Book Ii, Chap. 4.

“The German nation will at once obtain what it is now in need of, namely, fisheries and naval power, maritime commerce and colonies.” (National System, p. 143.) List has no difficulty in allying his patriotic idealism with the practical side of his nature.

List deliberately distinguishes between exchange values and productive forces; but the distinction is by no means a happy one. For a policy which aims at encouraging productive forces has no other way of demonstrating its superiority than by showing an increase of exchange value. The two notions are not opposed to one another, and in reckoning a nation’s wealth we must take some account of its present state as well as of its future resources. In his Letters to Ingersoll (cf. Letter IV, referred to above) he distinguishes between “natural and intellectual capital” on the one hand and “material productive capital” on the other (Adam Smith’s idea of capital). “The productive powers of the nation depend not only upon the latter, but also and chiefly upon the former.”

National System, p. 117.

Unjustly as we think, for on more than one occasion Smith did take account of moral forces. He dated the prosperity of English agriculture from the time when farmers were freed from their long servitude and became henceforth independent of the proprietors. He remarks that towns attain prosperity quicker than the country, because a regular government is earlier established there. “The best effect which commerce and manufactures have is the gradual introduction and establishment of order and good government, and with them the liberty and security of individuals among the inhabitants of the country. This, though it has been the least observed, is by far the most important of their effects. Mr. Hume is the only writer who so far as I know has hitherto taken notice of it.” (Book III, chap. 4; Cannan, vol i, p. 383.) Speaking of the American colonies, Smith (Cannan, vol. ii, p. 73) makes the remark that although their fertility is inferior to the Spanish, Portuguese, and the French colonies, “the political institutions of the English colonies have been more favourable to the improvement and cultivation of this land than those of any of the other three nations.” How could List have forgotten the celebrated passage in which Smith attributes the prosperity of Great Britain largely to its legal system, which guarantees to each individual the fruits of his toil and which must be reckoned among the definitive achievements of the Revolution of 1688? “That security which the laws in Great Britain give to every man that he shall enjoy the fruits of his own labour is alone sufficient to make any country flourish, notwithstanding these and twenty other absurd regulations of commerce; and this security was perfected much about the same time that the bounty was established.” (Book IV, chap. 5; Cannan, vol. ii, pp. 42-43.)

National System, chap. 17, beginning.

Compare chapters 7 and 15, where he treats of the manufacturing industry in its relation to each of the great economic forces of the country.

Ibid., p. 87.

National System, p. 150.

“It may in general be assumed that where any technical industry cannot be established by means of an original protection of 40 to 60 per cent., and cannot continue to maintain itself under a continued protection of 20 to 30 per cent., the fundamental conditions of manufacturing power are lacking.” (Ibid., p. 251.)

“Solely in nations of the latter kind, namely, those which possess all the necessary mental and material conditions and means for establishing a manufacturing power of their own and of thereby attaining the highest degree of civilisation and development of material prosperity and political power, but which are retarded in their progress by the competition of a foreign manufacturing Power which is already farther advanced than their own—only in such nations are commercial restrictions justified for the purpose of establishing and protecting their own manufacturing power.” (Ibid., p. 144.)

Ibid., p. 240.

“Everyone knows,” says he (quoted by Hirst, pp. 231 et seq.), “that the cost of production of a manufactured good depends very largely upon the quantity produced—that is, upon the operation of the law of increasing returns. This law exercises considerable influence upon the rise and fall of manufacturing power.… An English manufacturer producing for the home market has a regular sale of 10,000 yards at 6 dollars a yard.… His expenses being thus guaranteed by his sales in the home market, the cost of producing a further quantity of 10,000 yards for the foreign market will be considerably reduced and would yield him a profit even were he to sell for 3 or 4 dollars a yard. And even though he should not be making any profit just then, he can feel pretty confident about the future when he has ruined the foreign producer and driven him out of the field altogether.” List thinks that this shows how impossible it is for manufacturers in a new country without any measure of protection to compete with other countries whose industry is better established. But this is one of the arguments that has been most frequently used by British manufacturers in recent years in demanding protection against American competition. We would like to know what List would have thought of this.

National System, p. 144, and the whole of chap. 16 of Book II. He considered that “it would be a further error if France, after her manufacturing power has become sufficiently strong and established, were not willing to revert gradually to a more moderate system of Protection and by permitting a limited amount of competition incite her manufacturers to emulation.” (Ibid., p. 249.)

Ibid., p. 253, and especially p. 162, etc., where with a sudden change of front he declares himself in favour of Free Trade in agriculture, and employs the arguments which Free Traders had applied to all products. Compare again p. 230, where he declares that agriculture “by the very nature of things is sufficiently well protected against foreign competition.”

The authors were unable to find a copy of Hamilton’s works in France, but according to Bastable (Commerce of Nations, 6th ed., London, 1912, pp. 120, 121) the principal arguments deduced by the report to prove the advantages of industry are that it permits of greater division of labour, prevents unemployment, supplies a more regular market than the foreign, and encourages immigration.

It is very probable that List had read the work of another American Protectionist, Daniel Raymond, whose Thoughts on Political Economy appeared in 1820 and ran into four editions (cf. Daniel Raymond, by Charles Patrick Neill, Baltimore, 1897). This seems to be the opinion of the majority of writers who during the last few years have especially concerned themselves with the study of List’s opinions (Miss Hirst, in her Life of Friedrich List, and M. Curt Kohler in his book Problematisches zu Friedrich List, Leipzig, 1909). But to regard Raymond as his only inspirer, as is done by Rambaud in his Histoire des Doctrines, seems to us mere exaggeration. Apart from the facts that Raymond’s ideas are not particularly original and that List had lived some years in America in a Protectionist environment, List never quotes him at all. On the other hand, he frequently and enthusiastically refers to both Dupin and Chaptal in his Letters to Ingersoll. The expression “productive forces” was probably borrowed from Baron Dupin’s Situation progressive des Forces de la France (Paris, 1827), which opens with the following words: “This forms an introduction to a work entitled The Productive and Commercial Forces of France. By productive forces I mean the combined forces of men, animals, and nature applied to the work of agriculture, of industry, or of commerce.” Again, the idea of protecting infant industries is very neatly put by Chaptal. On p. xlvi of the introduction to his De l’Industrie français (published in 1819) we meet with the following words: “It does not require much reflection to be convinced of the fact that something more than mere desire is needed to overcome the natural obstacles in the way of the development of industry. Everywhere we feel that ‘infant industries’ cannot struggle against older establishments cemented by time, supported by much capital, freed from worry and carried on by a number of trained, skilled workmen, without having recourse to prohibition in order to overcome the competition of foreign industries.”

It is certain that List, during his first stay in France, had read these two authors, and had there found a confirmation of his own Protectionist ideas. It is not less certain, from a letter written by him in April 1825 (quoted by Miss Hirst, p. 33), that he was converted before going to America, but that he expected to find some new arguments there which would strengthen him in his opposition to Smith. Marx’s assertion made in his Theorien über den Mehrwerth, vol. i, p. 339 (published by Kautsky, Stuttgart, 1905), that List’s principal source of inspiration was Ferrier (Du Gouvernement considéré dans ses Rapports avec le Commerce, Paris, 1805) has not the slightest foundation. Neither has the attempt to credit Adam Müller with being the real author of the conception of a national system of political economy. List, we know, was acquainted with Müller, a Catholic writer who wished for the restoration of the feudal system. But to be a German writer in the Germany of the nineteenth century was quite enough to imbue one with the idea of nationality. Moreover, Protectionists’ arguments are extremely limited in number, so that they do not differ very much from one epoch to another, and it is a comparatively easy task to find some precursors of Friedrich List.

Published in a volume entitled Outlines of a New System of Political Economy, in a Series of Letters addressed by F. List to Charles Ingersoll (Philadelphia, 1827). This publication did not find a place in the collected edition published by Häusser, but the whole of it has been incorporated in the interesting Life of Friedrich List by Margaret E. Hirst (London, 1909).

This was the consideration that influenced him in adopting a Protectionist attitude, although hitherto he had regarded himself as a disciple of Smith and Say. (Letters to Ingersoll, p. 173.)

National System, preface, p. 54.

The Zollvereinsblatt, which was published by him towards the end of 1843.

National System, p. 230. We do not by any means imply that the Germany of List’s day was in greater need of Protection than the Germany of to-day. Indeed, if we accept Chaptal’s view, we may well deny this, for, writing in 1819, he said that Saxony occupied a place in the front rank of European nations in the matter of industry. Speaking of Prussia, he declared that the industry of Aix-la-Chapelle alone was enough to establish the fame of any nation (De l’Industrie française, vol. i, p. 75). We must also recall the fact that the basis of the present prosperity of Germany was laid under a régime of much greater freedom.

“Neither is it at all necessary that all branches of industry should be protected in the same degree. Only the most important branches require special protection, for the working of which much outlay of capital in building and management, much machinery and therefore much technical knowledge, skill, and experience, and many workmen are required, and whose products belong to the category of the first necessaries of life and consequently are of the greatest importance as regards their total value as well as regards national independence (as, for example, cotton, woollen, and linen manufactures, etc.). If these main branches are suitably protected and developed, all other less important branches of manufacture will rise up around them under a less degree of protection.” (National System, p. 145.)

On Carey see infra, Book III.

Carey, Principles of Social Science.

Carey, Principles of Social Science.

National System, Book II, chap. 3.

Principles of Political Economy, Book V, chap. 10, § 1.

“Of all the things required for the purposes of man, the one that least bears transportation, and is, yet, of all the most important, is manure. The soil can continue to produce on the condition, only, of restoring to it the elements of which its crop had been composed. That being complied with, the supply of food increases, and men are enabled to come nearer together and combine their efforts—developing their individual faculties, and thus increasing their wealth; and yet this condition of improvement, essential as it is, has been overlooked by all economists.” (Principles of Social Science, vol. i, pp. 273-274.)

Principles of Political Economy, Book V, chap. 10, § 1.

On this point see Jenks, Henry C. Carey als Nationalökonom, chap. 1 (Jena, 1885).

Compare the long passage in the Principles, Book V, chap. 10, § 1, which begins: “The only case in which on mere principles of political economy protecting duties can be defensible is when they are imposed temporarily (especially in a young and rising nation) in hopes of naturalising a foreign industry, in itself perfectly suitable to the circumstances of the country. The superiority of one country over another in a branch of production often varies only from having begun it sooner.” Stuart Mill, however, does not refer to List, and one wonders whether the paragraph owes anything to his influence.

We must make an exception of M. Cauwès, whose Protectionism, on the contrary, is a quite logical adaptation of List’s idea, viz. the superiority of nations possessing a complex economy. This is the only scientific system of Protection that we are to-day acquainted with. But it must be confessed that the majority of writers are very far removed from Cauwès’ point of view. Compare his Cours d’ Économie politique, 3rd ed., vol. iii.

Such, e.g., are the economists who are always speaking of a “commercial deficit,” i.e. of an unfavourable balance of commerce. Despite the frequent refutations which have been given of it, it is still frequently quoted as an axiomatic truth. List criticised the school for its complete indifference to the balance of imports and exports. But he did not favour the Mercantilist theory of the balance of trade; on the contrary, he regarded that as definitely condemned (p. 218). He regarded the question from a special point of view, that of monetary equilibrium. When a nation, says he, imports much, but does not export a corresponding amount of goods, it may be forced to furnish payment in gold, and a drainage of gold might give rise to a financial crisis. The indifference of the school with regard to this question of the quantity of money is very much exaggerated (Book II, chap. 13). The policy of the great central banks of to-day aims at easing those tensions in the money market which appear as the result of over-importation, and in this matter they have proved themselves much superior to any system of Protection.

Some writers go even farther. Patten (Economic Foundations of Protection) longs to see a national type established peculiar to each country, as the result of forcing the inhabitants to be nourished and clothed according to the natural resources of the country in which they live. We should, as a consequence of this, have an American type quite superior to any European type. “Then,” says he, “we should be able to exercise a preponderant influence upon the fate of other nations and could force them to renounce their present economic methods and adopt a more highly developed social State.” Until then no foreign goods are to enter the country. Here, as is very frequently the case, Protectionism is confounded with nationalism or imperialism.

“A merely agricultural State is an infinitely less perfect institution than an agricultural-manufacturing State. The former is always more or less economically and politically dependent on those foreign nations which take from it agricultural products in exchange for manufactured goods. It cannot determine for itself how much it will produce: it must wait and see how much others will buy from it.” (National System, p. 145.)

“A nation which has already attained manufacturing supremacy can only protect its own manufactures and merchants against retrogression and indolence by the free importation of means of subsistence and raw materials, and by the competition of foreign manufactured goods.” (National System, p. 153.) Hence the appeal to England in the name of this theory to abolish her tariffs, but to gracefully allow France, Germany, and the United States to continue theirs.

See M. Pareto’s Economia Politica (Milan, 1906) for a demonstration that international exchange is not necessarily advantageous for both parties (chap. 9, § 45).

But the line is sometimes difficult to follow. Latterly statesmen have been concerned not so much with the exportation of goods as with the migration of capital. Ought the Minister for Foreign Affairs to veto the raising of a loan in the home market on behalf of a foreign Power or an alien company? To what extent ought bankers and capitalists to accept his advice? Such are some of the questions that for some years past have been repeatedly asked in France, England, and Germany. And it seems in almost every case that political economy has had to bow before political necessity, and not vice versa.

It is very remarkable that List’s greatest admirer, Dühring, in his Kritische Geschichte der Nationalökonomie und des Sozialismus (2nd ed., p. 362), insists on the fact that Protection is not an essential element, but a mere temporary form of the principle of national economic solidarity, which is List’s fundamental conception, and which must survive all forms of Protection. Dühring is the only real successor of List and Carey. He has developed their ideas with a great deal of ability and has shown himself a really scientific thinker. But what he chiefly admires in both writers is not their Protection, but their effort to lay hold of the material and moral forces which lie below the mere fact of exchange, and upon which a nation’s prosperity really depends. His Kursus der National- und Sozial-oekonomie (Berlin, 1873) is very interesting reading.

Except the Saint-Simonians nobody seems to have conceived of the State’s responsibility for a nation’s productive forces. List refers to them sympathetically, especially to those who, like Michel Chevalier, “sought to discover the connection of these doctrines with those of the premier schools, and to make their ideas compatible with existing circumstances” (National System, p. 287). But List differs from them in his love of individual liberty and in the importance which he attaches to moral, political, and intellectual liberty as elements of productive efficiency.

Philosophie du Progrès, Œuvres, vol. xx, p. 19: “Growth is essential to thought, and truth or reality whether in nature or in human affairs is essentially historical, at one time advancing, at another receding, evolving slowly, but always undergoing some change.” In his Contradictions économiques he defines social science as “the systematised study of society, not merely as it was in the past or will be in the future, but as it is in the present in all its manifold appearances, for only by looking at the whole of its activities can we hope to discover intelligence and order.” (Vol. i, p. 43.) “If we apply this conception to the organisation of labour we cannot agree with the economists when they say that it is already completely organised, or with the socialists when they declare that it must be organised, but simply that it is gradually organising itself; that is, that the process of organisation has gone on since time immemorial and is still going on, and that it will continue to go on. Science should always be on the look-out for the results that have already been achieved or are on the point of realisation.” (Vol. i, p. 45.)

A vigorous exposition of his other ideas is given in Bouglé’s La Sociologie de Proudhon (Paris, 1911).

The following are Proudhon’s principal works: 1840, Qu’est-ce que la Propriété? (studies in ethics and politics); 1846, Système des Contradictions économiques (the “philosophy of destitution”); 1848, Organisation du Crédit et de la Circulation et Solution du Problème social; 1848, Résumé de la Question sociale, Banque d’Échange; 1849, Les Confessions d’un Révolutionnaire; 1850, Intérêt et Principal (a discussion between M. Bastiat and M. Proudhon); 1858, De la Justice dans la Révolution et dans l’Église (three volumes); 1861, La Guerre et la Paix; 1865, De la Capacité politique des Classes ouvrières. Our quotations are taken from the Œuvres complètes, published in twenty-six volumes by Lacroix (1867-70).

“Do you happen to know, madam, what my father was? Well, he was just an honest brewer whom you could never persuade to make money by selling above cost price. Such gains, he thought, were immoral. ‘My beer,’ he would always remark, ‘costs me so much, including my salary. I cannot sell it for more.’ What was the result? My dear father always lived in poverty and died a poor man, leaving poor children behind him.” (Letter to Madame d’Agoult, Correspondance, vol. ii, p. 239.)

It has been said that Proudhon borrowed this formula from Brissot de Warville, the author of a work entitled Recherches philosophiques sur le Droit de Propriété et sur le Vol, considérés dans la Nature et dans la Société. It was first published in 1780, and reappeared with some modifications in vol. vi, pp. 261 et seq., of his Bibliothèque philosophique du Législateur (1782). But this is a mistake. Proudhon declares that the work was unknown to him (Justice, vol. i, p. 301); and, moreover, the formula is not there at all. Brissot’s point of view is entirely different from Proudhon’s. The former believes that in a state of nature the right of property is simply the outcome of want, and disappears when that want is satisfied; that man, and even animals and plants, has a right to everything that can satisfy his wants, but that the right disappears with the satisfaction of the want. Consequently theft perpetrated under the pressure of want simply means a return to nature. The rich are really the thieves, because they refuse to the culprit the lawful satisfaction of his needs. The result is a plea for a more lenient treatment of thieves. But Brissot is very careful not to attack civil property, which is indispensable for the growth of wealth and the expansion of commerce, although it has no foundation in a natural right (p. 333). There is no mention of unearned income. Proudhon, on the other hand, never even discusses the question as to whether property is based upon want or not. He would certainly have referred to this if he had read Brissot.

Contradictions, vol. i, pp. 219, 221.

Résumé de la Question sociale, p. 29. We meet with the same idea in other passages. “Property under the influence of division of labour has become a mere link in the chain of circulation, and the proprietor himself a kind of toll-gatherer who demands a toll from every commodity that passes his way. Property is the real thief.” (Banque d’Échange, p. 166.) We must also remember that Proudhon did not consider that taking interest was always illegal. In the controversy with Bastiat he admits that it was necessary in the past, but that he has found a way of getting rid of it altogether.

We must distinguish between this and Marx’s doctrine. Marx believed that all value is the product of labour. Proudhon refuses to admit this. He thinks that value should in some way correspond to the quantity of labour, but that this is not the case in present-day society. Marx was quite aware of the fact that Proudhon did not share his views (see Misère de la Philosophie). Proudhon follows Rodbertus, who taught that the products only and not their values are provided by labour.

Propriété, 1er Mémoire, pp. 131-132. It is true that Proudhon adds that without land and capital labour would be unproductive. But he soon forgets his qualifications when he proceeds to draw conclusions, especially when he comes to give an exposition of the Exchange Bank, where we meet with the following sentence: “Society is built up as follows: All the raw material required is gratuitously supplied by nature, so that in the economic world every product is really begot of labour, and capital must be considered unproductive.” Elsewhere he writes: “To work is not necessarily to produce anything.” (Solution du Problème social, Œuvres, vol. vi, pp. 361 et seq., and p. 187.)

Propriété, 1er Mémoire, p. 133.

L. von Stein, Geschichte der sozialen Bewegung in Frankreich, vol. iii, p. 362 (Leipzig, 1850). A remarkable piece of work altogether.

It is true that Proudhon’s attack is entirely directed against the ethics of private property. He shows how every justification that is usually offered, such as right of occupation, natural right, or labour, cannot justify the institution as it is to-day. Private property as we know it is confined to the few, whereas on these principles it ought to be widely diffused. Criticism of this kind is not very difficult, perhaps, but it does nothing to weaken the arguments of those who would justify property on the grounds of social utility. The criticism of the Saint-Simonians, who approach it from the point of view of utility and productiveness rather than from the ethical standpoint, seems to be much more profound. This is why we have regarded them as the critics of private property.

“This is the fundamental idea of my first Mémoire.” (Quoted by Sainte-Beuve, P. J. Proudhon, p. 90.) Later on he complains that the suggestion was never even discussed.

Propriété, 1er Mémoire, p. 94.

Ibid., p. 91.

Blanqui’s letter dated May 1, 1841, in reply to a communication from Proudhon concerning the second Mémoire on property.

Cf. Sainte-Beuve, P. J. Proudhon, pp. 202, 203; and see on this point Proudhon’s amusing letters to Guillaumin (Correspondance, vol. ii).

Propriété, 1er Mémoire, p. 203.

An article in Le Peuple, in 1848. Proudhon’s attacks are more especially directed against Fourier. Fourier’s was at this time the only socialist school that had any influence, and this was largely due to the active propaganda of Victor Considérant. See Contradictions, vol. ii, p. 297, and Propriété, 1er Mémoire, pp. 153 et seq.

Contradictions, vol. ii, p. 285. For the attack on Cabet, Louis Blanc, and the communists see the whole of chap. 12 of the Contradictions. Louis Blanc “has poisoned the working classes with his ridiculous formulæ” (Idée générale de la Révolution, p. 108). Louis Blanc himself is summed up as follows: “He seriously thought that he was the bee of the Revolution, but he turned out to be only a grasshopper.” (Ibid.)

“I believe that I am the first person possessed of a full knowledge of the phenomena in question who has dared to uphold the doctrine that instead of restraining economic forces whose strength has been so much exaggerated we ought to try to balance them against one another in accordance with the little known and less perfectly understood principle that contraries, far from being mutually destructive, support one another just because of their contrary nature.” (Justice, vol. i, pp. 265-266.) The same idea also finds expression on pp. 302-303. Elsewhere he remarks that what society is in search of is a way of balancing the natural forces that are contained within itself (Révolution démontrée par le Coup d’État, p. 43).

“Division of labour, collective force, competition, exchange, credit, property, and even liberty—these are the true economic forces, the raw materials of all wealth, which, without actually making men the slaves of one another, give entire freedom to the producer, ease his toil, arouse his enthusiasm, and double his produce by creating a real solidarity which is not based upon personal considerations, but which binds men together with ties stronger than any which sympathetic combination or voluntary contract can supply.” (Idée générale de la Révolution au XIXe Siècle, p. 95.) The economic forces are somewhat differently enumerated in chap. 13 of La Capacité des Classes ouvrières. Association and mutuality are mentioned; but while recognising the prestige of the word “association,” especially among working men, Proudhon concludes that the only real association is mutuality—not in the sense of a mutual aid society, which he thinks is altogether too narrow.

It is true that Fourier was not a communist. Proudhon shows that on the one hand his Phalanstère would abolish interest, while it would give a special remuneration to talent on the other, simply because “talent is a product of society rather than a gift of nature.” (Propriété, 1er Mémoire, p. 156.)

Proudhon’s opposition to the principle of association is very remarkable. He refers to it more than once, but especially in the Idée générale de la Révolution. “Can association be regarded as an economic force? For my own part I distinctly say, No. By itself it is sterile, even if it does not check production, because of the limits it puts upon the liberty of the worker.” (P. 89.) “Association means that everyone is responsible for someone else, and the least counts as much as the greatest, the youngest as the oldest. It gets rid of inequality, with the result that there is general awkwardness and incapacity.” (Ibid.)

La Révolution démontrée par le Coup d’État, pp. 53, 54. Elsewhere: “When you speak of organising labour it seems as if you would put out the eyes of liberty.” (Organisation du Crédit et de l’Échange, Œuvres, vol. vi, p. 91.)

Programme révolutionnaire. To the electors of the Seine, in the Représentant du Peuple. (Œuvres, vol. xvii, pp. 45, 46.)

“I should like everybody to have some property. We are anxious that they should have property in order to avoid paying interest, because exorbitant interest is the one obstacle to the universal use of property.” (Le Peuple, September 2, 1849.)

Propriété, 1er Mémoire, p. 204.

Contradictions, vol. ii, p. 203.

Organisation du Credit et de la Circulation, p. 131. Elsewhere: “To adopt Hegelian phraseology, the community is the first term in social development—the thesis; property the contradictory term—the antithesis. The third term—the synthesis—must be found before the solution can be considered complete.” (Propriété, 1er Mémoire, p. 202.) That term will be possession pure and simple—the right of property with no claim to unearned income. “Get rid of property, but retain the right of possession, and this very simple change of principle will result in an alteration of the laws, the method of government, and the character of a nation’s economic institutions. Evil of every kind will be entirely swept away.” Proudhon employed Hegelian terminology as early as 1840, four years before Karl Grün’s visit to Paris. For Proudhon’s relation to Grün see Sainte-Beuve’s P. J. Proudhon.

Justice dans la Révolution, vol. i, pp. 182-183.

Ibid., p. 269. “It is easy to show how the principle of mutual respect is logically convertible with the principle of reciprocal service. If men are equal in the eyes of justice they must also have a common necessity, and whoever would place his brothers in a position of inferiority, against which it is the chief duty of society to fight, is not acting justly.”

This idea of mutual service is further developed, especially in Organisation du Crédit et de la Circulation (Œuvres, vol. vi, pp. 92-93), and in Idée générale, p. 97.

That is how the problem is put in the preface to the first Mémoire.

Contradictions, vol. ii, p. 414.

Le Droit au Travail et le Droit de Propriété, pp. 4, 5, 58 (1848).

Every historian is agreed on this point, which Louis Blanc has dealt with at great length in his Histoire de la Révolution de 1848 (chap. 11). The testimony of contemporaries, especially Lamartine in his Histoire de la Révolution de 1848 (vol. ii, p. 120), is also very significant. “These national workshops were placed under the direction of men who belonged to the anti-socialist party, whose one aim was to spoil the experiment, but who managed to keep the sectaries of the Luxembourg and the rebels of the clubs apart until the meeting of the National Assembly. Paris was disgusted with the quantity and the character of the work accomplished, but it little thought that these men had on more than one occasion defended and protected the city. Far from being in the pay of Louis Blanc, as some people seem to think, they were entirely at the beck and call of his opponents.” É. Thomas in his Histoire des Ateliers nationaux (pp. 146-147) relates how Marie sent for him on May 23 and secretly asked him whether the men in the workshops could be relied upon. “Try to get them strongly attached to you. Spare no expense. If there is any need we shall give you plenty of money.” Upon Thomas asking what was the purpose of all this, Marie replied: “It is all in the interest of public safety. Make sure of the men. The day is not far distant when we shall need them in the streets.”

These addresses were afterwards published in a volume entitled Le Droit au Travail.

Louis Blanc, Histoire de la Révolution de 1848, vol. ii, p. 135.

See the addresses in his La Révolution de Février au Luxembourg (Paris, 1849).

Moniteur, April 27, May 2, 3, and 6, 1848. The dismissal of the commission meant an interruption of the Exposé général, but Vidal in his work Vivre en travaillant! Projets, Voires, et Moyens de Réformes sociales (1848) continued the exposition. It contains a plan for agricultural credit, a State land purchase scheme in order to get rid of rent, a proposal for buying up railways and mines and for erecting cheap dwellings. It affords an interesting example of State Socialism in 1848 which seems to have struck many people then as being very amusing.

Cf. supra, p. 297, note 3.

Cf. supra, “The Associative Socialists.”

“I need hardly say that this measure of fiscal reform [namely, the abolition of private property] must be carried out without any violence or robbery. There must be no spoliation, but ample compensation must be given.” (Résumé de la Question sociale, p. 27.)

Solution du Problème social (Œuvres, vol. vi, p. 32).

Œuvres, vol. xviii, pp. 6-7. See also the letter dated February 25, 1848 (Correspondance, vol. ii, p. 280): “France will certainly accomplish it, whether it remains a republic or not. It might even be carried out by the present decadent Government, at a trifling cost.” This thought did not prevent his taking a hand in the Revolution.

In a pamphlet entitled Organisation du Crédit et de la Circulation, and dated March 31, 1848, he expounds the principle of the scheme and indicates some of its general features. The scheme is dealt with in a number of articles contributed to Le Représentant du Peuple for April, afterwards published in book form by Darimon, under the title of Résumé de la Question sociale. The plan differs slightly from the statutes of the People’s Bank as they appear in vol. vi of the Œuvres, but the guiding principle is much the same. A further exposition was given in Le Peuple in February and March 1849, just when the Bank was being founded. There is still another account contained in the volume entitled Intérêt et Principal: Discussion entre M. Proudhon and M. Bastiat sur l’Intérêt du Capitaux (Paris, 1880). This controversy was carried on in the columns of La Voix du Peuple from October 1849 to October 1850. Proudhon frequently refers to the same idea in his other works, notably in Justice dans la Révolution, vol. i, pp. 289 et seq., and in Idée générale, pp. 197 et seq.

See Solution du Problème social, pp. 178, 179.

Intérêt et Principal, p. 112.

“Money is simply a supplementary kind of capital, a medium of exchange or a credit instrument. If this is the case what claim has it to payment? To think of remunerating money for the service which it gives!” (Ibid., p. 113.)

Cf. Résumé de la Question sociale, p. 39.

Moreover, the advances will take the form of discount. The entrepreneur who has some scheme which he wishes to carry out “will in the first place collect orders, and on the strength of those orders get hold of some producer or dealer who has such raw material or services at his disposal. Having obtained the goods, he pays for them by means of promissory notes, which the bank, after taking due precaution, will convert into circulation notes.” The consumer is really a sleeping partner in the business, and between him and the entrepreneur there is no need for the intervention of money at all. (Organisation du Crédit, Œuvres, vol. vi, p. 123.) Discount was the fundamental characteristic of the bank, and no criticism is directed against this feature of its operations.

“How to resolve the bourgeoisie and the proletariat into the middle class, the class which lives upon its income and that which draws a salary into a class which has neither revenue nor wages, but lives by inventing and producing valuable commodities to exchange them for others. The middle class is the most active class in society, and is truly representative of a country’s activity. This was the problem in February 1848.” (Révolution démontrée par le Coup d’État, p. 135.)

“Reciprocity means a guarantee on the part of those who exchange commodities to sell at cost price.” (Idée générale de la Révolution, pp. 97-98.)

“The very existence of the State implies antagonism or war as the essential or inevitable condition of humanity, a condition that calls for the intervention of a coercive force which shall put an end to the struggle continually waging between the weak and the strong.” (Voix du Peuple, December 3, 1849; Œuvres, vol. xix, p. 23.) “When economic development has resulted in the transformation of society even despite itself, then the weak and the strong will alike disappear. There will only be workers; and industrial solidarity, and a guarantee that their products will be sold, will tend to make them equal both in capacity and wealth.” (Ibid., p. 18.)

“Consequently we consider ourselves anarchists and we have proclaimed the fact more than once. Anarchy is suitable for an adult society just as hierarchy is for a primitive one. Human society has progressed gradually from hierarchy to anarchy.” (Œuvres, vol. xix, p. 9.) A little later, in Idée générale de la Révolution, he states that the aim of the Revolution was “to build up a property constitution and to dissolve or otherwise cause the disappearance of the political or government system by reducing or simplifying, by decentralising and suppressing the whole machinery of the State.” This idea was borrowed from Saint-Simon, and Proudhon has acknowledged the debt in his Idée générale. This conception of industrial society rendering government useless or reducing it to harmless proportions is a development, though perhaps somewhat extravagant, of the economic Liberalism of J. B. Say. The first edition of the Mémoire sur la Propriété contains an admission of anarchical tendencies. “What are you, then? I am an anarchist.—I understand your doubts on this question. You think that I am against the Government.—That is not so. You asked for my confession of faith. Having duly pondered over it, and although a lover of order, I have come to the conclusion that I am in the fullest sense of the word an anarchist.”

“The whole problem of circulation is how to make the exchange note universally acceptable, how to secure that it shall always be exchangeable for goods and services and convertible at sight.” (Organisation du Crédit, Œuvres, vol. vi, pp. 113, 114.)

Organisation du Crédit.

Proudhon always maintained that his reform merely consisted in transforming a credit sale into a cash one. But he might as well have said that black was white. Far from giving mutual benefit, the borrower will be the one who will gain most advantage. Elsewhere he says that to give credit is merely to exchange. This is true enough, but discount is employed just to equalise different credit transactions.

In the Idée générale de la Révolution au XIXe Siècle, p. 198: “The citizens of France have a right to demand and if need be to join together for the establishment of bakehouses, butchers’ shops, etc., which will sell them bread and meat and other articles of consumption of good quality at a reasonable price, taking the place of the present chaotic method, where short weight, poor quality, and an exorbitant price seem to be the order. For a similar reason they have the right to establish a bank, with the amount of capital which they think fit, in order to get the cash which they need for their transactions as cheaply as possible.”

“Association avoids the waste of the retail system. M. Rossi recommends it to those small householders who cannot afford to buy wholesale. But this kind of association is wrong in principle. Give the producer, by helping him to exchange his products, an opportunity of supplying them with provisions at wholesale prices, or, what comes to the same thing, organise the retail trade so as to leave only just the same advantage as in the case of the wholesale transaction, and ‘association’ will be unnecessary.” (Idée générale de la Révolution, p. 92.)

This system was criticised by Marx in his Misère de la Philosophie, published in 1847 (Giard and Brière’s edition, 1896, pp. 92 et seq.). A more recent and more complete exposition is given in Foxwell’s introduction to Anton Menger’s The Right to the Whole Produce of Labour, pp. lxv, etc.

Mazel gave an exposition of his scheme in a series of pamphlets written in very bombastic language, but only of very slight interest to the economist. Another bank known as Bonnard’s Bank was established at Marseilles in 1838, and afterwards at Paris. The ideas are somewhat similar, but much more practical. Both branches are still in active operation. Proudhon refers to this bank in his Capacité politique des Classes ouvrières. Courcelle-Seneuil gives a very eulogistic account of it in his Traité des Banques, and in an article in the Journal des Économistes for April 1853. The modus operandi is explained in three brochures, which may be seen in the Bibliothèque Nationale. One of these is entitled Liste des Articles disponibles à la Banque; the other two describe the mechanism of the bank. Darimon, one of Proudhon’s disciples, in his work De la Réforme des Banques (Paris, Guillaumin, 1856), gives an account of a large number of similar institutions which were founded during this period. Several systems of the kind have also been discussed by M. Aucuy in his Systèmes socialistes d’Échange (Paris, 1907). But we cannot accept his interpretation of various points.

Bonnard’s Bank differs from the others in this way. The client of the bank, instead of bringing it some commodity or other which may or may not be sold by the bank, gets from the bank some commodity which he himself requires, promising to supply the bank with a commodity of his own production whenever the bank requires it. The bank charges a commission on every transaction. Its one aim is to bring buyer and seller together, and the notes are simply bills, payable according to the conditions written on them. But they cannot be regarded as substitutes for bank bills. Cf. Banque d’Échange de Marseille, C. Bonnard et Cie., fondée par Acte du 10 Janvier, 1849 (Marseilles, 1849).

“I repudiate Mazel’s system root and branch,” he declares in an article contributed to Le Peuple of December 1848 (Œuvres, vol. xvii, p. 221). He also adds that when he wrote first he had no acquaintance of any kind with Mazel. “It was M. Mazel who on his own initiative revealed his scheme to me and gave me the idea.” In one of his projects, published on May 10, 1848, Proudhon seems inclined to adopt this idea, just for a moment at any rate. Article 17 seems to hint at this. “The notes will always be exchangeable at the bank and at the offices of members, but only against goods and services, and in the same way commodities and services can always be exchanged for notes.” (Résumé de la Question sociale, p. 41.) This article justifies the interpretation which Courcelle-Seneuil puts on it, in his Traité des Operations de Banque (9th ed., 1899, p. 470), and which Ott accepts in his Traité d’Économie sociale (1851), which, moreover, contains a profound analysis and some subtle criticism of Proudhon’s idea. But we think that this article was simply an oversight on Proudhon’s part; for beyond a formal refutation of Mazel’s idea there is no reference to it in any of his other works, not even in the scheme of the People’s Bank. Moreover, it seems to contradict the statement that the notes would be issued against commodities which had been actually sold and delivered, as well as other articles of the scheme—e.g. Article 30, dealing with buying and selling. It also conflicts with the idea that the discounting of goods is the prime and essential operation of the bank. In our opinion, Diehl in his book on Proudhon (P. J. Proudhon, Seine Lehre u. seine Leben, vol. ii, p. 183) is wrong in thinking that the Exchange Bank would issue notes against all kinds of goods without taking the trouble to discover whether they had been sold or not.

Annales de l’Institut Solvay, vol. i, p. 19.

Ibid., p. 25.

Cf. Principes d’Orientation sociale, a résumé of Solvay’s studies in productivism and accounting (Brussels, 1904).

Although Solvay’s scheme seems very different from Proudhon’s, it possesses features that received the highest commendation from the Luxembourg Commission. In L’Exposé général de la Commission de Gouvernement pour les Travailleurs, which appeared in Le Moniteur of May 6, 1848, we read: “When in the future association has become complete, there will be no need for notes even. Every transaction will be carried on by balancing the accounts. Book-keepers will take the place of collecting clerks. Money, both paper and metallic, is largely superfluous even in present-day society.” The author then proceeds to outline a scheme of clearing-houses.

A hit at Proudhon’s Philosophie de la Misère, which was the sub-title of his Contradictions économiques.

In a letter written to Karl Marx on May 17, 1846 (Correspondance, vol. ii, p. 199), à propos the expression “at the moment of striking,” which Marx had employed, Proudhon takes the opportunity of declaring that he is opposed to all kinds of revolution. “You are perhaps still of opinion that no reform is possible without some kind of struggle or revolution, as it used to be called, but which is nothing more or less than a shock to society. That opinion I shared for a long time. I was always willing to discuss it, to explain it, and to defend it. But in my later studies I have completely changed my opinion. I think that it is not in the least necessary, and that consequently we ought not to consider revolution as a means of social reform. Revolution means an appeal to force, which is clearly in contradiction to every project of reform. I prefer to put the question in a different fashion, namely, How can we arrange the economic activities of society in such a fashion that the wealth which is at present lost to society may be retained for its use?” And in the Confessions d’un Révolutionnaire, p. 61: “A revolution is an explosion of organic forces, an evolution spreading from the heart of society through all its members. It can only be justified if it be spontaneous, peaceful, and gradual. It would be as tyrannous to try to suppress it as to bring it about through violence.” See M. Bourguin’s article on Proudhon and Karl Marx in the Revue d’Économie politique, 1893.

On this point see Puech, Proudhon et l’Internationale (Paris, 1907); preface by M. Andler.

This fact is recognised even by German socialists themselves. “The people who gave socialism to the world even in its earlier forms have immortalised themselves,” says Karl Grün, when speaking of France just about the time that our chapter refers to. (Quoted by Puech, loc. cit., p. 57.)

“So many things have we attempted! How is it that liberty, the easiest of all, has never been given a trial?” (Bastiat, Harmonies, chap. 4, p. 125.)

One of the sections of Dunoyer’s La Liberté du Travail is entitled: “Of the True Means of remedying the Evils from which the Workers suffer, by extending the Sphere of Competition.” (Book IV, chap. 10, § 18.)

“As a matter of fact,” says Dunoyer elsewhere, “this competition which seems such an element of discord is really the one solid bond which links together all the various sections of the social body.”

“Whenever the State undertakes to supply the wants of the individual, the individual himself loses his right of free choice and becomes less progressive and less human; and by and by all his fellow citizens are infected with a similar moral indifference.” (Bastiat, Harmonies, chap. 17, p. 545.)

Dunoyer says: “You may search the literature of association as much as you like, but you will never come across a single intelligent discussion of an equitable means of distribution.” (Liberté du Travail, vol. ii, p. 397.) Further, he asserts that association has damaged social even more than individual morality, because nothing will be considered lawful unless done by society as a whole. It is true that in this case he was speaking chiefly of corporative association, but the condemnation has a wider import.

On the occasion of the international gathering of economists at the Paris Exposition in July 1900, Levasseur, one of the most moderate members of the Liberal school, said: “There is no need to draw any distinction between us. Liberal economists ought not to be divided in this way. There may be different opinions on the question of applying our principles, but we are all united on this question of liberty. A man becomes wealthy, successful, or powerful all the sooner if he is free. The more liberty we have, the greater the stimulus to labour and thought and to the production of wealth.” (Journal des Économistes, August 15, 1900.)

“It is a good thing to have a number of inferior places in society to which families that conduct themselves badly are liable to fall, and from which they can rise only by dint of good behaviour. Want is just such a hell.” (Dunoyer, La Liberté du Travail, p. 409.)

See the discussion of the political doctrine of the Physiocrats, pp. 33 et seq.

Editions of the same work appeared between 1825 and 1830; but the volume was much smaller and had a different title. Dunoyer will again engage our attention towards the end of this chapter. Cf. Villey, L’Œuvre économique de Dunoyer (Paris, 1899).

Henry Charles Carey was born at Philadelphia in 1793, and died in 1879. Up to the age of forty-two he followed the profession of a publisher, retiring in 1835 to devote himself to economic studies. The three volumes of his Principles of Political Economy were issued in 1837, 1838, and 1840 respectively. In 1848 appeared The Past, the Present, and the Future, which contains his theory of rent. In 1850 his Harmony of Interests, Agricultural, Manufacturing, and Commercial, was published, and in 1858-59 his Principles of Social Science.

These dates possess some importance. At the time of the publication of the Harmonies in 1850 Carey wrote a letter to the Journal des Économistes accusing Bastiat of plagiarism. Bastiat, who was already on the point of death, wrote to the same paper to defend himself. He admitted that he had read Carey’s first book, and excuses himself for not making any reference to it on the ground that Carey had said so many uncomplimentary things about the French that he hesitated to recommend his work. Several foreign economists have since made the assertion that Bastiat merely copied Carey, but this is a gross exaggeration. Coincidence is a common feature in literary and scientific history. We have quite a recent instance in the simultaneous appearance of the utility theory in England and France.

Frédéric Bastiat, born in 1801 near Bayonne, belonged to a family of fairly wealthy merchants, and he himself became in turn a merchant, a farmer in the Landes district, a justice of the peace, a councillor, and finally a deputy in the Constituent Assembly of 1848. He made little impression in the Assembly; but he scarcely had time to become known there before his health gave way. He died at Rome in 1850, at the age of forty-nine.

Brief as was Bastiat’s life, his literary career was shorter still. It lasted just six years. His first article appeared in the Journal des Économistes in 1844. His one book, appropriately called Les Harmonies économiques, written in 1849, remains a fragment. In the meantime he published his Petits Pamphlets and his Sophismes, which were aimed at Protection and socialism. He was very anxious to organise a French Free Trade League on the lines of that which won such triumphs in England under the guidance of Cobden, but he did not succeed.

His life was that of the publicist rather than the scholar. He was not a bookworm, although he had read Say before he was nineteen, and Franklin’s Poor Richard’s Almanac soon afterwards. He was very enthusiastic about the merits of Franklin’s works, and Franklin’s influence upon his writings, even upon his personal appearance and behaviour, is very marked. “With his long hair, his small cap, his long frock-coat, and his large umbrella, he seemed for all the world like a rustic on a visit to town.” (Molinari in the Journal des Économistes, February 1851.)

These biographical details should not be lost sight of, especially by those who accuse him of lacking scientific culture and of being more of a journalist than an economist.

Despite the fact that he has been severely judged by foreign economists, he is still very popular in France. His wit is a little coarse, his irony somewhat blunt, and his discourses are perhaps too superficial, but his moderation, his good sense, and his lucidity leave an indelible impression on the mind. And we are by no means certain that the Harmonies and the Pamphlets are not still the best books that a young student of political economy can possibly read. Moreover, we shall find by and by that the purely scientific part of his work is by no means negligible.

On this question of who benefits by international trade see our discussion of Mill’s treatment of the problem (pp. 364-365).

Harmonies, p. 21. Our quotations are taken from the tenth edition of the Œuvres complètes.

“Economic phenomena are not without their efficient cause and their Providential aim.” (Harmonies, last page.)

“Looking at this harmony, the economist can join with the astronomer and the physiologist and say: Digitus Dei est hic.” (Ibid., chap. 10, p. 39.)

“If everyone would only look after his own affairs, God would look after everybody’s.” (Ibid., chap. 8, p. 290.)

Auguste Comte, Cours de Philosophie positive, vol. iv, p. 202.

The liturgy of the Reformed Church reads as follows: “We acknowledge and confess our manifold sins.” See our chapter on Doctrines that owe their Inspiration to Christianity.

Harmonies, chap. 5, p. 140.

“I have attempted to show that value is based not so much upon the amount of labour which a thing has cost the person who made it, as upon the amount of labour it saves the persons who obtain it. [He ought to have acknowledged his indebtedness to Carey in this matter.] Hence I have adopted the term ‘service,’ which implies both ideas.” (Ibid., chap. 9, p. 341.)

Ibid., chap. 5, p. 145.

Harmonies, chap. 5, p. 193.

“Socialists and economists, champions of equality and fraternity, I challenge you, however numerous you may be, to raise even a shadow of objection to the legitimacy of mutual service voluntarily rendered, and consequently against the institution of private property as I have defined it. With regard to both these considerations, men can only possess values, and values merely represent equal services freely secured and freely given.” (Ibid., chap. 8, pp. 265, 268.)

Had the limits of this work permitted us to speak of the Italian economists we should have had to refer to Ferrara, professor at Turin from 1849 to 1858, whose theory of value and economic harmony link him to his contemporaries Carey and Bastiat. The whole economic edifice, according to Ferrara, was built upon cost of production. The value of a commodity is not measured by the amount of labour which it really has cost to produce, but by the amount of labour that would be required to produce another similar commodity, or, if the commodity in question be absolutely limited in quantity, such as is the case with an old work of art, by the labour necessary to produce a new one that would satisfy the same need equally well—an application of the principle of substitution which had not been formulated when Ferrara wrote. The progress of industry gradually reduces the cost of labour and dispenses with human effort; hence harmony.

Everything, including the earth and its products, even capital, are subject to this same law, and a gradual diminution of rent and a lowering of the rate of interest are thus assured.

Ferrara’s principal writings consist of prefaces to Italian translations of the works of the chief economists. They were published in a collection known as Biblioteca dell’ Economista (Turin, 1850-70, 26 vols.).

Harmonies, chap. 7, p. 236. The controversy between Bastiat and Proudhon in 1849 concerning the legitimacy of interest was published under the title of Gratuité du Crédit, but the argument is scarcely worth examining here. Bastiat’s argument is based upon the supposition that the person who lends money performs some service or other, and that the service, whenever given, should be paid for; in other words, he maintains that capital is productive. A plane means more planks produced, and it is only just that the owner of the plane should get some of them. Proudhon replies that he does not deny the legitimacy of interest under present conditions, but that interest itself is just a historical category—to use a phrase that only became current after Proudhon’s time—and that it will be quite unnecessary under the new régime. The Exchange Bank was to be the parent of the new order. The two combatants never really come to blows. They keep on arguing about nothing. The result is that this discussion is very trying and brings little honour to either.

“The relative importance of any service must vary with the circumstances. This will depend upon its utility, and the number of people who are willing to give the amount of labour, of ability or training necessary to produce it, as well as the amount of labour which it will save us.” (Harmonies, chap. 5, p. 146.)

Bastiat himself was obliged to recognise this. “I have not taken the trouble to ask whether all these services are real and proper or whether men are not sometimes paid for services which they never give. The world is full of such injustices.” (Ibid., chap. 5, p. 157.)

But if the world is full of people who are paid for services which they have never given or for merely imaginary and improper work, what is the use of speaking of value and property as if they were founded upon service rendered?

See Gide’s article on La Notion de la Valeur dans Bastiat, in the Revue d’Économie politique, 1887.

J. B. Say had already employed the term “service” without giving it any normative significance, simply using it to distinguish between wealth which consists of acts and wealth which consists of material products.

Social Possibilities of Economic Chivalry, in Economic Journal, March 1907.

“And I also declare that you have not intercepted any of the gifts of God. It is true that you received them free out of nature’s hand. But it is equally true that you have handed them on freely, reserving nothing for yourself. Fear not, but live in peace and freedom from every qualm.” (Harmonies, chap. 8, p. 257.)

“Coal is free for everyone. There is neither paradox nor exaggeration in that. It is as free as the water of the brook, if we only take the trouble to get it, or pay others for getting it for us.” (Ibid., chap. 10.) Bastiat would not regard the shareholders’ dividends as payments for the trouble which the shareholders have taken in getting the coal. The dividends simply pay for the trouble taken to save the money which made the exploitation possible.

Say spoke of free natural agents. What he meant to refer to was such natural commodities as air and water, which are at the disposal of everyone.

Harmonies, chap. 8, p. 256.

Ibid., chap. 5, p. 142.

Bastiat does not seem to have studied rent. The chapter of the Harmonies on this subject was never completed. Fontenay, one of his disciples, wrote a brilliant book called Du Revenu foncier (1854), which is almost forgotten to-day. He attempted to show:

(1) That Ricardian or differential rent would not exist were all the land equally fertile and suitably cultivated.

(2) That it is incorrect to speak of the rent of natural fertility, as Adam Smith and the Physiocrats did, if all utility (and not merely value) is the product of human labour. A fish, a grape, a grain of wheat, a fat ox, all of them have been created by human industry. Nature is for ever incapable of doing this. This is quite true if we say nature alone, but it is equally true of labour taken by itself.

Carey, Principles of Social Science.

Even in Algeria, for example, where Carey’s theory was at first true, now that the fertile plain of the Mitidja has been cultivated by two generations of colonists it is certain that there is only second-class land available.

“Wealth consists of the right to command the services of nature, which are always free.” (Carey, Principles of Social Science, vol. i, chap. 13.)

“As man’s power over nature grows, his power over his fellow-men seems to dwindle and equality becomes possible.” (Ibid., vol. iii, p. 122.)

Compare, for example, the relative equality of comfort enjoyed by those who travel by rail irrespective of class distinctions (which are only to be found in some countries) with the former method of travelling by post-chaise.

“Capitalists and workers, don’t look at one another with an air of defiance and vengeance.” (Harmonies, p. 252.)

A lowering of the rate of interest from 5 to 3 per cent. means that what formerly cost £60 and yielded 3 per cent. will now cost £100. There is no decrease of the revenue and there is an increase in the capital. It is quite a good bargain. A lowering of the rate of interest will simply reduce the amount of capital in those instances where the borrower can effect a conversion to his own advantage.

This truth is so obvious that Rodbertus, as we shall see by and by, took the opposite point of view and attempted to argue on the strength of the “iron law” that capital’s share is always increasing, while labour’s is decreasing. This thesis seems to have no better foundation than the other. See an article by Rist entitled Deux Sophismes économiques, in the Revue d’Économie politique for March 1905.

Bastiat’s thesis may also be seen in Carey. The Liberal school has clearly adopted it. See Paul Leroy-Beaulieu’s Répartition der Richesses.

See Gide’s Political Economy, p. 599 (English translation), and Colson’s Political Economy, vol. iii, p. 366. According to Colson, capital’s share has quadrupled since 1820, while labour’s has only increased in the proportion of 1:3½.

“Just as the earth is the great reservoir of electricity, so the public or the consumer is the one source of any gain or loss which the producer makes or suffers. Everything comes back to the consumer. Consequently every important question must be studied from the consumer’s point of view if we want to get hold of its general and permanent results.” (Harmonies, chap. 11, p. 414.)

See one of Bastiat’s best known pamphlets, La Vitre cassée.

Harmonies, chap. 6, p. 419.

Quoted by his friend Paillottet in his preface to the Œuvres complètes.

E.g. Yves Guyot in the Journal des Économistes for 1904 et passim. See p. 326.

The word is not his invention. That honour is claimed by Pierre Leroux. See p. 235.

Harmonies, chap. 21, p. 624.

“There is not a man living whose character has not been determined by a thousand factors entirely beyond his control.” (Ibid., p. 623.)

“All profit by the progress of the one, and the one by the progress of the many.” (Ibid., chap. 11, p. 411.)

“Solidarity implies a kind of collective responsibility. And so solidarity as well as responsibility is a force that makes for progress. It is a system that is admirably calculated to check evil and to advance the good.” (Ibid., chap. 21, pp. 622-626.)

“Workers must understand that these collective funds [pension funds] must be voluntarily contributed by those who are to have a share in them. It would be quite unjust, as well as anti-social, to raise them by means of taxation—that is, by force—from the classes who have no share in the benefits.” (Harmonies, chap. 14, p. 471.)

“A peasant marries late in the hope of having a small family, and we force him to rear other people’s children. He has to contribute towards the rearing of bastards.” (Ibid., chap. 20, pp. 617, 618.)

Speaking of sharing in the benefits, he remarks: “That is really not worth talking about.” (Ibid., chap. 14, p. 457.)

“Organisms in nature have their rank and degree of perfection determined by the number of organs which they possess and the amount of difference which exists between each of them.” (Social Science, vol. iii, p. 461.)

“Life has been defined as an exchange of mutual obligations, but if there were no difference between the various objects how could the exchange take place?” (Ibid., vol. i, pp. 54-55.)

“The more perfectly co-ordinated the whole is, the better developed will be each of its parts.” (Ibid., vol. iii, p. 462.)

Charles Dunoyer was Bastiat’s senior. The first edition of De la Liberté du Travail, to which we have already referred, dates from 1825, and the last edition from 1845. He took an active part in opposing the Restoration Government, but he became prefect and subsequently Conseiller d’État under Louis Philippe.

Molinari, a modern French economist, holds similar views.

If a person died intestate he was in favour of equal division of wealth. The arguments which he employed are very interesting, especially those directed against the upholders of primogeniture. They thought that by depriving the younger sons of their inheritance they became more industrious and thoughtful. Dunoyer replies by asking whether it would not be an advantage to deny the right of succession to the eldest son as well, “for it is obviously unfair that he should be deprived of that kind of training which is so profitable to his younger brothers.” Dunoyer forgot that it would have gone ill with his arguments if the socialists had taken him at his word.

“Labour is the only source of productive power. Capital is a human creation, and land is simply a form of capital.” (De la Liberté du Travail, Book VI.)

Say had already recognised the claims of immaterial wealth alongside of material, and he had employed the term “services” in describing them. In this way he considered that the professor, the doctor and the actor had claims to be regarded as producers. Dunoyer, while accepting his conclusion, criticises his way of putting it. He recognises no distinction between material and immaterial wealth. There is nothing but utility. “It is true that taste, education, etc., are immaterial, but so is everything that man produces.” But he is entirely wrong when he says that a good teacher is a producer of enlightened men and a doctor a producer of healthy persons. We are at a loss to explain why at one moment he refuses to recognise the material element in production, while at another he grossly exaggerates the material results of purely intellectual labour.

“Labour and exchange belong to two categories of facts which are absolutely distinct in their nature. Labour implies production. Commerce and exchange imply nothing of the kind.” (De la Liberté du Travail, p. 599.)

Seligman in the Economic Journal for 1903, pp. 335-511, devotes two very interesting articles to such writers under the title of Some Neglected British Economists. One is astonished to find how many there are and the originality which they show, and to learn that several of the more important modern theories are simply rediscoveries.

Mrs. Marcet’s Conversations belong to 1817, Miss Martineau’s Illustrations to 1832. The latter had a wonderful vogue.

Quoted by Seager in a lecture on economics at Columbia University in 1908.

We have already referred to McCulloch and James Mill, two of Ricardo’s immediate disciples. We must just add the names of Torrens and Gibbon Wakefield. Wakefield was the author of a book which had a great reputation at one time, but which was simply an attempt to apply the Ricardian principles to the practice of colonisation.

Nassau Senior during a part of his life was Professor of Political Economy at Oxford. The Oxford chair, created in 1825, was the first chair of economics to be established in England. His writings, which treat of various subjects, belong to the period 1827-52. The bulk of his doctrine is contained in his Political Economy, contributed to the Encyclopædia Britannica in 1836 and afterwards published separately. This small volume may be regarded as the earliest manual of political economy.

The four principles were: (i) the Hedonistic Principle; (ii) the Principle of Population; (iii) the Law of Increasing Returns in Industry; (iv) the Law of Diminishing Returns in Agriculture.

“But a considerable part of the produce of every country is the recompense of no sacrifice whatever; is received by those who neither labour nor put by, but merely hold out their hands to accept the offerings of the rest of the community.” (Political Economy, p. 89.) He takes the income of a successful doctor as an illustration, and divides it up as follows (ibid., p. 189):

Wages or payment for labour £40 Profit or payment for abstinence £960 Rent £3000

See Senior’s Theory of Monopoly, by Richard Ely (American Economic Association, 1899).

This confusion between rent and the income of inherited wealth does little honour to Senior, for the two facts belong to entirely different categories. Rent is a purely economic phenomenon, resulting from the necessary conditions of exchange. It owes nothing to social organisation, not even to the institution of private property. Inheritance, on the other hand, is a purely juridical phenomenon, the product of civil law. Even if inheritance were abolished it would make no difference to the existence and growth of rent, whether obtained from the soil or from some other source; whereas under the hypothetical régime of perfectly free competition, although rent would no longer be known, inheritance, together with all its privileges, might still continue to exist. Senior evidently understands by the term “rent” any kind of income that is not obtained by personal effort. But this is clearly a perversion of the original meaning.

Rau’s treatise on political economy belongs to the years 1826-37, and von Thünen’s Der Isolirte Staat appeared in 1826.

Pellegrino Rossi, who became a naturalised Frenchman in 1833, was an Italian by birth. He succeeded Say as professor at the Collège de France. He afterwards became Lecturer on Constitutional Law, and his name is commemorated in one of the annual prizes. He eventually entered the diplomatic service, and was attached to the Papal See during the pontificate of Pius IX. He was assassinated at Rome in 1848.

John Stuart Mill, born in 1806, was the son of James Mill the economist of whom we have already spoken. The system of education which his father planned for him can only be described as extraordinary. Practised on anyone else it would have been fatal. At the age of ten he was already well versed in universal history and in the literatures of Greece and Rome. At thirteen he had a fair grasp of science and philosophy, and had written a history of Rome. By the time he was fourteen he knew all the political economy that there was to know then. In 1829, then a young man of twenty-three, he published his first essays on political economy. In 1843 appeared his well-known System of Logic, which immediately established his fame. In 1848 he issued the admirable Principles of Political Economy. Mill was in the service of the East India Company up to the time when it lost its charter in 1858. From 1865 to 1868 he was a member of the House of Commons. After the death of his wife, who collaborated with him in the production of several of his works, especially Liberty (1859), being unwilling to quit the spot where she lay buried, he spent the last years of his life, except those taken up by his Parliamentary work, at Avignon. His autobiography contains a precious account of his life and of his gradual conversion to socialistic views.

Principles, Book II, chap. 1, § 3.

Ibid., Book IV, chap. 7, § 7.

Dupont de Nemours, writing very much in the spirit of the Classical school, had already given an excellent definition of natural law. “By natural law we are to understand those essential conditions that regulate all things in accordance with the design laid down by the Author of Nature. They are the ‘essential conditions’ to which men must submit if they would obtain all the benefits which the natural order offers them.” (Introduction to Quesnay’s works, p. 21.)

Adam Smith, let us remember, also wrote a book on the Theory of Moral Sentiments (see Book I, chap. 2), and Stuart Mill writes as follows: “In the golden rule of Jesus of Nazareth we read the complete spirit of the ethics of utility. To do as you would be done by and to love your neighbour as yourself constitute the ideal perfection of utilitarian morality.” (Utilitarianism, chap. 2.)

This is how Mill views it: “It is only in a very imperfect state of the world’s arrangements that anyone can best serve the happiness of others by the absolute sacrifice of his own.” (Utilitarianism, chap. 2.) But it is scarcely necessary to add, seeing that the two propositions are necessarily complementary, that one of the best ways of securing happiness is to sacrifice one’s self in the cause of others. All that is required is a little patience. “Education and opinion will so use that power as to establish in the mind of every individual an indissoluble association between his happiness and the good of the whole.” Interpreted in this way, individualism is closely akin even to the most transcendent form of solidarity.

One is sometimes asked to state the differences between the Classical, the Individualist, the Liberal, and the Optimist schools. The question does not seem to us to be a very important one, but we may answer it in this way:

(a) The Individualist school, according to the worst interpretation put upon it, thinks that egoism is the only possible system of ethics and that each for himself is the sole principle of action. But, naturally enough, everyone is anxious to avoid the taunt of selfishness, and the existence of such economic ties as exchange and division of labour make egoism impossible as an ethical system. According to the broadest interpretation of the term, individualism implies the recognition of individual welfare as the sole aim of every activity, whether individual or social, economic or political. But this does not take us very far, for every socialist and individualist would accept this interpretation. We seldom speak of the welfare of society per se as an entity possessed of conscious feeling. This definition is much too wide. It includes solidarity and association, State intervention and labour legislation, provided the aim be to protect the individual against certain dangers. Self-sacrifice is not excluded, for what can strengthen individualism like self-sacrifice? This is the interpretation which Schatz puts upon it in his L’Individualisme économique et social. But the term “individualist” is too indefinite and we must avoid it whenever we can.

(b) The so-called Liberal school uses the term in a much more definite fashion. The individual is to be not merely the sole end of economic action, but he is also to be the sole agent of the economic movement, because no one else can understand his true interests or realise them in a better way. Interpreted in this fashion, it means letting the individual alone and removing every external intervention, whether by the State or the master.

According to the one definition, individualism is a creed which everyone can adopt; according to the other it is open to very serious objections. Experience shows that the individual, whether as consumer buying injurious, costly, or useless commodities, or as worker working for wages that ruin his health and lower his children’s vitality, is a poor judge of his own interest, and is helpless to defend himself, even where science and hygiene are on his side.

(c) If we push this interpretation a stage farther and admit not only that each individual is best qualified to speak for himself, but also that the social interest is simply the sum of the individual interests, all of which converge in a harmonious whole, then the Liberal school becomes the Optimistic. In France it has the tradition of a generation behind it, and an attempt has been made to revive it in certain recent works; still it may now be regarded as somewhat antiquated.

(d) When we speak of the Classical school we mean those who have remained faithful to the principles enunciated by the earlier masters of economic science. An effort has been made to improve, to develop, and even to correct the older theories, but no attempt has been made to change their essential aspects. Individualistic and liberal by tradition, this school has never been optimistic. It lays no claim to finality of doctrine or to the universality of its aim, but simply confines itself to pure science.

Auguste Comte and Positivism.

Principles, Book IV, chap. 7, par. 7 (Ashley’s ed., p. 793). See the recent work of Molinari, or La Morale de la Concurrence, by Yves Guyot.

“It is in vain to say that all mouths which the increase of mankind calls into existence bring with them hands. The new mouths require as much food as the old ones and the hands do not produce as much.” (Principles, Book I, chap. 11, § 2.)

“It is seldom by the choice of the wife that families are too numerous; on her devolves (along with all the physical suffering and at least a full share of the privations) the whole of the intolerable domestic drudgery resulting from the excess.” (Principles, Book II, chap. 13, § 2.)

“While a man who is intemperate in drink, is discountenanced and despised by all who profess to be moral people, it is one of the chief grounds made use of in appeals to the benevolent that the applicant has a large family and is unable to maintain them.” (Ibid., Book II, chap. 13, § 1.) “Little improvement can be expected in morality, until the producing large families is regarded with the same feelings as drunkenness or any other physical excess. But while the aristocracy and clergy are foremost to set the example of this kind of incontinence what can be expected of the poor?” (Ibid., Ashley’s ed., p. 375, note.)

He complains that the Christian religion inculcates the belief that God in His wisdom and care blesses a numerous family.

“The laws which in many countries on the Continent forbid marriage unless the parties can show that they have the means of supporting a family, do not exceed the legitimate powers of the State. They are not objectionable as violations of liberty.” (Liberty, chap. 5.)

On the other hand he thought that a law which limited the number of public-houses involved a violation of liberty because it meant treating the workers as children. (Ibid., chap. 5.)

“The rise or the fall continues until the demand and supply are again equal to one another: and the value which a commodity will bring in any market is no other than the value which in that market gives a demand just sufficient to carry off the existing or expected supply.” (Principles, Book III, chap. 2, § 4.)

Cournot in his criticisms of the law of demand and supply had anticipated Mill. But it is very probable that Mill was not acquainted with the Recherches.

Principles, Book III, chap. 3, § 1.

Ibid., Book III, chap. 1, § 1.

“Wages depend, then, on the proportion between the number of the labouring population and the capital or other funds devoted to the purchase of labour, and cannot under the rule of competition be affected by anything else.” (Ibid., Book II, chap. 11, parts 1 and 3.)

Saving with a view to augmenting the wages fund is only possible for the rich, and Mill is as insistent upon their doing it as he is upon the workers refraining from marriage. He also tries to impress upon the workers the importance of saving, but his way of showing its advantages is often laborious and obscure.

Stuart Mill admitted that trade unions might modify the relations between demand and supply, forgetting for the moment that this meant a contradiction of the Classical theory.

The unions might limit the number of available men. He feared that this would result in high wages for the small number of organised labourers and in low wages for the others. They might check the birth-rate, their members becoming accustomed to such a degree of comfort and well-being as would raise their standard of life. He was always a strict Malthusian.

See the quarterlies of Harvard and Columbia. It was an American, however, Francis Walker, in his Wages Question (1876), who did more than anyone to destroy the old wage fund theory.

“The cost value of a thing means the cost value of the most costly portion of it.” (Principles, Book III, chap. 6, § 1, prop. 7.)

“The extra gains which any producer or dealer obtains through superior talents for business or superior business arrangements are very much of a similar kind. If all his competitors had the same advantages, and used them, the benefit would be transferred to their customers through the diminished value of the article: he only retains it for himself because he is able to bring his commodity to market at a lower cost while its value is determined by a higher.” (Ibid., Book III, chap. 5, § 4.)

Senior had already emphasised one important difference between agricultural and industrial production, namely that whilst the law of diminishing returns operates in the former case, the law of increasing returns is operative in the second. In other words, the cost of production diminishes as the quantity produced increases. The result is, as Mill points out elsewhere, that the industrial employer is anxious to reduce the sale price in order to produce more and to recoup himself for a reduction in price by a reduced cost of production.

Ricardo, moreover, gives an exposition of the advantages of international trade in terms that Bastiat might have adopted. “Under a system of perfectly free commerce each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while by increasing the general mass of productions it diffuses general benefit and binds together, by one common tie of interest and intercourse, the universal society of nations throughout the civilised world. It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England.” (Ricardo, Works, p. 75.)

The following apparent paradox may be deduced from Ricardo’s theory. A country is wise in importing not only those commodities which it can only produce at a disadvantage as compared with its rivals, but also those goods in which it has a distinct advantage in the matter of production, though not so great as the advantage enjoyed in some other case. Under those circumstances it is better that it should produce that product in the making of which it has the greater advantage and exchange it for some other product in which it has less.

“Two men can both make shoes and hats, and one is superior to the other in both employments; but in making hats, he can only exceed his competitor by one-fifth, or 20 per cent., and in making shoes he can excel him by one-third, or 33 per cent. Will it not be for the interest of both, that the superior man should employ himself exclusively in making shoes, and the inferior man in making hats.” (Ricardo, Works, p. 77, note.)

And so England might find it advantageous to exchange her coal for French cloths, although she may be able to produce those cloths cheaper herself.

“The value of a thing in any place depends on the cost of its acquisition in that place; which in the case of an imported article means the cost of production of the thing which is exported to pay for it.” (Principles, Book III, chap. 18, § 1.)

Mill first treated of the theory in his Unsettled Questions of Political Economy. A more complicated but more precise exposition is given in the Principles Book III, chap. 18, § 7. The whole process of reasoning, based as it is upon the hypothetical conduct of two persons, is purely abstract, and is of very little practical use. What is really important is to know the relation between the advantages gained by either side. It is true that on the whole imports and exports balance one another, thanks to the operation of money, but that is another question.

“It still appears, that the countries which carry on their foreign trade on the most advantageous terms are those whose commodities are most in demand by foreign countries, and which have themselves the least demand for foreign commodities, from which, among other consequences, it follows that the richest countries, ceteris paribus, gain the least by a given amount of foreign commerce, since, having a greater demand for commodities generally they are likely to have a greater demand for foreign commodities and thus modify the terms of interchange to their own disadvantage.” (Principles, Book III, chap. 18, § 8.) Note the phrase “a given amount of foreign commerce.” That is, although the rate of interchange is less advantageous for the rich country than it is for the poor, still, since the former exchanges much more than the latter it gains more on the whole transaction. Mill states this expressly elsewhere. The rich and the poor country are like the wholesale house and the little shop. The former gains very little on each article sold, but gains much on the whole turnover.

Ibid., Book V, chap. 10, § 1.

An even more important concession to the Protectionist view is his admission that the duties are not always borne by the home consumer in the form of higher prices, but that they are sometimes paid by the foreigner.

Principles, Book V, chap. 10, § 1. The duty would check the demand of the importing country, and according to Mill’s own formula it ought to modify the exchange equation in its favour.

Histoire des Doctrines économiques, p. 338.

Mill was for many years resident in France, and died at Avignon. An article written by him in defence of the Revolution of 1848 has been translated into French and published in book form by M. Sadi Carnot.

Principles, p. 210.

Representative Government, chap. 3.

“The laws and conditions of the production of wealth partake of the character of physical truths. There is nothing optional or arbitrary in them.… It is not so with the distribution of wealth. This is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like.” (Principles, Book II, chap. 1, § 1.) Karl Marx, a little later than this, claimed that distribution is wholly determined by production.

See Chatelain’s introduction to Rodbertus’s Kapital.

See Autobiography, p. 133 (“Popular” edition).

“If the improvement which even triumphant military despotism has only retarded, not stopped, shall continue its course there can be little doubt that the status of hired labourers will gradually tend to confine itself to the description of workpeople whose low moral qualities render them unfit for anything more independent, and that the relation of masters and workpeople will be gradually superseded by partnership in one of two forms: in some cases, association of the labourers with the capitalist; in others, and perhaps finally in all, association of labourers among themselves.” (Principles, Book IV, chap. 7, § 4.)

“In this or some such mode, the existing accumulations of capital might honestly and by a kind of spontaneous process become in the end the joint property of all who participate in their productive employment—a transformation which, thus effected, would be the nearest approach to social justice and the most beneficial ordering of industrial affairs for the universal good which it is possible at present to foresee.” (Ibid.,