Coquelin on Industry
- Essays on Economics: 19thC French Political Economy in Lalor's Cyclopedia
Source: This article first appeared in the Dictionnaire d'Économie Politique, ed. Guillaumin and Charles Coquelin (Paris: Guillaumin, 1852) and was translated into English and included in Lalor's Cyclopedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (Chicago: M.B. Carey, 1899) in Vol 2 East India Co. - Nullification Chapter: INDUSTRY. I. DEFINITION OF THE WORD; EXPLANATION OF THE SUBJECT.
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Charles Coquelin (1805-1852) studied literature and economics before working in the linen textile business between 1839 and 1844 which resulted in a book Traité de la filature du lin (1845). He was active in free trade circles in Paris, becoming an advisor to the newly formed Free Trade Association and was one of the principal contributors to the journal Libre-Échange. Coquelin also wrote articles for the Revue des Deux Mondes and the Journal des Économistes on many economic topics, especially on free banking and currency matters. He is best known for his book on free banking, Du crédit et des banques (1848), and for editing the magisterial Dictionnaire d'Économie Politique.
INDUSTRY. I. DEFINITION OF THE WORD; EXPLANATION OF THE SUBJECT. The meaning of this word, at first quite restricted, has gradually extended, in proportion as the importance of the phenomena to which it relates and the connection of the various labors of man were better understood. It may be recognized, however, as having at present three distinct acceptations.
—In common language, the word industry most frequently means nothing more than manufacturing industry, whose special object it is to transform, in the working, the raw materials furnished by agriculture or mining. We usually say, for example, commerce and industry, when we wish to distinguish the shop from the workshop, the store from the factory. We also say agriculture and industry when we wish to compare farming with the activity of cities. This popular acceptation is moreover the one which long prevailed, and which still prevails quite frequently in official language and law.
—Nevertheless, a broader meaning is sometimes given, in ordinary speech, to the word industry. It is used in a general way to describe all material labors, agricultural as well as manufacturing or commercial, in distinction from those which appear to have a more elevated character, such as the labors of scholars, artists, public functionaries, etc. In this case, industry forms in a certain way an antithesis to all that is embraced under the term liberal professions. We say, for instance, that a man begins an industry when he becomes an agriculturist, a manufacturer or a merchant, and that he abandons industry, when he exchanges one of these occupations for that of an artist, an advocate, a physician or a public functionary. This interpretation, like the first, has gone into official language and law, in which the restricted meaning which we have just mentioned, or the broader one to which we call attention, is given to the word industry according as it is desired to express one sense or the other.
—Though neither of these acceptations of the word belongs really to economic language, for the reason that each one of them seems to create an absolute separation between labors which are only distinguished by differences of kind or species, still they are both found in the works of the principal economists. Adam Smith uses no other, and they appear frequently enough in the writings of his successors. It is difficult, moreover, to reject either of them absolutely, since they are sanctioned by use, and there is perhaps no inconvenience in adopting them sometimes, provided that care be taken clearly to define their application. But we must hasten to say that, in proportion as the field of economic science extended, while being cleared from obscurity, in proportion as the resemblances between human labors as well as the force of the ties which connect them were more clearly explained, the necessity was felt of giving a broader meaning to the word. The distinction so frequently established between the industrial arts and the professions called liberal, seems false or empty, at least when taken in an absolute sense. It was understood that these labors, no matter how different they may be in their processes and in their relations to their immediate object, are connected, bound together, lend each other a mutual support; that they are governed by the same laws, and lead in reality to the same ends; that there is, consequently, a reason to include them under a common designation. In this way, by the natural movement of economic studies, men came, gradually, to include under the general name of industry, all labors, of whatever nature, which contribute directly or indirectly to satisfy the wants of man.
—So that, in genuine economic language, industry is human labor, without distinction of kind; labor considered in the infinite variety of its applications. The word industry would even be the exact synonym of labor, were it not necessary to recognize for it a higher meaning in some respects. But, while we can scarcely understand by the term labor, only the exercise pure and simple of the physical forces, or the intellectual faculties of man, we must include under the term industry the employment of these same forces, these same faculties, with all the social combinations which increase their power, and the concurrence of all the physical agents which favor their action. It is, in one word, labor but labor raised, if it be permitted to say so to a higher power, both by the agency and combination of individual forces, and the aid of auxiliary agents which man has been able to gather around himself.
—Considered from this broad and general point of view, industry is, as we shall see in the article POLITICAL ECONOMY the real object of the investigations of economic science, which studies its organization and explains its laws. By taking it up in this way we are evidently relieved from exalting its importance. We have no need of dwelling on those commonplace considerations which are usually brought forward to extol its advantages and merits; considerations which to our thinking are always of meagre fitness, since they lower what they pretend to exalt, and which would be particularly out of place here. Industry, as we look upon it, is not a secondary fact seeking its place; it is the active life of man; it is, in some respects, the man altogether. When addressing men there is no need of wasting eloquence to heighten the importance of such a fact.
—But if we are freed from insisting on this point, we have another task to fulfill, that of showing at a rough estimate how industry is organized as a whole; to present a miniature picture of this organization, and indicate at least its principal features. This is the place to group and collect the general phenomena presented to us in the field of industry, and which form the ordinary text of economic studies. It is necessary to show, as far as is possible in a summary analysis, how these phenomena are arranged and connected, in order to point out the place which each one of them occupies in the industrial order; this is the best way of showing, at the same time, the extent of the field which economic science must cover.
—To attain this object successfully, it is well understood that what we have to consider is industry as it exists, such as civilization has made it, that is to say, with all the organic elements developed in it by time. Still, as industry, considered with reference to the organization of the labors which it embraces, is an essentially progressive phenomenon, which though subject to certain invariable laws derived from the nature of man itself, is built up in a gradual and progressive manner; since it begins in a rude state and rises gradually to the miracles of organization, which we witness to day, like the tree which, contained at first in the germ, develops only with time, and throws out its branches successively, it seems to us useful to consider it in its rudimentary and primitive state. This is the more important since it is not developed regularly, in the sense that its organization is equally advanced everywhere; it is, on the contrary, very unequally developed according to locality, and we find here and there, in places even far advanced in civilization, remnants of its primitive organization.
—II. PRIMITIVE AND RUDIMENTARY CONDITION OF INDUSTRY. The condition of industry which we call rudimentary consists essentially in this, that the most varied functions are united in the same hands; that exchange is almost unknown, and consequently the division of labor also, which is induced by exchange. All those occupations, so numerous and diversified, which are carried on separately in society as it now exists, opening a field to so many professions or different careers, were then in a certain way mingled and confounded, in the sense that they were exercised in turn by the same individuals, though in a very imperfect and rude manner. Another distinctive trait of this primitive organization is, that a sort of intimate community existed in it among men, at least among those forming the same society, in such a manner that they performed the greater part of their labors in common, and made a direct division of the fruits of these labors.
—We have tried to give an idea of this state of things in several articles in this Cyclopædia, especially under the word EXCHANGE; but we think it our duty, in order to preserve the connection of ideas, to recall it in a few words here. In order to find its traces it is not absolutely necessary to go back, as we have done previously, to the infancy of society, or to follow man in the savage state; we can find a more or less faithful picture of it, even to-day, wherever a small group of men live separate from the rest of society, or without ordinary communication with it. If, for example, we go to the remote frontier of the United States, we shall find here and there isolated farms, on which a small number of men, belonging in most cases to the same family, live together, and satisfy all their own wants themselves without contact with the rest of the human race. This picture of primitive society is not complete, it is true, but it is near enough to the type which it represents. No matter how remote these men may be from the great society of mankind, they do not cease to borrow from it largely: first, they obtain their arms from it, as well as most of the implements which they use in their labor. Besides, having issued from that society themselves, they took from it at their departure a portion of the enlightenment and acquired knowledge which it had accumulated for the use of all. This gives them a decided advantage over their savage neighbors. With this exception, they embody the type of primitive industry, in the sense that all labors necessary to their support are carried on by themselves, and all the functions of social life are united and concentrated in the little group which they form.
—A truer picture of this primitive constitution of industry can be found, perhaps, in the lives of the patriarchs, as presented to us in the Scriptures. Abraham and his earlier successors lived alone with their families and their servants by isolated agriculture, and without ordinary contact with the rest of the world. These patriarchs, it is true, knew the use of money, which shows that exchange was practiced among them to a certain extent; but it is evident that they had recourse to exchange only at long intervals, in exceptional cases, and that in general they themselves supplied everything which was needed to satisfy their daily wants. In their activity, as in that of the farmers of the American border, all industrial labors were united, all social functions brought together, with this additional circumstance, that as the patriarchs recognized no superior authority to which they owed obedience, they held besides the functions of the government in their hands.
—On considering industry in this primary stage we perceive clearly the intimate connection of all its branches. On close examination all the functions of social life are found there united, though many of them appeared only in germ. Around agricultural industry, which in a certain way formed the basis of the common labors, were gradually grouped manufacturing industry, commercial industry, the fine arts, which were not unknown there, as well as the labors which to-day form the appanage of the professions called liberal, including even the functions pertaining to public authority. Land was cultivated and flocks were raised; this was the chief occupation of the tribe an occupation altogether agricultural. But the fruits of the earth once gathered, it was necessary to prepare them for common use. It was necessary also to collect the wool of the flocks, to spin and weave it, to make garments for each one. This was manufacturing industry with all the distinguishing characteristics which belong to it, but closely connected with agricultural industry, of which it was merely the accessory, so to speak. Next, it was necessary to distribute all these products among the different members of the tribe; and what is this but the foundation itself of those occupations which constitute commercial industry? The fine arts were cultivated, even if only in the song and dance at leisure moments. Man observed the stars, while cultivating the earth, or watching his flocks; this was the beginning of science, which was connected with the advancement of the most common labors. At intervals, also, the properties of certain medicinal plants were studied, plants suited to the cure of certain diseases; medicine took its place side by side with the plow of the laborer. Arms were sometimes taken up in self-defense, either against wild animals, or against other enemies more dangerous, and the art of war was practiced by the same hands which were devoted to the arts of peace. Those who had committed crimes were judged and punished; and thus, in the midst of so many other labors the solemn functions of justice were performed. Finally, there was a government, a chief to direct, and agents to serve it, and a police of some kind. It is true, therefore, that in this small group, composed of so few men, all the essential functions of the social order were united. It was a small picture of the world, as it exists in its present condition; with this sole difference that, in the world of the tribe, all these functions were mingled, confounded, exercised by the same agents, while in the world of to-day they are separated and intrusted to different agents, without ceasing on that account to be united and dependent on each other, as much as they could possibly be the first day. We shall now see how, in consequence of the progress of exchange, all these elements, mingled at first, became detached from each other, and what the new order was which was established.
—III. ORGANIZATION OF INDUSTRY. Exchange; division of labor; subordination of labors; money. In proportion as the number of exchanges increases, under the influence of causes which we have enumerated elsewhere (see EXCHANGE), a division of labor takes place, in the sense that each individual chooses a distinct occupation to which he devotes himself exclusively, leaving to others the task of carrying on those which he has abandoned. In this way the functions of industry, at first closely connected, and executed by the same hand, separate; the mingled elements become detached from each other, and a new organization is established with exchange and division of labor as essential bases.
—The first general effect of this movement of division is to set free manufacturing industry, which settles into a distinct branch of labor, through separation from agricultural industry, with which it was at first confounded and of which it formed, so to speak, merely an appendage. We have seen that, in the primitive organization, agriculturists themselves prepared the wool of their flocks, or the flax which they had harvested, in order to turn them into clothing; just as they also produced every change required by the other products of the earth. This part of labor, which consisted in fashioning and working up all the raw products of the soil, in order to adapt them more completely to our wants, was at that time only a kind of accessory of the first; in appearance, as well as in reality, there was at that period but one industry: agriculture, with its dependencies. But gradually, in proportion as exchanges became more frequent, these accessory labors separated sharply from agricultural industry, where they were always out of place and imperfectly executed. They acquired a greater importance by the separation itself, and tended to constitute, under the name of manufacturing arts, or manufacturing industry, a perfectly distinct branch of industry which, feeble at first and in the infancy of society, now occupies a high position among civilized nations. We are indebted to it in general for the creation of cities; for it is the nature of the manufacturing arts, which are not, like agriculture, fastened to the soil, to associate in groups, to concentrate and form by their union those masses of population which are called cities. Once established, they become still more special, through separation into a great number of distinct branches. Exchanges consequently multiply more than ever, and by their increase lend a new importance to that other branch of general labor, whose object it is to facilitate exchanges, and which is known as commerce. At the same time several other labors, previously without distinct character and confounded in the general mass, are detached from the common trunk: labors of art, of science, those relating to government, the police, and in general all those which form the object of what is called at present the liberal professions. Thus, everything which was formerly united now tends to separation, specialty is introduced everywhere, and exchange, originally the exception, becomes the universal law.
—Exchange and the division of labor are therefore the fundamental bases of the new organization of industry; to speak more correctly, they are the points of departure for every genuine organization. In truth, it can not be said that this primitive condition which we have endeavored to describe had really an organized industry. All these isolated groups of men appearing on different parts of a territory, each one working indifferently the tract of territory which fell to its lot, were too unconnected to exhibit any general order in their relations. They formed, perhaps, industrial workshops, but workshops without connection, without tie, among which, therefore, no trace of general organization could be noted; and as to the particular organization of each one of them, it was the ruder and more imperfect since the most varied functions of labor were mingled and confounded, and no assistance from without could be expected to favor its action; it was, besides, unstable, depending essentially on the changing views of those who directed it. It was only when exchange became more frequent, that regular relations were established between these workshops, and it was then also that general organization began to appear. This was completed by the division of labor, which freed each one of these workshops from the parasitic functions with which it was overburdened, confined it to its own specialty, and made every separate workshop an integral part of a great whole—An imperfect idea would, however, be formed of the general order of industry unless to these two essential conditions, exchange and a division of labor, a third and no less important one be joined, which completes them, namely, the connection, the mutual dependence in which the various functions separated by the division of labor are placed with regard to each other. To say, as is often said, that labor is divided in the progress of industry, is not enough; this is to omit another important phenomenon, which beyond a doubt has an intimate connection with that of the division of labor, but which in many respects is distinct from it, and would on this account deserve a separate title. We wish to speak precisely of this principle by virtue of which the various labors of industry, though separated from each other and executed independently, continue nevertheless in such a reciprocal dependence and subordination that they all seem to form the different links of an endless chain. Economists in general do not, perhaps, dwell sufficiently on this phenomenon, to which, as appears to us, they do not attach due importance. But what other phenomenon shows more clearly the elevated character, the eminently social character of industry, so different from that which so many unjust detractors attribute to it? In virtue of the division of labor, different kinds of labor are separated in view of more convenient and better execution; it might be believed that they continue thus without relations; nothing of the kind; once separated, they come together again, and are reconnected; without being confounded, however, as they were before, they are subordinated to each other, but solely for purposes of mutual support. There is not, therefore, a single one of the great functions of industry which is not connected with a thousand others, from which it obtains the materials which it works up, the instruments which it uses, the buildings which it occupies, or the technical processes which it employs. This is what we shall permit ourselves to call the subordination of labors; the necessary crowning of the division of labor, from which, however, it is distinct; an interesting phenomenon which characterizes, better than any other, this organization at once simple and complex, to which human industry lends itself. Another no less interesting phenomenon, which completes the foregoing, is the use of money, without which any active system of exchanges would be impracticable.
—Exchange, the division of labor or the separation of tasks, the subordination of the different kinds of labor, and the use of money: these are the four essential elements which constitute the industrial order as it exists; they are the fundamental bases on which the whole edifice rests. It will be understood that this is not the place to dwell on these elements, which will be more properly explained elsewhere. It is sufficient for us to call brief attention to them, to assign them their proper place in the industrial system. Let us merely repeat that together they form the whole industrial order, and it is not necessary to go outside this circle to include the total of economic phenomena. It remains, however, to see what results from the action of these elementary phenomena, and how in the movement of affairs originated by exchange, order is introduced among all these industrial elements separated by the division of labor.
—IV. CONSEQUENCES OF THE PRECEDING. The industrial world constitutes a great society. In the primitive state of things, a feeble sketch of which we have tried to present, there was, properly speaking, no human society; the world was divided into a certain number of isolated groups of close communities, little disposed, as a general thing, to come together, and between which a state of war often created a gulf. But when exchanges increased and the division of labor began, all these isolated groups dissolved, they became merged into each other, and finished by forming together a great society, whose tendency, as we shall point out in the article POLITICAL ECONOMY, is to become universal. This is human society, very different from political society, with which it is sometimes improperly confounded, and which is never greater than a more or less considerable fraction of it.
—Now what are the bonds of this society? Precisely those which we have just enumerated: exchange, division of labor, subordination of the different kinds of labor, and money. By exchange, men supply each other with the fruits of their labors, products for products, services for services. By the division of labor, they share the different parts of a common task. This is enough to create between them a social tie so intimate that no human power can break it, and from which no individual can free himself. The subordination of the different kinds of labor strengthens this bond, which the use of money cements, by making it general. The existence of this great human society has often been denied or ignored. Some look on it merely as a promise of the future. They are mistaken; it is a reality of the present. This society exists to day, though it has not yet arrived at the last stage of its development, and continues to extend and multiply its bonds daily. Its existence is shown clearly enough, it appears, by that intimate solidarity of interests which becomes more and more evident, which is established especially between all parts of the civilized world, and which makes them all sensitive to the same accidents, to the same catastrophes. It is shown by the simple fact, that any individual hidden away in a corner of this civilized world may deliver the fruits of his labors to his neighbors, and, provided that he has them accepted, may receive their equivalent in any other part of this habitable world. He has worked for the French, the Germans or the Russians; he can be paid the price of his labor by Americans, Indians or Chinese. Its existence is shown further by this other no less significant fact, that nations most different from each other, not only agree to effect an exchange of products, but, in addition, aid each other in a certain way in completing the successive processes which certain products require, and bearing them by a series of uninterrupted labors to their final termination. Thus the cotton fabrics which we wear are the combined result of the labor of North Americans and Europeans; leaving out the fact that several other nations have contributed to their manufacture, some by furnishing dye-stuffs which color them, others by furnishing the instruments which were used in their manufacture. The wool of flocks raised by Australians is brought to Europe by English seamen; it is distributed by English merchants over the European continent; where it is converted into thread and cloth by German, Belgian or French laborers, dyed with stuffs furnished by Central America; again it is transported, in the form of manufactured cloth, by the sailors of every country, into every part of the world, including that in which it grew. Is it possible to fail to recognize in such movements the intimate community of interests which is established between the inhabitants of countries most different from each other, and the existence of a social bond which connects the whole world?
—Our intention, however, was not so much to prove this great fact here as to mention it. We shall say simply, in passing, that it is just this human society, thus formed and constructed of the elements which we have just examined, whose laws are studied by political economists. It remains now to see what the principles and general facts are from which these same laws are derived.
—V. MOTIVES AND REGULATORS OF INDUSTRY. Personal interest; supply and demand; competition. The great motive of industry is personal interest, which is besides the essential motive of all human actions. When God created animated beings he endowed them with a profound and indestructible sentiment: love of self, as necessary to their preservation. It is his will, however, that this sentiment, too exclusive, should be tempered in each individual by a more or less pronounced sentiment of sympathy for his fellow-men. This same sentiment, personal interest, love of self, imparts movement to the whole industrial machine; but it finds here an additional moderator, the balance of opposing interests, which confine each individual interest within its limits, and from this, final harmony results.
—The pretense has sometimes been made of substituting another motive for this natural one: devotion to others. This was a desire to interfere in the work of the Creator, who assigned its place to each sentiment, when he admitted sympathy or devotion merely as a corrective. Suppose this project to have been successful (an impossible thing), its success would have merely enervated man, by depriving him of his most active principle. For what other sentiment can rival self-interest in energy and perseverance? What other, inherent in man from the cradle to the grave, could apply the same spur to his activity? Happily these absurd projects have never had a chance of success. Personal interest may sometimes be perverted or corrupted, by turning it from its path, but it can never be destroyed.
—The great motive of industry is, therefore, the same which has determined human activity in all directions and at all times: personal interest. But it would be a mistake to suppose that from the movement and conflict of diverging individual interests anarchy or disorder must necessarily result. This would have doubtless been true in those systems of an absolute community of labor and wealth which existed at the beginning of human society, and which certain misguided minds have sometimes been bold enough to propose to us as an improvement on our present condition. With such an arrangement personal interest, without ceasing to be as active as in our present society, would be absolutely deprived of a rule of action: therefore it would become lawless at every moment through brutal violence, passionate disputes over places, by a rivalry of slothfulness in labor, and a culpable disregard of the service of the community, unless continually reproved, directed and restrained by the all-powerful and despotic will of a director. But this is not the case in the industrial system founded on exchange, in which order springs from the very principle in virtue of which society moves. As soon as exchange has become in practice the universal law, as each individual is forced to count on others for the satisfaction of his wants, and as he has no right to their services except in so far as he brings them to accept his, he is led by his own interest to labor for his fellow-men, to study their wants, their tastes, and to make the satisfaction of these wants the sole object of his activity. Thus, in this system, personal interest, without losing any of its native energy, tends unceasingly toward order, while subordinating itself in each of its manifestations to the interests of all.
—In the midst of this extreme complication of phenomena, which exchange and the division of labor produce, there remain nevertheless certain grave questions to be solved, which touch upon the very existence of the industrial order; that of knowing, for instance, on what basis products and services are to be exchanged, and how equal values are to be established. This is the great problem of value. This problem is solved by the beautiful law of supply and demand, which has been explained before (see DEMAND AND SUPPLY), and by competition which is its complement. Let each man be obliged to offer his services to his neighbors, and have them accepted by those who demand them before being able to claim a part of the fruit of their labors in his turn; this arrangement suffices to make the personal interest of each individual tend to satisfy the wants of all the others; but it is inadequate to effect a balance and equilibrium between all the individual interests which are put in movement, and give to each one in a just measure the satisfaction due it. What would happen, for instance, if each individual, when he offered his products and his services to others, were able to fix his price arbitrarily according to his will? Another rule is needed. Where does it come from? The decrease of the demand suffices, in a certain measure, to moderate the claims of those who offer the supply; it is the commencement of a rule. But it would still be insufficient, if competition which grows up naturally between the latter did not impose on them a more rigorous law, by forcing them to be satisfied with the lowest price which the exigencies of production can admit. It is competition then, finally, which determines the relative price of things. It renders many other services, and in the last analysis it may be considered as the supreme regulator of the industrial world. But having already explained this truth, in some of its developments, under the word COMPETITION, we shall not return to it here. It only remains for us to do what we have omitted elsewhere: to determine the conditions of competition and the limitations to which it is naturally subject.
—VI. CONDITIONS AND LIMITS OF COMPETITION. Interference of political authority; necessity and danger of this interference; natural monopolies. Such is the power of the principles of order which we have just mentioned, and especially of competition, that sovereign regulator of industrial affairs, that if the action of these principles were never opposed or limited, if it were not submitted to conditions which frequently distort its effect, all the functions of the industrial world would be carried on without trouble, and with perfect regularity. We have stated elsewhere that, if competition had always ruled without obstacle, if it could have fully developed in the midst of human societies, such is the power, the inexhaustible fruitfulness of this principle, that humanity would have advanced, and with an incessantly increasing rapidity, toward a future of prosperity, of wealth and of general well-being, of which it has perhaps yet no idea. More than this: the industrial mechanism, so admirable already, would be free from all the disorders which impede its action.
—The action of competition supposes the reign of justice and right; it supposes that, in every operation of exchange, the contracting parties will be free to refuse or accept the conditions proposed them, and even to apply elsewhere if such is their good pleasure; it supposes, in a word, the absence of constraint, of fraud, of violence in human transactions; for if one of the parties may, in any manner, impose his conditions on the other without the latter being free to weigh, to measure and reject these conditions, there is no longer any competition, and equilibrium between the respective interests of the parties ceases to exist. Under the empire of the law of exchange, personal interests continually tend toward order, since no one can pretend to obtain values which he seeks, unless at the cost of furnishing equivalent values to his fellow-men, and of subordinating his labors to their wants. But it is always under this essential condition, that no one of these interests in question should prevail over the others through violence and injustice; that, on the contrary, each man should be bound to respect in all other men the free manifestation of their wants. Otherwise, the tendency of individual interests toward order immediately changes into a contrary tendency. Now, it is precisely this essential condition, this necessary condition of order, which is almost never completely realized.
—In view of the evil passions of men, which but too easily incline to violence and injustice, when urged by personal interests, and when they have force on their side, justice and right can prevail in human transactions only so far as there is a superior power above individuals, which holds the balance between them, and which has both the force and the will to prevent all their deviations from justice; this is the political power, whose interference, understood in this way, is always necessary. The task of this power is a great and admirable one. It consists essentially in holding the balance between individuals, to make the liberty of each one of them respected, and to keep them within the limits of their respective rights, without speaking of the corresponding mission which is intrusted to it, of defending the population of the country which it governs against foreign attacks—a negative rôle, when properly considered, since it consists almost entirely in repressing violence and preventing evil, but which is nevertheless of considerable importance. It is owing to the continual interference of this power, an interference altogether salutary and beneficial when it does not exceed proper limits, that freedom reigns in private transactions, and it is in this case alone that competition becomes possible. If the political power is not the creator of the industrial order, whose principle lies elsewhere, it is at least its guarantee, and the necessary guarantee. Under its wing, so to speak, individual interests are secured, and competition gains its vigor. We can therefore consider the different political powers which divide the world between them as so many indispensable wheels in the great industrial mechanism.
—But these political powers are exercised also by men who are no more exempt than others from the evil passions which it is their duty to restrain; this is the weak side of human society; it is the gate through which every evil enters. In addition to the fact that those who wield power in each country (we mean here governments in general) do not always show themselves sufficiently active in repressing excesses, and thus fail in their exalted mission, they too frequently permit themselves to commit like excesses. Subject to all the impulses of human nature, they often yield, like other men, to their evil inclinations, and the unjust acts which they commit at such times have consequences all the graver since they have a loftier origin. To find a government which makes justice respected and which respects it scrupulously itself, is the political problem, but a problem which still awaits solution. This is why the industrial system, in spite of its admirable structure and the regulating principles which it possesses, forced as it is to lean on the political order, which does not enjoy the same advantages, still finds itself tainted with a great number of partial disorders from which perhaps it will never be entirely exempt.
—Thus in the industrial order, everything is good in so far as we consider it governed by the economic law; but this law, more general in its application than the political law, is nevertheless subject to it, in certain respects, within the territory embraced by the latter, since it is everywhere incomplete without its co-operation. From this arises disorder wherever disorder reigns; from this come the vexatious imperfections to which the industrial system is still subject. The mass of men have no reason to complain, since the primary cause of the evil is in the violence of their own evil passions. It must be said, however, that independently of this severe condition to which competition is subject, of being unable to act except under the protection and guarantee of the political powers, it meets also here and there necessary limits, which the nature of things imposes on it.
—It is evident, to begin with, that competition can not act in all its completeness except when the number of men occupied in the field of industry is so large that each one of those who offer in bulk services of a certain kind should meet competitors or rivals. It is evident that where population is sparse, or the groups of men are few and far between, this beneficent principle is scarcely felt. It is almost entirely absent in that primitive condition of society which we mentioned above; and this is one of the causes which explain why progress is generally so slow in nascent societies. It only begins to exhibit all its effects when men collect on narrow spaces, or when among sparse populations means have been found to establish numerous and easy communications, which bring producers into contact with consumers.
—But even where the population is dense, competition always meets certain limits, if nowhere else, in the existence of certain absolute monopolies which arrest its activity. We do not speak here of artificial monopolies, of those which the negligence of governments has allowed to spring up, or which they have by design unjustly established. We speak of natural monopolies, of those which are necessary, unavoidable, and which the most careful vigilance of the political power could not remove. There is in every country a certain number of this kind of monopolies; and though inevitable and necessary, they do not in general fail to produce certain disorders followed by pernicious effects. The first and most considerable of all these monopolies, the most unfortunate perhaps, but surely the most inevitable, is precisely that which is enjoyed by these same political powers just mentioned. In every country, the established government, whatever it be, acts alone in its sphere, and suffers no competition of any kind in the exercise of the functions intrusted to it. This is inevitable, we say, and results from the truths which we have just explained. Since in fact competition even between one individual and another is only possible on condition of equal freedom for the contracting parties; since it supposes, consequently, the existence of a superior power, which holds the balance of justice between the contracting parties, and forces each to respect the rights of the other, how could it be practiced with reference to a government which knows no superior, and which could accept one only by abdicating? Contracts are made between individuals under the guarantee of public authority which prevents violence; this is what produces freedom of agreements and makes competition possible. But under what guarantee can a contract be made between a government and an individual? There can be none. In this case the strongest carries the day and imposes the law. The strongest is the government, which, instead of bargaining, of discussing as individuals do in their affairs, dictates and imposes its conditions. This is what has been seen in all times and which will always be seen, since the nature of things has thus ordained it.
—But if this monopoly of political powers is inevitable, it nevertheless produces very annoying results. Since they never feel the spur of competition, which alone is able to enforce activity, economy and order on men of whatever condition, all the governments of the world grow slack. Consider what really happens in every state, and you will see that of all industrial enterprises undertaken, the enterprise of government—and we can call it that—is, beyond comparison, the worst administered. There are doubtless differences between states, but they are merely differences of degree. Besides, these same governments always sell their services too dearly. The price of these services, not being determined by the general laws which determine the relative value of things, is arbitrarily raised, with no other certain limit than the resources of the people. We are not criticising one particular government or another, since, on the contrary, we are establishing a general law. We simply say it results from the very nature of things that the functions peculiar to governments are always badly executed and paid for at too high a price. It is another consequence of this same fact, that the remuneration of services rendered by governments always assumes a particular form, that of a tax or impost—an annoying form, for more than one reason, though it is, in some respects, inevitable. Taxes are nothing else in principle than the remuneration for services rendered by those who govern; but they are a remuneration which, instead of being voluntarily and freely paid like all others, is exacted and collected with authority by those who receive the remuneration. From this there results both an underhand resistance on the part of those who pay, and who endeavor by various means to escape from the burden imposed on them, and a want of equilibrium in the assessment of taxes, which scarcely ever are proportioned to the importance of the services received by each individual, and besides a considerable increase in the cost of collection, aggravated by the resistance of tax payers; without considering that the precautions taken to insure this collection almost always become serious hindrances to industry, and nearly as oppressive as the taxes themselves.
—Thus from the natural monopoly which governments enjoy, it results that the functions belonging to these governments are badly executed, that their services are always too highly remunerated, though there are great differences of degree between them. Besides the natural monopoly of political powers, there are others, which always involve consequences more or less lamentable. But it is not our intention to enumerate them here, still less to analyze all their effects, this subject being specially treated, like all others, in its own place. It is sufficient here to point out the principle, in order to compare it with the other principles which govern the industrial world and indicate in what sense it modifies the action of this world.
—VII. INSTRUMENTS OF INDUSTRY. In the preceding pages, we have passed in rapid review the series of great industrial phenomena, stopping only at the chief points. We showed first that industry, in its general expression, embraces all human labors, of whatever nature they may be. We then stated that when scarcely out of its cradle, this industry tended toward ordering itself by exchange, division of labor and subordination of the different kinds of labor, by the aid of money which favored their action; that thus organized it constitutes a great society, the tendency of which is to become universal; that its principal motive is personal interest, the same that directs all human actions, but subordinate in this case, in virtue of the law of exchange, to the general interest; that the great principle governing it, and from which all its laws spring, is competition, a principle both of progress and order, which directs it incessantly toward an organization more and more satisfactory and perfect. We added that if this principle reigned in the industrial world alone and without division, all would be for the best, and that the wealth or general well-being would be as great as the degree of civilization at which nations have arrived would permit; but that competition has its conditions and its limits, which arrest its action and neutralize in a certain measure its beneficial effects; that it is subordinated, for example, to the action of governments, which not being subject themselves to its influence, do not subordinate themselves to the general order; that it is, besides, limited by a certain number of artificial or natural monopolies; that this is the weak or vulnerable side of human society; that by this, that is to say, the irregular action of governments, and by the disastrous influence of monopolies, disorder is introduced into the world; and that this explains why the organization of industry, so beautiful and marvelous as a whole, still continues to be tainted with numerous imperfections.
—We have in a certain fashion summed up all the economic truths in this miniature picture. It must be understood, of course, that each one of these truths would require lengthy explanations, necessary to illustrate and bring out all its applications, but which we refrain from making because they will be found elsewhere. There would be a lack, however, in this general picture, if we should pass over, without mentioning them, the instruments of industry, that is to say, the agents of different kinds which are of assistance to man in his labor.
—Man does not labor alone; he calls to his aid, as far as possible, all the forces of nature, all the powers of the physical world. Among the instruments which he uses, some, created by his own hands, were slowly accumulated by saving; others, given by nature, were merely conquered and subjected by him. But all lend him a powerful aid, without which the most energetic development of his activity would remain comparatively barren. This is a great and general fact, which could not be omitted, and whose place it was necessary at least to indicate.
—There is really no particular law to be established in regard to the instruments of labor. Considered in their general bearings, the principles which we have already laid down apply to everything, to the simple agents of labor as well as to men. Men and capital are subject to the great law of competition, which arranges and classifies all things, which fixes every where the value of services rendered. Everything is subject in like manner to the influence of monopolies, which are connected with things as well as with men, and everywhere produce the same effects. The only difference is in the applications, which still offer, it is true, a vast field of study, but into which we can not enter at present. But if there is no particular law to establish here concerning instruments of labor, there are at least a few observations to make—To begin with, it is not uninteresting to see what kind of assistance is furnished to man by tools and machines in general, how far they are necessary to the development of his productive faculties, and how their increasing multiplication raises the level of humanity every day. So far as various kinds of capital are particularly concerned, the accumulated fruits of the labor of man, it is of interest to see how they are formed and accumulated by saving; in what conditions this accumulation is quickest, and what are the circumstances which favor it most—an important subject in itself, with which many others are connected, which are not devoid of importance either. There is less to be said, it appears, about appropriated natural agents. As they are given by nature, they do not increase by saving: though saving almost always adds something to them by means of the capital which it connects with them. They are purely and simply conquests of man over nature, conquests which are happily extended from day to day. There is, however, an important observation to be made on this subject, it is that appropriated natural instruments are more subject to monopoly than capital, and to monopolies frequently complicated, whose effects are not always easily analyzed. As to agents not appropriated, however valuable be their aid, we may omit them entirely, since, their services being always gratuitous, they do not enter into the current of exchanges, and thus escape all the effects of economic law.
—Moreover in all we have just stated, though here and there a glimpse may be had of a vast series of interesting studies, no new principle appears; at least none of those primordial principles, those generative principles, so to speak, like those which we laid down earlier in this article, and to the explanation of which we desired to confine ourselves. In fact, since the instruments of labor, those at least which are appropriated, follow, as we may say, the fortunes of the human race, and are subject, saving a few differences and restrictions, to the same general laws, what principle could be appealed to concerning them which would not be simply derived from these same laws?
—VIII. CLASSIFICATION OF INDUSTRIES. Industry is one in this sense, that all its parts are connected, and that it would not be possible to suppress a single one of them without leaving an evident breach in the whole. Nothing, however, prevents our dividing it into several branches, for the convenience and facility of the studies of which it is the subject; there is no difficulty in doing this, provided the necessary connection of all the branches with each other is never lost sight of.—"There is but a single industry," says J. B. Say (Cours, part i., chap. vii.), "if we consider its object and general results; and there are a thousand, if we consider the variety of their methods and the materials on which they act. In other words, there is but a single industry and a multitude of different arts." Though J. B. Say takes the word industry here in a more restricted sense than that which we have given it, since he applies it only to that kind of labor which acts on matter, his observation is correct. It has even a higher significance than he gives it, and we can apply it to universal industry with the same authority. "Nevertheless," adds the same author, "it has been found convenient, in studying industrial action, to classify its operations, to unite in the same group all those which have a certain analogy among them. Thus, we say that the industry which brings products from the hands of nature, whether it has promoted their production, or whether that production has been spontaneous, would be called agricultural industry or agriculture; that the industry which takes products from the hand of their first producer, and subjects them to any change whatever, by chemical or mechanical processes, should be called manufacturing industry; and that the industry which takes products from one place to transport them to another, where they are nearer the consumer, should be called commercial industry, or simply commerce." This classification is, in fact, that which is most generally followed. It has passed from everyday language into books, and nothing prevents its adoption, since after all, as the writer we have just quoted very aptly says, every classification is arbitrary, having no other object than to direct study or simplify operations of the mind. Still, it is necessary to remark how insufficient and incomplete this classification is in certain respects. It comprises under the same denomination, that of agricultural industry, several kinds of labor, which have without doubt an analogy to each other, as all human labors have, but which surely differ for many reasons; for instance, the venturesome labors of the man who is engaged in whale fishing and the uneventful occupation of the laborer who cultivates his field in peace. The man engaged in the whale fisheries in the southern seas, would surely be astonished to learn that he exercises an industry similar to that of the gardener who furnishes the market of Paris with fruits or vegetables. On the other hand, how many industries remain outside of this classification, even it we give it every possible extension. We find here, for example, no place for the labors of scholars, physicians, advocates, artists, professors, public functionaries, nor for those of the men devoted to the professions called liberal; for all these men, each one of whom exercises an industry, and often a very active one, could not be considered as merchants, manufacturers or agriculturists.
—Struck with these considerations and some others in addition which he has developed with much force, Ch. Dunoyer has endeavored to establish a new classification, more scientific and complete, in his excellent work, Sur la Liberté du Travail. He begins by dividing industry into two categories or two orders; embracing in the first category those which act on things, and in the second those which act on men. The industries which act on things, are: 1, extractive industry, that is to say, that which wrests from nature spontaneous productions, and in which must be comprised fisheries, the chase, and the working of mines; 2, the industry of transportation, that is to say, that industry which transports objects by land or by water; 3, manufacturing industry; 4, and last, agricultural industry. The last two, the author defines very nearly as they are defined everywhere. In the category of industries or arts which are exercised on men, Ch. Dunoyer includes: 1, those occupied in the perfecting of our physical nature; 2, those which have for special object the cultivation of our imagination and sentiments; 3, those whose office it is to educate our intelligence; and 4, those which contribute to the perfecting of our moral habits. This classification, more regular than the other, more satisfactory, perhaps, and surely more complete, has nevertheless the great drawback of not being usual, and not presenting, in the terms used, a meaning understood with sufficient ease; a serious drawback, especially in a publication like the present, which should, by the simplicity of its nomenclature, make itself easily understood at once by every one. Is Dunoyer's classification itself complete? Is it satisfactory, speaking in the language of science, in the sense that it comprises without distinction, while ranging them in their real order, all kinds of labor? We need not examine this question here; we shall merely say that, satisfactory or not, it may be considered at least, as a new elaboration of a subject which still leaves much to be desired—a rational, judicious elaboration, always very useful to consult.
—Notwithstanding the relative merit of this classification, we are forced by the decisive consideration which we have just mentioned to return to the other. We adopt, then, the distinction established between the agricultural, manufacturing and commercial industries; but we would remark that this classification, which only applies to the great divisions of industry, does not comprise everything. In the first place we can not permit ourselves to confound under a common denomination agriculture, fisheries, working of mines, or even the chase, which we consider rather as special industries, and very important ones. It seems to us necessary, besides, to make another reservation in favor of the industries connected with the professions called liberal, which we have already enumerated.
- Aquinas on fraudulent dealing
- Atkinson: Protection promotes War - Free Trade promotes Peace
- Bentham on Usury
- Boehm-Bawerk’s Theory of Capital
- Böhm-Bawerk, “On the Completion of Marx’s System (of Thought)” (1896, 1898)
- Böhm-Bawerk, “Zum Abschluß des Marxschen Systems” (1896)
- Cobden’s Speeches on Free Trade
- Cobden: An Appreciation I
- Cobden: An Appreciation II
- Condillac’s Economic Thought
- Coquelin on Competititon
- Coquelin on Industry
- Coquelin on Political Economy
- Demsetz and Property Rights
- Early Republican Economic Policy
- Eugen Richter and the Critique of Socialism
- Famous Economists and Political Philosophers
- Faucher on Property
- Fetter’s Economic Thought
- Friedman on “I, Pencil” & the Invisible Hand
- Friedman on Capitalism and Freedom
- Garnier on the Origin of the Term Laissez-faire
- Garnier on the Physiocrats
- Grampp on the Manchester School of Economics
- Hazlitt, The Future of Capitalism
- Heyne, Economics as a Way of Thinking
- Higgs on the Influence of the Physiocrats
- Hirst on the Manchester School
- Hutt, Reflections on the Keynsian Episode
- Ingram, History of the Early Austrian School of Economics
- Invisible Hand Explanations of Society
- Jasay, The Capitalist State
- Jevons on Richard Cantillon
- Kirzner on the Economic Point of View
- Kirzner, Entrepreneurship & the Market Approach to Development
- Lachmann and the Subjective Paradigm
- Lachmann, The Significance of the Austrian School
- Lalor’s Cyclopedia - 19thC French Political Economy
- Lalor’s Cyclopedia - Preface and Table of Contents
- Marshall on The Growth of Free Industry and Enterprise
- Martineau on Property & Slave Labour
- Martineau’s Primer on Laissez-Faire Economics
- Marx’s Works
- McCulloch on Smuggling
- McCulloch on the Balance of Trade
- McCulloch on the Corn Laws
- O'Driscoll, Spontaneous Order and Coordination
- Polanyi and Spontaneous Ordering
- Political Ideas of the Classical Economists
- Rae on the publication of the Wealth of Nations (1776)
- Richard Cobden’s “I have a Dream” speech (1846)
- Rothbard on the Prehistory of the Austrian School
- Rothbard on the Public Sector
- Say on Colonial Slave Labor
- Say on Markets
- Say on Property Rights
- Selgin on Free Banking
- Sennholz, The Chicago Monetary Tradition
- Sirc, Problems of Economic Resposibility
- Smart on Boehm-Bawerk
- Smart on Wieser’s theory of value
- The Economic and Ethical Thought of Paul Heyne
- The Manchester School of Economics by William Grampp
- Tullock and Scientific Inquiry
- Tullock, Application of Economics in Biology
- Viner on International Trade
- Walker on Public Revenue (1899)
- Walker on the Wage Fund (1899)
- Walker on Wages (1899)
- Wicksteed on the Psychology of Choice
- Yeager & Smith on Central Banking