[263-2]According to § 165, we might say: where the product of the workman last employed is not sufficient to meet his own wants. ThusJ. B. Saysays that only that can be considered a product, the utility of which is at least equal to its cost. He makes use of the example where a three days' journey is necessary to obtain the food requisite for one. As the limits of production he gives the following: too few human wants; too costly methods of production; too high taxes, natural obstacles created by infertility or too great distance. (Traite I, ch. 15. Cours pratique, I, 349.)
[263-3]D. Hume, Discourses, No. 3, On Money.
[263-4]England is especially well situated in this respect, in consequence of its excellent commercial position and its surplus of the principal auxiliary products, such as coal, iron, etc. Should the coal-beds of such a manufacturing country be ever entirely exhausted, it is scarcely possible to see, from our present point of view, how the most rapid and most frightful decline of its national economy could be averted! Compare the opening address before the British Association, by Armstrong, at Newcastle (1863), who prophecies the exhaustion of the English coal-beds in 212 years at the rate at which coal had been consumed during the eight preceding years. According to the report of the royal committee on the coal question (1871, vol. III), Great Britain has still attainable deposits, that is 4,000 feet deep, 90,207,000,000 tons of coal in its coal beds already known; and in beds not yet worked, 56,273,000,000 tons. Compare, also,Jevons, The Coal Question (1866). It is estimated that the most productive French coal-field will be exhausted in 100 years. (M. Chevalier, Rapport du Jury international de 1867, 57.)
[263-5]EvenJ. S. Mill'sviews on the probability of perpetual peace on earth are altogether too rosy: Principles III, ch. 17, 5. This is still truer ofBuckle. History of Civilization, I, ch. 4. In the modern state-system of Europe, there is wont to be in each generation, a peaceful half and a warlike one, which follow each other as ebb and flow. I need only mention the preponderance of peace between 1714 and 1740, between 1763 and 1793, and between 1815 and 1853. It happens frequently that at the close of the period of peace, intelligent and noble but unhistorical and therefore short-sighted minds begin to dream of perpetual peace. Even a man likeDohm(Ueber die bürgerliche Verbesserung der Juden, 227 seq.) expected, in 1785, that considering the size and quality of armies, and the mutual knowledge of all countries of one another, that instead of actually waging war, nations might send to each other well authenticated statements of the strength, for instance, of their navies and of the sums necessary to maintain them for a number of years.
[263-6]The Mongols saw the abandonment of their nomadic life in so gloomy a light that they seriously thought of turning all China with its countless human beings into pasture-land! (Gibbon, History of the Roman Empire, ch. 34.)
[263-7]It is a fact characteristic of the history of England, that Norman supremacy and afterwards bondage were wiped out so gradually that contemporary historians have nothing to say of the transformation. (Macaulay, History of England, ch. 1.) Repeal of the corn lawsvis-a-visof the most recent industrial advance of the country.
[263-8]EvenRicardosays that in a highly civilized country the continual making of savings is by no means desirable. Carried to an extreme, saving would lead to the equal poverty of all. (Principles, ch. 5.)
[263-9]TheBeccaria, Economia publica I, 3, 31, teaches that the limits of population are to be found at the point where agriculture cannot be made to yield an additional increase of products, and where foreign countries do not offer any more a counter value of their products in exchange for the manufactured articles and the services to be furnished them. Similarly,Büsch, Geldumlauf III, 7; otherwise, indeed, V, 15, in which, in opposition toAdam Smith, it is claimed that the work to be performed by one nation for others has no limits which cannot be exceeded.Steuart'stheory of the limits to the production of every commercial nation: Principles, I, ch. 18.Lauderdale, Inquiry, ch. 5, 274 ff., says categorically, that all wealth which is produced by the transformation of raw material depends on the production of such raw material, and of the means of subsistence necessary for the support of the labor employed in such transformation. Excellent investigations byMalthusin the additions (1817) to the Essay on the Principles of Population, II, ch. 9-13. CompareRoscherNationalöcon. des Ackerbaues, § 162. As early a writer asMirabeau, Philosophie rurale, ch. X, was of opinion that a country whose industries were on as large a scale as those of Holland, dispersed its people indeed over the whole earth, made them independent at home, but almost destroyed their nationality.
SECTION CCLXIV.
THE DECLINE OF NATIONS.
That, after a whole nation has reached the zenith of its prosperity, it is subject to old age and to decline, and cannot avoid them, is in general, a proposition susceptible neither of proof nor refutation.[264-1]This uncertainty is practically very useful, for were it otherwise, mediocre statesmen might become either discouraged or indifferent. However, we should not assume, as so many do,[264-2]without proof, the earthly immortalityof nations, provided only they observe a proper diet; nor call the science of the physiology or medicine of nations a chimera, simply because it confesses that it knows of no preventive against such old age. It has doubtless been the fate of many nations to die, that is, not precisely to be destroyed—just as in the physical world, not a particle of matter is lost—but to see their former national personality disappear, and themselves continue to exist only as component parts of some other nation.[264-3]This phenomenon, indeed, finds its analogon in every thing that is human, but seems to contradict a law of nature which very widely prevails, viz.: that it is easier to advance in a certain direction in proportion to the distance gone over in it already.[264-4]
The problem of decline, however, is solved by the enervating influence of possession and power, an influence which only a select few among men can escape. And yet to every external advance there must be a corresponding advance of the interior man, else there is a fall great in proportion to the height before attained. The greater number take their ease once they have attained the object of their ambition. I need only cite the example of the posterity of those men who havegrown rich by unusual exertion. Success itself generates vanity and a feeling of false security, the latter especially, inasmuch as that is expected from the whole community, from the state for instance, from others generally, which should be the fruits of one's own vigilance and one's own endeavors. It should not be forgotten that the nation is made up of individuals.[264-5]
In addition to this there is the striving after the new for the sake of novelty; a striving promotive of progress in itself, and without which the full development of the forces of civilization would probably not be possible. But if the genius of no nation is possessed of infinite capacities, it must happen, at last, that, in case the best has been attained, and the demand for novelty continues, men will go over to that which is worse. Even very great competition has here a dangerous influence, since it raises the great mass of the incompetent to the dignity of judges, and endeavors to seduce them by illicit means; in the arts, for instance, sensuousness is made to take the place of the feeling of the beautiful.[264-6]
There is, further the process of undeceiving, inseparable from the prosecution of any ideal purpose. Such ideals have always very much of human weakness in them. The great crowd of ordinary men follow, as a rule, their material interests.Only occasionally do they rise to the height of ideal things; and here we discover the brightest points in history. Later there comes uniformly a period of disenchantment and of exhaustion after the debauch is over. When all the ideals accessible to the nation have been destroyed or outlived, nothing can be done to awaken the masses from their slumber, or induce them to shake off their inactivity.
As a rule, the influences which have accelerated a nation's progress and brought it to the apogee of its social existence end in precipitating its ruin by their further action. Every direction which humanity takes has almost always something of evil in it, is limited in its very nature, and cannot stand its extremest consequences.[264-7]All earthly existence bears in itself, from the first, the germs of its decay.
However, to calm the feeling of human liberty, we may boldly assert that there never was a nation remarkable for its religiousness and morality which declined so long as it preserved these highest of all goods; but then no nation outlived their possession.
[264-1]Even in the case of individuals, that death is necessary is not susceptible of absolute demonstration; but no one doubts it, because of the experience so frequently repeated; an experience, however, which cannot be had in the same degree in the case of whole nations.
[264-2]Remarkable controversy[TN 121]betweenHumeandTucker. The former had charged the latter with holding the opinion that industry and wealth must necessarily continue to advance indefinitely; and yet all things had in them the germs of decay.Tucker, on the other hand, remarked that all he wished to say was that no one could point out where progress must necessarily cease. All political bodies like all natural bodies might decay; but it is not necessary that they should. With good laws and morality they would become more vigorous with increasing age. A great deal depended here on the more general distribution of property, on the assurance that industry would meet with its reward, and on the removal of the principal defects in the English electoral system. (Four Tracts, 477 seq. Two Sermons, 30.) Most political economists are of the same opinion; thusMcCulloch, Principles, II, 3. See, however, the last two sections inFerguson, History of civil Society.
[264-3]We assume that a new nation has arisen, when, after the disappearance of an earlier and high civilization, combined with the taking up of new ethnographic elements, we perceive anew the easily recognizable symptoms of youthful immaturity.
[264-4]Expressed in the domain of religion in the words of the Savior:Matth., 25, 29. But at the same time the equally well-known expression inLuke, 12, 48, must be fulfilled. CompareH. Brocher, L'Economie monétaire, 1871, 25 ff.
[264-5]Schools of art are generally ruined by mannerism. Of the two great means of education in art, the study of nature and the study of classic models, the latter is the easier, and the former is readily neglected for it. Then there is the endeavor to flatter the master, which is most effectually done by imitating his faults; and the fact that pretending connoisseurs are most cheaply satisfied by mannerism.
[264-6]There is a peculiar charm, very productive in itself, attaching to the cultivation of a field which has been but little cultivated, and which, therefore, has the advantage of promising something new. On the other hand, the decline of almost all literatures begins with this, that writers and readers no longer think out completely the forms of speech, modes of expression, etc. to which they have become used, as their original creators did; a great temptation to have recourse to a more and more spicy literary style.J. S. Millconsiders the stationary state (Principles, IV, ch. 6) a very pleasant one to contemplate, but he overlooks the very important fact, that as men are constituted it uniformly introduces national decline.
[264-7]Great rulers, of whom it is said that they conquered the world by following out their own ideas to their ultimate consequences, would most certainly have lost the world by reason of the same logic if they had continued it only fifty years longer. What would have become of Alexander the Great and Charlemagne if they had lived one generation more?
SECTION CCLXV.
CONCLUSION.
All the separate nations which have lived side by side, or followed one another, are embraced under the general name, humanity. Who would deny the existence of a point, viewed from which humanity might be seen to constitute one great whole; all the variations and differences in its life only one great plan, one wonderful sovereign decree of the divine will, grandly and wonderfully executed by God? Or who is so bold as to say that he stands on this point himself? Theologians should be the last to do it, since even the apostle Paul callsGod's ways inscrutable. So long as we do not even know whether we live in one of the first or one of the last decades of humanity, every system of universal history in which each nation and period is made to take its place in due subordination to its superiors, can be only a castle in the air; and it is a matter of indifference whether the basis of the system is philosophical, socialistic, or natural-philosophical.[265-1]
The usual error into which the builders of such history fall, is that they consider the peculiarities of certain stages of civilization, which may be shown to exist among all nations in the corresponding period of their history as the national peculiarity of the single people with whose history they are, for the time being, concerned. They deduce wonderful consequences, from the premises they laid down, but which our increasing acquaintance with other nations immediately shows to be unfounded.
There is, however, a number of facts really peculiar to a people which make up the national character, and which may give to an observer endowed with an imaginative mind, an inkling to the special vocation in the economy of providence of a particular people. That a positive system can be constructed from the material of such facts, I do not, indeed, think. But they are at least a safeguard against false systems, against the improper application of analogies, against the idle, fatalistic exaggeration of the maxim: "nothing new under the sun!" It had almost become the fashion to compare our present with the period of decline of the Greek and Roman republics. Frightful parallel, in which the greatest and most undoubted differences were frequently overlooked for smaller and certainly questionable similarities. Is not the abolition of slavery, which has been accomplished among allthe most important nations of the present, something new and of great import from a moral and economic point of view?[265-2]Can the national wealth, which depends on labor and frugality, be in any way compared with that which was based on plunder? And so, no one can calculate the benefits which may be reaped by posterity from the mere continuation of the scientific and especially natural-philosophical results obtained by former generations. The discovery of the whole earth soon to be completed, and its probable consequence, the civilization of all nations of any importance, must remove the danger to which all the civilized nations of antiquity eventually succumbed, namely, destruction by entirely barbarous hordes. Nor should the significance of the state-system of Europe, which might be extended soon enough into a state-system embracing the world, be under-estimated. Macedonia would not so readily have subjugated the Hellenes and the Persians if the great powers of the west, Rome and Carthage, had intervened at the right time. And there, too, is Christianity, whose means of grace are at hand for every one at all times, for his complete moral regeneration.
In one word, the usual argument with which the "man of experience" meets the man of inventive genius, that there never was anything of the like seen before, may suffice in thousands and thousands of cases; but it affords no strict proof. It is the province of genius to compel rules to extend their limits. But science should never forget that self-denial is necessary to the discovery of truth.[265-3]
[265-1]I mean here, especially, the attempt so frequently made (byHerder, for instance) to draw a parallel between the periods of universal history and the age at different times of the individual, or with the seasons. If there were a great many humanities between which we might institute a comparison, we might accomplish something with the analogy, but——!
[265-2]However, even such a man as MinisterStein, thinks that a laboriously acquired wealth may affect a people's morality injuriously. "The striving after wealth is the striving for the possession of the means of satisfying chiefly sensuous wants. This striving may suppress all nobler feelings, whether it find expression in violence or industry." Contrariwise, it is possible that some of the noblest of human qualities may be found side by side with the forcible acquisition of wealth, viz.: courage, patriotism. (Pertz, Leben Steins, II, 466.)
[265-3]Compare my discourse on the relation of Political Economy to classic antiquity in the transactions of the royal Saxon Academy of Sciences, May, 1849; also many excellent remarks inKnies, Polit. Oekonomie.Chr. J. Kraus, has zealously discussed the question whether the development of humanity turns about eternally in a circle, or whether it forever advances to a progressively better future. He strongly advocates the latter view, and on grounds which appeal both to the head and to the heart. (Vermischte Schriften, III, 146 ff.; IV, 277 ff.)
SECTION I.
THE MERCANTILE SYSTEM.
The principal peculiarities of the so-called mercantile system depend on a five-fold over-estimation: of the density of population, of the quantity of money, of foreign commerce, of the industries concerned with the transformation of materials (Verarbeitungsgewerbe), and of the guardianship of the state over private industry.[A2-1-1]All these tendencies are very intelligible, and almost self-evident, in a sovereign city-economy (Stadtwirthschaft) as opposed to the governed and worked-out (ausgebeuteten)[TN 122]country districts; as they are found even in the city-republics of later medieval times. But they are also natural in whole national economies, during that period of youthful and rapid growth in which the increasing density of population continues still, for a long time, to be really only a spur and an assistance, and in which, therefore, there can be no expression of anxiety concerning over-population; in which the new and rapidly growing division of labor draws attention particularly to the market-side of all businesses and to the circulation of goods; in which the progress from trade by barter to trade by money necessarily makes the volume of money needed even relatively greater; but especially are they natural in that world-period in which foreign trade suddenly increased enormously in consequence of the discovery of thewhole earth; when the citizen classes of the people assumed immense importance as compared with the landed and clerical aristocracy, and when, in the internal affairs of state absolute monarchy, and in foreign politics, the system of equilibrium, through the instrumentality of the great compact-formation of states prevailed.
All these tendencies are most intimately connected with one another. If precious metal-money be really the essence of national wealth,[A2-1-2]a people who possess no gold and silver mines themselves;[A2-1-3]for instance, Italy, France and England, can becomericher only through foreign trade,[A2-1-4]by means of a favorable balance produced by a preponderance of their exports over their imports; and only inasmuch as this excess is balanced by a payment in money from foreign parts. And so, too, in foreign trade, one nation can gain only what another nation has lost.[A2-1-5]Gain is promoted not only by direct obstacles placed in the way of the exportation of the precious metals, but still more by the value-enhancement of the exported commodities, and by the value-diminution of the imported commodities.[A2-1-6]And as commodities which have undergone the process of transformationare, on an average, more valuable than raw materials, the state can best carry out this policy by import duties, import prohibitions, and export premiums on manufactured articles, as well as by export duties, export prohibitions and import premiums on raw materials.[A2-1-7]This is extremely necessary against those nations who are superior to others in culture, wealth, the cheapness of labor and capital; and hence the envy of the mercantilists was directed chiefly against Holland, and after Colbert's time also against France.[A2-1-8]Such commodities as are not at all adapted to the nature of a country, because of its climate, for instance, the nation should produce at least in colonies of its own, that it might, in thisway, emancipate itself from foreign countries.[A2-1-9]As the clear distinction drawn to-day between money and capital has asserted itself only since Hume's time, the notion that prevailed for centuries, that much money, much trade and a large population mutually conditioned one another, was a very natural one.[A2-1-10]
The younger and more refined conception of the mercantile system is distinguished from the coarse Midas-believing one, by two tendencies especially:
A. By the more thorough consideration of the balance of trade and the consequent limitation of the traditional supposition, that the excess of exports over imports would be always made up in cash money.[A2-1-11]
B. By the extension of the field of view, so that not only the direct but also the indirect and more remote effects of international trade were taken into consideration.[A2-1-12]
A certain over-estimation of the circulation of goods continued to characterize even the latest adherents of the mercantile system.[A2-1-13]Yet the caricature drawn by the tradition of more recent text-books, of the mercantilists, is true only of the inferior ones among them.[A2-1-14]The most distinguished of them, Botero,[A2-1-15]for instance, approximate more closely to the science of the present day than is usually supposed.
[A2-1-1]CompareRoscher, Geschichte der Nationalökonomik in Deutschland, I, 228 ff.
[A2-1-2]Even the remarkable Florentine pamphlet of 1454 (Jablonowski'sprize essay of 1878, app. Beilage, 4) complains of the decrease of industry principally on account of the diminution of money caused thereby. "Wealth is money," saysErnestine, essay of 1530, on the coin, and explains the smaller wealth of the silver-country, Saxony, as compared with England, France, Burgundy and Lombardy, by the greater exportation of commodities of these countries, by means of which they draw the silver of Saxony to themselves. (Roscher, Geschichte, I, 103.)Bornitz, Theorie wie sich der Staat diesennervus rerumin grösster Menge verschafft: De Nummis (1608), II, 4, 6, 8.A. Serra, Sulle Cause, che possono far abbondare un Regno di Monete (1613), places excess of gold and silver and poverty as diametrical opposites, at the head of his work.Hörnigk, Oesterreich über Alles, wann es nur will (1684), says that it is "better to give two dollars which remain in the country for a commodity, than only one dollar which goes out of the country" (ch. 9). According toSchröder, Fürstliche Schatz- und Rentkammer (1686), the export of commodities is a blessing only "when we can turn them into silver through our neighbors." (LXX, 12.) EvenLockeheld similar views (Considerations of the Consequences of the Lowering of Interest, 1691. Further Considerations concerning Raising the Value of Money, 1698). OnDavenant'sinconsistency in this respect, compareRoscher, Geschichte der Englischen Volkswirthschaftslehre, 110 ff. The quantity of money remaining the same, a country grows neither richer nor poorer (Christ. Wolff, Vernünftige Gedanken vom gesellschaftlichen Leben, 1721, § 476).J. Gee, Trade and Navigation of Great Britain considered (1730), bewails the folly of those to whom "money is a commodity like other things, and also think themselves never the poorer for what the nation daily exports," (p. 11).Justi, von Manufacturen und Fabriken (1759 seq.), considers it the principal object of industry simply to prevent the outflow of money. Similarly,Pfeifer, Polizeiwissenschaft (1779), II, 286. Even Frederick the Great considered it "true and obvious" that "a purse out of which money is taken every day, and into which nothing is put in turn, must soon become empty." (Œuvres, VI, 77).
[A2-1-3]The thirst for gold which, in the sixteenth and seventeenth centuries, drove so many emigrants to the western Eldorado, reminds one, by reason of its enthusiasm, of the crusades to the Holy Land. The striving after the making of gold which the emperors Rudolph II., Ferdinand III., Leopold I., Frederick I. of Prussia, Christian IV. of Denmark, Christian II. and Augustus the Strong of Saxony, Heinrich Julius of Braunschweig, Frederick of Würtemberg, harbored, and also the Silesian and Brandenburg princes even during the Hussite war (Riedel, Cod. Dipl. Brandenb., II, 4, 151), was, to a great extent, misplaced philosophy; men went in search of themateria universalissima,[TN 123]thespiritus universalis, from which all that is receives itsesse et fieri, the universal elixir, at once the life-power of man, the universal medicine and maturing principle of natural bodies. (Roscher'sGesch., I, 230.)
[A2-1-4]Schröderjustifies the little estimation in which he holds internal commerce by saying that "a country may indeed grow and become powerful by its means, but cannot gain in wealth;" just as a dress embroidered with pearls is not made more costly by taking the pearls from the cuffs and putting them upon the cape. (F. Schatz- und Rentkammer, XXIX, 3.) According to the Fredrickian theorizer,Philippi, "internal trade scarcely deserves the name of commerce." (Vergröss. Staat, 1759, ch. 6.)Sir J. Steuartstill teaches that an isolated state may, indeed, be happy, but that it can grow rich only through foreign trade and mining. (Principles, II, ch, 13.) The same fundamental thought finds expression in the title ofTh. Mun'scelebrated book: England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is the Rule of our Treasure (1664).
[A2-1-5]Il est claire qu'un pays ne peut gagner, sans qu'un autre perde, et qu'il ne peut vaincre sans faire des malheureux(Voltaire, Dict. phil., art. Patrie). EvenVerriwas, in his earlier period, of the opinion:ogni vantaggio di una nazione net commercio[TN 124]porta un danno ad un altra nazione; lo studio del commercio è una vera guerra(Opuscoli, 335).
[A2-1-6]Even in 1761, the learnedMablycould say:la défense de transporter les espèces d'or et d'argent est générale dans tous les états de l'Europe ... il n'y a point de voie moins sensée(Droit public, II, 365).
[A2-1-7]The obstacles placed in the way of importation by governments originated, in great part, from views entertained on sumptuary legislation; in that of exportation, from a desire to prevent a scarcity of certain articles, as may be clearly seen inPatricius(De Inst. Reipublic., V, 10, I, 8), and even inSully(Mémoires, XI, XII, XIII, but especially XII),Bornitz,Besold,Klockandv. Seckendorf. (CompareRoscher, Gesch., I, 191, 202, 215, 247.) But the mercantilistic germs show themselves even inHuttenandLuther. (Roscher, I, 44, 63.) The advance made between the police ordinance of the empire of 1530 and that of 1548, is very remarkable in this respect. The mercantile theory of duties appears very systematically elaborated even inJ. Bodinus, De Republica, 1577, VI, 2; in Germany inHörnigk, Oesterreich über Alles, ch. 9.
[A2-1-8]The English jealousy of Holland is represented especially bySir W. Raleigh(?), Observations touching Trade and Commerce with the Hollander and other nations, 1603, Works, III, 31 ff.;Sir J. Child, A new Discourse of Trade (1690), andSir W. Temple, Observations upon the U. Provinces (1672). CompareRoscher, Z. Gesch. der englischen V. W. Lehre, p. 31 ff., 125 ff. The English jealousy of France:Sam. Fortrey, England's Interest and Improvement (1663).R. Coke, A Treatise, wherein is demonstrated that the Church and State of England are in equal Danger with its Trade (1671), and the anonymous, Britannia languens (1680).Per contra, especially the work: England's Greatest Happiness, wherein it is demonstrated that a great Part of our Complaints is causeless (1677). Here we find chapters with the title: To export Money our great Advantage; the French Trade a profitable Trade; Multitudes of Traders a great Advantage.Pettygave the best solution to the question in dispute, in his posthumous Political Arithmetic concerning the Value of Lands, etc.Hörnigkwould enlist his service in the cause of the jealousy against France, immediately after the disgraceful defeats which Germany in 1680 ff. suffered in the midst of peace, by Louis XIV. Concerning smaller works of the same period and in the same direction, seeRoscher'sGesch., I, 299 seq.
[A2-1-9]EvenPeter Martyrconsidered the colonization of countries which yielded the same products as the mother country of no advantage (Ocean, Dec., VIII, 10). On Spanish maps the most flourishing portions of America at present are designated astierras de ningun provecho. And the English for a long time, ascribed value to their New England possessions, so far as the mother country was concerned, only to the extent it was possible to provide the West Indies from that quarter with corn, meat and wood. (Roscher, Kolonien, p. 262.)
[A2-1-10]CompareBotero, Ragion di Stato (1591);Law, Money and Trade (1705), p. 19 ff.; andVerri, Opuscoli, pp. 325, 333. Meditazioni (1771), cap. 19.
[A2-1-11]ThusChild, spite of all his esteem for the discoverers of the balance-problem, calls attention to cases in which exports suffer so much waste (Abgang), or imports are sold so advantageously, that an apparently favorable balance made a people poorer, and an apparently unfavorable one, richer. From the value of the imported commodities the self-earned freight has to be deducted. Countries like Ireland, many colonies, etc., have a preponderance of exportations, because they, by means of the same, pay a rent to absent capitalists or to landowners. (p. 312 ff.)
[A2-1-12]Munadmits that, for instance, the East Indian trade makes England richer, although it causes the exportation of much English money. But the exporter of money who, in exchange for it, brings back reëxportable commodities, should be compared to the sower. (Ch. 4.) Similarly,C. Roberts, The Treasure of Trafficke (1641), and evenA. Serra, III, 2. According toChild, the loss in the East Indian trade is compensated for chiefly by this, that England obtains there the saltpeter it needs to satisfy its demand, and that the ships engaged in that trade are peculiarly well fitted for war. (l. c.)Saavedra Faxardo, for similar reasons, declared the discovery of America to be a misfortune. (Idea Principis Christiani politici, 1649, Symb., 68 seq.)
[A2-1-13]ThusLaw,Dutot,DarjesandBüsch. Even the violent opponent of the mercantile system,Boisguillebert, could not entirely escape this view. Compare vol. I, § 96.
[A2-1-14]This is true, especially of the protectionist weekly paper: British Merchant or Commerce preserved (1713 ff.), in the contest with the weekly Tory paper edited byDefoe: Mercator or Commerce retrieved, which Charles King systematized and published anew in 1721. LaterUlloa: Noticias Americanas (1772), cap. 12.Adam Smithalso concedes that many of the best writers on commerce, at the beginning of their books, allow that the wealth of a country consists not only in gold and silver, but also in goods of every description; but that further on they tend more and more to forget this qualification of the meaning of wealth. (W. of N., IV, ch. 1.) Hence it is that, in recent text-books, so many are now called adherents and now opponents of the mercantile system.
[A2-1-15]EvenColbertsays: nothing is more precious in a state than the labor of men (Lettres, Instructions et Mémoires de C. publiés par P. Clement, 1861 ff., II, 105). The great trade with foreign countries and the small trade in the interior contribute equally to the welfare of nations. (II, 548.) I would not hesitate to do away with all privileges, the moment I found that greater or as great advantages attended their abolition. (II, 694.) His duty-system of 1664 was a simplification, but also an important diminution of his earlier chaotic tariff. (II, 787 ff.)
SECTION II.
REACTION AGAINST THE MERCANTILE SYSTEM.
The reaction against the mercantile theory of the balance of trade, which reached its height in Adam Smith, was based principally upon the following considerations:
A. Precious-metal-money is a commodity like all other commodities, and therefore useful only for certain purposes. It is as little to the wealth-interest of a people, by means of a continually favorable balance, to import infinite quantities of the precious metals, as it is to its power-interest, by means of its commercial policy, to accumulate infinite stores of powder. The person who possesses other exchangeable goods will be as well able, in case of need, to obtain gold and silver therewith as to obtain powder.[A2-2-1]We part with no capital whenwe export the precious metals and import other commodities instead; we simply exchange thereby one form of capital for another.[A2-2-2]The notion that the gain in trade is coincident with the balance of account paid in cash, is just as palpably false in the trade among nations as in trade among private persons.[A2-2-3]It would be a decided hardship to most men, if they were to receive payment at once in money for all that they possessed: and the nation is made up of individuals.[A2-2-4]And even the reasons which make payments in cash more uniformly desirable, in the case of private persons not engaged in mercantile pursuits, cease in the case of whole nations.[A2-2-5]
B. But a continual over-balance (Ueberbilanz) is not at all possible. Every relative increase of the amount of money must enhance the price of commodities, lower the value of money, and thus produce an exportation of money until a restoration of the level with other countries.[A2-2-6]The prohibitions of the exportation of money, so often resorted to, can avail nothing, because the precious metals are among the specifically most valuable goods; and because it is easier yet to smuggle them out of a country than to smuggle them into it.[A2-2-7]
C. The signs by which the mercantile system supposed it could estimate the favorableness of the balance of trade are essentially deceptive.[A2-2-8]We cannot, for instance, from the course of exchange, determine whether the payments made by us to foreign countries have been made for purchases, to absentees, etc., or as loans; and yet, according to the mercantilists, the latter are as useful to us as the former are injurious.[A2-2-9]And even the most accurate tariff-record (Zollregister) ofthe exportation and importation of commodities affords no guaranty[A2-2-10]that, in many instances, the rendering of the counter-value may not remain absent, by reason of bankruptcy, shipwreck, or the emigration of property.[A2-2-11]
D. Every act of exchange is advantageous only because through it a greater value is received than the one parted with was. (?) Fortunately, in normal trade, where both parties satisfy a real want, and neither party is deceived, this is actually the case on both sides.[A2-2-12]In accordance with all this,[A2-2-13]Baudrillart is of opinion that the whole theory of the balance of trade no longer exists.
[A2-2-1]EvenPettyandNorth, with their deep insight into the nature and functions of money, could not possibly entertain the mercantile theory of the balance of trade.Pettyconsiders the exportation of money useful, even when commodities are brought back in exchange for it, and which are of greater value in the interior than the exported money. (Quantulumcunque concerning Money, 1682.) According toNorth, no one is richer simply because he has his property in the form of gold and silver plate, etc.; he is even poorer, because he allows his goods to lie in that shape unproductive. Hence the importation of money is, in itself, not more advantageous than the importation of logs of wood; at most, the difference that, in case of excess, it would be easier to get rid of the money than of the wood, is of importance. Therefore, a state need never care very anxiously for its supplies of money. A rich nation will never suffer from a want of money. (Discourses upon Trade, 1691, pp. 11, 17.) According toBerkeley(Querist, 1735, pp. 566 ff.), there is no greater error than to measure the wealth of a nation by its gold and silver. It is to the interest of a people to keep their money or to send it off according as its industry is thereby promoted.Quesnaydeclares it to be impossible that the exports of a country should be permanently greater than its imports:tout achat est vente et toute vente est achat.
Adam Smith(W. of N., IV, 1) compares the Spanish discoverers who inquired on every island, first of all, for gold, to the Mongolians, whomRubruquis(c. 32) was obliged to give information to concerning the cattle of France: "of the two, perhaps the Tartar nation was the nearest to the truth." Precious-metal-money may be even more easily dispensed with than most other commodities, since, in case of necessity, it can, by reason of its greater transportability be readily obtained from without, and can also be supplied by exchange and by credit. "Money makes but a small part of the national capital and always the most unprofitable part of it.... Money necessarily runs after goods, but goods do not always or necessarily run after money."J. B. Saycalls the exportation of money more advantageous than that of other commodities, because the former is of use, not through its physical qualities, but only through its value, and the value of the money which remains behind correspondingly rises by reason of the exportation. (Traité, I, ch. 17.) Compare especiallyBastiat, Maudit Argent, 1849.
[A2-2-2]AgainstGanilh, Théorie de l'Economie politique, II, 200.
[A2-2-3]EvenMunhad, in every balance of trade, distinguished three persons who participated in it; the merchant might lose when the nation in general gained, andvice versa; the king, with his duties, always gained. (Ch. 7.) The British Merchant (p. 23) maintained even, that when the merchant himself gains nothing and takes his back-freight (Rückfracht) in money, his country gains the whole amount thereof.
[A2-2-4]"Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage, naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society." (Ad. Smith, W. of N., IV, ch. 2.)
[A2-2-5]For the reason that money, in international trade, for the most part, loses its character as money, and appears more as a commodity. Exhaustively inAdam SmithandJ. B. Say, l. c. The English state paid, during the French war of the Revolution, in subsidies to foreign countries, £44,800,000; and yet, up to the end of 1797, imperial loans and the payments of private individuals included, not as much as one million in cash went out of the country. (Rose, Brief Examination into the Increase of the Revenue of Great Britain, 1799.) When France paid the five milliards to Germany, the plus value of English exportation to Germany above the English importation thence rose from 274,000,000 (1869) to 478,000,000 (1872), and the increase in the amount of French from 39,400,000 (1869) to 131,700,000 (1873). The entire German under-balance (Unterbilanz),Soetbeer(loc. cit.) estimates at 878,000,000 of marks.
[A2-2-6]Emphasized especially byDavid Humewho calls attention to the seeking of its level by water. (Discourses: On the Balance of Trade.)J. B. Sayspeaks of carriages, the increase of which over and above the need of them must infallibly produce a reëxportation of them. (Traité, I, ch. 17.)
[A2-2-7]With all the severity of its export prohibitions, Spain, for centuries, served as a medium to conduct the streams of American silver to the other parts of Europe. As to how Spain, during the last third of the 18th century, was overflowed by copper money, seeCampomanes, Educación popular, IV, 272.
[A2-2-8]von. Schröder, F. Schatz- und Rentkammer, XXVII, has a very ingenuous faith in the rate of exchange and a tariff-record (Zollregister); whileChildhad a much better insight into the defects of these two criteria. (Disc. of Trade, p. 312 ff.) CompareSteuart, Principles, III, 2, ch. 2.
[A2-2-9]Compare § 199. It was a discovery ofLocke's, that borrowing from foreign countries was advantageous in all those instances in which the inland borrower earned more than the amount of his interest by means of the loan. (Considerations, p. 9.)
[A2-2-10]Ségur, Mémoires, II, 298, tells how the Russian officers of custom were bribed by English merchants to represent the Russian imports from Englandunder, and the exports to Englandabovethe true value. In addition to this, smuggling was carried on!
[A2-2-11]J. B. Saycalculates from the English tariff-record (Zollregister), from the beginning of the 18th century to 1798, an excess of exports over imports of £347,000,000; and yet the highest estimates of the amount of money actually in England, according toPittandPrice, gave only £47,000,000. (Traité, I, IV, 17.) The Russian lists of exports and imports from 1742 to 1797, show a favorable balance of 250,000,000 rubles; to which must be added 88,000,000 rubles taken from the mines during the same time. But it is notorious that the stores of money diminished.Storch, Gemälde des russischen Reiches, XI, 12.
[A2-2-12]Manuel, 310.F. B. W. Herrmann(Münch. gelehrte Anz. XXV, 540) also declares the whole theory of the balance of trade wrong. According toBrauner, Was sind Maut[TN 125]und Zollanstalten (1816), 51, it is "a mere fancy."
[A2-2-13]Recognized even byCh. Davenant, On the probable methods of making a People Gainers in the Balance of Trade (Works, II, p. 11).
SECTION III.
FURTHER REACTION AGAINST THE MERCANTILE SYSTEM.
Simultaneously with this opposition, the theory of the international balance of trade underwent important refinements, a new and improved edition, so to speak, of old Colbertism.[A2-3-1]Each school is wont to estimate the favorableness of the balance according to the preponderance of that which they consider the most important element in a nation's economy. Thus the population-enthusiasts, after the middle of the 18th century, distinguished the "balance of advantage" from the "merely numerical:" the former is favorable to the country which, by means of its exports, employs and feeds the greatest number of men; the latter to the country with a preponderating importation of money. And they call the former much more important than the latter.[A2-3-2]The great advance which this view constitutes over the old system lies chiefly in two points: that the number and employment of men are evidently, so far as the whole national economy and national life are concerned, a much more important element than the quantity of money in a country; and further, that now, at least, the possibility of a simultaneous profit on both sides is admitted.[A2-3-3]The best writer in this direction, Jos. Tucker, is among the great-grand-parents of the Manchester theory of to-day!
A further advance was made by men who introduced the higher notions of nationality and of the stages of civilization into the theory of international trade. Thus, at about the same time, the socialistic J. G. Fichte, with his shut-in commercial state, and the romantic reactionary, Ad. Müller, with his organic whole of national economy.[A2-3-4]Finally, Fr. List,[A2-3-5]with his "National system of Political Economy," and his severe subordination of the mere "agricultural state" to the "agricultural, manufacturing and commercial state," acknowledges the favorableness of the balance in the nation which by means of the exportation of manufactured articles, the importation of the means of subsistence and of articles to be manufactured, demonstrates and promotes its higher stage of civilization.[A2-3-6]
[A2-3-1]CompareMengotti: Il Colbertismo (prize essay of the Georgofili at Florence), 1791. If, withH. Leo, we were to designate the whole period from the issue of the struggles of the Reformation to the preparations of the French Revolution as the "age of the mercantile system,"Colbertwould be a very appropriate type of it.
[A2-3-2]Compare § 254. Here belongForbonnais, Necker, Tucker(Important Questions, IV, 11; V, 5; VII, 4; VIII, 5. Four Tracts, 1774, I, p. 36);Justiin his middle period (Roscher, Gesch. der N. O. in Deutschland, I, 451 ff.); but especiallySonnenfels(politische Abhandlungen, 1777, Nr. 1), who sees the best sign of a favorable balance in the increase of population. (Grundsätze, II, 333.) When Austria, for 2,500,000, purchases diamondsofPortugal, and sells Portugal linen to the amount of 2,000,000, it has the numerical balance against it, but obtains the "balance of advantage." (II, 329 seq.) With an admixture of physiocratism, this doctrine appears inCantillon, Nature du Commerce, 1755, p. 298 ff.; with an admixture of free trade, inBüsch, Geldumlanf, V, 12.
[A2-3-3]Justi, Chimäre des Gleichgewichts der Handlung und Schiffahrt (1759), supposes a gain on both sides in all commerce between nations. Hence, no nation can attain to a flourishing trade in any way except it be to the advantage of those with which it has to do. (p. 14 ff., 43.) Here, it may be presumed,Hume'sEssay, On the Jealousy of Trade, exercised an influence.Sonnenfelsdistinguishes, in foreign trade, five grades of advantage: 1, most advantageous, when finished commodities are exported and cash money is imported; 2, when finished commodities are exchanged for raw materials; 3, finished commodities against finished commodities; 4, raw material against raw material; 5, raw material against finished commodities. (Grundsätze, II, 202.)
[A2-3-4]It is as necessary that every nation should constitute a separate commercial body as that it should be a separate political and juridical body. The person who asks: why should I not have commodities in all the perfection in which they are made in foreign countries? might as well ask: why am I not completely a foreigner? (Fichte, Geschloss. Handelstaat, 1800: Werke, III, 476, 411.)Ad. Müllercompares universal freedom of trade to a universal empire, which will ever remain a chimera. (Elemente der Staatskunst, 1809, I, 283.)
[A2-3-5]List(Werke, II, 31 ff.) had, after 1818, recognized that apassivebalance for whole nations was possible, if they were not able to cover their wants, supplied from abroad and then consumed, by their income, but were obliged to make inroads on their national capital.
[A2-3-6]Ch. Ganilh, who expects a real enrichment of a nation only from foreign trade (Dictionnaire de l'E. P., 1826, p. 131), ascribes the most favorable balance to the nation that exchanges dear labor against cheap; that is, principally to a nation of tradesmen as contradistinguished from a nation of agriculturists. (Theorie de l'E. P., 1822, II, 239 ff.)
SECTION IV.
PARTIAL TRUTH OF THE MERCANTILE SYSTEM.
But even among the successors of Hume and Smith, a deeper insight into, so to speak, the physics of money and of international trade must have led to the recognition of many a truth which the mercantile system had, indeed, badly formulated, insufficiently proved, but which it had, nevertheless, an inkling of. And, indeed, how frequently it happens that the progress of science proceeds from one one-sidedness, through another opposed but higher one-sidedness, to the all-sidedness which knows no prejudice!
A. Precious-metal-money is, indeed, a commodity, but of all commodities, the most current, the most many-sided in its utility, the most economically energetic, and at the same time of peculiarly great durability.[A2-4-1]Money-capital, far from being the least useful portion of a nation's capital, is rather one of its most important parts; and especially in the higher stages of civilization, where the division of labor has been most largely developed, is it peculiarly productive and indispensable.[A2-4-2]Hereit is really more likely that the possessor of commodities may be wanting the wished for money, than that the possessor of money should be wanting in the wished for commodities. And, hence, the numerous half mystic expressions of the magical power of money, which have passed into literature from the common usage of the people, can be, by no means, considered mere errors.
B. Just as little, can the impossibility of the preponderant importation of money for a long time, be asserted. Hume's rigid theory of a level, by no means, exactly corresponds with the reality. The precious metal which is, indeed, imported, but which does not subsequently enter into the circulation, need exert no influence whatever on the prices of commodities in general; and may, therefore, remain permanently in the country. Think only of the articles made of the precious metals, which minister to luxury,[A2-4-3]of buried private treasure, of the treasures of the state, which are idly stored up; as well as of a portion at least of most cash on hand.[A2-4-4]From the other side, also, the over-balance or under-balance (Ueber-oder Unterbilanz) of a country may continue, a very long time, when its internal trade with its money-need is, in the first case, an increasing, and in the last, a decreasing one. So far, the preponderance of the importation of money may be called a favorable sign and the preponderance of the exportation of money an unfavorable one. And the person who thinks that a permanent preponderance of exports or imports is not at all possible in the way of commerce, overlooks the possibility of a very extensive national indebtedness.[A2-4-5]
C. But a distinction should be made between thebalance of paymentsand thebalance of tradein the narrower sense of the expression.[A2-4-6]In the case of the latter, to be complete, it is necessary to carry to the credit side of the account: 1, The exports of commodities; 2, the profit made by parties at home by realizing on (Realisierung[TN 126]) the exports in foreign countries; 3, the freight-profit made by parties at home on exports and imports, as well as in foreign carrying trade (Zwischenverkehr); 4, the sale of inland ships in foreign countries; 5, premiums and compensation for damage on account of maritime insurance from foreign countries. On the debit side, on the other hand, the corresponding items when foreigners have received from the home country, as in the case of imports, etc. To obtain the general payment-balance, we have still, in addition, on the credit side: 1, The profit from home participation in enterprises in foreign countries and the transfers of capital originating therefrom; 2, the interest and repayments of money-capitalloaned in foreign countries; 3, the sale of stocks (Effecten) to foreign countries as well as new loans to which the home country makes in foreign parts; 4, remittances from foreign countries to foreigners sojourning in the home country, and money brought with them by travelers and emigrants; 5, inheritances, pensions and extraordinary payments from foreign countries. Then, too, on the debit-side, belong the corresponding counter-items.[A2-4-7]If we, in this way, take a survey of the whole world, we shall perceive a treble current of the precious metals. The first and most regular goes, in long lines, from mining countries, over to the commercial countries of the world, and distributes the newly acquired gold and silver as commodities according to the wants of the coinage, of manufactures, etc. The second oscillates, as it were, in short waves from country to country, in order to adjust theplusorminusfor the time being of payment-balances. Lastly, regular sudden currents, with slow subsequent counter-currents, when single economic districts require to make extraordinary drafts or shipments of the precious metals, by reason of bad harvests, war, a disturbed double standard, etc.
D. Since international indebtedness has so much increased, precisely the richest nations may have the greatest regular excess of exports over imports; partly because of the great amount of capital, etc., which they possess in foreign countries; partly because of the great development of their system of credit in the interior, by means of which they find substitutes for so great a part of the metallic currency.[A2-4-8]
[A2-4-1]Locke, Civil Government (1691), § 49, seq., emphasizes this durability of the value-preserving metallic money, in opposition to the perishable articles of consumption, as a principal element in the development of private property and of economic civilization. But evenPettyascribes to the precious metals a higher quality as wealth than to any other commodity, for the reason that they are less perishable, and possess value always and everywhere. Hence, he esteems foreign trade more highly than inland trade, and would have those businesses which import the precious metals protected more than others against taxation. (Several Essays, 1682, p. 113, 126, 159.)Adam Smithalso recognizes this, at least so far as intermediate trade is concerned. (W. of N., IV, ch. 6.)
[A2-4-2]EvenRau, in his additions toStorch(1820), p. 397, concedes the peculiarly charming, vivifying power, which money possesses to an extent greater than any other commodity. Well distinguished whether the money-want of a country is already fully satisfied or not. (Ansichten der Volkswirthschaft, 1821, p. 157.)Careyexaggerates when he calls money the cause of the movement in society, out of which force is produced, what coal is to the locomotive, or food to the animal body (Principles of Social Science, ch. XXXII, 5), or the only want of life for which there is a universal demand. (Ch. XXXIII, 1.) But he rightly calls it the "instrument of association." Excellent demonstration, as to how, at the sudden outbreak of a war, of a revolution, etc., all those who have money on hand, even when they had previously obtained it while peace still prevailed, in the form of a loan, are in an infinitely better position than the owners of the otherwise most useful commodities. (Ch. XXXVII, 12.) Earlier yet,P. Kaufmannplaced the "principal character of money" in this, that it was "most perfect property (Vermögen);" and he calls its quality as a commodity, philosophically considered, in question; and judges the balance of trade according to this, that in commodities, interest-yielding as well as dead capital is exported, but in money-capital, which is always gain-engendering. (Untersuchungen im Gebiete der politischen Oekonomie, 1829, I, 4, 74, 80.)
[A2-4-3]In England,Pattersonestimates the regular additional importation (Mehreinfuhr[TN 127]) of money at from four to five millions sterling, of which the greater part is devoted to purposes of luxury. (Statist. Jrl., 1870, 217.)