Montesquieu: commerce and the constitution

In Reflexions sur la monarchie universelle en Europe (1734), Montesquieu (1964, 193) challenges the idea of a large Monarchy governing the affairs of Europe and the world through military power and argues, on the contrary, that, thanks to trade and navigation, the universe is almost like one nation and “the peoples all polished are, so to speak, members of a great Republic.” In De l'esprit des lois (1748), he notes that, unlike the politicians of ancient Greece who spoke of virtue, those of today “only talk to us of manufacturing, trade, finance, wealth and even luxury” (1964, 537).

moveable effects, such as money, notes, bills of exchange, shares in com­panies, vessels, all merchandises, belong to the whole world, which, in this respect, is composed of only one State, of which all societies are members: the people who possess most of these moveable effects in the universe are the richest.

(1964, 655-8)

A world that has become commercial

To describe this transformation of modern Europe, Montesquieu appeals, like Melon, to the spirit of conquest and the spirit of commerce, but he does not make such a decisive criterion of separation between Antiquity and the modern world. Rather, he perceives a permanence of the spirit of commerce - which “carries with it that of frugality, economy, moderation, labour, wisdom, tranquillity, order and rule” (1964, 546) - from ancient republics to modern ones. On this first distinc­tion between conquest and commerce, he superimposes a second one, between the empire of the land and the empire of the sea (1964, 649; 662).^[60] Noting that governments that are wholly or partially republican, both ancient and modern, have sought to establish empires of the sea, he emphasises that commerce is compatible with a certain form of power and the use of military force when it concerns preserv­ing the wealth acquired.

Melon gave a rather general definition of the spirit of commerce. Montesquieu links it from the outset to the republican government^[61] assuring its compatibility with this government, whatever its principle - democratic or aristocratic - provided that the accumulation of private wealth that it generates is moderate (1964, 546). Commerce does not corrupt the mores of the republics. These are not condemned to live on what is necessary: they can be rich. What corrupts them is “the excess of wealth” and the excess of luxury, since then “the mind turns towards particular interest” (1964, 546; 565). Since luxury is “always in proportion to the inequality of fortunes” (1964, 564), it follows (i) that the wealth obtained through commerce must be based on rules and behaviour that control the acquisitive passion; (ii) that luxury is generally scarce in democratic republics where wealth is equally shared, that it should be moderated in aristocratic republics, and that it is above all “singu­larly proper to monarchies” (1964, 566).

Montesquieu (1964, 566) distinguishes “absolute luxury” from “relative lux­ury”, also called “relative frugality”. Absolute luxury is that which is accompanied by appalling misery, relative luxury is determined by comparing the quantity of needs that a nation would satisfy with foreign commodities that it would import at a very high price and the quantity of needs of which it should deprive itself by exporting its own commodities in compensation. Montesquieu (1964, 649) also mentions a “solid luxury, founded, not on the refinement of vanity, but on that of real wants”. This acceptable luxury is the result of an inevitable spiral: “The effect of commerce is wealth; the continuation of wealth, luxury; that of luxury, the per­fection of the arts” (1964, 660).

What are the effects of the civilising effects of commerce? It all depends on the constitution. Commerce softens the mores of monarchical governments and mili­tary republics, without corrupting the principle of each of these governments, and it moderates relations between nations because it naturally leads to peace: it brings together nations with different cultures which can henceforth compare each other and takes the best of each of them - the “doux commerce”, as this was to be called later.

Two trades, two constitutions

Montesquieu distinguishes the “luxury trade” (“commerce de luxe”) and the “eco­nomical trade” (“commerce d’economie”), that is the carrying trade. The first, common to ancient empires and barbarian nations, is rather terrestrial and aims to satisfy the pride and fancies of rulers (1964, 651-2, 660). The second is originally practised on the fringes of these empires by peoples who took refuge in small infer­tile coastal territories fleeing “violence and vexation” (1964, 652). This second trade is of more interest to Montesquieu, who attributes several characteristics to it: (i) it is the fact of peoples who, not being able to live from their territory, have had to draw their subsistence and wealth from the territory of others; (ii) these peoples escaped territorial empires and built their own empires through seafaring by tak­ing goods from one country to sell them in another; (iii) this commerce involves ordinary goods satisfying “real needs” on which little is earned, which requires continuous selling (1964, 651-2).

The luxury trade is more suited to the monarchical principle and the economical trade more appropriate to the republican principle. The moral virtues that accom­pany the spirit of commerce correspond quite well to the economical trade of ancient democratic republics, and also to ancient and modern aristocratic republics.

The latter are compatible with “large trading enterprises that are always necessarily involved in public affairs” (1964, 652), made possible because property is ensured there and the accumulation of riches legitimised, as are banks and credit (1964, 652, 653).^[62]

Melon, Cantillon or Du Tot essentially understood commerce in its relation to the power of the State. Montesquieu (1964, 653) does not reject this vision, but he adds a constitutional dimension to it, for example, when he maintains that it is against the spirit of the monarchy that the nobles trade - an assertion that can be read as an objection to Du Tot’s plea in favour of an engagement by the nobility in wholesale and maritime trade.

Liberty and freedom of trade

Liberty, according to Montesquieu, depends on constitutions and circumstances. “Political liberty is not about doing what you want”, it is “the right to do what the laws allow” (1964, 586). As with Melon, it is, then, liberty within the limits of the law: it consists of doing what is not against the interests of the nation. Likewise, “freedom of trade is not a power granted to traders to do what they want... what hinders the trader does not therefore hinder trade” (1964, 653). To say that the interests of traders are not necessarily those of the nation and that the interests of the nation are not necessarily those of other nations is to recognise that trade involves regulations, prohibitions, customs and, more generally, that it is an ele­ment of the politics of States. If these States do not intervene arbitrarily, “then people enjoy a free trade” (1964, 653-4).

Making England one of the models of “doux commerce” that best combines religion, commerce and liberty (1964, 652), Montesquieu is not unaware that the foreign trade of this nation is, as with that of other nations, a trade of rivalry. Equipped with a powerful fleet, this free nation abandons neither its maritime empire nor its colonial conquests, which it transformed into “objects of trade” (1964, 673). In addition, it protects its domestic trade by a Navigation Act that has become more moderate with time. Following Melon, Montesquieu sees no incompatibility between this Act and free trade.

The “doux commerce” also does not exclude the rivalry and competition with nations that are not all in the same situation. This commerce is free in the sense that States which necessarily intervene refrain from doing so arbitrarily, by placing the fewest obstacles possible, which Montesquieu expresses in the form of a maxim: “do not exclude any nation from trade without great reasons” (1964, 653).

Finally, the “doux commerce” is a response to a political problem: it is a way of avoiding despotism, what Montesquieu calls the “coups d’autorite” of govern­ments. Rulers must act, but as little as possible; they do decide, but they cannot decide everything. Fortunately, part of commerce escapes them. Three processes govern the world of commerce and put it beyond the reach of these acts of authority.

First, the bill of exchange that the Jews invented in the Middle Ages to avoid the confiscation of their wealth. By this means, their funds that had become “invisible” (1964, 672) found themselves beyond the reach of rulers who were now unable to block their circulation.

Then, there are the spontaneous forces that act on international markets for com­modities. One cannot govern an international market ruled by competition despoti­cally, for it is competition “which gives a just price to commodities, and which establishes true relations between them” (1964, 653). By a rather simple quantita­tive reasoning, Montesquieu considers that one can compare “the mass of gold and silver that is in the world with the sum of the goods that are there” and that the international market determines parity between these quantities: “the establish­ment of the price of things always depends fundamentally on the proportion of the total of things to the total of signs” (1964, 678).

Finally, the exchange rate. While the currency adjusts itself to commodities, it also adjusts itself to other currencies. It is the exchange rate that regulates this adjustment, places currencies at their just value and prevents acts of author­ity (1964, 678; 683). The ruler certainly intervenes by setting the weight and the standard of the currency, but his intervention, although it is not arbitrary, remains limited: it does not determine its value.

Despotism haunts the work of Montesquieu. While Melon and Du Tot advocated a uniformity of the rules, Montesquieu wondered about the demand to have “the same weight in the police, the same measures in trade, the same laws in the State, the same religion in all its parts” (1964, 755). Uniformity can lead to despotism. It is also a kind of despotism that he saw creep into the System of Law, a system that, in his view, one had sought to establish from above, through brutal reforms ignoring the remonstrances of the Paris Parliament and restricting liberties, such as the prohibition on keeping coins at home; a system that threatened with extinction the intermediate orders and the political communities in the monarchy and which allowed the greatest monetary manipulations (1964, 535-6; 750).

4.