In the 16th century, economic thought in Europe underwent significant changes: an active theoretical search for sources of capitalist we alth began. This turbulent era is rightly considered the period of primitive capital accumulation, the period in which European states began their commercial and political expansion, etc. At this time, the bourgeoisie is gaining ground not only in politics, but also in the economy.
Then the transition to the so-called classical teaching took place in France, where the school of physiocrats arose, the founder of which was the famous Francois Quesnay.
What is physiocracy and who are physiocrats?
The concept of "physiocrats" comes from the merger of the Greek words "physis", which translates as "nature", and "kratos", which means power, strength, domination. Physiocrats is the name of one of the most popular trends in the so-called classical political economy, and physiocrats are, respectively, representatives of this trend. Despite the fact that the school itself originated in France in the middle of the 18th century (in 1750, according to most sources), when the crisis of the feudal system was rapidly growing in the country, the term “physiocrats” began to be used only in the 19th century. It was put into circulation by Dupont de Nemours, who published the works of the founder of this French school of economists, F. Quesnay. The representatives of the direction themselves preferred to call themselves "economists", and the theory that they developed and of which they were adherents - "political economy". Physiocrats are supporters of the "natural order" in the economic life of society, who zealously defended the idea that nature, the earth, is the only independent factor of production.
The origin of the physiocratic theory
According to the majority of English, Russian and German historians, the founder of political economy is Adam Smith. However, French scientists refute this opinion, arguing that the emergence of this science is the exclusive merit of the Physiocratic school. They argue that A. Smith himself wanted to dedicate his main work, The We alth of Nations, to the recognized leader of the Physiocrats, Francois Quesnay.
Physiocracy replaced the so-called mercantilism, which was more of a system than a theory. In addition, the mercantilists failed to create a full-fledged scientific doctrine. Therefore, it is the Physiocrats who deserve to be recognized as the real founders of political economy. For the first time in history, they put forward the principle that the life of societydetermined by the natural order. In their opinion, it is enough to discover the laws that affect economic life, and it will be possible to create theories of reproduction and distribution of goods among members of society. The method of A. Smith, as well as other prominent representatives of the "classical" political economy, is very similar to their deductive method.
The Teaching of the Physiocrats: Key Points
Physiocrats are the opponents of mercantilism, who actually managed to create a general economic science. They expressed the interests of large farmers, capitalists, and argued that cultivators (farmers) are the only productive class that exists in society.
The main ideas of the Physiocrats are as follows:
- The laws of economics are natural, that is, they can be understood by every person. In the event of the slightest deviation from these laws, the production process is inevitably violated.
- The economic doctrine of the Physiocrats is based on the position that the source of we alth is the sphere of production, in particular agriculture.
- Industry was viewed as a barren, non-productive sphere.
- The Physiocrats also referred trading activities to the barren sphere.
- Physiocrats considered the net product as the difference between the totality of goods produced in agriculture and the costs necessary for their production.
- After analyzing the material parts of capital, the physiocrats (representatives of the interests of farmers) noted that one should distinguish between “annual advances” (working capital), “primary advances”(fixed capital) and annual costs, which, in their opinion, represent the main fund of the organization of farmers' farms.
- Cash was not included in any of the listed types of advances. Despite the fact that "money capital" is a concept that is very often used by modern economic theory, the physiocrats, however, did not use it, arguing that money is sterile, only their function as a medium of exchange matters. Moreover, it was believed that it was impossible to save money, since after its withdrawal from circulation, they lose their only beneficial function - to be a means of exchanging goods.
- The issue of taxation was reduced by the teachings of the Physiocrats to three basic principles:
- taxation based on source of income;
- taxes must necessarily correspond to income;
- The cost of levying taxes should not be excessive.
Francois Quesnay and his economic table
The economic component of French society in the second half of the 18th century was permeated with ideas expressed and disseminated to the masses by the Physiocrats. Representatives of this direction of classical political economy resolved questions regarding how the economic relations of people should proceed in the conditions of a natural order, and also what should be the principles of these relations. The founder of the physiocratic school was Francois Quesnay, who was born in the suburbs of Paris in 1694. He was not an economist by profession, but servedphysician at the court of Louis XV. He became interested in economic problems when he was sixty years old.
The main merit of F. Quesnay was the creation of the famous "economic table". In his work, he showed how the total product that is created in agriculture is divided among the classes existing in society. Quesnay distinguished the following classes:
- productive (farmers and agricultural workers);
- barren (merchants and industrialists);
- owners (landowners, as well as the king himself).
According to Quesnay, the movement of the annual total product consists of 5 main steps, or acts:
- Farmers buy food from farmers in the amount of 1 billion livres. As a result of this action, 1 billion livres are returned to farmers and 1/3 of the annual product disappears from circulation.
- For the billion received as rent by the property class, the landowners acquire industrial products produced by the "barren" class.
- Manufacturers buy food from farmers (the productive class) for their million. Thus, farmers get the next billion and already 2/3 of the annual product disappears from circulation.
- Farmers buy manufactured products from industrialists. The cost of purchased products is included in the cost of the annual product.
- Industrialists for the received billion buy from farmers the raw materials they need to manufacture products. Thus, the movement of the annual product contributes to the replacement of funds used in industry and, of course, inagriculture as the main prerequisite for the resumption of the production process.
As for taxes, F. Quesnay believed that they should be collected exclusively from landowners. The tax should be, in his opinion, 1/3 of the net product.
F. Quesnay developed the concept of natural order, the main idea of which is that the moral laws followed by the state and each individual citizen should not be contrary to the interests of society as a whole.
The main ideas of the physiocrat A. Turgot
A. Turgot was born in 1727 in France and graduated from the Sorbonne Faculty of Theology. In parallel, he was fond of economics. For two years, from 1774 to 1776, A. Turgot was the general controller of finances. The work that brought fame to the physiocrat is called "Reflections on the Creation and Distribution of We alth", it was published in 1770.
Like other physiocrats, A. Turgot insisted on providing complete freedom in economic activity and argued that the only source of surplus product is agriculture. He was the first to distinguish between the "agricultural" class and the "artisan" class workers, wage workers, and entrepreneurs.
A. Turgot formulated the "Law of Decreasing Soil Fertility", according to which each subsequent investment in land, whether it be labor or capital, gives a smaller effect than the previous investment, and at a certain point there comes a limit when an additional effect is simply no longer possible.reach.
Other prominent representatives of physiocracy
The role played by the physiocrats in the French economy cannot be underestimated. Their ideas are reflected in the writings of such famous personalities as, for example, Pierre Lepezan de Boisguillebert and R. Cantillon.
Pierre de Boisguillebert is known to history as the person who put forward the famous principle "Laisser faire, laisser passer", which later became the main principle of economics. He sharply criticized the theory of the mercantilists, but at the same time supported the ideas that the Physiocratic school carried to the masses. Representatives of mercantilism, according to Boisguillebert, should reconsider their vision in the field of the economy, which does not correspond to the real realities of life.
According to Boisguillebert, only those taxes that do not conflict with the natural order, but contribute to the development of economic activity, are expedient. He spoke out against the unreasonable interference of the state and the king in economic life, and also demanded that the population be given the right to trade freely. In addition, he was one of the authors of the labor theory of value, arguing that the true value of a commodity should be determined by labor, and the measure of value by labor time.
R. Cantillon was a native of Ireland, but for a very long time he lived in France. In 1755, his main work, An Essay on Nature and Trade, was published. In his essay, he identified a number of dangers that threaten the country if it followsthe thesis "buy low, sell high". R. Cantillon noted that there are discrepancies between the existing market demand and supply, due to which it becomes possible to buy something cheaper and sell, respectively, more expensive. He called the people who take advantage of this opportunity “entrepreneurs.”
The spread of the theory of the physiocrats outside of France
Physiocrats are not only the French who founded the school of physiocracy and defended its ideas within the country. The Germans Schlettwein, Springer, Movillon, the Italians Bandini, Delfico, Sarkiani, the Swiss Schaeffer, Olaf Runeberg, Khidenius, Brunkman, Westerman, the Poles V. Stroynovsky, A. Poplavsky and many others also considered themselves physiocrats.
The ideas of the Physiocrats found especially many supporters in Germany. The most famous here was Karl-Friedrich, who made an attempt to reform the taxation system. To do this, choosing a few small villages, he abolished all previous taxes and instead introduced a single tax in the amount of 1/5 of the "net income" received from the products of the land.
In Italy, the theory of the Physiocrats had a huge impact on the reforms that Leopold of Tuscany brought to life.
In Sweden, physiocracy was also gaining ground. Mercantilism began to weaken sharply, and the Physiocrats did not miss their chance. Their most prominent representative was Khidenius, who talked about the source and causes of the poverty of the state. In addition, he was fascinated by the issue of emigration. He triedidentify the causes of this phenomenon and develop measures to eliminate it.
Regarding Poland, it should be noted that in this country, agriculture has been a priority occupation of the population since the distant 16th century. That is why the ideas put forward by the French physiocrats very quickly found their supporters here. Qualitative changes have taken place in the Polish economy and the standard of living of the middle strata of the population has increased significantly.
Echoes of physiocracy in Russia
Although there were no pure representatives of physiocracy in Russia, however, certain provisions of this direction to a certain extent influenced the reign of Catherine II. For example, in the first years of her reign, the empress abolished the monopoly of factories on the production of a particular product, and on March 17, 1775, she published a manifesto that proclaimed the principle of free competition. In 1765, the Free Economic Society was created, whose members were Russian supporters of applied physiocracy. One of them was agronomist Andrei Bolotov.
Dmitry Golitsyn was the Russian envoy in Paris and often took part in meetings of French physiocrats. Being inspired by their ideas, he recommended Catherine II to send an invitation to Quesnay's student Pierre de la Riviere to visit Russia. Arriving in the country, Riviere made a disappointing conclusion that the fortress system was contrary to the "natural order", expressing his opinion incorrectly and, ultimately, after 8 months was sent back to France.
Golitsyn, in turn, put forward the idea of providing peasantsfreedom of the individual and give them the right to own movable property. It was proposed to leave the land in the ownership of the landlords, who could lease it to the peasants.
Since the 70s. XVIII century Catherine II dramatically changes her mind about the physiocrats. Now she begins to complain that they bore her with their intrusive advice and calls them "screamers" or "fools" whenever possible.
Flaws of the teachings of the physiocrats
Both mercantilists and physiocrats were often criticized for their ideas. Among the main shortcomings of the physiocratic school, the following should be noted:
- The main flaw in the theory put forward by the Physiocrats is primarily due to the erroneous notion that agriculture is the only area of we alth creation.
- They determined the cost of labor exclusively in agriculture.
- The Physiocrats argued that the only form of surplus product is land rent.
- They propagated the misconception that land is also a source of value along with labor.
- They were unable to conduct a complete and comprehensive analysis of the reproduction process, since industrial production was not considered by them as a source of value.
Strengths of the teachings of the Physiocrats
Among the positive aspects of the physiocratic theory, the following should be highlighted:
- One of the main merits of the physiocrats is that they managed to transfer research tothe sphere of production. All classical political economy followed suit.
- Bourgeois forms of production were considered by the Physiocrats as physiological, that is, natural and independent of the human will or the political structure of society. This was the beginning of the doctrine of the objectivity of the laws of economics.
- Defended the view that we alth lies in use value, not money.
- Were the first scientists to propose a distinction between productive and unproductive labor.
- They defined capital.
- Substantiated the division of society into 3 main classes.
- F. Quesnay in his "economic table" made an attempt to conduct a comprehensive analysis of the reproduction process.
- By raising the issue of the equivalence of exchange, the Physiocrats de alt a severe blow to the teachings of the mercantilists and proved that exchange in itself is not a source of we alth.
Since the Physiocrats had the idea of creating we alth exclusively in agriculture, they demanded that the government cancel all taxes in the industrial sector. As a result, the conditions for the normal development of capitalism appeared.
