PHYSIOCRACY

Adam Smith praised the physiocratic system ‘with all its imperfections’ as
‘perhaps the nearest approximation to the truth that has yet been published upon the
subject of Political Economy’. The physiocrats’ attack on mercantilism and their
proposals to remove tariff barriers roused his admiration; from them he drew the theme
of wealth as ‘the consumable goods annually reproduced by the labour of society’, the
doctrine of productive labour, and the emphasis on the essential circularity of the
process of production and distribution. It comes as something of a shock, however, to
realise that he refers only obliquely to the most notorious of physiocratic concepts, the
single tax, and does not mention it at all in the chapter specifically devoted to the
physiocrats. Moreover, he misrepresents the no less infamous notion of ‘the sterile
class’ by condemning Quesnay for seeking ‘to degrade the artificers, manufacturers, and
merchants by the humiliating appellation of the barren or unproductive classes’. The
physiocrats did not regard industry as useless but simply as a sector that produces no net
additions to income; Turgot’s ‘stipendiary class’ is indeed a happier expression than
Quesnay’s ‘sterile class’. Ironically enough, Adam Smith had difficulty in upsetting the
physiocratic doctrine that manufacturing is ‘sterile’; in the end he was forced to argue
that manufacturing is productive because its receipts are sufficient to pay wages and to
replace worn-out capital but that agriculture is more productive because it yields rent
over and above wages and depreciation. Apart from a quibble on words, however this
concedes the whole of the physiocratic argument.

11 The meaning of physiocracy

Physiocracy, as Adam Smith suggested, should be understood as a reaction to

the mercantilist policies of Colbert during the reign of Louis XIV. The glory of the age
of the Sun King was the growth of French industry and agriculture was consistently
neglected. The War of the Spanish Succession and the magnificence of the Versailles
court placed a severe burden upon taxable capacity and the land tax, being the chief
source of revenue, was steadily increased. By the time of the death of Louis XIV in
1715, the plight of French agriculture had produced a wave of reactions against
Colbertisme, fanned by the religious struggle against the Huguenots. Louis XV, instead
of recouping losses at home, threw himself into the Seven Years’ War with England,
from which France emerged defeated, deprived of Canada and her Oriental possessions,
and reduced to a second-rate power in Europe. The stage was set for a back-to-nature
movement, a return to rustic simplicity, of which the writings of Rousseau and the
paintings of Boucher and Fragonard are familiar witnesses. Inclined to emphasise
agriculture, the physiocrats could hardly resist casting envious glances at England. The
combination of smallholdings, antiquated methods and a maze of feudal obligations
made it difficult for France to adopt the improvements effected by the much admired
‘agricultural revolution’ in England. The programme of the physiocrats was to eliminate
the vestiges of mediaeval parochialism in the countryside, to rationalise the fiscal
system by reducing all taxes to a single levy on rent, to amalgamate smallholdings and
to free the corn trade from all pro tectionist restrictions, in short, to emulate English
agriculture. Placed in its historical context (the reader must forgive this brief lapse into
relativism) there is nothing very surprising about all this. It was only the effort to
provide agrarian reform with a watertight theoretical argument that produced
conclusions which struck observers even at the time as slightly absurd.