AN INTRODUCTION TO ECONOMICS by Maurice Dobb 1932
POLITICAL Economy was cradled in those social economic and ideal changes which marked the transition in Western Europe to the new bourgeois epoch. In France and Germany the remnants of feudalism were ripe for abolition. The centre of gravity, economically and politically, was shifting in favour of the parvenu “third estate.” In England the bourgeoisie had come into its own much earlier, and the bourgeois State, pursuing a commercial policy, had been established two to three centuries before. England had had her economic writers at that period Thomas Mun, Locke and Sir William Petty-but they were concerned with detailed points of State policy rather than with creating a theoretical system. By the end of the eighteenth century a new section of the bourgeois class was coming into existence: a class of industrial capitalists whose interests were ranged against the existing system established in the combined landowning and commercial interests of the eighteenth century Whig aristocracy. But it was in France rather than England that the unified concept of an economic society as the subject for Political Economy first appeared. The French Physiocrats of the eighteenth century sketched the outline which Adam Smith filled out in his enquiry into the Wealth of Nations, and Ricardo developed in his analysis of the distribution of wealth.
Both France and England at this time witnessed a considerable ferment of new ideas, couched in the language of natural science, which since Bacon and Descartes was making steady conquests. In antithesis to the old authoritarian order, with its prescribed codes and sanctions, there was placed the concept of a “natural order,” which showed its hand only when man was unfettered and free, and which gave its sanctions to the popular will. In antithesis to authoritarian “divine right” was placed the “natural right” of the individual. It was in this framework that there developed the concept of an economic society. This economic society was still in the foetal stage, taking shape within the confines of a system of sanctions and prohibitions which had at first nurtured and now cramped its further development as an independent entity. Hence, in opposition to the authoritarian views of Mercantilism, which held that a commercial system only existed as such by virtue of detailed regulation by the State and would relapse into chaos without such control, Political Economy offered the conception of an economic order ruled by “natural law,” which would “go by itself” if left to itself and would only produce the best results if “natural law” were left to operate free and unfettered. The individual had a “natural right” to pursue his own self-interest, because in so doing by virtue of this “unseen hand” he thereby promoted the common good. To discover and postulate this “natural law” was the rôle of Political Economy; and “the advice to the sovereign” which it tendered was not how to regulate, but why not to regulate, economic affairs in order to promote the greatest wealth of the nation. And while the Physiocrats coined the slogan laissez-faire, laissez-aller (let do as you please, let go as you please), the English economists followed Adam Smith in expounding that imposing symmetry of economic harmonies which would come to birth if it were not suffocated and strangled by an unnatural degree of obstetrical attention. Political Economy, therefore, had its origin and derived its force as a direct apologetic of capitalist individualism.
An economic order ruled by “natural law” must possess a unifying principle. However complex and apparently arbitrary the phenomena, they must be explicable in terms of generalisations which hold together in a consistent logical whole. Science is not a matter of classifying everything in an arbitrary arrangement of pigeon-holes, or fitting it into a convenient card-indexing system, even if this be a necessary preliminary device. Its ultimate aim is to refer the maze of qualitative differences which meet the eye to a single common denominator. The Physiocrats were the first explicitly to conceive of the economic order in analogy with a natural organism; and the dominant analogy which presented itself was that economic society was a system of the circulation of wealth. What was the physiology of this process? The economic system was to human society what the body was to the human personality-the physical basis for the growth of the higher functions; and the condition of social progress was that the economic system should be capable of yielding to the State and the ruling class the largest possible surplus on which the development of the State and of culture could thrive. Qµesnay’s famous Tableau Economique was designed to show how of the annual produce part went by exchange to replace what had been consumed during the previous cycle, another part did not need to go back into the economic system as a condition for restarting a fresh cycle of production and circulation over again, but remained as a surplus or produit net; and labour was judged “productive” to the extent that it yielded such a surplus. What commerce and manufacture absorbed was what was necessary as fuel to their activities. Manufacture exchanged the products which it did not use itself against the agricultural production which it required to supply its raw materials and the subsistence of its work-people. Manufacture by this act of exchange did no more than give an equivalent for equivalent received, and hence was not productive of any surplus. Said Mirabeau: “I give a length of cloth to a tailor: he will never be able to increase it, so as to make out of it a coat for himself as well as for me.” Agriculture, on its side, exchanged a part of its products against manufactures which it needed for the maintenance of agriculture and the agricultural population, such as tools and clothing. But this part of its produce which it exchanged against manufactures, plus what it used itself for subsistence and seed-corn, did not exhaust the whole of the produce of the land: a third part went to the landowning class as rent, without any exchange of equivalents. This was the essential surplus, or produit net, of the economic system; and agriculture alone yielded this surplus. Progress consisted in the continual enlargement of this produit net.
These ideas have been so often misunderstood by later economists, that the Physiocrats are frequently assigned only a modest place in the hierarchy of political economy. Economic text-books customarily pass .them by with a reproof for being so stupid as to assert that agriculture alone was “productive,” thereby missing the essential definition of “productive” as creative of surplus or produit net, and missing, too, the whole fundamental significance of the distinction between surplus and gross produce and cost, as the unifying concept of political economy. And in tracing this surplus to agriculture alone the Physiocrats were asserting nothing so silly as their traducers claim it was a concept born from, and appropriate to, economic society before the French Revolution, when manufacture on a capitalist basis was still in its infancy and land rent was the essential basis of the income of the ruling class. In the history of ideology it represents an interesting transitional philosophy lying between the old epoch and the new. Formally, by its insistence on the importance of agriculture and of land rent, it seemed to rest upon the aristocratic society of the past. Certainly it contained no prophecy of nineteenth century industrialism or of the needs and functions of a new bourgeois class. Indeed, what grounds for such ideas were there in eighteenth century France? But in its implied insistence on removing feudal restrictions on agricultural development and restrictions on capital investment in farming, in its emphasis on freedom of commerce and on land rent as the appropriate basis of taxation, in its concept of a “natural” economic order which would “work of itself” unaided by authoritarian control, its significance was revolutionary. In the realm of economic ideas, it played the same rôle of John the Baptist to the coming bourgeois revolution that Voltaire and Rousseau played in the realm of political ideas.
Adam Smith (1723-1790), who was considerably influenced by the Physiocrats, was much more concerned with composing a commentary on specific economic questions and in advancing a practical thesis than in establishing a conceptual unity. In this he was fully in the tradition of English empiricism. At the same time, his treatment was more comprehensive in the range of practical issues he touched upon, more thorough in its detail, and his championing of the new bourgeois philosophy of economic freedom was much more explicit. His enquiry into the causes of the wealth of nations produced a number of sound empirical generalisations about the division of labour and the accumulation of capital, a vigorous criticism of Mercantilism, and an acute analysis of the effect of different forms of taxation. Temperamentally he differed considerably from the Physiocrats, at any rate from Quesnay. His empiricism even had a touch of atomism about it. He was at any rate quite willing to be eclectic where convenience seemed to demand it the only considerable point of doctrine on which he differed from the Physiocrats was in their statement that agriculture alone was “productive”; but true to his temperament he left the matter there and developed the concept of a produit net in manufacture no further. Ricardo (1772-1823), on the other hand, whose essentially continental temperament was in many ways the antithesis of that of Adam Smith, was much more in the direct tradition of the Physiocrats (i.e. in the manner of his approach, and in his method, rather than in his conclusions). He was concerned to establish a unitary principle by which to interpret all the major phenomena of the economic system.
In particular, he was concerned, like the Physiocrats, with the problem of the distribution of wealth. In his treatment produit net, or rent, assumed specifically the garb of an exaction from the industrious classes for the benefit of the passive land-owning class. This was an important shift of perspective. In his theory of Profit he virtually advanced a second species of produit net – an implication which Marx was quick to develop – the produit net of manufacture. But this species had essential peculiarities, even if it belonged to the same broader genus. As it represented the income of the bourgeoisie, the accumulators of industrial capital and the pioneers of industrial advance, its increase constituted a desirable engine of progress, whereas rent, which fed a passive and reactionary aristocracy, was a tax on progress. Ricardo was par excellence the economic prophet of the industrial bourgeoisie.