The islands parable

In his Essai politique sur le commerce, Melon imagines a system of nations formed of three or four islands of the same area and identical population, and confronted succes­sively with three different situations.

In the second situation, the island that produces corn is assumed to be more fertile than the others and can exist without any kind of specialisation. This island produces not only its own commodity in abundance, but also the commodities produced by the other islands in quantities sufficient for its consumption. The other islands’ soil, poorly fertile, does not allow their inhabitants to produce the amount of corn necessary for their subsistence. The latter are therefore dependent on the corn island for their subsistence and find it impossible to sell their surplus for the corn they need. As their commodity is no longer an object of trade, they are confronted with the alternative, either to leave their island and to be employed on the corn island in order to obtain this basic commodity, or to force the corn island, through a “just war”, to produce corn for them and to sell it to them. The second alternative implies that the other islands unite and invoke the “law of nations” to force the corn island to cultivate for them again and to prohibit it from pro­ducing what they produce themselves (Melon 1734a [1735]: 3). In this second situation the law of nations is a “balance of power” that the corn island can influence in its favour, since it has the monopoly of a commodity that is absolutely necessary.

In the third situation, all the islands are equally fertile and self-sufficient in corn or in necessary goods, so that none of them can now either dominate the others because of the fertility of its soil, nor claim a “just war”. The islands then enter into more intense, but also more uncertain, trading relations, as it becomes difficult to “know which of the islands becomes the most powerful” (Melon 1734a [1735]: 6). Melon draws several conse­quences from this situation. First, the more islands there are which produce a diversity of manufactured goods, the more the needs of all will be varied, the more trade there will be between them and, consequently, the less an island will dominate by trading corn alone. Second, this extensive trade only works if the islands adopt the principle of competition, that is, if they seek a hegemonic position without resorting to monopoly. Third, the more the circulation of goods increases, the more money and instruments of credit are needed. Three principles therefore emerge to increase the power of an island: to possess a fertile territory that permits an increase in the production of corn, to develop a manufacturing policy suitable to employ a growing population, and to proportion monetary instru­ments to the circulation of goods. “With these advantages, an island will soon end the balance of equality, achieve superiority of power, and give its laws to the other islands” (Melon 1734a [1735]: 10): trade appears to be a more confrontational than harmonious relation. Essentially reciprocal, it rapidly becomes a way of tilting the balance of power in its favour.

Of these three situations, the first recalls the old doctrine of the “universal economy” that the modern era has made obsolete. The second, assuming a decline in international trade, concludes that war is the primary means of wealth and power: it is a possible expression of the doctrine of the “universal monarchy”. The third, separating trade from war and replacing the latter with competition in times of peace, makes trade the main cause of wealth and power: it expresses a doctrine, not of harmony, but of the balance of trading nations.

The doctrine appears as a derivation of the English doctrine of favourable balance of trade. Melon (1734b [1736]: 283-4) faithfully repeats the four ways of making a posi­tive balance that Child (1693 [1698]: 168-9) had listed: “encrease the hands in trade”, “encrease the stock in trade”, “make trade easie and necessary”, “make it the interest of other nations to trade with us”. He also takes from Child the plea for a low rate of interest. Finally, as in the British science of trade, he associates this doctrine with a policy combining freedom and protection (Melon 1734a [1735]: 29-30). The demand for freedom is the assertion of the principle of competition and free access, against that of monopoly and privilege. However, two situations justify the concession of privileges: in a newly established trade when a privilege is granted “either to reward the discovery, or to encourage entrepreneurs”, and in the case of a strong commercial rivalry when international competition harms the interests of the nation (Melon 1734a [1735]: 69-70).

This theme of the compatibility of freedom of trade and protection can also be found in Henri de Boulainvilliers (1727: 219-20) and Montesquieu (1748, bk XX.: ch. 12). Melon, for example, writes that freedom is measured by its contribution to the common good. This primacy of the common good over the individual good is a central topic of “commerce politique” and the British science of trade: the interest of the merchant is not necessarily the same as the interest of trade in general. Freedom of trade is not the right to trade without rules and limits, but to “negotiate under... established laws” (Melon 1734b [1736]: 165). A policy of freedom and protection thus aims at guaranteeing a nation a dominant position in international trade, but certainly not a monopoly posi­tion. Yet, Melon writes, it is towards such a position that Petty inclines when he writes that the English are the only ones to have enough funds and ability to “drive the trade of the whole commercial world” (ibid.: 354). Melon interprets this quest for a single empo­rium, or “universal trade” (Petty 1690 [1899]: 312), as symmetrically the same flaw as the quest for a universal monarchy, and emphasises the doctrine of preservation, competi­tion and the balance of nations: that is, the doctrine of the preservation of the territories and wealth already acquired, as opposed to the doctrine of expansion to new territories and appropriation of their wealth (Melon 1734a [1735]: 102).