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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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 4 of 8)
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sure of the atmosphere, were of various qualities ; if they
could be appropriated, and each quality existed only in mo-
derate abundance, they, as well as the land, would afford a
rent, as the successive qualities were brought into use. With
every worse quality employed, the value of the commodities,
in the manufacture of which they were used, would rise, be-
cause equal quantities of labour would be less productive
Man would do more by the sweat of his brow, and nature
perform less ; and the law would be no longer pre-eminent
for its limited powers." Principles of Political Economy
and Taxation, 1st edit. p. 63.


the theory which it expounded, its systematic antl
scientific shape, and the liberal system of commercial
intercourse which it recommended, speedily obtain-
ed for it a very high degree of reputation.* It is to be
regretted that the friends and disciples of Quesnay,
among whom we have to reckon the Marquis de
Mirabeau, Mercier de la Riviere, Dupont de Ne-
mours, Saint Peravy, Turgot, and other distin-
guished individuals, in France, Italy, and Ger-
many, should, in their zeal for his peculiar doc-
trines, which they enthusiastically exerted them-
selves to defend and propagate, have exhibited
more of the character of partisans, than of (what
there is the best reason to think they really were)
sincere and honest inquirers after truth. Hence
it is that they have always been regarded as a sect,
known by the name of Economists, or Physiocrats ;
and that their works are characterised by an un-
usual degree of sameness, f

But, in despite of all these defects, there can
be no question that the labours of the French

* See Appendix, Note A, for some further remarks on the
Economical theory.

t The following are the principal works published by the
French Economists :

Tableau Economique, et Maxlmes Generates du Gouverne-
*ient Economigue, par Francois Quesnay, 4-to, Versailles,


Economists powerfully contributed to accelerate
the progress of economical science. In reason-
ing on subjects connected with national wealth,
it was now found to be necessary to subject its

Theoriede I'Impot, par M. de Mirabeau, 4to, 1760.

La Philosophic Rurale, par M, de Mirabeau, 4to, and
3 Tomes, 12mo, 1763.

L'Ordre Naturel et Essentiel des Societes Politiques, par
Mercier de la Riviere, 4to, 2 Tomes 12mo, 1767.

Sur I'Origine et Progrcs d'une Science Nouvelle, par Du-
pont de Nemours, 1767.

La Physiocratie, ou Constitution Naturelle du Gouverne-
ment le plus avantageux aux Genre Humain, Recueil des
Principaux Ouvrages Economiques de M. Quesnay, redige
et public par Dupont de Nemours, 2 Parties, 176?.

Lettres d'un Citoyen a un Magistrat, sur les Vingtiemes
ct les autres Impots, par 1' Abbe Baudeau, 1 768.

Memoire sur les Effets de I'Impot indirect; qui a remporte
le Prix propose par la Societe Royale d' Agriculture de Limo-
ges, par Saint Peravy, 12mo, 1768.

Reflexions sur la Formation, et la Distribution des Richesses,
par Turgot, Svo, 1771. This is the best of all the works
founded on the principles of the Economists ; and is, in some
respects, the best work on Political Economy published pre-
viously to the Wealth of Nations.

The Journal d 1 Agriculture, fyc. and the Ephemerides du,
Citoyen, contain a variety of valuable articles by Quesnay
and other leading Economists, The Ephemerides was begun
in 1767, and was dropped in 1775; it was first conducted by
the Abbe Baudeau, and then by Dupont.


sources, and the laws which regulate its production
and distribution, to a more accurate and searching
analysis. In the course of this examination, it
was speedily ascertained that both the mercantile
and economical theories were erroneous and defec-
tive ; arid that, to establish the science of Political
Economy on a firm foundation, it was necessary to
take a much more extensive survey, and to seek
for its principles, not in a few partial and distorted
facts, or in metaphysical abstractions, but in the
connection and relation subsisting among the va-
rious phenomena manifested in the progress of ci-
vilization. The Count di Verri, whose Medita-
tions on Political Economy were published in 17?1>
demonstrated the fallacy of the opinions entertain-
ed by the French Economists respecting the supe-
rior productiveness of the labour employed in agri-
culture ; and showed that all the operations of in-
dustry really consist of modifications of matter al-
ready in existence. * But Verri did not trace the

* Accostare et seperaresono gli unici element! che 1'ingeg-
ro umano ritrova analizando 1'iclea della riproduzione ; e
tanto e riproduzione di valore e di richezza se la terra,
1'aria, e 1'aqua ne' campi 'si trasmutino in grano, come se
colla mano dello uomo il gluttine di un insetto si trasmuti
in velluto, o vero alcuni pezzetti di metallo si organizzino a
formare una repetizione, Meditazipni sulla Economia Po-
litica, 3.


consequences of this important principle ; and,
possessing no clear and definite notions of what
constituted wealth, did not attempt to discover
the means by which labour might be facilitated.
He made some valuable additions to particular
branches of the science, and had sufficient acute-
ness to detect errors in the systems of others ; but
the task of constructing a better system in their
stead required talents of a far higher order.

At length, in 1776, our illustrious countryman
Adam Smith published the " Wealth of Nations"
a work which has done for Political Economy
what the Essay of Locke did for the philosophy
of mind. In this work the science was, for the
first time, treated in its fullest extent ; and the
fundamental principles, on which the production of
wealth depend, placed beyond the reach of cavil
and dispute. In opposition to the French Econo-
mists, Dr Smith has shown that labour is the only
source of wealth, and that the wish to augment our
fortunes and to rise in the world a wish that comes
with us from the womb, and never leaves us till we
go into the grave is the cause of wealth being
saved and accumulated : He has shown that labour
is productive of wealth when employed in manufac-
tures and commerce, as well as when it is employ-
ed in the cultivation of the land : He has traced
the various means by which labour may be render-
ed most effective j and has given a most admirable


analysis and exposition of the prodigious addition
made to its powers by its division among different
individuals, and by the employment of accumulated
wealth, or capital, in industrious undertakings. Dr
Smith has also shown, in opposition to the common-
ly received opinions of the merchants, politicians,
and statesmen of his time, that wealth does not
consist in the abundance of gold and silver, but in
the abundance of the various necessaries, conve-
niences, and enjoyments of human life : He has
shown that it is in every case sound policy, to
leave individuals to pursue their own interest in
their own way; that, in prosecuting branches of
industry advantageous to themselves, they neces-
sarily prosecute such as are, at the same time, ad-
vantageous to the public ; and that every regu-
lation intended to force industry into particular
channels, or to determine the species of commer-
cial intercourse to be carried on between different
parts of the same country, or between distant and
independent countries, is impolitic and pernicious
injurious to the rights of individuals and ad-
verse to the progress of real opulence and lasting

The fact that the distinct statement of several
of the most important of these principles, and that
traces of them all, may be found in the works of
previous writers, does not in the least detract
from the real merits of Dr Smith. In adopting


the discoveries of others, he has made them his
own ; he has demonstrated the truth of principles
on which his predecessors had, in most cases,
stumbled by chance ; has separated them from
the errors by which they were previously incum-
bered ; has traced their remote consequences, and
pointed out their limitations ; has shown their
practical importance and real value their mutual
dependence and relation ; and has reduced them
into a consistent, harmonious, and beautiful sys-

But, however excellent in many respects, still it
cannot be denied that there are errors, and those
too of no slight importance, in the " Wealth of
Nations." Dr Smith does not say that in prose-
cuting such branches of industry as are most ad-
vantageous to themselves, individuals necessarily
prosecute such as are at the same time MOST ad-
vantageous to the public. His leaning to the sys-
tem of the Economists a leaning perceptible in
every part of his work made him so far swerve
from the principles of his own system, as to admit
that individual advantage is not always a true
test of the public advantageousness of different em-
ployments. He considered agriculture, though
not the only productive employment, as the most
productive of any ; and he considered the home
trade as more productive than a direct foreign
trade, and the latter than the carrying trade. It


is clear, however, that all these distinctions are
fundamentally erroneous. A state being nothing
more than an aggregate collection of individuals, it
necessarily follows, that whatever is most advan-
tageous to them must be most advantageous to the
state ; and it is obvious, that the self-interest of
those concerned will always prevent them from en-
gaging in manufacturing and commercial undertak-
ings, unless when they yield as large profits, and are,
consequently, as publicly beneficial as agriculture.
His opinion with respect to the unproductiveness of
all labour, not realized in a fixed and vendible com-
modity, appears, at first sight, to rest on no better
foundation than the opinion of the Economists with
respect to the unproductiveness of commerce and
manufactures ; and its fallacy has been fully esta-
blished by several late writers. . These, however,
are blemishes of inferior importance. The radical
defect of the " Wealth of Nations" consists in the
erroneous doctrines Dr Smith has advanced with
respect to the invariableness of the value of corn,
and the effect of fluctuations in the rate of wages
on prices : These have prevented him from acquir-
ing any clear and accurate notions respecting the
nature and causes of rent, and the laws which go-
vern the rate of profit ; and have, in consequence,
vitiated all that part of his work which treats of
the distribution of wealth, and the principles of


But, after every allowance has been made for
these defects, enough still remains to justify us in
considering Dr Smith as the real founder of the
modern system of Political Economy. If he has not
left us a perfect work, he has, at all events, left us
one which contains a greater number of useful
truths than have ever been given to the world by any
other individual ; and he has pointed out and smooth-
ed the route, by following which, subsequent phi-
losophers have been enabled to perfect much
that he had left incomplete, to rectify the mis-
takes into which he had fallen, and to make
many new and important discoveries. Whether,
indeed, we refer to the soundness of its leading
doctrines, to the liberality and universal applicabi-
lity of its practical conclusions, or to the powerful
and beneficial influence it has had on the progress
and perfection of economical science, and still more
on the policy and conduct of nations, Dr Smith's
work must be placed in the foremost rank of those
that have helped to liberalise, enlighten, and en-
rich mankind.

Mr Malthus's Essay on the " Principle of Popu-
lation," published in 1798, was the first great con-
tribution made to the science subsequently to the
publication of the " Wealth of Nations." The
fact that the population of every country has a na-
tural and constant tendency not only to rise to the
level of the means of subsistence, but to exceed them,


had been frequently observed by previous writers,
and had been very strikingly illustrated by the
late Mr Townsend in his " Dissertation on the
Poor Lam" published in 1786.* But though
not the original discoverer of the principle of po-
pulation, Mr Mai thus was certainly the first to
establish it on a secure foundation, and to show
its vast consequence to a right understanding of al*
most all the great questions connected with the
essential interests of society ; and especially of those
respecting the governing causes of the rate of wages
and the condition of the poor. He has demonstrated,
by an extensive and careful examination of the
state of population in different countries, and in
every stage of society, that an increase in the
means of subsistence is the only sure criterion of a
real, and permanent, and beneficial increase in the
numbers of any people ; that, so far from there be-
ing the least risk of population falling below the
level of subsistence, the danger is all on the other
side ; that, instead of there being a deficiency, there
is, generally speaking, an excess of numbers in
every country, as compared with the means of sub-
sistence ; and that, if population were not kept down
to its level by the prevalence of moral restraint, or
of a proper degree of prudence in the formation of
matrimonial connections, it would necessarily be

* See ttote B at the end.


kept down by the prevalence of vice, want, and

From the remotest antiquity down to our own
times, it had been the uniform policy of legislators
to give an artificial stimulus to population, by en-
couraging early marriages, and bestowing rewards
on those who had reared the greatest number of
children. But the doctrines of Mr Malthus show
the mischievous nature of all interference with the
natural progress of population, and have in this re-
spect effected a complete change in the public opi-
nion. They have shown, that every increase in
the numbers of the people, occasioned by artificial
expedients, and which is not either preceded or
accompanied by a corresponding increase in the
means of subsistence, can be productive only of mi-
sery, or of increased mortality ; that the difficul-
ty never is to bring human beings into the world,
but to feed, clothe, and educate them when there ;
and that, so far from attempting to strengthen
the principle of increase, we should invariably en-
deavour to control and regulate it.

A few words only will be required to satisfy the
most sceptical, that the well-being and happiness of
society must ever necessarily depend on the degree
in which the principle of increase is subjected to
prudential control and regulation. Those who are
least conversant with the principles of the science
are aware, that the market rate of wages is ex-


clusively dependent on the proportion which the
capital of the country, or the means of employing
labour, bears to the number of labourers. There
is plainly, therefore, only one way of really im-
proving the condition of the great majority of the
community, or of the labouring class, and that is,
ly increasing the ratio of capital to population.
If this be done, the rate of wages will be propor-
tionally augmented, and the labourers will rise in
the scale of society ; whereas, if the ratio of capi-
tal to population be diminished, wages will be pro-
portionally reduced, and the condition of the la-
bourers changed for the worse. Unfortunately, the
labourers have very little power over the increase
or diminution of the national capital, but they
are all-powerful in respect to the increase or dimi-
nution of the supply of labour. And if they had
only good sense and intelligence sufficient to avail
themselves of this power, they might, by under-
stocking the market with labour, render their wages
high, notwithstanding the demand for their services
should happen to be diminished ; while, if they do
not avail themselves of this power, but allow the
principle of population to exert its natural tenden-
cy to overstock the market with labour, wages will
be low, to whatever extent the demand for la-
bour may be increased. It appears, therefore,
that the lower classes are in a very great degree
the arbiters of their own fortune. What others



can do for them is really, to use Mr Malthus's
words, but as ilie dust of the balance compared
with what they can do for themselves. Nor is
there any very great reason to think that their
condition will ever be materially improved, until
they are made acquainted with the circumstances
which govern the rate of wages, and are impress-
ed with an intimate conviction of the important
and unquestionable truth, that they are themselves
the masters of the only means by which their com-
mand of the necessaries and comforts of life can be
materially extended.

These statements, though necessarily very brief
and imperfect, are yet sufficient to show the utter
fallacy of the opinions advanced by those who
argue that the principles and conclusions of the
Essay on Population are unfavourable to human
happiness. The ignorant abuse with which Mr
Malthus has been so perseveringly assailed, dis-
graceful as it is to its authors, can have but little
influence in retarding the adoption of juster views:
and the more general dissemination of the elemen-
tary principles of the science afford good grounds
for hoping, that the period is not very far distant,
when the prejudices and misrepresentations, so in-
dustriously propagated on this subject, will have
lost much of their influence, and when it will be
generally admitted, that it is by the condition of
the people by the extent of their command over


the necessaries and enjoyments of human life, and
not by their numbers, that their happiness is to be
estimated ; and that the extent of this command
must, generally speaking, depend on the prudence
and discretion displayed in supplying the market
with labour. *

The Traite d* Economic Politique of M. J. B.
Say of Paris, the first edition of which appeared in
1802, would deserve to be respectfully mentioned
in a sketch of the progress of Political Econo-
my, were it for nothing else than the effect that
his well-digested and luminous exposition of the
principles of Dr Smith has had in accelerating
the progress of the science on the Continent. But
in addition to the great and unquestionable merit
that it possesses from its clear and logical arrange-
ment, and the felicity of many of its illustrations,
" it is enriched with several accurate, original, and
profound discussions." t Of these, the explana-
tion of the real nature and causes of gluts is de-

* These observations apply exclusively to the doctrines
respecting population advocated by Mr Malthus, and are
not meant to express any approbation of that system of Po-
litical Economy, to which he has given his support. On the
contrary, many of the principles of that system seem to me
fundamentally erroneous, and to be pregnant with the most
pernicious consequences.

f Preface to Mr Ricardo's Principles of Political Econo-


cidedly the most important and valuable. M.
Say has shown that no conceivable increase of
the powers of production can ever occasion a ge-
neral glut, or overloading of the market. Too
much of one commodity may occasionally be pro-
duced ; but it is quite impossible there can be
too great a supply of every species of commo-
dities. For every excess there must be a cor-
responding deficiency. A man is stimulated to
produce, when he finds a ready market for the
products of his industry, that is, when he can
readily exchange them for other products. And
hence it is that the true and only genuine en-
couragement of industry consists, not, as was
formerly supposed, in the increase of unpro-
ductive and wasteful expenditure, but in the in-
crease of production. Every new product ne-
cessarily forms a new equivalent, or a new means of
purchasing some other commodity. It must be
remembered, that the mere existence of a demand,
how intense soever it may be, cannot of itself be
a means of encouraging production. To become
a real demander, a man must not only have the
will, but he must also have the power, to purchase
jthe commodity he wishes to possess ; or, in other
words, he must be able to offer an equivalent for
it. There never has been, nor is it in the na-
ture of things that there ever can be, any limits




to our wish to possess the products of art and in-

Nee Crcesifortuna unquam, nee Persica Regna
Sufficient animo !

It is the power to give effect to our wishes, or to
furnish other products in exchange for those we
are desirous to obtain, that is the real and only
desideratum. The more, then, that this power is
increased, that is, the more industrious every in-
dividual becomes, his means of offering equivalents
for the products of others will be so much the
more increased, and the market rendered so much
the more extensive. It is clear, therefore, that a
glut cannot originate in over-production, but that
it is in every case a consequence of the wrong ap-
plication of productive power, of the production
of commodities which either do not suit the tastes
of those with whom we wish to exchange them,
or which we cannot ourselves consume. If we
attend to these two grand requisites if we pro-
duce such commodities only as can be taken off by
those to whom we offer them for sale, or such as
are directly available to our own use, we may
increase the power of production a thousand
or a million of times, and we shall be just as
free of all excess as if we diminished it in the
same proportion. Miscalculation, and the too great
ardour of speculation, will occasionally divert capi-
tal into channels in which it ought not to have


flowed ; but, if Government do not interfere to
relieve the parties concerned from the effects of
their improvidence, a regard to their own interest
will make them withdraw from the losing businesses
in which they have engaged ; and will, sooner
than any artificial remedy, correct the improper
distribution of capital, and reproduce the natural
equilibrium between the price and the cost of pro-
ducing commodities. Unproductive expenditure is
not, therefore, necessary to prevent the overloading
of the market ; and to maintain that it contributes to
increase national wealth in any other way, is really
quite the same thing as to maintain, that wealth
would be increased by throwing a portion of it into
the sea or the fire !

While M. Say was thus successfully cultivating
the science in France, it was every day rising in
importance, and acquiring fresh converts in Eng-
land. The extraordinary changes occasioned by
the late war in every department of the public eco-
nomy, deeply affecting, as they necessarily did, the
interests of all classes, created the most anxious and
universal attention. The experience of previous
centuries was crowded into the short space of thirty
years j and new combinations of circumstances not
only served as tests whereby to try existing theo-
ries, but enabled even inferior writers to extend
the boundaries of the science, and to become the
discoverers of new truths. It is not too much
to say, that the discussions that grew out of the


enactment of the restriction on cash payments by
the Bank of England, and the consequent depre-
ciation of the currency, have perfected the theory
of money : and the discussions respecting the po-
licy of restrictions on the corn trade, and the causes
of the heavy fall of prices which took place subse-
quently to the late peace, by inciting some of the
ablest men that this country has ever produced
to investigate the laws regulating the price of
raw produce, the rent of land, and the rate of
profit, have elicited many most important and uni-
versally applicable principles, and have given birth
to a work rivalling the " Wealth of Nations" in
importance, and excelling it in profoundness and

The first considerable step towards the successful
investigation of the laws which regulate the distri-
bution of wealth among the various classes of so-
ciety was made in 1815, when the real nature,
origin, and causes of rent were, for the first time,

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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 4 of 8)