354 POLITICAL ECONOMY by Adam Smith, who must be regarded as continuing and completing their work. It must be admitted that with the whole modern move ment serious moral evils were almost necessarily con nected. 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 individual ism 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 ascendency bore indeed in their bosom an ulti mate 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. FIRST MODERN PHASE. The first phase was marked, on the one hand, 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 fulfil 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 am bition and cupidity. Strong Governments were formed, which served to maintain material order amidst the growing intellectual and moral disorder. The universal admission of the commons 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 armiesat first temporary, afterwards permanent which prevented the interruption or distraction of labour by devoting a determinate minority of the population to martial opera tions 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 of printing showed how the intellectual movement and the industrial develop ment 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 marvellous practical ferment and ex pansion. 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. Boscher, 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, ct Mutationibus Monctarum (reprinted by Wolowski, 1864) contains a theory of money which is almost entirely correct according to the views of the 19th century, and is stated with such brevity, clear ness, and simplicity of language as, more than anything else, show the work to be from the hand of a master. SECOND MODERN PHASE : MERCANTILE SYSTEM. Throughout the first modern phase the rise of the new social forces had been essentially spontaneous ; in the second they became the object of systematic encouragement on the part of Governments, which, now that the financial methods of the Middle Ages no longer sufficed, could not further their military and political ends by any other means than increased taxation, implying augmented wealth of the com munity. Industry thus became a permanent interest of European Governments, and even tended to become the principal object of their policy. In natural harmony with this state of facts, the mercantile system arose and grew, attaining its highest development about the middle of the 17th century. The mercantile doctrine, stated in its most extreme form, makes wealth and money identical, and regards it ! therefore as the great object of a community so to conduct j its dealings with other nations as to attract to itself the largest possible share of the precious metals. Each country must seek to export the utmost possible quantity of its own manufactures, and to import as little as possible of those of other countries, receiving the difference of the two values in gold and silver. This difference is called the balance of trade, and the balance is favourable when more money is received than is paid. Governments must resort to all available expedients prohibition of, or high duties on, the importation of foreign wares, bounties on the export of home manufactures, restrictions on the export of the precious metals for the purpose of securing such a balance. But this statement of the doctrine, though current in the text books, does not represent correctly the views of all who must be classed as belonging to the mercantile school. Many of the members of that school were much too clear-sighted to entertain the belief, which the modern student feels difficulty in supposing any class of thinkers to have professed, that wealth consists exclusively of gold and silver. The mercantilists may be best described, as lloscher has remarked, not by any definite economic theorem which they held in common, but by a set of theoretic tendencies, commonly found in combination, though severally prevailing in different degrees in different minds. These tendencies may be enumerated as follows : (1) towards overestimating the importance of possessing a large amount of the precious metals ; (2) towards an undue exaltation (a) of foreign trade over domestic, and (i>) of the industry which works up materials over that which provides them ; (3) towards attaching too high a value to a dense population as an element of national
strength ; and (4) towards invoking the action of the state