The Wealth of Nations
Book 4, Chapter 9
The Agricultural Systems As The Principal Source Of Revenue And Wealth Of Every Country
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Chapter 9 Summary
The line of thought, particularly amongst scholars in France, was that agricultural development was the sole source of a country’s revenue and wealth. Mr. Colbert, the famous minister of Louis XIV, however, embraced all of the prejudices of the mercantile system, and regulated the country’s industry and commerce on the same model as that of departments of a public office, rather than allowing men free rein. He prohibited the exportation of corn and excluded the country’s inhabitants from foreign trade, thus discouraging and suppressing the country’s agriculture, favoring industry over agriculture.
His thinking was directly opposed to that of the French scholars who believed that agricultural development represented the basis of a country’s wealth; whereas Mr. Colbert’s line of thought favored industry over agriculture, these French intellectuals favored agriculture over industry.
Under Mr. Colbert’s system, people were divided into three classes: landowners, cultivators (the productive class), artificers and merchants (the unproductive class). Landowners contribute to production by investing in improving the land, buildings, drains, enclosures, etc. (ground expenses).
Cultivators contribute by investing in instruments of husbandry, cattle, seed, and maintenance of the farmer's family, servants and cattle. The produce of the land left over for the farmer once he has paid the rent should to be sufficient to cover all of his expenses, together with ordinary profits. Under this system, initial outlay expenses and annual expenses are called “productive expenses” since they go towards the end net produce. The ground expenses of the landlord, together with the original outlay and annual expenses of the farmer, are the only three expenses deemed productive. Under this system, all other expenses and all other classes of people, even those who are the most productive, are viewed as unproductive. Artificers and manufacturers in particular, whose work significantly improves the crude produce of the land, are viewed as barren and unproductive under this system.
The capital error of this system is its inaccurate representation of the class consisting of craftsmen, manufacturers and merchants as altogether barren and unproductive.
This system, with all its imperfections, has numerous followers, particularly the economists of France. Literature on this system was nevertheless the nearest approximation to the truth published at that time on the subject of political economy, and as such provides valuable information for anyone studying the principles of this topic. Although its suggestion that agricultural labor is the only productive labor is a somewhat narrow and confined notion, its recognition that a nation’s wealth consists not of the money but rather of the consumable goods produced annually by the labor of its society is a better, more liberal notion.
The Netherlands draws a great part of its subsistence from other countries; live cattle from Holstein and Jutland, and corn from all over Europe. A trading and manufacturing country is able to purchase a large volume of unfinished produce from other countries with just a small part of its own manufactured produce. On the contrary, a country with no trade or manufacturing is generally obliged to use a major part of its own produce to purchase a very small part of other countries’ manufactured produce.
European countries’ political economy favors manufacturing industries and foreign trade over agriculture, whereas other countries have tended to favor agriculture over manufacturing industries and foreign trade.
The major form of commerce of every nation is that between the inhabitants of the town and the country. The town purchases unfinished produce from the country, which it pays for by returning a portion of it manufactured and prepared for immediate use. The trade between these two different sets of people involves unfinished crude produce being exchanged for manufactured produce. When prices of manufactured goods rise, those of crude land-produced goods drop, thereby discouraging agriculture. When the number of craftsmen and manufacturers drops, the home market tends to diminish. Since this is the most important market for home-produced crude produce, agriculture is further discouraged.
The systems which favor agriculture and impose restraints on manufacturing and foreign trade indirectly discourage the very industry they are aiming to promote. They are more inconsistent than the mercantile system, which, by encouraging manufacturing and foreign trade over agriculture, channels a portion of a society’s capital away from a more profitable industry towards a less profitable one.
Any system which endeavors to channel a greater share of capital towards a particular industry than would naturally go to it is actually going against the very process it is endeavoring to promote. This approach hinders rather than accelerates a society’s progress towards real wealth and power, diminishing the real value of the annual produce of its land and labor.
When a system of either preferential agreements or restrictions is removed, a system of natural liberty establishes itself of its own accord. Any man, as long as he does not break the law, is left free to pursue his own interests in his own way, and to compete with others through industry and capital.
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