid., Vol. I, p. 197.

144Ibid., Vol. I, p. 197.

145 Ibid. Vol. I, p. 379.

146 Ibid., Vol. I, pp. 381-385.

147 See Etudes sur l’Economie Politique, Vol. II, p 211

148 Nouveaux Principes, Vol. I, p. 366.

149 Ibid.. Vol. I, p. 322.

150 Ibid., Vol. II, p. 317.

151 Ibid., Vol. II, p. 321.

152 Etudes, I, p. 34.

153 Nouveaux Principes, Vol. II, pp. 331-333.

154 Ibid., Vol. II, pp. 267-270.

155 The similarity to Malthus and the different emphasis are alike interesting: “La population se mesure toujours, en dernière analyse, sur la demande du travail. Toutes les fois que le travail sera demandé et qu’un salaire sufnsant lui sera offert, I’ouvrier naitra pour le gagner” (ibid., Vol. II, p. 284).

156 Ibid., Vol. II, p. 259.

157 Ibid., Vol. II, p. 263.

158 Ibid., Vol. II, p. 285.

159 Ibid., Vol. II, p. 295

160 He was more definite in earlier editions,

161 Ibid., Vol. II, pp. 339. 363. etc.

162 See Mill, Principles of Political Economy, Book III, chap. 14,

163 See Etudes, Vol. I, p. 6?

164 The pathetic words with which (in some editions) the Nouveaux Principes closes have often been quoted: “Je l’avoue, après avoir indiqué où est à nos yeux le principe, où est la justice, je ne me sens pas la force de tracer les moyens d’execution; la distribution des profits du travail entre ceux qui con-courent à les produire me paraît vicieuse; mais il me semble presque au-dessus des forces humaines de concevoir un £tat de propriété absolument différent de celui que nous fait connaître l’expérience.”

• 1So 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.
• 2Firstly, 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.
• 3A 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.
• 4Thus 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.”
• 5Then 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.”
• 6A 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.
• 7A 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.
• 8Among 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.
• 9Under 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.
• 10Among 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.
• 11Aristotle’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.
• 12The 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.”
• 13When 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.
• 14Apart 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.
• 15Aristotle’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.
• 16Coming 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.
• 17Seneca’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.
• 18The 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.”
• 19The 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.”
• 20Under 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.
• 21Apart 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.
• 22In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 23As 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.
• 24One 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.”
• 25It would, however, be a mistake to consider that the Physiocratic advocacy of Free Trade was rooted in any importance attached to foreign trade as such. On the contrary, foreign trade, like all trade, is for the Physiocrats essentially unproductive. As Quesnay specifically puts it, it is only possible to buy from the foreigner as much as one sells to him; and the consequence is that in a state of free competition in foreign trade, there can only be an exchange of value for equal value, without gain or loss on one side or the other. Reverting to Quesnay’s distinction between the two nations—agricultural and commercial—combined in a mixed kingdom, the expenses of the second, even if necessary, are to be regarded as an “onerous expense,” laid on the revenues of the landed proprietor. Foreign trade is thus primarily a liability rather than an asset. The whole tendency of Physiocratic thought is to depreciate the importance of foreign trade. It is above all by the condition of internal commerce that the wealth of a country must be judged; a nation that is making the best use of its soil and its men has no occasion to be envious of the commerce of its neighbours. It is curious that the first school in modern times to proclaim Free Trade did so, not from any belief in the advantages of foreign trade, but on general principles of a quasi-philosophical and religious nature.
• 26Apart 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.
• 27The 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.”
• 28The Réflexions are arranged in a hundred short paragraphs, and may be taken as a summarized statement of economic doctrine, as apprehended by one Physiocrat. In this brief treatise—written, it is said, for the instruction of two Chinese students—there are many acute and ingenious observations embedded in a dogmatic statement of the more untenable portions of Physiocratic theory. The superiority of agriculture is here in its full glory, and the iron law of wages, as applied to the worker who has only his arms and his industry, is one of the consequences of this superiority. The simple labourer is beaten down in his negotiations with a master who has a choice among many workers. It is different with the worker on the soil: “Nature does not bargain with him to oblige him to be content with the absolutely necessary.” The happy position of the agriculturist is that he receives, over and above his subsistence, a “richesse independente et dis-ponible” which he has not bought and which he sells. The land is therefore the unique source of all wealth, and that part which it gives as a pure gift (en pur don) is the net product. There is something excessively naïve in this touching faith in the bounty of Nature which few farmers—at least in Buchan—could share. Of other points in the Réflexions, it must suffice to note Turgot’s zealous plea for the abolition of all restraints on the fixing of the rate of interest; the payment of interest, being to the advantage of both parties concerned, should be determined solely by the course of trade. On this point, which Turgot also discusses elsewhere, he reveals the logic of laissez-faire in its most cogent form.
• 29One 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.”
• 30Seneca’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.
• 31Ibid., pp. 369-370.
• 32For 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.
• 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.”
• 34In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 35Thus, in discussing “instruments,” he explains that “a field fitted for use is an instrument....The power which has made it an instrument is the agriculturalist’s labour” (p. 16). And again, “a portion of cultivated land, considered as an instrument actually subject to the operations of the husbandman, does not differ from any other instrument” (p. 40). On the question of value where articles are produced with less labour than formerly, they “procure for their owners less of other articles in exchange than they did before. They exchange, not for what labour has been actually wrought up in them, but for what is now required to make others similar to them” (p. 107).
• 36It is, however, in the short essay on The Ways and Means to Increase the Revenues of Athens that Xenophon is most interesting, most enlightened and perhaps also most confused. Here he is concerned with finding a “remedy for the poverty of our citizens,” and the tract therefore resolves itself into an elementary discussion of public finance. Throughout, a more liberal view than customary is manifested. The foreign residents are seen as a source of revenue, and Xenophon argues for the abolition of all regulations that inflict disabilities on this class. He is indeed anxious to attract “more and better class foreigners to settle at Athens,” and in pursuance of this policy he would show favour to merchants—by free seats at festivals and invitations to banquets. No less significant is his suggestion to raise a capital sum to provide accommodation for merchants and shops and houses for retail dealers. Equally enlightened is his contention that it is the cities which have been longest at peace that have been most prosperous; despite the booty of war, it is in peace that wealth is accumulated; it is in war-time that it is spent.
• 37The second point is more fundamental. Since there is only one source of national wealth, all taxation must ultimately fall there, and therefore all taxation should be imposed at once where the burden will ultimately fall. Quesnay, in short, advocates a single direct tax falling on the “produit net.” In this he is wholly logical on Physiocratic assumptions. Sooner or later a tax is bound to be shifted on to the “produit net,” if the “produit net” is what Quesnay considers he has shown it to be; and therefore the simplest and least onerous way of raising a revenue is to divert directly to the State a part of what is the only real national revenue. Quesnay in various places devotes considerable attention to proving the inconvenience and loss, and the detriment to the State which would result from any other method of taxation; and in particular, in The Second Economic Problem, he proves (at least to his own satisfaction) that though the landowner might imagine that he would be advantaged by some other form of taxation, yet in the end, owing to the shifting of the tax, the burden—and moreover an increased burden, owing to the inevitable incidental frictions and losses—will fall upon him. It is interesting to note, in passing, that in the course of his discussion of the incidence of taxation, Quesnay enunciates what a later generation has come to know as the Iron Law of Wages: “Wages, and in consequence the enjoyments which wage-earners can obtain, are fixed and reduced to the lowest level by the extreme competition which is among them.”
• 38The full title is significant: De la Richesse Commerciale ou Principes d’Econotnie Politique appliqués à la Législation du Commerce.
• 39Even a brief survey of Xenophon would be incomplete without reference to a passage in the Cyropœdia which, being quoted by Marx and others, has become one of the curiosities of economic literature. It represents division of labour as applied to the kitchen, run mad, with one man to boil fish and another to bake them. Here, surely, the centuries have shown retrogression.
• 40The Réflexions are arranged in a hundred short paragraphs, and may be taken as a summarized statement of economic doctrine, as apprehended by one Physiocrat. In this brief treatise—written, it is said, for the instruction of two Chinese students—there are many acute and ingenious observations embedded in a dogmatic statement of the more untenable portions of Physiocratic theory. The superiority of agriculture is here in its full glory, and the iron law of wages, as applied to the worker who has only his arms and his industry, is one of the consequences of this superiority. The simple labourer is beaten down in his negotiations with a master who has a choice among many workers. It is different with the worker on the soil: “Nature does not bargain with him to oblige him to be content with the absolutely necessary.” The happy position of the agriculturist is that he receives, over and above his subsistence, a “richesse independente et dis-ponible” which he has not bought and which he sells. The land is therefore the unique source of all wealth, and that part which it gives as a pure gift (en pur don) is the net product. There is something excessively naïve in this touching faith in the bounty of Nature which few farmers—at least in Buchan—could share. Of other points in the Réflexions, it must suffice to note Turgot’s zealous plea for the abolition of all restraints on the fixing of the rate of interest; the payment of interest, being to the advantage of both parties concerned, should be determined solely by the course of trade. On this point, which Turgot also discusses elsewhere, he reveals the logic of laissez-faire in its most cogent form.
• 41Nouveaux Principes, p. vii.
• 42The distinction between agriculture on the one hand and industry and commerce on the other, is further revealed by the fact that in the former there is a surplus, while the others merely pay their way. This surplus is the famous “produit net,” the token of Nature’s superior bounty in agricultural operations. On Quesnay’s theory, agriculture is carried on by advances of various kinds (avances foncières, avances primitives, avances annuelles), some of these falling on the proprietor and some on the cultivator. But when all expenses have been met, and the cultivators have taken all that is required to maintain themselves and reimburse them in respect of their annual advances, there still remains something over, a “produit net” (a rent) which is payable to the proprietor. This “ produit net” is in fact the real revenue of the nation, and it is this which, in one form or another, supports the manufacturing and commercial classes. Thus we get the triple division of classes, so dear to the Physiocrats. There is, firstly, the class of proprietors, to whom the “produit net” is paid, whose services consist in making the avances foncières, and also in the more general and social duties which fall upon them; there is, secondly, the productive class, who cultivate the soil; and thirdly, there are all those who are lumped together under a title, which, despite all apologetics, has in it something wounding and depreciatory, the “unproductive” or sterile class. Strictly speaking, there is a fourth class, the wage-earners, but they do not occupy a large place in Physiocratic classification.
• 43With regard to the industrial and manufacturing classes the argument is similar, though inevitably it seems more forced and unnatural. The common value of a commodity Is merely the value of the original material and of the cost of maintenance of the worker during the time he has been engaged. If the work of the artisan were “productive,” it would be desirable to increase the amount ot work necessary for a job. In fact, however, such labour cannot increase the wealth which the nation spends annually, because the labour is limited by the amount of this wealth, and this can only be increased by agriculture, and in no way by the expense involved in the work of the artisans (a question-begging argument; but he means for what it is worth, that to increase the number of cobblers, e.g., there must first be an increase in the number of cow hides). The product of the artisan then is merely worth the expense involved; he merely acquires a right to share in the consumption of wealth produced by the cultivator. But in contradistinction to agriculture, there is no surplus. In his own language, which happens to be correct, the worker speaks of “earning his keep”; he does not say that he produces it: “il dit qu’il gagne sa subsistance, et ne dit pas qu’il la produit.” Thus by arguments which appear thin and unconvincing, as is inevitable in the defender of a confused cause, Quesnay demonstrated that the artisan, the industrial worker, is an unproductive labourer.
• 44It is, however, when Quesnay advocates Free Trade and analyses the assumptions of the mercantilists, that he most clearly speaks with the voice of Adam Smith. Money is supposed to be wealth, because with money one can buy what one has need of. But money is not obtained for nothing; it also costs as much as it is worth to the buyer, and nations will always be able to obtain as much money as they require, if they have things to give in exchange for it. Wealth consists in the sum total of things necessary for life and in the annual reproduction of these things, and the quantity of money may diminish without these things being affected, since in a rich country, with freedom of commerce, there are means of supplying the place of money. The opulence of a state must not therefore be judged by the greater or less supply of money it possesses. Money is therefore but a richesse sterile, the only utility of which consists in its employment in effecting purchases and sales. Further, buying and selling are but two aspects of the same operation; every purchase is a sale, and every sale is a purchase. It follows that the central idea of the mercantilists, that of a nation selling more than it buys, is not merely erroneous but absurd: “Instead of saying that you wish our sales to exceed our purchases, which is physically impossible, you ought merely to say that you wish to purchase money with your productions.”In an effective phrase, selling more than is bought is merely a “commerce commencé,” an incomplete transaction. The argument resting on the greater durability of metal is admirably disposed of by a reductio ad absurdum, that if the contention be valid, then in logic it leads to the conclusion that any quantity of the metals, however small (being durable), is worth more than any quantity of commodities however large (being perishable). The doctrine of the balance of trade is thus reduced to “nothing and perhaps less than nothing.” Commerce not to be regarded as a state of war against an enemy; the only interest a nation has is to leave trade entirely free, in order that the greatest possible competition of buyers and sellers may guarantee the highest possible price for the sale of its products and the lowest price for the purchase of what may be necessary. Commerce cannot be conducted at the expense of other nations, for a good and a just God has decreed that commerce shall always be “le fruit d’un avantage évidemment reciproque.” All this and much more may strike the rétentive student as strangely familiar, and as an echo of certain classic passages in the fourth book of Adam Smith.
• 45Ibid.. Vol. II, p. 143.
• 46Apart from these three main representatives of Greek thought, a passing reference is perhaps due to the dialogue called Eryxias, which is of interest as being devoted wholly to an analysis of wealth, and which clearly distinguishes between material and immaterial wealth, so that “in exchange for their art” men may obtain the necessaries of life; and to Aristophanes’ wholly diverting play Ecclesiazusœ, a skit on communism (not neglecting votes for women) which is full of the most modern thrusts.
• 47Ibid., chap. 16, p. 143.
• 48Nouveaux Principes, Vol. II, p. 248; Vol. I, pp. 8-9.
• 49With regard to the industrial and manufacturing classes the argument is similar, though inevitably it seems more forced and unnatural. The common value of a commodity Is merely the value of the original material and of the cost of maintenance of the worker during the time he has been engaged. If the work of the artisan were “productive,” it would be desirable to increase the amount ot work necessary for a job. In fact, however, such labour cannot increase the wealth which the nation spends annually, because the labour is limited by the amount of this wealth, and this can only be increased by agriculture, and in no way by the expense involved in the work of the artisans (a question-begging argument; but he means for what it is worth, that to increase the number of cobblers, e.g., there must first be an increase in the number of cow hides). The product of the artisan then is merely worth the expense involved; he merely acquires a right to share in the consumption of wealth produced by the cultivator. But in contradistinction to agriculture, there is no surplus. In his own language, which happens to be correct, the worker speaks of “earning his keep”; he does not say that he produces it: “il dit qu’il gagne sa subsistance, et ne dit pas qu’il la produit.” Thus by arguments which appear thin and unconvincing, as is inevitable in the defender of a confused cause, Quesnay demonstrated that the artisan, the industrial worker, is an unproductive labourer.
• 50Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 51Ibid., Vol. I, p. 68.
• 52Ibid., Vol. I, pp. 77-80.
• 53It is, however, when Quesnay advocates Free Trade and analyses the assumptions of the mercantilists, that he most clearly speaks with the voice of Adam Smith. Money is supposed to be wealth, because with money one can buy what one has need of. But money is not obtained for nothing; it also costs as much as it is worth to the buyer, and nations will always be able to obtain as much money as they require, if they have things to give in exchange for it. Wealth consists in the sum total of things necessary for life and in the annual reproduction of these things, and the quantity of money may diminish without these things being affected, since in a rich country, with freedom of commerce, there are means of supplying the place of money. The opulence of a state must not therefore be judged by the greater or less supply of money it possesses. Money is therefore but a richesse sterile, the only utility of which consists in its employment in effecting purchases and sales. Further, buying and selling are but two aspects of the same operation; every purchase is a sale, and every sale is a purchase. It follows that the central idea of the mercantilists, that of a nation selling more than it buys, is not merely erroneous but absurd: “Instead of saying that you wish our sales to exceed our purchases, which is physically impossible, you ought merely to say that you wish to purchase money with your productions.”In an effective phrase, selling more than is bought is merely a “commerce commencé,” an incomplete transaction. The argument resting on the greater durability of metal is admirably disposed of by a reductio ad absurdum, that if the contention be valid, then in logic it leads to the conclusion that any quantity of the metals, however small (being durable), is worth more than any quantity of commodities however large (being perishable). The doctrine of the balance of trade is thus reduced to “nothing and perhaps less than nothing.” Commerce not to be regarded as a state of war against an enemy; the only interest a nation has is to leave trade entirely free, in order that the greatest possible competition of buyers and sellers may guarantee the highest possible price for the sale of its products and the lowest price for the purchase of what may be necessary. Commerce cannot be conducted at the expense of other nations, for a good and a just God has decreed that commerce shall always be “le fruit d’un avantage évidemment reciproque.” All this and much more may strike the rétentive student as strangely familiar, and as an echo of certain classic passages in the fourth book of Adam Smith.
• 54Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 55Ibid., Vol. I, p. 338.
• 56The reader who desires to fail to understand Sismondi may be referred to Book II, chapters 5 and 6 of the Nouveaux Principes, on “The division of the national revenue between the various classes of citizens,” and on “The reciprocal determination of production by consumption and of expenditure by revenue.”
• 57In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 58Ibid., Vol. I, p. 78.
• 59“Nous invoquons presque constamment, pour surveiller le progres de la richesse, cette intervention qu’ Adam Smith repoussait”(ibid., Vol. I, p. 54).
• 60Quesnay’s peculiar views with regard to agriculture as the only productive activity and the only source of the national revenue lead to certain important conclusions in the field of taxation. Taxation also is subject to laws and immovable rules, capable of rigorous demonstration.Here it is only possible to note two of Quesnay’s fundamental points. The first (a counsel of perfection) is that the State should avoid loans; the statesman should hope for resources in special emergencies from the prosperity of the nation, and not from the credit of the financiers. The objection to loans is primarily that they create a “traffic in finances,” from which spring “fortunes pécuniaires” and “rentes financières.” Sterile fortunes, withdrawing money from agriculture, are thus created (the corresponding Tableau Économique would show a drain to the right to the unproductive classes). Moreover such “pecuniary fortunes” know no king nor country. In more modern language, loans lead to a rentier class operating in an international field of investment.
• 61Apart from dithyrambic praise of agriculture, as, for instance, when Columella says that husbandry is next to and near akin to wisdom, it is notable that the writers of this group condemn slave-labour as inefficient. Pliny may be taken as typical: “It is the very worst plan of all to have land tilled by slaves let loose from the house of correction, as indeed is the case with all work entrusted to men who live without hope.” Certain sayings of Cato, as on the superiority of an agricultural population, and his dictum that he has been a useful member of society who leaves more at his death than he inherited, passed into current wisdom. But in the main these writers are concerned with tips for the landowner (and his wife): hints on the pruning of trees, where to buy tunics, the medicinal effects of cabbage, the salting of gammon and the like.
• 62Ibid., Vol. I, p. 197.
• 63Ibid. Vol. I, p. 379.
• 64Ibid., Vol. I, pp. 381-385.
• 65It is, however, when Quesnay advocates Free Trade and analyses the assumptions of the mercantilists, that he most clearly speaks with the voice of Adam Smith. Money is supposed to be wealth, because with money one can buy what one has need of. But money is not obtained for nothing; it also costs as much as it is worth to the buyer, and nations will always be able to obtain as much money as they require, if they have things to give in exchange for it. Wealth consists in the sum total of things necessary for life and in the annual reproduction of these things, and the quantity of money may diminish without these things being affected, since in a rich country, with freedom of commerce, there are means of supplying the place of money. The opulence of a state must not therefore be judged by the greater or less supply of money it possesses. Money is therefore but a richesse sterile, the only utility of which consists in its employment in effecting purchases and sales. Further, buying and selling are but two aspects of the same operation; every purchase is a sale, and every sale is a purchase. It follows that the central idea of the mercantilists, that of a nation selling more than it buys, is not merely erroneous but absurd: “Instead of saying that you wish our sales to exceed our purchases, which is physically impossible, you ought merely to say that you wish to purchase money with your productions.”In an effective phrase, selling more than is bought is merely a “commerce commencé,” an incomplete transaction. The argument resting on the greater durability of metal is admirably disposed of by a reductio ad absurdum, that if the contention be valid, then in logic it leads to the conclusion that any quantity of the metals, however small (being durable), is worth more than any quantity of commodities however large (being perishable). The doctrine of the balance of trade is thus reduced to “nothing and perhaps less than nothing.” Commerce not to be regarded as a state of war against an enemy; the only interest a nation has is to leave trade entirely free, in order that the greatest possible competition of buyers and sellers may guarantee the highest possible price for the sale of its products and the lowest price for the purchase of what may be necessary. Commerce cannot be conducted at the expense of other nations, for a good and a just God has decreed that commerce shall always be “le fruit d’un avantage évidemment reciproque.” All this and much more may strike the rétentive student as strangely familiar, and as an echo of certain classic passages in the fourth book of Adam Smith.
• 66Ibid., chap. 2, footnote, p. 39.
• 67Ibid.. Vol. I, p. 322.
• 68Ibid., Vol. II, p. 317.
• 69See above, p. 116.
• 70Etudes, I, p. 34.
• 71Nouveaux Principes, Vol. II, pp. 331-333.
• 72Ibid., chap. 5, On Wages, p. 57.
• 73The similarity to Malthus and the different emphasis are alike interesting: “La population se mesure toujours, en dernière analyse, sur la demande du travail. Toutes les fois que le travail sera demandé et qu’un salaire sufnsant lui sera offert, I’ouvrier naitra pour le gagner” (ibid., Vol. II, p. 284).
• 74Ibid., Vol. II, p. 259.
• 75Ibid., Vol. II, p. 263.
• 76Ibid., chap. 6, On Profits, pp. 70-71.
• 77Ibid., Vol. II, p. 295
• 78He was more definite in earlier editions,
• 79Ibid., Vol. II, pp. 339. 363. etc.
• 80Mr. Gonnard has very properly drawn attention to the illogical combination of pessimistic belief and the cult of individual liberty, characteristic of the school of Ricardo, which he ascribes to the Calvinistic and puritanical element in the British character. But in Ricardo’s case it must go furthei back than Calvin. See Gonnard, op, cit., Vol. II, p. 250.
• 81See Etudes, Vol. I, p. 6?
• 82Ibid., chap. 17, footnote, p. 160.
• 83The Republic, Jowett’s translation, p. 49.
• 84Beer, Social Struggles in Antiquity, p. 97.
• 85Ibid., p. 124.
• 86Ibid., Book III, p. 106.
• 87The Republic, Jowett’s translation, p. 154.
• 88Ibid., p. 127.
• 89The Laws, Jowett’s translation, p. 121.
• 90Ibid., p. 87.
• 91Ibid., Book I, chaps. 5 and 6.
• 92Ibid., p. 230.
• 93Ibid., Book II, chap. 5, p. 48.
• 94Ibid., p. 517.
• 95Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 96Ibid., Book I, chaps. 3 and 8.
• 97Ibid., Book II, chap. 5, p. 49.
• 98Ad Helviam Matrem de Consolatione, chap. 9.
• 99Ibid., Book I, chap. 8.
• 100Ibid., p. 401.
• 101Laistner, Greek Economics, p. 16; Ways and Means, etc.
• 102Ibid., Book I, chap. 6, Welldon, p. 13.
• 103Ibid., p. 153.
• 104Pliny, Book XVIII, chap. 7.
• 105Ibid., Book I, chap. 9.
• 106Ecclesiasticus 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).
• 107Nos. 12 and 13 of the Maximes, attached to Grains, p. 239.
• 108Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 109Ibid., p. 405.
• 110Ibid., sections 71-75.
• 111Politics, Book III, chap. 5, Welldon, p. 113.
• 112De Ira, III, 32, 33.
• 113This presumption Rae holds to be unfounded; it is by no means demonstrable that the art of the legislator is powerless to promote the prosperity of nations, and indeed the assumption should rather be the other way. The example which bulks most largely in his mind is that of the passage of the useful arts from one country to another. These transplantations were originally due to violent causes; they were the consequences of war, revolution and exile. But if such evil influences no longer operate, must we also sacrifice the indirect good which such causes may have produced, or is it not rather the duty of “the intellectual part of our nature “to achieve the good and prevent the evil? The original violent methods of dissemination of the knowledge of the arts should therefore be replaced by the direct efforts of the legislator to draw them there. Thus the legislator is called upon to act, but to act cautiously; and the weapons which Rae places in his hands for this purpose are represented by premiums, bounties and duties. This argument Rae further buttresses by the contention that cases in which private effort succeeds in transferring an industry to a new country are very rare, and that it is scarcely ever likely to be profitable. “It would be more just and judicious,” he says, “that the necessary first cost of the scheme should be borne by the whole community” rather than that we should wait “till the miscalculations of some unfortunate projector confer on us a public benefit.” Thus does the infant industry argument gently crow from its cot.
• 114Ibid., p. 92.
• 115Loeb translation, pp. 367, 409.
• 116Pliny, Book XXXIII, chap. 19.
• 117Rae is an interesting study for those who are fascinated by the reaction of mind on mind. Perhaps in part owing to a common American environment, there is a good deal in him that foreshadows Carey, notably in his treatment of land as an instrument, indistinguishable from other instruments, and in a doctrine that approaches Carey’s theory of value as determined by cost of reproduction.
• 118Printed in Laistner, Greek Economics.
• 119Second Probleme Économique, p. 706.
• 120Sismondi (1773-1842), as a writer of economics, is extremely difficult to “place.” This is due to the fact that his was a mind in transition; he never quite lost contact with his starting point, yet he never quite arrived at his natural destination. While having kinship with many schools, he is consequently at home with none. In his first important work, De la Richesse Commerciale (1803), his position is simple; he is, as becomes a young man, content to be a not very critical follower of Adam Smith. Moreover, there is a refreshing honesty about his dis-cipleship. Of certain chapters he tells us that they contain no ideas really new to anyone who has studied Adam Smith, and further that his object is to appropriate to France the counsels which Adam Smith had intended primarily for England. There is an engaging candour in his later confession that if in this book he did not make any discoveries, he was at least well aware of the fact.
• 121“For just as all other arts are developed to superior excellence in large cities, in that same way the food at the king’s palace is also elaborately prepared with superior excellence. For in small towns the same workman makes chairs and doors and ploughs and tables, and often this same artisan builds houses, and even so he is thankful if he can only find employment to support him. And it is, of course, impossible for a man of many trades to be proficient in all of them. In large cities, on the other hand, inasmuch as many people have demands to make upon each branch of industry, one trade alone, and very often even less than a whole trade, is enough to support a man: one man, for instance, makes shoes for men, and another for women; and there are places even where one man earns a living by only stitching shoes, another by cutting them out, another by sewing the uppers together, while there is another who performs none of these operations but only assembles the parts. It follows, therefore, as a matter of course, that he who devotes himself to a very specialized line of work is bound to do it in the best possible manner. Exactly the same thing holds true in reference to the kitchen; in any establishment where one and the same man arranges the dining couches, lays the table, bakes the bread, prepares now one sort of dish and now another, he must necessarily have things go as they may; but where it is all one man can do to stew meats and another to roast them, for one man to boil fish and another to bake them, for another to bake bread and not every sort at that, but where it suffices if he makes one kind that has a high reputation—everything that is prepared in such a kitchen will, I think, necessarily be worked out with superior excellence.” (Cyropœdia, Book VIII, ii, 5-6; Loeb translation, PP- 333-335.)
• 122Ibid., section 7.
• 123Sismondi (1773-1842), as a writer of economics, is extremely difficult to “place.” This is due to the fact that his was a mind in transition; he never quite lost contact with his starting point, yet he never quite arrived at his natural destination. While having kinship with many schools, he is consequently at home with none. In his first important work, De la Richesse Commerciale (1803), his position is simple; he is, as becomes a young man, content to be a not very critical follower of Adam Smith. Moreover, there is a refreshing honesty about his dis-cipleship. Of certain chapters he tells us that they contain no ideas really new to anyone who has studied Adam Smith, and further that his object is to appropriate to France the counsels which Adam Smith had intended primarily for England. There is an engaging candour in his later confession that if in this book he did not make any discoveries, he was at least well aware of the fact.
• 124Analyse du Tableau Économique, pp. 304-309.
• 125The reader who is beclouded by this brief summary should refer to the Réponse au Memoire de M.H., pp. 384-395, and the dialogue Sur les Travaux des Artisans, p. 256 et seq., where this point is discussed with much Physiocratic subtlety.
• 126Ibid., p. 484.
• 127In the main, then, the central point of this first work is to be found in Sismondi’s restatement of the harmony of interests, the necessity of laissez-faire and the folly of Government interference. When commerce is left free, he explains in one place, capital naturally takes the direction which is most advantageous to the nation which possesses it, and there is more than an echo of the invisible hand in his assertion that “all men, in seeking their own interest, incessantly tend to serve the national interest.” Thus we arrive at the glowing optimistic conclusion that “the capitalist, who consults his own interest, always works for that of the nation”; and the sans cesse and the toujours stand forth brazenly without modification. He thus quotes as a noble réponse, the alleged reply of the British business world to a Government anxious to help them that the only favour they desired was “la grâce de nous oublier.” All this savours of the clotted cream of laissez-faire; but there are pointers in the direction of the later Sismondi, as when he exclaims that “no man of sensibility can without grief see the most interesting class in the nation, that which supports the whole by the fruit of its labours, deprived of its enjoyments in order to share it with people who are a charge upon it.”
• 128Laistner, op. cit., p. 41.
• 129Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?” He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,” Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity? His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.
• 130When Sismondi, after an interval of sixteen years spent in historical research, returned to economics in his Nouveaux Principes d’ Économie Politique (1819) he may be a respectful admirer of Adam Smith, but he is certainly no longer a meek disciple. In the interval he had seen the world in a period of rapid transition and industrialization, a world urged from every quarter to produce more, and to produce more cheaply. He had looked upon it, and had found little to admire. Behind all this feverish accumulation there lurked the teaching of orthodox political economy; but for the maturing Sismondi, political economy ought to be something else. It was “la théorie de la bienfaisance”; its object was to increase the physical well-being of man. But in the Europe of 1819, above all in the England of that day, what had happened to the enjoyment of life? In sombre phraseology, in contrast to which Malthus appears a radiant optimist, Sismondi describes a world, hungry, suffering, degraded, and he is tempted to curse division of labour and the invention of manufactures as the rock on which the human race has made shipwreck. To Sismondi, it appears appropriate to ask the disturbing question: “Where are we going?” Where are the happy people in this world in which everywhere one observes the progress of things, everywhere the suffering of men ?
• 131Réponse au Memoire de M.H., p. 390.
• 132“Now in regard to trades and other means of livelihood, which ones are to be considered becoming to a gentleman and which ones are vulgar, we have been taught, in general, as follows: First, those means of livelihood are rejected as undesirable which incur people’s ill-will, as those of tax-gatherers and usurers. Unbecoming to a gentleman, too, and vulgar, are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wages they receive is a pledge of their slavery. Vulgar we must consider those also who buy from wholesale merchants to retail immediately; for they would get no profits without a great deal of downright lying; and verily there is no action that is meaner than misrepresentation. And all mechanics are engaged in vulgar trades; for no workshop can have anything liberal about it. Least respectable of all are those trades which cater to sensual pleasures:
• 133Sismondi’s central theme is simple, and it is so omnipresent that he tends to be a man of one idea. That idea is to be found in his emphasis on the evils which flow from unrestrained competition, above all as evidenced in the excessive production of goods for which there is not, and cannot be, any demand. This over-production which so haunts Sismondi is, it will be observed, a general over-production of all commodities, and not merely overproduction of certain commodities relative to others. It is, in his view, a direct result of division of labour and large-scale production. In isolation, a man produces for himself and knows when to stop and “repose”; in society he is producing for others, and cannot know when enough has been produced. To the man in isolation there is therefore a clear limit to the extent to which he should amass. The purpose of accumulation is sub sequent enjoyment and rest, and it would be folly to accumulate in excess of the power to consume. With a complex society, the efforts of men are separated from their natural rewards, so that one man labours and another man rests. Yet, though thus obscured, it is as true of society as it is of the individual that there is a limit to the power of consumption. But as this limit is no longer obvious, men are urged on by the “zeal to produce which every writer stimulates and which every Government encourages.” Demand should precede production; but what, in fact, the producer considers is whether he is capable of producing more, not whether there will be a demand for the commodity when it is produced. Production, that is to say, is based on the extent of capital at the disposal of the producer. These evil consequences are accentuated by the fact (which has much later been no immaterial factor in the tendency to industrial combination) that it is always easier to expand than to contract, that it is indeed almost impossible, for a variety of reasons, to restrict the size of an undertaking or to close down. To Sismondi, looking around, the world everywhere presented the spectacle of overstocked markets, of production for which there were no consumers—the consequence of apportioning production not to demand but to available capital.
• 134Sismondi’s central theme is simple, and it is so omnipresent that he tends to be a man of one idea. That idea is to be found in his emphasis on the evils which flow from unrestrained competition, above all as evidenced in the excessive production of goods for which there is not, and cannot be, any demand. This over-production which so haunts Sismondi is, it will be observed, a general over-production of all commodities, and not merely overproduction of certain commodities relative to others. It is, in his view, a direct result of division of labour and large-scale production. In isolation, a man produces for himself and knows when to stop and “repose”; in society he is producing for others, and cannot know when enough has been produced. To the man in isolation there is therefore a clear limit to the extent to which he should amass. The purpose of accumulation is sub sequent enjoyment and rest, and it would be folly to accumulate in excess of the power to consume. With a complex society, the efforts of men are separated from their natural rewards, so that one man labours and another man rests. Yet, though thus obscured, it is as true of society as it is of the individual that there is a limit to the power of consumption. But as this limit is no longer obvious, men are urged on by the “zeal to produce which every writer stimulates and which every Government encourages.” Demand should precede production; but what, in fact, the producer considers is whether he is capable of producing more, not whether there will be a demand for the commodity when it is produced. Production, that is to say, is based on the extent of capital at the disposal of the producer. These evil consequences are accentuated by the fact (which has much later been no immaterial factor in the tendency to industrial combination) that it is always easier to expand than to contract, that it is indeed almost impossible, for a variety of reasons, to restrict the size of an undertaking or to close down. To Sismondi, looking around, the world everywhere presented the spectacle of overstocked markets, of production for which there were no consumers—the consequence of apportioning production not to demand but to available capital.
• 135Ibid., p. 482.
• 136“Et cum ille, qui quæsierat, dixisset: ‘ Quid fænerari? ’, turn Cato: ‘ Quid hominem,’ inquit, ‘ occidere’” (De Officiis, Book II, xxv; Loeb, p. 266.)
• 137Sismondi’s central theme is simple, and it is so omnipresent that he tends to be a man of one idea. That idea is to be found in his emphasis on the evils which flow from unrestrained competition, above all as evidenced in the excessive production of goods for which there is not, and cannot be, any demand. This over-production which so haunts Sismondi is, it will be observed, a general over-production of all commodities, and not merely overproduction of certain commodities relative to others. It is, in his view, a direct result of division of labour and large-scale production. In isolation, a man produces for himself and knows when to stop and “repose”; in society he is producing for others, and cannot know when enough has been produced. To the man in isolation there is therefore a clear limit to the extent to which he should amass. The purpose of accumulation is sub sequent enjoyment and rest, and it would be folly to accumulate in excess of the power to consume. With a complex society, the efforts of men are separated from their natural rewards, so that one man labours and another man rests. Yet, though thus obscured, it is as true of society as it is of the individual that there is a limit to the power of consumption. But as this limit is no longer obvious, men are urged on by the “zeal to produce which every writer stimulates and which every Government encourages.” Demand should precede production; but what, in fact, the producer considers is whether he is capable of producing more, not whether there will be a demand for the commodity when it is produced. Production, that is to say, is based on the extent of capital at the disposal of the producer. These evil consequences are accentuated by the fact (which has much later been no immaterial factor in the tendency to industrial combination) that it is always easier to expand than to contract, that it is indeed almost impossible, for a variety of reasons, to restrict the size of an undertaking or to close down. To Sismondi, looking around, the world everywhere presented the spectacle of overstocked markets, of production for which there were no consumers—the consequence of apportioning production not to demand but to available capital.
• 138Sismondi’s theory of distribution, on which the doctrine of over-production rests, is one of those things which are better left in their natural obscurity. His distinction between the annual production and the annual revenue, and his view that the annual production of any year is bought by the revenue of the preceding year, reveal a mind which was a stranger to strict reasoning. On this side Sismondi’s doctrines merely possess the value of antiquarian curiosities, and as such should not be withdrawn from the museum, even for purposes of examination. His strength lay in the force of his general contentions, not in the abstract reasoning on which these were based. Out of incomprehensible reasoning there emerges for Sismondi a sure conviction which is at least comprehensible, that there ought to be an equilibrium between production and consumption, and that nations may be ruined either by spending too much or too little. His is, in fact, a doctrine of under-consumption.
• 139Pliny, Book XXXIII, chaps. 3, 4.
• 140Probably the economic foundation is so tangled and uncertain because the main inspiration may have come from elsewhere. His view of man is that of the moralist; there is indeed an almost religious fervour in his denunciations. For Sismondi, man is a creature with whom rest, le repos, is a natural taste, and in the scheme of things this natural taste should also find its gratification. “L’homme travaille pour que l’homme se repose,” as he says with an air of benediction; but in the urge to produce, we forget the end of all labour and the purpose of life.
• 141Inasmuch, then, as it is not merely accumulation of wealth that matters, but control of wealth and the direction of wealth to secure the increase of happiness, the blessedness of unlimited competition vanishes. Laissez-faire tends to incredible suffering, and it is therefore essential that there be a large measure of Government intervention. For the function of the State is to be the protector of the weak against the strong, the defender of the defenceless, the representative of the permanent interest of all against the temporary interest of each. And in the light of experience (since the days of Adam Smith, as he hints) it had become abundantly evident that there was need of such an authority “to prevent men being sacrificed to the progress of a wealth from which they will derive no profit.”
• 142Despotisme de la Chine, chap. 8, sec. 7, p. 645.
• 143Pliny, Book XVIII, chap. 7.
• 144The doctrine of the harmony of interests and of the potency of the invisible hand accordingly receives short shrift from the later Sismondi, and though he does not use the phrase, he realizes how laissez-faire may break down on inequality of bargaining power. There may be self-interest displayed in highway robbery, and self-interest may likewise dictate to the victim the expediency of offering no resistance, if acquiescence is calculated to increase his prospects of escaping unmurdered. The institutions of society have, argues Sismondi, given rise to a similar kind of restraint, though it may not be accompanied by such obvious violence. “It has as often as not placed the poor man under the necessity of submitting to increasingly onerous conditions, under the penalty of dying of hunger; in placing him in this perilous condition, it falls to society to undertake his defence.” Left to its natural course, the conflict of interests, since it may be to the interest of the weak not to resist, may lead to the triumph of injustice.
• 145The doctrine of the harmony of interests and of the potency of the invisible hand accordingly receives short shrift from the later Sismondi, and though he does not use the phrase, he realizes how laissez-faire may break down on inequality of bargaining power. There may be self-interest displayed in highway robbery, and self-interest may likewise dictate to the victim the expediency of offering no resistance, if acquiescence is calculated to increase his prospects of escaping unmurdered. The institutions of society have, argues Sismondi, given rise to a similar kind of restraint, though it may not be accompanied by such obvious violence. “It has as often as not placed the poor man under the necessity of submitting to increasingly onerous conditions, under the penalty of dying of hunger; in placing him in this perilous condition, it falls to society to undertake his defence.” Left to its natural course, the conflict of interests, since it may be to the interest of the weak not to resist, may lead to the triumph of injustice.
• 146Thus we arrive in the most general terms at the functions of government. Each individual, pursuing his interests, tends to increase the speed of the machine; the task of the Government should be to slow down and regularize its movement; to exercise, in the pursuit of wealth, “une action régulatrice et modératrice.” The difference between other economists and Sismondi, as he himself expressed it, was that while they had applauded the new industrial ardour, and had urged to greater rivalry and speed, he had felt merely alarm, and had summoned the friends of humanity to assist “in retarding the social chariot which, in its accelerated course, seems to be on the point of plunging us in the abyss.”
• 147Ibid., p. 477.
• 148It will be seen how far-reaching are the implications of the Ricardian theory. Before any other claims are considered, a slice of the produce of the earth is assigned to the landlords in return for no service rendered, a slice, moreover, which grows progressively with the increase of population, so that there is scarcely (from the point of view of Ricardian theory) any limit to the proportion of the annual produce which may be absorbed in this way. So, too, there is a complete reversal of the Physiocratic point of view which not merely assigned to the landlords a place of conspicuous honour and usefulness, but viewed the existence of rent as proof of the motherly benevolence of a bountiful Nature. Nature has now become stepmotherly: “The labour of Nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts she exacts a greater price for her works.” Gloom is settling down on the economic horizon.
• 149Easy enough to speak of slowing down; but how? Take, for instance, the vexed question of inventions and machinery on which Sismondi has unusual views. In the main he detests inventions; they usually, though not necessarily, lead to evil consequences. Man loses in intelligence, in bodily vigour, in health and gaiety, all that he gains in increased power to produce wealth. Even children, it is true, may make stockings from their most tender years, before they have tasted any of the enjoyments of life. But at what an odious price are these things bought! The normal effect of inventions is to diminish the labour demanded, and thereby make the country poorer, even though this broad effect may be concealed by the operation of foreign trade which, while creating prosperity in the producing country, may concentrate elsewhere the real ruin created. Thus in the case of English manufacturers, “all the suffering has fallen on continental producers, all the enjoyment has remained with the English.” It is not, however, all inventions that are to be condemned; the criterion which Sismondi applies is to be found in the pre-existence of an unsatisfied demand. “Whenever demand for consumption surpasses the means of production, any new discovery is a benefit for society, because it provides the means of satisfying existing needs. On the contrary, wherever production is fully sufficient for consumption, any similar discovery is a calamity because it does not add to the enjoyment of the consumers anything else than that of satisfying their needs at a lower price, while it suppresses the very life of the producers.” The market must first be extended; if this is done, there is room for invention. Modifying the argument, Sismondi contends that when an invention extends the market by putting the commodity at the disposal of a poorer class, it is beneficial. But if the market cannot be extended, either because all needs are already supplied or because, no matter what reduction in price is made, the poor will never be consumers, then the discovery is a calamity for the human race, for in this case it will only advantage certain manufacturers at the cost of others—or, it may be, certain nations at the cost of others. So also, when Sismondi assumes the part of a laudator temporis acti, it is one of the marks of happier times that then men only thought of inventions when a new need had made itself felt.
• 150Easy enough to speak of slowing down; but how? Take, for instance, the vexed question of inventions and machinery on which Sismondi has unusual views. In the main he detests inventions; they usually, though not necessarily, lead to evil consequences. Man loses in intelligence, in bodily vigour, in health and gaiety, all that he gains in increased power to produce wealth. Even children, it is true, may make stockings from their most tender years, before they have tasted any of the enjoyments of life. But at what an odious price are these things bought! The normal effect of inventions is to diminish the labour demanded, and thereby make the country poorer, even though this broad effect may be concealed by the operation of foreign trade which, while creating prosperity in the producing country, may concentrate elsewhere the real ruin created. Thus in the case of English manufacturers, “all the suffering has fallen on continental producers, all the enjoyment has remained with the English.” It is not, however, all inventions that are to be condemned; the criterion which Sismondi applies is to be found in the pre-existence of an unsatisfied demand. “Whenever demand for consumption surpasses the means of production, any new discovery is a benefit for society, because it provides the means of satisfying existing needs. On the contrary, wherever production is fully sufficient for consumption, any similar discovery is a calamity because it does not add to the enjoyment of the consumers anything else than that of satisfying their needs at a lower price, while it suppresses the very life of the producers.” The market must first be extended; if this is done, there is room for invention. Modifying the argument, Sismondi contends that when an invention extends the market by putting the commodity at the disposal of a poorer class, it is beneficial. But if the market cannot be extended, either because all needs are already supplied or because, no matter what reduction in price is made, the poor will never be consumers, then the discovery is a calamity for the human race, for in this case it will only advantage certain manufacturers at the cost of others—or, it may be, certain nations at the cost of others. So also, when Sismondi assumes the part of a laudator temporis acti, it is one of the marks of happier times that then men only thought of inventions when a new need had made itself felt.
• 151What, then, is the natural price of labour? The answer is to be found in what later, following Lassalle, came to be known as the Iron or Brazen Law of Wages. If there be obloquy attaching to the authorship of this law, it must rest, not on Ricardo, but on many Others who expressed what was tending to become a commonplace view in the late eighteenth century. The very precise statement of Turgot has already been noted. According to Ricardo, “the natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.” According as the price of food and necessaries rises and falls, so will the natural price of labour rise and fall. The market price of labour will tend towards the natural price, because it obviously cannot remain below it without leading to a reduction in the volume of labour, while, if it rises above it, the population will increase, and with redundancy of labour the market price will again tend to fall. For Ricardo, a complete Malthusian, “no point is better established than that the supply of labourers will always ultimately be in proportion to the means of supporting them.” The natural price of labour, in short, is the minimum cost of producing men.
• 152Easy enough to speak of slowing down; but how? Take, for instance, the vexed question of inventions and machinery on which Sismondi has unusual views. In the main he detests inventions; they usually, though not necessarily, lead to evil consequences. Man loses in intelligence, in bodily vigour, in health and gaiety, all that he gains in increased power to produce wealth. Even children, it is true, may make stockings from their most tender years, before they have tasted any of the enjoyments of life. But at what an odious price are these things bought! The normal effect of inventions is to diminish the labour demanded, and thereby make the country poorer, even though this broad effect may be concealed by the operation of foreign trade which, while creating prosperity in the producing country, may concentrate elsewhere the real ruin created. Thus in the case of English manufacturers, “all the suffering has fallen on continental producers, all the enjoyment has remained with the English.” It is not, however, all inventions that are to be condemned; the criterion which Sismondi applies is to be found in the pre-existence of an unsatisfied demand. “Whenever demand for consumption surpasses the means of production, any new discovery is a benefit for society, because it provides the means of satisfying existing needs. On the contrary, wherever production is fully sufficient for consumption, any similar discovery is a calamity because it does not add to the enjoyment of the consumers anything else than that of satisfying their needs at a lower price, while it suppresses the very life of the producers.” The market must first be extended; if this is done, there is room for invention. Modifying the argument, Sismondi contends that when an invention extends the market by putting the commodity at the disposal of a poorer class, it is beneficial. But if the market cannot be extended, either because all needs are already supplied or because, no matter what reduction in price is made, the poor will never be consumers, then the discovery is a calamity for the human race, for in this case it will only advantage certain manufacturers at the cost of others—or, it may be, certain nations at the cost of others. So also, when Sismondi assumes the part of a laudator temporis acti, it is one of the marks of happier times that then men only thought of inventions when a new need had made itself felt.
• 153It remains to be considered what can be done to protect society and the worker against the rage of inventors. Here Sismondi does not get beyond a very tentative and curious suggestion. He realizes that it would be idle to forbid the use of a pernicious invention, if other countries were still free to make use of it. The sole measure of protection which he suggests is the suppression of the privileges accorded to the inventor; if all inventions are at once made known and available to all, then, as he says, revealing the individualist at his heart, “the zeal for such discoveries will grow cold.”
• 154Ricardo’s professions would lead the reader to expect a discussion of the proportion in which the “produce” is allotted among the various claimants. While his discussion nowhere approaches such a quantitative computation as might be anticipated, he does indicate how, in accordance with his theory, the proportion will tend to vary in future. Rent, as we have seen, will rise; wages will tend to rise nominally, owing to the increased cost of food occasioned by resort to inferior land, but real wages (being governed by subsistence considerations) will not rise. Indeed, though it may appear to be in contradiction with the stricter interpretation of the Ricardian law, the normal rise in wages will not be sufficient to compensate the worker for the rise in prices of commodities in general. With regard to profits, along with which interest is lumped, Ricardo is not entirely clear, but to one general proposition he adheres with the utmost tenacity. It is that whatever increases wages necessarily reduces profits, and indeed nothing can affect profits but a rise in wages. No place here for the “economy of high wages,” or for a consideration of those causes which may lead to variations of the output of labour. Wages and profits are diametrically opposed, and a fall in the one means a rise in the other. In the long run, as has been seen, money wages will rise, so that the rate of profit will tend to fall.
• 155With regard to population, that apple of discord which Malthus had lightly tossed to the economists, Sismondi’s views are likewise peculiarly his own. Population, he holds, is limited by revenue. In contradistinction to what Malthus had said, population never reaches and probably never will reach the limit of possible subsistence. It is checked because it becomes impossible to buy the means of subsistence, or because people are not allowed to work in order to produce it. The check thus comes, not from the means of subsistence, but from the “will” of man, above all of the landowner who will not allow others to work unless he receives a revenue for his assent. This, of course, is scarcely in opposition to Malthus; but in his further elaboration of the element of human volonté, his views as to the natural action of man differ profoundly from those of Malthus. The vital thing on which population depends is the demand for labour. Given employment and an assured revenue, people will marry and have children; the vice of the new society is that there is no security as to the worker’s revenue, and the worker being deceived as to his position, children are born for whom there is no provision. It is a firm article of faith with Sismondi that the worker will not marry until he can afford to marry, and that he will proportion his family to his revenue—that is, assuming there is stability and a fixed revenue. But if there is no stability, if the workers are displaced by machinery, how grave is their situation! The workers’ revenue is no longer within their calculation; it may be altered by others without their knowledge; the entrepreneur himself may miscalculate. So living from day to day, the “proletarians become content that their children should do the same”; moreover, do not the children become a title to charity, and may they not spasmodically earn wages from the age of seven? Thus the restraint on marriage disappears and children are born for whom society has made no provision. It is not then so much demand for work that is important, as regular and perpetual demand; for if the demand is Intermittent, it merely creates workers in order to condemn them to death.
• 156With regard to population, that apple of discord which Malthus had lightly tossed to the economists, Sismondi’s views are likewise peculiarly his own. Population, he holds, is limited by revenue. In contradistinction to what Malthus had said, population never reaches and probably never will reach the limit of possible subsistence. It is checked because it becomes impossible to buy the means of subsistence, or because people are not allowed to work in order to produce it. The check thus comes, not from the means of subsistence, but from the “will” of man, above all of the landowner who will not allow others to work unless he receives a revenue for his assent. This, of course, is scarcely in opposition to Malthus; but in his further elaboration of the element of human volonté, his views as to the natural action of man differ profoundly from those of Malthus. The vital thing on which population depends is the demand for labour. Given employment and an assured revenue, people will marry and have children; the vice of the new society is that there is no security as to the worker’s revenue, and the worker being deceived as to his position, children are born for whom there is no provision. It is a firm article of faith with Sismondi that the worker will not marry until he can afford to marry, and that he will proportion his family to his revenue—that is, assuming there is stability and a fixed revenue. But if there is no stability, if the workers are displaced by machinery, how grave is their situation! The workers’ revenue is no longer within their calculation; it may be altered by others without their knowledge; the entrepreneur himself may miscalculate. So living from day to day, the “proletarians become content that their children should do the same”; moreover, do not the children become a title to charity, and may they not spasmodically earn wages from the age of seven? Thus the restraint on marriage disappears and children are born for whom society has made no provision. It is not then so much demand for work that is important, as regular and perpetual demand; for if the demand is Intermittent, it merely creates workers in order to condemn them to death.
• 157With regard to population, that apple of discord which Malthus had lightly tossed to the economists, Sismondi’s views are likewise peculiarly his own. Population, he holds, is limited by revenue. In contradistinction to what Malthus had said, population never reaches and probably never will reach the limit of possible subsistence. It is checked because it becomes impossible to buy the means of subsistence, or because people are not allowed to work in order to produce it. The check thus comes, not from the means of subsistence, but from the “will” of man, above all of the landowner who will not allow others to work unless he receives a revenue for his assent. This, of course, is scarcely in opposition to Malthus; but in his further elaboration of the element of human volonté, his views as to the natural action of man differ profoundly from those of Malthus. The vital thing on which population depends is the demand for labour. Given employment and an assured revenue, people will marry and have children; the vice of the new society is that there is no security as to the worker’s revenue, and the worker being deceived as to his position, children are born for whom there is no provision. It is a firm article of faith with Sismondi that the worker will not marry until he can afford to marry, and that he will proportion his family to his revenue—that is, assuming there is stability and a fixed revenue. But if there is no stability, if the workers are displaced by machinery, how grave is their situation! The workers’ revenue is no longer within their calculation; it may be altered by others without their knowledge; the entrepreneur himself may miscalculate. So living from day to day, the “proletarians become content that their children should do the same”; moreover, do not the children become a title to charity, and may they not spasmodically earn wages from the age of seven? Thus the restraint on marriage disappears and children are born for whom society has made no provision. It is not then so much demand for work that is important, as regular and perpetual demand; for if the demand is Intermittent, it merely creates workers in order to condemn them to death.
• 158Ricardo’s professions would lead the reader to expect a discussion of the proportion in which the “produce” is allotted among the various claimants. While his discussion nowhere approaches such a quantitative computation as might be anticipated, he does indicate how, in accordance with his theory, the proportion will tend to vary in future. Rent, as we have seen, will rise; wages will tend to rise nominally, owing to the increased cost of food occasioned by resort to inferior land, but real wages (being governed by subsistence considerations) will not rise. Indeed, though it may appear to be in contradiction with the stricter interpretation of the Ricardian law, the normal rise in wages will not be sufficient to compensate the worker for the rise in prices of commodities in general. With regard to profits, along with which interest is lumped, Ricardo is not entirely clear, but to one general proposition he adheres with the utmost tenacity. It is that whatever increases wages necessarily reduces profits, and indeed nothing can affect profits but a rise in wages. No place here for the “economy of high wages,” or for a consideration of those causes which may lead to variations of the output of labour. Wages and profits are diametrically opposed, and a fall in the one means a rise in the other. In the long run, as has been seen, money wages will rise, so that the rate of profit will tend to fall.
• 159We are back, it will be observed, at the old point. Excessive population is the offspring of instability, which itself is the offspring of over-production and of all the devilish inventions of the era of the Industrial Revolution. His views, by way of suggested remedy, even if impracticable are of interest. He accepts as almost obvious the view that the obligations of celibacy rest on the married as soon as they have the family to which they are entitled—which would appear to be one boy and one girl. To have more would be unjust and cruel, since such a course is tantamount to depriving others, either of the joys of marriage in youth or of the comforts of children in old age. Beyond this, the remedies which Sismondi hints at, rather than suggests, are drastic; he would be prepared to prohibit the marriage of the poor, or at least to require certain guarantees. The aim of the Government, so far as the agricultural population is concerned, should be to unite labour and property, and Sismondi’s suggestions would ultimately rest marriage on a property qualification. In the towns, though the task is not so easy, the end should be the same, namely, to abolish the precarious position in which the workers live, to make it possible for them to attain to a certain status, and to forbid marriage until that has been reached. This means among other things a guarantee from the employer; it means vesting in the employer the right to veto the marriage of his employees; it means, on the other side, that the worker is to be a permanent charge on his industry.
• 160We are back, it will be observed, at the old point. Excessive population is the offspring of instability, which itself is the offspring of over-production and of all the devilish inventions of the era of the Industrial Revolution. His views, by way of suggested remedy, even if impracticable are of interest. He accepts as almost obvious the view that the obligations of celibacy rest on the married as soon as they have the family to which they are entitled—which would appear to be one boy and one girl. To have more would be unjust and cruel, since such a course is tantamount to depriving others, either of the joys of marriage in youth or of the comforts of children in old age. Beyond this, the remedies which Sismondi hints at, rather than suggests, are drastic; he would be prepared to prohibit the marriage of the poor, or at least to require certain guarantees. The aim of the Government, so far as the agricultural population is concerned, should be to unite labour and property, and Sismondi’s suggestions would ultimately rest marriage on a property qualification. In the towns, though the task is not so easy, the end should be the same, namely, to abolish the precarious position in which the workers live, to make it possible for them to attain to a certain status, and to forbid marriage until that has been reached. This means among other things a guarantee from the employer; it means vesting in the employer the right to veto the marriage of his employees; it means, on the other side, that the worker is to be a permanent charge on his industry.
• 161We are back, it will be observed, at the old point. Excessive population is the offspring of instability, which itself is the offspring of over-production and of all the devilish inventions of the era of the Industrial Revolution. His views, by way of suggested remedy, even if impracticable are of interest. He accepts as almost obvious the view that the obligations of celibacy rest on the married as soon as they have the family to which they are entitled—which would appear to be one boy and one girl. To have more would be unjust and cruel, since such a course is tantamount to depriving others, either of the joys of marriage in youth or of the comforts of children in old age. Beyond this, the remedies which Sismondi hints at, rather than suggests, are drastic; he would be prepared to prohibit the marriage of the poor, or at least to require certain guarantees. The aim of the Government, so far as the agricultural population is concerned, should be to unite labour and property, and Sismondi’s suggestions would ultimately rest marriage on a property qualification. In the towns, though the task is not so easy, the end should be the same, namely, to abolish the precarious position in which the workers live, to make it possible for them to attain to a certain status, and to forbid marriage until that has been reached. This means among other things a guarantee from the employer; it means vesting in the employer the right to veto the marriage of his employees; it means, on the other side, that the worker is to be a permanent charge on his industry.
• 162Such is the Ricardian scheme of distribution; in place of the old harmony of interest, he has placed dissension and antagonism at the heart of things. “The interest of the landlord is always opposed to that of the consumer and manufacturer.” So also the interests of the worker and the employer are eternally and irreconcilably opposed; when one gains, the other loses. Further, the outlook for all, except the landlord, is a process of continual pejoration. Gone is the large-hearted optimism of Adam Smith, transmuted into a pessimism that will not be comforted. Yet Ricardo remains immovably non-interventionist. “These, then,” he says, “are the laws by which wages are regulated”; and he adds inconse-quently, “like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.” In a world of Ricardian gloom one might ask, and did in effect ask, why there should not be interference. An optimist carolling that God’s in His Heaven, and that all’s right with enlightened self-interest has a right to nail the laissez-faire flag to the mast, but a pessimist who merely looks forward to bad days and worse times ought not in principle to be opposed to intervention, unless his pessimism is so thorough-going as to lead to the conviction that, bad as all diseases are, all remedies for all diseases are even worse.
• 163In summary, Sismondi is a protesting voice, and it is from this point alone that he is significant. In so far as he presented a body of “doctrine” to the world, he is negligible. His chief obsession, that of a general overproduction of goods as an explanation of glutted markets and commercial crises, is obviously untenable, and the orthodox spokesmen have never had any difficulty in showing that while there may be over-production in respect of particular commodities, a uniform overproduction of all commodities simultaneously is unimaginable. Over-production, indeed, means disproportionate production; it means, within limits, that too much is produced, having regard to the volume of other products; that is to say, it involves under-production elsewhere. So also, in his doctrines with regard to machinery and improvements, and in his insistence on the existence of a previous demand before expansion is justified, Sismondi turns a blind eye to half the facts of economic life, and neglects the possible reactions which variations in the conditions of supply may exercise on demand. It is scarcely too much to say that none of the peculiar tenets of Sismondi has stood the test of time. Yet he is not thereby negligible. In an age when the protest was necessary, he affirmed that wealth was made for man and not man for wealth, as the “chrematistic” doctrine seemed to imply; in the darkest days of the Industrial Revolution he asked, very pertinently, where the world was going, and insisted on the importance for the worker of stability and status. But in truth he gets nowhere in particular. He never reached Socialism, though it would be easy to collect a nosegay of Socialist sentiments from his works, and it would be folly to ignore his influence on later Socialist writers. But his final attitude is rather one of helplessness and bewilderment before a problem of which he cannot find the solution. He is perhaps a moralist rather than an economist, reminding us, as certain of our own poets have done in these latter days, of the folly of those whose vision is machines for making more machines, of the poverty of a life which leaves no time to stand and stare. Righteous indignation, such as inspired Sismondi, is a noble passion, and the indignant prophet fulfils a useful purpose, even if indignation not infrequently leads to bad logic.
• 164Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?” He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,” Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity? His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.