Political economists. 103. The separation of political economy from the general science, which regards the well-being of communities, was not so strictly made by the earlier philosophers as in modern times. It does not follow that national wealth engaged none of their attention. Few, on the contrary, of those who have taken comprehensive views, could have failed to regard it. In Bodin, Botero, Bacon, Hobbes, Puffendorf, Locke, we have already seen proofs of this. These may be said to have discussed the subject, not systematically, nor always with thorough knowledge, but with acuteness and in a philosophical tone. Others there were of a more limited range, whose habits of life and experience led them to particular departments of economical inquiry, especially as to commerce, the precious metals, and the laws affecting them. The Italians led the way; Serra has been mentioned in our last volume, and a few more might find a place in this. De Witt’s Interest of Holland can hardly be reckoned among economical writings; and it is said by Morhof, that the Dutch were not fond of promulgating their commercial knowledge;[963] little, at least, was contributed from that country, even at a later period, towards the theory of becoming rich. But England now took a large share in this new literature. Free, inquisitive, thriving rapidly in commerce, so that her progress even in the nineteenth century has hardly been in a greater ratio than before, and after the middle of the seventeenth, if we may trust the statements of contemporaries, she produced some writers who, though few of them merit the name of philosophers, may not yet here be overlooked, on account of their influence, their reputation, or their position as links in the chain of science.
[963] Polyhistor, part iii., lib. iii., § 3.
Mun on Foreign Trade. 104. The first of these was Thomas Mun, an intelligent merchant in the earlier part of the century, whose posthumous treatise, England’s Treasure by Foreign Trade, was published in 1664, but seems to have been written soon after the accession of Charles I.[964] Mun is generally reckoned the founder of what has been called the mercantile system. His main position is that “the ordinary means to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule to sell more to strangers yearly than we consume of theirs in value.”[965] We must therefore sell as cheap as possible; it was by underselling the Venetians of late years, that we had exported a great deal of cloth to Turkey.[966] It is singular that Mun should not have perceived the difficulty of selling very cheap the productions of a country’s labour, whose gold and silver were in great abundance. He was, however, too good a merchant not to acknowledge the inefficacy and impolicy of restraining by law the exportation of coin, which is often a means of increasing our treasure in the long run; advising instead a due regard to the balance of trade, or general surplus of exported goods, by which we shall infallibly obtain a stock of gold and silver. These notions have long since been covered with ridicule; and it is plain that, in a merely economical view, they must always be delusive. Mun, however, looked to the accumulation of a portion of this imported treasure by the state; a resource in critical emergencies which we have now learned to despise, since others have been at hand, but which, in reality, had made a great difference in the events of war, and changed the balance of power between many commonwealths. |Child on Trade.| Mun was followed, about 1670, by Sir Josiah Child, in a discourse on Trade, written on the same principles of the mercantile system, but more copious and varied. The chief aim of Child is to effect a reduction of the legal interest of money, from six to four per cent., drawing an erroneous inference from the increase of wealth which had followed similar enactments.
[964] Mr. Maculloch says (Introductory Discourse to Smith’s Wealth of Nations), it had most probably been written about 1635 or 1640. I remarked some things which serve to carry it up a little higher.
[965] P. 11 (edit. 1664).
[966] P. 18.
Locke on the Coin. 105. Among the many difficulties with which the government of William III. had to contend, one of the most embarrassing was the scarcity of the precious metals and depreciated condition of the coin. This opened the whole field of controversy in that province of political economy; and the bold spirit of inquiry, unshackled by prejudice in favour of ancient custom, which, in all respects, was characteristic of that age, began to work by reasonings on general theorems, instead of collecting insulated and inconclusive details. Locke stood forward on this, as on so many subjects, with his masculine sense and habitual closeness of thinking. His “Considerations of the Consequences of lowering Interest, and raising the Value of Money” were published in 1691. Two further treatises are in answer to the pamphlets of Lowndes. These economical writings of Locke are not in all points conformable to the modern principles of the science. He seems to incline rather too much towards the mercantile theory, and to lay too much stress on the possession of the precious metals. From his excellent sense, however, as well as from some expressions, I should conceive that he only considers them, as they doubtless are, a portion of the exchangeable wealth of the nation, and by their inconsumable nature, as well as by the constancy of the demand for them, one of the most important. “Riches do not consist,” he says, “in having more gold and silver, but in having more in proportion than the rest of the world or than our neighbours, whereby we are enabled to procure to ourselves a greater plenty of the conveniences of life.”
106. Locke had the sagacity to perceive the impossibility of regulating the interest of money by law. It was an empirical proposition at that time, as we have just seen in Sir Josiah Child, to render loans more easy to the borrower by reducing the legal rate to four per cent. The whole drift of his reasoning is against any limitation, though, from fear of appearing too paradoxical, he does not arrive at that inference. For the reasons he gives in favour of a legal limit of interest, namely, that courts of law may have some rule where nothing is stipulated in the contract, and that a few money-lenders in the metropolis may not have the monopoly of all loans in England, are, especially the first, so trifling, that he could not have relied upon them; and, indeed, he admits that, in other circumstances, there would be no danger from the second. But his prudence having restrained him from speaking out, a famous writer, almost a century afterwards, came forward to assert a paradox, which he loved the better for seeming such, and, finally, to convince the thinking part of mankind.
107. Laws fixing the value of silver Locke perceived to be nugatory, and is averse to prohibit its exportation. The value of money, he maintains, does not depend on the rate of interest, but on its plenty relatively to commodities. Hence, the rate of interest, he thinks, but, perhaps, erroneously, does not govern the price of land; arguing from the higher rate of land relatively to money, that is, the worse interest it gave, in the reigns of Elizabeth and James, than in his own time. But one of Locke’s positions, if generally received, would alone have sufficed to lower the value of land. “It is in vain,” he says, “in a country whose great fund is land, to hope to lay the public charges of the government on anything else; there, at last, it will terminate.” The legislature soon proceeded to act on this mistaken theory in the annual land tax; an impost of tremendous severity at that time, the gross unfairness, however, of which has been compensated in later times by the taxes on personal succession.
108. In such a monetary crisis as that of his time, Locke was naturally obliged to consider the usual resource of raising the denomination of the coin. This, he truly says, would be to rob all creditors of such a proportion of their debts. It is probable that his influence, which was very considerable, may have put a stop to the scheme. He contends in his Further Considerations, in answer to a tract by Lowndes, that clipped money should go only by weight. This seems to have been agreed by both parties; but Lowndes thought the loss should be defrayed by a tax; Locke that it should fall on the holders. Honourably for the government, the former opinion prevailed.