Reflections on the Formation and the Distribution of Riches

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[Introductory Note by Du Pont de Nemours, in the Éphémérides for Nov. 1769, p. 12.]

We have long begged the Author of the following work to let us have it to enrich our Periodical. He was never ready to consent, because he had not given the last touch to the exposition of his reflections; because, throwing them on paper, three years ago, very hastily and for a particular purpose, he approaches the subject in a manner which seems to him not sufficiently direct; because, as a consequence, he has been obliged sometimes to repeat himself; and because it seems to him that thereby he gives occasion to objections which could easily have been forestalled if the subjects had been presented in a more systematic fashion. It is the Author himself who has so severely criticised his performance, whenever we have spoken to him about it; and we doubt not that he would really have been quite capable of giving it a higher degree of perfection. Yet as important occupations, from which he cannot be released, leave him too little leisure for it to be possible for him to reckon upon the time which would be necessary to arrive at what would satisfy himself; and since, even in the condition in which the reflections now are, they seem to us to compose a Work that is very interesting, very fruitful, and very worthy of the important subject of which they treat; we have insisted upon his giving us permission to place them in our Collection; and he has finally granted to friendship the sacrifice he had always refused to our arguments.

Reflections on the formation & the distribution of riches, by Mr. X.

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ECONOMIC CLASSICS

Volumes now ready:

1664. | |THOMAS MUN:

Foreword

REFLECTIONS

ON

THE FORMATION AND THE DISTRIBUTION OF RICHES

BY

TURGOT

1770

New York THE MACMILLAN COMPANY LONDON : MACMILLAN & CO., Ltd. 1898

All rights reserved

Copyright, 1898, By the MACMILLAN COMPANY.

Norword Press J. S. Cushing & Co.—Berwick & Smith Norwood Mass. U.S.A.

Anne Robert Jacques Turgot, baron d'Aulne, was born in Paris on May 10, 1727. He came of a branch of an old noble family of Normandy, which had for two or three generations furnished the state with able administrative officials: his grandfather had served as an Intendant; his father had occupied high judicial positions, and presided for a time over the municipal government of Paris as Prévôt des Marchands. He received his early education at the Collège Louis-le-Grand and the Collège du Plessis; and then, being destined as a younger son for the ecclesiastical profession, he entered upon his theological studies at the Séminaire de Saint-Sulpice, and received the degree of bachelor of theology in 1747. In 1748 he was admitted to residence in the Maison de Sorbonne; and, in December 1749, he was elected to the honorary office of Prieur for the ensuing year. Early in 1751 he changed his plans, and determined to enter the judicial and administrative service. In January 1752 he was appointed Substitut du Procureur Général; in December, Conseiller au Parlement de Paris; in March 1753, Maître des Requêtes. His duties for the next eight years were chiefly judicial; but in 1755 and 1756 he accompanied Gournay, the Intendant du Commerce, in his official tours of inspection through the south and west of the kingdom.

In August 1761 he was appointed Intendant of the Généralité of Limoges, and held that office till the middle of 1774. During his administration he reformed the method of collecting the Taille, substituted a money payment for the forced labour of the Corvée, brought about the free circulation of corn within the Généralité, and established a system of poor relief. In his occasional visits to Paris, he contracted a friendship with David Hume (secretary to the English Embassy from 1763 to 1766), and made the acquaintance of Adam Smith (in Paris from Christmas 1765 to October 1766). It was during 1766 that Turgot wrote his Reflections (for which see infra).

Upon the accession of Louis XVI, Turgot was invited to join the new reforming ministry. After a brief tenure of the Ministry of Marine (July 20-August 24, 1774), he was appointed Contrôleur Général des Finances. His short ministry of two years forms one of the best known episodes in the history of France. The most important of his measures were the establishment of freedom in the internal corn-trade, the substitution for the Corvée of a tax to which the privileged classes were also to contribute, and the abolition of the Jurandes, or corporations of crafts. Turgot's edicts aroused the most determined opposition from the nobility, the magistracy, and all those interested in the maintenance of existing conditions; and Louis yielded to the remonstrances of the court and of Marie Antoinette, and dismissed Turgot, May 12, 1776. His measures were at once recalled,—to be re-enacted by the legislatures of the Revolution. Turgot devoted the years of retirement to literary labours; and died on March 18, 1781.

The only economic writings of Turgot, other than the Reflections, published during his lifetime, would seem to have been the Questions importantes sur le commerce, 1755 (translated from the English of Tucker), and two articles on Foires et Marchés and Fondations in the Encyclopædie, 1756. He drew up, however, a large number of Mémoires on various economic topics, some of them addressed to his official superiors apropos of his government of Limoges: his measures of reform while Intendant were all explained and justified by him in circular letters and other papers addressed to the public: and the edicts of his ministry were preceded by elaborate expositions of the principles involved. All these, together with his Éloge de Gournay, written in 1759, were published, under the editorship of Du Pont de Nemours, in the Œuvres de Turgot, in 9 vols., 1809-1811; and reprinted with additions in the 2-volume edition of his Œuvres, edited by Daire and Dussard, in 1844, for the Guillaumin Collection des Principaux Economistes. The volume entitled Turgot: Administration et Œuvres Économiques, edited by M. Robineau, 1889, in the Petite Bibliothèque Économique, contains the Réflexions, the Éloge, the Édit de Suppression des Corvées, and the Édit de Suppression des Jurandes. In Mr. W. Walker Stephens' Life and Writings of Turgot, 1895, will be found a translation of the Éloge, and of a good many miscellaneous extracts from Turgot's writings.

The main source for the biography of Turgot is Du Pont de Nemours, Mémoires sur la vie et les ouvrages de M. Turgot, 1782. The Vie de Turgot, by his friend Condorcet, 1786, (translated into English 1787), gives some additional particulars. Of writings concerning Turgot a list will be found in Dr. Lippert's article in the Handwörterbuch der Staatswissenschaften, vol. vi. Among the most notable of these, from the eminence of the writers, are the articles of M. Léonce de Lavergne in Les Économistes Français du dix-huitième siècle, 1870, and of Mr. John Morley in Critical Miscellanies 1877, and the brief life by M. Léon Say, 1887, translated into English by Mr. Gustave Masson, 1888. Among the very few really impartial estimates of Turgot's place in French history, the reader may be referred to M. Albert Sorel's L'Europe et la Révolution Française, 1885, i, pp. 209-213.

The Reflections on the Production and the Distribution of Riches were written towards the close of 1766 for the benefit of two young Chinese, who having been educated in France were returning to their country with a pension from the crown. China was commonly regarded by the French economists of the time as the peculiar home of enlightened government (compare de Tocqueville, L'Ancien Régime, livre III, ch. 3); and these young men were expected to keep their European patrons informed upon the internal affairs of their country. Turgot drew up a list of questions for them to answer, and prepared the Reflections to enable them the better to understand the purpose of his interrogations (see Appendix, Excerpt 6). In 1769 he yielded to the insistence of Du Pont de Nemours, then editing the Éphémérides du Citoyen, the organ of the Physiocratic party, who was in chronic want of copy, and gave him the Reflections to print. They appeared in the numbers for November and December 1769, and January 1770; which, however, were not actually issued till January, February and April 1770.

It has recently been shewn by M. G. Schelle (in his Du Pont de Nemours et l'école physiocratique, 1888, pp. 126-129, and in an article in the Journal des Economistes for July 1888), that Du Pont took upon himself, without consulting the author, to modify the text in more than one direction. In § xvii (infra, p. 16) the adjectives "human" and "civil" were omitted before "conventions" and "laws"; and to the words "after they ceased to cultivate them" were added, "And this as the price of the original agricultural advances, by which they have brought these soils into a condition to be cultivated, and which, so to speak, are incorporated with the soil" ("Et cela pour prix des avances foncières par les quelles ils ont mis ces terreins en état d'être cultivées, et qui se sont pour ainsi dire incorporées au sol même"). Out of Turgot's one section (xxi) on cultivation by slaves. Du Pont made three; his additions (more than equal in extent to Turgot's own text) not only emphasizing the moral evil of slavery, but also maintaining that slave labour was unprofitable even to the masters: and from the heading and opening sentences of § lv Du Pont omitted altogether the enumeration of slaves among moveable riches. Turgot was exceedingly annoyed (see Appendix, Excerpts 7, 8); and remonstrated in time to prevent the third instalment from being tampered with. But Du Pont could not allow Turgot's language in § lxxviii, about saving ("l'épargne") as the source of capital, to pass uncriticised; and accordingly he appended a long note, urging that "the formation of capitals arises much less from saving out of the expenditure of revenues than from the wise employment of the expenditure" (see Appendix, Excerpt 9), and added one or two other fussy notes. Throughout he touched-up the style in minute points.

Turgot insisted that in the separate issue of the Reflections which was about to be made, the text should be corrected, and an erratum inserted drawn up by himself. This was done; but according to M. Schelle only 100 or 150 copies were struck off, and scarcely one has survived. A corrected reprint, issued in 1788, is equally rare. Strangest of all is the fact that when, in 1808, Du Pont edited Turgot's Œuvres, he boldly reprinted his old text of the Éphé and this was copied by Daire in his edition of 1844. Not till 1889 were the Reflections accessible as originally written. M. Schelle and M. Robineau have both announced that in the Reflections, as printed by the latter in the Turgot volume of the Petite Bibliothèque Économique, the original text has been re-established. In every essential point this is doubtless the case; but a comparison of the Robineau text with that of the Éphémérides and with the English translation of 1793 about to be mentioned, raises a good many curious little questions as to Turgot's exact language which cannot at present be answered. A really critical edition of the Reflections would come with good grace from the inheritors of the Turgot tradition,—the group of Parisian economists associated with the Journal des Économistes and the house of Guillaumin. It must be observed, also, that unless the manuscript of Turgot's other writings published posthumously by Du Pont can be recovered, they must remain under some suspicion.

An anonymous English translation, made, as is clear from internal evidence, from the edition of 1788, appeared in London in 1793; and this was reprinted by J. R. McCulloch in 1859 in one of the Overstone volumes, (A Select Collection of Scarce and Valuable Economical Tracts). The original intention of the present editor was merely to reprint this translation; but upon examination this was quickly seen to be out of the question. The 1793 translation is fairly good for the first few paragraphs; but soon gross blunders begin to make their appearance, e.g. in § XXV, where the heading "Colonage partiaire" is translated "Partial Colonization"! As it proceeds it becomes worse, until in the second half there are many paragraphs which are absolutely unintelligible. It was evidently a piece of hack-work, done by a man who had little understanding of the course of Turgot's argument. McCulloch can hardly have read it.

The present editor has, accordingly, ventured on a new translation, following M. Robineau's text, and comparing it with that of the Éphémérides,— for the loan of a copy of which he is indebted to his friend, Professor E. R. A. Seligman. He has attempted to produce something like the effect of Turgot's style; which is, indeed, inelegant and sometimes rugged, and also very limited in vocabulary, but yet direct and clear, the style pre-eminently of a man of affairs. Turgot's thought is, of course, abstract, like that of the group to which he belonged; but his language is not as abstract as that of economic writing has since become; and, in spite of the occasional awkwardness of the result, the translator has sought to retain as much as possible of the concreteness of Turgot's expressions. In this attempt some help has been derived from the usage of Adam Smith. Thus "richesses" has been rendered "riches," "la société" commonly by "the society," and so on. Sometimes a word like "denrée" is used first in a narrower and then in a wider sense, and therefore differently rendered. To avoid misrepresenting our author, the original French has been given in a note, when it is either a technical term, or used with more than one shade of meaning, or for any other reason noticeable. The punctuation in the Éphémérides, (connecting, for instance, two or three sentences with the colon or semi-colon) often suggests the connection of ideas more clearly than the modern texts, and it has been usually followed here, except where a printer's blunder could be fairly supposed. In the use of capital letters (which, it will be noticed, are far fewer in the third instalment), and in various trifles of typography, the printing of the Éphémérides has also been here imitated, in the hope of keeping something of the eighteenth-century flavour.

The Excerpts from Turgot's Correspondence, given in the Appendix, will be found to throw a good deal of light on his economic theory. Those numbered 1, 3, 5, were printed as long ago as 1849 by J. H. Burton in Letters of Eminent Persons to David Hume; while the letters of Hume, from which 2 and 4 are taken, have only of late years seen the light, in M. Léon Say's David Hume: Œuvre Économique, 1888, (in Petite Bibliothèque Economique). The economic passages form a small part of the whole correspondence between Turgot and Hume, which is chiefly concerned with the affairs of Rousseau. Hume's interesting letter to Morellet, (of which excerpt 10 is a fragment) is also printed in M. Say's Hume. Excerpts 6-9 are taken from previously unprinted letters of Turgot given by M. Schelle in the article in the Journal des Économistes and the book on Du Pont de Nemours already mentioned. The latter is an indispensable source of information for all students of the Physiocratic school.

The translator may be permitted to add two observations at the end of his work. The first is that, in spite of Turgot's dislike for the narrow sectarian spirit of the circle that surrounded Quesnay, and the freedom with which he expressed his dissent from them on minor points of doctrine, nevertheless his whole economic thought was dominated by the fundamental Physiocratic ideas; and these find in the Reflections their briefest and most lucid expression. The second is suggested by the recent discussion as to the relation between Adam Smith on the one side, and Turgot, or the whole Physiocratic school, on the other. This discus , though it has received of late some valuable contributions, (S. Feilbogen, Smith und Turgot, 1892; E. Cannan, Introduction to his edition of Smith's Lectures, 1896; H. Higgs in Economic Journal, December 1896; and W. Hasbach in Political Science Quarterly, January 1898) cannot be regarded as concluded. It is now generally recognized that there are not inconsiderable portions of Adam Smith's treatise of a distinctly Physiocratic character. And it will probably be found that the contribution of Physiocracy to the production of the Wealth of Nations was even greater in two other ways,—in raising questions in Adam Smith's mind, which left to himself he would never have put, and in providing him with a phraseology which of himself he would never have hit upon.

Table of Contents

CONTENTS

REFLECTIONS ON THE ORIGIN AND THE DISTRIBUTION OF RICHES.

APPENDIX.

Appendix

EXCERPTS FROM TURGOT'S CORRESPONDENCE.

1

1. Turgot to Hume, July 23, 1766.

I am tempted to send you at the same time a trifle of a very different sort,—the programme of an academic prize I think of offering, on a subject we have sometimes discussed. The best means of deciding this, like all other questions, is to get it discussed by the public. I have tried to set forth the state of the question in a clear fashion, as well as the different aspects under which it may be considered. I very much wish you could have the time to give us your ideas. We should take essays on the subject even in English. Our economic philosophers, who belong to Quesnay's sect, will strongly maintain the system of their master. This is a system from which the English writers have been far removed, up to the present; and it is too hard to reconcile its principles with the ambition to monopolize the commerce of the universe for one to expect that they will adopt it from this side for a long time to come. It would, however, be very desirable that Mr. Pitt, and all those who lead the nations, should think as Quesnay does upon all these points. I fear greatly lest your famous demagogue should follow altogether different principles, and think himself interested in keeping up in your nation the prejudice you have called "The Jealousy of Trade." It would be a great misfortune for the two nations. I believe, however, the almost equal exhaustion on both sides will prevent this folly from being long maintained.

2

2. Hume to Turgot, Aug. 5, 1766.

. . . I highly approve of your prize; yet why so much restrict the essays of the competitors, by assuming, as a recognized truth, that all taxes fall on the proprietors of land? You know that no government of any age or country has ever relied on this hypothesis: it has always been supposed that taxes fell on those who paid them upon consuming the products; and this universal rule, added to the evident appearance of things, at any rate leaves some room for doubt. Perhaps it would not have been bad to set that very question itself as the subject of discussion.

3

3. Turgot to Hume, Sept. 7, 1766.

I don't know why you have thought that those who would like to maintain that indirect taxation is favourable to the proprietors of landed estates will be excluded from competing for my prize. I assure you that if you will give us an essay looking at the question from that point of view, it will be very well received. It is true that the instructions seem to direct authors to look at it from another. But the fact is I have offered the prize rather to get people to see what they can do in the way of estimating the effects of indirect taxation,—for I am still uncertain how the exact share (of each class in the burden?—Ed.) should be reckoned,—than to get a discussion of the general question, as to which my mind is entirely made up.

I have said it was agreed that indirect taxation fell back altogether on the proprietors, since as a matter of fact I have supposed that most of those who defended indirect taxation for other reasons have agreed as to this, especially during the last fifteen or twenty years; and because most of the people agreed with it with whom I have had occasion to talk on the matter. I well know that the practice of no government at all conforms to the principle; but, in the first place, you know, as well as I do, that the principles put into practice by all the governments do not change as easily as speculative principles. The financial system of all the peoples was formed in periods when men gave little thought to these matters; and, although people might be quite convinced that it was established on weak foundations, it would still be a good deal of trouble, and take a good deal of time, to remove a machine in full working and substitute another for it. You know, also, as well as I do, what is the great aim of all the governments of the earth: obedience and money. The object is, as the saying goes, to pluck the hen without making it cry out; but it is the proprietors who cry out, and the government has always preferred to attack them indirectly, because then they do not perceive the harm until after the matter has become law; and, moreover, intelligence is not widely enough distributed, and the prin involved are not clearly enough proved, for them to attribute the evil they suffer to its true cause. I am always sorry not to find myself in accord with you. But I rely upon your tolerance....

4

4. Hume to Turgot, undated.

...I am tempted to say a word on the political question which we have so often raised, as to the method of establishing taxes, and as to whether it is better to place them upon landed proprietors or upon consumption. You recognize that, as the public revenue is employed for the defence of the entire nation, it is more equitable to levy them upon everybody; but you say that this is impracticable, the taxes will ultimately fall upon the land, and it would be better to lay them there in the first instance. You suppose, then, that the labourers always raise the price of their labour in proportion to the taxes; but this is contrary to experience. Manual labour is dearer in the canton of Neufchâtel, and in other parts of Switzerland, where there are no taxes, than in the neighbouring provinces of France where there are a good many. There are scarcely any taxes in the English colonies; and yet labour is three times as dear there as in any country of Europe. There are heavy taxes upon consumption in Holland, and the Republic does not possess lands upon which these taxes can ultimately fall.

The price of labour will always depend on the quantity of offers of labour and the quantity of the demand, and not upon the taxes. Tradesmen who manufacture stuffs to be exported cannot augment the price of their labour; because, in that case, the stuffs would cost too much to be able to be sold in foreign markets. And tradesmen who manufacture stuffs for consumption within the country are equally unable to raise their price, because there cannot be two prices for the same sort of labour. This applies to all commodities whereof part is exported,—i.e. to almost all commodities. Even if there existed some commodities whereof no part was exported, the price of the labour employed in their production could not rise; for the rise of the price would induce so many hands to turn to this kind of industry that the prices would immediately fall. It seems to me that, where there is a tax on consumption, the immediate consequence is that the workpeople either consume less or work more. There is no workman who is not nimble enough to be able to add a few additional hours to his week's work; and there is hardly any individual so poor that he cannot retrench somewhat in his expenditure. What happens when corn goes up in price? Does not the poor man live more meagrely and work harder? A tax has the same effect.

I beg you to remember, also, that besides landed proprietors and poor labourers, there is, in every civilized nation, a very considerable and very opulent body of persons, which employs its capitals in commerce, and which enjoys a large revenue while giving work to the poorer class. I am persuaded that in France and in England the revenues of this nature are more considerable than those which come from the land: for besides merchants properly so called, I include in this class all the shopkeepers and notable tradesmen of every kind. Now it is very just that these should pay for the maintenance of the community,—and this cannot be brought about unless the taxes are placed upon consumption. It seems to me that there is no warrant for saying that this class of taxpayers is compelled to shift its taxes upon the landed proprietors; for its profits and its revenues can certainly bear a deduction.

5

5. Turgot to Hume, March 25, 1767.

I should very much have liked to enter into some detail on the subject of taxation; but to reply to your objections it would have been necessary, so to speak, to write a book and earn my own prize. I will only indicate to you the principle from which I set out, and which I believe incontestable: it is, that there is no other revenue possible in a State than the sum of the annual productions of the land; that the total mass of these productions falls into two parts: one set aside for the reproduction of the following year, which comprises not only the portion of the crops that the undertakers of agriculture consume in kind, but also all they use to pay the wages of the workmen of every kind who labour for them: blacksmiths, wheelwrights, saddlers, weavers, tailors &c; it includes, also, their profits and the interests upon their advances. The other part is the net produce, which the farmer pays over to the proprietor, when the person of the latter is distinguished from that of the culti vator,—which is not always the case; the proprietor employs it to pay all that labour for him. If this is granted, it necessarily follows that that taxation which does not bear directly upon the proprietor, falls either upon the wage-earners who live upon the net produce, or upon those whose labour is paid on the part of the cultivator. If wages have been reduced by competition to their just price, they cannot go up; and as they cannot go up except at the expense of those who pay them, one part falls ultimately upon the proprietor for the expenditure he engages in with his net product, the other part increases the expenditure of the cultivators, who are consequently obliged to give less to the proprietor. It is, therefore, in all cases the proprietor who pays.

You remark that I am supposing that wages increase in proportion to taxes, and that experience proves the falsity of this principle: and you justly observe that it is not taxes, high or low, which determine the price of wages, but simply the relation of supply and demand.

This principle has certainly never been disputed; it is the only principle which fixes at the time the price of all the things which have a value in commerce. But one must distinguish two prices, the current price, which is established by the relation of supply to demand, and the fundamental price, which, in the case of a commodity, is what the thing costs the workman. In the case of the workman's wages, the fundamental price is what his subsistence costs the workman. You cannot tax the man who receives wages without increasing the price of his subsistence, since he has to add to his old expenditure that involved by the tax. You thus increase the fundamental price of labour. But although the fundamental price be not the immediate principle of the current value, it is nevertheless a minimum below which it cannot fall. For if a merchant loses by his trade, he ceases to sell or manufacture; if a workman cannot live by his labour, he becomes a mendicant or leaves the country. That is not all: it is necessary that the workman obtain a certain profit, to provide for accidents, to bring up his family. In a nation where trade and industry are free and vigorous, competition fixes this profit at the lowest possible rate. A kind of equilibrium establishes itself between the value of all the productions of the land, the consumption of the different kinds of commodities, the different sorts of works, the number of men employed at them, and the price of their wages.

Wages can be fixed and remain constantly at a definite point only in virtue of this equilibrium, and of the influence which all the parts of the society, all the branches of production and commerce, exercise upon one another. This granted, if you change one of the weights, a movement cannot but result from it in the whole of the machine which tends to restore the old equilibrium. The proportion which the current value of wages bears to their fundamental value was established by the laws of this equilibrium and by the combination of all the circumstances under which all the parts of the society are placed.

You augment the fundamental value: the circumstances which have before fixed the proportion which the current value bears to this fundamental value cannot but cause the current value to rise until the proportion is re-established. I am aware that this result will not be sudden; and that in every complicated machine there are frictions which delay the results most infallibly demonstrated by theory. Even in the case of a fluid perfectly homogeneous, it takes time for the level to be restored; but with time it always is restored. It is the same with the equilibrium of the values which we are examining. The workman, as you say, taxes his ingenuity to work more or consume less; but all this is only temporary. Doubtless there is no man who works as much as he could. But it is no more natural for men to work as much as they can than for a cord to be stretched as much as it can be. There is a degree of relaxation necessary in every machine, without which it would run the risk of breaking at any moment. This degree of relaxation in the case of labour is fixed by a thousand causes which continue to operate after the tax is imposed; and consequently, even if by a first effort the tension had increased, things would not be long in regaining their natural shape.