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J. R. (John Ramsay) McCulloch.

A discourse on the rise, progress, peculiar objects, and importance, of political economy : containing an outline of a course of lectures on the principles and doctrines of that science online

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indeed, who bring forward theories resting on
so narrow a basis, are almost invariably empirics,
whose vanity or interest prompts them to set up
conclusions drawn from their own limited and im-
perfect range of observation, in opposition to those
that are sanctioned by the general experience of
mankind.

But although we are not to reject a received
principle because of the apparent opposition of a
few results, with the particular circumstances of
which we are unacquainted, we can have no confi-
dence in its solidity unless it be deduced from a
very comprehensive and careful induction. To ar-
rive at a true knowledge of the laws regulating
the production, distribution, and consumption of
wealth, the economist must draw his materials
from a very wide surface. He should study man in

* A remark of Dr Cullen.
B



18 DISCOURSE ON

every different situation he should have recourse
to the history of society, arts, commerce, and
civilization * to the works of philosophers and
travellers to every thing, in short, that can throw
light on the causes which accelerate or retard the
progress of civilization : He should mark the
changes which have taken place in the fortunes
and condition of the human race in different re-
gions and ages of the world : He should trace
the rise, progress, and decline of industry : And,
above all, he should carefully analyse and compare
the effects of different institutions and regulations,
and discriminate the various circumstances where-



* " History, if I may be allowed the expression, is now a
vast museum, in which specimens of every variety of human
nature may be studied. From these great accessions to
knowledge, law-givers and statesmen, but, above all, moralists
and political philosophers) may derive the most important in-
structions. They may plainly discover in all the useful and
beautiful variety of governments and institutions, and under
all the fantastic multitude of usages and rites which have pre-
vailed among men, the same fundamental comprehensive
truths, the sacred master principles which are the guardians
of human society, recognized and revered (with few and
slight exceptions) by every nation upon earth, and uniform-
ly taught (with exceptions still fewer) by a succession of
wise men, from the first dawn of speculation to the present
moment." I have extracted this passage from Sir James
Mackintosh's most eloquent and masterly Discourse on the
Laiv of Nature and Nations, p. 27



POLITICAL ECONOMY. 19

in an advancing and declining society differ from
each other. These investigations, by disclosing
the real causes of national opulence and refine-
ment, and of poverty and degradation, furnish the
economist with the means of giving a satisfactory
solution of almost all the important problems in
the science of wealth, and of devising a scheme of
public administration calculated to ensure the con-
tinued advancement of the society in the career of
improvement.

Such inquiries cannot fail to excite the deepest
interest in every ingenuous mind. The laws by
which the motions of the celestial bodies are regu-
lated, and over which man cannot exercise the
smallest influence or control, are yet universally
allowed to be noble and rational objects of study.
But the laws which regulate the movements of hu-
man society which cause one people to advance in
opulence and refinement, at the same time that
another is sinking into the abyss of poverty and
barbarism have an infinitely stronger claim on
our attention ; both because they relate to ob-
jects which exercise a direct influence over human
happiness, and because their effects may be, and in
fact are, continually modified by human interfer-
ence. National prosperity does not depend nearly
so much on advantageous situation, salubrity of cli-
mate, or fertility of soil, as on the adoption of mea-
sures fitted to excite the inventive powers of genius,







*.



20 DISCOURSE ON

and to give perseverance and activity to industry.
The establishment of a wise system of public eco-
nomy can compensate for every other deficiency : It
can render regions naturally inhospitable, barren,
and unproductive, the comfortable abodes of an
elegant and refined, a crowded and wealthy popu-
lation ; but where it is wanting, the best gifts of
nature are of no value ; and countries possessed of
the greatest capacities of improvement, and abound-
ing in all the materials necessary for the production
of wealth, with difficulty furnish a miserable subsist-
ence to hordes distinguished only by their ignor-
ance, barbarism, and wretchedness.



When we reflect on the variety and extent of
the previous knowledge required for the construc-
tion of a sound theory of Political Economy, we
cease to feel any surprise at the errors into which
economists have been betrayed, or at the discre-
pancy of the opinions that are still entertained on
some important points. Political Economy is of
very recent origin. Though various treatises of
considerable merit had previously appeared on some
of its detached parts, it was not treated as a whole,
or in a scientific manner, until about the middle
of last century. This circumstance is of itself
enough to account for the number of erroneous
systems that have since appeared. Instead of de-



POLITICAL ECONOMY. 21

ducing their general conclusions from a compari-
son of particular facts, and a careful examination
of the phenomena attending the operation of dif-
ferent principles, and of the same principles in dif-
ferent circumstances, the first cultivators of almost
every branch of science have begun by framing
their theories on a very narrow and insecure basis.
Nor is it really in their power to go to work dif-
ferently. Observations are scarcely ever made or
particulars noted for their own sake. It is not
until they begin to be sought after, as furnishing the
only test by which to ascertain the truth or false-
hood of some popular theory, that they are made
in sufficient numbers, and with sufficient accu-
racy. It is, in the peculiar phraseology of this
science, the effectual demand of the theorist that
occasions the production of the facts or raw mate-
rials, which he is afterwards to work into a sys-
tem. The history of Political Economy strikingly
exemplifies the truth of this remark. Being, as
already observed, entirely unknown to the ancients,
and but little attended to by our ancestors up to a
comparatively late period, those circumstances
which would have enabled us to judge with the
greatest precision of the wealth and civilization of
the inhabitants of the most celebrated states of an-
tiquity, and of Europe during the middle ages,
have either been thought unworthy of the notice
of the historian, or have been very imperfectly
and carelessly detailed. Those, therefore, who



DISCOURSE ON



first began to trace the general principles of the
science had but a comparatively limited and scan-
ty experience on which to build their conclusions.
Nor did they even avail themselves of the few his-
torical facts with which they might easily have be-
come acquainted ; but almost exclusively confined
their attention to such as happened to come within
the sphere of their own observation.

The once prevalent opinion, that wealth consists
exclusively of Gold and Silver, naturally grew out of
the circumstance of the money of all civilized coun-
tries being almost entirely formed of these metals.
Having been used both as standards whereby to
measure the relative value of different commodities
and as the equivalents for which they were most
frequently exchanged, gold and silver, or money,
acquired a factitious importance, not in the esti-
mation of the vulgar only, but in that of persons
of the greatest discernment. The simple and deci-
sive consideration, that all buying and selling is real-
ly nothing more than the bartering of one commo
dlty for another of a certain quantity of corn or
cloth, for example, for a certain quantity of gold or
silver, and vice versa was entirely overlooked.
The attention was gradually transferred from the
money's worth to the money itself ; and the wealth
of individuals and of states was measured, not by the
abundance of their disposable products by the
quantity and value of the commodities with which



POLITICAL ECONOMY. 123

they could afford to purchase the precious metals
but by the quantity of these metals actually in their
possession And hence the policy, as obvious as it
was universal, of attempting to increase the
amount of national wealth by forbidding the ex-
portation of gold and silver, and encouraging their
importation.

It appears from a passage in Cicero, that the ex-
portation of the precious metals from Rome had been
frequently prohibited during the period of the Re-
public ; * and this prohibition was repeatedly re-
newed, though to very little purpose, by the Em-
perors.f Neither, perhaps, has there been a state
in modern Europe whose early laws have not ex-
pressly forbidden the exportation of gold and sil-
ver. It is said to have been interdicted by the
law of England previously to the Conquest ; and
reiterated statutes were subsequently passed to the
same effect ; one of which, (3d Henry VIII.
cap. 1,) enacted so late as 1512, declared, that
all persons carrying over sea any coins, plate,



* " Exportari aurum non oportere, cum scepe antea senatus,
turn me consuls, gravissi me judicavit." Orat. pro L. Flacco,
sect. 28.

+ Pliny, when enumerating the silks, spices, and other
Eastern products imported into Italy, says, " Minimaque
computatione millies centena millia sestertium annis omnibus,
India ct Seres, peninsulaque ilia (Arabia) imperia nostro de-
(Hist. Nat. Lib. xii. cap. 18.)



2 DISCOURSE ON

jewels, &c. should, on detection, forfeit double
the value of these articles.

The extraordinary extension of commerce during
the fifteenth and sixteenth centuries occasioned the
substitution of a more refined and complex system
for increasing the supply of the precious metals in
place of the coarse and vulgar one that had pre-
viously obtained. The establishment of a direct
intercourse with India by the Cape of Good Hope,
seems to have had the greatest influence in effect-
ing this change. The precious metals have always
been one of the most advantageous articles of ex-
port to the East : And notwithstanding the old and
deeply rooted prejudices against their exportation,
the East India Company obtained, when first in-
stituted, in 1600, leave annually to export fo-
reign coins, or bullion, of the value of L. 30,000 ;
on condition, however, that they should import,
within six months after the termination of every
voyage, except the first, as much gold and silver as
should together be equal to the value of the silver
exported by them. But the enemies of the Com-
pany contended, that this condition was not com-
plied with j and that it was besides contrary to all
principle, and highly injurious to the public inte-
rests, to permit gold and silver to be sent out of
the kingdom. The merchants, and others inte-
rested in the support of the Company, could not
controvert the reasoning of their opponents, without



POLITICAL ECONOMY. 25

openly impugning the ancient policy of absolutely
preventing the exportation of the precious metals.
They did not, however, venture to contend, nor is
there indeed any good reason for thinking that it
really occurred to them, that the exportation of bul-
lion to the East was advantageous, on the ground
that the commodities purchased by it were of greater
value in England. But they contended, that the
exportation of bullion to India was advantageous,
because the commodities imported from thence were
chiefly re-exported to other countries, from which
ti much greater quantity of bullion was obtained than
had been required to pay them in India. Mr Thomas
Mun, the ablest of the Company's advocates, in-
geniously compares the operations of the merchant
in conducting a trade carried on by the exporta-
tion of gold and silver, to the seed-time and har-
vest of agriculture. " If we only behold," says
he, " the actions of the husbandman in the seed-
time, when he casteth away much good corn into
the ground, we shall account him rather a mad-
man than a husbandman. But when we consider
his labours in the harvest, which is the end of his
endeavours, we shall find the worth and plentiful
increase of his actions." *



* Treasure by Foreign Trade, orig. ed. p. 50 This work

was published in 1664-, a considerable period after Mr Mun's
death. Most probably it had been written about 1635,



26 DISCOURSE ON

Such was the origin of what has been called the
MERCANTILE SYSTEM : And, when compared with
the previous prejudice for it hardly deserves the
name of system which wholly interdicted the
exportation of gold and silver, it must he allow-
ed that its adoption was a considerable step in
the progress to sounder opinions. The support-
ers of the mercantile system, like their prede-
cessors, held that gold and silver alone constituted
wealth ; but they thought that sound policy dic-
tated the propriety of allowing their exportation
to foreigners, provided the commodities imported
in their stead, or a portion of them, were after-
wards sold to other foreigners for a greater amount
of bullion than had been originally laid out on their
purchase ; or, provided the importation of the fo-
reign commodities caused the exportation of so
much more native produce than would otherwise
have been exported, as would more than equal
their cost. These opinions necessarily led to the
celebrated doctrine of the Balance of Trade. It
was obvious that the precious metals could not be
imported into countries destitute of mines, except



or 1640. Mun had previously advanced the same doctrines,
and nearly in the same words, in his Defence of the East
India Trade, originally published in I6'09, and reprinted in
1621, and in a petition drawn up by him, and presented by
the East India Company to Parliament in 1628.



POLITICAL ECONOMY. 27

in return for exported commodities ; and the
grand object of the supporters of the mercan-
tile system was to monopolise the largest pos-
sible supply of the precious metals, by the adop-
tion of various complex schemes for encouraging
exportation, and restraining the importation of al-
most all products, except gold and silver, that were
not intended for future exportation. In conse-
quence, the excess of the value of the Exports
over that of the Imports came to be consider-
ed as being at once the sole cause and measure of
the progress of a country in the career of wealth.
This excess, it was taken for granted, could not be
balanced otherwise than by the importation of an
equal value of gold or silver, or of the only real
wealth it was then supposed a country could pos-
sess.

The principles and conclusions of the mercantile
system, though absolutely false and erroneous, af-
ford a tolerable explanation of a few very obvious
phenomena ; and what did more to recommend
them, they were in perfect unison with the popular
prejudices on the subject. The merchants, and
practical men, who were the founders of this sys-
tem, did not consider it necessary to subject the
principles they assumed to any very refined ana-
lysis or examination. But, reckoning them as
sufficiently established by the common consent
and agreement of mankind, they applied them-



28 DISCOURSE ON

selves almost exclusively to the discussion of the
practical measures calculated to give them the
greatest efficacy.

" Although a kingdom," says Mr Mun, " may
be enriched by gifts received, or by purchase taken,
from some other nations, yet these are things un-
certain, and of small consideration, when they
happen. The ordinary means, therefore, to in-
crease our wealth and treasure, is by foreign trade,
wherein we must ever observe this rule to sell
more to strangers yearly than we consume of theirs
in value. For, suppose, that when this kingdom
is plentifully served with cloth, lead, tin, iron,
fish, and other native commodities, we do yearly
export the overplus to foreign countries to the
value of L. 2,200,000, by which means we are en-
abled, beyond the seas, to buy and bring in foreign
wares for our use and consumption to the value of
L. 2,000,000 : By this order duly kept in our
trading, we may rest assured that the kingdom
shall be enriched yearly L. 200,000, which must
be brought to us as so much treasure ; because that
part of our stock which is not returned to us in
wares, must necessarily be brought home in trea-



sure."



The gain on our foreign commerce is here sup-
posed to consist exclusively of the gold and silver

* Treasure by Foreign Trade, p. 11.



POLITICAL ECONOMY. 29

which, it is taken for granted, must necessarily be
brought home in payment of the excess of export-
ed commodities. Mr Mun lays no stress whatever
on the circumstance of foreign commerce enabling
us to obtain an infinite variety of useful and agree-
able products, which it would either have been im-
possible for us to produce at all, or to produce so
cheaply at home. \Ve are desired to consider all
this accession of wealth all the vast addition made
by commerce to the motives which stimulate, and
to the comforts and enjoyments which reward the
labour of the industrious, as nothing, and to fix our
attention exclusively on the balance of L. 200,000
of gold and silver ! This is much the same as if
we were desired to estimate the comfort and ad-
vantage derived from a suit of clothes, by the num-
ber and glare of the metal buttons by which they
are fastened. And yet the rule for estimating the
advantageousness of foreign commerce, which Mr
Mun has here given, was long regarded by the ge-
nerality of merchants and practical statesmen as
infallible ; and such is the inveteracy of ancient
prejudices, that we are still annually congratulated
on the excess of our exports over our imports !

There were many other circumstances, however,
besides the erroneous notions respecting the pre-
cious metals, which led to the enactment of regula-
tions restricting the freedom of industry, and se-
cured the ascendancy of the mercantile system.



30 DISCOURSE ON

The feudal governments established in the countries
that had formed the western division of the Ro-
man Empire, early sunk into a state of confu-
sion and anarchy. The princes, unable of them-
selves to restrain the usurpations of the greater
barons, or to control their violence, endeavour-
ed to strengthen their influence and consolidate
their power, by attaching the inhabitants of cities
and towns to their interests. For this purpose,
they granted them charters, enfranchising the in-
habitants, abolishing every existing mark of ser-
vitude, and forming them into corporations, or
bodies politic, to be governed by a council and
magistrates of their own selection. The order and
good government that were thus established in the
cities, and the security of property enjoyed by their
inhabitants, while the rest of the country was a
prey to rapine and disorder, stimulated their indus-
try, and gave them a decided superiority over the
cultivators of the soil. It was from the cities that
the princes derived the greater part of their supplies
of money ; and it was by their assistance and co-
operation that they were enabled to control and
subdue the pride and independence of the barons.
But the citizens did not render this assistance to
their sovereigns merely by way of compensation for
the original gift of their charters. They were con-
tinually soliciting and obtaining new privileges.
And it was not to be expected that princes, whom



. POLITICAL ECONOMY. 3]

they had laid under so many obligations, and who
justly regarded them as forming the most indus-
trious and deserving portion of their subjects,
should feel any great disinclination to gratify their
wishes. To enable them to obtain cheap provi-
sions, and to carry on their industry to the best
advantage, the exportation of corn, and of the raw
materials of their manufactures, was strictly prohi-
bited ; at the same time that heavy duties and ab-
solute prohibitions were interposed to prevent the
importation of manufactured articles from abroad,
and to secure the complete monopoly of the home-
market to the home manufacturers. These, toge-
ther with the privilege granted to the citizens of
corporate towns of preventing any individual from
exercising any branch of business until he had ob-
tained leave from them ; and a variety of subor-
dinate regulations intended to force the importa-
tion of the raw materials required in manufactures,
and the exportation of manufactured goods, form
the principal features of the system of public
economy adopted, with the view of encouraging
manufacturing industry, in every country in Eu-
rope, in the fourteenth, fifteenth, sixteenth, and
seventeenth centuries. The freedom of indus-
try recognised by their ancient laws was almost
totally destroyed. It would be easy to mention a
thousand instances of the excess to which this arti-
ficial system was carried in England and other



32 DISCOURSE ON

countries ; but as many of these instances must be
familiar to the reader, I shall only observe, as il-
lustrative of its spirit, that, by an act passed in
1678, for the encouragement of the English wool-
len manufacture, it was ordered that all dead bo-
dies should be wrapped in a woollen shroud !

But the exclusion of foreign competition, and the
monopoly of the home-market, were not enough to
satisfy the manufacturers and merchants. Having
obtained all the ad vantage they could from the public,
they next attempted to prey on each other. Such of
them as possessed most influence, procured the pri-
vilege of carrying on particular branches of industry
to the exclusion of every other individual. This
abuse was carried to a most oppressive height in
the reign of Elizabeth, who granted an infinite
number of new patents. At length, the grievance
became so insupportable, as to induce all classes to
join in petitioning for its abolition : which, after
much opposition on the part of the Crown, by
whom the power of erecting monopolies was con-
sidered a very valuable branch of the prerogative,
was effected by an act passed in 1624. This act
has been productive of the greatest advantage ; but
it did not touch any of the fundamental principles
of the mercantile or manufacturing system ; and
the exclusive privileges of all bodies-corporate
were exempted from its operation.

In France the interests of the manufacturers



POLITICAL ECONOMY. 33

were warmly espoused by the justly celebrated M.
Colbert, minister of finances during the most splen-
did period of the reign of Louis XIV. ; and the
year 1664, when the famous tariff, compiled under
his direction, was first promulgated, has been some-
times considered, by the Continental writers,
though, as we have seen, most erroneously, as the
real era of the mercantile system. *

The restrictions in favour of the manufacturers
were all zealously supported by the advocates of
the mercantile system, and the balance of trade.
The facilities given to the exportation of goods
manufactured at home, and the obstacles thrown in
the way of importation from abroad, seemed pecu-
liarly well fitted for making the exports exceed the
imports, and procuring a favourable balance. In-
stead, therefore, of regarding these regulations as
the offspring of a selfish monopolizing spirit, they
looked on them as having been dictated by the
soundest policy. The interests of the manufactur-
ers and merchants were thus naturally identified ;
and were held to be the same with those of the pub-
lic. The acquisition of a favourable balance of pay-
ments was the grand object to be accomplished j
and heavy duties and restrictions on importation,
and bounties and premiums on exportation, were
the means by which this object was to be attained.

* See Mengotti, DisserUizione sul Colberllsmo, cap. 11.
C



34 DISCOURSE ON

It cannot excite our surprise that a system having
so many popular prejudices in its favour, and which
afforded a plausible apology for the exclusive pri-
vileges enjoyed by the manufacturing and commer-
cial classes, should have early attained, or that it
should still preserve, notwithstanding the over-
throw of its principles, a powerful practical influ-
ence.*

" It is no exaggeration to affirm," says a late
foreign writer, " that there are very few poli-
tical errors which have produced more mischief


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Online LibraryJ. R. (John Ramsay) McCullochA discourse on the rise, progress, peculiar objects, and importance, of political economy : containing an outline of a course of lectures on the principles and doctrines of that science → online text (page 2 of 8)