The National System of Political Economy

Book I, Chapter X
THE TEACHINGS OF HISTORY.

EVERYWHERE and at all times has the well-being of the nation been in equal proportion to the intelligence, morality, and industry of its citizens; according to these, wealth has accrued or been diminished; but industry and thrift, invention and enterprise, on the part of individuals, have never as yet accomplished aught of importance where they were not sustained by municipal liberty, by suitable public institutions and laws, by the State administration and foreign policy, but above all by the unity and power, of the nation.

History everywhere shows us a powerful process of reciprocal action between the social and the individual powers and conditions. In the Italian and the Hanseatic cities, in Holland and England, in France and America, we find the powers of production, and consequently the wealth of individuals, growing in proportion to the liberties enjoyed, to the degree of perfection of political and social institutions, while these, on the other hand, derive material and stimulus for their further improvement from the increase of the material wealth and of the productive power of individuals. The real rise of the industry and power of England dates only from the days of the actual foundation of England's national freedom, while the industry and power of Venice, of the Hanse Towns, of the Spanish and Portuguese, decayed concurrently with their loss of freedom. However industrious, thrifty, inventive, and intelligent, individual citizens might be, they could not make up for the lack of free institutions. History also teaches that individuals derive the greater part of their productive powers from the social institutions and conditions under which they are placed.

The influence of liberty, intelligence, and enlightenment over the power, and therefore over the productive capacity and wealth of a nation, is exemplified in no respect so clearly as in navigation. Of all industrial pursuits, navigation most demands energy, personal courage, enterprise, and endurance; qualifications that can only flourish in an atmosphere of freedom. In no other calling do ignorance, superstition, and prejudice, indolence, cowardice, effeminacy, and weakness produce such disastrous consequences; nowhere else is a sense of self-reliance so indispensable. Hence history cannot point to a single example of an enslaved people taking a prominent part in navigation. The Hindoos, the Chinese, and the Japanese have ever strictly confined their efforts to canal and river navigation and the coasting trade. In ancient Egypt maritime navigation was held in abhorrence, probably because priests and rulers dreaded lest by means of it the spirit of freedom and independence should be encouraged. The freest and most enlightened states of ancient Greece were also the most powerful at sea; their naval power ceased with their freedom, and however much history may narrate of the victories of the kings of Macedonia on land, she is silent as to their victories at sea.

When were the Romans powerful at sea, and when is nothing more heard of their fleets? When did Italy lay down the law in the Mediterranean, and since when has her very coasting trade fallen into the hands of foreigners? Upon the Spanish navy the Inquisition had passed sentence of death long ere the English and the Dutch fleets had executed the decree. With the coming into power of the mercantile oligarchies in the Hanse Towns, power and the spirit of enterprise took leave of the Hanseatic League.

Of the Spanish Netherlands only the maritime provinces achieved their freedom, whereas those held in subjection by the Inquisition had even to submit to the closing of their rivers. The English fleet, victorious over the Dutch in the Channel, now took possession of the dominion of the seas, which the spirit of freedom had assigned to England long before; and yet Holland, down to our own days, has retained a large proportion of her mercantile marine, whereas that of the Spaniards and the Portuguese is almost annihilated. In vain were the efforts of a great individual minister now and then under the despotic kings of France to create a fleet, for it invariably went again to ruin.

But how is it that at the present day we witness the growing strength of French navigation and naval power? Hardly had the independence of the United States of North America come to life, when we find the Americans contending with renown against the giant fleets of the mother country. But what is the position of the Central and South American nations? So long as their flags wave not over every sea, but little dependence can be placed upon the effectiveness of their republican forms of government. Contrast these with Texas, a territory that has scarcely attained to political life, and yet already claims its share in the realm of Neptune.

But navigation is merely one part of the industrial power of a nation—a part which can flourish and attain to importance only in conjunction with all the other complementary parts. Everywhere and at all times we see navigation, inland and foreign trade, and even agriculture itself, flourish only where manufactures have reached a high state of prosperity. But if freedom be an indispensable condition for the prosperity of navigation, how much more must it be so for the prosperity of the manufacturing power, for the growth of the entire producing power of a nation? History contains no record of a rich, commercial, and industrial community that was not at the same time in the enjoyment of freedom.

Manufactures everywhere first brought into operation improved means of transport, improved river navigation, improved highways, steam navigation and railways, which constitute the fundamental elements of improved systems of agriculture and of civilisation.

History teaches that arts and trades migrated from city to city, from one country to another. Persecuted and oppressed at home, they took refuge in cities and in countries where freedom, protection, and support were assured to them. In this way they migrated from Greece and Asia to Italy; from Italy to Germany, Flanders, and Brabant; and from thence to Holland and England. Everywhere it was want of sense and despotism that drove them away, and the spirit of freedom that attracted them. But for the folly of the Continental governments, England would have had difficulty in attaining supremacy in industry. But does it appear more consistent with wisdom for us in Germany to wait patiently until other nations are impolitic enough to drive out their industries and thus compel them to seek a refuge with us, or that we should, without waiting for such contingencies, invite them by proffered advantages to settle down amongst us?

It is true that experience teaches that the wind bears the seed from one region to another, and that thus waste moorlands have been transformed into dense forests; but would it on that account be wise policy for the forester to wait until the wind in the course of ages effects this transformation?

Is it unwise on his part if by sowing and planting he seeks to attain the same object within a few decades? History tells us that whole nations have successfully accomplished that which we see the forester do? Single free cities, or small republics and confederations of such cities and states, limited in territorial possessions, of small population and insignificant military power, but fortified by the energy of youthful freedom and favoured by geographical position as well as by fortunate circumstances and opportunities, flourished by means of manufactures and commerce long before the great monarchies; and by free commercial intercourse with the latter, by which they exported to them manufactured goods and imported raw produce in exchange, raised themselves to a high degree of wealth and power. Thus did Venice, the Hanse Towns, the Belgians and the Dutch.

Nor was this system of free trade less profitable at first to the great monarchies themselves, with whom these smaller communities had commercial intercourse. For, having regard to the wealth of their natural resources and to their undeveloped social condition, the free importation of foreign manufactured goods and the exportation of native produce presented the surest and most effectual means of developing their own powers of production, of instilling habits of industry into their subjects who were addicted to idleness and turbulence, of inducing their landowners and nobles to feel an interest in industry, of arousing the dormant spirit of enterprise amongst their merchants, and especially of raising their own civilisation, industry, and power.

These effects were learned generally by Great Britain from the trade and manufacturing industry of the Italians, the Hansards, the Belgians, and the Dutch. But having attained to a certain grade of development by means of free trade, the great monarchies perceived that the highest degree of civilisation, power, and wealth can only be attained by a combination of manufactures and commerce with agriculture. They perceived that their newly established native manufactures could never hope to succeed in free competition with the old and long-established manufactures of foreigners; that their native fisheries and native mercantile marine, the foundations of their naval power, could never make successful progress without special privileges; and that the spirit of enterprise of their native merchants would always be kept down by the overwhelming reserves of capital, the greater experience and sagacity of the foreigners. Hence they sought, by a system of restrictions, privileges, and encouragements, to transplant on to their native soil the wealth, the talents, and the spirit of enterprise of the foreigners. This policy was pursued with greater or lesser, with speedier or more tardy success, just in proportion as the measures adopted were more or less judiciously adapted to the object in view, and applied and pursued with more or less energy and perseverance.

England, above all other nations, has adopted this policy. Often interrupted in its execution from the want of intelligence and self-restraint on the part of her rulers, or owing to internal commotions and foreign wars, it first assumed the character of a settled and practically efficient policy under Edward VI., Elizabeth, and the revolutionary period. For how could the measures of Edward III. work satisfactorily when it was not till under Henry VI. that the law permitted the carriage of corn from one English county to another, or the shipment of it to foreign parts; when still under Henry VII. and Henry VIII. all interest on money, even discount on bills, was held to be usury, and when it was still thought at the time that trade might be encouraged by fixing by law at a low figure the price of woollen goods and the rate of wages, and that the production of corn could be increased by prohibiting sheep farming on a large scale?

And how much sooner would England's woollen manufactures and maritime trade have reached a high standard of prosperity had not Henry VIII. regarded a rise in the prices of corn as an evil; had he, instead of driving foreign workmen by wholesale from the kingdom, sought like his predecessors to augment their number by encouraging their immigration; and had not Henry VII. refused his sanction to the Act of Navigation as proposed by Parliament?

In France we see native manufactures, free internal intercourse, foreign trade, fisheries, navigation, and naval power—in a word, all the attributes of a great, mighty, and rich nation (which it had cost England the persevering efforts of centuries to acquire)—called into existence by a great genius within the space of a few years, as it were by a magician's wand; and afterwards all of them yet more speedily annihilated by the iron hand of fanaticism and despotism.

We see the principle of free trade contending in vain under unfavourable conditions against restriction powerfully enforced; the Hanseatic League is ruined, while Holland sinks under the blows of England and France.

That a restrictive commercial policy can be operative for good only so far as it is supported by the progressive civilisation and free institutions of a nation, we learn from the decay of Venice, Spain, and Portugal, from the relapse of France in consequence of the revocation of the Edict of Nantes, and from the history of England, in which country liberty kept pace at all times with the advance of industry, trade, and national wealth.

That, on the contrary, a highly advanced state of civilisation, with or without free institutions, unless supported by a suitable system of commercial policy, will prove but a poor guarantee for a nation's economic progress, may be learnt on the one hand from the history of the North American free states, and on the other from the experience of Germany.

Modern Germany, lacking a system of vigorous and united commercial policy, exposed in her home markets to competition with a foreign manufacturing power in every way superior to her own, while excluded at the same time from foreign markets by arbitrary and often capricious restrictions, and very far indeed from making that progress in industry to which her degree of culture entitles her, cannot even maintain her previously acquired position, and is made a convenience of (like a colony) by that very nation which centuries ago was worked upon in like manner by the merchants of Germany, until at last the German states have resolved to secure their home markets for their own industry, by the adoption of a united vigorous system of commercial policy.

The North American free states, who, more than any other nation before them, are in a position to benefit by freedom of trade, and influenced even from the very cradle of their independence by the doctrines of the cosmopolitan school, are striving more than any other nation to act on that principle. But owing to wars with Great Britain, we find that nation twice compelled to manufacture at home the goods which it previously purchased under free trade from other countries, and twice, after the conclusion of peace, brought to the brink of ruin by free competition with foreigners, and thereby admonished of the fact that under the present conditions of the world every great nation must seek the guarantees of its continued prosperity and independence, before all other things, in the independent and uniform development of its own powers and resources.

Thus history shows that restrictions are not so much the inventions of mere speculative minds, as the natural consequences of the diversity of interests, and of the strivings of nations after independence or overpowering ascendency, and thus of national emulation and wars, and therefore that they cannot be dispensed with until this conflict of national interests shall cease, in other words until all nations can be united under one and the same system of law. Thus the question as to whether, and how, the various nations can be brought into one united federation, and how the decisions of law can be invoked in the place of military force to determine the differences which arise between independent nations, has to be solved concurrently with the question how universal free trade can be established in the place of separate national commercial systems.

The attempts which have been made by single nations to introduce freedom of trade in face of a nation which is predominant in industry, wealth, and power, no less than distinguished for an exclusive tariff system—as Portugal did in 1703, France in 1786, North America in 1786 and 1816, Russia from 1815 till 1821, and as Germany has done for centuries—go to show us that in this way the prosperity of individual nations is sacrificed, without benefit to mankind in general, solely for the enrichment of the predominant manufacturing and commercial nation. Switzerland (as we hope to show in the sequel) constitutes an exception, which proves just as much as it proves little for or against one or the other system.

Colbert appears to us not to have been the inventor of that system which the Italians have named after him; for, as we have seen, it was fully elaborated by the English long before his time. Colbert only put in practice what France, if she wished to fulfil her destinies, was bound to carry out sooner or later. If Colbert is to be blamed at all, it can only be charged against him that he attempted to put into force under a despotic government a system which could subsist only after a fundamental reform of the political conditions.

But against this reproach to Colbert's memory it may very well be argued that, had his system been continued by wise princes and sagacious ministers, it would in all probability have removed by means of reforms all those hindrances which stood in the way of progress in manufactures, agriculture, and trade, as well as of national freedom; and France would then have undergone no revolution, but rather, impelled along the path of development by the reciprocating influences of industry and freedom, she might for the last century and a half have been successfully competing with England in manufactures, in the promotion of her internal trade, in foreign commerce, and in colonisation, as well as in her fisheries, her navigation, and her naval power.

Finally, history teaches us how nations which have been endowed by Nature with all resources which are requisite for the attainment of the highest grade of wealth and power, may and must—without on that account forfeiting the end in view—modify their systems according to the measure of their own progress: in the first stage, adopting free trade with more advanced nations as a means of raising themselves from a state of barbarism, and of making advances in agriculture; in the second stage, promoting the growth of manufactures, fisheries, navigation, and foreign trade by means of commercial restrictions; and in the last stage, after reaching the highest degree of wealth and power, by gradually reverting to the principle of free trade and of unrestricted competition in the home as well as in foreign markets, that so their agriculturists, manufacturers, and merchants may be preserved from indolence, and stimulated to retain the supremacy which they have acquired. In the first stage, we see Spain, Portugal, and the Kingdom of Naples; in the second, Germany and the United States of North America; France apparently stands close upon the boundary line of the last stage; but Great Britain alone at the present time has actually reached it.