Third Modern Phase:System of Natural Liberty The changes introduced during the third phase in the internal organisation of the industrial world were (1)the morecomplete separation of banking from general commerce,and the wider extension of its operations,especially through thesystem of public credit;and (2)the great development of the use of machinery in production.The latter did not become veryprominent during the first half of the eighteenth century,Whilst tending to promote the dignity of the working classes byrelieving them from degrading and exhausting forms of labour,it widened the gulf between them and the capitalistemployers.It thus became plain that for the definitive constitution of industry a moral reform was the necessary preliminarycondition.
With respect to the political relations of industry,a remarkable inversion now showed itself.The systematic encouragementswhich the European Governments had extended to it in the preceding phase had been prompted by their desire to use it as aninstrument for achieving the military superiority which was the great end of thek policy.Now,on the contrary,the militaryspirit subordinated itself to the industrial,and the armies and the diplomacy of Governments were placed at the service ofcommerce.The wars which filled a large part of the eighteenth century were essentially Commercial wars,arising out of theeffort to sustain or extend the colonial establishments founded in the previous phase,or to deprive rival nations of theindustrial advantages connected with the possession of such establishments.This change of attitude,notwithstanding itsdeplorable tendency to foster international enmities and jealousies,marked a real and important progress by pointing toindustrial activity as the one permanent practical destination of modern societies.
But,whilst by this sort of action furthering the ascendency of the new forces,the ruling powers,both in England and France,betrayed the alarm they felt at the subversive tendencies which appeared inherent in the modern movement by taking up intheir domestic policy an attitude of resistance.Reaction became triumphant in France during the latter half of the reign ofLouis XIV,under the disastrous influence of Madame de Maintenon.In England,after the transaction of 1688,by which theGovernment was consolidated on the double basis of aristocratic power and official orthodoxy,the state policy became notso much retrograde as stationary,industrial conquest being put forward to satisfy the middle class and wean it from thepursuit of a social renovation.In both countries there was for some time a noticeable check in the intellectual development,and Roscher and others have observed that,in economic studies particularly,the first three decades of the eighteenth centurywere a period of general stagnation,eclecticism for the most part taking the place of originality.The movement was,however,soon to be resumed,but with an altered and more formidable character.The negative doctrine,which had risenand taken a definite form in England,was diffused and popularised in France,where it became evident,even before thedecisive explosion,that the only possible issue lay in a radical social transformation.The partial schools of Voltaire andRousseau in different ways led up to a violent crisis,whilst taking little thought of the conditions of a system which couldreplace the old;but the more complete and organic school,of which Diderot is the best representative,looked throughfreedom to a thorough reorganisation.Its constructive aim is shown by the design of the Encyclopédie --a project,however,which could have only a temporary success,because no real synthesis was forthcoming,and this joint production of mindsoften divergent could possess no more than an external unity.It was with this great school that the physiocrats werespecially connected;and,in common with its other members whilst pushing towards an entire change of the existing system,they yet would gladly have avoided political demolition through the exercise of a royal dictatorship,or contemplated it onlyas the necessary condition of a new and better order of things.But,though marked off by such tendencies from the purelyrevolutionary sects,their method and fundamental ideas were negative,resting,as they did,essentially on the basis of the jusnatura .We shall follow in detail these French developments in their special relation to economic science,and afterwardsnotice the corresponding movements in other European countries which showed themselves before the appearance of AdamSmith,or were at least unaffected by his influence.
BEFORE ADAM SMITH
France The more liberal,as well as more rational,principles put forward by the English thinkers of the new type began,early in theeighteenth century,to find an echo in France,where the clearer and more vigorous intellects were prepared for theirreception by a sense of the great evils which exaggerated mercantilism,serving as instrument of political ambition,hadproduced in that country.The impoverished condition of the agricultural population,the oppressive weight and unequalimposition of taxation,and the unsound state of the public finances had produced a general feeling of disquiet,and ledseveral distinguished writers to protest strongly against the policy of Colbert and to demand a complete reform.
The most important amongst them was Pierre Boisguillebert (d.1714),whose whole life was devoted to these controversies.
