The Competitiveness of Nations
in a Global Knowledge-Based Economy
H.H. Chartrand
April 2002
Warren J. Samuels
The Physiocratic Theory of Property and State
*
Quarterly Journal of Economics, 75(1)
Feb. 1961, pp. 96-111
Introduction, 96. —
On the origin and justification of
property, 97. —The social claim on private property — some evidence, 100. —
The Physiocratic theory of property-state relations, 109.
Economists have long interpreted the Physiocratic
concept of the relation of the state to property as essentially the protection
of private property. The thesis of
this article is that the Physiocratic theory of property de facto valid,
however doctrinal its advocacy of private property, is a theory of malleable
property rights premised upon an utilitarian understanding of the social
function of private property and necessarily involving the state in the
continuing reconstitution of property rights.
There is no question that the “protection of property”
interpretation is amply supported by the Physiocrats’ own statements. Their affection for private property as
the dominant institutional form is clear: “Respect for property,” wrote Quesnay,
“is the primary element of the power of society.” Schlatter paraphrases la
Riviere:
It is from the right of property, maintained in all its natural and primitive fullness, that all the institutions which make up the essential form of society necessarily flow: you can think of the right of property as a tree, and all the institutions of society are the branches which it shoots forth, which it nourishes, and which perish when they are detached from it. 2
The fourth of Quesnay’s Mazime Generales thus
declares:
That the ownership of the landed properties and the mobile wealth be assured to those who are their legitimate possessors; for THE SECURITY OF PROPERTY IS THE ESSENTIAL FUNDAMENTAL OF THE ECONOMIC ORDER OF SOCIETY. 3
Possessed of this view toward private property the
Physiocrats were often equally explicit as to a desirable property-state
relation-
* The author would like to acknowledge the assistance
provided by the Bureau of Business and Economic Research at Georgia State
College of Business Administration, and in particular by Dr. Willys R. Knight,
Director.
1. Quoted in George John Malanos, The Evolution of
the General Theory (Unpublished doctoral dissertation, Harvard, 1946), p.
45.
2. Richard
Schiatter, Private Property: The History of an Idea (New Brunswick:
Rutgers University Press, 1951), p. 217.
3. Auguste Oncken (ed.), Oeuvres Economiques et
Philosophiques de F. Quesnay (Paris: Joseph Baer, 1888), p.
331.
96
ship. Having also held that “The social laws
established by the Supreme Being prescribe only the preservation of the right of
property, and of that liberty which is inseparable from it,” 4
du Pont inferred that, “No order of
any kind is possible in society unless the right of possession is guaranteed to
the members of that society by the force of a sovereign authority.”
5 This
reflects the dictum of Quesnay that, “There is only the sovereign power which
assures the proprietorship of the subjects…” 6
The “protection of private property” would thus seem
demonstrated as the distinctive component of the Physiocratic theory of
property-state relations. Private property would appear
upheld as inviolable and indivisible, something not to be infringed. The Physiocrats were aware that
interpersonal property claims are always in a process of adjudication, the state
reconciling conflicts between private litigants, with a concomitant expansion of
the law of property. 7 But what of the property-state
relationship as it involved, not the conflicting claims of private interests,
but conflicting private and public, or social, interests? Does the Physiocratic theory of
property maintain or imply that the social interest is best served when, perhaps
without substantial exception, private property rights are unrestrained and
unabridged? Or does the
Physiocratic theory of property encompass - and if so to what extent and by what
criteria - an element of restriction on behalf of some definition of the social
interest? We know that the
Physiocrats “accepted” private property, but was the state to be only a
gendarme in its protection?
ON THE ORIGIN AND JUSTIFICATION OF
PROPERTY
Three explanations of private property are recognized in
the literature on Physiocracy: private property as (a) an object of divine will,
(b) a manifestation of the natural order, and (c) derived
from
4. Quoted in John Herman Randall, Jr., The Making of
the Modern Mind (Boston: Houghton Mifflin, 1926), p.
324.
5. Quoted in Charles Gide and Charles Rist, A History
of Economic Doctrines (
6. Oncken, op. cit., p.
332.
7. “All property,” reads du Pont’s necrologue,
“is bound by the surrounding properties as all liberty by other liberties.
They press together but are still
separate as the cells of a honeycomb.” Further, “Yet the respect for liberty and
proprietorship requires that men and capitalists live completely [free] from any
masters in the usage of their advances and their time, provided that the results
of it neither hinder liberty nor damage the proprietorship of anyone.”
(Ibid., pp. 803, 804.)
97
the application of labor. In each case private property is
postulated as given and independent of the volition of
man.
Yet a fourth, less absolutist, justification of private
property is also present. This may
be called the “instrumental,” for it maintains that private property is not only
right but also expedient. Emphasis upon private property as a
means rather than as something given or ordained pervades the Physiocrats’
writings in two contexts.
First, it is contended that the harmony of interests is
to be effectuated through the institution of private property. The logic involves an equation of
individual and social interests, the social interest being consonant with the
sum total of individual interests when, ceteris paribus, individual
interests are effectuated and secured with private property. Private property rights are defended as
instrumental in securing private interests and in attaining the harmony of
interests – “... the unity of social interests and its conformity with the law
of justice.... “(Letrosne). 8 Hence the proposition that “Individual
interest is the primary bond of society, which will be the more solid in
proportion as private interest is secure,” 9 is the basis
for holding that “freedom in exchange, an absolutely unshackled use of the
wealth of individuals, could not be dissociated from the full enjoyment of the
rights of private property.” 1
Second, private property rights are justified on the
equally utilitarian ground that private property stimulates and facilitates the
production and accumulation of wealth, i.e., economic welfare. Private property becomes the foundation
of the natural order “most essential” and “most advantageous” to the human race
because it is so functional. 2 When Quesnay argues that “the security of
property
8. R. H. Palgrave (ed.), Dictionary of Political
Economy (London: Macmillan, 1908), II, 598.
9. Ibid., III, 105.
1. Ibid., II, 148.
2. Taken from the title of la
“Positive legislation consists, then,” says Quesnay, “in
the enunciation of the natural laws which make up the order obviously the most
advantageous possible for men in society:...” (K. W. Kapp and L. L. Kapp, Readings
in Economics (New York: Barnes and Noble, 1949), pp. 100, 101). See also Nicolas Baudeau, Premiere
Introduction a la Philosophie Economique (Paris: Librairie Paul Geuthner,
1910), p. 31.
98
is the fundamental essential of the economic order of
society,” the reason he advances for its necessity is
that,
Without the certainty of ownership, the territory would
rest uncultivated. There would be
neither proprietors nor tenants responsible for making the necessary
expenditures to develop and cultivate it, if the preservation of the land and
produce were not assured to those who advance these expenditures. It is the security of permanent
possession which induces the work and the employment of wealth to the
improvement and to the cultivation of land and to the enterprises of commerce
and industry. 3
La Riviere is equally explicit in propounding this
instrumental justification of private property:
The greatest possible happiness of the community as a
whole consists in the greatest possible abundance of useful goods and in the
greatest possible liberty to make use of these goods. I have made it clear that this maximum of
enjoyment is the necessary consequence of the establishment of the right of
property and that it is only by establishing this right that we are able to
attain happiness. 4
In contrast, then, with the three conventionally
recognized theories, the instrumental theory is utilitarian in its appeal for
acceptance; for private property is functional in use and its benevolent
efficacy - given the ends defined above - serves as its own justification. Private property as an institution
becomes a means subject to discretionary value criteria. The former theories serve as mandatory
criteria for the state, which would have to “maintain” or “protect” private
property. Other than the
adjudicatory function, nothing further can be inferred. The instrumental theory, however,
suggests that the substance of private property rights, nominally the
essence of the property-state relationship, may be malleable. Private property as an institution is
advanced as desirable on functional grounds; it seems reasonable to infer that
the state would have justification for altering the dimensions or substance of
property rights should the harmony of interests for some reason not be achieved
or should there be some obstacle to the attainment of the wealth and happiness
of the populace and the nation. While private property would be the
desired form of property arrangement, the actual construction of the institution
would seem subject to the same criterion as applied to the adoption of private
property itself, namely, a strictly utilitarian one, and as such subject to
change.
The recognition of the instrumental role of private
property would warrant the question: what was the social claim on
private
3. Oneken, op. cit., pp.
331-32.
4. P. C. Newman, A. D. Gayer, and M. H. Spencer,
Source Readings in Economic Thought (New York: Norton, 1954), p.
103.
99
property? If the state does not merely “protect”
private property, what are the other dimensions to the property-state
relationship?
THE SOCIAL CLAIM ON PRIVATE
PROPERTY – SOME EVIDENCE
Private ownership was to be de juro the accepted
form of property rights, and the duty of the state was here to protect property.
But Physiocratic property theory
also encompassed the reasoned modification-reconstitution of such rights as
necessary to maintain and strengthen the same social interest by which private
property itself was sanctioned. The
evidence recorded below suggests that the Physiocratic theory of property rights
is more nearly a theory of “social utility” than a theory of exclusive or
absolute private dominium. Such a view was propounded by de
Tocqueville, when he observed that the Physiocrats had neither concern nor
respect for contractual and proprietary rights. Such claims are minor, compared with the
social interest: “there are no longer private rights, but only a public
utility.”5 With respect to property, the role of the state was thus
seen as an active manipulator, rather than a passive securer. 6
5. Alexis de Tocqueville, The Old Regime and the
French Revolution (Garden City: Doubleday Anchor, 1955), p. 159. (See also
the French edition, published by Librairie Gallimard, 1952, I, 210.) Mario Binaudi, The Physiocratic
Doctrine of Judicial Control (Cambridge: Harvard University Press, 1938),
p.3.
6. Schlatter cites Baudeau’s view that, “it is a common
error to attribute property to the civil law.” (Op. cit., p. 217.) The inference that private property
exists prior and pre-eminent to civil law reflects Lord Acton’s dictum that,
“Society secures rights; it neither bestows nor restricts them.” (Quoted in Paschal Larkin, Property in
the Eighteenth Century (Dublin: Cork University Press, 1930), p. 198.) Turgot, however, agreeing “that labour
gave a natural title to property,” added, says Schlatter, that “in the state of
nature property in land lasted only so long as the appropriator continued to
occupy and cultivate: permanent property in land was a creation of the civil
law.” (P. 217; see infra,
footnote 4, p. 104.) Larkin
found another qualification by the Physiocrats, that “Every individual
has a natural right to at least those things which are necessary for his
welfare.” (P. 200.) Quesnay also
qualified the general rule by noting that “the strong can unjustly employ
violence upon the weak,” by “the condition that he injure neither himself nor
others,” and by recognizing differential “circumstances.” (Kapp and Kapp, op.
cit., pp. 97, 99.)
(These are the same qualifications propounded by Locke
himself. Locke qualifies his
explanation of property in the natural state (On Civil Government,
paragraphs 26, 27, 28, 29, 32, 33) by assuming abundance (paragraphs 33, 36)
and the use of the qualifying phrase, “As much as anyone can make use of”
(paragraphs 31, 36). Civil society
is also differentiated from the state of nature. See Larkin, op. cit., pp. 50-64,
and
Schiatter concludes that: “These civil extensions of the
right of property were justified by their general utility, but they should be
revised whenever they conflict with the original right of nature.” (P.
217.) “Thus the privileges of the
aristocracy, he advised the king, are civil rights which deprive others of their
natural right to enjoy the produce of their own industry: these privileges
ought, consequently, to be suppressed.”
On the distinction between feudal rights as privileges or legitimate
property, see Larkin, pp. 213 ff. [HHC - this last paragraph appears on page
101]
100
(1) Foundations: The two administrations of
public office by Turgot, together with the large body of his writings both
public and private, provide us with much serious insight into the social
character of private property as understood by an important member of the
Physiocratic group.7 One of the
most striking examples concerns Turgot’s attitude towards “foundations,” an
attitude comparable to the Anglo-Saxon law of perpetuities. Turgot argues that the governmerit has an
“incontestable right. . . to dispose of old foundations, to extend their funds
to new objects, or, better still, to suppress them altogether. Public utility is the supreme law, and it
ought not to be nullified by any superstitious respect for what we call the
intention of the founder - as if ignorant and short-sighted individuals
had the right to chain to their capricious wills the generations that had still
to be borne.”8 When private right or private interest is not coincident
with social interest, then “public utility is the supreme
law.”
(2) Famine Relief: Another notable example
relates to Turgot’s pragmatic program for the relief of the depression
engendered by the severe famines of 1769 and 1770, during his Intendency in the
Generality of Limoges. Turgot was
responsible for (a) the imposition of a voluntary charitable assessment, which
was supplemented by (b) a compulsory tax, to finance (c) a system of useful
public works. Furthermore he
required (d) the compulsory maintenance and provision of the cultivators and
their families by the employer-landlords, and (e) even went so far as to
regulate and recalculate the grain rents, and (f) abrogate the privileges of the
bakers of Limoges.
That Turgot employed his powers of governance to modify
the rights of privilege and property is clear. Turgot wrote in his report that “It has
been necessary for the public authority to require the
7. While not a Physiocrat in every doctrinal respect,
Turgot’s association with the group is reasonably close; moreover, his attitude
towards governmentally induced social change and social reconstruction does
parallel the general Physiocratic view in almost every respect. Turgot may have been “more of a
fellow-traveler... than a Physiocrat pur,” but he is also the only major
Physiocrat providing the historical analyst with practical experience as a
source of insight. (Ronald L. Meek, “The Physiocratic Concept of Profit,”
Economica, N.S. XXVI (Feb., 1959), 52.)
8. W; Walker Stephens (ed.), The Life and Writings of
Turgot (New York: Longmans, Green, 1895), pp. 227—28.
101
proprietors and inhabitants in better circumstances in
each parish to assess themselves for the relief of the poor...” Anticipating the principle of “social
fault yet private responsibility” of present-day unemployment compensation, he
argued that “The labourers must find resources in the advances from, or in the
gratuitous assistance of, their masters, who owe to them this support not
less on the score of charity than on that of justice, and as landlords, for
their own interest, rightly understood.” Thus by ordinance he
proclaimed:
For these causes we order that the proprietors of
domains, of whatever quality or condition they may be, privileged or not
privileged, shall be held to keep and to maintain, until the next harvest, the
labourers whom they had on October 1 last, as well as their families, men,
women, and children. 9
Moreover, when the landlords demanded payment of the
metayers’ rent in grain, as originally contracted, or the money value thereof at
the existing market famine-price, Turgot intervened. Although “The landlords were requiring no
more than their legal right, and they upheld the principle of the inviolability
of contract,”1
Turgot persuaded the
Parliament of Bordeaux to sanction a recalculation of the grain rents in terms
of an earlier, somewhat lower, price. In a letter to the Chancellor, Turgot
justified his course of action:
In times of scarcity it is humane, and even just, to
bring the law to the assistance of the overburdened tenant. The proprietor whom the scarcity enriches
cannot, without showing most odious greed, attempt to draw, from the cruel
circumstances in which his tenant is now placed, a profit still more exorbitant
than before. 2
(3) Guilds: Turgot’s Edict suppressing the guilds
- consonant with the general Physiocratic program of reform - is well known as
part of Turgot’s endeavor to rid commerce of the burden of the many restrictions
then imposed upon it. But the
significance of the Edict for the Physiocratic theory of property is less well
appreciated.
Seguier, challenging the principle of the Edict before
the Parliament of Paris, “contended, and with much force, that the masterships
were items of property which had been purchased; that to abolish the guilds,
rather than to reform them, meant nothing less than to confiscate the property
of innocent purchasers.” Furthermore, said Seguier, “To give to
all your subjects indiscriminately the right to hold a store or to open a shop
is to violate the property of the masters,
9. Ibid., pp. 50, 53, 54.
1. Ibid., p. 51.
2. Ibid., p. 54.
3. R. P. Shepherd, Turgot and the Six Edicts,
Columbia University, Series in History, Economics and Public Law (New York
1903), XVIII, 131.
102
who compose the communities.” 4 Turgot’s response is characterized by Shepherd as that
of a “minister who saw not tradition but the future; who felt that justice to
the many demanded injustice to the few who exploited the many.” Hence valuable property rights were, by
the Edict, to be done away with, or at least seriously modified. This was the case and it was recognized
as such.
(4) Economic Stability: It is now well recognized
in the literature that several of the Physiocrats were solicitous lest an
improper pattern or an inadequate volume of spending impede the maximization of
the net product and thereby national prosperity. 6 Of the specific policies proposed by
Quesnay, the regulation of interest rates for the purpose of insuring an
adequate flow of capital to agriculture is also well known, as is also the
strenuous objection raised by Turgot, du Pont and Letrosne (vis-a~vis Mirabeau,
who concurred with Quesnay). But
the fact nonetheless remains that Quesnay not alone accepted such restriction of
property rights as is involved in interest-rate regulation. Even more striking are several other
proposals of Quesnay having as their purpose the modification of property rights
for the objective of protecting the social interest in the processes of
circulation and reproduction.
Du Pont, in a letter to Turgot, urged the view that “the
formation of capitals arises much less from saving out of the expenditure of
revenues than from the wise employment of the expenditures.” 7 Thus Quesnay devoted two Maximes
to public policy both compensatory and promotional toward the proper pattern
and magnitude of expenditures:
That the government be less occupied with economies than
with the operations necessary for the prosperity of the
kingdom….
That the economic government occupy itself only in
favoring the productive outlays and the commerce of agricultural commodities,
and that it leave alone the sterile outlays .8
4. Stephens, op. cit.,
p. 134.
5. Shepherd, op. cit.,
p. 131.
6. J. J. Spengler, “The Physiocrats and Say’s Law of
Markets,” I—II, Journal of Political Economy, LIII (Sept. and Dec. 1945),
193-211, 317-47, esp. 204-11,317-29, 345-47; Henri Woog, The Tableau
Econornique of Francois Quesnay (Bern: A. Francke, 1950), pp.
22-25,82-98 (“The ‘Tableau Economique’ in Disequilibrium”); Leo Rogin, The
Meaning and Validity of Economic Theory (New York: Harper, 1956), pp. 23-24,
29; Joseph A. Schumpeter, History of Economic Analysis (New York:
Oxford University Press, 1954), p. 287; A. R. J. Turgot, Reflections
on the Formation and the Distribution of Riches (New York: Macmillan, 1922),
p. ix; Edmund Whittaker, Schools and Streams of Economic Thought
(Chicago: Rand McNally, 1960), p. 95.
7. Turgot, loc. cit.
8.Oncken, op. cit., pp. 336,
333.
103
Both fiscal and monetary policies are contemplated by
Quesnay. Immediately after
stating and reiterating the need to emphasize agricultural (via-a-vis
manufacturing and luxury) production as the foundation of a prosperous economy,
Quesnay offers, in italics no less, two rather astounding but concrete
restrictions on the use of property, restrictions suggestive no doubt of how he
would further minimize the problem of “sterile hoarding.” Says Quesnay:
That a part of the sum of incomes not pass to a foreign
country without returning, in money or in merchandise.
That they prevent [evite] the desertion of inhabitants
who would carry their wealth out of the kingdom.9
As with hoarding, “Money,” it would seem, “is strictly
speaking, a public utility,” as Rogin has postulated;1
or, in Schumpeter’s words, unspent
saving is “a sort of public enemy.” 2
Nor is that all, for Quesnay’s often-cited maxim on “the
complete freedom of commerce” is preceded by two maxims which modify such
freedom by requiring, in effect, that there be no social loss in foreign trade -
perhaps another reversion to currency and, also, to import-export controls.
3
It is clear that these controls, having as their
objective the promotion of the social interest in national economic prosperity,
would have necessarily involved to some direct and indirect extent (as do their
modern counterparts) the modification of the rights of private property. Individually and in their totality these
modifications would have constituted a social claim on private property. Conversely, it is again evident that the
uninterfered-with use of private property was, in the minds of the Physiocrats,
contingent upon the consonance of that use with the requirements of justice and
the prosperity of the system, as defined by them. 4
9.Ibid., p.
333.
1.Rogin, op. cit.,
p. 23.
2. Schumpeter, op.
cit., p. 287.
3. Oncken, op. cit., p.
336.
4. Spengler points out that “Among the economic
principles to which the physiocrats subscribed were these three: (a) the
institution of private property is essential, at all times and in all places, to
the well-being and development of societies; (b) complete economic liberty -
freedom of exchange, of entry, and of competition - is prerequisite to the
maximization of effort and conducive to the private and the public interest; (c)
activity and policy directed to the maximization of the net product are
necessary to, and consistent with, the maximization of the collective welfare.”
He notes that critics “have pointed
out that principle c is not universally consistent with principle b; that
pursuit of principle c must eventually involve conflict with, and
sacrifice of, principle b and its corollary, principle a.” “Were the pursuit of principle b to
run counter to that of principle c,
[it is said, Quesnay would have sacrificed principle
b to principle c, even to the extent of supporting state
intervention in favor of agriculture.”
But, the critics agree, Quesnay’s disciples “other than Mirabeau, who
subscribed without qualification to Quesnay’s views, assigned primacy to
principles a and b.
These disciples of Quesnay, in event of conflict between principles
c and b, would have subordinated the pursuit of principle c
to that of the overriding principle b, it is inferred.” This characterization of Quesnay’s
position is consonant with the position taken here. Spengler’s final comment aim supports
the present thesis: “At most, supposing principle bwere subordinated to
principle c, consumer sovereignty would be more restricted.” (Op.
cit., pp. 328, 329.)
Restricted, that is, in the use of their property: Quesnay is quite clear
in proscribing unproductive consumption (manufacturing and luxury expenditures)
and hoarding. See thicken, op.
cit., maxims VII, VIII, IX, XXI, XXII, pp. 332-35.
A related point concerns the accountability of the
landlords for the use of their property, primarily the lands capable of
cultivation, as stewards of society.
Quesnay accepted a feudal class structure, but he had his reservations
and doubts over the efficacy of “the dependence of the current process of
production on the financial resources of the landed class.” (Woog, op. cit.,
p. 19.) Says James
Bonar:
“... the land should be allowed to become property not
only because men have worked on it, but in order that they may have the motive
to go on working upon it.” But he
continued, “This tacitly implies that, if they do not work upon it, their title
is pro tante insecure, and the State would not be bound to treat them as
absolute masters of their land. But
the existence of proprietorship without work is certainly tolerated by the
Physiocrats.” (Philosophy and Political Economy (New York: Macmillan,
1909), p. 143.)
Spengler also concludes that the Physiocrats held the
proprietors and cultivators should maintain the annual reproduction and
net product, as well as “the continued augmentation of advances until net
product has been raised to the attainable maximum,” i.e., that they were
“morally responsible, each within his own sphere” and that such conduct was
considered “meritorious”; but that such behavior was not “obligatory.” (Op.
cit., pp. 208-9.) Whether a
Physiocratic regime would have imposed sanctions toward such a goal is
speculative and unanswerable. It must be remembered, however, that under the
ancien regime there was “confiscated the whole local property of an owner
who left his land derelict.” (Woog, op. cit., p. 13.) There would no doubt have been a schism
of opinion among the Physiocrats. ] [HHC - bracketed section displayed on p.105
of the original]
104
(5) Taxation: A priori it would be expected that
any theory of property-state relations characterized by the “protection of
property” formulation would have as concomitant views that (a) taxes are
intrinsically inimical to private property, (b) spending is generally best when
done by private hands, and (c) taxes (and the cost of government), being
essentially sterile, should therefore be minimized. One would expect an attitude thoroughly
condescending and repugnant to taxation, in which the necessity for some
compulsory contribution to government would be but grudgingly acknowledged.
It will be found, however, that for
a group presumably holding private property sacred and inviolable, the
Physiocrats are not unduly hostile to taxation per se; rather they attribute to
taxation (and government) considerable positive social
significance.
105
The impot unique was proposed by Quesnay as a
means of protecting the agricultural advances and thereby the prosperity of the
nation. Quesnay also warns “That
taxation not be destructive, or disproportionate to the total income of the
nation;…. otherwise the tax degenerates into spoilation and causes a
dwindling away which quickly ruins a state.” 5 This emphasis upon the destructive
potential of taxation is reiterated throughout the writings of the Physiocrats.
But concentration upon such
destructive potential would be, however, a demonstrably inadequate
characterization of the Physiocratic attitude toward taxation. Beyond this manifest concern over the
proper magnitude and form of taxation, the Physiocrats had a pervasive
solicitude for what may be called the constructive facet of taxation and
public expenditures. Taxation
becomes less of a nemesis and more of an instrument of social utility. Indeed, L. Einaudi expresses as a
principle of Physiocratic tax theory that:
Tax, if kept within its rational limits, is not a burden
at all. On the contrary, is a
condition toward the maximization of the national
dividend.
The object of taxation is “that part of the national
dividend which is the necessary remuneration of the political class.” “....
in an orderly, progressive society the national dividend reaches a maximum when
a sufficient quota is devoted to the maintenance of the political governing
class,” for “we see that tax is born out of its very utility.” There is no burden, “because it is the
fruit of the work done by the political class, acting either individually or
collectively, through the agency of the State.” According to L. Einaudi, then, taxation
for the Physiocrats was “a problem not of a burden laid on individual producer’s
shoulders for the sake of keeping the consumptive governmental machine going,
but... a problem of distribution between productive agents - the State being counted among them
according to his (its) proper nature - of a total national dividend produced by
the same agents.” 6
This interpretation of L. Einaudi is supported not only
by La Riviere and du Pont, both of whom are cited by him, but also by Bandeau,
7 Quesnay and Turgot. Maxim XXVII reads in
full:
That the government be less occupied with economies than
with the operations necessary for the prosperity of the kingdom;
for very great expenses can cease to be
excessive by the augmentation of wealth. But it must not confound the excesses
with the
5 .Oncken, op. cit., p. 332; see also pp.
337-41.
6. Luigi Einaudi, “The Physiocratic Theory of Taxation,”
in Economic Essays in Honour of Gustav Cassel (London: George Allen &
Unwin, 1933), pp. 131-35.
7.Baudeau,
loc. cit.
106
simple expenses; for the excesses would be able to
swallow up all the wealth of the nation and sovereign. 8
So also says Turgot:
If the realm becomes generally more wealthy, if there is
more money, more capital, and greater activity in industry and trade, all the
king’s expenses will increase proportionately. Everything is dearer in
Also relevant is Quesnay’s dictum that “...the sovereign
power which assures the proprietorship of the subjects... has a primitive right
in the division of the fruits of the land...” 1
8. Oncken, op. cit.,
p.336.
9. Shepherd, op. cit., p. 99. “As for government
expenditures,” says Shepherd, “Turgot held that there was a direct connection
between governmental expenses and public prosperity. He did not question that as the economic
development of the state required enlarged expenditure by the government, the
taxes to meet growing needs would be more and more easily borne by the
people. He had public and private
expenditure so closely allied that he could consider no increase of the budget
allowable, except in case of dire necessity, until the indebtedness of the state
was in process of liquidation.” (P. 138.)
1.Oncken, op. cit., p. 332. See also Gide and
Blat: “...the Physiocrats argued that taxes ought to be paid liberally, and not
grudgingly,...” (Op. cit., p. 38.) The fact that “the public authority must
also incur some expense, which might be designated avances souveraines,”
(Baudeau) is one justification. (Loc. cit.) As Spengler notes, the sovereign
becomes “a co-proprietor.” What was
transferred to the sovereign, consistently with the principles of the natural
order, was not really a tax, therefore, but only his share. Moreover, this share had not really been
the possession of the existing land-owning class; it had not been bequeathed or
sold.” (Op. cit., p. 211.)
Said du Pont: “The tax is a kind of
inalienable common property. When
proprietors buy or sell land they do not buy and sell the tax. They can only dispose of that portion of
the land which really belongs to them, after deducting the amount of the tax.
This tax is no more a charge upon
property than is the right of fellow proprietors a burden upon one’s property.
And so the public revenue is not
burdensome to anyone, costs nothing, and is paid by no one. Hence, it in no way curtails the amount
of property which a person has.” (Quoted in Gide and Blat, op. cit., p.
40.) This can only be the case if,
as L Einaudi argues, the state is one of the “agents” of production. Thus Baudeau “recognized the advisability
of periodical revaluations ‘in order that the sovereign power should always
share in both the profits and the losses of the producer.’ And he addresses this important caution
to the proprietors: ‘Take no credit
to yourselves for the increase in the revenue of land. The thanks are really due to the growing
efficiency of the sovereign authority” (Gide and Blat, op. cit., p.
40.)
As Gide and Blat note, the percentage limitation
“affords a barrier against the autocracy of the sovereign - a barrier that is
much more effective than a parliamentary vote.” (P. 44.) But - and this is very important for
property theory - they also state that, “There is no mention of representation
as a corollary of taxation. This
form of guarantee, which marks the beginnings of
* [Parliamentary government,” and which involve the
doctrine of consent (or at least implied consent) so intrinsic to
conservative property theory, “could have no real significance for the
Physiocrats.” (P. 35.) Said
du Pont in a letter to Say: “it is a narrow and churlish English idea which
decree. that an annual sum should be annually voted to the Government, and that
Parliament should reserve to itself the right of refusing this tax.” (P.
88.)] * HHC – [bracketed] portion displayed on page 108 of the
original.
It is also clear that the reconstruction of the tax
system proposed by the Physiocrats would have necessarily involved the
abrogation of valuable and privileged property rights of long standing. The impot unique is proposed not
only on grounds of efficiency but also “Because (indirect taxation) is a
disproportionate burden on the poor consumer,” a rich man’s consumption not
being proportionate to his greater wealth. 2 Moreover, “The expenses of the government
having for their object the interests of all, all ought to contribute to them;
and the more one enjoys the advantages of the society, the more ought it to be
held a matter of honor to participate in these charges.”
3 Taxation being subject to considerations of public
utility, privilege would have to give way to a rational tax administration.
That such a reconstruction involved
a concomitant reconstitution of property rights 4
goes without saying. As with the impot unique, so with
the corvee: the rights of privilege and exemption were to be abrogated.
Such a revolution was involved in
Turgot’s plan to replace the corvee with a direct money tax on the real
beneficiaries (“It is then the class of proprietors of land which receives the
fruit of the construction of roads; it is that class which ought alone to make
the necessary advances, since they finally secure the benefits.”)
5 that the Parliament of Paris refused to register the
Edict for the suppression of the corvee because, in its own
words,
this suppression would be against justice. The first rule of justice is to preserve
to every one what belongs to him: this rule consists, not only in preserving the
rights of property, but still more in preserving those belonging to the person,
which arise from the prerogative of birth and positions. 6
In the later development of American economic policy the
same issue was to be formulated in terms, of a juxtaposition of the two due
process clauses to the national commerce and tax powers and the state police
power. For the Physiocrats, with
respect to both guild and corvee reform, a change in policy and of the
system involved what was correctly considered a reconstitution of the rights of
prop
2. Stephens, op. cit., p.
320.
3. Quoted in Shepherd, op. cit., p.
108.
4. For example, the right of exemption from taxes was an
object of purchase and sale, a valuable property right indeed. Ibid., pp.
108-9.
5. Ibid., p. 152.
6. Stephens, op. cit., pp.
132-33.
108
erty, differences of opinion arising over what best
served the “social interest.” A
similar position was taken, it should be noted, by Quesnay with respect to
“abolishing or moderating the excessive rights of rivers and tolls...” “those to
whom these rights belong will be sufficiently compensated by their part of the
general increase in the incomes from the lands of the kingdom.”7 Privileges, vested interests, and property rights
disturbed by reform in the public interest were thus to be compensated only by
the resultant general prosperity.
While it was intrinsic, then, to Physiocratic thought that taxation not be destructive and uneconomical, it is also characteristic of Physiocrats thought that taxation (and therefore tax reform) is a matter of public utility not to be subjugated to any priority of private property rights. Taxation and private property itself were envisioned as instruments of social utility.
THE PHYSIOCRATIC THEORY OF PROPERTY-STATE
RELATIONS
To the Physiocrats, private property was the accepted,
indeed cherished, form of institutionalized ownership. They frequently couched their
justification of private property in mandatory, superhuman sanctions, embodied
in a theory of apparently absolute individual dominium. Viewed thusly, the Physiocratic
theory would appear to involve the state in the simple protection of private
property.
The foregoing analysis reveals, however, that the
Physiocrats also endeavored to justify the institution on functional grounds,
reducing the institutionalization of ownership to the domain of human volition
and to the service of discretionary ends and values. Physiocratic thought both theoretically
and practically, implicitly and explicitly, evidences a departure from the
theory of individual dominium. While the dominium theory
served as doctrine, Physiocratic thought and program belies the adoption de
facto of a “bundle-of-rights” theory of property.
The character of property, as operationally understood
by the Physiocrats, was such that the positive parameters and composition of all
property, and of the dimensions of the rights of any given property, were all
determined by and through the state and reworked in accordance with their
conception of the social interest. Property rights thus took the form of a
summation or bundle of rights, which
7. Oncken, op.
cit., p. 241
109
did not exist in a vacuum in some predetermined absolute
form, but were extant in reference to the functional requirements of their
proposed Royaume Agricole. There were no rights independent of
state law; there was no operationally definable quantum of rights extant in the
Physiocratic literature that persists beyond the scope of lawmaking by the
state. In a word, property rights
are malleable, and the social claim on private property is manifest through
changes in the bundle of rights, such changes presumably justified by the public
interest - the law of social utility.
The Physiocratic social claim on private property has
the following major dimensions: the application of the police power as
conventionally understood, and the implementation of the Physiocratic programs
of social construction, economic development and economic stability.
The ultimate sources of such
property-state relationship include: (a) the vestiges of a feudal conception of
property, with the sovereign conceived as coproprietor of property and economy,
coupled with the Physiocratic theory of a paternal, absolute (albeit benign)
sovereign; (b) more important, operationally at least, their equating of the
natural order not with the status quo but with the ideal with the consequent
program of social change and reconstruction along the lines of the ideal through
the agency of the sovereign, i.e., the state; and (c) the recognition that the
presumed harmony of interests, if it was to be realized, had to be attained (and
disharmonies and obstacles precluded) through the agency of the state,
especially (but not only) for the maximization of the produit net and the
proper functioning of the processes of circulation and
reproduction.
All these considerations support the recognition of the
de facto alteration of the fabric of property rights. There is no question but that the
divesting of property rights (vested interests) through the focusing and
refocusing of economic activity through state action is tantamount not to the
protection of property in the abstract but to the material remaking of property
and property rights. For the
Physiocrats it was axiomatic that the state was responsible for the development
of property, that it was through the agency of the state that property was to be
reconstructed continuously in the social interest. The role of the state was thus to
manipulate property law, thereby manipulating the bundle of rights that
constituted property. From the
perspective of the individual holder of property, the uninterfered-with use of
private property was contingent upon the consonance of that use with the public
interest as defined by the state. The concept of social function was thus
correlative to that
110
of private right, and for practical purposes the former
would govern the latter. 8
8. Compare R.. H. Tawney, The Acquisitive Socie4y
(New York: Harcourt, Brace, 1920), Chaps. II and III. Given the recognition of these
manipulations, “their philosophies would have permitted and would even have
compelled them to regard” them “as ordained by Nature.” (0. H. Taylor,
Economics and Liberalism (Cambridge: Harvard University Press, 1955), p.
99. As Spengler notes, even “Dubois
admits that if it could have been proved to Quesnay that legislation (e.g.,
tariffs) would increase the net products he might have found such intervention
to conform to the natural order.” (Op. cit., p.
328.)
111