Otto Gierke (essay date 1900)
SOURCE: "The Beginnings of the Modern State," in Political Theories of the Middle Age, translated by Frederic William Maitland, 1900. Reprint by Cambridge at the University Press, 1913, pp. 87-100.
[In the excerpt below, Gierke sketches the transition from the heyday of the Middle Ages to the modern era. Emphasizing concepts rather than individual thinkers, Gierke discusses the emerging sovereignties of the period—that of the state and that of the individual.]
… Everywhere beside the formulation of thoughts that were properly medieval we have detected the genesis of 'antique-modern' ideas, the growth of which coincides with the destruction of the social system of the Middle Age and with the construction of 'naturerightly' theories of the State. It remains for us to set forth by way of summary this tendency of medieval doctrine to give birth to the modern idea of the State and to transform the previously accepted theory of Communities. We must attend separately to the more important of those points at which this tendency exhibits itself.
The fundamental fact which chiefly concerns us when we contemplate this process of evolution is that in medieval theory itself we may see a drift which makes for a theoretical concentration of right and power in the highest and widest group on the one hand and the individual man on the other, at the cost of all intermediate groups. The Sovereignty of the State and the Sovereignty of the Individual were steadily on their way towards becoming the two central axioms from which all theories of social structure would proceed, and whose relationship to each other would be the focus of all theoretical controversy. And soon we may see that combination which is characteristic of the 'nature-rightly' doctrines of a later time: namely, a combination of the Absolutism which is due to the renaissance of the antique idea of the State, with the modern Individualism which unfolds itself from out the Christiano-Germanic thought of Liberty.
As regards the question touching the Origin of the State—its origin in time and its origin in law—the Theory of the Social Contract slowly grew. It was generally agreed that in the beginning there was a State of Nature. At that time 'States' were not, and pure Natural Law prevailed, by virtue whereof all persons were free and equal and all goods were in common. Thus it was universally admitted that the Politic or Civil State was the product of acts done at a later time, and the only moot question was whether this was a mere consequence of the Fall of Man, or whether the State would have come into being, though in some freer and purer form, if mankind had increased in numbers while yet they were innocent. By way of investigating the origin of Political Society, men at first contented themselves with a general discussion of the manner in which dominium had made its appearance in the world and the legitimacy of its origin; and in their concept of dominium, Rulership and Ownership were blent. Then, when the question about Ownership had been severed from that about Rulership, we may see coming to the front always more plainly the supposition of the State's origin in a Contract of Subjection made between People and Ruler. Even the partizans of the Church adopt this opinion when they have surrendered the notion that the State originated in mere wrong. But then arose this further question:—How did it happen that this Community itself, whose Will, expressed in an act of transfer, was the origin of the State, came to be a Single Body competent to perform a legal act and possessing a transferable power over its members? At this point the idea of a Divine Creation of the State began to fail, for however certain men might be that the Will of God was the ultimate cause of Politic Society, still this cause fell back into the position of a causa remota working through human agency. As a more proximate cause the 'politic nature' which God has implanted in mankind could be introduced; and Aristotle might be vouched. We can not say that there were absolutely no representatives of a theory of organic development, which would teach that the State had grown out of that aboriginal Community, the Family, in a purely natural, direct and necessary fashion. Still the weightier opinion was that Nature (like God) had worked only as causa remota or causa impulsiva: that is, as the source of a need for and of an impulse towards the social life, or, in short, as a more or less compulsory motive for the foundation of the State. More and more decisively was expressed the opinion that the very union of men in a political bond was an act of rational, human Will. Occasionally there may appear the notion that the State was an Institution which was founded, as other human institutions [e.g. monasteries or colleges] were founded, by certain definite Founders, either in peaceful wise or by some act of violence; but, in the main, there was a general inclination towards the hypothesis of some original, creative, act of Will of the whole uniting Community. This joint act was compared to the selfconstitution of a corporation. But men did not construct for this purpose any legal concept that was specially adapted to the case. The learning of Corporations developed by the lawyers had no such concept to offer, for they also, despite the distinction between universitas and societas, [between Corporation and Partnership,] confused the single act whereby a Community unifies itself, with a mere obligatory contract made among individuals, and they regarded the peculiar unity of the Corporation as something that came to it from without by virtue of a concession made by the State. Thus in the end the Medieval Doctrine already brings the hypothetical act of political union under the category of a Contract of Partnership or 'Social' Contract. On the one hand, therefore, proclamation was made of the original Sovereignty of the Individual as the source of all political obligation. In this manner a base was won for the construction of Natural Rights of Man, which, since they were not comprised in the Contract, were unaffected by it and could not be impaired by the State. On the other hand, since the Sovereignty of the State, when once it was erected, rested on the indestructible foundation of a Contract sanctioned by the Law of Nature, conclusions which reached far in the direction of the State's Absolutism could be drawn by those who formulated the terms of the Contract.
If Philosophy was to find the terms of that fictitious Contract which provided a basis of Natural Law for the State and the State's power, it could not but be that the decisive word about this matter would be sought in the purpose which the State and its power are designed to fulfil. If, on the one part, the idea was retained that every individual had a final cause of his own, which was independent of and stood outside and above all political and communal life—and here was a divergence from Classical Antiquity—so, on the other part, the final cause of the State was always being enlarged—and here was a departure from the earlier Middle Age, though at times we may still hear echoes of the old Germanic idea that the State's one function is the maintenance of peace and law. In imitation of classical thought, men defined the State's purpose to be a happy and virtuous life: the realization of the public-weal and civic morality. True, that, according to the prevailing doctrine, the function of the State had a limit, and a necessary complement, in the function of the Church: a function making for a higher aim than that of the State, namely, for inward virtue and supra-mundane bliss. But an always stronger assault was being made upon the Church's monopoly of culture. An independent spiritual and moral mission was claimed for the State, until at length there were some who would ascribe to the State the care for all the interests of the Community, whether those interests were material or whether they were spiritual.
If, however, the contents of the Institutes of Natural Law were to be discovered by a consideration of their final cause, this same final cause would also be the measure of those indestructible rights that pertained to the 'Subjects' of Natural Law. From the final cause of the Individual flow the innate and inalienable rights of liberty, and so from the final cause of the Politic Community flow—and from of old the Church might here serve as a model—the State's innate and inalienable rights of superiority. From the rights thus bestowed Positive Law could take, and to them it could add, nothing. If, as a matter of fact, it contravenes them, it must admit itself over-ruled. The maxim Salus publica suprema lex entered on its reign, and a good legal title had been found on which Revolution, whether it came from above or from below, could support itself when it endeavoured to bring the traditional law into conformity with the postulates of the Law of Nature.
In truth Medieval Doctrine prepared the way for the great revolutions in Church and State, and this it did by attributing a real working validity as rules of Natural Law to a system constructed of abstract premisses and planned in accordance with the dictates of expediency. The whole internal structure of the State was subjected ever more and more to criticism proceeding from the Rationalist's stand-point. The value of the structure was tested by reference to its power of accomplishing a purpose and was measured by reference to an ideal and 'nature-rightly' State. The steering of public affairs was likened to the steering of a ship; it is a free activity consciously directed towards the attainment of a goal. Thus there arose the idea of an Art of Government, and people undertook to teach it in detail. There was disputation about the best form of government and the most suitable laws, and out of this grew a demand for such a transformation of Public Law as would bring it into accord with theoretical principles. Through the last centuries of the Middle Age, alike in Church and Empire, unbroken and always louder, rings the cry for 'Reformation'!
Turning now to the fundamental concepts of Public Law, the resuscitation and further development of the classical idea of Sovereignty will appear to us as the main exploit achieved in this department by the prevalent endeavour to construct constitutions which shall conform to Natural Law. Men found the essence of all political organization in a separation of Rulers and Ruled. Also they took over from the antique world the doctrine of the Forms of Government and of the distinctions that exist between them. And so they came to the opinion that in every State some one visible Ruler, a man or a ruling assembly, is the 'Subject' of a Sovereign Power over the Ruled. And then, when, in contrast to the theory of 'Ruler's Sovereignty,' men developed the theory of a Popular Sovereignty, existing everywhere and always, the partizans of this doctrine did not once more call in question the newly acquired idea of Sovereignty, but transferred it to an Assembly which represents the People. The Medieval notion of Sovereignty, it is true, always differed in principle from that exalted notion which prevailed in after times. For one thing, there was unanimous agreement that the Sovereign Power, though raised above all Positive, is limited by Natural Law. Secondly, it was as unanimously agreed that the idea of the Sovereign by no means excludes an independent legal claim of nonsovereign subjects to participate in the power of the State. On the contrary, advocates of 'Ruler's Sovereignty' expressly maintained a political right of the People, and advocates of the People's Sovereignty expressly maintained a political right of the Ruler, so that even the extremest theories gave to the State somewhat of a 'constitutional' character. Therefore it was thought possible to combine the Sovereignty of the Monarch with what was in principle a Limited Monarchy. Therefore also the idea of a Mixed Constitution could be developed without facing awkward questions. Therefore again the beginnings of a doctrine which teaches the Separation of Powers could be reared on a basis of Popular Sovereignty. And therefore also the Representative System could be theoretically elaborated. None the less, the idea of Sovereignty, when once it had been formulated, irresistibly pressed forwards towards the conclusion that in the last resort some one Ruler or some one Assembly must be the 'Subject' of the Supreme Power, and that in case of conflict the State is incorporate only in this one man or this one Assembly.
The State Power, thus focussed at a single point, made, over all members of the State, ever fresh claims to all such rights of Superiority as were comprised within the idea and measure of the State's final cause and were compatible with those rights of Liberty of which the Individual could not be deprived. And just because the rights of Superiority flowed from the very idea of State Power, that Power, with increasing insistance, claimed to exercise them over all individuals equally and with equal directness and immediacy. If then, on the one hand, the Individual just in so far as he belongs to the Community is fully, and wholly absorbed into the State, so, on the other hand, there is a strong tendency to emancipate the Individual from all bonds that are not of the State's making.
There was, moreover, a steady advance of the notion that the State is an exclusive Community. In phrases which tell of the Antique World men spoke of the State simply as 'Human Society.' The State is the allcomprehensive, and therefore the one and only, expression of that common life which stands above the life of the individual.
This thought, it is true, came at once into conflict with the ascription of a higher, or even an equal, right to the Church. And it was only with a great saving-clause for the rights of the Church that the prevalent doctrine of the Middle Age received the antique idea of the State. Still in the fourteenth and fifteenth centuries theory was preparing the way for the subsequent absorption of Church in State. One medieval publicist there was who dared to project a system, logically elaborated even into details, wherein the Church was a State Institution, Church property was State property, spiritual offices were offices of State, the government of the Church was part of the government of the State, and the sovereign Ecclesiastical Community was identical with the Political Assembly of the Citizens. He was Marsilius of Padua. No one followed him the whole way. Howbeit, isolated consequences of the same principle were drawn even in the Middle Age by other opponents of the Hierarchy. Already an unlimited power of suppressing abuses of ecclesiastical office was claimed for the State. Already, with more or less distinctness, Church property was treated as public property and placed, should the salus publica require it, at the disposal of the State. Already powers of the State which reach far down even into the internal affairs of the Church were being deduced from the demand that in temporal matters the Church should be subject to the temporal Magistrate. Already the classical sentence which told how the ius sacrum was a part of the publicum was once more beginning to reveal its original meaning.
If, however, we leave out of sight the State's relation to the Church, we see that, when Medieval Doctrine first takes shape, the idea of the State, which had been derived from the Antique World, was enfeebled and well-nigh suffocated by the consequences that were flowing from the medieval idea of the Empire: an idea which itself was being formulated by theory. The thought of a concentration at a single point of the whole life of the Community not only stood in sharp contradiction to actual facts and popular opinions, but also was opposed in theory to what might seem an insurmountable bulwark, namely to the medieval thought of an harmoniously articulated Universal Community whose structure from top to bottom was of the federalistic kind. Nevertheless that antique concept of the State, when once it had found admission, worked and worked unceasingly and with deadly certainty until it had completely shattered this proud edifice of medieval thought. We may see theory trying to hold fast the mere shadow of this stately idea, even when what should have corresponded to it in the world of fact, the Medieval Empire, had long lain in ruins. And so also we may see in theory the new edifice of the Modern State being roofed and tiled when in the world of fact just the first courses of this new edifice are beginning to arise amidst the ruins of the old.
When Aristotle's Politics had begun their new life, the current definition taught that the State is the highest and completest of Communities and a Community that is self-sufficing. It is evident that, so soon as men are taking this definition in earnest, only some one among the various subordinated and superordinated Communities can be regarded as being the State. For a while this logical consequence might be evaded by a grossly illogical device. The … civitas that the ancients had defined was discovered by medieval Philosophy in a medieval town, and, by virtue of the ideal of the organic structure of the whole Human Race, the community of this … civitas was subordinated to a regnum and to the imperium: that is, to higher and wider communities in which it found its completion and its limitations. Thus, no sooner has the medieval thinker given his definition, than he is withdrawing it without the slightest embarrassment: his superlative becomes a comparative, and the absolute attribute becomes relative. Then, on the other hand, the lawyers, with the Corpus Iuris before them, explained that the Empire is the one true State; but they defined civitas and populus and even regnum in such a manner that these terms could be applied to provinces and to rural or urban communes; and then, as a matter of fact, they went on applying the concept of 'The State' to communities that were much smaller than the Empire. Still the antique idea, when once it had been grasped, was sure to triumph over this confused thinking. Indeed we may see that the Philosophic Theory of the State often sets to work with the assumption that there cannot be two States one above the other, and that above the State there is no room for a World-State, while below the State there is only room for mere communes. Then in Jurisprudence, from the days of Bartolus onwards, an ever sharper distinction was being drawn between communities which had and those which had not an external Superior, and communities of the latter kind were being placed on a level with the Imperium. The differences between civitas, regnum and imperium became mere differences in size instead of being joints in the organic articulation of a single body, and at the same time the concept of the State became the exclusive property of a community which recognizes no external superior (universitas superiorem non recognoscens).
Thus already in the Middle Age the idea of the State arrived at theoretical completion, and the attribute of External Sovereignty became the distinguishing mark of the State. The Imperium Mundi, which rose above the Sovereign States, had evaporated into an unsubstantial shadow, and at any rate was stripped of the character of a State, even when its bare existence was not denied. For States within the State there was thenceforth no room, and all the smaller groups had to be brought under the rubric 'Communes and Corporations'.
From the concentration of 'State Life' at a single point there by no means follows as logically necessary a similar concentration of all 'Community Life.' The medieval idea of the organic articulation of Mankind might live on, though but in miniature, within each separate State. It might become the idea of the organic articulation of the Nation. And up to a certain degree this actually happened. The Romano-Canonical Theory of Corporations, although it decomposed and radically transmuted the German notion of the autonomous life of communities and fellowships, always insured to the non-sovereign community a certain independent life of its own, a sphere of rights within the domain of Public Law, a sphere that belonged to it merely because it was a community, and lastly, an organic interposition between the Individual and the Community of All. Even among political theorists there were not wanting some who in the last centuries of the Middle Age—centuries brimful of vigorous corporate life—sought to oppose to that centralization which had triumphed in the Church and was threatening the State, a scientific statement of the idea of corporative articulation and a logically deduced justification of the claims that could be made on behalf of the smaller groups as beings with rights of their own and an intrinsic value.
For all this, however, even in the Middle Age the drift of Theory set incessantly towards an exaltation of the Sovereignty of the State which ended in the exclusive representation by the State of all the common interests and common life of the Community. In this direction Philosophy with giant strides was outstripping Jurisprudence.
For those rights of Lordship of Germanic origin which subsisted within the State and beneath the Sovereign's Power, Jurisprudence might long provide a secure place. It had accepted the ius feudorum, and was prepared to treat offices as objects of proprietary rights. But Political and Philosophical Theories could find no room whatever in their abstract systems for feudal and patrimonial powers. On the contrary, this was just the point whence spread the thought that all subordinate public power is a mere delegation of the Sovereign Power. Also this was just the point whence spread a process which transmuted the medieval concept of Office, in such wise that every office appeared merely as a commission to use the Power of the State: to use, that is, in a certain manner, a power which is in substance one and untransferable. When that process is completed, every officer appears as the freely chosen instrument of the Sovereign Will.
A similar attitude was taken by the abstract theories of Politics and Philosophy in relation to those independent Rights of Fellowships which had their source in Germanic Law. For a long time Jurisprudence was prepared to give them a home; but Philosophical Theory looked askance at them. The Doctrine of the State that was reared upon a classical ground-work had nothing to say of groups that mediated between the State and the Individual. This being so, the domain of Natural Law was closed to the Corporation, and its very existence was based upon the ground of a Positive Law which the State had made and might at any time alter. And then as the sphere of the State's Might on the one hand, and the sphere of the Individual's Liberty on the other, became the exclusive and allsufficing starting-points for a Philosophy of Law, the end was that the Corporation could find a place in Public Law only as a part of the State and a place in Private Law only as an artificial Individual, while all in actual life that might seem to conflict with this doctrine was regarded as the outcome of privileges which the State had bestowed and in the interest of the public might at any time revoke. While the Middle Age endured, it was but rarely that the consequences of these opinions were expressly drawn. Howbeit, Philosophic Doctrine was on the one hand filling itself full of the antique idea of the State, and on the other hand it was saving therefrom and developing the Christiano-Germanic idea of Freedom and depositing this in the theory of Natural Law. And as this work proceeded towards the attainment of ever more distinct results, the keener were the weapons which Medieval Doctrine was forging for that combat which fills the subsequent centuries. A combat it was in which the Sovereign State and the Sovereign Individual contended over the delimitation of the provinces assigned to them by Natural Law, and in the course of that struggle all intermediate groups were first degraded into the position of the more or less arbitrarily fashioned creatures of mere Positive Law, and in the end were obliterated.
Andrew S. Skinner (essay date 1993)
SOURCE: "The Shaping of Political Economy in the Enlightment," in Adam Smith: International Perspectives, edited Hiroshi Mizuta and Chuhei Sugiyama, St. Martin's Press, 1993, pp. 113-39.
[The essay that follows, revised for publication from a lecture originally delivered in 1990, looks at political and economic thought together. By considering the works of Smith, Hume, and Steuart, Skinner seeks to determine "the 'shape' which these writers gave to their studies" and ultimately the shape they gave to the course of political thought in general.]
Thirty-five years ago, Alec Macfie addressed the question of the 'Scottish tradition in economic thought'. He sought to isolate a number of characteristic features of the Scottish approach and in so doing drew attention to the sociological, philosophical and historical dimensions which Adam Smith together with his predecessors and successors had brought to the study of economic phenomena. In particular, Professor Macfie gave prominence to a certain penchant for systematic argument, and to an approach which was 'more concerned with giving a broad, well balanced comprehensive picture, seen from different points of view than with logical rigour' (1967, p. 22).
While one might hesitate to describe these approaches to the study of political economy as particularly or even exclusively Scottish, there is no doubt that all are characteristic of the work done by three major figures of the Enlightenment, David Hume, Sir James Steuart and Adam Smith. Adam Smith, the bicentenary of whose death has just passed, proved, in the event, to be the most influential figure: the writer whose choice of 'model' (and there were choices to be made) did most to establish the shape of the early classical system as Alfred Marshall would have known it. Yet there is a sense in which we can claim that all three of the writers named not only shared common intellectual interests, but also produced work of lasting value. It may also be true that we can only attain a true perspective on the measure of Smith's achievement by pausing to review the contributions of his immediate predecessors, both of whom he knew. It is, in any event, certain that we cannot attain an accurate understanding of the tradition which Macfie identified by considering the contribution of Adam Smith in isolation. There is, besides, the intriguing fact that Hume's Political Discourses profoundly influenced two writers who were to produce systematic treatises which were quite markedly different in character.
This paper is divided into four main parts. In Part I we consider Hume's contribution. In Parts II and III we examine the different ways in which Steuart and Smith may have reacted to the lead provided by their friend. In Part IV we consider the advantages of the Smithian system and examine the consequences of his dominance as the founder of classical economics, especially as this affected the interpretation of the past. But it is not the intention in this place exhaustively to review the work done by these major figures, and far less to consider in detail their analytical contributions. Rather our concern is with the broad perspectives adopted—the 'shape' which these writers gave to their studies.
David Hume's Discourses (1752) contain nine essays on economic topics which were conveniently collected and most helpfully introduced by Eugene Rotwein in 1955. The essays cover such subjects as money, the balance of trade, the rate of interest, public finance, taxation and population. The topics were treated as essays, a fact which makes it difficult to recover Hume's intention if not his meaning. But as Rotwein has shown, the essays are marked by a unity of purpose and method. They also enable us to identify a number of particular and interdependent themes.
The first theme is broadly methodological and arises from Hume's conviction 'that all the sciences have a relation, greater or less, to human nature, and that however wide any of them may seem to run from it, they still return back by one passage or another' (EW, p. xx). The study of human nature was thus to be based upon empirical evidence: as Hume himself made clear, the Treatise constituted an attempt to introduce the 'experimental method of reasoning into moral subjects'.
The approach also allowed Hume to state a proposition which was profoundly influential in the eighteenth century, namely that: 'It is universally acknowledged that there is a great uniformity among the actions of men, in all nations and ages, and that human nature remains still the same in its principles and operations.' Among these 'constant principles' Hume was to include a desire for action, for liveliness and, of particular interest to the economist, avarice or the desire for gain; a constant principle of motion which allows the commentator to offer scientific generalizations at least in the sphere of political economy (Essays, pp. 12-13).
A second major theme in the Discourses relates to Hume's employment of historical materials. From one point of view this perspective is straightforward, in the sense that the study of history is an 'invention' which 'extends our experience to all past ages, and to the most distant nations' (Essays, p. 556). But from the point of view of our understanding of economic phenomena, broadly defined, the picture which was to emerge from the 'economic writings' was in fact a complex one.
If Hume did argue that the principles of human nature were constant, he also appreciated that the way in which they found expression would be profoundly affected by the socio-economic environment which may happen to exist, and by habit, customs and manners. While this theme runs throughout the essays, perhaps two examples will suffice for the present purpose.
In the long essay 'Of the Populousness of Ancient Nations', a work which has scarcely received the attention it deserves, Hume addressed a proposition which had been advanced by both Montesquieu and Robert Wallace to the effect that population levels had been higher in ancient as compared to modern times (EW, p. 108n.). In deciding in favour of modern society, Hume drew attention to the use of slavery in the classical period as 'in general disadvantageous both to the happiness and populousness of mankind' (EW, p. 124), pointing also to the inci dence of military conflict and of political instability. But perhaps the most striking aspect of the argument is the attention given to the point that 'Trade, manufactures, industry were no where, in former ages, so flourishing as they are at present in Europe' (EW, p. 143). Population is ultimately limited not just by political factors, but also by the food supply, and this in turn by the type of economic organization prevailing.
The same basic theme emerges in the essay 'Of Money' where Hume rejected the conventional wisdom that money can be regarded as wealth (EW, pp. 33, 37) and stated the famous relationship between changes in the money supply and the general price level, a relationship which remained substantially unchallenged until the 1920s.
Less familiar is the point that Hume consistently contrasted the situation of a primitive economy with a more sophisticated version. It is, he argued, 'the proportion between the circulating money, and the commodities in the market which determines the prices' (EW, p. 42). In the primitive economy, 'we must consider that, in the first and more uncultivated ages of any state, … men have little occasion for exchange, at least for money, which, by agreement, is the common measure of exchange' (EW, p. 42). But in the state of commerce, in contrast, 'coin enters into many more contracts, and by that means is much more employed' (EW, p. 43).
On the other hand, the changed form of economic organization had given a greater scope to individual effort and must therefore massively increase the supply of commodities which are subject to exchange. Hume therefore concluded that although prices in Europe had risen since the discoveries in the West Indies and elsewhere, these prices were in fact much lower than the extent of the increase in the money supply might of itself suggest: 'And no other satisfactory reason can be given, why all prices have not risen to a much more exorbitant height, except that which is derived from a change of customs and manners' (EW, p. 44).
The technique which we have just considered is essentially an exercise in comparative statics in the sense that it enables us to contrast and compare the operation of certain economic relationships in different institutional environments. But there was another dimension to Hume's historicism which, if loosely articulated, is none the less more explicitly dynamic in character.
The theme of historical dynamics is addressed primarily in the essays 'Of Commerce' and 'Of Refinement in the Arts', where it is noted that:
The bulk of every state may be divided into husbandmen and manufacturers. The former are employed in the culture of the land; the latter work up the materials furnished by the former, into all the commodities which are necessary or ornamental to human life. As soon as men quite the savage state, where they live chiefly by hunting and fishing, they must fall into these two classes though the arts of agriculture employ at first the most numerous part of the society.
(EW, pp. 5-6)
It was Hume's contention that there had been a gradual progression to a situation where the two main sectors of activity are fully interdependent, supported by merchants: 'one of the most useful races of men, who serve as agents between those parts of the state, that are wholly unacquainted, and ignorant of each other's necessities' (EW, p. 52).
The argument is rooted in Hume's deployment of a favourite thesis of the eighteenth century, namely that men have natural wants which gradually extend in a self-sustaining spiral. The tone is best expressed in the essay 'Of Refinement in the Arts' where Hume also contrasts the form of government found in 'rude and unpolished nations' with that likely to be associated with the modern state. In passages which are likely to have caught the attention of both Smith and Steuart, Hume observed that 'where luxury nourished commerce and industry, the peasants, by proper cultivation of the land, become rich and independent; while the tradesmen and merchants acquire a share of property, and draw authority and consideration to that middling rank of men, who are the best and firmest basis of public liberty' (EW, pp. 28-9): a development which may be expected further to encourage the rate of economic growth.
The final major theme in Hume's thought relates to the problem of international trade, a theme which, here as elsewhere, unfolds on a number of levels. To begin with Hume drew attention to the general benefits of foreign trade. In the essay 'Of Commerce', for example, he made the point that if 'we consult history, we shall find that in most nations, foreign trade had preceded any refinement in home manufactures, and had given birth to domestic luxury'. In the same context he drew attention to induced changes in taste and to the point that imitation leads domestic manufactures 'to emulate the foreign in their improvements' (EW, pp. 13-14, cf. p. 78). Hume continued to note that the encouragement of domestic industry would further enhance the opportunities for trade and economic growth (EW, p. 79).
The second aspect of Hume's argument supports his repeated claim for freedom of trade on grounds that are essentially technical. Building upon the analysis in the essay 'Of Money' Hume examined the case of two or more economies with no unemployed resources with a view to demonstrating the futility of the mercantile preoccupation with a positive balance of trade. Against this, Hume contended, a net inflow of gold would inevitably raise prices in the domestic economy, while a loss of specie would reduce the general price level elsewhere—thus improving the competitive position in the latter case and reducing it in the former. In the essay 'Of the Balance of Trade' Hume concluded that 'money, in spite of the absurd jealousy of princes and states, has brought itself nearly to a level' (EW, p. 66) just as 'all water, wherever it communicates, remains always at a level' (EW, p. 63).
The third dimension to Hume's treatment of foreign trade is much more complex. It is based upon the premiss that countries have different characteristics and different rates of growth, thus opening up a different and distinctive policy position as compared to those so far considered. The argument effectively introduced what Hont (1983, Ch. 11) has described as the 'rich country-poor country debate'. Hont has identified no fewer than twelve aspects of the argument (1983, pp. 274-5). But for the present purpose, we may approach the matter in a slightly different way.
While critical of Montesquieu's thesis regarding the role of physical factors, Hume was none the less conscious of the fact that different countries could have different factor endowments, and aware that climate could have some influence upon economic activity (EW, p. 17). But there is also a sense in which the rich country-poor country thesis reflects strands of thought which we have already identified in dealing with the comparative static and dynamic branches of Hume's argument.
In this context it is worth recalling that the comparative static technique involves the comparison of different economic types, while the dynamic element draws attention to the importance of individual effort and to an accelerating rate of change as institutions and manners themselves change. On the one hand the reader is reminded of the phenomenon of a 'diversity of geniuses, climates and soil' while on the other attention is drawn to the point that the extent to which men apply 'art, care and industry' may vary in one society over time and between different societies at a given point in time. Other factors which will affect the rate of growth and cause variations in rates of growth in different communities, include the form of government and the degree to which public policies such as trade regulations, taxes and debt are deployed with intelligence.
Hume illustrated this new phase of problem by referring to the issue of regional imbalance (a concern which he shared with Josiah Tucker) citing the case of London and Yorkshire (EW, p. 95). The regional dimension is as relevant to the rich country-poor country debate as is the international, although it was upon the latter that Hume chose to place most emphasis.
Hume's treatment of the performance of the modern economy, especially in the context of the essays 'Of Money' and 'Of Interest' implies an increase in productivity which may give the developed economy an advantage in terms of the price of manufactures (cf. EW, p. 195). He also recognized that an inflow of gold in the context of a growing economy need not generate adverse price effects (EW, pp. 197-8).
But Hume clearly felt that rich countries could lose their competitive edge, in noting that England feels 'some disadvantages in foreign trade by the high price of labour, which is in part the effect of the riches of their artisans, as well as of the plenty of money' (EW, pp. 15-16). It was thus recognized that advantages may be eroded, causing the loss in turn of particular industries, (EW, p. 80), unless care is taken to preserve them.
Hume also seems to have felt that the tendency for the prices of labour and provisions to rise over time could lead to a general loss of markets and that this could involve a policy of protection to support employment levels, a situation which he contemplated with calm objectivity in noting that 'as foreign trade is not the most material circumstance, it is not to be put in competition with the happiness of so many millions' (EW, p. 16).
Hume concluded in the essay 'Of Money' that 'there seems to be a happy concurrence of causes in human affairs, which checks the growth of trade and riches, and hinders them from being confined entirely to one people' (EW, p. 34). The point was to be elaborated in correspondence with Lord Kames, and reflects an old preoccupation with the thesis of 'growth and decay' (cf. EW, p. 201).
Sir James Steuart cited more than fifty authorities in the Principles (Skinner, 1966, pp. 739-40) in a list which includes Cantillon, Mirabeau, Montesquieu and Hume. It is not difficult, therefore, to identify Steuart's sources of inspiration in matters of doctrine. But it is sometimes forgotten that Steuart faced an acute problem of organization in writing the Principles (cf. Skinner, 1966, pp. 5-6), a problem which was largely solved by his adoption of the broad methodological perspectives associated with Hume. While Hume was said to have been critical of the 'form and style' of the Principles, it is not difficult to understand his pleasure when first he read the work in manuscript form (Skinner, 1966, p. xlv).
Perhaps the use of the historical approach provides the most striking parallel, especially as applied to political subjects where Steuart ascribed to economic development a gradual but fundamental change in the patterns of authority and dependence, deducing that 'modern liberty' had arisen from the 'introduction of industry, and circulation of an adequate equivalent for every service' (Skinner, 1966, p. 209). The change in the balance of power which was the reflection of the same process also led Steuart to the conclusion that 'industry must give wealth and wealth will give power' (Skinner, 1966, p. 213). As an earnest of this position Steuart drew attention (in his notes on Hume's History) to the reduced position of the Crown at the end of Elizabeth's reign, a revolution which appears 'quite natural when we set before us the causes which occasioned it. Wealth must give power; and industry, in a country of luxury, will throw it into the hands of the commons' (Skinner, 1966, p. 213n).
There is an equally obvious parallel between Steuart and Hume in respect of the treatment of population, where in effect the former sought to extend the analysis of Hume's essay and to place this topic at the centre of his treatment in Book I. In so doing, Steuart stated that the first fundamental principle of population is generation, the next is food (Skinner, 1966, p. 31) from which it followed that where men live by gathering the fruits of the earth (the North American model), population levels must be determined by their extent (pp. 36-7).
Where some effort is applied to the cultivation of the soil (the agrarian stage) Steuart recognized that the output of food, and therefore the level of population, would grow. But here again he drew a distinction between cultivation for subsistence and the application of industry to the soil, as found in the modern situation, where all goods and services command a price and where the potential for economic growth (and therefore population) is enhanced—especially in a situation where the major sectors of activity are fully interdependent (Skinner, 1966, p. 42). It was for these reasons that Steuart was able to side with Hume's judgment against that of Montesquieu and Wallace.
Steuart's account of the stage of commerce also includes a statement which Hume would have instantly recognized when it was noted that:
We find the people distributed into two classes. The first is that of the farmers who produce the subsistence, and who are necessarily employed in this branch of business; the other I shall call the free hands; because their occupation being to procure themselves subsistence out of the superfluity of the farmers, and by a labour adapted to the wants of the society, may vary according to these wants and these again according to the spirit of the times.
(Skinner, 1966, p. 43)
The whole process, it was then noted, would be facilitated by the use of money as the means of exchange and further 'by an operation by which the wealth or work, either of individuals or of societies, may, by a set of men called merchants, be exchanged for an equivalent, proper for supplying every want, without interruption to industry, or any check upon consumption' (Skinner, 1966, p. 146).
Hume would have had little difficulty in appreciating these points or the broadly optimistic assessment which Steuart offered with regard to economic growth within this institutional framework. It is readily apparent that Steuart saw no reason to doubt the potential for economic development in the context of the exchange economy. Here, and for the first time in an institutional sense: 'Wealth becomes equably distributed; … by equably distributed I do not mean, that every individual comes to have an equal share, but an equal chance, I may say a certainty, of becoming rich in proportion to his industry' (Works, 1805, ii. 156). Steuart also argued that the potential for economic growth was almost without limit or certain boundary in the current 'situation of every country in Europe' (Skinner, 1966, p. 137). An equally dramatic confirmation of the general theme is to be found in the chapter on machines, which he considered to be 'of the greatest utility' in 'augmenting the produce or assisting the labour and ingenuity of man' (p. 125).
Again in the manner of Hume, it was Steuart's contention that the modern economy had encouraged new forms of demand and new incentives to industry. In a passage reminiscent of Smith's Moral Sentiments (which he may have read), Steuart drew attention to man's love of ingenuity and to the fact that the satisfaction of one level of perceived wants tends to open up others by virtue of a kind of demonstration effect (Skinner, 1966, p. 157).
The general point at issue is best caught by Steuart's earlier (but recurring) contrast between the feudal and modern systems: 'Men were then forced to labour because they were slaves to others; men are now forced to labour because they are slaves to their own wants' (Skinner, 1966, p. 51). But Steuart was to offer further applications of the thesis in ways which recall Hume's concern with variations in rates of economic performance in different communities.
In the second book Steuart dropped the Humean assumption of the closed economy and proceeded to examine the issue of international trade. Characteristically, he traced the interrelationship between developed and undeveloped nations in terms of the distinction between active and passive trade, which had already been established by Malachy Postlethwayt but in the context of a problem already addressed by Hume.
Steuart was clearly preoccupied with variations caused by 'natural advantages' such as access to materials, transport and the nature of the climate (Skinner, 1966, p. 238), as benefits a close student and admirer of 'the great Montesquieu' (p. 121). To these he added the form of government in arguing that 'trade and industry have been found to flourish best under the republican form, and under those which have come nearest to it' (p. 211). But equally important for Steuart were the spirit of a people and 'the greater degree of force' with which 'a taste for refinement and luxury in the rich, an ambition to become so, and an application to labour and ingenuity in the lower classes of men' manifested themselves in different societies at any one point in time and over time, a thoroughly Humean perspective.
Steuart was acutely conscious of the sheer variety of economic conditions and indeed noted early in the book that:
If one considers the variety which is found in different countries, in the distribution of property, subordination of classes, genius of people, proceeding from the variety of forms of government, laws, climate, and manners, one may conclude, that the political economy of each must necessarily be different.
(Skinner, 1966, p. 17)
The number of possible 'combinations' opened up by the proposition that growth rates and other characteristics will vary is virtually endless. In recognition of this point Steuart employed three broad classifications, all of which may derive from Mirabeau's Friend of Man (1756): the stages of infant, foreign and inland trade. This generalization and clarification of Hume's position reminds us of a further characteristic of Steuart's argument, namely his concern with economic policy.
The duties of the statesman in the economic sphere are clear: having defined the essence of the exchange economy as involving a 'general tacit contract', Steuart went on to note that 'Whenever … anyone is found, upon whom nobody depends, and who depends on everyone, as is the case with him who is willing to work for his bread, but who can find no employment, there is a breach of contract and an abuse' (Skinner, 1966, p. 88).
As in the case of Smith, the justification for intervention is market failure, although Steuart's position with respect to the function of the state arises directly from the areas of analysis and policy with which he was primarily concerned.
It is appropriate, first, to recall Steuart's interest in the model of primitive accumulation and in the emergence of the exchange economy. Steuart's concern with society in a process of transition is reflected in his attempt to formulate policies designed to deal with the problems generated by historical developments, developments which had caused cities to expand, and feudal retainers to be dismissed. It is in this context that the statesman is invited to consider the employment of redundant nobles and of the 'multitudes of poor' together with the all-important issue of the means of communication (such as good roads).
Steuart also suggested that the historical and contemporary record would also provide an invaluable guide to the problems which would confront a statesman who adopted a self-conscious policy of economic and therefore of social development. It was Steuart's contention that in many cases the transition from a state of 'trifling industry' and subsistence farming (which could be described as the primitive version of the stage of commerce) could not occur without the interposition of the sovereign (Skinner, 1966, p. 108). Steuart also gave a great deal of attention to policy with respect to international trade, in emphasizing the need for protection in particular cases and freedom of trade in others. The position is conveniently summarized by reference to the 'stages' of trade.
Infant trade, for example, represents an undeveloped economy where the ruling policy must be one of protection (Skinner, 1966, p. 262)—although he also noted that 'the scaffolding must be taken away when the fabric is completed' (Works, ii. 235). In the case of foreign trade, taken as representing the attainment of a competitive stage, the policies recommended are simply designed to retain the capacity of an economy to compete: here the ruling principles are 'to banish luxury; to encourage frugality; to fix the lowest standard of prices possible; and to watch, with the greatest attention, over the vibrations of the balance between work and demand. While this is preserved, no internal vice can affect the prosperity of it' (Skinner, 1966, p. 263).
Inland trade, on the other hand, represents a situation where a developed nation has lost its competitive edge. Here the basic preoccupation must be the maintenance of the level of employment. Steuart also recognized the importance of the balance of payments in advocating a restrictive monetary policy, and concluded: 'I will not therefore say, that in every case which can be supposed, certain restrictions upon the exportation of bullion or coin are contrary to good policy. This proposition I confine to the fluorishing nations of our own time' (Skinner, 1966, p. 581).
Two additional points are worth making before we conclude this sketch. First, we should recall Hume's distinction between the loss of particular markets in international trade and the situation where an economy finds itself in an...
(The entire section is 21889 words.)