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THE POLITICAL IDEAS OF THE CLASSICAL ECONOMISTS

The political ideas of the classical economists have an interesting and a significant relation to their ideas of economic policy. An analysis of the relation uncovers two paradoxes. They are important in themselves and they are important for what they tell us of the development of economic liberalism after the middle of the eighteenth century.

The classicists urged economic freedom on the world and in doing so they were expressly or by implication saying that all men should have the right to seek their material welfare in their own way. This right was “natural” to them in one of two senses or both. It was natural because it was either a psychological characteristic or a political privilege with which they were born, or both. Now to say that each man has a right to make economic choices is to imply that he also has a right to make political choices. I do not mean that a free market, in every argument that can be made for it, necessarily implies a government based on universal consent, i.e., a democracy. A free market can be justified on grounds of efficiency and not of psychology or ethics—as, for example, it could be justified in an authoritarian state as a means of maximizing consumer satisfaction. It need not be justified as a means of permitting people to make choices for the sake of making them, a justification derived from the Stoic conception that virtue consists in the act of choice and not in the thing chosen. The justification given the free market by the classical economists was related to the Stoic conception but was not the same. The economists justified it as a means of allowing the individual to exercise his natural right to make economic choices, and the justification implies he also should have a means of exercising his natural right to make political choices. That implies a democratic form of government and suggests the classical economists should have favored such a government. But they did not.

In the opposition of these views is one paradox: A free market implies what may be called universal economic enfranchisement, but limitations on representative government deny men the political freedom that is the analogue of a free market. This paradox is exactly the opposite of that which usually is attributed to capitalism, namely that capitalism provides political but not economic democracy.

The second paradox is implicit in the opposition between the classical doctrine of free international trade and the belief of the economists in the advantages of a strong national state, a belief manifested in their views on military establishments, on the defense of Britain, and on the relationship of liberty to national power. If all countries traded freely with each other, some commodities that are essential to national power would be produced in only a few countries and not all of them in any one country. Other goods would be produced more widely but not all of them in sufficient quantity to support power. There eventually would come into being a world political condition in which national states, as carriers of decisive power, would be impossible or unlikely. What now are nations would become regional economies, which would be bound together by ties of mutual economic dependence and a common condition of political (or at least military) impotence. This paradox was to succeeding generations a little less evident than the first, but it was more obvious to the classical economists themselves. It was to Smith because he wrote in favor of the Navigation Acts and other measures which increased the national power of Britain but diminished its real income.

In seeking to uncover the source of these paradoxes, I shall refer mainly (although not exclusively) to the writings of Hume and Smith and to the historical circumstances of which they seemed most aware; because in the early period of classicism the paradoxes were most striking. Except for differences in emphasis and detail, what is said here of Hume and Smith will apply also to most of the other figures in the classical school, like Malthus, James Mill, Ricardo, McCulloch, and Senior. The ideas of John Stuart Mill are of a quite different sort and are described separately at the close of this chapter.

1

The Political Philosophy of Hume and Smith

The political doctrine of the classical economists was in fact liberal and consistent with their economic policy, despite its paradoxical relationship to the idea of a free market. Their standards of political practice—as distinct from doctrine—can be described as “utilitarian,” as that word is taken in its ordinary and limited meaning. The political structure they advocated was a representative government of a type common in the liberal tradition. In the way they viewed the objectives of political organization, the economists were in agreement with the political philosophers of the seventeenth century. The economists departed from them in certain practical, or utilitarian, matters. The economists gave less emphasis to the methods of government than to its end; they were less exacting about the organization of the state; and they believed that such matters were to be appraised by the success of any particular political organization in achieving the primary ends of liberalism. In this sense their standards of political practice were utilitarian. This latitude did not, however, make them wholly indifferent to the form of government: although they looked upon the organization or structure of the state less critically than upon its intentions and its effects, they did believe in keeping the structure within the limits of what Smith called “republicanism.”

A SUMMARY STATEMENT

To the eighteenth century, even more than to the liberal philosophers of the preceding century and a half, governments were a necessary evil at best and at worst were “engines of despotism.” They reflected unhappily on the imperfect constitution of human nature and existed only to serve very limited ends, ends that unfortunately could not be realized by agreement alone but needed a coercive agency. To the classical economists, the primary objective of political organization was the protection and increase of individual liberty, in which was included the liberty to accumulate property. The principal condition for realizing this end was the maintenance of peace and order through government by law. Among the things to be secured, a major item was private property. In establishing social peace as the great desideratum, the economists had in mind something more than merely preserving the status quo. They looked upon political stability as the condition for advancing the more important ends of individual liberty and the free use of wealth. But although they were not committed to the status quo—and were very clear in asserting the right of a people to rebel against authority—neither were they light-minded about revolution. This attitude is made plain by Smith in his Lectures on Police, Justice, Revenue and Arms, where, after stating that utility is the foundation of government, he declared that once a government loses its usefulness it no longer has any right to exist and should be overthrown; but, he continued, the people will do well to bear many inconveniences before taking on themselves the responsibility for revolution. These “inconveniences” may be no mere trifles; they may be major violations of individual liberty, to be endured by nothing short of heroic patience. So one may infer from The Wealth of Nations. The evils of government and governors are painted very black indeed, but at no point does Smith suggest that revolution is the remedy (as some of his American admirers did).

Although the classical economists wrote less about the form of government than about its objectives and seemed to think it less important, still almost all of them proposed limited representative institutions and an hereditary monarch as a stabilizing agency. Such a government was described in a variety of ways. To Hume, it was an aristocracy; to Smith, a republic; to James Mill, a system of checking bodies; to Nassau W. Senior, a mixed government. These descriptions were hardly more diverse than the party sympathies of the economists. Hume was a Tory while Smith was inclined to the Whigs; James Mill also was a Whig, and Ricardo sided with its radical wing on most of the issues that arose when he was in the House of Commons. But despite the differences in party attachment, the economists were pretty well agreed among themselves on political principles.

This summary statement of their politics seems to place them outside the political philosophy of the Enlightenment as it is stated in such works as Richard Hooker’s The Laws of Ecclesiastical Polity, The Leviathan of Hobbes, the second Treatise on Civil Government of Locke, Montesquieu’s Spirit of the Laws, and the pragmatism of Halifax (George Savile). These men differ in many ways, but they express some common suppositions about man and society. One is that man is by nature motivated by a desire for material gain and the motive has no natural limits. It leads him to grasp what he can in complete disregard for the rights of others. When expressed in a state of nature—i.e., in the absence of government—it leads men to war upon each other, to disrupt the peace essential to liberty, and to subvert liberty itself. A second assumption is that however badly man may behave in a state of nature, he nevertheless is reasonable enough to understand that his condition can be improved. That understanding directs him to form a political society, for which he fortunately is qualified by a natural gregariousness and a capacity for government. A third assumption is that each man possesses certain natural rights, the most fundamental of which are the security of his life, his liberty, and his property. Being natural, the rights are therefore inviolable, and no institution nor person legitimately can alienate them.

Man’s natural rights are the result of his natural behavior—its consequence or product. The philosophers of the Enlightenment assumed that each person sought to protect first his own life, liberty, and possessions, that he was by nature interested principally in his own welfare, that any other course of behavior was unnatural and hence uncommon. If men were so inclined, that was because they either were intended by the Deity to act in this way or were so constituted psychologically as to make any other form of behavior impossible. In either case, self-seeking had to be taken as the datum of politics. To guarantee to each man the right to seek his own interest became then the major purpose of government. In the language of the Enlightenment, the purpose of government is the protection of natural rights. Stated in summary fashion, the protection of a man’s natural rights simply meant the protection of his right to act naturally.

In a state of nature, these rights could not be secure, because individuals would not respect the natural rights of others. The problem of political organization was to find a way of bringing men together which would enable each person to seek his own interests without violating the interests of others. It perhaps needs underscoring that government did not have as its purpose the remaking of human nature in order thereby to eliminate self-interest as the cause of social discord. The classical liberals believed that the state should take men as it finds them and they would have been shocked (to say the least) by certain later writers on government who in the name of freedom wanted to refashion humanity in order to make it conform to their notions of the good society.

The classic liberals solved the problem of political organization—the problem of bringing men together and of their living usefully and peaceably—by means of the social contract. The social contract was an agreement between all members of society about the conditions on which they would combine and associate. As no man willingly would agree to any form of government which deprived him of his rights, and as the social contract could be concluded only through voluntary agreement, the kind of government so established would be necessarily one that represented every individual and promoted his welfare. The social contract occupied the central place in the political philosophy of the Enlightenment, because it represented the means whereby agreement was achieved and natural rights secured.

In the political remarks of the classical economists, the contract theory of government usually is rejected. Hume dismissed it as fanciful, and Smith believed it was unwarranted. Hume conceded that a contract once may have existed, but said that in the course of history it had become obliterated by violence and usurpation.1 Smith argued against the idea in his Lectures, and in The Wealth of Nations declared that government initially was established to enforce an unequal distribution of wealth, remarking dryly that only under the wing of the civil magistrate could the rich get a good night’s sleep.2

Yet even when the rejection of the social contract is given full weight, there will be found, I believe, an underlying consistency between the political philosophy of the Enlightenment and that of the classical economists. Behind the idea of an original contract, there was in classical liberalism a conception of human nature and a belief in natural rights. Though the economists rejected a literal interpretation of the contract and abandoned the idea of a providential force (the natural law) as the guiding force of men’s social behavior, they did not depart significantly from the seventeenth century’s view of human motives or from its ethical standards.

Hooker, Hobbes, and Locke, from whose work later liberal doctrine derives, may have meant to make a literal statement of the origins of government or they may have meant to describe the foundation on which government ought to rest. Whatever their intentions were, their writings were tracts for the times, and the times called for somewhat more freedom. The books performed their duty well, and we are richer today because of them. When Hume and Smith dismissed the assumption of an original contract, they were not disputing the idea that consent ought to form the basis of government but rather the belief that it actually did. Unfortunately they were not much more careful than the earlier philosophers in distinguishing between the actual and the ideal.

HUME AND THE IDEA OF OPINION

In his political essays, Hume observed that man by nature is factious, impulsive, ignorant of his best interests, and without sense enough to choose his own government. His intrinsic avarice, Hume declared, makes him covetous of the property of others and is the principal cause of social conflict (and also of progress).3 Yet Hume found that these deficiencies were not fatal when he came to consider whether man’s innate dignity was not more compelling than his meanness. Men are social creatures, he stated. Although they are not always rational (and not conspicuously rational ever) there is enough sense in the mass of them to make them capable eventually of self-government.4 Their dignity manifests itself in two ways: in the power to conceive of perfection and in the ability to discern, respect, and to create “general opinion.” The significance of this is made clear in the essay “Of the First Principles of Government.” In the place of the social contract as the origin of government, Hume substituted “opinion.” He said there are three “principles” (or beliefs) from which governments derive their authority: (a) individuals give allegiance to a government when they believe (i.e., are of the opinion) that it acts in their interest by providing certain general advantages, like the maintenance of law and order; (b) they believe a government that protects their property should be supported; (c) and they believe that a government of long standing has the right to rule simply because it is of long standing. In addition, there are secondary principles from which governments derive their authority. Individuals may support a government out of very narrowly regarded self-interest, in the expectation of a particular advantage, as distinct from the general advantage which comprises the first of the three principles noted above; or men may give their support to a government only because they are afraid to oppose it; or they may support it out of a personal devotion to the sovereign.5

Some of these principles (both “first” and “second”) are rooted in human traits that Hume thought were dignified and others in traits that he thought were mean. One may infer that Hume in this essay was explaining the actual foundations of government and not the ideal. The most desirable government would base itself on the dignity in human nature, which is shown in the first two of the leading principles: the desire for peace and the desire for the protection of private property. These desires are in no way inconsistent with those established by Hooker, Locke, and Hobbes, nor are the conditions which, according to Hume, make the objectives realizable: the gregariousness of man and his ability to conceive of an ideal society. The explicit difference between Hume and his predecessors is over the social contract. But the difference is not decisive. Much more important is their agreement that government should be based on the consent of the governed. This idea was at the heart of the political doctrine of the Enlightenment. Although it does not appear in this form in Hume’s essays, there does appear the idea of opinion, with the very strong suggestion that the ideal government draws its power from the opinion men hold of its ability to keep the peace and protect their property. And what is opinion, if it is not the idea of consent?

The classic liberals said that government ought to maintain peace and protect wealth. But that is not all it should do. When Locke wrote of the protection of property he clearly was interested in safeguarding more than the wealth of men. He meant “their lives, liberties and estates, which I call by the general name—property.”6 Property, so conceived, comprehended all natural rights. The duty of government is to protect and advance them. Hume did not say much about natural rights and he did not emphasize, as Locke and Hobbes did, the government’s responsibility to protect them. But he certainly was not indifferent to freedom and security, which were the principal rights. The term “natural rights” appears rarely in classical economics except in The Wealth of Nations where, however, it usually applies to economic liberty. The political rights of the individual frequently are described but are not stressed as much as in the writings of the seventeenth century. The want of emphasis suggests that political freedom was so clearly and obviously a care of government that it did not have to be asserted as forcibly as a century earlier when its importance was not generally acknowledged. What called for more emphasis in the eighteenth century was the fostering of economic freedom. When one compares in the works of Hobbes and Locke the small part occupied by the doctrine of free exchange with the great emphasis given to political freedom and security, one can understand why in the works of Hume and Smith, writing in the next century, economic freedom receives the greatest attention while political rights are taken almost as data. The former are famous for their exposition of the political rights of man and are known hardly at all for their belief in a free market, while the latter are noted almost wholly for advocating free exchange and little at all for their political doctrine. Yet there is no essential difference in either the economic or the political doctrines of the two centuries.

UTILITY AND JUSTICE IN SMITH

The political doctrine of Smith does not depart from that of Hume in any important way. It deserves separate mention because of the emphasis utility receives and because of Smith’s specification of the just state. One may remark that Smith’s comments on government are permeated with a cynicism which by comparison makes the tracts of his skeptical friend, Hume, glow with sweetness and warmth. In The Wealth of Nations, the motive of political behavior (and most other) is self-interest, and self-interest operates with indifferent success. His statements about government here are fragmentary and must be taken with those in the Lectures in order to secure a fairly complete conception of his political doctrine. After a seemly acknowledgment of the idea of sympathy (the basis, it will be recalled, of The Theory of Moral Sentiments), Smith states in the Lectures that governments are established in order to provide justice and men learn that justice requires coercion—an idea which, I think, is subsumed in Hume’s principle of “general advantage.” Governments are founded, therefore, on utility, which is their usefulness in providing justice. Justice consists of religious freedom, freedom of speech, the free use of property, and representative government. A government which deprives men of these liberties cannot be tolerated, and if resistance to it evokes violence, that is to be considered regrettable but hardly a reason for submission. Smith once observed that “rebels and heretics are those unlucky persons, who, when things have come to a certain degree of violence, have the misfortune to be of the weaker party.”7 Perhaps because he warmly cherished “the pretious right of private judgment, for the sake of which our forefathers kicked out the Pope and Pretender,” and perhaps because he was less of the world than Hume, he could not become so agitated by the specter of revolution.8 Both, however, were agreed that so long as a government demonstrated “any degree of moderation” (in taxation and its other powers) wisdom dictated it be supported.9

One must note all of the kinds of things that Smith expected of a just government. A reading of only The Wealth of Nations is apt to suggest that governments are founded solely to protect property. That men are avaricious, Smith certainly did say. He said also that they at times subordinate all other interests to their passion for property and he clearly implied that cupidity is at the root of most social disorder. But these traits do not exhaust the register of things that urge men to action nor do they comprehend all of those considerations, psychological and ethical, that Smith believed were relevant to political doctrine. As with Hume’s politics, a distinction must be made between the actual and the ideal. Smith did say that governments came into existence in order to protect the wealthy from the poor. But he did not say that this was reason enough to support them. A government had to do much more. The kind he most desired was one that would protect those “pretious” rights for which his ancestors fought and which were declaimed so movingly by Locke, Hobbes, and Hooker. Although he did not believe (as they may have) that the English state was founded originally on a social contract, he did believe, when he stated that men seek justice through political association, that consent should form the basis of government.

A literal interpretation of the social contract was the only important issue that separated the political doctrine of the classical economists from that of the Enlightenment. The psychological and ethical assumptions of the two were the same. Indeed, the seventeenth century taught the eighteenth the elements of liberal political philosophy, namely, that men are avaricious, that they are mean and belligerent but that their rational faculty and gregarious instinct are strong enough to bring them together under a government that will protect their lives, liberties, and estates.

2

The Paradox of Economic and Political Freedom

The classical economists were not prepared to carry their political liberalism to its implied conclusion, namely, universal enfranchisement and popular control of all branches of the government. On the other hand, the economists did not expressly place any limits on freedom when they said that a free market was the ideal method of organizing the economy. Instead, they implied or stated that economic freedom was a natural right. Does this opposition of economic and political doctrine—of believing in complete economic freedom but limited political freedom—denote a contradiction in their liberalism? A common view is that the classical economists were spokesmen for the emergent capitalism of their time and were devoted only to the liberty of their special charge, the middle class. In this view their conception of economic freedom was in fact as limited as their conception of political freedom. I do not accept this view. I believe there really was a paradox in their economic and political ideas.

THE ECONOMISTS AND THE MIDDLE CLASS

The classicists believed in economic freedom for everyone and not just for the middle class. They argued most persuasively for the freedom of the latter, but there is no evidence that it was their exclusive concern. Their sympathy for the lower classes was demonstrated in many ways. Hume declared that an equal distribution of income was most consistent with human nature, that it best promoted the national welfare, and was most conducive to the extension of liberty, even though under certain conditions it might create conflict.10 Smith gave the workingman the most important function in the economy, upbraided employers for combining to drive down wages, heaped scorn on the manners and morals of businessmen, and in so many ways evinced his hostility to the middle class, even though he defended its right to trade freely, that he hardly can be called its champion.11 The desire of Malthus to see the poor and propertyless sheltered from as much distress as possible led him to be skeptical of a policy of laisser faire. Ricardo in many ways disclosed his humanitarian feelings, despite his reputation as an impersonal and remorseless logician. He made his productivity ethics the justification for raising wages; he was opposed to any sudden repeal of the laws providing relief to the poor, favoring instead their gradual elimination in order to prevent “overwhelming distress.”12 He was receptive to measures that might improve the condition of the poor, advocating in his Principles that the legislature make some effort to discourage large families and that society at large persuade the lower classes that prudence and forethought were both necessary and “profitable” virtues.13 In 1819, he agreed to serve as a member of a committee to examine the proposal of Robert Owen, the utopian socialist. Although he disagreed with Owen on most points he gave the proposal a thorough and fair hearing.14 That the object of the classicists was the welfare of all society, and not that of the middle class only, was stated most explicitly by M’Culloch. He said of the work of the political economist:

He is not to frame systems, and devise schemes, for increasing the wealth and enjoyments of particular classes; but to apply himself to discover the sources of national wealth and universal prosperity, and the means by which they may be rendered most productive.15

When, however, the economists considered the proper extent of political freedom, their views were not as comprehensive. They did not believe the people in their entirety should have as much opportunity to make political decisions as to make economic decisions. That some liberty should be allowed to everyone they did believe—but that all should have the same liberty they did not believe.

Not all of the classical economists wrote about the structure of government and the extent of the suffrage. Those who did proposed various limitations on the suffrage and on the number of public officials who should be chosen by election. Hume favored a hereditary monarch. He was opposed to the election of the chief officer of government and was opposed also to any tampering with the right of succession. This is made quite plain in his essay “On the Protestant Succession.” After considering the legitimacy of the claims of the Stuarts and of the Hanovers who displaced them, Hume acknowledged that by reason of antiquity and heredity the Stuarts clearly belonged on the throne and the Hanovers did not. But, he continued, the Hanovers happened to be there and the Stuarts were in exile. To try to depose the Hanovers would be so disruptive that no man in his right mind would suggest it. Such reasoning seems guided by the maxim, Whatever is, is right, and to make Hume’s politics follow the rule of laisser être as his economics followed laisser faire. That impression, however, is erroneous, because Hume in his political works gave greatest emphasis to the need for authority, to peace and order, as the conditions of liberty—as opposed to legitimacy or obedience—and he valued a government in the measure to which it met these needs. What Hume did in this essay was in fact to reduce the conventional doctrine of monarchy to an absurdity. He stated that it did not matter who was king as long as he performed his function tolerably well, that the king ruled not by divine right or by the authority of succession but simply to provide the stability which government needed. One may imagine how the Jacobites and the partisans of the Hanovers reacted to this tract. One feels one knows how Hume reacted to them—no doubt in the same way that he viewed the hairsplitting of the Molenists and Jansenists, with their “thousand unintelligible disputes, which are not worthy the reflection of a man of sense.”

Smith too was opposed to a government in which all officers were elected. In his Lectures, he listed three forms of government: “monarchical,” in which power is vested in one person “who can do what he pleases”; “aristocratical,” in which power is held by a small group that achieves status because of family or wealth; and “democratical,” in which the “management of affairs belongs to the whole body of the people together.” The second and the third were, he said, “republican,” the term being used to denote a government without an hereditary, single magistrate.16 Smith did not wholly approve of any of the three, but favored a form of the third combined with a monarch, holding that a king was necessary for preserving order among contending economic interests and political factions.17

THE FRANCHISE

Neither Hume nor Smith wrote specifically about the extent of the franchise. They probably approved of the property qualification which was commonly attached to the vote in the eighteenth century (and later). The limitation is consistent with their doctrine and they nowhere opposed it, expressly or by implication. Among the economists James Mill was the first who explicitly formulated the details of a proper franchise. In his extraordinary Essay on Government (so deductive that it made Macaulay think of the propositions of geometry), Mill stated that the privilege of voting should be restricted to those persons whose private interests were identical with the interests of the community. He deduced that they came mainly from the middle and working classes, who fortunately comprise the majority of the community. Not everyone in the majority is, however, capable of making political decisions and hence of voting. The right to vote was to be limited to those of proven ability. Mill tried to prove that political ability is revealed in certain outward signs, principally of age and the possession of property, and he made them the conditions of the suffrage. The age qualification is placed quite high but the property qualification is made very low in order to include in the electorate more than are excluded from it. He dismissed the inclusion of women in the suffrage. His language was curt and contemptuous. So too was the language used fifty years later by John Stuart Mill to ridicule those who would exclude them.18

The universal franchise was viewed skeptically, though briefly, by Senior in his Outline of the Science of Political Economy. He later wrote of it at length in his review of Lord Brougham’s Political Philosophy and elaborated a point he made earlier that not only is politics “the most difficult of all sciences” but its difficulty is scarcely recognized, with the consequence that ability is most scarce where it is most needed. Until the mass of the people give more evidence of understanding the point, popular government—in which the suffrage is universal and all offices elective—was not feasible, he said.19 To support his point Senior adduced the behavior of the American people of the generation preceding the Civil War.

M’Culloch in writing of the relation between economic and political liberty did not see any great necessity for individuals to have political freedom along with economic freedom, although he acknowledged that free governments were more likely than absolute governments to promote economic progress.20

3

Human Nature, History, and Government

In the foregoing description of the economists’ ideas of economic and political freedom there is a clear paradox. Its source is in the utilitarian basis of their politics. To understand the source one must recall the circumstances of the last half of the eighteenth and of the early nineteenth centuries and relate them to what the economists said about the structure of government. Their ideas about representation seem to have been formed by two considerations. One was a distrust of the ability of the people for self-government, and the other an opposition to strong government. The economists’ statements on the extent of political liberty suggest they sought to avoid both a condition in which the people possessed full power and one in which power was concentrated in a small group. Of the two, it was probably the latter they most feared. This interpretation is based on the frequent assertions in the works of the economists (and of others of the same period) that a government founded upon a universal franchise is necessarily unstable and disorderly, that it must terminate in a despotism exercised by a small minority at the expense of all other groups in the community, including the originally enfranchised majority. (Many eighteenth-century writers distinguished between an absolute government, which was one based on law and administered by a minority and an arbitrary government which was one in which the minority recognized no law and acknowledged no limit to its power. The economists, however, were not among the writers who made this distinction, because they believed that any ruling minority would necessarily become willful, arbitrary, and dictatorial. Therefore I have used the words “absolute,” “arbitrary,” and “authoritarian” synonymously.)

THE CONCEPTION OF HUMAN NATURE

The distrust of popular government appears to have come partly from the economists’ conception of human nature and partly from historical circumstances. In the political philosophy of the Enlightenment and of the classical economists one of the leading ideas was (as noted above) that property is the major cause of social disorder. Men are naturally covetous and restrain themselves only for reasons of a larger self-interest and never out of benevolence or justice. Hence there are only two means open to a government for maintaining social peace. It either must suppress all acquisitive behavior, thereby removing the cause of disorder, or it must devise a way to make the self-interest of each individual consistent with that of all others in order that the liberty of all of them be increased.

The first alternative was rejected by the liberals—in the seventeenth century because it was a violation of man’s natural right to increase his wealth as long as he injured no one else, and in the eighteenth because suppression was futile as well as wrong. The other alternative—that of reconciling the self-interest of individuals—was the basis of representative government in those two centuries. In order that the behavior of each person would promote the welfare of others as well as of himself, political representation (the economists believed) should be given to those who had a private interest in keeping the peace and withheld from those who did not. Those with property had an interest in supporting government, as a law-enforcing agency, and so they were included in the suffrage; but the propertyless did not have this interest and hence were excluded. This limitation was not imposed because the economists believed the poor were covetous and other people were not. Everyone was thought to be covetous. But men of property could be more depended upon to restrain themselves: first, because having a private interest to be protected they were more aware of the general interest served by government; and second, because they wished to protect this private interest even though by so doing they sacrificed the possibility of a larger gain (the implication being that they favored a certain smaller sum to an uncertain larger one). The propertyless, however, had nothing to lose. They conceivably would gamble on a political upheaval on the chance of acquiring some fortune. In a less extreme case they might seek to improve their position by legislation that discriminated against wealth (which, in the economists’ view, invariably reacted to the disadvantage of the poor as well as of the rich). In summary, the psychology of the classical economists dictated the exclusion of the poor from the franchise, because their covetousness would bring social disorder if permitted to express itself politically.

Why should the poor be given any opportunity to express themselves, politically or otherwise, if their natural inclinations lead them to disorder and violence? If men will abuse their political liberty, they will, a fortiori, abuse their economic liberty. This difficulty can be removed by recalling (from the preceding chapter) that the classical economists did not think much damage could come from individual economic activity, as long as it remained individual, that is, as long as it was competitive. Each individual in seeking to increase his wealth was restrained from doing serious injury to others by law and custom and more compellingly by the competitive activity of others. The economic damage from unrestrained acquisitiveness took the form of a reduction in the aggregate quantity of goods and services and of a redistribution of income—both of which would be disclosed in changes in prices. In a competitive economy no individual could have any effect on the prices of the things he bought or sold. However much he may have wished to influence prices, he was prevented from doing so by the competing activity of others. This I take to be the meaning of Smith’s statement that once competition is established, although it cannot prevent individuals from wishing to do injury to others, it will prevent “the mean rapacity, the monopolizing spirit of merchants and manufacturers . . . from disturbing the tranquillity of anybody but themselves.”21

Political activity by its nature cannot be competitive—so one infers. If the members of a class have common interests, if it was given full freedom of action, and if it was the most numerous, there would be nothing to prevent it from imposing its will on everyone else. To give such a class complete political liberty would surely result, the economists reasoned, in the destruction of the liberty of everyone. The poor were regarded as just such a class. As the economists believed that economic freedom should be denied to all who would use it to injure others (monopolists, for example), so they also believed that political freedom should not be given to those who would destroy the freedom of others.

THE RECORD OF BEHAVIOR

The economists’ conception of human behavior was supported by the social conditions of their age and by the lessons which they saw in history. Nearly all of the classical school were historically minded, and none more so than Hume. He was also the most skeptical of popular government. The history of the efforts at self-government seemed to them to be a record of failure on which there was engrossed a warning against giving the people power enough to choose their own rulers.

When they turned from history to their own society, they saw some improvement in the condition of the people but not enough to disallow the lesson of the past. Many lived in distress, and the great majority still were preoccupied with the mechanics of existence. The mass of men had little time, energy, or interest for the cultivating of political talents. Crime was frequent and brutal. The enforcement of the law was lax and at times negligible; usually it was left to night watchmen who often were criminals themselves. On the country roads, robbery and assault were common and a part of the expected hazards of travel. Once the roads did become safe, Britons were several generations in becoming accustomed to safety as a normal condition. “Can you not walk from one end of England to another in perfect security? I ask you whether, the world over or in past history, there is anything like that? Nothing.” So spoke one of the early figures of the Manchester School of economics, J. A. Roebuck, a Philosophic Radical and friend of John Mill. Matthew Arnold quoted this to illustrate his description of a Philistine22 —the same Arnold, the reader will recall, who found Marcus Aurelius so completely admirable. And yet Roebuck was one of the end products of what the Stoics began, however outrageous the connection will seem to those of Arnold’s view. Freedom does require personal safety.

Drunkenness was common and a major problem. It was a problem to the military, which could not find enough physically fit recruits; to the parish authorities, because of extensive indigence and neglect of families; and to the state, because of the high mortality rate from diseases having their origin in alcoholism. When for a time the common people left off these habits and interested themselves in politics, they turned, in the most celebrated liberal cause of the eighteenth century, to the support of John Wilkes who had been deprived unlawfully of his seat in Parliament. Wilkes, as it happened, was not meant for the role of people’s champion; in fact, his defense of representative government was almost inadvertent. If he had been a different sort of person and if there had been more order in his private affairs, this phase of the political education of the people would have presented its issues more clearly and its achievement (for Wilkes was reseated) more lastingly. In all, the condition of the common people, their manners and morals, offered little to suggest a capacity for self-government.

What they knew of psychology, history, and from observation led the economists to oppose popular government and led them to oppose also those forms of government that concentrated power in a small group or in one person. As stated above, their ideas of representation were conditioned by the fear of centralized authority as well as by a distrust of self-government. They believed both extremes must be avoided if the liberty of the individual was to be advanced. A centralized government exercising large powers, such as an absolute monarchy or an oligarchy, presented a danger that although exactly the opposite was just as real as the danger of a state based on universal enfranchisement. A popularly elected government could not serve freedom because it could not establish the prior condition of social peace. An authoritarian government never would advance beyond the establishment of peace to the granting of freedom to its subjects.

In their view of human nature, the economists (as stated before) gave a large place to self-interest and believed it usually was stronger than any altruism or benevolence the individual might feel. This view made them as skeptical of an authoritarian government as of a popular one. That every man will, if he can, subject others to himself was a belief which they put among the first of their first principles of politics. This belief was expressed in many ways: by Hume when he declared that man’s sense of justice was feeble before the sense of his own interest; by Smith when he declared that the violence and injustice of the rulers of mankind were an ancient evil dictated by “the nature of human affairs”; and most plainly by James Mill when he said:

That one human being will desire to render the person and property of another subservient to his pleasures, not withstanding the pain or loss of pleasure it may occasion to that other individual, is the foundation of Government.23

Even John Stuart Mill, who lived at a more amiable time, said a natural disposition of mankind was to wish to tyrannize over one another.24 Against this background, Lord Acton’s famous remark about power is an epigrammatic summary of the wisdom of two centuries. (Like most epigrams it is an annoying, even mischievous, half-truth, the other half of which is, according to Allen N. Herzog, that an inadequate amount of power is corrupting and no power at all is absolutely corrupting.)

It was not only their psychology that led the classical economists to oppose authoritarian government. Historical observation and the experience of government in their own age also influenced them. Still fresh in meaning, although they had happened a century before, were the English revolutions that overthrew the despotism of the Stuarts and of the Puritans and established the supremacy of constitutional government. Even nearer in time and significance were the political conditions on the Continent. Such facts could only strengthen the view that liberty was impossible in an absolute state. The view was so consistent with the tradition of classical liberalism, with which the eighteenth century began, that it hardly needs explaining. One may note, however, that there was a great difference between the British classicists and the French physiocrats over the issue of absolute government. The physiocrats, while believing that each man should have the liberty to pursue his economic interests in his own way, were also defenders of absolute monarchy. When The Wealth of Nations was published, the physiocrats found much in it of interest, but certainly nothing could have seemed more curious than the author’s strictures on statesmen, rulers, and politicians, from whom he expected nothing enlightened either in the form of despotic rule or any other kind.

4

The Nationalism of the Economists

The aversion of the economists toward concentrated power—which made them oppose absolute government—also made them advocate a strong national state. When their nationalism is set against their belief in free trade, there emerges a second paradox. Actually, the paradox is double-edged. There seems to be as much inconsistency in believing a government should have only limited power over its subjects and great power to confront other states as there is in believing in both free trade and national power.

The purely political side of the paradox—the opposition between believing the government should have limited power at home and great power abroad—I can explain only by saying that British liberalism was nationalistic. Its principles emerged from the history of the people who made up Great Britain; they were meant to describe that people’s social policy and to direct them. One would be pleased to believe that the liberals had as generous a view of foreigners as of their countrymen, that they brought the entire world within the compass of their ideas, and that their object was the welfare of the nations. But they did not think this way at all. They did not even include western Europe in their view. When Hume declared he wanted the French and Germans to prosper, he said he did so as an Englishman.25 I do not think the economists had any animosity toward foreigners, and they certainly kept themselves apart from the crude parochialism of the time. But they were not prepared to sacrifice the wealth and liberty of the British to the people of other countries.

THE EXCEPTIONS TO FREE TRADE

The economic aspect of the paradox is more important than the political. The paradox itself emerges (as stated above) from the fact that if free trade was carried as far as it profitably can be carried, national states would be impossible or unlikely. There is considerable evidence that the economists did not wish to carry free trade this far. Hume was against free trade if it reduced the military power of the nation. Moreover, in a significant passage he favored a protective tariff not only to hasten the development of industries that eventually would become efficient but also to encourage those that otherwise never would exist.26

The exceptions to free trade are even more pronounced in The Wealth of Nations. Smith defended the Navigation Acts as the wisest of all restrictive legislation, because “defense . . . is of much more importance than opulence.” When he passed from the general principle that should govern international trade to specific measures of trade policy, he advocated a surprising amount of restriction. He said a tariff was permissible (a) if it promoted national defense, (b) if it enabled one nation to force others into free trade, (c) if by the repeal of a specific duty legitimate vested interests would suffer, and (d) if a domestic product competing with an import was taxed. Finally, he said, there could be “a sort of reasons of state” which justify suspending free trade.27

(The distinctive feature of Smith’s mind is disclosed in passages like these, which qualify a general proposition and relate it to particular problems, as here he qualifies the idea that free trade is the most efficient way to organize the international market. At constructing general propositions, Smith was less gifted than the best of his contemporaries. He was much less original than Hume. He also was verbose where Hume was brief and was unclear where Hume was lucid. In putting propositions together into a general system which was complete, coherent, and logical, Smith was even worse. He does not compare with Ricardo at that sort of thing, which today is called model building. Most intellectual historians agree that Smith was not particularly original and that he certainly was not logical. They would say, however, that he was a great empiricist and that his marshaling of the facts was what made his conceptual structure distinguished. I would disagree even with this. He certainly was empirically minded, but often he was wrong about the facts. For example, many of the trade restrictions which he deplored were actually no longer in effect when he wrote. At times he not only was pushing at an open door but besieging institutions which already had surrendered. What seems to me to have been his great achievement was to move from general propositions to their particular application, to separate what was relevant and useful in them from what was not, to qualify, amend, and adapt ideas so that they would be helpful in solving specific problems. At this kind of work he had no equal. It is a work calling for a mind that is inquiring without being merely curious, skeptical but not pessimistic, tough but not unchangeable, and above all common-sensible and yet not prosaic. His good sense was his great glory.)

The work of Ricardo also reveals national feelings, despite the rigor with which he upheld the benefits of free exchange. In discussing the reasons why resources do not move freely across national boundaries, he stated that non-economic considerations were paramount. The emigration of capital is hampered, he said, by the “natural disinclination” which every man feels to quit the country of his birth and connections. He added that these are “feelings which I should be sorry to see weakened.”28

INDIVIDUAL FREEDOM AND NATIONAL POWER

Such national feelings expressed a more fundamental belief of the economists. It was that each nation must have power enough to secure its sovereignty. This belief in turn comes from their ideas of order and liberty. The paradox between nationalism and free trade can be resolved by examining Hume’s conception of the relation between liberty and national power. The state, he said, must have enough power to prevent liberty from falling into license, and the people must be powerful enough to protect themselves against the state. But that is not all. There is also a danger to liberty and order from those states that do not have a free constitution. That danger alone would have led the economists to support national power.

Conceivably the liberties of the people could be protected by the amalgamation of independent nations into one grand political unit, but this was impossible within the precepts of the economists’, and particularly of Hume’s, political doctrine. A world government could maintain itself only by an amount of power that was inconsistent with freedom. Such a government would have within its authority all of those powers by which, Hume believed, tyranny came to be established. Because its territories would be separated and widely distant, there could be no adequate communication among citizens. The dispersion of territories would enable the government to subvert the liberty of outlying areas and then move inward until all liberty had been destroyed. The chief officer of such a government necessarily would be remote from the people, which would engender a superstitious reverence for him. Hume believed that liberty and order are served best in small states, where the citizens can communicate easily with each other, where each region is aware of what is happening in others, and where the sovereign is always before the eyes of the people, who, seeing him in the regular business of government, come to realize that he is an ordinary mortal as fallible as they and no more worthy of reverence. Moreover, should something occur to disrupt social peace, a small state imposes limits to the spread of popular delusion; conversely, its relatively small area places limits on the extension of tyranny if once that should be attempted.29

The paradox of free trade and nationalism is to be explained, then, as a manifestation of the economists’ hostility to absolute government. They believed in free trade as the principle which should guide the economic relations among states, but they also believed in qualifying the principle in order to avoid its interfering with national power. An unqualified application of free trade (including the free movement of labor) is possible only in a world state. To the economists, however, the governing of any but a relatively small area required an exercise of power which they thought incompatible with the protection of liberty. They were forced to compromise either their belief in economic liberty or in political liberty, and it was the former that was modified.

5

The Structure of Government

The economists favored a particular form, or structure, of government, and it was derived from their ideas about political behavior and about the purpose of government. They favored a form in which power would be distributed among two or three groups in such a way that each person would have some freedom but not enough to deprive other persons of their freedom. I say “some” rather than complete freedom, because every person would not have all of the powers that have come to comprise the characteristics of a free government. Every person would be assured of government by law, but not all of them would have the power, through the vote or other means, of participating in the making of law.

POLITICAL EQUILIBRIUM

This structure of government was described in different words by the economists who wrote about it. Whatever it was called, its features were the same in the writing of Hume, Smith, James Mill, and Senior. It appears by implication in some of the Parliamentary speeches by Ricardo. The conception was simple and clear. It held that society consisted of the governed and the governors. The mass of the people comprised most, but not all, of the first group. That group was to express itself in the lower house of Parliament, to the extent that it was to express itself at all. Parliament could not be allowed to rule alone. It had to be restrained, and the restraint would be exercised by what frequently was described as the “aristocratical interest,” that interest would express itself in an upper house, the Lords, or through a royal family, or both. The purpose of the House of Lords and of the monarchy was to prevent a representative government from abusing its power. The Lords and monarchy, that is, would contribute order and stability while the Commons would provide freedom. The belief in limited representation was not a justification of aristocracy and monarchy. That rationalization runs in quite a different direction and follows from an assumption that there is a class which by reason of its superior talents and exclusive political wisdom necessarily should be given power. The economists, in their conception of human nature, ascribed the same motives to the upper classes as to the lower and believed neither was to be trusted with a monopoly of power. Their object was a government that would establish an equilibrium among competing interest groups. That would be done by distributing power in such a way that no group would become paramount but each would have power enough to express its permissible interests. The theory of such a government is the familiar one of checks and balances. It was one of the ideas for which the eighteenth century is famous. It is found in many of the political papers of the period, and was set forth most impressively in The Federalist (as Chapter 3, Vol. 1 of this book explains).

Most of the economists did not write systematic political works and did not develop the idea fully. But they did present its essential features. Hume declared that liberty most probably would succeed in a society in which the government was strong enough to maintain order and did not have to fear popular resistance, and in which the people were strong enough to exercise their rights and need not fear the government. Such a society would be governed by “checks and controls, provided by the constitution.”30 Of the views of Smith, there is no better summary than what the Earl of Buchan said of them:

He approached to republicanism in his political principles, and considered a commonwealth as the platform for the monarchy, hereditary succession in the chief magistrate being necessary only to prevent the commonwealth from being shaken by ambition or absolute dominion introduced by the consequences of contending factions.31

Although James Mill denied the possibility of an exact “balance of power” among the democratic, aristocratic, and royal interests in society, he nevertheless proposed a governmental structure consisting of “checking bodies.” The legislative branch, to be chosen by an extensive although not a universal suffrage, would restrain the aristocracy and monarchy, and would advance the democratic interest. The aristocracy would be represented by a body serving as a check on the legislature. An hereditary monarch would discharge the administrative and judicial functions of government.32

Senior favored a “mixed” form of government, in which the people would have representation enough to protect liberty and the aristocracy and monarchy enough power to secure order.33 Ricardo’s views on the structure of government are suggested in a speech he made on the suffrage. There is in the speech a strong implication that he looked with approval on the House of Lords. Since he usually was in the radical wing of Commons, one may assume that his approval was not given out of sympathy for an aristocratic form of government. One may infer that his position on this point was similar to that of the other classical economists and that he favored the continuation of the House of Lords (which, he stated, the people also wanted preserved) because it provided a necessary restraining element in government.34

6

Economic Improvement and Social Progress

Out of the nationalistic feelings of the classical economists and their conception of the structure of government, there emerges the idea of a strong national state based on law. In it power is limited enough to leave each man free in the pursuit of his legitimate interests and great enough to protect him from the encroachments of others in his own country and from abroad. Sovereignty in such a state rests ultimately with the electorate, and the electorate is to consist only of persons possessing some property. The limitation was necessary, the economists said, because men without property could not be expected to exercise the franchise in the interest of order and liberty. This belief in turn was derived from their conception of human nature; it was strengthened by their interpretation of past efforts of self-government, and by the condition of the lower classes in their age.

The limitation on freedom was not, however, something to be imposed forever. If the circumstances which made it necessary were to change, the amount of freedom which the people properly could exercise would change also. The major prerequisite for more freedom was an increase in the real income of the masses. Their poverty was the man cause of whatever social disorder and tyranny that existed, and the reduction of poverty would, the economist believed, make society more orderly, stable, and free. They have a great reputation for being pessimists; actually the classical economists believed society could be greatly improved. If they had believed anything else, their beliefs would have been anomalous indeed, since progress was a byword of their age.

THE CONDITION OF PROGRESS

The issue to which they directed their attention was not the possibility of progress—that was taken for granted—but the circumstances most favorable to it. They believed that in the free market they had found what was most favorable. If men had the liberty of trading freely and if their property was secure, economic progress would follow “naturally,” meaning not providentially but as a matter of course. The accumulation of capital would raise the real income of the masses, and two important changes would occur. They would acquire an interest in supporting the existing order, an order of the kind the economists regarded as ideal. And they would be able to attend to their moral and mental improvement. Then, by reason both of desire and ability, the masses would deserve complete political liberty. I want to emphasize their belief that the condition of political progress was an increase in real income and that the condition of such an increase was an extension of economic freedom (but not complete laisser faire by any means). This belief was a part of a larger conception of the classical economists that the improvement of morals and manners, and progress in the arts and sciences, could advance only as men were free to seek their material welfare in their own way. In this conception the political and economic doctrines of the classicists are most closely related.

The relationship was made clear in many ways. Hume saw in the development of a free market the raising of the moral level of society. He said that as “commerce” diffused its benefits throughout all ranks of society, the coarse and baleful aspects of acquisitiveness would disappear and honor and virtue would replace them.35 Throughout his essays there is disclosed the belief that as liberty becomes more extensive, the material and political welfare of the people is raised and their intellectual and moral qualities as well. Even though he was distrustful of self-government in his own time, he saw the likelihood of its eventual establishment. He stated:

It has also been found, as the experience of mankind increases, that the people are no such dangerous monsters as they have been represented, and that it is in every respect better to guide them like rational creatures than to lead or drive them like brute beasts.36

Smith, more than any of the economists, wrote about the relation between economic activity and social progress. He made the development of a free society depend on the extension of economic freedom; and he made the development of virtue and wisdom, on which, he believed, self-government must rely, depend on raising the material welfare of the people.37 Although Ricardo did not express himself directly on this point, he probably agreed with Smith, believing as he did that “the general happiness” of mankind was increased as its income increased, and that the method of increasing income was a free market.38

The dependence of cultural development upon material welfare was expressed most completely by M’Culloch who said:

Where wealth has not been amassed, individuals, being constantly occupied in providing for their immediate wants, have no time left for the culture of their minds; so that their views, sentiments, and feelings, become alike contracted and illiberal. The possession of a decent competence, or the power to indulge in other pursuits than those which directly tend to satisfy our animal wants and desires, is necessary to soften the selfish passions; to improve the moral and intellectual character; and to ensure any considerable proficiency in liberal studies and pursuits. And hence, the acquisition of wealth is not desirable merely as the means of procuring immediate and direct gratifications, but is indispensably necessary to the advancement of society in civilization and refinement.39

What the economists believed about progress made their view of representative government considerably more liberal than it otherwise would have been. The amount of order which a state must impose as a practical necessity, and the extent of liberty which of moral necessity it must cultivate, both depend on the material condition of the majority of the people. The better is that condition, the more capable are the people of governing themselves, the more liberty are they able to exercise, and the less is the amount of coercion the state need use. The economists believed that the material condition of society would improve, and hence they also were confident that its government would become more free—that the masses would achieve political liberty commensurate with their economic liberty.

A NOTE ON MILL

In the nineteenth century such an improvement in the real income of the people did occur. When John Stuart Mill, the last of the classical school, wrote of government, he allowed a far greater amount of liberty and insisted on much less order than his predecessors had. I have refrained from considering his political ideas here, except incidentally, because they belong to a period much different from that in which the earlier economists wrote. (His economic policy is described in the next chapter.) His view of the function of government was much more extensive than that of the earlier economists, not only because he lived in a more complex society but also (and more fundamentally) because his ideas were more utilitarian than theirs and more influenced by Helvetius, Holbach, and Bentham than by Hooker, Locke, and Hume. He was not as averse as his predecessors in the classical school to regarding individuals as instruments to be improved and manipulated in the hands of a wise and beneficent government. Yet he did, in many other ways, exemplify the tradition of the earlier economists. His conception of the ideal government was as relative as theirs, and he said even more explicitly than they that the best government for a society is that which is best adapted to the capacities of its members. These capacities were far larger in his age than they were half a century or more earlier. So far had the people of the Western world, and especially those of Great Britain, revealed their worth that Mill urged an extensive though not entirely universal franchise as most consistent with the quality of his age.

In the nineteenth century there not only was a growing belief that the government could do with fewer coercive political powers because the people were better able to exercise their freedom with restraint. There also was a belief among some that the power of the government in international affairs properly should be diminished. As the belief of the economists in self-government increased, so too did their nationalistic feeling diminish. Certain of them, and the political leaders who shared their principles, strongly believed in restraining the foreign policy of Great Britain, in maintaining an indifferent attitude to the troubles of the Continent, and in vigorously opposing the expansion of the empire. Better, they said, that the energies of Britain be directed toward increasing its trade than to meddling in other people’s affairs.

That was the view of Cobden and Bright and the Manchester school, which more than any other was responsible for putting the idea of free trade into practice. It also agitated for world peace and for extending the franchise. The Manchester school carried the classical ideas of political liberty and economic liberty in foreign trade (but only foreign trade) to their ultimate conclusion. The ideas were applied so ruthlessly that the economists of the period (and most were in the classical tradition) stood apart from the school. That, however, is another event, and I have described it elsewhere.40

[1]David Hume, “Of the First Principles of Government,” and “Of the Original Contract,” Essays Moral, Political, and Literary in Philosophical Works, III (Edinburgh, 1826).