Front Page Titles (by Subject) SECOND PART: Commerce and Government Considered in Relation to Each Other Following Some Assumptions - Commerce and Government Considered in their Mutual Relationship
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SECOND PART: Commerce and Government Considered in Relation to Each Other Following Some Assumptions - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship 
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).
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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.
The Distribution of Wealth, When Trade Enjoys Complete and Permanent Freedom
I assume that the country that our tribe occupies is as large as England, France, Spain, or as these three kingdoms put together. It has to have a certain extensiveness, and commerce must find a considerable stock-in-trade in the variety of products that the provinces will need to exchange.
This country is filled with hamlets, villages, boroughs, towns. It is a multitude of free cities which govern themselves near enough by the same laws; and which, remembering their origins, regard themselves as one and the same family, although they already form several peoples.
All these peoples, busy with agriculture and the arts which relate to it, or which tend to make it flourish, live a simple life, and live in peace. The magistracies are the ceiling of ambition for the citizens and none of them has yet thought of aspiring to tyranny.
These peoples know neither tolls, nor customs dues, nor arbitrary taxes, nor privileges, nor the police forces which hamper liberty. Among them, every one does what he wishes and freely enjoys the fruits of his labour.
Finally, they have no enemies, since we have placed them in a country inaccessible to any foreign nation.
There you have the assumptions following which you can form an idea for yourself of what I understand by commerce which enjoys complete freedom. It simply mattered to make that notion perfectly clear; and it hardly matters that some of the assumptions do not appear realistic.
To make trade flourish in all the provinces where I spread out cities, it is essential that the surplus pours out without hindrance, reciprocally from the one to the other, and that it supplies what is missing in the places where it spreads. It is a kind of ebb and flow where things balance out by alternating movement and tend to place themselves on a level.
Among the peoples we are observing, nature alone can place obstacles in trade’s way, and we lift them, or at least we lessen them. Navigation on the rivers is made easier, canals are dug, roads are constructed. These works which amaze us, as we, who do nothing except by dint of money, are rarely rich enough to undertake them, cost little to a sober nation which has willing arms. It sees its interest there; it feels that it is working for itself; and it carries out the greatest undertakings. It is not forced to impose taxes since all contribute voluntarily, one of his labour, another of his foodstuffs, to provide the workers’ subsistence.
The transport of merchandise is thus carried out with the minimum expenditure. Everywhere we have outlets to make surplus goods leave: everywhere these outlets are so many doors to allow essential goods to arrive; and, in consequence, exchanges between all the provinces are always made with equal facility, at least to the extent that the nature of the ground allows. If there is some difference, it only comes from the obstacles which nature has placed, and which it has not been possible to flatten out equally everywhere. But where there are more obstacles there is also more industry; and skill seems to make good the wrongs of nature. Let us see how wealth spreads naturally everywhere in a land such as the one I have just invented.
The country districts, each abounding in varied types of products, are rightly the first source of wealth.
In the boroughs, in the villages, in the hamlets, even on the farms, people work up the raw materials to make them ready for the needs of the settler who cultivates his field, or of the farmer who cultivates another’s field. There they make ploughs, yokes, carts, tumbrils, pickaxes, spades, coarse linen, heavy cloths and other works which require little skill, and are used in the neighbourhood of the places where they are made.
These manufactures, however coarse they are, give a new value to raw materials. They are thus so many channels through which the spring of wealth is distributed to spread from one side to the other at a certain distance.
I say at a certain distance, because the works which come out of these manufactures are only a stock-in-trade for the canton where they are established. Being of little value in themselves, and made expensive by the costs of transport, they would not be marketable in distant places where people make similar goods.
The wealth of the towns consists in the revenues of the landowners and the industry of the inhabitants, an industry whose income is in money. So it is money that forms the principal wealth of the towns, just as produce forms the principal wealth of the countryside.
It is in the towns that the greatest consumption is made. It is the place where the most skilled artisans in every kind of work set up valuable manufactures. There are permanent markets where people come from the countryside to buy works which are not made in the villages, or which are not made so skilfully there. There you have the channels through which wealth in money circulates in greater abundance. [more appreciably: 1798]
If a town’s industry were only paid for by the landowners who lived there, it would not increase the quantity of money which circulated in that place. However, it would make it circulate faster and that speed would make the same amount of money equal to a greater one.
But if, as we have noted, the articles which are made in the countryside are not of a type to be sold far away, it is not the same with those which come from the manufactures established in the towns. As they are at a greater price, the increase occasioned by transport costs is very little in comparison with this price. The artisans are thus not reduced to being paid only by the landowners of the towns they live in. Money reaches them from all the places where their works are sought after. It is really they who dig the channels through which wealth comes together in the towns; channels which form more branches and more extensive branches in line with industry’s progress.
Such in general is the distribution of wealth between the countryside and the towns; it is that the country districts are rich in products through the ploughman’s work and that the cities are rich in money through the incomes of the landowners and the work of the artisans.
[1798 addition: But you must not think I mean that money is wealth exclusively for the towns. Doubtless it moves continually through the countryside where it is exchanged for products: but it always returns to the towns as to reservoirs from which it flows back again into the countryside.]
But from one country area to another, and from town to town, this distribution is not and cannot be made in an equal fashion.
The ploughman sees the foodstuffs that are for sale. The more he is asked for, the more he demands from the fields he cultivates, and he applies all his effort to bring each piece of land to value. The countryside neighbouring the main towns, where people consume more, is thus the richest in produce.
In the remote countryside this wealth will be in proportion to the greater or lesser ease in transporting foodstuffs into the principal towns. Whatever trouble people have taken to make roads, to dig canals, to make rivers navigable, it has not always been possible to open up equally convenient outlets everywhere. Nature often placed obstacles in the way, which, even after being smoothed out, caused further great expenses for the transport of goods.
It is not in the ploughman’s interest to have foodstuffs beyond what can be consumed. So the provinces where export is less easy will be less rich in products. Less rich, I say, in comparison with the others; but rich enough for themselves because they will have as much as they need for their consumption.
In the provinces whose soil is the most unyielding the inhabitants will be harder working and they will have more ingenuity. They will develop the land right up to the rocks which they will cover with crops. In the seasons when they do not have enough work at home they will go in search of it in neighbouring provinces. They will return to their villages with profits which will place them in a position to form some small enterprises. They will increase the number of their animals, they will clear some scraps of land; and they will set up some common manufactures to work up their soil’s raw materials themselves. It is in that way that, in proportion to their extent, the least fertile provinces will be able to be almost as populous as the others.
Towns are not all in an equally favourable position for trade because they do not all have the same means to communicate afar. There cannot everywhere be large rivers, channels of communication and usable roads. There will therefore be towns which are more accessible, more engaged in marketing as a result, and more populous. These are the principal ones.
If a city conquered all the others, its town, now the seat of sovereign power, would be the capital, and could fill itself with people to the point where it would confine a twentieth of the citizens. We shall see elsewhere what such a capital must produce in a state. But there are not yet any among the peoples who have developed from our tribe. Up till now they have only been busy each governing itself separately, and none of them has had occasion to discover what it might do with conquests. It takes many circumstances to prepare the means of conquest for a people; and when all these circumstances come together, it does not nourish the ambition of dominating afar, except when, after making unintended conquests, it judges that it is capable of making them: this ambition is not therefore the first idea that proposes itself to a people.
All the cities are consequently free and independent, and if we consider them at a time when dissension has not armed them against each other, we shall judge that their towns communicate among themselves without hindrance.
On this assumption wealth divides itself among the towns by reason of the consumption made in them.
In the chief towns, which enclose a great population and which count many wealthy landowners among the citizens, there will be a great assembly of artisans and merchants of every kind, and money will circulate there more rapidly and in greater quantity.
In the smaller towns there will be less wealth, or less money in circulation; because being less populous they will consume less, and as they consume less they will not have as many artisans or merchants.
But although richer or poorer in money, all the towns have plenty of the things on which they have become dependent; because in all of them, the population is proportioned to the subsistence they can obtain for themselves. The less rich have only been formed because they have found subsistence in the places where they are settled. Now they find every day all the more to subsist on, as their citizens possess more industry as the days pass, and this industry is not held up by any impediment.
Let us conclude that the spread of wealth among the towns condemns none of them to lack necessities. Comparing some with others they are richer or less rich in money as they are more or less populated, but there is abundance in all.
Having seen what is the wealth of the provinces, the countryside and the towns, it remains for us to observe the division of it which must be made among the citizens. They have only one means to enrich themselves, trade.
Now we have distinguished the trade of products which is that of the settler and the farmer, the commerce in manufactures which is that of the artisan, and the commission trade [or long-distance trade: 1798] which is that of the merchant.
In all these kinds of commerce one only earns in relation to the high price one can set on the goods one sells. It will therefore be according to these prices that the division of wealth will be made among the merchants.
If, under the pretext of provisioning the towns, privileged companies had exclusive permission to carry corn there, you can conceive that they would rapidly enrich themselves on a fantastic scale. They would buy corn at the lowest price in the country districts where the harvests had been plentiful, because corn could only be handed over to them; and soon after they would sell it at the highest price, because, by keeping it back in their warehouses and putting on sale only an amount that was below consumption, they would cause a scarcity, even in places where there was abundance. This monopoly is not known in our cities.
Since everyone is free to sell to whom he wishes and when he wishes, it is the sellers and buyers who decide, alone and freely, on the price of each commodity.
This price, as we have seen, will rise or fall from one market to another. However, if we except the cases of glut or of great scarcity, prices will in general vary imperceptibly because competition will always be nearly the same.
It is rare too, when commerce is free, that the move from abundance to scarcity causes considerable variation in the price.
That would happen if in the same year all provinces experienced the same plenty at the same time, and the same dearth at another time. This cannot happen in a country of a certain extent whose parts are in a different situation. Normally when one province is in dearth another is in abundance.
Now abundance in one province causes the price of foodstuffs to fall very little there, when trade is free to export the surplus.
Likewise dearth raises the price little in another where trade is not slow to bring in the surplus.
So it is not in proportion to a localised abundance or scarcity that prices vary most perceptibly: it is rather in proportion as trade has less freedom. So we have demonstrated that, when freedom is complete and permanent, goods tend to make themselves equally common everywhere at the same price, or near enough.
Whatever this variation may be, wealth cannot be spread very unequally between those who carry out trade in products amongst peoples where this trade enjoys complete freedom, and where, in consequence, competition between sellers and buyers is the sole regulator of prices.
So it will not be in the power of some settlers or farmers to sell their food-stuffs for as much as they would like. The market price will necessarily be the price of everything: and they will be mutually forced to content themselves with the same profits.
In this state of affairs, the commerce in products will not enrich some at the expense of others, because no one will gain too much, and all will gain. All will share in the pleasures to which custom gives them claims; and if some, harder-working, live in greater comfort, the others will not fall into wretchedness; because to subsist it will be enough to work as one generally works. It is not to be feared that market prices will deprive anyone of the profits he ought to make. For that to happen all the cultivators would have to agree to sell at a loss, which cannot be.
Commerce in manufactures will spread wealth in the same manner. Competition will regulate the artisans’ wage according to the type of work. Some will earn more, some less. But all will subsist, and each, in his branch of work, will be happy to enjoy those things which in general those who make them in competition with him enjoy.
It will be the same for the commission trade, as for the two other trades, since competition will regulate the wage of the merchants.
If goods came from a distant, foreign country we should not know in our cities what they had cost in those places; and by capitalising on that ignorance, merchants would be able to make huge profits, especially as they would have few competitors. But, following our assumptions, this disadvantage is not to be feared. Since our cities only trade among themselves, the goods offered for sale are the products of their soil, or the works of their manufactures; that is to say, goods whose prices, known by everyone, are always regulated by competition.
In proving in the first part of this work that the true price is the same in the common market where all nations come freely to sell and buy, I have noted that this price is higher or lower for them depending on whether they are far away or adjacent to the common market.
Prices will therefore not be the same wherever our cities have been established. First of all, they will be higher in the towns than in the country districts. That is because, besides the wages due to the merchants, we also owe them the carriage costs and an indemnity for the risks they have run.
Secondly, prices will be higher in the chief towns since that is where people make the largest consumption. There one is better fed, better clothed, better housed, better furnished. Now the more one consumes, the more one demands; and the more one demands, the more one buys at a high price, other things being equal.
Besides, in proportion as consumption becomes greater, people will have to go to look for products in a greater extent of territory. There will thus be more risks and more transport costs to pay.
But lastly, although prices are not the same everywhere, they will be regulated everywhere by competition: everywhere they will be what they should be, and wealth will be spread with little inequality among those who compete in the same branch of trade. Everyone will have what he needs to subsist according to his condition, and no one will be able to make himself much wealthier than his rivals.
Someone who has not enough money income to live in a town will have enough in products to live in a country district: the worker who has no kind of income will find his subsistence in a wage proportioned to the price of foodstuffs; and because no one will be able to make himself surpassingly rich, so no one will be able to fall into wretchedness.
I estimate that a present-day merchant who gains 40 or 50 per cent will accumulate great wealth if, continuing to live with the sobriety to which he has become accustomed, he reinvests each year the lion’s share of his profits in trade. So it is not because he spends little that he becomes rich: it is because he earns a lot; and if he earned little he would not become wealthy whatever his savings were otherwise. But among the peoples whom we are observing the gains will be limited to procuring for the merchants the use of things necessary to their status.
There is only one class of citizen whom savings could enrich, that is the landlords. By making savings on their incomes, they would be able to increase the value of their lands, and it is to be wished that they should do so. This method of getting richer would help the day-labourers, for whom they provide work, to live more comfortably; and it would be beneficial to the state, for which it would provide products in greater quantity. But it can only be very slowly that one acquires wealth by this route, and the wealth is necessarily limited.
So everything comes together among the peoples whom we have conjured up to place limits to the fortunes of individuals; it seems that they cannot know the passion for money. Among them each person has his essentials: a large number live in ease; few are rich; no one is opulent. That is what freedom of trade must naturally bring about when it puts every good at its true price and it proportions wages to the price of subsistence.
The Circulation of Wealth When Trade Enjoys Complete Freedom
The arts multiply the goods of secondary need, they perfect them; and in proportion to their progress, they place in trade a greater quantity of goods, and goods of greater value.
We have seen manufactures right down to the villages; but these are manufactures which are not sold far away, and which, in consequence, only cause wealth to circulate in their localities.
So it is for the manufactures set up in the towns to produce a general circulation between all our cities. The works which come out of them, being made to be sought after everywhere, are on sale everywhere, and the trade made in them causes a sequence of exchanges on every hand which brings everything to value.
I call mercantile the provinces where there are manufactures of this kind and agrarian those where there are none. Let us look at the trade between the one and the other kind.
If an agrarian province buys cloth and linen with the surplus of its products, or with a sum of money equal to that surplus, it makes a profitable trade. Because in handing over the surplus of its products for sale, it gives up something which is useless to it; and in handing over an equivalent sum of money, it gives up money with which this surplus will be bought, and, as a result, the money will come back to it.
This trade is equally profitable to the mercantile provinces whether they are paid in products or whether they are paid in coin. Because they need these products and this money for their subsistence and for the upkeep of their manufactures. It will often happen that they subsist in part on the product of the agrarian provinces; but the latter will not suffer from that if they only ever give up their surplus.
This respective position of the provinces would secure the same plenty for all, if it could always stay unchanged.
It is not to be denied that in mercantile provinces manufactures to a greater or lesser extent harm the cultivation of products necessary for man’s subsistence. By preference, people there will grow the raw materials for which manufacturers are accustomed to pay a higher price, and the lure of gain will draw the inhabitants to become artisans rather than ploughmen. These provinces will thus be forced to carry their money into the agrarian provinces to provide themselves with those foodstuffs lacking for their subsistence; and they will carry all the more there as they become more populous. Now the manufactures, which are a magnet for industry, will make new inhabitants come every day from all over.
Subsistence in a mercantile province is thus not in proportion to its population. But it is easy for it to put this disadvantage right, since with the product of its manufactures it can buy everything it lacks.
The more need the mercantile provinces have of subsistence, the more they demand from the agrarian provinces; and in consequence, they make agriculture flourish there. For the same reason, the fewer manufactures the agrarian provinces have, the more they cause them to flourish in the mercantile provinces. So it is that as the ones lack what is surplus in the others, they all come together for their common advantage.
However, there is a disadvantage for an agrarian province, which is that it is never possible for it to buy except by reason of its surplus. Indeed, as each individual is free to dispose of his property as he pleases, by what means could the province come to regulate its expenditure in this proportion? To increase its expenditure beyond its surplus, would it not be enough, for instance, for the use of fine cloths and fine linen to become more common? It would then have to give up part of the foodstuffs needed for its consumption, or to give a sum with which people could come to buy them.
In the one case as in the other, it would not have enough foodstuffs left: that would make them rise to a higher price, and would force some of the inhabitants to go and live elsewhere.
The more it consumed in cloth and expensive fabrics the more everything would become expensive for it; because the subsistence it would be forced to give in exchange would become scarcer every day.
However, the cloths and fabrics of which it was consuming more would become still more costly, and cause a greater amount of money to pass into the mercantile provinces.
As the latter become richer they form new undertakings. They extend their trade more and more, and they summon new citizens from every part because they offer industry copious wages. That is how these provinces seem bound to enrich themselves and populate themselves at the expense of the agrarian provinces, and seem to be preparing their ruin. But they will not cause it.
You may perhaps judge that it does not matter to the state that wealth and men pass from one province to another, provided that the total of wealth and of men always finds itself the same. However, it is not right, in order to make some provinces more populous and to enrich them, to make of the others so many deserts, or only to leave a wretched people there. If agriculture decayed in the agrarian provinces, because they were no longer populous or rich enough, the mercantile provinces which had caused their ruin would destroy themselves in reaction, because they would not be able to extract anything from them, nor carry anything to them.
Everything would seem to draw towards this general ruin, if the trade in manufactures belonged exclusively to the mercantile provinces.
This is not how they possess it; it can be shared with them, and it will be. In step as the mercantile provinces make everything more expensive, industry will revive in the agrarian provinces, where people would like to go on wearing fine linen and fine cloth, and where they find that it is progressively more difficult to buy them at the price set by the mercantile provinces. It is easy for the agrarian provinces to judge how profitable it would be for them to have their own manufactures, where labour is at a lower cost.
Now if there are flourishing manufactures in the mercantile provinces, there are also others which are hardly so. The attraction of profit has multiplied them excessively and they harm each other by rivalry. There are therefore manufacturers interested in setting up elsewhere. They move into the agrarian provinces where they are called for.
At first, they only make poor-quality cloths, because they do not have the choice of workers; the most skilled having remained in the mercantile provinces where rich manufacturers give them higher wages.
But they offer their cloths at the lowest possible price, and they find a sale in a region where people in general are not rich enough to buy finer ones.
Bit by bit they train up better workers. Then they make cloths which rival in beauty those of the mercantile provinces; and they sell them for a lower price, because labour costs them little and they live very economically.
So the mercantile provinces see some of their trade escaping them. To keep it, as far as they are able, they lower the price of their cloth, of their fabrics, etc. They are forced to do so by the competition of the manufactures set up in the agrarian provinces.
In this way there will be a continuous balancing of wealth and population between all the provinces: a balancing which will be maintained by industry and competition, and which, without reaching a permanent equilibrium, will always seem to lead towards it, and will always be close to it. In a word, all provinces will be rich and populous by reason of the fertility of their soil and their industry.
If a province believed it could become wealthier by concerning itself with the ways of attracting and retaining gold and silver from all the others, that would be an error on its part as fatal as it was gross. Soon everything would become costlier for it: it would lose population: sooner or later it would be forced to spread abroad its gold and silver; and it would have no more idea how to bring them back because, as everything became more expensive, it would have lost its manufactures, and it would need a long time to set them up again.
So gold and silver must be able to enter and leave freely. That is the way that wealth balances itself between all the provinces: all will be in plenty through the exchange of their work.
It is true that, when one province is richer in metal, it seems to have an advantage over others. Since the price of the land’s products and of work are evaluated in money, they are higher in it. They will double, for instance, if it has twice as much money in circulation. With the product of one of its arpents, valued at four ounces of silver, it can buy the product of two arpents, which would only bring in two ounces each in silver in another province. In the same way the product of the work of one of its inhabitants will be the equivalent of the product of the work of two inhabitants of another province. In consequence, it will sell for twice as much money what people buy from it, and it will pay half as much money for what people sell to it.
This advantage would be huge and real for it, if it had the exclusive privilege of the trade in manufactures. It does not. If it believes it is richer because it has more money it is thus harbouring an illusion.
In reality the provinces which have been harmed will concern themselves with ways to draw money to them, and they will succeed through the cheapness of their manufactures. They will sell a lot, while the province that is rich in metal will sell little, or nothing, and nevertheless it will buy all the more, as its consumption will be far greater. So money will leave it, not to return, and it will enter the others, not to leave them, or at least only to leave when they have made the same mistake.
To develop my ideas I have had to show how it appears that provinces must get rich at each other’s expense. All the same this cannot happen when one assumes that they give trade complete and permanent freedom. Because if the circulation of wealth can be carried on with some inequality, it is not to be feared that this inequality can ever go as far as to place wretchedness in sharp contrast to opulence. All the peoples will work in emulation of each other, because they will all want to join in the same benefits. In this competition manufactures will gradually decay in the provinces that they have enriched, and where the price of labour has risen; while they will recover in the other provinces which they must make wealthier, and where the price of labour is lower. They will pass from province to province. Everywhere they will set down a part of the wealth of a nation; and trade will be like a river that divides itself in a host of channels, to water all the lands in succession.
This revolving motion will finish only to begin again. When, in one province, the high price of labour starts to make manufactures decay, the low price will raise them up again in another. They will thus be more or less rich in turn. But because none will be too rich, so none will be poor. That is, wealth will flow back continuously from one to the other; following the different gradients that trade will make them take, they will pour out in succession everywhere. This revolving motion will be without drawbacks, because it will happen naturally and without violence. It is imperceptibly that some provinces will lose a part of their commerce; it is imperceptibly that others will recover what they have lost. Freedom has thus the benefit of guaranteeing them all against poverty, and at the same time checking the advance of wealth in each, when excess of this kind could be harmful.
At the start of this chapter I was obliged to distinguish two kinds of provinces, the one mercantile and the other agrarian: but you can see that, through freedom of trade, they are all at the same time both agrarian and mercantile. That is to say that, in each, people are concerned with everything, and no one knows exclusive preferences.
The Simple Ways of an Isolated Nation Within Which Trade Enjoys Complete Freedom
Placed closely enough under the same heavens, the people whom we observe generally enjoy the same products, only in more or less abundance, depending on the nature of the soil and the hard work of the cultivators. A foodstuff, which is rare in one province, will be common in another, where a foodstuff which is common elsewhere will be scarce.
For trade between them, these peoples possess a stock in the products of which each of them has more than enough; and, as skills develop, they have another stock in their industry.
This double stock gives them the wherewithal to make exchanges of every kind; and through these exchanges, all enjoy the same products and the same goods.
They enjoy the same products, because, with the surplus of those which grow in their lands, they buy those which do not grow there.
They enjoy the same comforts, because they either develop the same skills or they trade with those who develop them.
Now it is the needs we have created for ourselves, and the means we use to satisfy them, which make our customs, our practices, our habits, in a word our behaviour.
Needs are the same for all the peoples we have imagined: the means of satisfying them are also the same. Therefore their ways are yet again the same.
So in order to give them a new way of life one would have to carry to them products foreign to their soil, or comforts unfamiliar to their skills.
But not only do they have the same mode of existence: I also state that their ways are simple and can only be simple. That is to say that it is impossible for them to know luxury.
We have seen that luxury consists in those pleasures which are the portion of a small number to the exclusion of the majority; that these pleasures only occur as people scorn common goods in order to seek out rare and expensive goods; and finally, that these goods are only rare and expensive because they come from a remote region, or because they have been worked up with great skill.
Now, following our assumptions, no foreign rarity can arrive among the peoples whom we are observing. It will not be any more in their power to obtain these works for themselves, works to which considerable labour will give a high price. As no one would be rich enough to pay for them, no artisan would dream of making them.
We have just proved that among such peoples there cannot be those overwhelming fortunes, which form from the despoilment of a host of families reduced to ruin. How could this disorder occur in a land where commerce, the sole means of obtaining ease for oneself, sinks and recovers in turn from one province to another, and everywhere keeps wealth at more or less the same level, or constantly tends to bring it back to it?
Now once this wealth cannot get lost in a small number of families, there will not be those exclusive pleasures which mock public misery, and which seem to efface the majority of the citizens from the ranks of humanity.
I do not mean that all will enjoy the same pleasures on an equal footing; doubtless not all, for instance, will wear cloth of equal fineness: but they will all wear cloth. Each, according to his position, will enjoy the comforts that the arts bring. Each one will be in plenty and ease, since all will have the use of the articles which their station in life allows them to make necessities; and if fortunes are not equal, it will only be because talents are not equal. Yet, once more, no one will be able to make excessive expenditure, because no one will be able to enrich himself exclusively.
I can see only one way to introduce luxury among these peoples: that would be to substitute exclusive privileges for freedom of trade. Then there would soon be a great disparity of fortunes, and articles which had previously been common would become scarce through the high price to which they would be raised. In such a case glass and earthenware, for instance, would become a luxury; and it is just so that china and mirrors are a luxury in our country.
Blows Directed Against Commerce: Wars
We have seen what freedom can achieve. It is time to sow dissension among our peoples, and to place constraints on trade: our assumptions will be the more plausible for that.
Divided by wars they form several nations which have opposing interests.
Now if we may assume that each of these nations trades freely within its boundaries we may no longer assume that they all trade freely with each other.
External trade, always hampered and sometimes suspended, will be all the less flourishing as it will be more expensive, whether from the losses to which it is exposed, or through the efforts made to sustain it.
These nations therefore do themselves mutual harm: firstly, because they each deprive themselves of the advantages which they would obtain for each other through exchanges.
Secondly, they harm themselves more, because they lay waste each others’ lands. Each time they take up arms, they destroy a stock of wealth which they could have put into circulation, and which cannot be there any more. There will be fields which warfare will not allow to be sown: there will be others, where it will not allow any harvesting. Consequently, products will diminish, and the population with them.
I want some of these nations to cover themselves with glory, with that glory which the peoples, in their stupidity, attach to conquest, and which historians, stupider still, love to celebrate to the point of boring the reader: what will be their advantage? They will rule far away in countries once populous and fertile, and now in part deserted and uncultivated. Because it is not by exterminating that they will assure their sway over previously free peoples. Let us assume that our cities are reduced to four enemy nations, more or less equally powerful, or which attempt to maintain themselves in a kind of equilibrium.
Are they equally powerful? They will hurt each other equally.
Do they try to keep themselves in a kind of balance? Two or three will join against a power whose dominance threatens to subject them, and they will hurt themselves again. The war will cost even the conquering nation provinces; because I regard as lost, provinces where the population and cultivation have been ruined or markedly damaged. Indeed, an empire which lost population and let lands fall fallow would not be the greater for having pushed back its boundaries.
But this balance, will one succeed in establishing it? Never: only false steps will be made, and anxiety will seem the sole moving force of the powers: they will confidently abandon themselves to the most ruinous projects, to carry them out in a more ruinous manner still.
Now, in this disorder, will the lands be as rich in products as when they were divided between a host of peaceful cities? They will be all the less so, as, with war taking away all freedom to trade, the surplus will cease to pass reciprocally from one nation to another. So it will not be consumed any more: now once it ceases to be consumed it ceases to reproduce itself.
While agriculture is damaged, many manufactures will collapse; and those which still exist will not have the same market any more. Normally they will only be able to sell to the nation in which they are established; and they will sell less to it, because that nation will itself be less rich.
No doubt you will say that these peoples will not always be at war. Indeed, there will be intervals of peace: but in those intervals you will not make good all the evils war has caused; and yet people will place new obstacles in the way of trade.
Blows Directed Against Commerce: Customs Dues, Tolls
The four nations which we postulated in the previous chapter are now four monarchies, whose monarchs rival each other in the ambition to be rich and powerful: but sadly they do just what is needed to be neither the one nor the other. They are in a deluded state from which they cannot escape. Because each of them believes he has nothing to fear from his neighbours, and even sees that he has sometimes made himself feared, they believe that they are all equally powerful, or near enough. The same faults that they repeat, copying each other, hold them in a balance of weakness, which they take for a balance of power: their great maxim is that one must weaken one’s enemies. There you have the essence of policy which must give them turn by turn the upper hand; furthermore they have no maxim for obtaining real strength.
One of them, to increase his income, conceived of putting taxes on all foreign merchandise that enters his states; and to that end he established customs and tolls. The others also set up customs and tolls.
Some time later he persuaded himself that the income would increase further if he placed taxes on the goods leaving his kingdom; so he placed them and the others set them following his example.
When it was no longer permissible to export or to import anything, unless one had paid in advance a certain tax, everything became more expensive in these four monarchies by virtue of the taxes imposed; and this increase in price which first of all reduced consumption, and then production, suddenly slowed down trade. There were manufacturers who, not being able to be certain of selling, no longer worked. Those who continued in their business worked less, and the ploughmen neglected every surplus which was becoming useless to them. So it is that customs duties and tolls injured agriculture, the arts and trade, and reduced to beggary a large number of citizens who had previously lived by their work.
Free trade between these four kingdoms would have caused the surplus of all to flow back from one to the other; and each sovereign would have based his power on a numerous people made wealthy by the arts and by agriculture.
That is not how our four monarchs saw things. On the contrary they doubled taxes because they thought they were doubling income, which they did not double. They tripled and quadrupled taxes; and they did not understand how, far from having more income, they had less. They did not see that they had caused consumption to fall.
Trade languished, and they thought they had found the reason. How, people said in the four monarchies, could our manufactures not fall since we are in the habit of preferring articles made abroad to those which are made at home? So one of the monarchs conceived of subjecting imports to new taxes and of suppressing some of those which he had placed on exports. But the three others, who were no less crafty, did the same, and trade did not pick up anywhere.
There was a great profit in defrauding the duties at tolls and customs, and people defrauded them. So it was forbidden in the four kingdoms, under severe penalties, to sell foreign goods for which one had not paid the tax imposed. But people carried on selling fraudulently: they simply sold at a higher price, compensating for the risks to which they were exposed. The traders who committed this fraud were called smugglers.
It was necessary to spread troops on all frontiers to stop the smuggling, which was not prevented. So there you have the four monarchies armed in time of peace in order to stop all trade between themselves.
Under the pretence of levying the sovereign’s rights, employees in the customs and tolls committed a great deal of harassment; and the government, which protected them, seemed to be in league with them, to compel all the traders to become smugglers.
These employees were large in number; men armed with the intent to prevent fraud were in even greater number. All these men consumed a large part of the customs duties and tolls dues at the expense of the state, and yet they were so many citizens taken away from crafts and agriculture.
Blows Directed Against Commerce: Taxes on Industry
Our cities from their foundation, and consequently a long time before the monarchy, had recognised the obligation citizens have to contribute to public expenditure.
Composed solely of settlers, it was only from the settlers that they could ask for subsidies. Consequently they levied them on each field and everyone paid by reason of the products he harvested.
This subsidy was raised at little expense. Its assessment was made in each canton by the settlers themselves. Each person paid without being forced, and as no one could complain of being overcharged, so no one thought of paying less than he owed. When, afterwards, some citizens found themselves without belongings, people did not think of demanding subsidies from them. It could not even occur to anyone to make men who had nothing pay. Custom, which determines the rules when it is reasonable, did not allow it.
These citizens who only had their strength thus lived on their work, or on the wage they received from the settlers, and they paid nothing.
This custom continued with the progress of the arts because every custom lasts. Therefore the artisans and the merchants, as well as the farmers and the day-labourers, lived on their wages and no one thought at all of asking them for subsidies.
So long as this custom lasted, everything flourished. Industry, assured of a wage regulated by competition alone and from which nothing had to be deducted, busied itself with ways of increasing this wage, whether by creating new crafts or by perfecting already known skills.
Then everything became useful. The surplus found a use in step with the progress of the arts and commerce. People consumed more: products grew by reason of consumption; and the lands were better cultivated every day.
Matters continued in this state right up to the time of the monarchy. They remained there still even under the first kings. But at length there had to be a transformation.
Because the artisans and merchants lived in ease, people asked: but why should these men who are rich not make a contribution to the subsidies? How have they been able to be exempt? Must the settlers alone [landowners alone: 1798] pay all the expenses, and does not every citizen have the duty to contribute to public expenditure? This reasoning seemed a gleam of enlightenment.
So taxes were placed on industry, and it was no longer permissible to undertake any kind of work, unless one had paid a certain sum of money to the state. It was no longer permitted to work! There is a very strange law. However, when one wishes someone who has nothing to pay for a licence to earn his subsistence, it is very necessary to forbid work to those who do not pay; and in consequence to take from them every means of subsistence.
One does not make the same profit in every occupation any more than in every kind of trade. It therefore seemed fair to create different classes, whether of artisans or of merchants, in order to tax each of them in proportion to the profits they could make.
This operation was not easy. How is one to estimate the amount a man can earn from his hard work? It is bound to happen that in the same occupation and in the same trade the person who earns less will pay as much as the person who earns more. That is a disadvantage which was not seen or which people did not want to see.
The name Guild was given to the different classes of artisans; and because one could only be admitted to them if one had passed as master, they were further given the name of Masteries. As for the classes of merchants, they were called Corporations.
As many guilds were created as the trades that could be distinguished in the mechanical arts; and as many corporations were created as branches of trade were distinguished.
When these distinctions had been made, the tax that each guild or corporation had to pay was set; and, in consequence, those who formed themselves into these bodies not only had the right to work, they also had the right to forbid all work to those who had been excluded; that is to say, to reduce them to begging for their bread.
To work without being a member of one of these bodies was a misdemeanour; and because an individual would not have wanted to stay idle, or rather, because he had been forced to work for his own and his family’s subsistence, he was apprehended and condemned to a fine he could not pay, or that he could only pay to fall into wretchedness.
As the chief branches of trade meet at the trunk from which they arise, still more are joined to these principal branches, and so forth; you may imagine that it will be all the more difficult to disentangle all these branches, as one divides the corporations of merchants and subdivides them again. However, they will divide and subdivide, because the sovereign, seeing that he is paid a new tax as each new corporation emerges, will believe himself richer when he has caused them to multiply.
Then the corporations will entangle like branches at the trunk they join. They will no longer be able to distinguish their privileges: they will blame each other for encroachment, and law suits will be born. It will be the same with the guilds.
All these bodies will be forced to incur great expense, whether to pay taxes, or to pursue their law suits, or to hunt out those who are working without having been incorporated into a guild or a corporation.
Forced to this expense, each of them will levy common funds from its members; and these funds will be wasted in assemblies, meals, buildings, and often in embezzlement.
These expenses will be recouped on the merchandise they sell. They will lay down the law to the consumers because, having the sole right to work, they fix the price of their work as they please. However many artisans and merchants there are, everything must become more expensive; because the guilds and corporations must always find the wherewithal to renew the common funds that they waste.
Besides, there exists in these guilds and corporations an esprit de corps, a kind of point of honour, which forces people to sell at the same price as the others. A person would pass for a traitor if he sold at a lower price; and he would expose himself to unpleasantness if he gave the slightest suspicion there.
Accustomed to laying down the law, these bodies sell dear the advantage of sharing in their privileges. It is not enough to pay for apprenticeship. So long as it lasts one only works for the master’s account; and one must expend many years to learn a trade which one could sometimes know at the end of a few months. The person who has the greatest aptitude is sentenced to an apprenticeship as long as the person who has the least aptitude. From that it results that all those who have no means are excluded for ever from every guild. Have you been received? If you do not succeed there is no more time to serve another apprenticeship: you would no longer have the means to pay for it, and you are condemned to beg.
When the professions were free in our cities, the artisans somehow found themselves scattered widely. The ploughmen, in the moments when they did not apply themselves to cultivation, could work at some mechanical art. They could give work to some children who were not yet strong enough to work in the fields, and they used the profits they had made for cultivation. This expedient was taken from them when all the trades had been formed into guilds.
Thus the guilds and the corporations take all comfort away from the country inhabitants: they reduce to beggary the hard-working citizens who have not the means to pay for an apprenticeship: they force them to pay a high price to a master to learn from him what one could often learn much better on one’s own: finally, they deliver a blow to commerce because, by making everything more expensive, they reduce consumption and consequently production, cultivation and the population. Can one reflect on these abuses and not recognise how contrary they are to public welfare?
Blows Directed Against Commerce: Privileged and Exclusive Companies
The privileges accorded to guilds and corporations are iniquitous rights which only seem in order because we find them established. It is true that the competition of a large number of artisans and merchants places limits on the profit that guilds and corporations might draw from their monopoly. But it is no less true, according to what we have just shown, that these bodies take away comfort from many citizens, reduce others to beggary, make everything more expensive, and bring damage to agriculture as to trade.
However, once people became used to regarding monopoly as in the order of things in a large body, it was natural to see it again as in order when it was found in smaller bodies. An abuse which has passed into custom becomes a rule; and because one has judged badly at first, one carries on judging badly.
It was easy to foresee that the profits stemming from a privilege, which were great for each member in a large body, would be greater still as one reduced the number of members. It was no more than a matter of establishing this new monopoly and few obstacles were found in the way.
Salt, which is very common in our four monarchies, was, through free trade, at a price proportionate to the means of the less well-off citizens; and it was consumed on a large scale since it is necessary to men, to animals, and even to the land for which it is an excellent fertilizer.
There was thus bound to be great profit in exercising a salt monopoly. The project for it was made and to that end a privileged and exclusive company was created. The company gave the sovereign a considerable sum, and it gave the great men who protected it a share in its profit. Those who made up this company called themselves contractors because they had contracted with the king. They alone carried out, in his own name, the salt trade in the length and breadth of the kingdom. The first king who found this source of wealth caused the others’ eyes to open, and he was copied.
The price of salt rose suddenly from one to six, seven or eight; and yet the contractors, who alone had the right to buy it at source, paid so poorly for it that people ceased to work several salt pits.
Such was the abuse of this monopoly that the consumption of salt fell to the point where, to make this branch of trade pay, it was necessary to force each of the citizens to take a certain amount per head. Salt was thus a fertilizer taken away from the land: people stopped giving it to animals; and very many subjects only continued to consume it because people forced them not to do without a necessary substance.
The company of contractors cost the state a vast amount. How many employees spread throughout the provinces for the sale of salt! How many armed men to prevent contraband! How many searches to make sure that all the subjects had bought the required amount! How much vexation! How much expense in arrests, seizures, fines, confiscation! In a word, how many families reduced to beggary!
There you have the troubles that this privileged and exclusive company produced. However, it did not yield the king half what it took from the citizens. The greater part of the other half was consumed in expenses. The rest was divided among the contractors: and if they did not have enough profit, as indeed they never found they had enough, they were given ordinance upon ordinance to give them every day greater scope for their privileges; that is to say, to permit them to harry the people more and more.
Once the profit of this monopoly was known, it spread a spirit of greed and plundering. One would have said that it was essential for every branch of trade to be carried out exclusively by companies. They were formed every day: patrons begged for them, often with success. They sold their credit, and they did not hide it. Everyone thought he could permit himself what he saw happening. It was the monopoly of the great.
These companies always had as an excuse the good of the state; and they did not fail to demonstrate in the privileges they were given great advantages for the very trade. They were particularly successful when they proposed to set up new manufactures.
It is clear that new manufactures deserve to be given advantages, that is to say to be multiplied; and the more useful they can be, the more one should reward those to whom the manufactures are owed. But exclusive privileges were granted, and straight away luxury came out of these manufactures. The works which were sold there became costly and scarce, whereas they could have been cheap and plentiful. I return to the consequences I have already repeated: reduction in consumption, in production, in cultivation, in the population; and I add, birth of luxury, growth of misery.
Blows Directed Against Commerce: Taxes on Consumption
The true way to make everyone contribute was to place taxes on consumption and our four monarchs placed them on every kind. They persuaded themselves that this imposition would be very productive for them and at the same time an indifferent burden on their subjects. Because in matters of administration one often reconciles the contradictory.
But they deceived themselves, both on the yield which is not as great as it appears, and on the burden which is greater than they thought.
First of all, the yield is not as large as it appears.
It is true that since everyone is forced to consume, everyone is forced to pay; and if one pauses at that consideration alone, one can see that the yield grows by reason of the number of consumers.
But one must first deduct the expenses of collection; expenses which themselves grow by virtue of the number of companies to which one farms out or gives the administration of each of these taxes, and by virtue of the number of employees they have on their payroll.
Besides, these companies alone know the potential yield of each of these taxes, and they put all their skill into concealing it from the government, which itself often closes its eyes to the abuses it sees. The collection would enlighten the public if it was simple, and would be less expensive: but they deliberately make it more complex, as it is not on them that the expenses fall; and it is all the easier for them to make the collection complicated, as the mass of taxes ends by making a totally incomprehensible science from this part of the administration.*
There you have a large part of the yield which is bound to be wasted; and the best that one can imagine for the monarch is that about half the yield comes to him.* But he deceives himself further if he believes that his income is increased by this half.
Taxes, multiplied like consumption, have made everything more expensive for the monarch as for his subjects; and this price rise bears on all expenditure since it raises the cost of labour in every type of work. Should one estimate his revenue to be increased by a third, he would not be richer if for what he used to pay an ounce of silver he in future paid an ounce and a half.
He thinks he is only placing the tax on his subjects and he is placing it on himself. He pays his share and this share is all the larger as he is compelled to greater expenditure. For industry which consumes, this tax is only an advance which it is forced to make. It makes the law in its turn and it forces even the sovereign to reimburse it.
The raw materials on which one works in manufacturing pass through the hands of many artisans and many merchants before they reach the consumers; and with each artisan and each merchant they take on an increase in price, because one must replace turn by turn the taxes that have been paid. So one thinks one is only paying the final tax, placed on the merchandise one is buying, and yet one is reimbursing many more still.
I do not intend to seek the result of these increases through calculations; an Englishman has done it.† It is enough for me to make it understood how much taxes placed on consumption necessarily increase the price of everything; and that consequently the king’s revenues do not grow by virtue of the yield that they pour into his coffers. Let us see if they are burdensome for the peoples.
The government did not suspect they were. It assumed that everyone can at his discretion place such limits to his consumption as he judges right; and it drew the conclusion that no one would pay more than he was willing to pay. According to it, this levy did no harm to anyone. Could one imagine a less onerous one? It left complete freedom.
The government, which reasoned thus, probably only considered as subjects the rich men who consume lavishly at the court or in the capital; and I agree with them that those people had the power to reduce their own consumption, and that it would have been desirable that they should have used the freedom given them. I agree besides that all those who lived in ease could also use this freedom, which is only so in name, since in reality one is compelled to do without what has become necessary.
But the subjects, who only earn from one day to the next just enough for themselves and their families to subsist, are they free to cut back their consumption? However, there you have the majority, and perhaps the government is unaware that there are many among them who scarcely have bread: because I am not talking about those who are begging, many of whom have only been reduced to it by the errors of government itself.
But I want everyone to be free to cut back his consumption; what will be the effects of this supposed freedom?
The monarch, I assume, will be the first to set an example. Economies will be suggested to him, and sooner or later he will have to make them, as, at the high price to which everything has risen, his income is no longer adequate for his expenditure.
I might note at this point that these economies are an evil; because they are at the expense of the cultivator, the artisan and the merchant, who no longer sell the same amount of goods. Consequently, agriculture and trade suffer. But let us go on.
I assume similar economies at the court and in the capital; I also assume like ones in other towns: and step by step I reach the cultivator, who having no surplus on which he can economise does so on the number of his animals, his horses, his ploughs. The final outcome of these economies is thus harmful to agriculture.
Do you wish to see them all from another standpoint? I shall say: comfortably-off men will make fewer clothes. As a result less cloth will be sold from the merchants and less will be made at the drapers, and fewer sheep will be raised in the countryside. So when we follow all these economies in every type of consumption, we see, as a result, the ruin of several manufactures in the towns, and the ruin of agriculture in the countryside. Then a host of citizens who previously found work will seek it in vain. Those unable to find it will beg or steal: and those who do find it will be forced to offer their labour on the cheap and will subsist wretchedly.
In this state of affairs the sovereign, who does not understand why his income is falling, doubles taxes and his income falls again. So it is that, through the economies, which he does not weary of forcing blow by blow on his subjects, he finally succeeds in ruining the arts and agriculture.
I pass over a demonstration of the constraints that the inspections at the gates of towns place on commerce; the processes needed to value the goods, the disputes and law-suits to which these processes often give rise; the harassment by employees who often only look for excuses to make charges; the losses that merchants sustain when, forced to leave their goods at the customs, they lose the right moment for sale. I could yet point out that the duties that are placed on entry and departure are necessarily arbitrary and unfairly distributed. Wine in the cask, for instance, which is only worth ten ounces of silver, will pay as much as a cask worth fifty; and, for the one as for the other, this tax will be the same in a year of scarcity and in a year of plenty, that is to say when they will each of them have changed in price. But, without repeating platitudes already repeated so often and always uselessly, it is enough to have shown that the duties on consumption are the deadliest of all.
Blows Directed Against Commerce: Variation in Coinage
We have seen that pieces of money are portions of metal, on to which public authority has placed a stamp to make known the amount of gold and silver they contain.
If, among pieces of coin, one only used pure gold and silver, it would be enough to weigh them to know their worth. But because these metals are amalgamated with a certain amount of copper, whether to work them more easily or to pay the costs of minting, one needs to know further in what relation the amount of gold or silver is to the amount of copper.
A gold piece considered as a whole is made up of twenty-four parts called carats. If these twenty-four parts were so many parts of gold one would say that the standard of the piece was twenty-four carats. But because there is always some alloy, the standard is always below twenty-four. If there is one part of copper, the standard is at twenty-three, if there are two it is at twenty-two; if there are three it is at twenty-one, etc.
In the same way, one considers a silver piece as a whole to be composed of twelve deniers; and one says that the silver standard is at eleven deniers if the piece contains one part of alloy; that it is at ten if it contains two parts, etc. It is understood that these divisions into twenty-four carats and twelve deniers are arbitrary, and that any other would have been equally suitable to fix the standard of the coinage.
The right to coin money can only belong to the sovereign. That is to say, he alone is worthy of public confidence, he alone can state the standard and the weight of the gold and silver pieces in circulation.
[1798 addition: The sovereign, that is to say, the king in a monarchy, and in a republic the nation or the body which represents it; the sovereign, I say, alone worthy of trust, can alone fix the denomination and the weight of pieces of gold and silver in circulation. The right to coin money can only belong to the sovereign.]
He is not only owed the expenses of minting, he is also owed a duty or a profit for his stamp, which has a value, since it is useful.
[1798 addition: But from whom should he demand his due? The money which is mine today will be yours tomorrow: if it is not fair that you should be made to pay since you do not yet have it, it is no more just that I should be made to pay since it is going to slip away from me. Indeed, it is neither for you nor for me that one coins money, it is for the citizen body: so it is up to this body to pay; in consequence it is for the landowners to pay if the old taxes do not cover this expense.]
But it is in his interest to limit this duty, because too great a profit on his part would invite counterfeiting. He alone sells coins. This monopoly, based on public utility, would become wicked if he abused it. He would have himself to blame for the crimes he had caused, and the need he would be under to punish them.
It is easy to judge that our four monarchs have abused this right and multiplied counterfeiters. They have done more.
In the early days, a livre in coins weighed twelve ounces of silver; and with these twelve ounces, twenty pieces called sous were made, and they were each a twentieth part. So twenty sous made a livre in weight.
Now our four monarchs changed the coinage by degrees. They sold, as the twentieth part of twelve ounces of silver, sous which were only the twenty-fifth part, the thirtieth, the fiftieth; and they finished by making sous which were only the hundredth part of an ounce. However, the public, which had at first judged that twenty sous make a livre, continued through habit to judge that twenty sous make a livre, without much understanding what it meant by sous and by livres. One might have said that their language concealed from them the deceit perpetrated on them, and conspired with the sovereign to deceive them. It is one of the most striking examples of the abuse of words.
When it was recognised that one no longer attached any precise idea to the denominations livre and sou, the monarchs noticed that they had a simpler way of raising or lowering the value of the coinage without changing it. That was to declare that what was worth, for instance, six livres, would in future be worth eight, or would be worth no more than five. So the pieces of money in commerce were, with the same quantity of silver, worth more or less according to what they judged fitting.
This operation is so absurd that if it were an assumption on my part you would say that it was unreal. People would object to me: How do you expect it to enter the sovereign’s mind to persuade the public that six is eight, or only five? What gain would he draw from this clumsy fraud? Would it not rebound on him? And would people not pay him with the same money with which he pays? Monarchs however have regarded these frauds as the great art of finance. Indeed, the least realistic assumptions that I have made are more realistic than many of the facts.
I shall not dwell on all the drawbacks that arise from variation in the coinage. It is enough for me to show how they damage commerce.
Confidence is absolutely necessary in commerce, and to establish it one must have, in the exchanges of value for value, a common measure which is exact and recognised as such. Gold and silver had that advantage when the stamp of the sovereign authority truly attested the standard, and never deceived.
But once the monarch had changed the coins, one could no longer accept them with confidence, because one no longer knew what they were worth. One had either to be deceived or oneself to deceive. So the sovereign’s deception placed deception in lieu of confidence in trade, and people could neither buy nor sell unless forced to by need.
When it pleased the monarch to raise and lower the value of the coins by turn without having changed their standard or their weight, the abuse was greater still; people did not know how to use a measure which, as it varied continually, was no longer a measure.
It is true that they could have disregarded the pretended value which was only in the name given to the piece of money: they could have calculated the amount of silver it contained and used it according to that valuation. That is what the prince did not permit. He wanted an écu, which contained an ounce of silver, to be taken for a hundred sous, six francs or eight livres, at his discretion; and he wanted this, because otherwise he would not have drawn from the fraud the profit that he found in having himself paid when money was low, and in himself paying when money was high. But we must look at the government procedures, to judge better the chaos these changes must produce.
Usually he did not make the coinage fall suddenly to the lowest limit at which he intended to halt it. He brought it down by steps. He issued an ordinance through which he declared that in the space of twenty months écus, for instance, which were worth a hundred sous, would lose 1 per cent a month; and that way he brought it down by degrees to be worth no more than four livres.
One could surmise that the coinage would rise after having fallen; because that was the government’s method of proceeding in this operation, as it thought it would find a profit in these alternate rises and falls. So people no longer knew on what they could count. Cautious people who did not want to lay out their money at the risk of losing it locked it up again. They waited for the moment to use it again with less risk, and trade suffered from this.
Others, less wise, seeing that at the beginning of the reductions one made twenty livres with four écus and that at the end it took five to make the same sum, hastened to put their money in the market place. For the same reason those who were indebted hurried to pay their debts.
So people found it very easy to borrow. This ease deceived incautious merchants who thought they must seize this opportunity to form some new enterprises. They took this money that was offered them, and they bought, but dearly, either because their competing demands raised prices, or because they paid with money which, from one day to the next, was to fall in value.
However, after several reductions, the king himself began to lock up the silver in his strongboxes. Payment at his treasury ceased. So mistrust was general and one saw no more silver in circulation. Merchants who had borrowed it did not have enough for everyday essential expenditure. Then, forced to empty their warehouses and to sell at a 50 or 60 per cent loss, they saw how they had been deceived in their speculations. The majority became bankrupt.
At the height of this crisis, the government suddenly raised the écu of four livres to a hundred sous, and it thought it had gained 25 per cent. But this gain is imaginary, and the harm it brought to the people real.
When I say it raised the écu, I am not speaking with enough precision. It banned the écu whose value it had lowered. It laid down that it should be carried to the mint where it was only received on the basis of four francs; and it made a new écu at the same standard, which it made worth a hundred sous.
Because it raised the duties of its mint to 20 per cent it thought it was finding 20 per cent profit in this operation. But counterfeiters bought the old écus for four livres five, four livres ten; and they made new ones which they sold, like the king, for a hundred sous. The government had thus grossly deceived itself.
For the rest, it matters little what is the standard and the weight of the coinage. It is enough that the stamp guarantees the amount of silver that each piece contains and that the prince, by abusing words, does not embark on placing a value that is imaginary, and hence always variable, in place of a real value which is permanent.
Blows Directed Against Commerce: The Exploitation of Mines
In one of our monarchies mines were found which, being very plentiful in gold and silver, suddenly made the owners, the entrepreneurs, the smelters, the refiners and all those who worked these metals wealthy.
When one becomes rich only slowly and by dint of work, one can be economical: but one is wasteful when money easily reproduces itself and seems bound always to reproduce itself in greater quantity. Now the mines that were plentiful in themselves were even richer still in the public estimation.
So those whom they made wealthy hurried to increase their expenditure; and consequently they shared their wealth with the artisans to whom they gave work, with the merchants from whom they bought, and with the farmers whose products they consumed.
The artisans, the merchants, the farmers, become wealthier also in their turn, spent more than they had before, and, in step with the growing consumption among citizens of every estate, prices rose in all the markets.
This rise in prices did harm to those who had lands whose leases they could not yet renew. But that was only for a while. It was more disastrous for people living as rentiers or on wages. It took from them permanently part of their subsistence and forced many to leave the kingdom. Thus the population fell.
Consumption increased further still when the leases of all the lands had been renewed. Then the kingdom appeared to be flourishing. Everyone was rich. The owner of an estate saw his income doubled. The merchants rapidly emptied their shops: there were scarcely sufficient artisans for the works sought from them: the farmers raised more animals, cleared more lands and cultivated them all more intensively.
In this moment of prosperity, people said: Mines are the power of a state. It is a plentiful spring which so to speak causes the other springs to over flow with wealth. You can see how they make the arts, trade and agriculture flourish. This truth was only momentary and one had to hurry to voice it.
Indeed, when a larger quantity of silver had again raised prices, people bought from abroad, where everything cost less, what they had previously bought in the kingdom. Bit by bit the artisans ceased work, the merchants gradually stopped selling and the farmers gradually stopped growing the products that were no longer wanted from them. Manufactures, agriculture, trade, all fell; and among those who previously lived from their work some left the kingdom, others remained there to beg.
So in the last analysis the product of the mines was depopulation and misery. The silver drawn from them crossed the provinces and passed abroad without leaving traces.
However, no one tired of exploiting the mines, and silver was no easier to come by for all that. People lacked it all the more as everything became more expensive in the neighbouring monarchies, where merchandise doubled and tripled in price, because silver had doubled and tripled there.
At last the increase in prices reached the point where people were obliged to abandon the mines. The costs of extracting the gold and the silver became so great that there was no longer profit in exploiting them. Richer ones were sought: none were found.
So a time comes when the exploitation of mines can no longer be carried out profitably. It is not the same for the cultivation of products which are consumed to reproduce themselves. By the abundance with which they renew themselves they increase each time, by reason both of the amount needed for our consumption and of the advances made and to be made; so that, whatever the costs, the product always ensures a profit. It is a spring which does not dry up. The more one takes from it, the more it increases. That is the advantage of the exploitation of the land over the exploitation of mines.
What would have happened if gold and silver had become as common as iron? These metals would have ceased to be the common measure of value, and it would no longer have been possible for the landowners to receive their incomes in the towns where they lived. When they had been forced to retire to their lands, because they would not have been able to cultivate them all by themselves, they would have left the larger part to the settlers whom the lands had enabled to subsist. So, no more towns, no more large fortunes. But also no more begging; and in place of our four monarchies where wretchedness and depopulation grow constantly, we should see a host of agricultural cities which would become more populous every day. How happy we should be if we could find mines rich enough to make all our gold and all our silver useless!
Blows Directed Against Commerce: Every Type of Government Borrowing
In the time of our cities, justice was administered in the simplest fashion, that is to say, with few laws and few magistrates. Under the monarchy, laws proliferated with tribunals, magistrates and henchmen of every kind.
Of all the causes which contributed to this abuse, there is only one which enters into my scheme: it is the creation of a host of offices; a creation from which the sovereigns obtained money.
In a monarchy the offices of the magistracy must be venal; since if they were not, intrigue would sell them, and the administration of justice would be plunder.
But, to sell them himself, the sovereign must not multiply efficient offices beyond the need for them, even less create useless ones. If it is a source of income for him, it is only temporary, and it remains charged with debt for eternity. Because an office he sells is rightly a loan, whose interest he pays under the name of wages.
However, when our four monarchs had found this income, they abused it to the point that the magistrates were often obliged to pay out to avoid the tribunals being overburdened with an excessive number of useless members. But this expedient, instead of producing the expected result, was yet another way for the sovereign to make money. So they paid up, and some time later new offices were created.
The nobility was exempt from a large part of the taxes. This ridiculous exemption, which is inexplicable among peoples who were agricultural in their origins, such as those I assume, is easily explained among peoples who were barbarous in origin.
Since the ancient nobles were exempt from taxation, people wanted to become noble to share this prerogative with them; and offices were created simply to sell nobility.
Then the people found itself more and more overburdened. Not only did it bear as an additional burden all the load that the ennobled commoner no longer bore; it also had new taxes placed on it to pay the wages of the new offices.
One would tire of seeing the four monarchs using the same means to make money. But then they had many which they gave up by turn and to which they returned at long intervals.
They especially found great resources in the privileged companies. These had credit. The monarchs borrowed from them, sometimes at 10, 15, 20 per cent, sums which the companies normally borrowed at 5.
At first the people did not deem these loans to be a new expense for it. It did not see that it was itself contracting debt when the sovereign borrowed. However, a part of the taxes was transferred to pay interest to the companies; and soon after, new taxes were imposed to equate tax receipts to total expenditure.
These loans were an endless expense for the state; an expense that was all the greater, as a part of the interest each year went abroad to foreigners who had also lent. The government did not abandon this income but it created another in the borrowings on life annuities; and to tempt greed it thought up tontines. It congratulated itself on contracting debts that snuffed themselves out, and on having found the secret of taking money from the citizens without doing violence to anyone.
This expedient, like all the others, placed it in the need to multiply taxes so as to balance income and expenditure; and it had to lay heavy taxes, as its debts were great. It is true that the debts died out; but the taxes remained; and they were piled up, because life annuities or tontines kept on being created. This operation which had no end filled the towns with idle, useless people who nevertheless lived at the state’s expense.
The companies, in borrowing to lend to the king, had spread among the public an amazing number of bills payable to the bearer and carrying interest at 5 per cent. There were ones of fifty ounces of silver, of a hundred, of a thousand, so as to make it easy for everyone to have the means of lending.
This paper currency seemed to put great impetus into the circulation, and people thought themselves wealthier. With lands, it was said, one always has repairs to carry out: a poor crop takes away some of one’s income, and one often has a lot of trouble getting paid by one’s farmers. Besides, if the circumstance occurs of an exceptional expense, one cannot take it from one’s capital, and there is difficulty in borrowing. But, with a portfolio, one has stock which pays well at maturity; and since, if needed, one can sell some bills, one can always face up to misfortunes.
You can imagine what a blow this new way of thinking delivered to agriculture. Land fell in price. Losses in livestock were not made good: farms were allowed to fall into ruin: farmers were harried for payment; and people bought bills. One needed to have a huge money surplus to contemplate buying an estate: and when a person had done so, he thought of ways of getting a lot out of it without putting anything back.
However, the state’s debts were growing, and the companies, which the government repaid poorly, could no longer keep their undertakings. Then the government put itself in their place and declared that it would pay for them, that is to say, it reduced the rate of interest on public paper from 5 to 4 per cent, to 3, to 2, finally to nothing. Then the ruin of a great many individuals, who had previously been rich, brought down with it a crowd of traders. One saw no more than bankruptcy on bankruptcy; and people learnt that it is not the same with papers, which only have a pretended value, as it is with gold and silver, which have a real value.
People ought at least to have learnt the lesson. But wealth in paper was so convenient that they only sought to deceive themselves; and after a while they again received it with confidence. It seemed that people did not know what to do with their silver.
We have seen how a banker put to work for his own account the funds that several traders entrusted to him. Now let us assume that bankers, rich in silver and especially in credit, associate and form a joint fund to exploit for their mutual profit. This association is a company which will give each of its members a written recognizance of the sum that each of them has provided. This promissory note or bill will be called a share [action] since it gives a title on the bank’s funds called an action in legal terms.
I assume that the capital of this bank amounts to a hundred thousand ounces of silver, and that to make its circulation easier, this capital has been split into a thousand shares, each of a hundred ounces.
These shares will yield 5, 6 per cent, sometimes more, sometimes less, according to the bank’s profit. The more they yield the more they will gain favour; and there will soon be several thousands of them among the public.
Every owner of a share has a credit on the bank and finds several advantages in it. The first is security for his money that he is afraid to keep on his premises. The second is the interest he will draw on it, interest which may grow from one day to the next. The third is to be able to place in small portions, and over the length of time he chooses, all the money he will not use for the moment. The fourth is the convenience of being able to pay large sums by the simple conveyance of these claims. The last is to hide one’s property in a wallet, and only to show it when one wants people to see it. These advantages, which everyone weighed up according to his whim, could cause shares originally valued at a hundred ounces to rise to a hundred and ten, a hundred and twenty, a hundred and thirty, etc.
The bank, which wanted to respond to the public’s eagerness, sold these shares, I assume, for a million ounces of silver. Now it does not need to have this million in hand, because, so long as it is trusted, it is confident that the shareholders will not all come at the same time to ask for their money. It will be enough for the bank to keep sufficient to pay those who will be in the position of needing ready money; and this will be, for example, a hundred thousand ounces, more or less, according to the circumstances.
These shares, like all other negotiable bills, gained or lost value depending on the eagerness with which they were sought after. If many people wanted to buy them, and few wanted to sell them, they rose in price: they fell, on the other hand, if many people wanted to sell, and few wanted to buy them. Sometimes a rumour, true or false, which will cause a loss to the bank will spread alarm and everyone will want to sell: at other times a rumour, just as true or false, will restore confidence, and everyone will want to buy. With these possibilities stock-jobbing will become the profession of many of those persons who will only be busy spreading confidence and alarm by turns. The bank itself, when it is confident of being able to re-establish its credit, will let it fall at intervals so that it can practise jobbing its own shares. It will buy them when it has caused them to fall: it will re-sell them when it has caused them to rise again.
The government could borrow from this bank, and it borrowed at high interest rates. But it turned it to its account in another way. The government had paper which was losing heavily; in particular the revenue farmers’ bills had fallen massively on all markets. It obliged the bank’s directors to create shares, whose value they had not received, and with these shares it caused the revenue farmers’ bills to be bought. Immediately these bills rose in price. People rushed for them: they rose still more. The rumours that were sown maintained the public delirium; and people rushed all the more to buy them as they believed they must always rise. When, by this manipulation, the bills had been made to rise above par again, the bank’s directors sold them to withdraw the exceptional shares that they had created, and they withdrew them with profit. So it was that in turn the bank’s bills and the tax farmers’ bills were promoted: sometimes the latter were good, sometimes the former; and the public did not perceive that all were bad.
It was only left now for the government to bank on its own account, and it did so. When it had borrrowed from the bank to the point where it could no longer pay, it took the place of the bankers. Then it created more shares, and it did so all the more, as it believed that in future the paper would serve it in place of silver.
These shares, multiplied to excess, fell in price from one day to the next. Soon no one bought any more, and the shareholders demanded their capital. Much skill was now required. A great display of gold and silver was made. However, payment was made slowly, with the excuse that everyone could not be paid at once; and trusted persons came to receive huge sums in public which they secretly took back to the bank. But though such deceits could be repeated, they could not always succeed. The collapse of the bank in the end produced a general upheaval.
Blows Directed Against Commerce: The Policing of Grain Import and Export
What one understands by grain policing is the regulations that the government makes when it wants to direct the grain trade itself. To judge the effects of this policing, I assume that this trade had enjoyed complete and entire freedom at all times in our four monarchies; and that in consequence, as merchants have multiplied in response to need, the circulation of grain was unimpeded and put cereals everywhere at their true price.
This was the state of affairs when, in one of our four monarchies, it was asked which could be more profitable, to allow the import and export of grain, or to forbid them both; and soon the decision was taken for prohibition. It is not the case that disadvantages had been noticed in the freedom. But if, in the normal way, those who govern let matters carry on as they did before them, it also sometimes happens that they innovate for the joy of innovating. They want their ministry to be epoch-making. Then they make changes under the pretence of correcting, and disorder begins.
Our lands, they maintain, produce in normal years as much as we consume. It follows that our corn will fall to too low a price if more than we need is brought to us; and we will be short of it if we export some of the cereals we need. This problem has not yet arisen; but it is possible, and it is wise to anticipate it. Such was the cause of the prohibitions.
It is not true that this disadvantage was possible. You will be persuaded of that if you recall how free circulation necessarily puts corn at a level everywhere. People do not import more than is needed, because this excess would not sell, or would be sold at a loss; and one does not export cereals that are needed, since there would not be a profit in selling them elsewhere. These prohibitions thus rest on false assumptions: let us see what were their results.
In a first year of surplus the price of corn fell: in a second it fell further: it became dirt cheap in a third. The people cheered a government which procured it bread so cheaply. But this surplus was a calamity for the growers; and it would have been a source of wealth for them if it could have been sold abroad. So it is that the favours of Heaven turned into scourges through man’s supposed wisdom.
The people did little work. They could subsist without needing to work much. Often they did not think of asking for work and, for the most part, the cultivators did not think of giving them any. The labourers, previously hard-working, acquired a habit of idleness; and they demanded higher wages when the growers could scarcely pay meagre ones.
Cultivation fell: fewer lands were sown; and years of dearth occurred. The price of corn was excessive.
The people then asked for work. Forced by competition, every kind of worker offered to work on the cheap. They only earned low wages, and yet bread was dear.
There you have the result of the regulations which forbade export and import. It was no longer possible either for corn or for wages to find their true price; and there was only wretchedness, now among the cultivators, now among the common people.
You will say that all that was needed was to allow import. And that is what they said too in the other monarchies which perceived all the benefit they could draw from it. They offered corn and it was taken. But if the need of the moment had greater force than the regulations, it did not get them revoked. The government persisted in its maxims.
It is very well done, the government in another monarchy was saying, to forbid export because one must not expose oneself to scarcity. But one must never forbid import, which can make good the deficiency in a year of dearth. So export was forbidden and import allowed.
But as soon as export was no longer allowed, the grower sold in lesser quantity and at a lower price. As he was less rich, he was in less of a position to cultivate, and he grew less. Therefore, from year to year, the harvest was always less abundant; and export which had been banned to avoid exposure to scarcity produced an opposite effect: people went short. To add to the misery, import provided for nothing.
It must be noted that when I say that export was forbidden, it is the case that heavy duties had been placed on the exit of grain; and when I say that import had been allowed, it is that no duty had been placed on its entry.
In this state of affairs the merchants had several risks to run.
If a large number of competitors simultaneously brought a large quantity of grain, they caused the price to fall; and it could happen that most of them did not find an adequate profit in the sale. They made a loss, if they sold at the low price to which the grain had fallen; and if they wanted to take it back, they made another loss as they had to pay exit duties. Often they were even forced by the people or the government to give up their corn at a fixed price. So you can imagine that, since the country, which was open to them on entry, was closed to them on exit, they were not going to bring corn at the risk of being forced to sell it at a loss; and that, consequently, permission to import provided for nothing. We may conclude that, however free import may appear, it is ineffective whenever export is not allowed.
It is not export that one should forbid, they said in another monarchy. The more one exports, the higher the price of our corn: the higher its price, the more profit there will be for the grower, and the more profit there is for the grower: the more he will grow; and the more he grows, the more flourishing agriculture will be. So one must encourage export: one must even allow a bounty to the exporters. But one must not allow import, as it would make our corn fall to a miserable price.
One cannot deny that, in this monarchy, people reasoned better than in the other two. Export produced abundance, as had been expected.
But the bounty was too much: because export carries the bounty with it, since one exports whenever one finds more advantage in selling abroad than at home. Besides, this bounty had the disadvantage of preventing corn from reaching its true price; because the native merchants, who had received the bounty, could sell at a lower price than the foreign merchants.
There were still more disadvantages in forbidding import. This prohibition was not complete: it consisted in entry dues that were stiffer or weaker.
They were stiffer when corn was at a low price; because it was judged that import, if allowed, would have made it fall all the more. That was an error because merchants do not carry their corn into markets where they sell it less favourably.
These duties were weaker when corn was at too high a price in the monarchy. It was then that there was a need to have prices lowered; and since import would produce this result, people were right in judging that it should be approved.
There were several years during which this monarchy enjoyed the plenty it owed to export, when, a bad harvest having brought dearth, the entry duties were reduced: they were even cut back completely.
But the foreign merchants, who, for a long time, had not been at all accustomed to congregate in this monarchy’s markets, could not immediately take every necessary measure to bring it enough corn. Most of them lacked carters, agents or representatives for this purpose. So too few of them came and the dearth continued.
Then the government forbade export. A useless precaution. Could it imagine that native merchants would take abroad cereals they could sell more profitably in their own country?
As it had forbidden import, this monarchy deprived itself of any expedient in a dearth, and placed itself at the mercy of monopolists.
Now when monopolists have a stranglehold on trade, the price of corn can no longer be permanent. It rises and falls suddenly in turn, and as though by shocks; it is costly or cheap depending on the rumours that it is or is not arriving.
During these variations the government does not know what course to take. From one day to the next it increases the entry duties on corn: from one day to the next it reduces them.
Therefore foreign merchants themselves have no idea on what they may count. If, when the import duties were slight, they got ready to make consignments in the hope of the profit that the high price seemed to promise them, often, when their corn arrived, the import duties had risen, because cereals had fallen in price; and they found that they had incurred large costs to bring their corn and to take it away at a downright loss. You can imagine that they tired of trading with this monarchy and that consequently when it was in dearth they left it there.
So there were only abuses in these three monarchies. In the fourth it was reckoned that one should have no permanent prohibition or interdiction, either of export or of import; but that one should, turn by turn, allow and forbid export and import, following the circumstances. This course seemed the wisest, and yet it was the least wise. It had all the drawbacks we have mentioned and even greater ones still.
It had, I say, all the drawbacks when it forbade export or import: and it had even greater ones, because it injected an uncertainty into trade which constantly held up the circulation of grain.
Since, in this monarchy, the policing varied following the ever-varying circumstances, prohibitions and permissions could only be transitory. Export was permitted with the proviso: until it is otherwise ordained, when the corn fell in price; and when it rose import was allowed, always with the proviso: until it is otherwise ordained. This proviso was necessary, because circumstances could change from one day to the next; and they were bound to change, without the government being able to predict the variations, since it rested with the monopolists to make the price of cereals fall when they wanted to import, and to make them rise when they wanted to export.
But when import was allowed for an uncertain time, people in the heart of the monarchy did not know if one could export before the permission was revoked; as a result there were risks in taking steps to export; and those who did not want to incur them, only saw in the permission the equivalent of a prohibition. So the internal provinces did not benefit from these outlets, which seemed to be closed to them almost as soon as they had been opened.
Merchants on the frontiers who foresaw a new prohibition rushed to send their corn abroad. They set up their storehouses outside the country to remove them from the police. Then the corn rapidly rose in price, because export was happening in rapid succession and in a large amount.
Permission to export, favourable to the merchants alone, came too late for the ploughman. As he was obliged to pay his lease, his taxation, wages of the day-labourers, he had sold the corn when it was at a low price; or if he had not sold it, permission still came too late, since the season that was right for the work of tillage had already passed. In the one case he had lost on the sale of his grain, in the other he could not use his profit to ensure for himself an abundant crop for the next year.
Finally, these short-lived permissions were all the more harmful as the cultivator, fearing a prohibition, hurried to sell; and consequently sold badly, or at too low a price.
However, all the surplus corn had been exported, when a harvest was reaped that was inadequate for consumption. Then the government banned export and allowed import, still with the clause which left its duration uncertain. Immediately the native merchants, who congratulated themselves on having sent their corn abroad, hurried to bring it back at various times, but each time in a small quantity; and people bought back from them at a very high price what had been sold to them cheaply.
The dearness lasted. They sustained it because they were the only sellers. The foreigner did not come at all, either because, lacking the time to take measures for sending consignments, he feared he would only arrive when import had been forbidden, or because he feared being forced by some blow from authority to leave his corn at a low price.
There you have the results of temporary permissions. There are no rules, either for giving them or for revoking them. All the duties on the entry or exit of cereals are necessarily arbitrary, and one could not say why one placed them at one rate rather than another. So export and import are only carried out at risk every time they occur following uncertain and changeable regulations. Then trust is lost, and trade, given up to monopolists, is continually stopped in its tracks. Let us move on to the regulations which it has been thought necessary to make on the internal circulation of grain.
Blows Directed Against Commerce: The Policing of the Internal Circulation of Grain
If import and export had always enjoyed complete and full freedom, the government would never have been in the position of interfering in the internal circulation of cereals. It would not have felt the need, because within each state cereals would have circulated themselves just as from one state to another.
But when it had once been disturbed in a part of its course, circulation could no longer carry on anywhere regularly; and we have just seen the disturbance wrought in our four monarchies by regulations that people felt obliged to make on export and import.
If governments had seen that these regulations were the prime cause of these disturbances they would have spared themselves a lot of trouble: they did not see it. So, to cure the ills they had produced, they placed themselves in need to make fresh ones, by making regulations on the internal circulation of grain.
In our four monarchies, the various regulations on export and import have had the same effect as exclusive privileges given to native merchants: hence the excessive price.
With this excessive price, dearth might merely appear to be there. But often it must have been real, because, when export was allowed, people hurried to send out the corn; and, when import was allowed, people were not in such haste to bring it back.
But since foreigners did not bring it, whether the dearth was real or merely in appearance made little difference; all the government could do was to busy itself with ways of getting it to arrive. So there you have it forced to become a corn merchant.
It caused corn to come in at great cost, and it sold none. However, the price fell: the fact is there merely appeared to be a dearth. Up to that point the merchants had held back from putting it on sale because they hoped for a greater increase in price. But when they saw that corn was coming, they hurried to carry theirs to market, to profit from the time when the price was still high.
Since the government had not sold its corn, on another occasion it caused less to arrive, and it sold that. It had assumed that the dearth was never more than in appearance. But this one was found to be genuine. So there was not enough corn, and the dearth continued.
As it was still persuaded that the dearth was only in appearance, the government had the granaries opened, and compelled several merchants to sell their corn at the price it set. But authority could not strike everywhere at the same time. People concealed corn to keep it away from coercion. So while corn was cheap, or below the true price in one place, it was dear or above in another. Soon the dearth was dreadful and widespread.
Then, as it had been convinced that dearths are sometimes genuine, the government feared they were always so. It had not caused enough corn to arrive, and not to fall into the same trap on another occasion it had corn brought, and sold it in such a huge amount that everywhere it fell to a dirt-cheap price.
So it made nothing but mistakes. It had been wrong to place itself in the position of itself having to provide for the people’s subsistence; and it made a second, even greater mistake, a consequence of the first, that of forcing open the granaries and claiming to fix the price of grain.
It did not know either the population, the production or the consumption. So it did not have the slightest idea in what ratio the quantity of corn stood with regard to the need. The disproportion could be stronger or weaker. There was such a province where on occasion it could be huge: sometimes too it could be almost negligible everywhere. What rule should one follow to assess the exact amount of corn one needed?
But should the government have known the relationship between the quantity and need, had it calculated all the costs of cultivation, of storage, of transport to require the cultivators and the merchants to give up the corn at the price fixed?
Forced to commit unjust actions to put right its mistakes, the government thought by these acts of authority to set right the disturbance it had caused, and it caused even greater ones.
It ordered all those who had corn to declare its amount. Therefore it felt that it needed to know this. But it should have begun by winning trust; and that order alone would have caused trust to be lost, if it was not already. For why should it want to know the amount of corn that each person was keeping in his barns unless it was intending to dispose of it by fiat? People made unreliable declarations.
False declarations are not always made with impunity. Often people were betrayed, and often the accusations themselves were false. The government ordered searches; but the force with which they were made caused such great disturbances that it reckoned it had better at least suspend them. So it remained in its ignorance, and each individual hid his corn.
When trade is perfectly free, the quantity and the need are apparent in all the markets. Then goods put themselves at their true price, and plenty spreads equally everywhere. That is what we have proved sufficiently.
But when one has once taken all freedom from trade, it is no longer possible to judge, either if there is really an imbalance between the quantity and the need, or what it is. If it were slight, it grows from day to day, through the people’s fear and the monopolists’ greed. Then circulation is constantly suspended by the obstacles it finds in its path; and it can happen that all the provinces have shortages at the same time, or at least that they experience scarcity one after the other.
It is true that the government redoubled its efforts in these circumstances. But its operations, always slow, could not bring help equally everywhere, as a crowd of merchants spread out on every side would have been able to do. Yet it found itself compelled to all the greater expenditure as the purchases on its behalf were made lavishly and sometimes dishonestly.
It was making useless attempts to settle the disorders. Its first regulations had produced them: its last regulations were bound to perpetuate them, or even to make them grow more.
It persuaded itself that the high price or dearth resulted from a residue of freedom. Consequently, It was forbidden to all persons to undertake trade in grain without having obtained permission for it from officials appointed for that purpose.
It was forbidden to all others, farmers or landowners to interfere directly or indirectly in carrying out this trade.
Any association between grain merchants was forbidden unless it had been authorised.
It was forbidden to pay a deposit on corn or to buy corn unripe, standing, before the harvest.
It was forbidden to sell corn other than in the markets.
It was forbidden to make hoards of grain.
It was forbidden to let it move from one province into another without having obtained permission.
There you have what in an abuse of language was called police regulations, as if order could have emerged from these regulations.
Yet the farmer could only sell to licensed merchants, who alone had permission to undertake the grain trade.
He was forced to sell his corn within the year; because the prohibition on amassing it did not allow him to place one crop upon another.
On the other hand, however much he needed money, he could not sell before he had harvested. So he only had a limited time for selling; and he saw himself placed in the power of a small number of merchants.
The prohibition on selling anywhere except in the markets caused him to have to leave the cultivation of his fields at intervals. He could have sold his corn to his neighbour; but his neighbour was obliged to go to the market to buy it. So they were both forced to expenses they could have been spared.
If he wanted to pay a debt or the wages of his day-labourers with his grain, he was accused of having sold elsewhere than in the market. He was treated with the same injustice if he advanced grain to a ploughman who did not have enough for sowing. This generous action was a fictitious sale, a fraud, in the jargon of the officers of the grain police.
Even the freedom given to merchants was limited. They needed leave to form an association, that is to say, to get together on the ways to provision the state. Without this leave it was left to each of them to carry on this trade individually, and as best they could.
Finally, a province suffering from dearth could not draw grain from a neighbouring province where there was a surplus. If permission was never refused, even if it was given the moment it was possible, it always came too late because it had to be awaited. The disorder was all the greater when, in order to cause a fresh price rise, permission was deliberately delayed. That is what happened on occasion.
On the one hand, the prohibitions removed all freedom from trade: on the other, the prohibitions authorised monopoly. Normally the officials from whom permission had to be sought did not give it for nothing, and you can judge why people bought it from them.
In this disorder the townspeople could not be assured of subsistence. So it was down to the government to provide it, and it created privileged companies to provision the towns, especially the capital. They alone might buy in the countryside what was set aside for this provisioning: or at least, you could only sell to others after they had made their purchases; and because you could only sell to them, you had to hand over the corn at the price they wished to pay. This final regulation, which was always fatal for the countryside, was sometimes so for the towns themselves, in whose favourit had been made. However much care was taken that bread should not become dearer in the capital, it could not always be prevented because the privileged companies introduced high prices in succession everywhere.
Blows Directed Against Commerce: The Manoeuvres of Monopolists
We have seen monopoly born from the regulations made for the policing of grain. In my design to make known the monopolists’ manoeuvres I should need them to give me some notes themselves. I shall limit myself to a few observations.
You could not carry on the corn trade at all without having obtained their permission. But it was not enough to ask for it in order to get it; you also needed to have protection; and protection was hardly ever granted except to those who would pay for it, or who would give up a share in their profit.
So the right to make a monopoly of corn was sold in some way to the highest and last bidder; and often when a person had bought it he also had to give money to prevent its being sold to others. Few people could therefore enjoy this privilege. Also the monopolists were too small in number to carry out a sufficiently extensive trade to deal with the needs of all the provinces. But they were not concerned with trading on a large scale: they simply cared about making a huge profit.
This profit was guaranteed to them, if they bought cheaply and sold dear.
Small farmers are forced to sell early from the month of September, October or November in order to pay the landowners, taxation, and the ex penses of cultivation. So then the price of grain falls through the surge of sellers. That is the time that the monopolists seize on to fill their stores; and they dictate to the farmers, who can only sell to them.
However, they used deception, as it would be dangerous for them to take advantage too openly of the exclusive right to carry on the grain trade. They provisioned themselves in the provinces where the harvest had been most plentiful, and they spread the rumour that it had been even more plentiful elsewhere. To confirm these reports, they made fictitious sales between themselves in public view in the markets, and delivered corn at the lowest price to each other. Then, as they had been given the privilege of buying every where, they went to the farms and they bought, or paid a deposit, on corn at the low price they had themselves set in the markets.
So now their only rivals are the large farmers who, not having been so pressed to make money, have waited for the moment to sell more advantageously. But these farmers have only a limited time in which to sell, as they are forbidden to hoard grain. The privileged merchants, on the other hand, sell when they wish. In the end it will happen that they are the sole sellers.
Then they put on sale a little at a time. They spread rumours about the latest harvests. They persuade that these have not been as plentiful as had been thought. Once again they do not fail to confirm this by fictitious sales, and they deliver corn to each other in public at the highest price.
So there is dearth; it is not that corn is lacking, but that it has been withheld from consumption.
However, the dearth is not general, because it matters to the monopolists themselves that it should not be. They must be able to pride themselves on the low price they maintain in some provinces in order to acquit themselves of the high price they set in others; and it is enough for them that dearth passes over all the provinces in turn. They caused such great disorders that sometimes in a province one saw the people compelled to feed themselves on all sorts of nasty roots; while in a nearby province the best wheat was thrown to the animals.
As they alone were responsible for making cereals flow back everywhere they were lacking, they did so slowly, with various excuses; and they found great profit in their slowness because they made the high price last.
Thus these monopolists made themselves wealthy, because they bought at a low price and they sold dear. There were others who made themselves no less wealthy, and yet bought at a high price and sold at a low one. I mean to speak of the commissioners who made purchases and sales of grain on the government’s account.
They were given 2 per cent profit on each purchase and 2 per cent on the sale.
The more grain they bought and the dearer they bought it, the more profit they had as a result. So they bought whatever the price was.
To make their operations easier, the merchants had been ordered to notify their associations, to make a declaration of their storehouses, and only to deal in the regulated markets on such and such a day and hour.
As all the merchants were known and all their storehouses revealed, it was easy to abort all their schemes. Wherever they might turn up to buy, the commissioners outbid them; and wherever they might present themselves to sell, the commissioners sold at a discount. So as the merchants could not keep up the competition without ruining themselves, one after the other they gave up the grain trade, and then the commissioners alone bought and sold.
The commissioners had an interest in buying much and dearly, since the 2 per cent profit was greater because of the high price of the purchases; and although the 2 per cent profit on the sale was smaller because of the low price, they had no less interest in selling cheaply, because they became the sole grain merchants.
It was the government that made all the advances for the purchases, as it made all the losses on the sales. It cost it several millions a year; and if it is true that to find one million, it was obliged to set three million in taxes, you may judge how this monopoly was in every way at the state’s expense.
The advances were paid to the commissioners in ready money. For the most part they turned their money to account in the capital, and they paid in the provinces or abroad with exchange operations. So this monopoly became a banking capital for them, or rather a veritable speculation.
Blows Directed Against Commerce: Obstacles to the Circulation of Grain, When the Government Wishes to Restore to Trade the Freedom It Took from It
Monopolists were always placing dearth, or at least high prices, somewhere, when in one of our monarchies this branch of administration was given to a minister who returned freedom to trade.
But when disorder has reached a certain point, a revolution, however good it may be, is never accomplished without causing violent shocks; and it is often necessary to take countless precautionary measures to restore order.
The new minister who wanted the public good, and whom even his enemies recognised as enlightened, took all the measures that prudence had suggested to him. But there was one thing which did not depend on him: that is the weather, and it was wanting.
In dealing with the circulation of cereals we have seen that it can only be carried out by a host of merchants spread everywhere. These merchants are so many canals through which the grain circulates. Now these canals had been broken and it was time to mend them.
Indeed, to succeed in any type of trade it is not enough to have the freedom to carry it on; one must, as we have already noted, have obtained contacts, and these contacts can only be the fruits of experience, which is often slow. One must also have capital, stores, carters, agents, correspondents: in a word one must have taken many precautions and many measures.
So the freedom returned to the grain trade was a benefit that could not be enjoyed the moment it was granted. A word from the monarch had been enough to wipe out this freedom; a word did not restore it, and there was high price a few months later.
“Look at what freedom produces.” That is how the common people reasoned, and they were almost the entire nation. They thought that the dearness was a result of freedom. People did not want to see that monopoly could not have fallen under the first blows directed at it, and that there could not be enough merchants yet to set cereals at their true price.
But, people were saying, we need bread every day. Now, because people are free to bring it to us, is it certain that they will bring it to us and will not put us in danger of doing without?
So they forgot the high prices and dearth that had occurred in turn in all the provinces, when the ministers took away all freedom on the pretext of not leaving the people’s subsistence to chance.
So they were counting on a small number of monopolists who could make a large profit by selling little, rather than on a large number of merchants who could only make a large profit by selling a great deal.
The merchants must have a wage: it is their due. But it is not for the sovereign or the people to set this wage: it is for competition, for competition alone. Now this wage will be smaller in proportion as competition is greater. Thus corn will be at a lower price when merchants multiply with freedom, than when their number is reduced by the police regulations. I add that one will be more assured of having it. For it will only be at a lower price because all the merchants, vying with each other, will offer it cheaply, and will be happy with a smaller profit.
They have as much need to sell as we to buy. Busy in anticipating where corn must go up in price, they will hurry all the more to come to our help, as those who arrive first are those who sell at the highest price. There is more cause to judge that they will bring us too much corn than to fear that they will not bring us enough.
These reasonings counted for nothing in the people’s mind. They thought that the one task of government was to procure them cheap bread. The police regulations seemed to have been issued for this purpose. In truth, they produced an opposite effect: but this was not known; and people wanted the police regulations, because they wanted cheap bread. So every time that it became dearer the people asked the government to have the price lowered.
There were only two ways to satisfy them. The government had to buy grain itself to sell again at a loss, or it had to force merchants to deliver their corn at the price it had fixed.
Of these two ways the first tended to ruin the state; the second was unjust and odious; and both accustomed the people to think that it was for the government to obtain cheap bread for them, whatever it cost either in money or in injustice.
From this another prejudice arose, even more opposed to the grain trade, if that is possible. That is, the people, who believed these violations just, since they were enacted for them, regarded the grain merchants as grasping men who took advantage of their needs. Once that opinion was rooted, a person could not engage in this trade if he cared for his reputation: it had to be left to those vile creatures who counted money for everything and honour for nothing.
It was the behaviour of the government that had produced these prejudices. They had so triumphed that often even those possessed of integrity, and what is called wit, were not shielded from them. No doubt we must respect the rights of property, said people whom one could not suspect of evil purpose; but we claim the rights of humanity for the people. From that they concluded that the government can, must even, regulate the price of corn and compel merchants to deliver it at the prices it has set.
The rights of humanity opposed to those of property! What gibberish! It was so decreed that one should say the most absurd things to oppose the operations of the new minister. But you, who believe you care for the people, would you like the strong-boxes of wealthy men to be broken open under the pretence of giving alms? Doubtless not: and you want the barns to be forced open! Are you also ignorant of the fact that cheapness is always, of necessity, followed by dearness; and that in consequence it is a calamity for the people, as much as for the merchant and the landowner? If you are unaware of this, I refer you back to what I have said.
It seemed that everyone was condemned to reason badly on this matter: poets, geometricians, philosophers, metaphysicians, in a word almost all literary men, and especially those whose trenchant tone hardly allows one to take their doubts for doubts, and who do not permit one to think differently from them. These men always saw excellent matter in the works which were written in favour of the grain police. These were, however, works in which, in place of clarity, exactitude and principles, one found only contradictions; and one could have proved that the author had written in favour of the freedom he wished to contest. The fact is that it is impossible to establish anything exact when people want to put limits on freedom to trade. Where indeed should one place these limits?
Deaf to all the suggestions, the new minister showed courage. He let them speak and write, and carried on with his initial moves. However, people were still very far from feeling the effects of freedom. Corn was dear in one province while it was cheap in another. The fact is that it did not circulate; there were not yet enough merchants. Besides, the people, who believed that export was necessarily the precursor of dearth, became alarmed at the sight of grain on the move. “There will be none left for us,” they said; and at that seditious cry [seditious is omitted in 1798], they rose in revolt. Then evil-minded men went round the markets, spread new alarms and caused riots. Such are the chief obstacles in the way of the re-establishment of freedom. Time will remove them if the government perseveres.
Blows Directed Against Commerce: The Luxury of a Great Capital City
Of the four monarchies I have postulated, I no longer make more than one, and I build a great capital city in that place where people come from all the provinces. Those who are rich enough to enjoy all the comforts found there gradually settle there. Others come there for business, others out of curiosity, many because they do not have the means of living elsewhere. Because, with nothing, one can often make great outlays in that place, as it offers resources of every kind. It even offers some which ought to be inadmissible, and yet which people do not hide.
Wealth brings forth the arts. There will thus be a large number of craftsmen. They will occasion great consumption. They will make foodstuffs rise in price, and they will attract money from the provinces, where people will be rich enough to seek out the goods in demand in the capital. Their handiwork will be at a higher price than it would have been had they chosen another place for their establishment: because their subsistence and their raw materials will have to be brought there at great expense.
If they had been spread throughout the provinces they would make the capital’s money flow back. They would bring plenty because, wherever they established themselves, they would increase the number of consumers, and they would help to spread wealth with less inequality. These considerations brought about the wish that manufactures should be established in the provinces; but this project remained a pipe dream.
Craftsmen do not mind that their products are costly, provided they are assured a sale. Now, where could they sell better than in a town of luxury, where without ever appreciating goods, people only value them in so far as they are highly priced? Where will they be in closer reach of realising their talents, whether they deal with the individuals to whom they sell their work themselves, or whether they deal with traders who vie to offer them the highest wages? Would it be possible for them to take advantage of the public’s whims from the depths of the provinces, to make and give it a product based on transitory fashions? Finally, I imagine that when they enjoy complete freedom they can spread into many different places; but when they are only free to work in the shelter of a privilege, do they not have to settle in the place where they are at hand to beg for this privilege, to have it renewed, and to prevent its being given to others? So then manufactures could only set up in the capital and, after the capital, in the large towns.
Once everything becomes more expensive in a great capital, goods that were made to be common there become scarce; and it is there that artisans direct all their energy to obtain for wealthy people the enjoyment of luxury articles, that is to say those pleasures sought through vanity, which boredom requires in one’s idle existence.
The complicated levying of a mass of taxes, manoeuvres of exclusive companies, public paper issues, banks, speculation, and the grain monopoly were the paths open to fortune along which people hurried en masse. From there new men emerged, one after another, who, made wealthy on the spoils of the people, made a striking contrast with the beggars who multiplied from one day to the next.
The Great had set the example of luxury: but at least their luxury was limited by their means. There was no limit to that of the upstarts, because they could spend all the more lavishly, as they became wealthy all the more easily. Because at one and the same time they were made to be imitated and imitation was out of reach, they seemed to prepare the ruin of every rank of citizen.
Indeed, as one could only make oneself noticed through expenditure, disorder found its way in turn into all fortunes; and every rank became confused by degrees by the very efforts that it made to single itself out. From the trends people followed it seemed they had immense desires; and from the frivolities they were happy with, it seemed they had no wants. Whim set the price of the smallest things. If people did not enjoy them, they wished to appear to enjoy them, because they supposed others did; lacking enthusiasm they took its language and made fools of themselves enthusing about everything. However one was struck by it, one had to obey the whims of fashion. It was the sole arbiter of taste and feeling and set down for everyone what he was to want, say, do and think: because thinking was the latest fashion.
In this disorder people spoke out against finance since financiers had more ways of becoming rich. But did not citizens of every degree have cause to reproach themselves in the same way? If they obtained less wealth was it because they were less greedy or because they could not? It is the general morality one should condemn; but in a century of corruption every order inveighs against the others.
I wish a monarchy could never be too rich. Indeed, the vice that destroys it is not in excessive wealth: it is in the inequality of its division, an inequality that becomes monstrous in a century of finance.
But what! you will say, must one make a new division of land, and limit each citizen to the same number of arpents? No, indubitably; that project would be chimerical. Perfect equality can only be maintained in a republic such as Sparta; and I agree that in a monarchy men are not Spartans. What must be done, you will ask? Every citizen must be able to live from his work; and I say that wherever there are beggars the government is vicious.
I am very well aware that it is supposed that everyone can live from his work: because the rich man, who does nothing, says to the unhappy person without bread, “Go and work.” Thus luxury which multiplies beggars hardens hearts, and there are no more resources for the needy. But let us see if every citizen can find work.
It is observed with reason that the luxury of the large towns gives a livelihood to many artisans, and consequently people say that luxury is a good thing. But how many men who would have been useful in the countryside flock to the capital to beg there, seduced by the profits that some make in a capital? Even some men of parts are reduced to wretchedness, because it is impossible for them to work in competition with those who set up before them, and who are in fashion. Is it not known that rich people, without knowing why, follow each other to the same shops, and that a skilful or lucky craftsman practises his own trade almost exclusively? Are you unaware that in matters of luxury the name of the workman is not unimportant?
Luxury creeps up imperceptibly on all conditions; and if a person is not rich he wants to appear so. Then he economises on necessities to be able to buy luxuries. So one takes away the work of the most useful artisans, and in consequence one takes away their bread. Besides, if in a time when wealth is spread too unequally, a small number of wealthy men cause costly manufactures to flourish, how few citizens are then rich enough to join in sustaining the commoner manufactures? If luxury gives some artisans a livelihood, it correspondingly reduces a greater number of them to beggary. There you have the results it produces in towns, especially in the capital. Let us move to the countryside.
The provinces have to pay at the capital the revenues of the landowners who live there and the Prince’s revenues; a huge debt which grows every day with taxation. It is true that, through the vast consumption made there, the capital gives back to the provinces the money it has received from them; and it makes agriculture flourish there, in proportion as it draws products from them in ever greater amounts. But it cannot draw equally from each, and so agriculture cannot flourish equally in all.
Abundance is found in the countryside surrounding the capital, and there the most recalcitrant soil is made fertile. Abundance is also found in the most remote provinces when they have easy communications with the capital. But when they lack outlets, you can judge the poverty by the wan complexion of the inhabitants, by the villages falling into ruin, and by the fallow fields. They produce little, because the wealthiest consumers, to whom the lands belong, live in the capital where they consume the products of other provinces. They produce little, because these consumers prefer to the genuine wealth of a cultivated soil intrigue which opens the path to fortune for some, paper documents with which they have more income and greater ease in wasting it, in short luxury which ruins all. Not only do they fail to make the necessary advances to obtain more abundant crops for themselves, they also place the farmers in a situation where they cannot make them. They cause them expense: they take some of their animals away from them; in a word they seem to take from them every means of cultivation. However, the farmers, more numerous than the farms, are reduced by competition to inadequate rewards. As they are reduced to hand-to-mouth subsistence, they deny themselves what is necessary in order to pay a master who, in the bosom of softness, has as his maxim that peasants must not be in easy circumstances, and who does not perceive that the wealth of the ploughman would enrich himself. So it is only too true that the luxury of a great capital is a source of wretchedness and devastation.
Blows Directed Against Commerce: The Rivalry of Nations
In order to judge what must happen to several rival nations who are each attempting to trade exclusively, I am moving the people we have observed into Asia Minor. I give it Mysia, Lydia, Bythinia and other provinces, and I make a kingdom with Troy as its capital.*
But since I only want to observe the results of the envy of nations, I assume, to remove every other cause, that this people no longer has in its customs or its government any of the vices with which I have reproached it. It will be at this moment an agricultural nation. It is fostering the skills that bear on agriculture: it is beginning to develop others: it is putting more refinement into the conveniences of life. But its habits are still simple, as is its government. It is unacquainted with tolls, customs, taxes, guilds, corporations or any kind of privilege, nor does it know what we call grain police. Each citizen is free to choose for his subsistence the type of work that suits him, and the government only demands a contribution which is adjusted to the needs of the state, and which the nation pays willingly. Such are the new Trojans. But you must allow me still more assumptions.
I assume, then, that in the centuries when they lived, centuries before all tradition, Asia, Egypt, Greece and Italy, as well as the islands scattered in the seas which separate these continents, were so many civilised countries whose peoples were beginning to have some trade with each other; while all the rest of Europe was still in barbarism.
Finally, my last assumption will be that the arts had not yet made as much progress anywhere as among the Trojans. Everywhere else they seemed in their infancy. Yet luxury was still unknown even at Troy.
The population must be large in all the countries I have just assumed. Many reasons contribute to it: the simplicity of manners, subsistence assured in work of one’s choice, and agriculture which makes all the more progress as it is prized more.
However, all the lands we have covered with civilised nations are not equally fertile; and, in consequence, all do not produce the means of subsistence for a similar population in a comparable area. Greece, for example, is nowhere near as fertile as Egypt; and many maritime coasts would be sparsely inhabited if they were confined to the produce of their soil alone.
But in places where agriculture cannot feed a large population, industry makes up for it, and trade enables a large populace to live there on the surplus of the agricultural nations. This people, to whom the soil seems to deny the essentials, becomes the carrier of the others. It deals with everyone’s surplus; it brings back the means of subsistence to its own soil, and because it has acquired a habit of the thrift with which it was forced to begin, it ends up enriching itself. There you see what must happen to the nations that live on unproductive soil along the sea coast. Trading nations from their location, they are the first to carry out commission trade or trafficking.
Then all the ports were open to traders. All the peoples gave import and export complete freedom. The surplus was constantly poured from one to the other. Through the competition of every possible merchant, each good was at its true price; and the plenty which spread among all the nations seemed, through a kind of ebb and flow, to tend to set itself everywhere at the same level.
This trade was particularly profitable to the Trojans. The progress they had made in the arts drew to them all the merchants of every nation. They worked up both the raw materials of their soil and those which they drew from abroad; and their manufactures, which flourished more every day, gave subsistence to a host of artisans.
Happy in this position, the peoples did not know how to sustain it. Why, they said, send the Trojans those prime materials we can work up ourselves? Is it reasonable to carry our money and our products abroad to give subsistence to artisans there, who, by consuming in our midst, would increase our population and our wealth? So all the peoples considered ways in which each could establish the same manufactures among themselves.
But the trading nations particularly aroused envy. These nations, poor in their soil, were becoming rich and populous and seemed to owe their wealth and population to the blindness of others. Why should we leave them to carry out all the trade virtually alone, the envious peoples were saying? Shall we still suffer them for long to make profits out of us which we could make ourselves? It is we who make them subsist, it is we who make them wealthy. Let us close our ports to them, they will fall into wretchedness and soon they will no longer exist.
These reflections are not as well-based as they appear. The Author of nature, in Whose eyes all the peoples, despite the prejudices that divide them, are as one republic, or rather as just one family, has established needs amongst them. These needs are a consequence of the difference in climate which causes one people to lack things of which another has a surplus, and which gives each of them different types of industry. A curse on the people that would like to do without all the others. It would be as absurd as a citizen who, regretting the profits made from him in society, wished to provide by himself for all his needs. If a people did without the trading nations, if it destroyed them, it would be less rich itself through its actions, since it would reduce the number of consumers to whom it sold its surplus products.
Besides, the traders do not really belong to any country. They form a nation which is spread everywhere and which has its separate interests. A people is therefore mistaken if it thinks it is working for itself when it sacrifices all to its merchants. By excluding those of other nations, it sells its goods at a lower price, and it buys foreign goods at a higher one; its manufactures collapse, its agriculture deteriorates, and it makes fresh losses every day. It is only the competition of all the merchants that can make trade flourish to the benefit of each people. Do and let do [faire & laisser faire], there then is what should be the aim of all the nations. Trade that is always open and always free, alone can contribute to the happiness of all together and of each individually.
But that is not how people reasoned. A state, they said, is only rich and powerful in proportion to the money that circulates; and money only circulates in greater quantity in so far as one carries on a more extensive trade. Every nation that understands its real interests must therefore think of ways to become the sole trading nation.
This reasoning appears clear-cut and people act upon it. So there you have the peoples working to make each other poorer: because in wanting to take trade away from each other, each of them trades less. Let us see the effects of this policy.
The Trojans who had ports on the Aegean Sea, on the Propontis and on the Black Sea were still masters of all the islands adjacent to their continent. In this position, where they could carry on an extensive trade alongside the other peoples, they wished to engage in it exclusively. So they set up customs posts everywhere: they subjected foreign merchants who exported or imported to taxation; finally they closed the ports completely to them.
The people applauded the government’s wisdom. It thought it was going to carry on all the trade by itself; and it handled no more than before, because it could not leave its manufactures and its fields to board ship.
Trade shrank considerably when it was no longer carried out through the intervention of the trading nations. This complete change brought with it the failure of many manufactures; and agriculture was damaged because there were fewer products, once the inability to export had made any surplus useless.
However, the government did not suspect the error it had made. On the contrary it believed that trade was bringing more wealth than ever into the state: it judged thus from the fortunes of some Trojan merchants.
But these traders were making themselves rich at the expense of the state: as they had no rivals when they bought and sold, they alone set the price of things. Every day they cut back the income of the artisan and the ploughman and sold dearly whatever they brought from abroad.
In their mutual rivalry, the peoples could not restrict themselves to closing their ports and denying each other trade in the hope of conducting it exclusively. They yet had to arm, and they armed. In wars that were disastrous for all, they congratulated themselves in turn on the blows they thought they were inflicting, and which only bore on trade to ruin it equally everywhere. Large armies by land, and large fleets at sea, made it necessary to snatch one section of the citizens forcibly from the plough and from manufactures, and to burden the other with taxes. These acts of violence were renewed with each war, always with new abuses because peace, which only came through exhaustion, never lasted long enough to allow the warring powers to make good their losses.
Trade, which had fallen during the war, did not pick up easily in peacetime. People did not dare to engage in enterprises demanding large advances, and whose prospects could evaporate in the first hostilities. None the less the government invited the people and even the nobility to carry out trade. It offered its protection to the dealers, and it seemed only concerned to make the trade flourish that it had wrecked and that it was to ruin further.
When one has power one believes that everything is possible. One does not mistrust one’s intellect at all, and because one has given orders, one does not imagine one could find obstacles. There lies the reason why an error which has been made in public administration is made again and is made for a long time. It becomes a maxim of state and prejudices rule. The Trojans persisted in closing their ports to trading nations, they persisted in making war on them, and yet they were searching for what could be the cause of the decay of their trade.
They thought they had found it, when having meditated that enterprises needed even larger advances as they were exposed to greater risks, they imagined that trade could only continue to be carried on by companies which brought together the capital of several rich merchants. So they only had to allow as many to be formed as was judged fitting. But a company presented itself. It made the state see great advantages in the types of trade it projected. It exaggerated the advances it would have to make. It represented that after having made the outlay it would not be fair that it should be deprived of profit due to its hard work; and it demanded an exclusive privilege. It was given it.
This privilege was a blow directed at freedom since it gave one single company a right which belonged to all the citizens. The traders protested, but in vain. The new company gave the money, and the privilege was confirmed.
As soon as the government realised that these privileges could be sold, it sold more. As this abuse passed into custom it became the rule; and soon people regarded exclusive privileges as a protection granted to trade.
However, to sell exclusive privileges to craftsmen and traders was to exile those to whom none were sold. Many left the kingdom and bore away manufactures with them. It is true that the government forbade them to leave the state under severe penalties. But when they had passed over to a foreign land, it was no longer possible to punish them, and yet one could not prevent them from crossing there. This prohibition made them desert in greater numbers.
When manufactures in a kingdom enjoy complete freedom they multiply in relation to need. It is not the same when they belong to an exclusive company. As the interest of this company is much less to sell a great deal than to sell dearly, it thinks to make the largest profit with the least trading. Besides, it finds an advantage in reducing the number of manufactures, namely that the workers, remaining in larger numbers than it can employ, are reduced, if they do not want to beg, to working for almost nothing.
It was not only that labour cost these exclusive companies little. They also wanted to make a new profit on raw materials. They represented to the government how much the export of raw materials abroad was contrary to the interests of trade, and their sale overseas was forbidden. They therefore bought them at rock-bottom prices and as a result agriculture was more neglected every day.
While customs duties, taxes and exclusive privileges troubled trade and agriculture, luxury grew with wretchedness: the state, which no longer subsisted except through expedients, was continually contracting new debts: and financial speculation raised itself in the midst of the debris of public wealth.
There you have the condition in which the Trojan monarchy found itself. Such a condition was near enough that of all the monarchies which had armed to take from each other certain branches of trade. One would not have guessed from the means that they used that they wanted to become richer.
When the government is for ever borrowing, the interest on money is necessarily very high: it is especially so at a time when luxury, which sets no limits to needs, compels the richest to borrow.
If it is the citizens who lend to the state, capital leaves trade to let a host of rentiers subsist without work, men who are useless, whose number grows continually.
If it is foreigners, the capital not only leaves trade, it also leaves the state which ruins itself by degrees.
Then the traders who are finding it difficult to borrow, or who only find money at high interest rates, are powerless to form great enterprises. How should they form them? Their businesses are almost always tied up with that of the government to which the exclusive companies have lent their credit; and in consequence mistrust of government banishes all confidence from trade. It is therefore very difficult for trade to flourish in such monarchies.
One did not see such drawbacks among the trading republics. On the contrary, great confidence reigned there because traders enjoyed complete freedom there and the government, without luxury and debt, assured their fortunes. They had a great advantage in trade over the traders of the monarchies because they could borrow at low interest rates, and having some saving, they thought less of making huge profits every time than to make small ones often. All the capital thus stayed in trade and made it flourish.
But of all the peoples, the wisest or the happiest were the agrarian republics. With little concern to carry out the trade themselves, they had not thought to close their ports to foreign merchants who came to carry away their surplus produce, and they lived in plenty.
This was the state of affairs, when new branches of trade changed everything.
The Phoenicians [the Dutch: Daire, Mélanges], a republican trading people, found to the east of Europe a country peopled by a host of cities, which seemed to them all the more barbaric, as possessed of plenty of gold and silver, they attached no value to them. This discovery, which gave them the means to carry out a much greater trade, soon gave them preponderance over all the trading nations.
In the Trojan monarchy, where exclusive companies had got hold of all the known trade, they had even greater need to make discoveries. It was the sole expedient for merchants who had bought no privileges at all. So as they were reduced to looking for some new branch of trade in unknown lands, they penetrated into the Caspian Sea; and from there by the Oxus, they went upstream to India. It was a vast, fertile country where the arts were cultivated, and where labour was all the cheaper, as a large population lived there in plenty with few needs.
This discovery introduced a new form of luxury into the monarchy. People admired the beauty of the fabrics made in India, and novelty giving them a value which grew in some way by reason of the remoteness of the country, the merchants who were the first to open up this trade earned from 150 to 200 per cent.
So this trade appeared very lucrative: indeed it was for the merchants. It would have been for the state itself, if people had gained 150 per cent on the goods they carried to India; because, on this assumption, it would have made the manufactures of the kingdom flourish. But the Indians had no need of articles which were made in the West; and gold and silver were almost the only goods which one could give them in exchange for theirs. So it was on the return journey that the merchants made a profit of 150 per cent; and consequently they made it at the state’s expense.
People were not used to making such distinctions. The merchants were making their fortunes by carrying on a trade that was burdensome for the state, and people said, the state is becoming wealthy.
Once this trade seemed to be conducted with so many advantages by some individual merchants, it was not hard to prove to the government that it would be conducted with still more benefit by an exclusive company. It was even proved to the government that the individuals who were carrying on the trade could not conduct it; and although it was convinced of their impotence, so that it followed that it was pointless to forbid them the trade, the government prohibited them, and gave an exclusive privilege for fifteen years to a company.
So there you have many merchants excluded from a trade which they had discovered at their own risk and with their own capital, and yet the company did not carry it on. Companies are slow in their operations: they lose a lot of time in debating and they incur many expenses before starting. The latter did not start at all: it simply prevented the trade being carried on by others.
A second company was formed, a third, several in succession, and the government which was making a habit of forming them still believed that it was to its advantage to form more. It was so convinced of this that it fin-ally formed one to which it gave the greatest help, down to advancing it the capital it needed.
The last named, despite some intermittent success, had soon used up the greater part of its capital. It could see the moment when it was going to lose its credit; and because it was important for it to conceal its losses, it had the idea of making a distribution to its shareholders as if the trade had produced a profit. But this fraudulent shift, which patched up its credit for a while, made an even greater hole in its coffers. Soon it was reduced to borrowing at high interest rates, and it only kept going through the help it received from the government.
But why is the selfsame trade at the same time lucrative and ruinous? It is lucrative when individuals carry it on, because it is then run economically. It is enough for merchants to be in touch with the merchants of the countries where they trade. At the most they will have factors wherever they need to have depots; and they avoid all useless expenditure because they see to everything by themselves.
It is not the same for companies. In the capital they need administrators, directors, clerks, employees: they need other administrators, other directors, other clerks, other employees wherever they form establishments. They also need, in addition to the counters and the warehouses, buildings as a monument to the vanity of the directors they employ. Forced to such outlays, how much will they not lose in embezzlement, in negligence, in incompetence? They pay for all the errors of those they employ to serve them; and all the more arise, as the administrators who succeed each other at the whim of faction, and who each see differently, never allow a sensible, sustained plan to be made. They form badly contrived enterprises: they carry them out as though randomly; and in an administration that seems to tie itself up in knots, they employ self-interested men to complicate it further. The direction of these companies is thus necessarily vicious.
But the India Company had further vices beyond that of its constitution. It wanted to be warlike and conquering. It interfered in the quarrels of the Indian princes: it had soldiers, forts: it acquired possessions; and its employees thought themselves sovereigns. It is thus easy to understand how its direction absorbed more than the products of trade.
However, this company persisted in wanting to keep its privileges; and it based its case on the assertion that this trade was impossible for individual traders. But it spoke for the interests of its employees who alone were amassing wealth. Indeed, its experience proved that it could no longer carry on this trade itself. So what risk was there in freeing the trade? The worst is that everyone would have abandoned it. But they would have carried it on, since they had done it before. [1798 addition: If it is possible to conduct the trade profitably individuals will carry it on, otherwise it will not be carried on.]
The Indian trade excited the greed of the trading nations. The Red Sea opened it to the Phoenicians. They were not slow to engage in it, and they carried to India the gold which they drew from the west of Europe. But it seemed that exclusive companies were to set up everywhere. One was formed to which the Phoenicians abandoned this trade.
This company had in their republic, as in a monarchy, the vices inherent in its constitution. However, it maintained itself better than that of the Trojans, because it found itself in more favourable circumstances.
The Phoenicians had conquered several islands, the only ones where spices grew; and they had believed they would keep to themselves the exclusive sale of these products, by giving these islands to a company that was concerned to close them to every foreign merchant. It was these products which supported their company. It would have been ruined, like all the others, if, without unique possessions, it had been confined to the Indian trade. Enlightened Phoenicians were not unaware of this. They did not count at all on the lasting nature of a company that was at one and the same time warlike and trading, and they judged with reason that it would have been more advantageous for their republic to leave complete freedom to trade, and to share even that of spices with foreign nations.
However, the example of an exclusive company among the Phoenicians was a great argument in Troy for protecting the India Company. How, people said, can this company be contrary to freedom and trade since similar ones are being established among free, mercantile peoples? But if those who made this objection foresaw the reply, they were in bad faith; and if they did not foresee it, they were very ill-informed. Nevertheless, similar reasoning blinded the government to the extent that it did not tire of making fresh efforts constantly to support this company.
The Egyptians [the English: Daire, Mélanges], situated so advantageously for trading from East to West, found it hard to see without envy the riches that the trade was bringing to the Phoenicians. So they tried to share them, and they opened up the same routes for themselves. Bit by bit the other peoples of Asia, copying each other, devoted themselves to the trade, and all arrived in India by different routes. The latecomers counted on the same profits as the first had made. They did not foresee that the competition of so many trading nations would make everything more expensive in Indian markets; and that the goods that were bought there at a higher price would resell at a lower one, because they were becoming commoner. On the contrary, with the great movement that was growing in the trade, people were convinced every day of the maxim that a state is only powerful in so far as it is rich, and that it is only rich in so far as it trades.
It is not that I blame the trading. I think one should allow a people to do whatever it thinks right. The government has nothing to prescribe in this respect. It certainly must not encourage trading exclusively, nor even agriculture. All its protection is limited to watching what is happening, to allowing it to be done, to lifting obstacles and maintaining order. So the country districts should not be trampled on, they will be repopulated with a surplus which will flow again into the towns to fill them with craftsmen, and into the ports to fill them with sailors. Then all will be brought to worth by an effort which will be applied to everything, and the nation will be truly powerful.
But, in order not to trample on the country districts, must one remove all the taxes? Doubtless not. Because it is the lands which must pay the taxes, since they alone are able to pay. As we have noted, whatever tax we place on them, the artisans and the merchants never pay, because if they work they are reimbursed and if they do not work they beg. In a word, whatever way one sets about to make them contribute, it is always the landowners who pay for the wage-earners, since it is the owners who pay the wages: we have already said so. One must therefore place taxes on the lands: one must give industry complete freedom, and one must not allow any of the abuses to arise which we have seen in governments.
All these abuses were to a greater or lesser extent introduced among the nations of Asia; and when they removed all freedom from trade, and with the repercussion ruined agriculture, they wanted to become trading nations and each wanted to be so exclusively. From that came frequent wars in India, in Asia, and continued upheavals in trade. It fell in turn everywhere, and it only picked up feebly among the nations which had had more success. All contracted debts, all multiplied taxes; and to support trade they all seemed to compete in ruining agriculture, without which, however, there was no trade at all. Disorder was the same everywhere, or near enough.
At last people realised that land is the greatest source of wealth; and it was proposed among the Trojans to encourage agriculture by allowing export and import of corn at the same time. Our soil, they said, is naturally fertile, and, if well cultivated, it will be an inexhaustible resource for us. Competition between the nations will set corn at its true price. Assured of the sale of their grains, cultivators will clear all the lands; and each year we shall have a greater stock for trade.
In Egypt, export alone was allowed: frequently the government even encouraged it by bounties. Wealthy through their soil, the Egyptians were so also through their trade, and they then dominated on the seas. Following this example, many people among the Trojans wanted export at least to be allowed: others opposed it, and the public, who did not know what to think, was fearful, whether it was allowed, or whether it was forbidden.
Among the lines of argument sustained on this matter, the best did not convince, and the worst had the advantage of being numerous. The government which, like the public, did not know what to think, obeyed the cry which appeared the strongest, allowing and forbidding export in turn; and because for lack of principles it conducted itself timidly, it usually only granted a freedom that it circumscribed, and which for that reason it left open to the greatest abuses. In a word, one would have said, by its behaviour, that it wanted to cause dearth to favour the monopolists.
In the meantime it was learnt that the Egyptians had just forbidden export; and this news seemed to make those who laid the blame on it in Troy win the argument.
We have proved that it is in the interest of all the nations to grant freedom to import and export: we note here that this freedom must procure the greatest advantages, or at least procure them more promptly, when it comes together with all the causes which can contribute to the progress of agriculture.
Although there were abuses in Egypt, old customs still caused agriculture to be respected. They had as a maxim that taxes should never be set except on the net product of the land, and this product was assessed in the way that was most favourable to the cultivator. A farmer knew what he ought to pay. Confident that he would never be asked for more, he lived in comfort. He was left all the advances he needed to cultivate the fields and to improve them; and the tax could never, on whatever excuse, be levied on these advances. He even had an opportunity to make himself wealthy, which contributed to the progress of agriculture. The fact is that leases lasted for twenty, twenty-five or thirty years. So, during the first four or five years of a lease, rich farmers could direct all their profits into plantations, into clearance of land, into increasing their livestock. They could even use some of their property for this purpose, and they often did so, because they were guaranteed being able to withdraw with profit the advances they had made, in fifteen or twenty years’ time. In a word, through the length of their leases, they were able to cultivate a farm with the same self-interest as if it had been their own; and the proprietors themselves found a great advantage in it, because at each renewal of the lease they considerably increased their revenues.
There you have the causes which came together with the freedom to export in Egypt, and you can imagine that great advantages must have resulted from them.
In Troy, for quite some time, a large number of abuses contributed to the deterioration of agriculture. Leases were for nine years: the law did not allow longer ones to be fixed; and even if it had allowed it, agriculture would have drawn few advantages. What could one expect from the farmers? In general they only earned enough to subsist wretchedly. Little assured of their advances, they were often reduced to selling their animals, or even down to their ploughs, in order to pay their taxes. Poor as they were, they pretended to appear even poorer; because the taxes, which were arbitrary and fell on the individual, grew the moment a ploughman allowed any comfortable living to show. In this state of affairs, the fields fell fallow: people only cultivated in so far as they were forced by necessity; and the majority of farms were far from productive. One may judge from this exposition that, in the Trojan monarchy, time was needed to obtain for themselves all the advantages one must expect from the freedom of trade in corn.
You will no doubt ask why the Egyptians had forbidden export after encouraging it: the fact is that they had not allowed import. There was dearness following a bad harvest and foreigners brought no corn, or did not bring enough. In these circumstances, the government thought it should take the useless precaution of forbidding export, which was not happening and which could not happen.
The Trojans ought to have given the corn trade complete freedom, and they ought also to have made all the causes which can contribute to the progress of agriculture come together. But when a state falls into decay, people think neither about agriculture, nor of the causes which bring damage to it, nor of the ways to set it right. The sole maxim held is that one must make money; and when one has made it, one thinks one has more power, because one can raise larger armies. But in supposing that large armies create power, one must know how the monarch has the money, to judge if his power is well founded.
Is it the cultivators who give the money; and after having given it, do they live in ease? I can conceive that the sovereign is rich; and if he puts his wealth to use he will be powerful. But does he only have money because he has borrowed it? Then he has none. He only has debts. In order to pay them, he will ruin his people; and before he has paid them, he will already have contracted new ones.
Nevertheless, that is the position in which the chief powers of Asia found themselves. Everywhere one spoke of making money enter the state: one spoke of preventing it from leaving: in a word, one only spoke of the need to have it; and governments, which only conducted themselves by the principles of finance, could not think of ways to make agriculture flourish.
With this financial policy, monarchs believed themselves powerful, or prided themselves on becoming so. But the distant centuries in which I make them live must forgive them this error. They did not foresee how easily the richest empires, especially those of Asia, would be overthrown; and they could believe that some day there would be financial conquerors. They deceived themselves.
Blows Directed Against Commerce: How Traders’ Speculations Have as Their Outcome the Ruin of Trade
When trade enjoys complete freedom, it is possible to have a large number of competitors; and then the undertakings are exposed to greater or lesser risk, in proportion as they are more or less large scale. Let us see what the trader’s speculations can be in such circumstances. What matters for them is to ensure the greatest possible profit.
A farmer who takes land on a lease estimates its return on the basis of the crops in normal years, and according to the current price of foodstuffs in the markets.
There you have his first speculation. It is founded on a supposition that is more or less probable: but the outcome is uncertain. He will make a profit if he gathers as much produce as he has expected, and if he realises the price on which he has counted. In the opposite case, he will make losses. He will have few products to sell should hail take away some of his harvest; and yet he will be obliged to part with them at a low price if his neighbours have produced plentiful crops.
Such is the danger to which he is exposed when he acts according to the commonest speculation.
If he thinks of a new form of cultivation and is the first to try it out, his speculations will be all the more uncertain. Because they will only have as a basis analogies which he cannot yet judge, and where experience alone can assure success.
Finally, should he see products which are at a higher price, because they are at one and the same time scarcer and more sought after, and he grows them in preference, his enterprise will be all the riskier. Either his soil will not be right for them, or they will cease to be so eagerly sought after, or they will become plentiful because other growers will have made the same speculation.
For the soundness of his undertakings he needs to have made sure of the nature of his soil, to have always grasped exactly the changing tastes of the crowd, and to have taken into consideration the endeavours of the other cultivators.
As they are unable to calculate all these things, the farmers always expose themselves to risk. They win, they lose; but they all contribute to the progress of agriculture, some by their mistakes, the others by their success; and finally in each region, a way of farming is established, which could often be improved in many respects, but whose excellence seems in general confirmed by experience. Then the cultivator conforms to custom and speculates less each day.
The craftsman also makes speculations. These bear on the current price of raw materials, on the wage that custom allots him, on the public’s taste for certain works, and on the number of those who work alongside him in the same way.
The commonest artefacts which everyone uses are those where there are the fewest risks to incur. The price of the raw material varies little as it is always in good supply. The wage due to the worker is better known since these kinds of articles are always traded: they are there in large quantity, and it is a daily need that makes them sought after, not a passing fad. Finally, the number of craftsmen adjusts itself naturally to the needs of society, and consequently their competition, which is always much the same, puts little variation in their wages.
The profits in this type of work are thus better guaranteed: they renew themselves constantly. But they are insignificant. The worker whom they enable to live from day to day can only make small economies; and again he often makes them on his necessities, and could not change his condition without great difficulty.
These types of craftsmen have few speculations to make: for them to subsist it is enough for them to act as people did before them. But those who study the tastes of the rich, those who want to create new tastes, the craftsmen of luxury goods, in a word, if they can hope to earn greater profits, they also have more matters to take into account.
The raw materials on which they work normally being scarcer, and so costlier, become more and more expensive, as their articles become more fashionable. So they must limit themselves to smaller profits: too high a price could put off those who commission them.
Fashion, fickle by its nature, guarantees them nothing; and yet it is on this basis that they build all their speculations. Huge profits, if they make them, even come to work against them, because they soon see a host of rivals whom the lure of gain beckons to work in the same fashion. Then it often happens that one is hard-pushed to live from a trade which has made those who first carried it on wealthy.
Moved at random, and victims of fashion’s whims, these craftsmen are often exposed to finding themselves resourceless. Those who have many competitors, because they came to it too late, have not been able to accumulate savings; and those who have worked in more favourable circumstances had not thought of making any. They did not foresee that there would come a time when their work earned them less.
As they do not have enough capital to wait for the moment to sell profitably, they have scarcely finished an article than they are sometimes reduced to selling it cheaply. Often they even find themselves unable to work because they cannot buy the raw materials.
Then a merchant who wants to extend his trade offers them his help. He agrees to guarantee them a wage provided they are happy to work for him exclusively. The craftsmen accept conditions that need dictates to them; and they come by degrees, one after another, to place themselves on the merchants’ payroll.
Much the same is the case with the farmers: to fulfil their undertakings they need to have sold their products within fixed quarters. Besides, they are not normally rich enough to build storehouses where they might keep them, while they wait for the moment to sell them advantageously. So they believe themselves only too happy to be able to hand over to the merchants those products for which they cannot find a sale in the markets; and yet these merchants only buy them when they are at a low price, and they can count on selling them on at a profit.
Thus everything seems to favour the merchants who form great undertakings. Masters of all the tradable goods, they seem to have all the wealth of the state in their hands to make themselves rich from the toil of the ploughmen and the skill of the craftsmen. There you have a vast field of speculation for them.
You can see that these speculations bear on the need of the craftsman to be paid his wage, and the cultivator’s need to sell his products, and the need the public will have for the works of the craftsman and the products of the grower.
It is in the merchant’s interest to buy at the lowest price and to sell at the highest. So it matters to him that there should be a large number of artisans of every description, so that by their competition they bring themselves down to lower wages. For the same reason it also matters to him that many cultivators should be in a hurry to sell. Finally, it is important to him to have few competitors in the undertakings in which he is engaged.
You may conceive that with an exclusive privilege, he will easily obtain all these advantages; and that in contrast he will often be frustrated in them if trade enjoys complete freedom. Then speculations will be all the harder for him, as the success of his undertakings will depend on a host of circumstances that one cannot feed into a calculation, or that it is impossible to foresee.
However advantageously he has dealt with the craftsmen and the growers, he can be mistaken in his expectations. Because if it is with foodstuffs of prime need that he has filled his storehouses, an abundant crop which causes their price to fall will rob him of all his anticipated profit. It may even be that their sale will not reimburse him the costs of purchase and carriage.
Besides, there is absolutely no way to be sure of the consumption of them that must be made in the places where he counts on selling. A thousand accidents may reduce consumption as they may increase it; and when he knows what to rely on in this respect, how is he to know the proportion between the goods he is buying and the consumption to be made of them? Is he to know the quantity with which his rivals are furnished? So it could happen, against his expectation, that he had bought too much, and that he found himself reduced to having to sell at a loss. There are absolutely no speculations which could guide him with certainty in this respect. So he will be forced to conduct himself in these enterprises as though groping, following experience.
Such are the dangers to which he is exposed when he trades in goods of primary need; and yet those are the ones whose sale is most certain.
Second-order goods, of which we create so many needs, are not all equally necessary. Their use may be recent, and sometimes they are passing tastes which give way to others. So there is often a moment to grasp. If they are too ordinary, people will get tired of them; and if they are too scarce, the high price will limit the number of consumers. So by what calculations would it be possible to ensure for oneself the promised profits in this type of trade?
These difficulties which are found especially in the great commercial undertakings should trouble the government little. For it is not through a small number of entrepreneurs, who make themselves exclusively wealthy, that trade must be carried on. Rather, it is important that it is carried on by a great number who are content to live comfortably, and who enable a large number of craftsmen and cultivators to live in the same comfort.
Now when trade enjoys complete freedom, it is naturally conducted by a large number of entrepreneurs who share between them all the branches of trade and all the profits. Then it is difficult and almost impossible for a merchant to obtain wealth that is markedly disproportionate to that of his rivals. He would have to engage in undertakings where his speculations would be accompanied by too many uncertainties: he would not dare to venture it.
There you have the chief advantage of freedom of trade. It multiplies traders: it makes competition as considerable as possible: it shares out wealth with less inequality, and it brings every good down to its true price.
But if it matters to the state that there should be a large number of entrepreneurs, it matters to the entrepreneurs to be few in number. All difficulties are smoothed in the path of an exclusive company, because its undertakings, whatever they may be, call for few speculations. Since it alone has the right to buy from the producer and to sell on, it sets the wage of the craftsman and that of the cultivator at will; and because with the smallest trade it is assured of the greatest profit, it will burn some of the goods it has in the warehouses, if it fears that by making them plentiful it will lower their price.
Such then is the secret motive which causes exclusive privileges to be solicited; it is that people want large, guaranteed profits: still larger ones are always desired, and people always want them with fewer risks. So it is that the speculations of merchants always have as their final point the ruin of trade itself.
This motive is found again in finance whose speculations, as straight-forward as they are easy, seem to leave nothing to chance, and ruin trade in its essence, because they ruin agriculture. If it undertakes to raise taxes, it acts so that for each million it pours into the king’s coffers it levies two. If the state asks it for money, it lends it at 10 per cent and borrows at 5. If it acts as the king’s banker, its profit is all the more assured as it makes itself mistress of all the government’s operations. All depends on it, because one can do nothing without money, and it is it alone that can find money wherever it is needed.
Just reflect on the companies of merchants and financiers and you will recognise that they must imperceptibly draw to themselves all the money in circulation. If they pour it out constantly, it never ceases to return to them. On each occasion they take a new part of it. People owe them money, people owe even more: their credits mount up, and finally it happens that the state has contracted debts with them that it cannot pay. There you have, at bottom, what the speculations of high finance come to, and there you have too what they must produce.
Political speculations would present great difficulties if one had to study every component part of government, and direct them to the general good. But in a century when it is believed that all can be done with money, they become easy, because they are only concerned with the transitory devices which prepare the state’s ruin: that is what we have shown. The ruin of everything. There then, you have the final outcome of the speculations of trade, high finance and politics in centuries where abuses have multiplied.
Conclusion of the First Two Parts
We have seen how wealth spreads everywhere when trade enjoys full and permanent freedom. It pours continuously from one province into another. Agriculture is flourishing: people cultivate the arts even in the hamlets: each citizen finds a comfortable existence in work of his choice: all is brought to value; and one does not catch a glimpse of those fortunes out of all proportion which bring luxury and wretchedness.
Everything changes in step with different causes which bring blows to freedom of trade. We have run through these causes, which are wars, tolls, customs, guilds, exclusive privileges, taxes on consumption, variations in coinage, exploitation of mines, every kind of government borrowing, the grain police, the luxury of a great capital, the rivalry of nations, finally the spirit of finance which enters every part of the administration. [1798 addition: Doubtless there are still more causes.]
Then disorder is at its height. Wretchedness grows with luxury: the towns fill with beggars: the countryside loses population; and the state which has contracted huge debts appears to have no further expedients except those which bring about its ruin.
We have been able to see in the first part of this work that Economic Science, which is difficult because it is naturally complicated, becomes easy when it has been simplified, that is to say when one has reduced it to some elementary propositions which, being determined with precision, appear trivial truths. Then this science develops by itself. Propositions arise one from the other, as so many consequences or as propositions that are in turn identical; and the statement of the question shows its solution so visibly, that one finds it in some fashion, without the need to reason.
In the second part I have reduced the reasoning to a simple narration. There I show the advantages of an entire and permanent freedom: I make known the causes which may undermine it: I make their results known: I do not hide the faults of governments, and I confirm the principles which I have established in the first part.
However, I have only picked up the principal abuses. It was all the more pointless for me to dwell on others as there is a means to destroy them all, that is to give trade full, complete and permanent freedom. I believe I have proved that.
Above all I have wished to spread light on a science which seems unknown, at least in practice. If I have succeeded in that, it will only remain to know whether the nations are capable of conducting themselves according to the light. This doubt, if it came from a man who had more talents and greater fame, would perhaps open their eyes, but, as for me, I know well that I shall only make those who have eyes see.
Nations are like children. In general they only do what they see to do; and what they have done, they go on doing for a long time, sometimes for ever.
It is not reason that makes them change, it is whim or authority.
Whim corrects nothing: it substitutes abuse for abuse, and disorders come always in increasing number.
Authority could correct: but usually it alleviates rather than corrects. It is still remarkable for it to alleviate. It has its passions, its prejudices, its routine, and it seems that experience teaches it nothing. How many mistakes have been made! How many times have they been repeated! And they are still repeated!
However, Europe is becoming more enlightened. There is a government which sees abuses, which thinks of ways to correct them; and it would please the monarch to demonstrate the truth. So there you have the moment when every good citizen must seek out the truth. It would be enough to find it. We are no longer in a time when courage was needed to speak the truth, and we live in a reign where its discovery would not be lost.
The initial 1776 edition concludes:
End of the Second Part
The third part of this work has not been written. The author will work on it, if the first two parts create a demand.
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[* ] One knows how Sully, who was naturally clear-sighted, had difficulty in unravelling this chaos.
[* ] There are writers who claim that for a million to come into the king’s coffers the subjects must pay three. I am not in a position to make exact calculations on this matter.
[† ] See Remarques sur les avantages et les désavantages de la France et de la Grande-Bretagne par rapport au Commerce [Louis-Joseph Plumart de Dangeul (Paris, 1754)], 394, where the English work [Matthew Decker, An Essay on the Causes of the Decline of the Foreign Trade (Edinburgh, 1743)] is cited.
[* ] [“The wisdom of the reader will have little difficulty in discovering in the course of this chapter that Condillac’s imaginary kingdom of Troy is France.” (Eugène Daire and G. de Molinari, Mélanges d’économie politique [Paris, 1847], 1:427.)]