A history of economic doctrines

To pass a criticism on the labours of Adam Smith would be to review the economic doctrines of the nineteenth century. That is the best eulogy one can bestow upon his work. The economic ideas of a whole century were, so to speak, in solution in his writings. Friends and foes have alike taken him as their starting-point. The former have developed, extended, and corrected his work. The latter have subjected his principal theories to harsh criticism at every point. All with tacit accord admit that political economy commenced with him. As Garnier, his French translator, put it, “he wrought a complete revolution in the science.”[245] To-day, even although the Wealth of Nations may no longer appear to us as a truly scientific treatise on political economy, certain of its fundamental ideas remain incontestable. The theory of money, the importance of division of labour, the fundamental character of spontaneous economic institutions, the constant operation of personal interest in economic life, liberty as the basis of rational political economy—all these appear to us as definite acquisitions to the science.

The imperfections of the work will be naturally demonstrated in the chapters which follow. In order to complete our exposition of Smith’s doctrines it only remains to show how they were diffused.

The rapid spread of his ideas throughout Europe and their incontestable supremacy remains one of the most curious phenomena in the history of ideas. Smith persuaded his own generation and governed the next.[246] History affords us some clue. To attribute it solely to the influence of his book is sheer exaggeration. A great deal must be set to the credit of circumstances more or less fortuitous.

M. Mantoux remarks with much justice that “it was the American War rather than Smith’s writings which demonstrated the decay of the ancient political economy and compassed its ruin. The War of Independence proved two things: (1) The danger lurking in a colonial system which could goad the most prosperous colonies to revolt; (2) the uselessness of a protective tariff, for on the very morrow of the war English trade with the American colonies was more flourishing than ever before. “The loss of the American colonies to England was really a gain to her.” So wrote Say in 1803, and he adds: “This is a fact that I have nowhere seen disputed.”[247] To the American War other causes must be added: (1) The urgent need for markets felt by English merchants at the close of the Napoleonic wars; they were already abundantly supplied with excellent machinery. (2) Coupled with this was a growing belief that a high price of corn as the result of agricultural protection increased the cost of hand labour. These two reasons were enough to create a desire for a general lowering of the customs duties.

Subsequent events have justified Smith’s attitude on the question of foreign trade. In the matter of domestic trade he has been less fortunate.

The French Revolution, which owed its economic measures to the Physiocrats, gave a powerful impulse to the principle of liberty. The influence of the movement was patent enough on the Continent. Even in England, where this influence was least felt; everybody was in favour of laissez-faire. Pitt became anxious to free Ireland from its antiquated system of prohibitions, and he succeeded in doing this by his Act of Union of 1800. The regulations laid down by the Elizabethan Statute of Apprentices, with its limitation of the hours of work and the fixing of wages by justices of the peace, became more and more irksome as industry developed. Every historian of the Industrial Revolution has described the struggle between workers and masters and shown how the former clung in despair to the old legislative measures as their only safeguard against a too rapid change, while the latter refused to be constrained either in the choice of workmen or the methods of their work.[248] They wished to pay only the wages that suited them and to use their machines as long as possible. These repeated attacks rendered the old Statute of Apprentices useless, and Parliament abolished its regulations one after another, so that by 1814 all traces of it were for ever effaced from the Statute Book.

But Smith did not foresee these things. He did not write with a view to pleasing either merchants or manufacturers. On the contrary, he was never weary of denouncing their monopolistic tendencies. But by the force of circumstances manufacturers and merchants became his best allies. His book supplied them with arguments, and it was his authority that they always invoked.

His authority never ceased growing. As soon as the Wealth of Nations appeared, men like Hume, and Gibbon, the historian, expressed to Smith or to his friends their admiration of the new work. In the following year the Prime Minister, Lord North, borrowed from him the idea of levying two new taxes—the tax on malt and the tax on inhabited houses. Smith was yet to make an even more illustrious convert in the person of Pitt. Pitt was a student when the Wealth of Nations appeared, but he always declared himself a disciple of Smith, and as soon as he became a Minister he strove to realise his ideas. It was he who signed the first Free Trade treaty with France—the Treaty of Eden, 1786.[249] When Smith came to London in 1787, Pitt met him more than once and consulted him on financial matters. The story is told that after one of these conversations Smith exclaimed: “What an extraordinary person Pitt is! He understands my ideas better than myself.”

While Smith made converts of the most prominent men of his time, his book gradually reached the public. Four editions in addition to the first appeared during the author’s lifetime.[250] The third, in 1784, presents important differences in the way of additions and corrections as compared with the first. From the date of his death in 1790 to the end of the century three other editions were published.[251]

Similar success attended the appearance of the work on the Continent. In France he was already known through his Theory of Moral Sentiments. The first mention of the Wealth of Nations in France appears in the Journal des Savants in the month of February, 1777. Here, after a brief description of the merits of the work, the critic gives expression to the following curious opinion: “Some of our men of letters who have read it have come to the conclusion that it is not a book that can be translated into our language. They point out, among other reasons, that no one would be willing to bear the expense of publishing because of the uncertain return, and a book-seller least of all. They are bound to admit, however, that the work is full of suggestions and of advice that is useful as well as curious, and might prove of benefit to statesmen.” In reality, despite the opinion of those men of letters, several translations of the work did appear in France, as well as elsewhere in Europe. In little more than twenty years, between 1779 and 1802, four translations had appeared. This in itself affords sufficient proof of the interest which the book had aroused.[252]

Few works have enjoyed such complete and universal success. But despite admiration the ideas did not spread very rapidly. Faults of composition have been burdened with the responsibility for this, and it is a reproach that has clung to the Wealth of Nations from the first. Its organic unity is very pronounced, but Smith does not seem to have taken the trouble to give it even the semblance of outward unity. To discover its unity requires a real effort of thought. Smith whimsically regarded it as a mere discourse, and the reading occasionally gives the impression of conversation. The general formulæ which summarise or recapitulate his ideas are indifferently found either in the middle or at the end of a chapter, just as they arose. They represent the conclusions from what preceded as they flashed across his mind. On the other hand, a consideration of such a question as money is scattered throughout the whole work, being discussed on no less than ten different occasions. As early as April 1, 1776, Hume had expressed to Smith some doubts as to the popularity of the book, seeing that its reading demanded considerable attention. Sartorius in 1794 attributed to this difficulty the slow progress made by Smith’s ideas in Germany. Germain Garnier, the French translator, gave an outline of the book in order to assist his readers. It was generally agreed that the work was a striking one, but badly composed and difficult to penetrate owing to the confused and equivocal character of some of the paragraphs. When Say referred to it as “a chaotic collection of just ideas thrown indiscriminately among a number of positive truths,”[253] he expressed the opinion of all who had read it.

But a complete triumph, so far as the Continent at least was concerned, had to be the work of an interpreter. Such an interpreter must fuse all these ideas into a coherent body of doctrines, leaving useless digressions aside.[254] This was the task that fell into the hands of J. B. Say. Among his merits (and it is not the only one) is that of popularising the ideas of the great Scotch economist on the Continent, and of giving to the ideas a somewhat classical appearance. The task of discrediting the first French school of economists and of facilitating the expansion of English political economy fell, curiously enough, to the hands of a Frenchman.

J. B. Say was twenty-three years of age in 1789.[255] At that time he was Clavières’ secretary. Clavières became Minister of Finance in 1792, but at this period he was manager of an assurance company, and was already a disciple of Smith. Say came across some stray pages of the Wealth of Nations, and sent for a copy of the book.[256] The impression it made upon him was profound. “When we read this work,” he writes, “we feel that previous to Smith there was no such thing as political economy.” Fourteen years afterwards, in 1803, appeared Le Traité d’Économie politique. The book met with immediate success, and a second edition would have appeared had not the First Consul interdicted it. Say had refused to support the Consul’s financial recommendations, and the writer, in addition to having his book proscribed, found himself banished from the Tribunate. Say waited until 1814 before republishing it. New editions rapidly followed, in 1817, 1819, and 1826. The treatise was translated into several languages. Say’s authority gradually extended itself; his reputation became European; and by these means the ideas of Adam Smith, clarified and logically arranged in the form of general principles from which conclusions could be easily deduced, gradually captivated the more enlightened section of public opinion.

It would, however, be unjust to regard Say as a mere populariser of Smith’s ideas. With praiseworthy modesty, he has never attempted to conceal all that he owed to the master. The master’s name is mentioned in almost every line, but he never remains content with a mere repetition of his ideas. These are carefully reconsidered and reviewed with discrimination. He develops some of them and emphasises others. Amid the devious paths pursued by Smith, the French economist chooses that which most directly leads to the desired end. This path is so clearly outlined for his successors that “wayfaring men, though fools, could not err therein.” In a sense he may be said to have filtered the ideas of the master, or to have toned his doctrines with the proper tints. He thus imparted to French political economy its distinctive character as distinguished from English political economy, to which at about the same time Malthus and Ricardo were to give an entirely new orientation. What interests us more than his borrowing is the personal share which he has in the work, an estimate of which we must now attempt.

(1) In the first place, Say succeeded in overthrowing the work of the Physiocrats.

The work of demolition was not altogether useless. In France there were many who still clung to the “sect.” Even Germain Garnier, Smith’s translator, considered the arguments of the Physiocrats theoretically irrefutable. The superiority of the Scotch economist was entirely in the realm of practice.[257] “We may,” says he, “reject the Economistes’ theory [meaning the Physiocrats’] because it is less useful, although it is not altogether erroneous.” Smith himself, as we know, was never quite rid of this idea, for he recognised a special productiveness of land as a result of the co-operation of nature, and doctors, judges, advocates, and artists were regarded as unproductive. But Say’s admission was the last straw. Not in agriculture alone, but everywhere, “nature is forced to work along with man,”[258] and by the funds of nature was to be understood in future all the help that a nation draws directly from nature, be it the force of wind or rush of water.[259] As to the doctors, lawyers, etc., how are we to prove that they take no part in production? Garnier had already protested against their exclusion. Such services must no doubt be classed as immaterial products, but products none the less, seeing that they possess exchange value and are the outcome[260] of the co-operation of capital and industry. In other respects also—e.g., in the pleasure and utility which they yield—services are not very unlike commodities. Say’s doctrine meets with some opposition on this point, for the English economists were unwilling to consider a simple service as wealth because of its unendurable character, and the consequent fact that it could not be considered as adding to the aggregate amount of capital. But he soon wins over the majority of writers.[261] Finally Say, like Condillac, discovered a decisive argument against Physiocracy in the fact that the production of material objects does not imply their creation. Man never can create, but must be content with mere transformation of matter. Production is merely a creation of utilities, a furthering of that capacity of responding to our needs and of satisfying our wants which is possessed by commodities; and all work is productive which achieves this result, whether it be industry, commerce, or agriculture.[262] The Physiocratic distinction falls to the ground, and Say refutes what Smith, owing to his intimacy with his adversaries, had failed to disprove.

(2) On another point Say carries forward Smith’s ideas, although at the same time superseding them. He subjects the whole conception of political economy and the rôle of the economist to a most thorough examination.

We have already noticed that the conception of the “natural order” underwent considerable modification during the period which intervened between the writings of the Physiocrats and the appearance of the Wealth of Nations. The Physiocrats regarded the “order” as one that was to be realised, and the science of political economy as essentially normative. For Smith it was a self-realising order. This spontaneity of the economic world is analogous to the vitality of the human body, and is capable of triumphing over the artificial barriers which Governments may erect against its progress. Practical political economy is based upon a knowledge of the economic constitution of society, and its sole aim is to give advice to statesmen. According to Say, this definition concedes too much to practice. Political economy, as he thinks, is just the science of this “spontaneous economic constitution,” or, as he puts it in 1814, it is a study of the laws which govern wealth.[263] It is, as the title of his book suggests, simply an exposition of the production, distribution, and consumption of wealth. It must be distinguished from politics, with which it has been too frequently confused, and also from statistics, which is a simple description of particular facts and not a science of co-ordinate principles at all.

Political economy in Say’s hands became a purely theoretical and descriptive science. The rôle of the economist, like that of the savant, is not to give advice, but simply to observe, to analyse, and to describe. “He must be content to remain an impartial spectator,” he writes to Malthus in 1820. “What we owe to the public is to tell them how and why such and such a fact is the consequence of another. Whether the conclusion be welcomed or rejected, it is enough that the economist should have demonstrated its cause; but he must give no advice.”[264]

In this way Say broke with the long tradition which, stretching from the days of the Canonists and the Cameralists to those of the Mercantilists and the Physiocrats, had treated political economy as a practical art and a guide for statesmen and administrators. Smith had already tried to approach economic phenomena as a scientist, but there was always something of the reformer in his attitude. Say’s only desire was to be a mere student; the healing art had no attraction for him, and so he inaugurates the true scientific method. He, moreover, instituted a comparison between this science and physics rather than between it and natural history, and in this respect also he differed from Smith, for whom the social body was essentially a living thing. Without actually employing the term “social physics,” he continually suggests it by his repeated comparison with Newtonian physics. The principles of the science, like the laws of physics, are not the work of men. They are derived from the very nature of things. They are not established; they are discovered. They govern even legislators and princes, and one never violates them with impunity.[265] Like the laws of gravity, they are not confined within the frontiers of any one country, and the limits of State administration, which are all-important for the student of politics, are mere accidents for the economist.[266] Political economy is accordingly based on the model of an exact science, with laws that are universal. Like physics, it is not so much concerned with the accumulation of particular facts as with the formulation of a few general principles from which a chain of consequences of greater or smaller length may be drawn according to circumstances.

A delight in uniformity,[267] love of universality, and contempt for isolated facts, these are the marks of the savant. But the same qualities in men of less breadth of view may easily become deformed and result in faults of indifference or of dogmatism, or even contempt for all facts. And are these very faults not produced by the stress which he lays upon these principles? Was not political economy placed in a vulnerable position for the attacks of Sismondi, of List, of the Historical school, and of the Christian Socialists by this very work of Say? In his radical separation of politics and economics, in avoiding the “practical” leanings of Adam Smith, he has succeeded in giving the science a greater degree of harmony. But it also acquired a certain frigidity which his less gifted successors have mistaken for banality or crudity. Rightly or wrongly, the responsibility is ascribed to Say.

(3) We have just seen the influence which the progress of the physical sciences had upon Say’s conception of political economy; but he was also much influenced by the progress of industry. Between 1776, the date of the appearance of the Wealth of Nations, and the year 1803, when Say’s treatise appeared, the Industrial Revolution had taken place. This is a fact of considerable importance for the history of economic ideas.

When Say visited England a little before 1789, he found machine production already in full swing there. In France at the same date manufactures were only just beginning. They increased rapidly under the Empire, and the progress after 1815 became enormous. Chaptal in his work De l’Industrie française reckons that in 1819 there were 220 factories in existence, with 922,200 spindles consuming 13 million kilograms of raw cotton. This, however, only represented a fifth of the English production, which twenty years later was quadrupled. Other industries were developing in a similar way. Everybody was convinced that the future must be along those lines—an indefinite future it is true, but it was to be one of wealth, work, and well-being. The rising generation was intoxicated at the prospect. The most eloquent exposition of this debauchery will be found in Saint-Simonism.

Say did not escape the infection. While Smith gives agriculture the premier place, Say accords the laurels to manufactures. For many years industrial problems had been predominant in political economy, and the first official course of lectures given by Say himself at the Conservatoire des Arts et Métiers was entitled “A Course of Lectures on Industrial Economy.”

In that hierarchy of activities which Smith had drawn up according to the varying degree of utility each possessed for the nation, Smith had placed agriculture first. Say preserved the order, but placed alongside of agriculture “all capital employed in utilising any of the productive forces of nature. An ingenious machine may produce more than the equivalent of the interest on the capital it has cost to produce, and society enjoys the benefit in lower prices.”[268] This sentence is not found in the edition of 1803, and appears only in the second edition. Say in the meantime had been managing his factory at Auchy-les-Hesdins, and he had profited by his experience. This question of machinery, which was merely touched on by Smith in a short passage, finds a larger place in every successive edition of Say’s work. The general adoption of machinery by manufacturers both in England and France frequently incited the workers to riot. Say does not fail to demonstrate its advantages. At first he admits that the Government might mitigate the resulting evils by confining the employment of machinery at the outset to certain districts where labour is scarce or is employed in other branches of production.[269] But by the beginning of the fifth edition he changed his advice and declared that such intervention involved interference with the inventor’s property,[270] admitting only that the Government might set up works of public utility in order to employ those men who are thrown out of employment on account of the introduction of machinery.

The influence of these same circumstances must be accounted responsible for the stress which is laid by Say upon the rôle of an individual whom Smith had not even defined, but one who is henceforth to remain an important personage in the economic world, namely, the entrepreneur. At the beginning of the nineteenth century the principal agent of economic progress was the industrious, active, well-informed individual, either an ingenious inventor, a progressive agriculturist, or an experienced business man. This type became quite common in every country where mechanical production and increasing markets became the rule. It is he rather than the capitalist properly so called, the landed proprietor, or the workman, who is “almost always passive,” who directs production and superintends the distribution of wealth. “The power of industrial entrepreneurs exercises a most notable influence upon the distribution of wealth,” says Say. “In the same kind of industry one entrepreneur who is judicious, active, methodical, and willing makes his fortune, while another who is devoid of these qualities or who meets with very different circumstances would be ruined.”[271] Is it not the master spinner of Auchy-les-Hesdins who is speaking here? We are easily convinced of this if we compare the edition of 1803 with that of 1814, and we can trace the gradual growth and development of this conception with every successive edition of the work.

Say’s classic exposition of the mechanism of distribution is based upon this very admirable conception, which is altogether superior to that of Smith or the Physiocrats. The entrepreneur serves as the pivot of the whole system. The following may be regarded as an outline of his treatment.

Men, capital, and labour furnish what Say refers to as productive services. These services, when brought to market, are given in exchange for wages, interest, or rent. It is the entrepreneur, whether merchant, manufacturer, or agriculturist, who requires them, and it is he who combines them with a view to satisfying the demand of consumers. “The entrepreneurs, accordingly, are mere intermediaries who set up a claim for those productive services which are necessary to satisfy the demand for certain products.” Accordingly there arises a demand for productive services, and the demand is “one of the factors determining the value of those services.” “On the other hand, the agents of production, both men and things, whether land, capital, or industrial employees, offer their services in greater or less quantities according to various motives, and thus constitute another factor which determines the value of these same services.”[272] In this fashion the law of demand and supply determines the price of services, the average rate of interest, and rent. Thanks to the entrepreneur, the value produced is again distributed among these “various productive services,” and the various services allotted according to need among the industries. This theory of distribution is in complete accordance with the theory of exchange and production.

Say’s very simple scheme of distribution constitutes a real progress. In the first place, it is much more exact than the Physiocrats’, who conceived of exchange as taking place between classes only, and not between individuals. It also enables us to distinguish the remuneration of the capitalist from the earnings of the entrepreneur, which were confounded by Adam Smith. The Scotch economist assumed that the entrepreneur was very frequently a capitalist, and confused the two functions, designating his total remuneration by the single word “profit,” without ever distinguishing between net interest of capital and profit properly so called. This regrettable confusion was followed by other English authors, and remained in English economic theory for a long time. Finally, Say’s theory has another advantage. It gave to his French successors a clear scheme of distribution which was wanting in Smith’s work, just at the time when Ricardo was attempting to overcome the omission by outlining a new theory of distribution. According to Ricardo, rent, by its very nature and the laws which give rise to it, is opposed to other revenues, and the rate of wages and of profits must be regarded as direct opposites, so that the one can only increase if the other diminishes—an attractive but erroneous theory, and one which led to endless discussion among English economists, with the result that they abandoned it altogether. Say, by showing this dependence, which becomes quite clear if we regard wages and profits from the point of view of demand for commodities, and by his demonstration that rent is determined by the same general causes—viz. demand and supply—as determine the exchange value of other productive services, saved political economy in France from a similar disaster. It was he, also, who furnished Walras with the first outlines of his attractive conception of prices and economic equilibrium. This explains why he never attached to the theory of rent the supreme importance given to it by English economists. In this respect he has been followed by the majority of French economists. On the other hand, and for a similar reason, he never went to the opposite extreme of denying the existence of rent altogether by regarding it merely as the revenue yielded by capital sunk in land. In this way he avoided the error which Carey and Bastiat attempted to defend at a later period.[273]

(4) So far it is Say’s brilliant power of logical reasoning that we have admired. But has he contributed anything which is entirely new to the science?

His theory of markets was for a long time considered first-class work. “Products are given in exchange for products.” It is a happy phrase, but it is not in truth very profound. It simply gives expression to an idea that was quite familiar to the Physiocrats and to Smith, namely, that money is but an intermediary which is acquired only to be passed on and exchanged for another product. “Once the exchange has been effected it is immediately discovered that products pay for products.”[274] Thus goods constitute a demand for other goods, and the interest of a country that produces much is that other countries should produce at least as much. Say thought that the outcome of this would be the advent of the true brotherhood of man. “The theory of markets will change the whole policy of the world,” said he.[275] He thought that the greater part of the doctrine of Free Trade could be based upon this principle. But to expect so much from such a vague, self-evident formula was to hope for the impossible.

Still more interesting is the way in which he applied this “theory of markets” to a study of over-production crises, and the light which that sheds upon the nature of Say’s thought. Garnier had already pointed out that a general congestion of markets was possible. As crises multiplied this fear began to agitate the minds of a number of thinkers. “Nothing can be more illogical,” writes Say. “The total supply of products and the total demand for them must of necessity be equal, for the total demand is nothing but the whole mass of commodities which have been produced: a general congestion would consequently be an absurdity.”[276] It would simply mean a general increase of wealth, and “wealth is none too plentiful among nations, any more than it is among individuals.”[277] We may have an inefficient application of the means of production, resulting in the over-production of some one commodity or other—i.e. we may have partial over-production.[278] Say wishes to emphasise the fact that we need never fear general over-production, but that we may have too much of some one product or other. He frequently gave expression to this idea in the form of paradoxes. We might almost be led to believe that he denies the existence of crises altogether in the second edition of his work.[279] In reality he was very anxious to admit their existence, but he wished to avoid everything that might prove unfavourable to an extension of industry.[280]

He thought that crises were essentially transient, and declared that individual liberty would be quite enough to prevent them. He was extremely anxious to get rid of the vague terrors which had haunted those people who feared that they would not be able to consume all this wealth, of a Malthus who thought the existence of the idle rich afforded a kind of safety-valve which prevented over-production,[281] of a Sismondi who prayed for a slackening of the pace of industrial progress and a checking of inventions. Such thoughts arouse his indignation, especially, as he remarks, when it is remembered that even among the most flourishing nations “seven-eighths of the population are without a great number of products which would be regarded as absolute necessities, not by a wealthy family, but even by one of moderate means.”[282] The inconvenience—and he is never tired of repeating it—is not the result of over-production, but is the effect of producing what is not exactly wanted.[283] Produce, produce all that you can, and in the natural course of events a lowering of prices will benefit even those who at first suffered from the extension of industry.

In this once famous controversy between Say, Malthus, Sismondi, and Ricardo (the latter sided with Say) we must not expect to find a clear exposition of the causes of crises. Indeed, that is nowhere to be found. All we have here is the expression of a sentiment which is at bottom perfectly just, but one which Say wrongly attempted to state in a scientific formula.

J. B. Say plays a by no means negligible part in the history of doctrines. Foreign economists have not always recognised him. Dühring, who is usually perspicacious, is very unjust to him when he speaks of “the labour of dilution” to which Say devoted his energies.[284] His want of insight frequently caused him to glide over problems instead of attempting to fathom them, and his treatment of political economy occasionally appears very superficial. Certain difficulties are veiled with pure verbiage—a characteristic in which he is very frequently imitated by Bastiat. Despite Say’s greater lucidity, it is doubtful whether Smith’s obscurity of style is not, after all, more stimulating for the mind. Notwithstanding all this, he was faithful in his transmission of the ideas of the great Scotch economist into French. Happily his knowledge of Turgot and Condillac enabled him to rectify some of the more contestable opinions of his master, and in this way he avoided many of the errors of his successors. He has left his mark upon French political economy, and had the English economists adopted his conception of the entrepreneur earlier, instead of waiting until the appearance of Jevons, they would have spared the science many useless discussions provoked by the work of a thinker who was certainly more profound but much less judicious than Say, namely, David Ricardo.[285]

CHAPTER III: THE PESSIMISTS

A new point of view is presented to us by the economists of whom we are now going to speak. Hitherto we have heard with admiration of the discovery of new facts and of their beneficent effects both upon nations and individuals. We are now to witness the enunciation of new doctrines which cast a deepening shadow across the radiant dawn of economics, giving it that strangely sinister aspect which led Carlyle to dub it “the dismal science.”

Hence the term “Pessimists,” although no reproach is implied in our use of that term. On the contrary, we shall have to show that the theories of the school are often truer than those of the Optimists, which we must study at a later stage of our survey. While nominally subscribing to their predecessors’ doctrine concerning the identity of individual and general interests, the many cogent reasons which they have adduced against such belief warrants our classification. The antagonism existing between proprietors and capitalists, between capitalists and workmen, is a discovery of theirs. Instead of the “natural” or “providential” laws that were to secure the establishment of the “order” provided they were once thoroughly understood and obeyed, they discovered the existence of other laws, such as that of rent, which guaranteed a revenue for a minority of idle proprietors—a revenue that was destined to grow as the direct result of the people’s growing need; or the “law of diminishing returns,” which sets a definite limit to the production of the necessaries of life. That limit, they asserted, was already being approached, and mankind had no prospect of bettering its lot save by the voluntary limitation of its numbers. There was also the tendency of profits to fall to a minimum—until it seemed as if the whole of human industry would sooner or later be swallowed up by the stagnant waters of the stationary State.

Lastly, they deserve to be classed as pessimists because of their utter disbelief in the possibility of changing the course of these inevitable laws either by legislative reform or by organised voluntary effort. In short, they had no faith in what we call progress.

But we must never imagine that they considered themselves pessimists or were classed as such by their contemporaries. This verdict is posterity’s, and would have caused them no little surprise. As for themselves, they seem to stand aloof from their systems with an insouciance that is most disconcerting. The “present order of things” possessed no disquieting features for them, and they never doubted the wisdom of “Nature’s Lord.” They believed that property had been put upon an immovable basis when they demonstrated the extent of its denotation, and that the spirit of revolt had been disarmed by impressing upon the poor a sense of responsibility for their own miseries.[286]

The best known representatives of the school are Malthus and Ricardo. They claimed to be philanthropists and friends of the people, and we have no reason to suspect their sincerity.[287] Their contemporaries, also, far from being alarmed, received the new political economy with the greatest enthusiasm. A warm welcome was extended to its apostles by the best of English society,[288] and ladies of distinction contended with one another for the privilege of popularising the abstract thoughts of Ricardo in newspaper articles and popular tales.[289]

Neither should we omit to pay them full homage for the eminent services rendered to the science, and among these not the least important was the antagonism which their theories aroused in the minds of the working classes. Pessimists unwittingly often do more for progress than optimists. To these two writers fell the task of criticising economic doctrines and institutions, a task that has been taken up by other writers in the course of the century, but which seems as far from completion as ever. Karl Marx, another critic, is intellectually a scion of the Ricardian family. It would be a mistake to imagine that all their theories savour of pessimism, but their reputation has always been more or less closely linked with the gloomier aspect of their teaching.

I: MALTHUS[290]

Malthus is best known for his “law of population.” That he was a great economist, even apart from his study of that question, might easily be proved by reference to his treatise on political economy, or by a perusal of the many miscellaneous articles which he wrote on various economic questions. A consideration of many of these theories, notably the theory of rent, must be postponed until we come to study them in connection with the name of Ricardo.

The Law of Population

Twenty years had elapsed since the publication of Smith’s immortal work, without economics making any advance, when the appearance of a small anonymous volume, known to be the work of a country clergyman, caused a great sensation. Even after the lapse of a century the echo of the controversy which it aroused has not altogether passed away. At first sight one might be led to think that the book touches only the fringe of economics, seeing that it is chiefly a statistical study of population, or demography, as the science is called to-day. But this new science, of which Malthus must be regarded as the founder, was separated from the main trunk of economics at a much later date. Furthermore, we shall find that the influence of his book upon all economic theories, both of production and distribution, was enormous. The essay might even be considered a reply to that of Adam Smith. The same title with slight modification would have served well enough, and James Bonar wittily remarks that Malthus might have headed it An Essay on the Causes of the Poverty of Nations.

The attempt to explain the persistence of certain economic phenomena by connecting them with the presence of a new factor, biological in its character and differing in its origin both from personal interest and the mere desire for profit, considerably expanded the economic horizon and announced the advent of sociology. We know that Darwin himself acknowledged his indebtedness to the work of Malthus for the first suggestion of what eventually became the most celebrated scientific doctrine of the nineteenth century, namely, the conception of the struggle for existence and the survival of the fittest as one of the mainsprings of progress.

There is no necessity for thinking that the dangers which might result from an indefinite growth of population had not engaged the attention of previous writers. In France Buffon and Montesquieu had already shown some concern in the matter. But a numerous population was usually regarded as advantageous, and fear of excess was never entertained inasmuch as it was believed that the number of people would always be limited by the available means of subsistence.[291] This was the view of the Physiocrat Mirabeau, stated in his own characteristic fashion in his book L’Ami des Hommes, which has for its sub-title Traité de la Population. Such a natural fact as the growth of population could possess no terrors for the advocates of the “natural order.” But in the writings of Godwin this “natural” optimism assumed extravagant proportions. His book on Political Justice appeared in 1793 and greatly impressed the public. Godwin, it has been well said, was the first anarchist who was also a doctrinaire. At any rate he seems to have been the first to employ that famous phrase, “Government even in its best state is an evil.” His illimitable confidence in the future of society and the progress of science, which he thought would result in such a multiplicity of products that half a day’s work would be sufficient to satisfy every need, and his belief in the efficacy of reason as a force which would restrain personal interest and check the desire for profit, really entitles him to be considered a pioneer. But life having become so pleasant, was there no possibility that men might then multiply beyond the available means of subsistence? Godwin was ignorant of the terrible intricacies of the problem he had thus raised, and he experienced no difficulty in replying that such a result, if it ever came to pass, must take several centuries, for reason may prove as powerful in controlling the sexual instinct as in restraining the desire for profit. Godwin even goes so far as to outline a social State in which reason shall so dominate sense that reproduction will cease altogether and man will become immortal.[292]

Almost at the same time there appeared in France a volume closely resembling Godwin’s, entitled Esquisse d’un Tableau historique des Progrès de l’Esprit humain, written by Condorcet (1794). It displays the same confidence in the possibility of achieving happiness through the all-powerful instrumentality of science, which, if not destined actually to overcome death, was at least going to postpone it indefinitely.[293] This optimistic book, written by a man who was about to poison himself in order to escape the guillotine, cannot leave us quite unmoved. But, death abolished, Condorcet finds that he has to face the old question propounded to Godwin: “Can the earth always be relied upon to supply sufficient means of subsistence?” To this question he gives the same answer: either science will be able to increase the means of subsistence or reason will prevent an inordinate growth of population.

It was inevitable, in accordance with the law of rhythm which characterises the movements of thought no less than the forces of nature, that such hasty optimism should provoke a reaction. It was not long in coming, and in Malthus’s essay we have it developed in fullest detail.

To the statement that there are no limits to the progress of mankind either in wealth or happiness, and that the fear of over-population is illusory, or at any rate so far removed that it need cause no apprehension, Malthus replied that, on the contrary, we have in population an almost insurmountable obstacle, not merely looming in the distant future, but pressing and insistent[294]—the stone of Sisyphus destined to be the cause of humanity’s ceaseless toil and final overthrow. Nature has planted an instinct in man which, left to itself, must result in starvation and death, or vice. This is the one fact that affords a clue to men’s suffering and a key to the history of nations and their untold woes.

Everyone, however little acquainted with sociological study, knows something of the memorable formula by which Malthus endeavoured to show the contrast between the frightful rapidity with which population grows when it is allowed to take its own course and the relative slowness in the growth of the means of subsistence. The first is represented by a geometrical series where each successive number is a multiple of the previous one. The second series increases in arithmetical progression, that is, by simple addition, the illustration being simply a series of whole numbers:

Every term corresponds to a period of twenty-five years, and a glance at the figures will show us that population is supposed to double every twenty-five years, while the means of subsistence merely increases by an equal amount during each of these periods. Thus the divergence between the two series grows with astonishing rapidity. In the table given above, containing only nine terms, the population figure has already grown to twenty-seven times the means of subsistence in a period of 225 years. Had the series been extended up to the hundredth term a numerical representation of the divergence would have required some ingenuity.

The first progression may be taken as correct, representing as it does the biological law of generation. The terms “generation” and “multiplication” are not used as synonyms without some purpose. It is true that doubling supposes four persons to arrive at the marriageable age, and this means five or six births if we are to allow for the inevitable wastage from infant mortality. This figure appears somewhat high to those who live in a society where limitation of the birth-rate is fairly usual. But it is certain that among living beings in general, including humankind, who are least prolific, the number of births where no restraint of any kind exists is really much higher. Women have been known to give birth to twenty or even more children. And there are no signs of diminishing capacity among the sexes, for population is still growing. In taking two as his coefficient Malthus has certainly not overstepped the mark.[295]

The period of twenty-five years as the interval between the two terms is more open to criticism.[296] The practice of reckoning three generations to a century implies that an interval of about thirty-three years must elapse between one generation and another.

But these are unimportant details. It is immaterial whether we lengthen the interval between the two terms from twenty-five to thirty-three years, or reduce the ratio from 2 to 1½, or even to something between 1¼ and 1¹/₁₀. The movement will be a little slower, but it is enough that its geometrical character should be admitted, for however slow it moves at first it will grow by leaps and bounds until it surpasses all limits. These corrections fail to touch the real force of Malthus’s reasoning concerning the law of reproduction.

The series representing the growth of the means of subsistence is also open to criticism. It is evidently of a more arbitrary character, and we cannot say whether it is simply supposed to represent a possible contingency like the first, or whether it pretends to represent reality. At least it does not correspond to any known and certain law, such as the law of reproduction. As a matter of fact it rather seems to give it the lie; for, in short, what is meant by means of subsistence unless we are to understand the animal and vegetable species that reproduce themselves according to the same laws as human beings, only at a much faster rate? The power of reproduction among plants, like corn or potatoes, or among animals, like fowls, herrings, cattle even, or sheep, far surpasses that of man. To this criticism Malthus might have replied as follows. This virtual power of reproduction possessed by these necessaries of life is in reality confined to very limited areas of the habitable globe. It is further restricted by the difficulty of obtaining the proper kind of nourishment, and by the struggle for existence. But if we admit exceptions in the one case why not also in the other? It certainly seems as if there were some inconsistency here. As a matter of fact we have two different theses. The one attempts to show how multiplication or reproduction need not of necessity be less rapid among plants or animals than it is among men. The other expresses what actually happens by showing that the obstacles to the indefinite multiplication of men are not less numerous than the difficulties in the way of an indefinite multiplication of vegetables or animals, or, in other words, that the former is a function of the latter.

In order to grasp the true significance of the second formula it must be translated from the domain of biology into the region of economics. Malthus evidently thought of it as the amount of corn yielded by a given quantity of land. The English economists could think of nothing except in terms of corn! What he wished to point out was that the utmost we can expect in this matter is that the increase in the amount of the harvest should be in arithmetical progression—say, an increase of two hectolitres every twenty-five years. This hypothesis is really rather too liberal. Lavoisier in 1789 calculated that the French crop yielded on an average about 7¾ hectolitres per hectare. During the last few years it has averaged about 16, and if we admit that the increment has been regular throughout the 120 years which have since elapsed we have an increase of 2 hectolitres per 25 years. This rate of increase has proved sufficient to meet the small increase which has taken place in the population of France. But would it have sufficed for a population growing as rapidly as that of England or Germany? Assuredly not, for these countries, despite their superior yields, are forced to import from outside a great proportion of the grain which they consume. The question arises whether France can continue indefinitely on the same basis during the course of the coming centuries. This is, indeed, unlikely, for there must be a physical limit to the earth’s capacity on account of the limited number of elements it contains. The economic limit will be reached still earlier because of the increasing cost of attempting to carry on production at these extreme limits. Thus it seems as if the law of diminishing returns, which we must study later, were the real basis of the Malthusian laws, although Malthus himself makes no express mention of it.

It is a truism that the number of people who can live in any place cannot exceed the number of people who can gain subsistence there. Any excessive population must, according to definition, die of hunger.[297] This is just what happens in the animal and vegetable kingdoms. Germs are extraordinarily prolific, but their undue multiplication is pitilessly retarded by a law which demands the death of a certain proportion, so that life, like a well-regulated reservoir, always remains at a mean level, the terrible gaps made by death being replenished by a new flow. Among savages, just as among animals, which they much resemble, a large proportion literally dies of hunger. Malthus devoted much attention to the study of primitive society, and he must be regarded as one of the pioneers of prehistoric sociology—a subject that has made much headway since then.

He proceeds to show how insufficient nourishment always brings a thousand evils in its train, not merely hunger and death, but also epidemics and such terrible practices as cannibalism, infanticide, and slaughter of the old, as well as war, which, even when not undertaken with a definite view to eating the conquered, always results in robbing them of their land and the food which it yielded. These are the “positive” or “repressive” checks.

But it may be replied that both among savages and animals the cause of this insufficiency of food is an incapacity for production rather than an excess of population.

Malthus has no difficulty in answering this objection by showing how savage customs prevailed among such civilised people as the Greeks. And even among the most modern nations the repressive checks, somewhat mitigated it is true, are never really absent. Famine in the sense of absolute starvation is seldom experienced nowadays, except in Russia and India, perhaps, but it is by no means a stranger even to the most advanced communities. Tuberculosis, which involves such terrible bodily suffering, is nothing but a deadly kind of famine. Lack of food is also responsible for the abnormally high rate of infant mortality and for the premature death of the adult worker. As for war, it still demands its toll. Malthus was living during the wars of the Revolution and the First Empire—bloody catastrophes that caused the death of about ten million men, all in the prime of life.

In civilized communities equilibrium is possible through humaner methods, in the substitution of the preventive check with its reduced birth-rate for the repressive check with its abnormal death-rate. Here is an expedient of which only the rational and the provident can avail themselves, an expedient open only to man. Knowing that his children are doomed to die—perhaps at an early age—he may abstain from having any. In reality this is the only efficacious way of checking the growth of population, for the positive check only excites new growth, just as the grass that is mown grows all the more rapidly afterwards. The history of war furnishes many a striking illustration of this. The year following the terrible war of 1870-71 remains unique in the demographic annals of France on account of the sudden upward trend of the declining curve of natality.

It was in the second edition of his book that Malthus expanded his treatment of the preventive checks, thus softening the somewhat harsher aspects of his first edition. It is very important that we should grasp his exact meaning. We therefore make no apology for frequently quoting his views on one point which is in itself very important, but upon which the ideas of the reverend pastor of Haileybury have been so often misrepresented.

The preventive check must be taken to imply moral restraint. But does this mean abstaining from sexual intercourse during the period of marriage after the birth, say, of three children, which may be taken as sufficient to keep the population stationary or moderately progressive? We cannot find that Malthus ever advocated such abstention. We have already seen that he considered six children a normal family, implying the doubling of the population every twenty-five years. Neither is it suggested that six should be the maximum, for he adds: “It may be said, perhaps, that even this degree of prudence might not always avail, as when a man marries he cannot tell what number of children he shall have, and many have more than six. This is certainly true.” (P. 536.)

But where does moral restraint come in? This is how he defines it: “Restraint from marriage which is not followed by irregular gratifications may properly be termed moral restraint” (p. 9); and to avoid any possible misunderstanding he adds a note: “By moral restraint I would be understood to mean a restraint from marriage from prudential motives with a conduct strictly moral during the period of this restraint, and I have never intentionally deviated from this sense.” All this is perfectly explicit. He means abstention from all sexual intercourse outside the bonds of marriage, and the postponement of marriage itself until such time as the man can take upon himself the responsibility of bringing up a family—and even the complete renunciation of marriage should the economic conditions never prove favourable.

Malthus unceremoniously rejected the methods advocated by those who to-day bear his name, and expressly condemned all who favoured the free exercise of sexual connection, whether within or without the marriage bond, through the practice of voluntary sterilization. All these preventive methods are grouped together as vices and their evil effects contrasted with the practice of moral restraint. Malthus is equally explicit on this point. “Indeed, I should always particularly reprobate any artificial and unnatural modes of checking population. The restraints which I have recommended are quite of a different character. They are not only pointed out by reason and sanctioned by religion, but tend in the most marked manner to stimulate industry.” (P. 572.) And he adds these significant words, so strangely prophetic so far as France is concerned: “It might be easy to fall into the opposite mistake and to check the growth of population altogether.”

It is quite needless to add that if Malthus thus made short work of conjugal frauds he all the more strongly condemned that other preventive method, namely, the institution of a special class of professional prostitutes.[298] He would similarly have condemned the practice of abortion, of which scarcely anything was heard in his day, but which now appears like a scourge, taking the place of infanticide and the other barbarous practices of antiquity. Criminal law seems powerless to suppress it, and it has already received the sanction of a new morality.

But apart from the question of immoral practices, did Malthus really believe that moral restraint as he conceived of it would constitute an effective check upon population?

He doubtless was anxious that it should be so, and he tried to rouse men to a holy crusade against this worst of all social evils. “To the Christian I would say that the Scriptures most clearly and precisely point it out to us as our duty to restrain our passions within the bounds of reason.… The Christian cannot consider the difficulty of moral restraint as any argument against its being his duty.” (P. 452.) And to those who wish to follow the dictates of reason rather than the observances of religion he remarks: “This virtue [chastity] appears to be absolutely necessary in order to avoid certain evils which would otherwise result from the general laws of nature.” (P. 452.)[299]

At bottom he was never quite certain as to the efficacy of moral restraint. The threatening hydra always peered over the fragile shield of pure crystal with which he had hoped to do battle.[300] He also felt that celibacy might not merely be ineffective, but would actually prove dangerous by provoking the vices it was intended to check. Its prolongation, or worse still its perpetuation, could never be favourable to good morals.

Malthus was faced with a terrible dilemma, and the uncompromising ascetic is forced to declare himself a utilitarian philosopher of the Benthamite persuasion. He has now to condone those practices which satisfy the sexual instinct without involving maternity, although at an earlier stage he characterised them as vices. It seemed to him to be the lesser of two evils, for over-population[301] is itself the cause of much immorality, with its misery, its promiscuous living and licence. All of which is very true.[302] At the same time the rule of conduct now prescribed is no longer that of “perfect purity.” It is, as he himself says, the grand rule of utility. “It is clearly our duty gradually to acquire a habit of gratifying our passion, only in that way which is unattended with evil.” (P. 500.) These concessions only served to prepare the way for the Neo-Malthusians.

Malthus gives us a picture of man at the cross-roads. Straight in front of him lies the road to misery, on the right the path of virtue, while on the left is the way of vice. Towards the first man is impelled by a blind instinct. Malthus warns him to rein in his desires and seek escape along either by-road, preferably by the path on his right. But he fears that the number of those who will accept his advice and choose “the strait road of salvation” will be very small. On the other hand, he is unwilling to admit, even in the secrecy of his own soul, that most men will probably follow the road that leads on to vice, and that masses will rush down the easy slope towards perdition. In any case the prospect is anything but inviting.

No doctrine ever was so much reviled. Imprecations have been showered upon it ever since Godwin’s memorable description of it as “that black and terrible demon that is always ready to stifle the hopes of humanity.”

Critics have declared that all Malthus’s economic predictions have been falsified by the facts, that morally his doctrines have given rise to the most repugnant practices, and not a few French writers are prepared to hold him responsible for the decline in the French birth-rate. What are we to make of these criticisms?

History certainly has not confirmed his fears. No single country has shown that it is suffering from over-population. In some cases—that of France, for example—population has increased only very slightly. In others the increase has been very considerable, but nowhere has it outstripped the increase in wealth.

The following table, based upon the decennial censuses, gives the per capita wealth of the population of the United States, the country from which Malthus obtained many of his data:

In fifty years the wealth of every inhabitant has more than quadrupled, although the population in the same interval also shows a fourfold increase (23 millions to 92 millions).[303]

Great Britain, i.e. England and Scotland, at the time Malthus wrote (1800-5), had a population of 10½ millions. To-day it has a population of 40 millions. Such a figure, had he been able to foresee it, would have terrified Malthus. But the wealth and prosperity of Great Britain have in the meantime probably quadrupled also.

Does this prove the claim that is constantly being made, that Malthus’s laws are not borne out by the facts? We think that it is correct to say that the laws still remain intact, but that the conclusions which he drew from them were unwarranted. No one can deny that living beings of every kind, including the human species, multiply in geometrical progression. Left to itself, with no check, such increase would exceed all limits. The increase of industrial products, on the other hand, must of necessity be limited by the numerous conditions which regulate all production—that is, by the amount of space available, the quantity of raw material, of capital and labour, etc. If the growth of population has not outstripped the increase in wealth, but, as appears from the figures we have given, has actually lagged behind it, it is because population has been voluntarily limited, not only in France, where the preventive check is in full swing, but also in almost every other country. This voluntary limitation which gave Malthus such trouble is one of the commonest phenomena of the present time.

Malthus’s apprehensions appear to involve some biological confusion. The sexual and the reproductive instincts are by no means one and the same;[304] they are governed by entirely different motives. Only to the first can be attributed that character of irresistibility which he wrongly attributes to the second. The first is a mere animal instinct which rouses the most impetuous of passions and is common to all men. The second is frequently social and religious in its origins, assuming different forms according to the exigencies of time and place.

To the religious peoples who adopted the laws of Moses, of Manu, or of Confucius to beget issue was to ensure salvation and to realise true immortality.[305] For the Brahmin, the Chinese, or the Jew not to have children meant not merely a misfortune, but a life branded with failure. Among the Greeks and Romans the rearing of children was a sacred duty laid upon every citizen and patriot. An aristocratic caste demanded that the glories of its ancestors and founders should never be allowed to perish for the want of heirs. Even among the working classes, whose lot is often miserable and always one of economic dependence, there are some who are buoyed up by the hope that the more children they have the larger will be their weekly earnings and the greater their power of enlisting public sympathy. And in every new country there is a demand for labourers to cultivate its virgin soil and to build up a new people.