Seventeenth Century Political Economy

Until: the last century political economy—the science of wealth—was discussed hand in hand with political science—the science of government—but for convenience we note elsewhere the growth of governmental ideas. Political economy proper had little consideration in ancient times. The economic decay of the Roman state gave rise to arguments against slave labor and interest on loans, and to measures for the increase of the free population, but economics as a science can hardly be recognized to have existed. All large economic activity ceased during the dark ages, but the subsequent growth of the cities and their trade gave rise to what Adam Smith calls the mercantile theory of economics.

Jean Bodin in the latter half of the sixteenth century made a great step in economic science by explaining the ten-fold rise in prices to the importation of gold from the New World. He distinguished money from wealth, but otherwise was a mercantilist in approving the interference of government in trade, high taxes on manufactured imports, and low taxes on imported raw materials and food. In 1581 W. S. (William Stafford) defended the exclusion of all foreign wares in England. Antonio Serra, an Italian, writing in 1613 in prison, argued in favor of the Superior profit to the nation of manufactures and for their protection. Monchrtien de Watteville in 1615 gave an exposition in French of the restrictive ideas. He believed in government control of all industries in the home state and in colonies. Thomas Mun (1571–1641) was the greatest English advocate of this system. He maintained that the great object of governmental economics should be tomaintain the balance of trade, that is, the excess of exports over imports., and that trade restrictions and tariffs should be formulated with this end in view. Josiah Child in 1668 and 1690 favored a low rate of interest maintained by government authority and exclusive control of the colonial trade. He believed, like the rest of the mercantilists, in a large and growing population. This, it will be remembered, was in direct opposition to the old Greek idea.

The mercantile theory had been put into practical use by most nations, and everywhere there were fast-bound restrictions on industry. This at length caused a reaction that later led, in what are called the physiocrats, to the opposite extreme.

Sir William Petty (1623–1687) was a precursor of the new school. He founded the value of an article on the labor required to produce it, argued for a single money standard, against a fixed rate of interest, and in general did not believe in government control. Sir Dudley North (1691) was also an opponent of the restrictive theory. He believed in home as well as foreign trade, and in non-interference by the government. John Locke based all property on labor—a theory that implied great political consequences.

These reactionary ideas took root in France and developed rapidly. Pierre Boisguillebert in the first of the eighteenth century, vainly struggled against government restrictions for the sake of manufactures, and lauded agriculture. Restrictions between nations he thought as harmful as between individuals. He brought forward the idea of a tax on incomes. But his words fell on deaf ears and had little influence. Vaubon in 1707 took up the same line of thought and urged more consideration for the laboring and agricultural class.

The great names, however, of the physiocrat school proper belong to the eighteenth century, and were Quesnay (1684–1774) and Gournay (1712–1759). They took for granted the doctrine of the natural rights and equality of man, of the social contract as the basis of the state. They thought that labor is the basis of property, but the soil the source of all wealth. They argued that agriculture, mining, fishing, etc., are the only truly productive occupations; that manufactories and commerce increase values only by the amount of labor put in them, and that this labor is not really productive because the sum of raw materials is not increased. "Laissez faire," non-intervention, should be the policy of governments. Turgot tried to carry out their ideas in France, but hewas unsustained by Louis XVI, and the government plunged on blindly to the Revolution.

In England David Hume brought his keen insight to bear against the balance of trade theory, and the identification of money and wealth. He was a friend of and unquestionably influenced, Adam Smith, but Smith’s Wealth of Nations is beyond doubt the beginning of modern political economy.