Physiocrats and Physiocracy

views updated

PHYSIOCRATS AND PHYSIOCRACY

PHYSIOCRATS AND PHYSIOCRACY. Physiocracy was an economic theory that flourished in France in the second half of the eighteenth century, and an important example of Enlightenment social science. In 1757 François Quesnay (1694–1774), the chief theorist of Physiocracy, met Victor Riqueti, marquis de Mirabeau (1715–1789), initiating a lifelong collaboration. Two years later, Quesnay published his Tableau œconomique, a work he and Mirabeau regarded as the foundation of Physiocracy. This was followed by Mirabeau's Théorie de l'impôt in 1760, and the Philosophie rurale, the first full exposition of physiocratic thought, in 1763. In the 1760s, Mirabeau and Quesnay recruited Pierre-Samuel Dupont (1739–1817), Guillaume-François Le Trosne (1728–1780), Nicolas Baudeau (1730–1792), J.-N.-M. de Saint-Péravy (1732–1789), and Paul-Pierre Le Mercier de la Rivière (1719–1801); the latter published the most complete account of the doctrine in his L'ordre naturel et essentiel des sociétés politiques (1767). Physiocracy also won converts in Sweden, Germany, Austria, and Italy, and Le Mercier de la Rivière traveled to Russia to consult with Catherine II the Great (ruled 1762–1796).

Physiocracy addressed critical problems of the French state in the aftermath of the Seven Years' War (1756–1763). French statesmen wanted to understand why England had surged ahead of France in wealth and power, and they sought a program to reestablish French preeminence. The Physiocrats offered a diagnosis of French weakness: France had neglected agriculture in favor of commerce and manufactures. The central premise of Physiocracy is that agriculture is the sole source of wealth. Quesnay denied that commerce and manufacturing produce riches. The increase in value that manufacturing confers on raw materials, he argued, covers only labor and production costs, and a profit for the entrepreneur equivalent to a moderate interest on his capital. Agriculture, on the other hand, pays wage and production costs, a profit for the farmer, and still leaves a surplus—a "net product"—to pay a rent to the landlord. Quesnay argued that state-sponsored industrial development in France, combined with efforts to keep manufacturing wages low by regulating grain prices, had impoverished agriculture. The Physiocrats also criticized the fiscal system. They called for the abolition of existing taxes and their replacement by a single tax, which was to fall only on the net product. The net product represents the whole economic surplus of society, they argued; to collect tax on revenues other than the net product is merely to increase the costs of collection. To revivify the agricultural economy, and regenerate the nation, the Physiocrats sought to replace peasant cultivation with an English-style commercial agriculture. They also demanded the deregulation of the grain trade, including a relaxation of the laws against export, so that the price of grain could return to its natural level. The Physiocrats were doctrinaire advocates of free trade, rejecting the "balance of trade" theory, which held that statesmen must ensure that national exports always exceed imports. They regarded unfettered property rights as the foundation of prosperity, and they also argued in favor of absolute liberty to work, which led them to condemn the trade corporations that regulated the artisanal economy.

Although they identified the market economy as "natural," the Physiocrats believed that vested interests had blocked its development. To override such interests, they proposed to establish "legal despotism," a governing authority untrammeled by constitutional checks. By legal despotism the Physiocrats meant not arbitrary rule, but government under laws derived from the "natural order." Though they suggested that an independent magistracy and public opinion would watch over the acts of the sovereign, they expected self-interest to function as the principal check on its actions.

During the 1760s, with the enthusiastic support of the Physiocrats, the French administration committed itself to a program of economic reform, introducing domestic free trade in grain in 1763 and freedom of export in 1764. As grain prices rose between 1764 and 1770, deregulation was attacked. The Physiocrats defended the government in pamphlets and in the physiocratic journal, the Éphémérides du citoyen. They also supported the administration's policy of ending the monopoly of the Indies Company in 1769. Whatever influence Physiocracy enjoyed in the 1760s, it lost with the fall of the reform-minded administration in 1770. The anti-physiocratic Abbé Terray reinstituted regulation of the grain trade in 1770, and in 1772 closed the Ephémérides du citoyen. The Physiocrats enjoyed a resurgence when Louis XVI appointed Turgot, a physiocratic sympathizer, as controller general in 1774. The new minister reinstituted free trade in grain, reestablished the Ephémérides, and moved against the trade corporations. However, the opposition Turgot's reforms aroused swept him from office in 1776 and Physiocracy never again enjoyed the same prominence.

See also Agriculture ; Enlightenment ; Industrial Revolution ; Industry ; Taxation .

BIBLIOGRAPHY

Primary Sources

Le Mercier de la Rivière, Paul-Pierre. L'ordre naturel et essentiel des sociétés politiques. Reprint. Paris, 2001. Originally published 1767.

Mirabeau, Victor Riqueti, marquis de. Théorie de l'impôt. n.p., 1760.

Mirabeau, Victor Riqueti, marquis de, and François Quesnay. Philosophie rurale, ou Économie générale et politique de l'agriculture. Amsterdam, 1763.

Quesnay, François. Oeuvres économiques et philosophiques de F. Quesnay, fondateur du système physiocratique. Edited by Auguste Oncken. Frankfurt, 1888.