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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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than the mercantile system. Armed with power,
it has commanded and forbid where it should
only have protected. The regulating mania which
it has inspired has tormented industry in a thou-
sand ways, to force it from its natural chan-
nels. It has made each particular nation re-
gard the welfare of its neighbours as incompatible
with its own ; hence the reciprocal desire of injur-
ing and impoverishing each other ; and hence that
spirit of commercial rivalry which has been the
immediate or remote cause of the greater number
of modern wars. It is this system which has sti-



* Melon and Forbonnais in France, Genovesi in Italy,
Mun, Sir Josiah Child, Dr Davenant, the authors of the
British Merchant, and Sir James Stewart, in England are
the ablest writers who have espoused, some with more and
some with fewer exceptions, the leading principles of the
mercantile system.

V



POLITICAL ECONOMY. 35

mulated nations to employ force or cunning to ex-
tort commercial treaties, productive of no real ad-
vantage to themselves, from the weakness or igno-
rance of others. It has formed colonies, that the
mother country might enjoy the monopoly of their
trade, and force them to resort exclusively to her
markets. In short, where this system has been
productive of the least injury, it has retarded the
progress of national prosperity ; every where else
it has deluged the earth with blood, and has depo-
pulated and ruined some of those countries whose
power and opulence it was supposed it would carry
to the highest pitch." *

The shock given to previous prejudices and sys-
tems by those great discoveries and events, which
will for ever distinguish the fifteenth and sixteenth
centuries, and the greater attention which the pro-
gress of civilization and industry naturally drew to
the sources of national power and opulence, pre-
pared the way for the downfall of the mercantile
system. The advocates of the East India Com-
pany, whose interests had first prompted them to
question the prevailing doctrines as to the expor-
tation of bullion, began gradually to assume a
higher tone ; and at length boldly contended that
bullion was nothing but a commodity r , and that its
exportation ought to be rendered as free as the



Storch, Cours $ Economic Politiquc, Tome I. p. 122.



36 DISCOURSE ON

exportation of any other commodity. Nor were
these opinions confined to the partners of the East
India Company. They were gradually communi-
cated to others ; and many eminent merchants were
taught to look with suspicion on several of the
most received maxims ; and were thus led to ac-
quire more correct and comprehensive views in
respect to the just principles of commercial inter-
course. The new ideas ultimately made their way
into the House of Commons ; and in 1663, the
statutes prohibiting the exportation of foreign
coin and bullion were repealed, and full liberty
given to the East India Company, and to private
traders, to export these articles in unlimited quan-
tities.

In addition to the controversies respecting the
East India trade, the discussions to which the foun-
dation of the colonies in America and the West
Indies, the establishment of a compulsory provision
for the support of the poor, and the acts prohibit-
ing the exportation of wool, &c. gave rise, attracted
an extraordinary portion of the public attention to
questions connected with the domestic policy of the
country. In the course of the seventeenth century,
a more than usual number of tracts were published
on commercial and economical subjects. And al-
though the greater number are strongly tinctured
with the prevailing spirit of the age, it cannot be
(denied, that several of them rise above the preju-



POLITICAL ECONOMY. 37

dices of their contemporaries, and have an unques-
tionable right to be regarded as the foundation of
the modern theory of commerce as the earliest
exposition of those sound and liberal doctrines, by
which it has been shown, that the prosperity of
states can never be promoted by restrictive regu-
lations, or by the depression of their neighbours
that the genuine spirit of commerce is incon-
sistent with the dark, selfish, and shallow policy of
monopoly and that the self-interest of mankind,
not less than their duty, requires them to live in
peace, and to cultivate a fair and friendly inter-
course with each other.

Sir Josiah Child,* whose work, though it is found-
ed on the principles of the mercantile system, con-
tains many sound and liberal views, Sir William
Petty, | and Sir Dudley North, are the most dis-
tinguished of the economical writers of the seven-
teenth century. The latter not only rose above
the established prejudices of his time, but had sa-
gacity enough to detect the more refined and less
obvious errors that were newly coming into fashion.
His tract, entitled, " Discourses on Trade, princi<



* A New Discourse of Trade, first published in 1668, but
greatly enlarged and improved in the second edition, pub-
lished in 1690.

f Quantuhimcunquc, published in 1682; Political Anatomy
of Ireland, published in 1672 ; and other works.



38 DISCOURSE ON

pally directed to the Cases of Interest, Coinage,
Clipping, and Increase of Money," published in
l691j contains a much more able statement of the
true principles of commerce than any that had then
appeared. He is throughout the intelligent, advo-
cate of all the great principles of commercial free-
dom. He is not, like the most eminent of his pre-
decessors, well informed on one subject, and erro-
neous on another. His system is consistent and
complete. He shows, that in commercial matters,
nations have the same interests as individuals ; and
forcibly exposes the absurdity of supposing, that
any trade which is advantageous to the merchant can
be injurious to the public. His opinions respect-
ing the imposition of a seignorage on the coinage
of money, and the expediency of sumptuary laws,
then very popular, are equally enlightened.

I shall subjoin, from the preface to this tract, an
abstract of the general propositions maintained in
it :

" THAT THE WHOLE WORLD AS TO TRADE IS
BUT AS ONE NATION OR PEOPLE, AND THEREIN NA-
TIONS ARE AS PERSONS.

" That the loss of a trade with one nation is not
that only, separately considered, but so much of
the trade of the world rescinded and lost, for all is
combined together.

" THAT THERE CAN BE NO TRADE UNPROFIT-
ABLE TO THE PUBLIC ; FOR IF ANY PROVE SO, MEN



POLITICAL ECONOMY. 39

LEAVE IT OFF ; AND WHEREVER THE TRADERS
THRIVE, THE PUBLIC, OF WHICH THEY ARE A PART,
THRIVE ALSO.

" That to force men to deal in any prescribed
manner may profit such as happen to serve them ;
but the public gains not, because it is talcing from
one subject to give to another.

" That no laws can set prices in trade, the rates
of which must and will make themselves. But
when such laws do happen to lay any hold, it is so
much impediment to trade, and therefore prejudi-
cial.

" That money is a merchandise, whereof there
may be a glut, as well as a scarcity, and that even
to an inconvenience.

" THAT A PEOPLE CANNOT WANT MONEY TO
SERVE THE ORDINARY DEALING, AND MORE THAN
ENOUGH THEY WILL NOT HAVE.

" That no man will be the richer for the mak-
ing much money, nor have any part of it, but as he
buys it for an equivalent price.

" That the free coynage is a perpetual motion
found out, whereby to melt and coyn without ceas-
ing, and so to feed goldsmiths and coyners at the
public charge.

" That debasing the coyn is defrauding one an-
other, and to the public there is no sort of advan-
tage from it ; for that admits no character, or va
lue, but intrinsick.



40 DISCOURSE ON

" That the sinking by alloy or weight is all one.

" That exchange and ready money are the same,
nothing but carnage and re-carriage being saved.

" That money exported in trade is an increase
to the wealth of the nation ; but spent in war, and
payments abroad, is so much impoverishment.

" In short, that ALL FAVOUR TO ONE TRADE, OR

INTEREST, IS 'AN ABUSE, AND CUTS SO MUCH OF
PROFIT FROM THE PUBLIC."

Unluckily this admirable tract never obtained
any considerable circulation. There is good reason,
indeed, for supposing that it was designedly sup-
pressed. * At all events, it speedily became ex-
cessively scarce ; and I am not aware that it has
ever been referred to by any subsequent writer on
commerce.

The same enlarged and liberal views that had
found so able a supporter in Sir Dudley North,
were subsequently advocated to a greater or less
extent by Locke, t the anonymous author of a
pamphlet on the East India Trade,t Vander-



* See the Honourable Roger North's Life of Ms Brother,
the Honourable Sir Dudley North, p. 179.

\ Considerations on the Lowering of .Interest and Raising
the Value of Money, 1691; and Further Considerations on
Raising the Value of Money, 1695.

J Considerations on the East India Trade, 1701. This is
a very remarkable pamphlet. The author has successfully



POLITICAL ECONOMY. 41

lint,* Sir Matthew Decker, t Hume,t and Harris.
But their efforts were ineffectual to the subversion
of the mercantile system. Their opinions respect-
ing the nature of wealth were confused and con-
tradictory ; and as they neither attempted to in-
vestigate its sources, nor to trace the causes of na-
tional opulence, their arguments in favour of a li-
beral system of commerce had somewhat of an em-
pirical aspect, and failed of making that impres-
sion which is always made by reasonings logically
deduced from well established principles, and shown
to be consistent with experience. Mr Locke un-
questionably entertained very correct opinions re-
specting the paramount influence of labour in the
production of wealth ; but he did not prosecute his
investigations with the view of elucidating the prin-
ciples of this science, and made no reference to
them in his subsequent writings. And though
Mr Harris adopted Mr Locke's views, and deduced
from them some practical inferences of great im-

refuted the various arguments advanced in justification of
the prohibition against importing East India manufactered
goods ; and has given a very striking illustration of the ef-
fects of the division of labour.

* Money Answers all Things, 1734.

f Essay on the Causes of the Decline of Foreign Trade,
1744.

t Political Essays, 1752.

Essay on Money and Coins, 1757-



42 DISCOURSE ON

portance, his general principles are merely intro-
duced by way of preface to his Treatise on Money,
and are not explained at any length, or in that
logical and systematic manner that is necessary in
scientific investigations.

But, what the English writers had left undone
was now attempted by a French philosopher, equal-
ly distinguished for the subtlety and originality of
his understanding, and the integrity and simplici-
ty of his character. This was the celebrated M.
Quesnay, a physician, attached to the court of
Louis XV. It is to him that the merit unques-
tionably belongs of having first attempted to in-
vestigate and analyze the sources of wealth, with
the intention of ascertaining the fundamental prin-
ciples of Political Economy ; and who thus gave
it a systematic form, and raised it to the rank of a
science. Quesnay's father was a small proprietor,
and having been educated in the country, he was
naturally inclined to regard agriculture with more
than ordinary partiality. At an early period of
his life he had been struck with its depressed state
in France, and had set himself to discover the
causes which had prevented its making that pro-
gress which the industry of the inhabitants, the
fertility of the soil, and the excellence of the cli-
mate, seemed to insure. In the course of this in-
quiry he speedily discovered that the prevention
of the exportation of corn to foreign countries,



POLITICAL ECONOMY. 43

and the preference given by the regulations of Col-
bert to the manufacturing and commercial classes
over the agriculturists, had formed the most pow-
erful obstacles to the progress and improvement
of agriculture. But Quesnay was not satisfied
with exposing the injustice of this preference, and
its pernicious consequences. His zeal for the in-
terests of agriculture led him, not merely to place
it on the same level with manufactures and com-
merce, but to raise it above them, by endea-
vouring to show that it was the only species of
industry which contributed to increase the riches
of a nation. Founding on the indisputable fact,
that every thing that either ministers to our wants
or gratifies our desires, must be originally de-
rived from the earth, Quesnay assumed as a self-
evident truth, and as the basis of his system, that
the earth is the only source of wealth ; and held
that industry was altogether incapable of produc-
ing any new value, except when employed in a-
griculture, including under that term fisheries and
mines. His observation of the striking effects of
the vegetative powers of nature, and his inability
to explain the real origin and causes of rent, con-
firmed him in this opinion. The circumstance, that
of those who are engaged in industrious undertak-
ings, none but the cultivators of the soil paid rent
for the use of natural agents, appeared to him an
incontrovertible proof, that agriculture was the on-



44 DISCOURSE ON

ly species of industry which yielded a net surplus
Cproduit net} over and above the expences of pro-
duction. Quesnay allowed that manufacturers and
merchants were highly useful ; but, as they realis-
ed no net surplus in the shape of rent, he contend-
ed they did not add any greater value to the raw
material of the commodities they manufactured or
carried from place to place, than was just equiva-
lent to the value of the capital or stock consumed
by them during the time they were necessarily en-
gaged in these operations. These principles once
established, Quesnay proceeded to divide society
into three classes ; the /?/*$/, or productive class, by
whose agency all wealth is produced, consists
of the farmers and labourers engaged in agricul-
ture, who subsist on a portion of the produce of
the land reserved to themselves as the wages of
their labour, and as a reasonable profit on their ca-
pital ; the second, or proprietary class, consists of
those who live on the rent of the land, or on the
net surplus produce raised by the cultivators after
their necessary expences have been deducted ; and
the third, or unproductive class, consists of manu-
facturers, merchants, menial servants, &c., whose
labour, though exceedingly useful, adds nothing
to the national wealth, and who subsist entirely on
the wages paid them by the other two classes. It
is obvious, supposing this classification made on
just principles, that all taxes must fall on the land-



POLITICAL ECONOMY. 45

lords. The third, or unproductive class, have no-
thing but what they receive from the other two
classes ; and if any deduction were made from the
fair and reasonable profits and wages of the hus-
bandmen, it would have the effect to paralyse their
exertions, and consequently to spread poverty and
misery throughout the land, by drying up the only
source of wealth. It necessarily follows, therefore,
on M. Quesnay's theory, that the entire expences
of government, and the various public burdens,
must, howsoever imposed, be ultimately defrayed out
of the produit net, or rent of the landlords ; and,
consistently with this principle, he proposed that
all the existing taxes should be repealed, and that a
single tax, (Impot unique,) laid directly on the
net produce, or rent, of the land, should be impos-
ed in their stead.

But, however much impressed with the import-
ance of agriculture over every other species of in-
dustry, Quesnay did not solicit for it any exclu-
sive favour or protection. He successfully con-
tended that the interests of the agriculturists, and
of all the other classes, would be best promoted by
establishing a system of perfect freedom. " Qu'on
maintienne," says he in one of his general Maxims,
" Pentiere liberte du commerce ; car la police du
commerce inter leur et exterieur la plus sure, la plus
exacte y la plus profitable a la nation et a Fetat,
consiste dam LA PLEINE LIBERTE' DE LA CONCUR-



46 DISCOURSE ON



* Quesnay showed that it could never
be for the interest of the proprietors and cultiva-
tors of the soil to fetter or discourage the industry
of merchants, artificers, and manufacturers ; for the
greater the liberty they enjoy, the greater will be
their competition, and their services will, in conse-
quence, be rendered so much the cheaper. Neither,
on the other hand, can it ever be for the interest
of the unproductive class to harass and oppress the
agriculturists, either by preventing the free expor-
tation of their products, or by any restrictive regu-
lations whatsoever. When the cultivators enjoy the
greatest degree of freedom, their industry, and,
consequently, their net surplus produce the only
fund from which any accession of national wealth
can be derived will be carried to the greatest pos-
sible extent. According to this " liberal and ge-
nerous system," j- the establishment of perfect li-
berty, perfect security, and perfect justice, is the
only, as it is the infallible, means of securing the
highest degree of prosperity to all classes of the so-
ciety.

" On a vu," says the ablest expositor of this sys-
tem, M. Mercier de la Riviere, " qu'il est de 1'es-
sence de Pordre que Pinteret particulier d'un seul
ne puisse jamais etre separee de Pinteret commun



Physiocratic, Premiere Partie, p. 119.
Wealth of Nation*, Vol. III. p. 17.



POLITICAL ECONOMY. 47

de tous ; nous en trouvons une preuve bien con-
vaincante dans les effets que produit naturellement
et necessairement la plenitude de la liberte qui doit
regner dans le commerce, pour ne point blesser la
propriete. L'interet personnel encouragee par cette
grande liberte, presse vivement et perpetuellement
chaque homme en particulier, de perfectionner, de
multiplier les choses dont il est vendeur ; de grossir
ainsi la masse des jouissances qu'il peut procurer
aux autres hommes, afin de grossir, par ce moyen,
la masse des jouissances que les autres hommes peu-
vent lui procurer en echange. Le monde alors va
, de lui meme ; le desir de jouir, et la liberte de jouir,
ne cessant de provoquer la multiplication des pro-
ductions et Paccroissement de Pindustrie, ils impri-
ment a toute la societe, un mouvement qui devient
une tendance perpetuelle vei's son meilleur etat pos-
sible/' *

It would greatly exceed the limits of this Dis-
course, to enter into a full examination of the prin-
ciples of this very ingenious theory. It is sufficient
for my present purpose to remark, that, in assum-
ing agriculture to be the only source of wealth, be-
cause the matter of which all commodities are com-
posed must be originally derived from the earth, M.
Quesnay and his followers mistook altogether the

* L'Ordre Naturcl et Essential des Socictes Politiques,
Tome II. p. 444.



48 DISCOURSE ON

nature of production, and really supposed wealth to
consist of matter j whereas, in its natural state, mat-
ter is very rarely possessed of immediate and direct
utility, and is always destitute of value. It is only
by means of the labour which must be laid out in
appropriating matter, and in fitting and preparing
it for our use, that it acquires exchangeable value,
and becomes wealth. Human industry does not
produce wealth by making any additions to the mat-
ter of our globe ; this being a quantity susceptible
neither of augmentation nor diminution. Its real
and only effect is to produce wealth by giving uti-
lity to matter already in existence ; * and it has



* This point has been strongly and ably stated by M. Des-
tutt Tracy. " Non-seulement,'* says he, " nous ne creons
jamais rien, raais il nous est meme impossible de concevoir
ce que c'est que creer, ou anneantir, si nous entendons ri-
goureusement par ces mots, faire quelque chose de rien, ou
reduire quelque chose a rien ; car nous n'avons jamais vu un
etre quelconque sortir du neant ni y rentrer. De la cet axi-
ome admis par toute 1'antiquite : rien ne vient de rien, et ne
peut redevenir rien. Que faisons-nous done par notre tra-
vail, par notre action sur tons les etres qui nous entourent?
Jamais rien, qu'operer dans ces etres des ck&ngemens de forme
ou de lieu qui les appropricnt a notre usage, qui les resident
utiles a la satisfaction des nos besoins. Voila ce que nous dc-
vons entendre par produire ; c'est donner aux choses une
utilite qu'elles n'avoient. Quelque soil notre travail, s'iln'en
resulte point d'utilite, il est infructeux, s'il en rebuke, il est
productif."



POLITICAL ECONOMY. 49

been repeatedly demonstrated, that the labour em-*
ployed in manufactures and commerce is just as
productive of utility, and consequently of wealth,
as the labour employed in agriculture. The opi-
nion of M. Quesnay, that the labour of man in ag-
riculture is powerfully assisted by the productive
powers of nature, but that in manufactures and com-
merce, he has to perform every thing himself with-
out any such co-operation, is wholly destitute of
foundation. It is unquestionably true, that nature
renders the most important services to the agricul-
turist : The husbandman prepares the ground for
the seed, and deposits it there ; but it is nature
that unfolds the germ, that feeds and ripens the
growing plant, and brings it to a state of maturity.
It is easy, however, to see that nature does quite
as much for us in every other department of indus-
try. The powers of water and of wind, which move
our machinery, support our ships, and impel them
over the deep, the pressure of the atmosphere,
and the elasticity of steam, which enable us to



I have extracted this passage from M. Destutt Tracy's
Traite d' Ideologic, (Tom. IV. p. 162,) the fourth volume of
which is almost wholly devoted to Political Economy, and
forms, indeed, one of the very best treatises on the science
that has ever appeared in France. This volume was publish-
ed separately in 12mo, in 1823, under the title of Traite
d'Economie Politique.

D



50 DISCOURSE ON

work the most stupendous engines, are they not
the spontaneous gifts of nature ? In fact, the
single and exclusive advantage of machinery con-
sists in its having enabled us to press the powers of
nature into our service, and to make them perform
the principal part of what must have been otherwise
wholly the work of man. In navigation, for ex~
ample, is it possible to doubt that the powers of na-
ture, the buoyancy of the water, the impulse of
the wind, and the polarity of the magnet, contri-
bute fully as much as the labour of the sailor to
waft our ships from one hemisphere to another ?
In bleaching and fermentation, the whole pro-
cesses are carried on by natural agents. And it is to
the effects of heat in softening and melting metals,
in preparing our food, and in warming our houses,
that we owe many of our most powerful and con-
venient instruments ; and that these northern cli-
mates have been made to afford a comfortable habi-
tation. Neither is the cultivation of the soil, as
M. Quesnay supposed, the only species of industry
which yields a surplus produce after the expences
of production are deducted. When agriculture is
most productive, that is, when none but the best
of the good soils are cultivated, no rent, or produit
net, is obtained from the land ; and it is only
after recourse has been had to poorer soils, and
when, consequently, the productive powers of the



POLITICAL ECONOMY. 51

labour and capital employed in cultivation begin
to diminish, that rent begins to appear : So that,
instead of being a consequence of the superior
productiveness of agricultural industry, rent is real-
ly a consequence of its becoming less productive
than others ! *

The Economical Table, a formula constructed
by M. Quesnay, and intended to exhibit the va-
rious phenomena attendant on the production of
wealth, and its distribution among the productive,
proprietary, and unproductive classes, was pub-
lished at Versailles, with accompanying illustra-
tions, in 17^8 ; and the novelty and ingenuity of



* " It is singular that this quality in the land, which should
have been noticed as an imperfection, compared with the
natural agents by which manufacturers are assisted, should
have been pointed out as constituting its peculiar pre emi-
nence. If air, water, the elasticity of steam, and the pres-


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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 3 of 8)