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30: A Concise Recapitulation of the First Part - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

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Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


30

A Concise Recapitulation of the First Part

The value of things, or the estimation we make of it, based on utility, is in proportion to our needs. From this it follows that the surplus, considered as surplus, has no value whatever, and that it can only acquire value in so far as one judges that it will become necessary.

Our needs are natural or artificial.

Natural needs in the isolated man follow from his makeup. In man as a citizen they follow from the constitution, without which society could not continue to exist.

These needs are small in number and only give value to things of primary need. artificial needs, in contrast, multiply with our customs, and give value to a host of products and worked materials which we have placed among the goods of secondary need.

The value of these things, in proportion to their scarcity and their abundance, varies again following the true or false notion we have of that scarcity and that abundance.

These values, estimated by comparison, are what one calls the price of goods. From this it follows that, in exchanges, the goods are reciprocally the price of each other, and that we are all at the same time, in different respects, buyers and sellers.

Prices are settled through competition between sellers and buyers. Prices can only adjust themselves at markets, and they will vary little if every one is allowed to bring to the market what he wishes in the quantity he chooses.

Now these exchanges, which are made in markets, are what one calls trade.

They suppose on the one hand surplus produce, and on the other, consumption to be made.

It is thus the surplus which is traded, whether the farmers make their own exchanges, in which case trade is made directly between producers and consumers; or whether exchanges are made through the intervention of merchants, traders or dealers; and then the merchants are like channels of communication between producers and consumers.

The surplus, which had absolutely no value in the hands of producers, acquires a value when it is placed in the hands of consumers. Trade therefore gives value to things which had none. It therefore increases the stock of wealth.

This stock also grows with the arts, which, in giving form to raw materials, give them value as they make them suitable for varied uses.

Society owes all its wealth to the work of the farmer, the artisan and the merchant. This work should merit a wage. This wage, regulated by competition, adjusts the consumption which each has the right to claim, and the citizens find themselves arranged by classes.

We have two kinds of wealth: landed wealth, which we owe to the farmer, and which is self-replacing; movable wealth, which we owe to the artisan or the artist, and which accumulates.

All these kinds of wealth are produced, distributed and preserved by virtue of the labour of the farmer, of the craftsman, of the artist, of the trader and of the sovereign power which maintains order and liberty.

Wealth abounds especially after the foundation of towns, since then greater consumption gives a new impetus to industry. The lands are better cultivated and the arts increase and perfect themselves.

All those who share this wealth acquire a right of property over it that is sacred and inviolable. We acquire this right ourselves through our work, or we acquire it because it has been ceded by those who have acquired it. In the one case as in the other, a person alone disposes of the goods he owns; no power can, without injustice, place a lower price on them than that which we place ourselves; and it is for competition alone to regulate the price of each good.

Just as the field belongs to the settler who cultivates it [landowner: 1798], and all those whom he employs in the cultivation acquire a right of co-ownership of its product: so in every enterprise there is a capital which belongs to those who have provided it, and a product which they must share with the workers whom they set to work. This co-ownership is represented by the wage which custom fixes and of which no one may be deprived.

Once wealth has increased, a more extensive commerce makes the need felt to judge the value of each good with more precision. So one looks for a common measure.

Since in exchange values measure themselves reciprocally, any kind of merchandise could be used to this end. We give the preference to metals, as being the commodity with which one can most conveniently measure all the others, and we create money.

It is thus because they had a value as merchandise that metals had one as money; and in becoming money, they do not cease to be merchandise.

The use of money, in facilitating exchanges, gives more movement to commerce, and increases the stock of wealth. But it causes what we call value to be misunderstood. When one thinks one sees the price of things in a measure, such as an ounce of silver, which is always the same, one does not doubt but that they have an absolute value; and because one judges that they have an equal value each time that they are estimated equal in value to the same amount of silver, one falsely supposes that in exchanges one always gives equal value for equal value.

Silver only facilitates commerce because one gives it constantly in exchange. It is collected up to be distributed, it is distributed to be gathered up; and never ceasing to pass and pass again from one hand to another, it circulates constantly.

So long as this circulation is made freely, it matters little whether there is more or less silver in trade. Its quantity can be smaller as it can be greater. One could not determine it with precision. One can simply surmise that, whatever the quantity is, it is at most equal in value to the value of the products which are consumed in the towns.

The circulation of silver is called exchange when, by the exchange of two sums which are at a distance, one makes them both in some manner bridge a gap to replace the one with the other.

Exchange has become a branch of commerce, in which money is the sole good which is bought and sold. The workings of exchange, which are simple, are regulated according to the reciprocal debts which exist between towns; and they assure the greatest profit to the dealers who have won confidence.

Just as silver has a price in exchange, so it has one when loaned, and that price is what one calls interest. Now as money in trade has a yield, the person who lends must have an interest in this yield, just as a landowner must have an interest in the yield of land he gives or leases to be farmed. This rate of interest, which rises and falls following circumstances, can only be regulated in commercial centres. The rate of interest is fair when it only puts silver at the price which dealers have placed on it freely and publicly; it is usurious when this price is arbitrary and clandestine.

The metals from which one makes coinage are scarcer or more plentiful, depending on whether they are used for more or fewer purposes: they tend to find a common level among the nations which have free and never-interrupted trade between themselves. That is why their relative value settles itself in all the markets of these nations, just as it would in a single market. Gold and silver each have the same price in all nations, because in all nations these metals are in the same relationship to each other.

As a free, never-interrupted trade tends to make gold and silver equally common among many nations, and for this reason gives each of these metals the same price in all: so a free and never-interrupted trade would tend to make corn equally common among many nations, and would give it the same price among them all.

This price, based on the quantity in relation to the consumption, would be the true price for all: because it would be the most beneficial for each. Then wages would always proportion themselves to the permanent price of corn: they would never fall too low, and each article would be constantly at its true price.

But when trade is not free, if corn is lacking in one nation, it stays deficient, and it rises to an excessive price which is to the detriment of the consumer: and if it is in surplus in another nation, it carries on being so, and it falls to a paltry price which is to the detriment of the producer. There is thus no longer a true price: there is only an excessive or a bargain price, that is to say harm for the buyer or for the seller.

So it is that when the number of merchants is not as great as it might be, monopoly, which raises itself on the ruins of liberty, places corn for sale in excessive or inadequate quantity, according to whether it is in its interest to lower or raise the price. However, if it matters that some corn is always on sale, because one constantly consumes it, it is no less important that it is only put on sale in the quantity one needs to consume. Now this proportion will never be grasped, except when the largest possible number of merchants make corn circulate everywhere with prompt and never-interrupted movement.

It is because this circulation has always been more or less halted that Europe cannot have in corn a measure fit to determine value in different ages and in different places. Once cereals can never be at their true price, once they can never have a permanent price, how can they be a common measure for all ages and all places?

Freedom alone can give each good its true price and cause commerce to flourish. It is then that order establishes itself naturally, that products of every kind multiply as does consumption; that all the land is brought to value; that every citizen finds his subsistence in his work, and plenty spreads. It spreads, I say, because habits are simple: but wretchedness spreads with luxury.

To sustain this plenty a power is required that will protect the arts and trade, that is to say, which will maintain order and freedom. This power has outlays to make, and it is for the landowners alone to pay the subsidies or taxes that it needs.

If this power maintains order and freedom, a nation which busies itself with everything without an exclusive preference, will be as rich as it can be. In every government see that all kinds of work are equally protected, and let the export and import of all goods, even necessities, be without restriction or interruption; then all nations will be rich, and their respective wealth will be by virtue of the fertility of the soil and the hard work of the inhabitants.

END OF THE FIRST PART

SECOND PART

Commerce and Government Considered in Relation to Each Other Following Some Assumptions

Although we are almost completely alike through the needs which follow from our physical constitution, we differ in particular through the needs which follow from our customs, and which, multiplying in proportion to the progress of the arts, develop our sensitivity and intelligence by degrees. The peoples are as brutes when they are limited to the needs which I have called natural. It appears as though nothing summons their attention: they are scarcely able to make some observations. But in step as they acquire new needs, their gaze rests on new objects. They notice what they never noticed before. One might say that objects only begin to exist for them when they have an interest in knowing that they exist.

However beneficial this progress may be, it would be dangerous for a people to pride itself on excessive sensibility, and to have a profusion of intelligence only to apply it to frivolous objects. However, there you have what happens wherever needs multiply to excess. More than ever a plaything of constantly changing circumstances, a people then changes itself continuously and applauds every change. Its customs vie with each other, destroy themselves, reproduce themselves, change: ever different in itself, the people never knows its identity. It behaves randomly according to its customs, its views, its prejudices. It has no thought of reforming itself: it does not think it needs to. As it is preoccupied with what it believes to exist, laws or abuses, order or disorder, all seem indifferent to it; and its delusion is such that it thinks it sees its prosperity in the very things that prove its decadence.

Is it by fighting the customs of such a people head on that one might flatter oneself to be enlightening it? It is too blinded and its eyes would shun the light as soon as one showed it truths that it does not wish to see.

For it to judge its errors it must be unaware that they are its own. Now one might, through assumptions, attempt to point them out to it in other peoples, where it would have some trouble in recognising itself. One might at least make it see perceptibly the advantages of which it deprives itself, if one has caused it to notice those enjoyed by a people which does not share its prejudices. That is what I intend in this second part. Besides, this method is the unique way to simplify overcomplicated questions which are raised about commerce, considered in relation to government; and one must simplify them if one wishes to treat them with precision.