Nature's Evil [calibre 5.27.0]

Cantillon

In pioneering the banking business in France, the Scot John Law was joined by another unlikely hero, the Irishman Richard Cantillon. Like many in the social sciences, Cantillon was a political refugee. His parents were Irish Catholics, and their estate was confiscated by the English. Cantillon moved to France and began working in the new bank founded by Law, first as an employee and then as a junior partner. Having made money with the Mississippi Company, by 1719 he decided that the boom had reached its peak, and sold his shares. He was too hasty; the shares he sold tripled in value before they became worthless. This sale of securities brought him into conflict with Law, and he left for Italy. Later, in 1734, Cantillon was burnt to death in his own home in the centre of London. His cook was suspected of having started the fire – he disappeared with documents and jewels. Later a certain Chevalier de Louvigny was discovered in distant Surinam. Allegedly, he possessed papers and other things which belonged to Cantillon. Antoin E. Murphy from Trinity College Dublin, who has written Cantillon’s biography, believes that this chevalier was actually Cantillon, who had himself started the fire in London and fled to Surinam. 11 If he had lived in Surinam for another twenty years he might well have met Candide and his accidental friend, the mutilated slave. I think Cantillon would have loved to talk to them.

All that has come down to us is Cantillon’s treatise An Essay on Economic Theory . Written in 1730 and published in French in 1755 as Essai sur la nature du commerce en général , this book was largely ignored, though Adam Smith duly referred to it. Much later, William S. Jevons, who ‘rediscovered’ the book and translated it into English, wrote that it was, ‘more emphatically than any other single work, the cradle of political economy’. Labour without land is worthless, as is land without labour. As long as land is freely available, ‘men multiply like mice in a barn,’ wrote Cantillon. The general measure that expresses value is not gold, but land. John Law had also built his ‘system’ on this theory, but Cantillon’s examples showed more clearly how it worked. The humblest life can subsist on one and a half acres per head. The price of a finished product could be calculated in units of land. An acre will graze enough sheep to provide sufficient wool for a suit, but a suit made of fine wool would need ten times more land to feed spinners and tailors. Wine in Paris costs more than wine in Burgundy because of delivery costs, which could also be calculated in the units of land that horses and coachmen need for subsistence.

Labour could increase the value of a natural product many times over. For Cantillon, this is a miracle which needs investigating. He was surprised to learn that, in the steel spring inside an English watch, the relation of the cost of the material to the cost of the work was one to a million. His method celebrated the superiority of labour over land. If one country exchanges its labour for the raw materials of another country, then the first country will have the advantage in this trade, since it maintains its people at the expense of that other country. As an example, Cantillon puts forward the trade between Paris and Brussels: lace is exchanged for champagne for the sum of 100,000 ounces of silver per year. He calculates that the harvest of a single acre of Flemish flax, with value added by the Brussels lace-makers, is equal in value to the wine from 16,000 acres of French vines. Thanks to this exchange, many people could live on every acre of Flemish land, doing other things – shipbuilding, military service or scholarly work – and buying food from Burgundy or elsewhere. The more productive the labour, the less land it needs for creating wealth. Thousands of acres of French land went to Brabant along with the barrels of wine every year, just as if France had temporarily lost this land in a war. From Brussels, Cantillon went on to examine the problems of Eastern Europe. If a Polish landowner is also fond of Brussels lace, it will cost him a sixth of the income that he receives from selling the grain grown on his estate; if he is fond of wines from Burgundy, he will pay another sixth of his income for them. In exchange for the product of 1 acre of land in Brabant and 1,500 acres of land in Burgundy, the Polish landowner will give grain harvested on hundreds of thousands of acres of his own land. In this way Holland and Flanders maintain half of their population, exchanging the fruits of their labours for products from a foreign land. For any single product, the higher the value of human labour and the lower that of raw material, the better it is for the economy that trades in this product. 12