1902 Encyclopedia > Political Economy (Economics) > Political Economy - Modern Times; The First Modern Phase

Political Economy
(Part 4)


The close of the Middle Ages, as Comte has shown, must be placed at the end, not of the 15th, but of the 13th century. The modern period, which then began, is filled by a development exhibiting three successive phrases, and issuing in the state of the things which characterizes our own epoch. During the 14th and 15th centuries the Catholico-feudal system was breaking down by the mutual conflicts of its own official members, whilst the constituent elements of a new order were rising beneath it. On the practical side the antagonists matched against each other were the crown and the feudal chief; and these rival powers sought to strengthen themselves by forming alliances with the towns and the industrial forces they represented. The movements of this phase can scarcely be said to find an echo in any contemporary economic literature. In the second phase of the modern period, which opens with the beginning of the 16th century, the spontaneous collapse of the mediaeval structure is followed by a series of systematic assaults which still further disorganize it. During this phase the central temporal power, which has made a great advance in stability and resources, lays hold of the rising elements of manufacturers and commerce, and seeks, whilst satisfying the popular enthusiasm for their promotion, to use them for political ends, and make them subserve its own strength and splendour by furnishing the treasure necessary for military success. With this practical effort and the social tendencies on which it rests the mercantile school of political economy, which then obtains a spontaneous ascendancy, is in close relation. Whilst partially succeeding in the policy we have indicated, the European Governments yet on the whole necessarily fail, their origin and nature disqualifying them for the task of guiding the industrial movement; and the discredit of the spiritual power, with which most of them are confederate, further weakens and undermines them. In the last phase, which coincides approximately with the 18th century, the tendency to a completely new system, both temporal and spiritual, becomes decisively pronounced, first in the philosophy and general literature of the period, and then in the great French explosion. The universal critical doctrine, which had been announced by the Protestantism of the previous phase, and systematized in England towards the close of that phase, is propagated and popularized, especially by French writers. The spirit of individualism inherent in the doctrine was eminently adapted to the wants of the time, and the general favour with which the dogmas of the social contract and laissez faire were received indicated a just sentiment of the European societies. So long as a new coherent system of thought and life could not be introduced, what was to be desired was a large and active development of personal energy under no further control of the old social powers than would suffice to prevent anarchy. Governments were therefore rightly called to abandon any effective direction of the social movement, and, as far as possible, to restrict their intervention to the maintenance of material order. This policy was, from its nature, of temporary application only; but the negative school, according to its ordinary spirit, erected what was merely a transitory and exceptional necessity into a permanent and normal law. The unanimous European movement towards the liberation of effort, which sometimes rose to the height of a public passion, had various sides, corresponding to the different aspects of thought and life; and of the economic side the French physiocrats were the first theoretic representatives on the large scale, though the office they undertook was, both in its destructive and organic provinces, more thoroughly and effectively done by Adam Smith, who must be regarded as continuing and completing their work.

It must be admitted that with the whole modern movement serious moral evils were almost necessarily connected. The general discipline which the Middle Ages had sought to institute and had partially succeeded in establishing, though on precarious bases, having broken down, the sentiment of duty was weakened along with the spirit of ensemble which is its natural ally, and individualism in doctrine tended to encourage egoism in action. In the economic field this result is specially conspicuous. National selfishness and private cupidity increasingly dominate; and the higher and lower industrial classes tend to separation and even to mutual hostility. The new elements—science and industry—which were gradually acquiring ascendancy bore indeed in their bosom an ultimate discipline more efficacious and stable than that which had been dissolved; but the final synthesis was long too remote, and too indeterminate in its nature, to be seen through the dispersive and seemingly incoherent growth of those elements. Now, however, that synthesis is becoming appreciable; and it is the effort towards it, and towards the practical system to be founded on it, that gives its peculiar character to the period in which we live. And to this spontaneous nisus of society corresponds, as we shall see, a new form of economic doctrine, in which it tends to be absorbed into general sociology and subordinated to morals.

It will be the object of the following pages to verify and illustrate in detail the scheme here broadly indicated, and to point out the manner in which the respective features of the several successive modern phases find their counterpart and reflexion in the historical development of economic speculation.


The first phase was marked, on the one kind, by the spontaneous decomposition of the mediaeval system, and, on the other, by the rise of several important elements of the new order. The spiritual power became less apt as well as less able to fulfill its moral office and the social movement was more and more left to the irregular impulses of individual energy, often enlisted in the service of ambition and cupidity. Strong Government were formed, which served to maintain material order amidst the growing intellectual and moral disorder. The universal admission of the common as an element in the political system showed the growing strength of the industrial forces, as did also in another way the insurrections of the working classes. The decisive prevalence of peaceful activity was indicated by the rise of the institution of paid armies—at first temporary, afterwards permanent—which prevented the interrupted or distraction of labour by devoting a determinate minority of the population to martial operations and exercises. Manufactures became increasingly important; and in this branch of industry the distinction between the entrepreneur and the workers was first firmly established, whilst fixed relations between these were made possible by the restriction of military training and service to a special profession. Navigation was facilitated by the use of the mariner’s compass. The art or printing showed how the intellectual movement and the industrial development were destined to be brought into relation with each other and to work towards common ends. Public credit rose in Florence, Venice, and Genoa long before Holland and England attained any great financial importance. Just at the close of the phase, the discovery of America and of the new route to the East, whilst revolutionizing the course of trade, prepared the way for the establishment of colonies, which contributed powerfully to the growing preponderance of industrial life, and pointed to its ultimate universality. It is doubtless due to the equivocal nature of the stage, standing between the mediaeval and the fully characterized modern period, that on the theoretic side we find nothing corresponding to this marvelous practical ferment and expansion. The general political doctrine of Aquinas was retained, with merely subordinate modifications. The only special economic question which seems to have received particular attention was that of the nature and functions of money, the importance of which began to be felt as payments in service or in kind were discontinued, and regular systems of taxation began to be introduced.

Roscher, and after him Wolowski, have called attention to Nicole Oresme, who died bishop of Lisieux in 1382. Roscher pronounces him a great economist. His Tractatus de Origine, Natura, Jure , et Mutationibus Monetarum (reprinted by Wolowski, 1804) contains a theory of money which is almost entirely correct according to the views of the 19th century, and is stated with such brevity, clearness and simplicity of language as, more than anything else, show the work to be from the hand of a master.

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