That may be; but, admitting a contempt for commerce, what conclusions do they draw from it? Shall they prohibit it, or regulate it, or shall they just let it take its own course? Any one of these conclusions would follow from their premises. If commerce be as useless as they tried to make out, the first solution would be the best. But it was the third that they were inclined to adopt, and we must see why.
It seems quite evident that the Physiocrats would have condemned both the Mercantile and the Colbertian systems. Both of these aimed at securing a favourable balance of trade—an aim which the Physiocrats considered illusory, if not actually immoral. But if they thought all trade was useless it is not easy to understand their enthusiasm for Free Trade. Those economists who nowadays favour Free Trade support it in the belief that it is of immense benefit to every country wherein it is practised, and that the more it is developed the richer will the exchanging countries become. But such was not the Physiocratic doctrine. It is a noteworthy fact that they are to be regarded as the founders of Free Trade, not because of any desire to favour trade as such, but because their attitude towards it was one of disdainful laissez-faire. They were not, perhaps, altogether free from the belief that laissez-faire would lead to the disappearance of commerce altogether. They were Free Traders primarily because they desired the freedom of domestic trade, and we must not lose sight of those extraordinary regulations which completely fettered its movements at this time.[67]
The “natural order” also implied that each one would be free to buy or sell wherever he chose, within or without the country. It recognised no frontiers,[68] for only through “liberty” could the “good price” be secured. The “good price” meant the highest price and not the lowest, dearth and not cheapness. “Free competition with foreign merchants can alone secure the best possible price, and only the highest price will enable us to increase our stock of wealth and to maintain our population by agriculture.”[69] This is the language of agriculturists rather than of Free Traders. It is the natural result of thinking about agricultural problems, and especially about the question of raising corn; and since Free Trade at this time gave rise to no fears on the score of importation, free exchange meant free exportation. Oncken points out that the commercial régime which the Physiocrats advocated was identical with that in operation in England about this time, where in case of over-abundance exportation was encouraged in order to keep up the price, and in case of dearth importation was permitted in order to ensure a steady supply and to prevent the price rising too much.[70]
In a word, Free Trade meant for the Physiocrats the total abolition of all those measures which found so much favour with the Mercantilists, and which aimed at preventing exportation to places outside the country and checking the growth of free intercourse within it.[71] Narrow as their conception of Free Trade at first was, it was not long in growing out of the straitened circumstances which gave it birth, and it developed gradually into the Free Trade doctrine as we know it, which Walras expressed as follows: “Free competition secures for every one the maximum final utility, or, what comes to the same thing, gives the maximum satisfaction.” We no longer admit that international trade is a mere pis aller. But all the arguments which have been used in its defence on the Free Trade side were first formulated by the Physiocrats. We shall refer to a few of them.
The fallacy lurking behind the “balance of trade” theory is exposed with great neatness by Mercier de la Rivière. “I will drown the clamour of all your blind and stupid policies. Suppose that I gave you all the money which circulates among the nations with whom you trade. Imagine it all in your possession. What would you do with it?” He goes on to show how not a single foreign country will any longer be able to buy, and consequently all exportation will cease. The result of this excessive dearness will be that buying from foreign countries will be resorted to, and this will result in the exportation of metallic currency, which will soon readjust matters.[72]
The contention that import duties are paid by the foreigner is also refuted. Nothing will be sold by the foreigner at a lower price than that which other nations would be willing to give him. An import duty on such goods will increase the real price, which the foreigner will demand, and this import duty will be paid by those who buy the goods.[73]
There is also a refutation of the policy known as reciprocity. “A nation levies an import duty upon the goods of another nation, but it forgets that in trying to injure the selling nation it is really checking the possible consumption of its own goods. This indirect effect, of course, is inevitable, but can nothing be done to remedy this by means of reprisals? England levies a heavy duty on French wines, thereby reducing its debit account with France very considerably, but more French wine will not be bought if a tax is also placed upon the goods which England exports to France. Do you think that the prejudice which England has taken against France can be remedied in this way?”
We have multiplied instances, for during the whole of the hundred years which have since elapsed has anyone deduced better arguments?
These theories immediately received legal sanction in the edicts of 1763 and 1766 establishing free trade in corn, first within the country and then without, but some very serious restrictions were still retained. Unfortunately Nature proved very ungrateful to her friends. For four or five years she ran riot with a series of bad harvests, for which, as we may well imagine, the Physiocratic régime and its inspirers were held responsible. Despite the protests of the Physiocrats, this liberal act was repealed in 1770. It was re-established by Turgot in 1774, and again repealed by Necker in 1777—a variety of fortune that betokens a fickleness of public opinion.
This new piece of legislation, and, indeed, the whole Physiocratic theory, was subjected to severe criticism by an abbot of the name of Galiani. Galiani was a Neapolitan monsignor residing at the French court. At the age of twenty-four he had written a remarkable work in Italian dealing with money, and in 1770, written in splendid French, appeared his Dialogues sur le Commerce des Blés. It was an immediate success, and it won the unqualified approval of Voltaire, who was possibly attracted more by the style than by the profundity of thought. Galiani was not exactly opposed to laissez-faire. “Liberty,” he wrote, “stands in no need of defence so long as it is at all possible. Whenever we can we ought to be on the side of liberty.”[74] But he is opposed to general systems and against complete self-surrender into the hands of Nature. “Nature,” says he, “is too vast to be concerned about our petty trifles.”[75] He shares the realistic or historical views of the writers of to-day, and thinks that before applying the principles of political economy some account should be taken of time, place, and circumstances. “The state of which the Physiocrats speak—what is it? Where is it to be found.”[76]
Along with Galiani we must mention the great financier Necker, who in a bulky volume entitled La Législation et le Commerce des Grains (1775) advocates opportunistic views almost identical in character with those of Galiani, and who, as Minister of State (1776–81 and 1788–90), put an end to free trade in corn.
In monetary matters, especially on the question of interest, the Physiocrats were willing to recognize an exception to their principle of non-intervention. Mirabeau thought that whenever a real increase of wealth resulted from the use of capital, as in agriculture, the payment of interest was only just. It was simply a sign or symbol of the net product. But in trade matters he thought it best to limit if not to prohibit it altogether. It often proved very harmful, and frequently was nothing better than a tax levied by order of “the corrosive landowners.” Quesnay could not justify it except in those cases where it yielded a net product, but he was content simply to suggest a limitation of it. The Physiocrats are at least logical. If capital sunk in industrial and