The Physiocrats

After the mid-18th century, Quesnay created his Tableau Economique to oppose the Mercantile System.

It was afterwards:

• expounded by Mirabeau and the Abbe de Riviere
• enlarged by Dupont de Nemours
• adopted by the Economists of France which spread to Italy

Quesnay’s was the second system in political economy called the “territorial system” or “the system of the economists”.

He asserts that:

• gold and silver do not themselves constitute the wealth of states
• a nation’s prosperity cannot be judged from the abundance of its precious metals.

He next defines the classes of men, all of whom:

• try to gain money and
• cause wealth to circulate

He separates the classes possessed of a creative power. He says that

• wealth originates with them
• all commercial transactions are merely transmissions of that wealth from hand to hand.

The merchant moves goods from one country to another merely transfers wealth and does not create wealth.

The merchant sells European manufactures into the colonies at a higher price because they are worth more there.

He has a like reimbursement to claim on the cotton or sugar he brings back to Europe. If, at the end of his voyage, any profit remains, it is the fruit of his economy and good management. The wages allowed him by consumers, for the trouble he has undergone, are greater than the sum he had expended.

It is the nature of wages, however, to be entirely expended by him who earns them; and had this merchant done so, he would have added nothing to the national wealth, by the labour of his whole life; because the produce which he brings back does nothing more than exactly replace the valuE of the produce given for it, added to his own wages, and the wages of all that were engaged with him in the business.

Quesnay called the transport trade as “economical trade” which does not provide for the nation’s wants. Instead, it merely serves the convenience of two foreign nations.

The carrying nation acquires from it no other profit than wages, and cannot grow rich except by the saving which economy enables it to make on them.

Quesnay considers manufactures as an exchange, just the same as commerce. But instead of having in view two present values, their primitive contract is an exchange of the present against the future.

The merchandise produced by the labour of the artisan is but the equivalent of his accumulated wages. During his labour, he had consumed the fruits of the earth, and the work produced by him is nothing but their value.

Agricultural labour to Quesnay is in the same condition as the merchant and the artisan. Like the latter, he makes with the earth an exchange of the present against the future. The crops produced by him represent the accumulated value of his labour; they pay his hire, to which he has the same right as the artisan to his wages, or the merchant to his profit. But when this hire has been deducted, there remains a net revenue, which was not be found in manufactures and commerce; it is what the labourer pays the proprietor for the use of his land.

Quesnay thinks that this revenue is of a nature quite different from any other.

It is not wages; it is not the result of an exchange; it is the price of the earth’s spontaneous labour, the fruit of nature’s beneficence; and since it does not represent pre-existent wealth, it alone must be the source of every kind of wealth.

Tracing the value of all other commodities, under all its transformations, Quesnay still discovers its first origin in the fruits of the earth. The labours of the husbandman, of the artisan, of the merchant, consume those fruits in the shape of wages and produce them under new forms.

The proprietor alone receives them at their source from the hands of nature herself, and by means of them is enabled to pay the wages of all his countrymen, who labour only for him.

This ingenious system totally supplanted the mercantile system. The economists denied the existence of that commercial balance to which their antagonists attached so much importance. They asserted the impossibility of that accumulation of gold and silver which the others expected from it.

Throughout the nation, they could see only proprietors of land, the sole dispensers of the national fortune; productive workmen, or labourers producing the revenue of the former. and a hired class, in which they ranked merchants also denying to them, as to the artisans, the faculty of producing any thing.

The mercantilists wished authority to interfere in everything.

The economists incessantly repeated laissez faire et laissez passer (let every man do as he pleases, and every thing take its course). This is because the public interest consists in the union of all individual interests. Individual interest will guide each man more surely to the public interest than any government can do.

The system of the economists excited an excessive ferment in France. Their government allowed the people to talk about public affairs, but not to understand them.

The discussion, of Quesnay’s theory was sufficiently unshackled; but none of the facts or documents in the hands of the administration, were presented to the public eye.

In the system of the French economists, it is easy to discern the effects produced by this mixture of ingenious theory and involuntary ignorance. It seduced the people, because they were now for the first time occupied with their own public affairs.

But, during these discussions, a free nation, possessed of the right to examine its own public affairs, was producing a system not less ingenious, and much better supported by fact and observation; a system which, after a short struggle, at length cast its predecessors into the shade; for truth always triumphs in the end, over dreams, however brilliant.

Adam Smith was author of this third system which represents labour as the sole origin of wealth, and economy as the sole means of accumulating it. He carried the science of political economy to perfection in one step.