Forbonnais and “commerce politique”

In Un extrait chapitrepar chapitre du livre de L'Esprit des Loix (1753, 21), Fran­cois Veron de Forbonnais addresses a similar criticism to Montesquieu: circum­stances, not the constitutions, explain the rise of the economical trade in the Dutch Republic and its weak development in the French monarchy.

Trade and the inequality of nations

Forbonnais’s reflection on commerce begins with a historical overview aiming at showing that this essential activity is not unequal by nature but made so by the course of events. According to the tradition also borrowed by Boisguilbert, Forbonnais goes back to biblical times. The first era of commerce was consubstan- tial with the specialisation of occupations: Cain was a cultivator, Abel a shepherd and Tubalcain a blacksmith. Exchanges were made in kind, “all men were equal, and each, through his labour, obtained the equivalent of the help that he expected from others” (Forbonnais 1754 I, 8). This first era of “innocence and peace” disap­peared under the effect of the increase in the population, which made exchange in kind impracticable, and the appearance of private property, which created inequal­ity amongst men, differentiation of their needs and their consumption. Moreover, this era had become incompatible with “the weakness and the corruption of their nature”, in particular their “greed” (1754 I, 225-6, 10).

The second era opened with the birth of the States and the establishment of legislation, whose purpose was to confirm the actual inequality of men and simul­taneously to limit its excesses. Two forms of wealth appeared: real wealth - natural (agricultural products) or artificial (manufactures) - and relative or conventional wealth (coined metals).

This second era was followed by several others, in which the small States found themselves alternately subject to the large ones, then emancipated from these. This explains the formation of ancient empires (Assyria, Babylonia and Persia) and, at their margins, that of trading cities (Phoenicia, Carthage and Greece) open to the outside and tending, through their economical trade, to gradually free themselves from their tutelage. The third era was characterised by the establishment of new empires (Macedonian, Roman and Byzantine), again subjugating the trading cities. The fourth era saw the fall of these empires and the rise of new trading cities (Italy, Flanders and Hansa) competing for control of the sea. On the other hand, the fifth era showed the return of territorial empires (Spain and Portugal) with the discovery of West Indies, then the liberation of the Netherlands, enriched by its economical trade, and the rise in power of England, thanks to the export of its manufacturing, its fishing, and to its powerful navy. The sixth and final era is that of the accession of a great trading State, France. In this new situation, “each State in Europe has been aware of the interests of commerce, and seeks to extend them, respectively to its strengths or those of its neighbours” (1754 I, 42).

The final two eras are noticeable: they illustrate a change in the pendulum swing between mercenarisation and the emancipation of trading States. The fifth era does indeed present an anomaly insofar as England is not, like the Netherlands, a small

and infertile State forced to engage in the carriage trade, but, on the contrary, a powerful, populous, industrious and commercial state, competing with the latter for the empire of the sea.

The lessons of the English science of trade

Forbonnais takes from the English science of trade the list of principles for a favourable balance of trade (1754, I, 51-2): export the superfluities; manufacture the superfluous products of the land; only import foreign raw materials to rework and resell them abroad; do not import any foreign manufacture that harms those of the country; do not import any pure luxuries; import foreign goods for re-export; and freight foreign goods on the country’s ships. By accepting these principles, he is thus led to think that each State should encourage its people to consume less foreign manufacturing and, to this end, establish import duties or prohibitions. But, if commerce is a means by which a nation seeks to acquire superiority over other nations, it also requires that other nations, despite their disadvantage, continue to trade with the advantaged nation and not retaliate (1754, I, 252). Forbonnais, fol­lowing Melon, finds that this ambivalence of commerce is summed up in two of the four fundamental points of commerce set out by Child: “make it our interest to trade” and “make it the interest of other Nations to trade with us” (1754, II, 249).

Forbonnais admits that England increased its power through the Navigation Act, but he immediately remarks that, if all trading nations had applied the same meas­ure, the English nation would have “lost many useful branches of its commerce”. Today, he wrote (1754, I, 325), “the people are too enlightened on the interests of commerce for any of them to dare to undertake such a vigorous operation.” Competition is a more efficient way of acquiring superiority in seafaring and trade, as in the domestic corn trade: “Competition produces abundance, and this cheap food, raw materials, artisans, money. Competition is one of the important princi­ples of commerce, and a considerable part of liberty” (1754, I, 63; 131).

Economic superiority and decadence

When Forbonnais writes that “the real wealth of a nation is at its highest degree when it has no recourse to others for its needs” (1754, I, 54), he does not mean that this high degree of wealth leads to a withdrawal into self-sufficiency, but rather to a situation where the nation can do without others without them being able to do without it. He insists on the necessity for a prosperous nation not to give up its foreign trade if it is profitable. The wealth which it enjoys can certainly place it in a situation where it no longer needs to import, but it remains vital for it to continu­ously support its agriculture and its manufacturing in order to export products and, in return, to obtain relative wealth (1754, I, 59-60). Equipped with a productive agriculture, this nation must continuously make manufactures giving new forms to raw materials, maintain a growing population thanks to these, and create desires for these new forms by considering luxury, not as a vice but as an increase in public wealth, in order to generate new trades on these and “to continually attract new money” (1754, II, 115; 121).

Taking up an old tradition, Forbonnais assumes that there is a “natural order” and a “natural circulation” of money specific to each nation, that each nation should try to maintain or regain. Natural circulation^[69] is a situation in which the sole func­tion of the money is to represent and circulate goods (unit of account, medium of exchange): the quantities of goods and money are in “perfect competition” or in an “exact balance”, and no one is a borrower or a lender, but merely a worker, a trader or a landowner.

Natural circulation is interrupted when money departs from trade - that is, it is held for itself, with its function as a store of value then prevailing - because of the “mistrust” or the “greed” of the owners of money (1754, II, 97; 103). As the quantity of money in circulation tightens, compared to the quantities of exist­ing commodities, the balance leans in favour of money, circulation diverts from its natural order, and slows down. The increasing scarcity of money is therefore harmful. To compensate for this, money can return to circulation by means of loans, but then the owners of money, who have become lenders, will claim inter­est or profit, the amount of which will be “in proportion to the borrower’s need, the benefit that can be made from the money, the risk incurred by the lender” (1754, II, 95). This practice can lead to abuses - prohibitive rates - that the leg­islator must prevent.

Conversely, an increased amount of money from a favourable trade balance is beneficial if it spreads imperceptibly and continuously to all parts of the body of the nation. It then means that “circulation is brought closer to its natural order” (1754, II, 113, 110), that there is less mistrust, fewer borrowers and more traders: money, spreading imperceptibly in the country, causes a fall in the interest rate and an increase in domestic prices that can be tempered, if there is greater competition, including in labour, through an increase in production. Foreign trade thus reinvig­orates the whole political body by the “shock” that the new money gives to circula­tion.

Forbonnais is then confronted by the hypothesis of foreign trade destroying itself by seeking to continuously attract precious metals (1754, II, 121), which he probably draws from reading two essays by David Hume (1711-1776), “Of Money” and “Of the Balance of Trade” (published in 1753 and translated into French the following year), and which he explicitly attributes to this author in a memoir dated 1755.^[70] According to this hypothesis, if a new amount of money introduced massively into circulation raised the prices of national commodities too much relative to foreign prices, then foreign trade would diminish, no longer reinvigorate the political body, and would even cause a reversal of the balance of trade and an outflow of specie.

But, objects Forbonnais, supposing that foreign trade diminishes, or even that it dies out, that the country has a high degree ofwealth and is self-sufficient, its circula­tion would certainly not increase, but it would nevertheless not be weakened (1754, II, 122). This country would be “happy” without foreign trade, it would no longer suffer the cyclical effects, as long as its population “did not exceed the propor­tion of land”, “the objective of the legislator would be fulfilled” - but, Forbonnais adds (1754, II, 123), “men have not yet been innocent enough to deserve such a profound peace from heaven and such a constant concatenation of prosperity.” In the 1755 memoir (1755a), he disputes another of Hume’s points of reasoning, that of proportionality - a deflation proportional to the amount of money flowing back abroad and inflation proportional to the amount of money flowing into the country - which the Scottish philosopher associates with a cyclical vision of trade alternating the phases of expansion and decline. Forbonnais retorts that the effects are not necessarily proportional: an outflow of money can be offset by the circu­lation of credit papers and the inflation caused by an inflow of money, occurring gradually, can easily be moderated.

Hume’s hypothesis is not plausible. It may be assumed that a country that has reached a high level of wealth does not abruptly interrupt its foreign trade and still finds an advantage to attract money by lending at interest to foreign nations (1754, II, 125) - not to mention the political advantage that can be drawn from it: “it is interesting to deprive one’s rivals from the means to become powerful, since this is to gain relative strength” (1754, II, 125). Forbonnais continues this debate in Principes et observations economiques (1767). In particular, he confirms the asser­tion by which a nation that has reached its highest degree of prosperity can do with­out the labour of others as much as possible without, however, breaking off trade (1767, I, 55): a rich and self-sufficient nation can, indeed, do without the trade of goods with its neighbours without provoking their right of reciprocity, while at the same time benefiting from a trade in money, namely by lending the capital that it would have sufficiently amassed to poorer nations in return for the interests that it would subsequently bring into its own internal circulation. This nation would thus continue to grow richer, without engaging in foreign trade in goods and without depending on the labour of others. It would make borrowing nations its “slaves”, having an infallible means of disrupting their circulation by suddenly withdrawing its capital (1754, II, 129-30, 1767, I, 137, 146).

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