WORKS ON GOVERNMENT, TRADE, AND FINANCE.
Locke's two _Treatises of Government_ (published in 1690) carry us back
into the region of worn-out controversies. The troublous times which
intervened between the outbreak of the Civil War and the Revolution of
1688, including some years on either side, naturally called forth a
large amount of controversy and controversial literature on the rights
of kings and subjects, on the origin of government, on the point at
which, if any, rebellion is justifiable, and other kindred topics. Not
only did the press teem with pamphlets on these subjects, but, for
three-quarters of a century, they were constantly being discussed and
re-discussed with a dreary monotony in Parliament, in the pulpits, in
the courts of law, and in the intercourse of private society. It is
no part of my plan to give any account of these disputes, except so
far as they bear immediately on the publication of Locke's treatises.
It is enough, therefore, to state that the despotic and absolutist
side in the controversy had been, or was supposed to have been,
considerably re-inforced by the appearance in 1680 of a posthumous
work, which had been circulated only in manuscript during its author's
lifetime, entitled _Patriarcha, or the Natural Power of Kings_, by Sir
Robert Filmer. This curious book (a more correct edition of which was
published by Edmund Bohun in 1685) grounds the rights of kings on the
patriarchal authority of Adam and his successors. Adam had received
directly from God (such was the theory) absolute dominion over Eve and
all his children and their posterity, to the most remote generations.
This dominion, which rested on two independent grounds, paternity
and right of property, was transmitted by Adam to his heirs, and is
at once the justification of the various sovereignties now exercised
by kings over their subjects, and a reason against any limitation of
their authority or any questioning of their titles. By what ingenious
contrivances the two links of the chain--Adam and the several monarchs
now actually reigning on the earth--are brought together, those curious
in such speculations may find by duly consulting the pages of Sir
Robert Filmer's work.
Such a tissue of contradictions, assumptions, and absurdities as is
presented by this book (which, however, contains one grain of truth,
namely, that all political power has, historically, its ultimate origin
in the dominion exercised by the head of the family or tribe) might
have been left, one would think, without any serious answer. But we
must recollect that at that time theological arguments were introduced
into all the provinces of thought, and that any reason, which by any
supposition could be connected with the authority of Scripture, was
certain to exercise considerable influence over a vast number of minds.
Any way, the book was celebrated and influential enough to merit, in
Locke's judgment, a detailed answer. This answer was given in due form,
step by step, in the former of Locke's two _Treatises_, which appears
to have been written between 1680 and 1685, as the Edition of the
_Patriarcha_ quoted is invariably that of 1680. I do not propose to
follow him through his various arguments and criticisms, many of which,
as will readily be supposed, are acute and sagacious enough. Most
modern readers will be of opinion that one of his questions might alone
have sufficed to spare him any further concern, namely, Where is Adam's
heir now to be found? If he could be shown, and his title indubitably
proved, the subsequent question of his rights and prerogatives might
then, perhaps, be profitably discussed.
Of incomparably more importance and interest than the former treatise
is the latter, in which Locke sets forth his own theory concerning "the
true original, extent, and end of Civil Government." Mr. Fox Bourne
is probably correct in referring the date of the composition of this
treatise to the time immediately preceding and concurrent with the
English Revolution, that is to say, to the closing period of Locke's
stay in Holland. The work, especially in the later chapters, bears
the marks of passion, as if written in the midst of a great political
struggle, and, in the Preface to the two _Treatises_, it is distinctly
stated to be the author's object "to establish the throne of our great
restorer, our present King William, and to justify to the world the
people of England, whose love of their just and natural rights saved
the nation when it was on the very brink of slavery and ruin."
The theories advanced by Locke on the origin and nature of civil
society have much in common with those of Puffendorf and Hooker, the
latter of whom is constantly quoted in the foot-notes. After some
preliminary speculations on the "state of nature," he determines that
Political Society originates solely in the individual consents of those
who constitute it. This consent, however, may be signified either
expressly or tacitly, and the tacit consent "reaches as far as the
very being of any one within the territories of that government."
Though no man need enter a political society against his will, yet
when, by consent given either expressly or tacitly, he has entered it,
he must submit to the form of government established by the majority.
There is, however, one form of government which it is not competent
even to the majority to establish, and that is Absolute Monarchy,
this being "inconsistent with civil society, and so being no form
of government at all." Locke ridicules the idea that men would ever
voluntarily have erected over themselves such an authority, "as if,
when men quitting the state of nature entered into society, they agreed
that all of them but one should be under the restraint of laws, but
that he should still retain all the liberty of the state of nature,
increased with power and made licentious by impunity. This is to think
that men are so foolish, that they take care to avoid what mischiefs
may be done them by pole-cats or foxes, but are content, nay, think it
safety, to be devoured by lions." In these and some of the following
strictures, he seems to have in view not only the ruder theories of
Filmer and the absolutist divines, but also the more philosophical
system of Hobbes.
But, supposing a government other than an Absolute Monarchy to have
been established, are there any acts or omissions by which it can
forfeit the allegiance of its subjects? To answer this question, we
must look to the ends of political society and government. Now the
great and chief end which men propose to themselves, when they unite
into commonwealths, is "the mutual preservation of their lives,
liberties, and estates, which I call by the general name, property."
A government, therefore, which neglects to secure this end, and still
more a government which itself invades the rights of its subjects,
is guilty of a breach of trust, and consequently may be lawfully set
aside, whenever an opportunity occurs. Hence the community itself must
always be regarded as the supreme authority, in abeyance, indeed, while
its fiduciary properly and faithfully executes the powers entrusted to
him, but ever ready to intervene when he misuses or betrays the trust
reposed in him.
On such a theory, it may be objected, of the relations of the people to
the government, what is to prevent incessant disturbance and repeated
revolutions? Locke relies on the inertia of mankind. Moreover, as he
says, with considerable truth, in a previous passage, whatever theories
may be propounded, or whatever traditions may have been handed down, as
to the origin, nature, and extent of government, a people, which knows
itself to be rendered miserable by the faults of its rulers and which
sees any chance of bettering its condition, will not be deterred from
attempting to throw off a yoke which has become intolerable. "When the
people are made miserable, and find themselves exposed to the ill-usage
of arbitrary power, cry up their governors, as much as you will, for
sons of Jupiter; let them be sacred and divine, descended or authorized
from heaven; give them out for whom or what you please, the same will
happen. The people generally ill-treated, and contrary to right, will
be ready upon any occasion to ease themselves of a burden that sits
heavy upon them."
But, though there is much truth in this last remark, there can be
little question that absolutist theories of government, especially
when clothed with a religious sanction which appeals to the beliefs
of the people at large, have much influence in protecting the person
of an absolute ruler, as well as in ensuring the execution of his
orders; while, on the other hand, theories like those of Locke have
a tendency to encourage criticism, and to weaken many of the motives
which have usually prevented men from offering resistance to the
established government. The practical consequences of Locke's theories,
as reproduced and improved on by later writers, would probably be
found, if we could trace them, to be represented, in no inconsiderable
degree, in the French and American revolutions which occurred about
a century after the publication of the Treatises. Nor have his
speculations been without their share, probably, in determining much of
the political history and still more of the political sentiment of our
own country. To maintain that kings have a divine right to misgovern
their subjects, or to deny that the people are, in the last resort,
the supreme arbiters of the fate of their rulers, are paradoxes which,
to Englishmen of our generation, would appear not so much dangerous
as foolish. This altered state of sentiment, and the good fruit it
has borne in the improved relations between the Legislature and the
People, the Crown and the Parliament, may, without undue partiality, be
ascribed, at least in some measure, to the generous spirit of liberty
which warms our author's pages, and to the Whig tradition which so long
cherished his doctrines, till at last they became the common heritage
of the English people.
Admirable, however, as, in most respects, are the parts of Locke's
treatise which discuss the present relations of governors and governed,
his conception of the remote origin of political society is radically
false. "The first framers of the government," "the original frame of
the government" (ch. xiii.), have never had any existence except in
the minds of jurists and publicists. In the primitive stages of human
development, governments, like languages, are not made; they grow.
The observation of primitive communities still existing, combined
with the more intelligent study of ancient history, has led recent
writers to adopt a wholly different view of the _origin_ of government
(the question of the respective _rights_ of governors and governed
is not affected) from that which prevailed in the times of Hobbes,
Locke, and Rousseau. The family or the tribe (according to different
theories) is the original unit of society. Government, therefore, of
some kind or other must always have existed, and the "state of nature"
is a mere fiction. In course of time, the family or the tribe, by a
natural process of development, would, in many cases, become greatly
enlarged, or combine with other units like itself. Out of this growth
or aggregation would arise, in most cases gradually and insensibly,
the nation or state as known to later history. The constitution, the
"frame of government," has generally passed through stages similar to
those passed through by the state or nation. A body of custom must
gradually have grown up even in the most primitive societies. The
"customs" would be interpreted and so administered by the house-father
or head of the tribe. But, as the family or tribe changed its abode,
or had to carry on its existence under different circumstances, or
became enlarged, or combined with other families or tribes, the customs
would necessarily be modified, often insensibly and unconsciously.
Moreover, the house-father or head of the tribe might be compelled
or might find it expedient to act in concert with others, either as
equals or subordinates, in interpreting the customs, in taking measures
of defence, in directing military operations, or in providing for
the various exigencies of the common life. Here there is no formal
assent of the governed to the acts of the governors, in our sense of
those terms, though, undoubtedly, the whole family or tribe, or its
stronger members, might on rare occasions substitute one head for
another; no passage from the "state of nature" to political society;
no definitely constituted "frame of government." At a further stage,
no doubt, political constitutions were discussed and framed, but this
stage was long posterior to the period in the progress of society at
which men are supposed to have quitted the state of nature, selected
their form of government, and entered into an express contract with
one another to obey and maintain it. The fault of Locke, like that
of the other political speculators of the seventeenth and eighteenth
centuries, consisted in assuming that primitive man was impelled by the
same motives, and acted in the same manner and with the same deliberate
design, as the men of his own generation. As in morals and psychology,
so in politics, the historical and comparative methods, so familiar to
recent investigators, were as yet hardly known.
* * * * *
I ought not to dismiss this book without noticing Locke's remarks on
the necessity of Parliamentary Reform. "To what gross absurdities the
following of custom, when reason has left it, may lead, we may be
satisfied when we see the bare name of a town, of which there remains
not so much as the ruins, where scarce so much housing as a sheepcote
or more inhabitants than a shepherd is to be found, sends as many
representatives to the grand assembly of law-makers as a whole county
numerous in people and powerful in riches."
* * * * *
The writings of Locke on Trade and Finance are chiefly interesting
to us on account of the place which they occupy in the History of
Political Economy. They consist of three tracts, the occasions and
consequences of which have already been described. The main positions
which he endeavours to establish are three. First, interest, or the
price of the hire of money, cannot, ordinarily speaking, be regulated
by law, and, if it could so be regulated, its reduction below the
natural or market rate would be injurious to the interests of the
public. Secondly, as silver and gold are commodities not differing
intrinsically in their nature from other commodities, it is impossible
by arbitrary acts of the Government to raise the value of silver and
gold coins. You may, indeed, enjoin by Act of Parliament that sixpence
shall henceforth be called a shilling, but, all the same, it will only
continue to purchase six-penny-worth of goods. You will soon find
that the new shilling is only as effective in the market as the old
sixpence, and hence, if the Government has taken the difference, it has
simply robbed its subjects to that amount. The third position, which
he only maintains incidentally in discussing the other two, is that
the commercial prosperity of a country is to be measured by the excess
of its exports over its imports, or, as the phrase then went, by the
balance of trade. The two former of these propositions are simple,
but long-disputed, economical truths. The latter is an obstinate and
specious economical fallacy.
To understand Locke's contention on the first point, it must be
borne in mind that in his time, and down even to the middle of the
present reign, the maximum rate of interest allowable in all ordinary
transactions was fixed by law. By the statute 12 Car. II. (passed in
1660) it had been reduced from eight to six per cent. Sir Josiah Child,
whose _Observations concerning Trade_ had been reprinted in 1690, and
who probably represented a very large amount of mercantile opinion,
advocated its further reduction to four per cent. He maintained,
quoting the example of Holland, that low interest is the cause of
national wealth, and that, consequently, to lower the legal rate of
interest would be to take a speedy and simple method of making the
country richer. Against this proposal Locke argued that the example of
Holland was entirely beside the question; that the low rate of interest
in that country was owing to the abundance of ready money which it had
formerly enjoyed, and not to any legal restrictions; nay, in the States
there was no law limiting the rate of interest at all, every one being
free to hire out his money for anything he could get for it, and the
courts enforcing the bargain. But, further, suppose the proposed law to
be enacted; what would be the consequences? It would be certain to be
evaded, while, at the same time, it would hamper trade, by increasing
the difficulty of borrowing and lending. Rather than lend at a low rate
of interest, many men would hoard, and, consequently, much of the money
which would otherwise find its way into trade would be intercepted,
and the commerce of the country be proportionately lessened. Excellent
as most of these arguments are, Locke unfortunately stopped short of
the legitimate conclusion to be drawn from them. He did not propose,
as he should have done, to sweep away the usury laws altogether, but
simply to maintain the existing law fixing the maximum of interest at
six per cent. Sir Dudley North, in his admirable pamphlet, _Discourses
on Trade_, published in 1691, just before the publication of the
_Considerations_, but too late, perhaps, to have been seen by Locke,
takes a much more consistent view as to the expediency of legal
restrictions on the rate of interest. "As touching interest of money,
he is clear that it should be left freely to the market, and not be
restrained by law." Notwithstanding the opposition of men like North
and Locke, to whom may be added an earlier writer, Sir William Petty,
the arguments of Child partially triumphed in the next reign. By the
12th of Anne, the legal rate of interest was reduced to five per cent.,
and so continued till the Act of 1854, repealing, with regard to all
future transactions, the existing Usury Laws. There can be little doubt
that public opinion had been prepared for this measure mainly through
the publication of Bentham's powerful _Defence of Usury_, the telling
arguments of which had gradually impressed themselves on the minds of
statesmen and economists. Adam Smith, on the other hand, had stopped
just where Locke did. "The legal rate of interest, though it ought
to be somewhat above, ought not to be much above the lowest market
rate." That the rate of interest, whatever it may be, should be fixed
by law, he appears to take for granted. Indeed, he seems to write more
confidently on this point than Locke had done, and, in this particular
at least, appears to be of opinion that the legislator can look after
the private interests of individuals better than they can look after
their own. Happily, as Bentham points out, the refutation of this
paradox was to be found in the general drift and spirit of his work.
* * * * *
On the second question, "raising the value of money," Locke's views
are much clearer and more consistent than on the first. It would
be impossible to state more explicitly than he has done the sound
economical dictum that gold and silver are simply commodities, not
differing essentially from other commodities, and that the government
stamp upon them, whereby they become coin, cannot materially raise
their value. As most of my readers are aware, it has been a favourite
device, time out of mind, of unprincipled and impecunious governments
to raise the denomination of the coin, or to put a smaller quantity of
the precious metals in coins retaining the old denomination, with the
view of recruiting an impoverished exchequer. There have, doubtless,
been financiers unintelligent enough to suppose that this expedient
might enrich the government, while it did no harm to the people. But it
requires only a slight amount of reflection to see that all creditors
are defrauded exactly in the same proportion as that in which the
coin is debased. One lucid passage from Locke's answer to Lowndes may
suffice to show the forcible manner in which he presents this truth:
"Raising of coin is but a specious word to deceive the unwary. It
only gives the usual denomination of a greater quantity of silver to
a less (_v. g._, calling four grains of silver a penny to-day, when
five grains of silver made a penny yesterday), but adds no worth
or real value to the silver coin, to make amends for its want of
silver. That is impossible to be done. For it is only the quantity
of silver in it that is, and eternally will be, the measure of its
value. One may as rationally hope to lengthen a foot, by dividing it
into fifteen parts instead of twelve and calling them inches, as to
increase the value of silver that is in a shilling, by dividing it
into fifteen parts instead of twelve and calling them pence. This is
all that is done when a shilling is raised from twelve to fifteen
pence."
Lowndes had maintained that "raising the coin," in addition to
making up the loss caused by calling in the clipped money, and other
advantages, would increase the circulating medium of the country, and
so put a stop to the multiplication of hazardous paper-credit and the
inconveniences of bartering. Nothing could be better than Locke's
reply:
"Just as the boy cut his leather into five quarters (as he called
them) to cover his ball, when cut into four quarters it fell short,
but, after all his pains, as much of his ball lay bare as before;
if the quantity of coined silver employed in England fall short,
the arbitrary denomination of a greater number of pence given to
it, or, which is all one, to the several coined pieces of it, will
not make it commensurate to the size of our trade or the greatness
of our occasions. This is as certain as that, if the quantity of a
board which is to stop a leak of a ship fifteen inches square, be but
twelve inches square, it will not be made to do it by being measured
by a foot that is divided into fifteen inches, instead of twelve, and
so having a larger tale or number of inches in denomination given to
it."
The general principle that to depreciate the coinage is to rob the
creditor, and that, though you may change the name, you cannot change
the thing, was quite as emphatically stated by Petty and North as by
Locke. But the value of Locke's tracts consisted in their amplitude of
argument and illustration, which left to the unprejudiced reader no
alternative but to accept their conclusion. As he himself said in a
letter to Molyneux, "Lay by the arbitrary names of pence and shillings,
and consider and speak of it as grains and ounces of silver, and 'tis
as easy as telling of twenty."
* * * * *
Locke had the penetration to see that the laws existing in his time
against the exportation of gold and silver coin must necessarily be
futile, and, while it was permitted to export bullion, could answer no
conceivable purpose. These laws, which date from the time of Edward
the Third, were, curiously enough, not repealed till the year 1819,
though as early as the time of the Restoration they had been pronounced
by so competent a judge as Sir William Petty to be "nugatory" and
"impracticable." Nothing, as Locke says towards the conclusion of his
answer to Lowndes, could prevent the exportation of silver and gold
in payment of debts contracted beyond the seas, and it could "be no
odds to England whether it was carried out in specie or when melted
down into bullion." But the principle on which the prohibition of
exporting gold and silver coin ultimately rested seems to have been
accepted by him as unhesitatingly as it was by almost all the other
economists of the time. That principle was that the wealth of a nation
is to be measured by the amount of gold and silver in its possession,
this amount depending on the ratio of the value of the exports to
that of the imports. When the value of the exports exceeded that of
the imports, the Balance of Trade, as it was called, was said to be
in favour of a country; when, on the other hand, the value of the
imports exceeded that of the exports, the Balance of Trade was said to
be against it. A favourable balance, it was assumed, must necessarily
increase the amount of gold and silver in the country, while an
unfavourable balance must necessarily diminish it. And, lastly, the
amount of gold and silver in its possession was the measure of a
nation's wealth. These views form part of what political economists
call the Mercantile Theory, which it was the peculiar glory of Adam
Smith to demolish.
It is somewhat humiliating to the biographer of Locke to be obliged to
confess that, in this respect, his theories on trade lag considerably
behind those of an almost contemporary writer, Sir Dudley North, whose
work has already been mentioned. Some of North's maxims are worthy of
Adam Smith, and one wonders that, when once enunciated, they found so
little currency, and were so completely ignored in both the literature
and the legislation of the time. Here are a few, but the whole tract
may be read in less than an hour: "The whole world, as to trade, is but
as one nation or people, and therein nations are as persons." "The loss
of a trade with one nation is not that only, separately considered,
but so much of the trade of the world rescinded and lost, for all is
combined together." "No laws can set prices in trade, the rates of
which must and will make themselves; but, when such laws do happen
to lay any hold, it is so much impediment to trade, and therefore
prejudicial." "No man is richer for having his estate all in money,
plate, &c., lying by him, but, on the contrary, he is for that reason
the poorer. That man is richest whose estate is in a growing condition,
either in land at farm, money at interest, or goods in trade." "Money
exported in trade is an increase to the wealth of the nation; but spent
in war and payments abroad, is so much impoverishment." "We may labour
to hedge in the Cuckoo, but in vain; for no people ever yet grew rich
by policies, but it is peace, industry, and freedom that brings trade
and wealth, and nothing else."
Some of Locke's opinions on trade and finance were undoubtedly
erroneous, and it must be confessed that the little tract of Sir Dudley
North supplies a better summary of sound economical doctrine than any
which we can find in his writings; but then this brochure is merely a
summary, with little of argument or elucidation, and perhaps it would
be difficult to point to any previous or contemporary writer whose
works are, on the whole, more important in the history of economical
science than those of Locke.