The Physiocrats failed to notice the contradiction involved in this. If the revenue which the proprietor draws represents the remuneration for his outlay and the return for his expenditure it is no longer a gift of nature, and the net product vanishes, for, by definition, it represented what was left of the gross product after paying all initial expenses—the excess over cost of production. If we accept this explanation of the facts there is no longer any surplus to dispose of. It is as capitalists pure and simple and not as the representatives of God that proprietors obtain their rents.
Must we really believe that although these outlays afford some explanation of the existence of private property they supply no means of measuring or of limiting its extent? Is there no connection between these outlays and the revenues which landed proprietors draw?
Or must we distinguish between the two portions of the revenue—the one, indispensable, representing the reimbursement of the original outlay, and in every respect comparable to the revenue of the farmer, and the other, being a true surplus, constituting the net product? How can they justify the appropriation of the latter?
There is another argument held in reserve, namely, that based upon social utility. They point out that the cultivation of land would cease and the one source of all wealth would become barren if the pioneer were not allowed to reap the fruits of his labour.
The new argument is a contradiction of the old. In the former case land was appropriated because it had been cultivated. In the present case land must be appropriated before it can be cultivated. In the former labour is treated as the efficient cause, in the latter as the final cause of production.
Finally, the Physiocrats believed that landed proprietorship was simply the direct outcome of “personal property,” or of the right of every man to provide for his own sustenance. This right includes the right of personal estate, which in turn involves the right of landed property. These three kinds of property are so closely connected that in reality they form one unit, and no one of the three can be detached without involving the destruction of the other two.[52] They were full of veneration for property of every description—not merely for landed property. “The safety of private property is the real basis of the economic order of society,” says Quesnay.[53] Mercier de la Rivière writes: “Property may be regarded as a tree of which social institutions are branches growing out of the trunk.”[54] We shall encounter this cult of property even during the terrible days of the French Revolution and the Reign of Terror. When all respect for human life was quite lost there still remained this respect for property.
The defence of private property was already well-nigh complete.[55] But if they were strong in their defence of the institution they did not fail to impose upon it some onerous duties—which counterbalanced its eminent dignity. Of course, every proprietor should always be guided by reason and be mannerly in his behaviour, and he should never allow mere authority to become the rule of life.[56] Their duties are as follows:
1. They must continue without fail to bring lands into cultivation, i.e. they must continue the avances foncières.[57]
2. They must dispose of the wealth which the nation has produced in such a way as to further the general interest; this is their task as the stewards of society.[58]
3. They must aim during their leisure at giving to society all those gratuitous services which they can render, and which society so sorely needs.
4. They must bear the whole burden of taxation.
5. Above all they must protect their tenants, the agriculturists, and be very careful not to demand more than the net product. The Physiocrats never go the length of advising them to give to their tenants a portion of the net product, but they impress upon them the importance of giving them the equivalent of their annual expenditure and of dealing liberally with them. It does not seem much, but it must have been something in those days. “I say it boldly,” writes Baudeau, “cursed be every proprietor, every sovereign and emperor that puts all the burden upon the peasant, and the land, which gives all of us our sustenance. Show them that the lot of the worthy individuals who employ their own funds or who depend upon those of others is to none of us a matter of complete indifference, that whoever hurts or degrades, attacks or robs them is the cruellest enemy of society, and that he who ennobles them, furthers their well-being, comfort, or leisure increases their output of wealth, which after all is the one source of income for every class in society.”[59] Such generous words, which were none too common at the time, release the Physiocrats from the taunt of showing too great a favour to the proprietors. In return for such privileges as they gave them they demanded an amount of social service far beyond anything that was customary at the time.
II
So far we have considered only the Physiocratic theory. But the Physiocratic influence can be much more clearly traced if we turn to applied economics and examine their treatment of such questions as the regulation of industry, the functions of the State, and the problems of taxation.[60]
I: TRADE
All exchange, the Physiocrats thought, was unproductive, for by definition it implies a transfer of equal values. If each party only receives the exact equivalent of what it gives there is no wealth produced. It may happen, however, that the parties to the exchange are of unequal strength, and the one may grow rich at the expense of the other.[61] In giving a bottle of wine in exchange for a loaf of bread there is a double displacement of wealth, which evidently affords a fuller satisfaction of wants in both cases, but there is no wealth created, for the objects so exchanged are of equal value. To-day the reasoning would be quite different. The present-day economist would argue as follows: “If I exchange my wine for your bread, that is a proof that my hunger is greater than my thirst, but that you are more thirsty than hungry. Consequently the wine has increased in utility in passing from my hands into yours, and the bread, likewise, in passing from your hands into mine, and this double increase of utility constitutes a real increase of wealth.” Such reasoning would have appeared absurd to the Physiocrats, who conceived of wealth as something material, and they could never have understood how the creation of a purely subjective attribute like utility could ever be considered productive.
We have already had occasion to remark that industry and commerce were considered unproductive. This was a most significant fact, so far as commerce was concerned, because all the theories that held the field under Mercantilism, notably the doctrine that foreign commerce afforded the only possible means of increasing a country’s wealth, immediately assumed a dwindling importance. For the Mercantilists the prototype of the State was a rich merchant of Amsterdam. For the Physiocrats it was John Bull.
And foreign trade, like domestic, produced no real wealth: the only result was a possible gain, and one man’s gain is another man’s loss. “Every commercial nation flatters itself upon its growing wealth as the outcome of foreign trade. This is a truly astonishing phenomenon, for they all believe that they are growing rich and gaining from one another. It must be admitted that this gain, as they call it, is a most remarkable thing, for they all gain and none loses.”[62] A country must, of course, obtain from foreigners the goods which it cannot itself produce in exchange for those it cannot itself consume. Foreign trade is quite indispensable, but Mercier de la Rivière thinks that it is a necessary evil[63] (he underlines the word). Quesnay contents himself with referring to it merely as a pis aller.[64] He thought that the only really useful exchange is