66 19 His great work (An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, 1778, 1784 and 1788) occupied him for five years. It shows that he was influenced by the Physiocrates, yet it is a decided advance upon their teachings. He finds the source of wealth in all the three forms of industry, but gives the first place in point of productiveness to agriculture, the last to foreign commerce; while he classes as unproductive all those forms of human activity that are not directed to the production or exchange of commodities. Tracing the natural growth of the three great industries, through whose association men advance from the poverty of the savage life to material welfare, he pronounces against all efforts of the state to direct and foster any one of the three, as most likely to turn capital out of more into less productive channels. He, like the Economistes, would have the State adopt ordinarily a purely passive policy as regards the industrial life of the people. By leaving every man to do what he will with his own, and to use it in whatever way will secure the largest possible returns to himself, society will receive the largest possible benefit. In the principle of free competition he discerns the tap-root of all national industrial life and growth; the enlightened and active selfishness of the individuals who make up society, is the source of general well-being. That which is good for the individual, is good for society also. If there are inequalities of profits or of wages, capital or labor will shift from one channel to another, till things find their natural level. The chief fault in the book is its failure to fulfil the promise of the title. Promising to discuss "the wealth of nations," it practically ignores their existence, and treats the whole question. as if there were no such bodies. Smith writes as if the world were all under one government, with no boundary lines to restrain the movement of labor and capital,-no inequalities of national civilization and industrial status, to affect the competition of producer with producer. He ignores, therefore, many of the most important elements of the problem that he undertook to solve. Sharing in the reaction of the Physiocratists against the excessively political drift of the Mercantile school, he also goes to the other extreme, and gives us, not a science of national or political economy, but of cosmopolitical economy, which is not adapted to the actual historical state of the world, but only to a state of things which has not, nor ever will have, any existence. This way of thinking was the popular one at that period; Europe was in a state of reaction against the nationalist drift of the previous centuries, and did not recover from it until the French Revolution had carried many very pretty theories to their logical consequences, and had shown what they were worth. To be "a citizen of the world" was the ambition of educated men, and many of the foremost minds of EuropeLessing and Goethe, for instance-formally repudiated the sentiment of patriotism as unworthy of an enlightened civilization. § 10. In spite of the great nationalist reaction that began with Burke and Fichte, the cosmopolitan way of thinking has not yet lost its attractions for men. The existence of the cosmopolitical school of economists for nearly a century, and the adhesion given to it by a majority of English, and a great number of Continental and American writers, are a proof of this. In France Jean Baptiste Say reduced the teachings of Smith to a more systematic shape, giving them that clearness of expression and perfection of form for which French literature is famous. In his hands, the cosmopolitanism of the system is complete; his very first title-page dropped the awkward words "of nations," and from this time the abstract conception of wealth, its production, distribution and consumption, became the themes of what was still called "political economy." He enlarged the conception of wealth, however, to embrace immaterial as well as material products. Since the passive policy was especially assailed as leading to a foreign trade in which the balance may be unfavorable, he devoted especial attention to the theory of commerce. He was the first to announce that commodities are always paid for in commodities, and that therefore to check the amount of imports is to limit in equal measure MALTHUS ON POPULATION." 21 the power of export. Later writers of the same nation have, like Say, generally spent their pains in the elaboration of the English theories, without adding much to their substance. Not a single recognised doctrine of the cosmopolitical economists can be traced to a French author since Say, while the French literature, in which those doctrines are defended and enforced, is even larger than the English. Chevalier, Rossi, Blanqui and Molinari are the chief French representatives of this school. Bastiat belongs to it in his general tendencies, but his system is a mixture of its doctrines with those of Carey. In England Rev. T. R. Malthus furnished a discussion of the other side of the picture-the poverty of nations (Essay on Population, 1798, 1803, 1807, 1817 and 1826). At a time of great political disturbances, when the impoverished classes of Europe were calling the governments to account for the bad policy or no policy that had led to so much misery, this gentleman, a member of the Conservative party, was led to a study of the economic conditions in which that misery originated, that he might close the mouths of agitators by showing that governments had nothing to do with it, that it was the effect of a cause beyond the control of the ruling classes. He found that cause in the excessive growth of population, which led to the pressure of numbers upon subsistence, and could only be permanently controlled by the self-restraint of the lower classes themselves. This discovery was a godsend to the cosmopolitical school, as it enabled it to tide over a dangerous period of popular agitation, when a thousand circumstances seemed to conspire to enforce upon economists as well as rulers the lesson that governments are put in trust with the national welfare, as well as the national honor and safety, and that no mere passivity of industrial policy could be a sufficient discharge of the trust. In the view of Mr. Malthus, the condition of the mass of the people oscillates between ease and misery; as soon as any sudden advance in their welfare takes place, there is a rapid increase of numbers through the increase of recklessness as to 4 the future, and then years of scarcity follow hard upon the years of plenty. It was an easy inference that there is a natural rate of wages, a medium between these two oscillations, above which and below which the rate was unstable and could not be permanent. Also that, calling the amount of capital in the country that was available for the wages of labor the wagefund, the only way to increase the rate of wages was to increase that fund or diminish the number between whom it was to be divided. Somewhat later, David Ricardo carried the investigation of the subject a step farther, desiring to show the first cause of the inequality of condition that distinguishes different classes of society. Looking through Whig spectacles, as Malthus had looked through Tory ones, he found that inequality to result not from the operation of a natural and unavoidable cause, but from the effects of an artificial monopoly, the tenure of land. The few who have been lucky enough to possess themselves of the best soils at the first settlement of a country, form a privileged class that can live in idleness upon the labor of others, through exacting payment for the use of the natural powers of those soils. This theory-though so different in its motive-was accepted by the school as supplementary to that of Malthus. Both-as they came to be taught-had the merit of showing how the apparent anomalies of society grew out of circumstances either natural or generally accepted as natural; in the last analysis the principle of competition was shown to be the tap-root of industrial phenomena in both cases; both vindicated the passive policy as the only wise one, and argued all national interference to be a fighting against invincible facts. Mr. Ricardo (following Say and Torrens) also elaborated the theory of international exchanges, in connection with the notion that money is a purely passive instrument of exchanges, changing its purchasing power according to the amount of it that a country possesses. From this it was an easy inference that a drain of money from a country would either have no effect, or would correct itself by so increasing the purchasing power of money ir RICARDO AND HIS CRITICS. 23 comparison with commodities, as to make the country a bad place to sell in, but a good place to buy in. With him the constructive period of the English school ends, and, after a time in which the writers are chiefly commentators on the traditional body of doctrines, a critical period begins. Ricardo's theory of rent has a great many aspects, according to the side from which it is studied. Did he, like the earliest writers who followed his lead, accept the landlord's monopoly as natural and inevitable, or look upon it as a mischief that society would be well rid of? His dry method of discussion makes it hard to say. Later writers draw from the theory the inference that landed property, as differing from all other property in that its utility is not the product of labor, is especially subject to national control. This is probably more in accord with Ricardo's own motive, as may be inferred from his hostility to the legislation by which the landowner was secured against foreign competition in the grain market. His Principles of Political Economy and Taxation (1817) is the last piece of positive work of the school,-the crowning of the edifice. McCulloch, James Mill, Chalmers, De Quincey, and many others are his commentators; the later writers, from Senior to Thornton, his critics. § 11. About the year 1833 English thinking, and its expression English literature, took a new departure, becoming less dry and mechanical, more fresh, vigorous and genial. Economic literature shared in the impulse. N. W. Senior led off (1835) with a vigorous criticism of both Malthus and Ricardo. He especially emphasized the fact that as political economy considered wealth in the abstract, and excluded all political considerations, it had no right to intrude into the political sphere with its conclusions, and insist on statesmen acting in accordance with them. At the utmost, they could be but one of many considerations that should influence them. The divorce of the science from the art in the English school-a divorce like that which once existed between the science and the art of musicwas thus candidly confessed. But this nice distinction, as is commonly the case, was not kept in view by most writers or by the statesmen who took lessons from them. Thomas Tooke (History of Prices, 6 vols., 1838-58) gave a refutation of the theory that money plays a mere passive part in industry, prices rising in proportion to its increase, and falling |