The Agricultural System Debate — The Wealth of Nations

Smith turns from mercantilism to agricultural systems of political economy that represent land's produce as the sole or principal source of every country's revenue and wealth. These systems will not require so long an explanation as the mercantile system, yet their outlines repay study. So far as Smith knows, no nation has adopted land-only wealth as policy; it exists only in speculations of a few men of great learning and ingenuity in France. It would not be worth examining at great length errors of a system which never has done and probably never will do harm in any part of the world, yet Smith will explain the great outlines of this ingenious system distinctly.

Mr Colbert, famous minister of Lewis XIV, was a man of probity, great industry, knowledge of detail, experience and acuteness in public accounts, and abilities fitted for introducing method and good order into collection and expenditure of public revenue. That minister unfortunately embraced all prejudices of the mercantile system, in its nature a system of restraint and regulation agreeable to a laborious plodding man of business accustomed to regulate departments of public offices and establish checks confining each to its proper sphere. Colbert endeavoured to regulate industry and commerce of a great country upon the same model as departments of a public office. Instead of allowing every man to pursue his own interest his own way upon the liberal plan of equality, liberty, and justice, he bestowed extraordinary privileges on certain branches while laying others under extraordinary restraints.

Colbert was not only disposed like other European ministers to encourage town industry more than country industry; to support town industry he was willing even to depress and keep down country industry. To render provisions cheap to town inhabitants and thereby encourage manufactures and foreign commerce, he prohibited altogether exportation of corn, excluding country inhabitants from every foreign market for by far the most important part of their produce. That prohibition joined to ancient provincial laws restraining transportation of corn between provinces and arbitrary degrading taxes on cultivators in almost all provinces discouraged and kept down French agriculture far below what fertile soil and happy climate would naturally support. Discouragement was felt in every part; many inquiries sought causes. One cause appeared preference given by Colbert's institutions to town industry above country industry.

If the rod be bent too much one way, says the proverb, to straighten it you must bend as much the other. French philosophers who proposed agriculture as sole source of revenue and wealth adopted that maxim. As Colbert certainly overvalued town industry compared with country, their system seems as certainly to undervalue it. Different orders contributing to annual produce of land and labour they divide into three classes. First proprietors of land. Second cultivators, farmers and country labourers, honoured with peculiar appellation productive class. Third artificers, manufacturers, and merchants degraded by humiliating appellation barren or unproductive class.

Proprietors contribute by expense on improvement of land, buildings, drains, enclosures, and ameliorations enabling cultivators with same capital to raise greater produce and pay greater rent. Advanced rent is interest or profit on proprietor's improvement capital; such expenses are ground expenses or depenses foncieres. Cultivators contribute by original and annual expenses on cultivation: instruments of husbandry, cattle, seed, maintenance of farmer's family, servants, and cattle until first returns; then seed, wear of instruments, annual maintenance of servants, cattle, and family portion employed in cultivation. Produce remaining after rent should replace original expenses with ordinary profit within reasonable time during occupancy, and replace annual expenses with ordinary profit each year. Those two capitals must be regularly restored with reasonable profit or farmer deserts cultivation for other employments.

Part necessary to enable farmer to continue business is fund sacred to cultivation; landlord who violates it reduces his own land's produce and in few years disables farmer from paying racked rent or reasonable rent otherwise obtainable. Rent properly belonging to landlord is neat produce remaining after paying completely all necessary expenses to raise gross produce. Because cultivators' labour over and above those expenses affords neat produce, they are productive class; their expenses are productive expenses because over and above replacing own value they occasion annual reproduction of neat produce. Ground expenses too are productive when advanced rent repays improvement outlay with ordinary profit; until then advanced rent should be sacred and inviolable by church and king, subject neither to tithe nor taxation lest improvement be discouraged and future tithes and taxes shrink.

Part One sets the stage: Colbert's mercantile regulation depressed French agriculture to feed towns; physiocrats bent the rod toward land, dividing society into proprietors, sacred productive cultivators, and barren townsmen. Smith will explain their system fairly before refuting its core error that manufacturers and merchants create nothing net. Understanding Colbert first matters because physiocracy is reaction as much as doctrine. Without Colbert's corn export ban and provincial grain restraints, the French Economists might never have needed a table proving agriculture alone reproduces national wealth. Smith treats both as false systems sharing preference and restraint, though mercantilism at least promoted its favourite industry whereas agricultural restraint will later undermine its own favourite.

Colbert's portrait is sympathetic on competence and corrupt on theory. He brought order to accounts while importing mercantile prejudice that a kingdom should run like a comptroller's office. Privileges to favoured manufactures and restraints on corn movement are not random cruelty; they follow from treating liberty as dangerous and regulation as wisdom. Smith's liberal plan of equality, liberty, and justice is explicit contrast. Every man pursuing his own interest his own way assumes information dispersed among millions, not centralized in ministerial bureaus. Colbert could audit a department; he could not audit a nation's comparative advantage. Corn export prohibition cheapened town provisions on paper while beggaring rural markets and discouraging investment in drainage, enclosure, and seed improvement that fertile France needed.

Provincial restraints on moving grain compounded export ban by fragmenting internal market. Arbitrary degrading taxes on cultivators added fiscal injury to commercial injury. Inquiries into rural depression therefore naturally traced to institutional bias toward towns. Physiocrats read that evidence and concluded town industry was not merely over-favoured but essentially sterile, a parasite on land's net produce. Smith will show they overcorrected yet captured partial truths Colbert's regime obscured: wealth is consumable annual produce, not bullion hoard; liberty matters; cultivators' fund must not be rack-rented away. Part One's three classes are labels with moral force. Productive versus barren is not neutral taxonomy; it is campaign slogan for policy reversing Colbert's town bias.

Smith's opening that no nation adopted physiocracy limits alarm while justifying attention. Speculative systems can still poison administration when ministers admire tables and sects influence leases and corn laws, as Smith notes later when French agriculture shed some oppressions after Economists' representations. Part One therefore introduces both historical antagonist (Colbert) and intellectual antagonist (Quesnay's followers) before Part Two walks through productive expenses, lace arithmetic, and paradoxical praise of merchants within physiocratic logic. Readers should hold two threads: physiocrats diagnose real rural injury under mercantile-town bias, and they misdiagnose manufacturing as worthless reproduction. Smith agrees with diagnosis of Colbert's harm without accepting barren label on artificers.

Ground expenses sacred from tithe and tax until improvement repaid illustrate physiocrats' earnest protection of cultivation capital. Landlords improving drainage or enclosures should receive advanced rent as return on capital without church or crown seizing share prematurely. Smith reports doctrine accurately because it contains seed of good policy even inside flawed system. Violating cultivation fund to rack-rent farmer destroys landlord's own long-run income; physiocrats understood that dynamic better than short-sighted mercantile squeezers of rural France. Part One ends with classes drawn and Colbert's rod bent; Part Two will animate the table and the lace worker who seems to multiply value seven thousand times yet adds nothing net on physiocratic accounting.

Smith emphasizes Colbert's administrative virtues to show competent government can still harm when theory is wrong. Probity and acuteness in accounts do not substitute for respecting dispersed knowledge of farmers, merchants, and artisans. Regulating a nation like public office departments assumes employments can be assigned from center without feedback from prices and bankruptcy. Corn export prohibition looked like cheap bread policy for manufacturers; it was slow-motion rural depression on some of Europe's best soil. Provincial barriers meant famine in one province could coexist with plenty in another because grain could not move to arbitrage scarcity. Degrading taxes on cultivators added insult to injury, taxing people already denied best market for chief product.

Physiocrats' three-class division is moral sociology as much as economics. Productive class honour attaches to those whose labour returns seed, cattle, tools, subsistence, and still yields rent. Barren class stigma attaches to those who only replace stock and merchant profit according to table logic. Proprietors occupy middle ground: neither spinning nor weaving nor ploughing daily yet productive when improving land because improvement capital reproduces in advanced rent. Smith will later agree improvement matters while denying only those three expense categories create value. Part One's task is exposition without yet delivering five objections; readers must feel plausibility of physiocratic vocabulary before Smith dismantles barren label.

French philosophers bent rod other way because evidence of rural injury under Colbert was visible to enlightened observers. If town preference depressed country, perhaps country preference would restore balance. Smith accepts diagnostic impulse, rejects prescriptive exaggeration. Agriculture is vital; it is not sole source of net value in advanced societies where division of labour and foreign trade multiply subsistence available from given land. Colbert and Quesnay share error of zero-sum favouritism even though they favour opposite sectors. Part Two shows physiocrats oddly liberal on foreign trade for landed nations while illiberal in vocabulary toward manufacturers who make trade possible.

Original and annual expenses of farmer as twin capitals explain why rack-renting violates physiocratic ethics. Farmer must recover both outlays plus profit or exit; landlord who extracts fund meant for seed and tool replacement kills goose producing rent. Mercantile systems hurt farmers differently, by cheapening wool or corn through restraints; physiocrats at least foreground farmer's reproduction problem. Smith borrows that insight for his own rent theory elsewhere. Part One therefore ends with intellectual respect inside criticism: understand Colbert's town bias, understand physiocratic counter-bias, prepare for synthesis in natural liberty where neither town nor country receives statutory throne.

Smith notes agricultural systems need shorter treatment because they never governed a nation; harm potential is speculative unlike mercantile codes enforced daily. That modesty is rhetorical too: physiocracy influenced French corn and lease reforms Smith praises later. Part One must therefore balance no nation adopted it with ideas nonetheless moved administration. Colbert remains historical villain for rural depression; Quesnay remains philosopher-physician building table to prove cultivation reproduces net revenue. Three classes are scaffolding for table arithmetic Part Two deploys. Without Colbert prologue, physiocrats look like arbitrary land fanatics; with Colbert, they look like oversteer correcting prior oversteer.