James is still definitely within the circle of the Mercantilist's ideas, since he holds so strongly that it is wise for the statesman to direct industry and commerce into the right channels; though he realizes, as few of his predecessors had done, that this is a most difficult and delicate operation.

6. The way was now fully prepared for the genius of Adam Smith to give a new turn to the old inquiries, and thus to revolutionize the whole nature of economic doctrine. Like all strokes of genius, what he did was extremely simple, and it was none the less a stroke of genius because the work of preceding writers had so far paved the way that the public were able to appreciate the merits of The Wealth of Nations at the moment when it appeared. He was prepared to go one step further than Sir James Steuart. The latter had aimed at, though he did not attain, an ideal scheme of national economy, while Adam Smith held that no such system was necessary. His predecessors had believed that the statesman must play upon private interests so as to force them to conduce to the public good, and the maintenance of national power. In Sir James Steuart this guiding aim becomes a mere abstraction, and the chief point to be considered in adjusting that aim is another abstraction-the spirit of the people. Truly the mercantile system was ready to vanish away. Adam Smith did not attempt to correct any previous system of economy, he was content to insist that all systems were idle, if not positively noxious. Other writers had begun with the requirements of the State, and had worked back to the funds in the possession of the people, from which these requirements could be supplied. Adam Smith approached the subject from the other end. The first object of political economy, as he understood it, was, to provide a plentiful revenue or subsistence for the people,' the second was, to supply the State or commonwealth, with a revenue sufficient for the public services.1 He simply discussed the subject of wealth; its bearing on the condition of the State appeared an afterthought. His great achievement lay in isolating the conception of national wealth, while previous writers had treated it in conscious subordination to the idea of national power.

So far as 'political economy considered as a branch of a science of a statesman' was concerned, it was now possible to regard material weath as a main object in view; and if this was the main object in view, then the systems of policy which had preferred one kind of wealth to another, or one kind of trade to another, on political grounds, had simply lost their raison d'être. The system

1 Works, iv. introduction.

of natural liberty was the necessary outcome of the new turn which Adam Smith had given to the old problem. We have already seen, in connexion with Massie and Sir James Steuart, how little his ablest predecessors were satisfied with the expedients then in vogue; and when Adam Smith propounded the new doctrine that all efforts to direct trade wisely were labour thrown away, the public of his age were ready to give him a hearing and to accept the new principles which followed from concentrating attention not on power, but on the necessaries and conveniences of life.

At no previous time perhaps, would it have been possible to proclaim this doctrine with any chance of success, but the circumstances of the day supplied the conditions which his principle assumes. The local obstacles to the fluidity of capital were for the most part disappearing. Even in towns like Hull, where the trading corporations had had an uninterrupted tenure of power for centuries, their influence was coming to an end, and the incorporated companies for commerce and for industry were no longer so exclusive or no longer so important. Everywhere there was freedom for internal commerce, and thus capital was able to flow into any direction which the rate of profit rendered attractive to the capitalist, and where as that very rate of profit showed, there was opportunity for developing some neglected side of national wealth. Till this was approximately the case, it would not have been so easy to urge that the system of natural liberty was most consonant with national prosperity.

In regard to other individual factors, there was no such free play; the system of natural liberty was realized in a somewhat one-sided fashion. The English law of entail and the custom of commonfield cultivation, sufficed in many places to prevent the improvement of the land. The laws of settlement placed crushing restrictions on the fluidity of labour, and the laws against combinations put the workers at a terrible disadvantage in competing for better wages. Adam Smith was prompt to denounce these evils, but the British public were not prompt to recognize them. It was not till the progress of the industrial revolution had demonstrated the frightful mischief of a partial adoption of natural liberty-that is to say, the adoption of this principle in regard to one factor of production, while it is wholly disregarded in relation to another-that the conditions of society were rendered more completely accordant to those which Adam Smith's principle assumes.

7. By isolating wealth, and the causes of wealth, as a subject

of study which could be pursued apart from the investigation of other political phenomena, Adam Smith laid the foundation of modern political economy. It was in this way that he differed from all his predecessors, so far as I have been able to examine them. There are two different sides from which we may obtain confirmatory evidence in regard to this characteristic feature of his work. We may note (i) the manner in which he treats previous writers, and (ii) the reception of his book by his contemporaries.

Firstly, the whole force of his criticism both of the Mercantilists and of the Physiocrats depends on the assumption that they were discussing economic problems in the more definite sense in which he himself regarded them. But this assumption, which is never explicitly stated, was wholly untrue. The English Mercantilists were considering how the power of this country might be promoted relatively to that of other nations. The object of their system was not absolute progress anywhere but relative superiority to our political neighbours. Their commercial jealousy followed from political distrust; and Adam Smith appears to admit that from this point of view, their reasoning was right. The wealth,' he says, of neighbouring nations, however, though dangerous in war and politics is certainly advantageous in trade. In a state of hostility it may enable our enemies to maintain fleets and armies superior to our own, but in a state of peace and commerce, it must likewise enable them to exchange with us,1 to our mutual advantage. As the Mercantilists were avowedly writing from a political standpoint they were bound to consider how to guard against these dangers. Adam Smith in criticising them persistently refuses to take their point of view. He assumes that they were trying to devise means for increasing wealth, or as they would have said, riches, as an end in itself, while every page of their writing showed that they were doing nothing of the kind. As a consequence, his vigorous attack misrepresents them strangely. They had attached political importance to treasure, but it would be easy to show that they rather underrated than overrated the importance of gold for commercial purposes and as an element of riches. And so with all the other points of their policy; they did not imagine they increased the riches or wealth of the country by the restrictions on colonial trade, but they did think that they increased its power, and the events of the eighteenth century went a long way to prove they were right. Similarly with the Physiocrats; when Quesnay spoke of agri1 Wealth of Nations, IV. iii. Nicholson's edition, 201.

culture as productive, and of all manufacturers and commercial men as sterile, he is not considering the means of procuring the necessaries and conveniences of life; he is pointing to a source from which in the progress of the society, an agricultural state may derive a permanent revenue with the least possible inconvenience to the citizens in their ordinary avocations. He points to an unearned increment from land,' though economic science had not so far advanced as to enable him to name it quite definitely. Adam Smith assumes in his criticism that Quesnay is really discussing the causes of the increase of national wealththe necessaries and conveniences of life-as they act in any country, and that he represents the produce of the land as the sole source; but Quesnay's maxims were avowedly devised for an agricultural realm,1 and he explicitly notes that the scheme would be inapplicable to small maritime states which are dependent on commerce. He was not discussing the growth of riches, but the most convenient source of taxation in a special community. But Adam Smith's criticism was not less damaging because it was quite irrelevant.

The misrepresentations of both these systems are glaring, and of course it can never be possible to decide with certainty how far Adam Smith mistook the purport of these writers and how far he was unfair. But when we take account of the acumen and character of the man, it is as difficult to the historian as it was to contemporaries in Paris to believe that his misrepresentations were unconscious. The story of Adam Smith's relations with Hume,* shows that he was neither distinguished for frankness nor moral courage; and there is little reason to plead for him as a judicial critic, if an adequate motive can be assigned for the misrepresentation of his predecessors; and the motive is not far to seek. His treatise was thoroughly practical; he may well have believed as others had done, that the whole scheme of Government interference, and the whole fiscal policy which rested on it, was bad. Under the circumstances he rightly desired to sweep it away and to have the revenue system altered in accordance with the maxims which he had adopted from M. Moreau de Beaumont." But by attacking the mercantile principles on which our existing system was founded, and by discrediting the Physiocratic principles which

1 Quesnay, Euvres, edition by Oncken, 328.

3 See M. Oncken's Preface to his edition of Quesnay. Haldane, Life of Adam Smith, 37.

2 Ibid. 338.

5 Adam Smith's celebrated maxims about taxation are improved in form, but in substance they are found in the Avertissement to the splendid Mémoires which were compiled and printed for the French government in 1768.

had been stated by Locke,1 and had become popular in France,2 he could hope to clear the way for the reforms which he approved, and which were, in some of the most obvious points, effected by Pitt. He seems to have had a practical object in view; the alterations in his third edition show that he was ready to write. for the times, and his practical purpose required that he should state his case in a fashion in which it would catch public attention. It was easier to discredit his opponents than to refute them by meeting them on their own ground or by showing that their position was untenable; and Adam Smith apparently sacrificed the part of a fair-minded critic, though he has certainly achieved the reputation of a great practical politician.

8. Secondly, the enthusiastic reception accorded to his work by his contemporaries was chiefly due to the extraordinary simplicity and clearness of his treatment, as well as to the excellence of the style. But this simplicity was secured by the definiteness of his new conception of the object of political economy. It had to do with the necessaries and conveniences of life, material commodities, definite concrete things. There was much clever compilation in the book, but it made no demand for additional inquiry as Massie had done, nor was much stress laid on that impalpable abstraction, the spirit of the nation; and the disagreeable discussion of metaphysical arguments. was avowedly abjured. It was all to be plain sailing for the man of ordinary intelligence; and within a few months of its publication the book had become a considerable power. In 1777 North had borrowed some suggestions which Adam Smith had incorporated from Moreau de Beaumont; Pitt's French policy followed the principles he had laid down, and which he amplified in the edition of 1784; the great minister explicitly referred to the book in introducing his scheme for modifying the pressure of taxation in 1792, and was determined by it in his action on

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1 Lowering of Interest, Works, iv. 55, 60. This by the way, if well considered, might let us see that taxes, however contrived, and out of whose hands soever immediately taken, do, in a country where their great fund is land, for the most part terminate upon land. . . . It is in vain, in a country whose great fund is land, to hope to lay the public charge of the Government on anything else there at last it will terminate.'

2 They were partly commended to Quesnay by the results of agricultural protection in England. Œuvres, 230.

3 Wealth of Nations, (ed. Nicholson) 349.

4 Dowell, History of Taxation, ii. 169.

5 See especially the passage inserted in IV. iii. It is in consequence-commerce with the other' (ed. Nicholson, 202); and By the second-calicoes and muslins. pp. 203-205.

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