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The National System of Political Economy (31)

Chapter 31

The System of Values of Exchange (Falsely Termed by the School, The ’Industrial’ System) — Adam Smith

Adam Smith’s doctrine is, in respect to national and international conditions, merely a continuation of the physiocratic system. Like the latter, it ignores the very nature of nationalities, seeks almost entirely to exclude politics and the power of the State, presupposes the existence of a state of perpetual peace and of universal union, underrates the value of a national manufacturing power, and the means of obtaining it, and demands absolute freedom of trade.

Adam Smith fell into these fundamental errors in exactly the same way as the physiocrats had done before him, namely, by regarding absolute freedom in international trade as an axiom assent to which is demanded by common sense, and by not investigating to the bottom how far history supports this idea.

The National System of Political Economy (30)

Chapter 30

The Physiocratic or Agricultural System

Had the great enterprise of Colbert been permitted to succeed — had not the Revocation of the Edict of Nantes, the love of splendour and false ambition of Louis XIV, and the debauchery and extravagance of his successors, nipped in the bud the seeds which Colbert had sown — if consequently a wealthy manufacturing and commercial interest had arisen in France, if by good fortune the enormous properties of the French clergy had been given over to the public, if these events had resulted in the formation of a powerful lower house of Parliament, by whose influence the feudal aristocracy had been reformed — the physiocratic system would hardly have ever come to light. That system was evidently deduced from the then existing circumstances of France, and was only applicable to those circumstances.

The National System of Political Economy (29)

Chapter 29

The Industrial System (Falsely Termed by the School ’The Mercantile System’)

At the period when great nationalities arose, owing to the union of entire peoples brought about by hereditary monarchy and by the centralisation of public power, commerce and navigation, and hence wealth and naval power, existed for the most part (as we have before shown) in republics of cities, or in leagues of such republics. The more, however, that the institutions of these great nationalities became developed, the more evident became the necessity of establishing on their own territories these main sources of power and of wealth.

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Third Book

The Systems

Chapter 28

The National Economists of Italy

Italy has been the forerunner of all modern nations, in the theory as well as in the practice of Political Economy. Count Pechio has given us a laboriously written sketch of that branch of Italian literature; only his book is open to the observation, that he has clung too slavishly to the popular theory, and has not duly set forth the fundamental causes of the decline of Italy’s national industry — the absence of national unity, surrounded as she was by great nationalities united under hereditary monarchies; further, priestly rule and the downfall of municipal freedom in the Italian republics and cities. If he had more deeply investigated these causes, he could not have failed to apprehend the special tendency of the ’Prince’ of Macchiavelli, and he would not have passed that author by with merely an incidental reference to him.(1*)

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Chapter 27

The Customs System and the Popular School

The popular school does not discriminate (in respect of the operation of protective duties) between natural or primitive products and manufactured products. It perverts the fact that such duties always operate injuriously on the production of primitive or natural products, into the false conclusion that they exercise an equally detrimental influence on the production of manufactured goods.

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Chapter 26

Customs Duties as a Chief Means of Establishing and Protecting the internal Manufacturing Power

It is not part of our plan to treat of those means of promoting internal industry whose efficacy and applicability are nowhere called in question. To these belong e.g. educational establishments (especially technical schools), industrial exhibitions, offers of prizes, transport improvements, patent laws, &c.; in short, all those laws and institutions by means of which industry is furthered, and internal and external commerce facilitated and regulated. We have here merely to speak of the institution of customs duties as a means for the development of industry.

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Chapter 25

The Manufacturing Power and the Inducement to Production and Consumption

In society man is not merely productive owing to the circumstance that he directly brings forth products or creates powers of production, but he also becomes productive by creating inducements to production and to consumption, or to the formation of productive powers.

The artist by his works acts in the first place on the ennobling and refinement of the human spirit and on the productive power of society; but inasmuch as the enjoyment of art presupposes the possession of those material means whereby it must be purchased, the artist also offers inducements to material production and to thrift.

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Chapter 24

The Manufacturing Power and the Principle of Stability and Continuity of Work

If we investigate the origin and progress of individual branches of industry we shall find that they have only gradually become possessed of improved methods of operation, machinery buildings, advantages in production, experiences, and skill, and of all those knowledges and connections which insure to them the profitable purchase of their raw materials and the profitable sale of their products. We may rest assured that it is (as a rule) incomparably easier to perfect and extend a business already established than to found a new one. We see everywhere old business establishments that have lasted for a series of generations worked with greater profits than new ones. We observe that it is the more difficult to set a new business going in proportion as fewer branches of industry of a similar character already exist in a nation; because, in that case, masters, foremen, and workmen must first be either trained up at home or procured from abroad, and because the profitableness of the business has not been sufficiently tested to give capitalists confidence in its success. If we compare the conditions of distinct classes of industry in any nation at various periods, we everywhere find, that when special causes had not operated to injure them, they have made remarkable progress, not only in regard to cheapness of prices, but also with respect to quantity and quality, from generation to generation. On the other hand, we observe that in consequence of external injurious causes, such as wars and devastation of territory, &c., or oppressive tyrannical or fanatical measures of government and finance (as e.g. the revocation of the Edict of Nantes), whole nations have been thrown back for centuries, either in their entire industry or in certain branches of it, and have in this manner been far outstripped by nations in comparison with which they had previously been far advanced.

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Chapter 23

The Manufacturing Power and the Instrument of Circulation

If the experience of the last twenty-five years has confirmed, as being partly correct, the principles which have been set up by the prevailing theory in contradiction to the ideas of the so-called ’mercantile’ system on the circulation of the precious metals and on the balance of trade, it has, on the other hand, brought to light important weak points in that theory respecting those subjects.

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Chapter 22

The manufacturing Power and Navigation, Naval Power and Colonization

    Manufactures as the basis of a large home and foreign commerce are also the fundamental conditions of the existence of any considerable mercantile marine. Since the most important function of inland transport consists in supplying manufacturers with fuel and building materials, raw materials and means of subsistence, the coast and river navigation cannot well prosper in a merely agricultural State. The coast navigation, however, is the school and the depфt of sailors, ships’ captains, and of shipbuilding, and hence in merely agricultural countries the main foundation for any large maritime navigation is lacking.