Physiocracy, as this current is called, was a school of economic thought founded in the 18th century by the French economist François Quesnay. This trend was born and developed exclusively in France, as a response to mercantilism and its ideology.
Physiocracy, born in 1750, was a current of economic thought, which based its main ideology on the little intervention of the state in the economy. The Physiocrats, in contrast to mercantilism and its strong commitment to state intervention in the economy, supported a freer current. A current based on the fact that the economy had a natural phenomenon, which gives rise to part of the term "physiocrat" ("physis", nature in Greek), which regulated the market by itself. Quesnay, as well as Turgot, formed what would be one of the first schools against state intervention. On the other hand, giving rise, later, to economic liberalism, by influencing the life of Adam Smith.
The Physiocrats believed in a natural phenomenon of the market that guaranteed the proper functioning of the state without the need for a state to intervene in it. Among its most recognized expressions is the term " Laissez Faire ", a phrase that, in French, means "letting go".
Fundamental Ideas of the Physiocratic School
Physiocracy, as a current of thought, bases its main ideas on two fundamental questions -based on natural law, although it then develops others for the full fulfillment of the physiocratic ideology:
- In the first place, the natural law ; which defended the unnecessary intervention of the state for self-regulation and the proper functioning of a market without the need for them to intervene. The Physiocrats considered that the intervention of the state prevented nature from manifesting its natural law, since the state was incapable of interpreting natural law, thus preventing the achievement of the benefits of the natural order.
- Second , the exclusive productivity of agriculture . For Quesnay, agriculture, widely practiced in the economy at that time, was the only source of net products. In other words, Quesnay considered the land as the only source of wealth, as well as agriculture the necessary multiplier. Agriculture, for the Physiocrats, was the only activity that generated a surplus greater than the resources used, considering the rest of the production branches as "sterile", since they did not enjoy the capacity that agriculture did possess.
Principles of physiocracy
Although these two previous points are its elementary principles, the physiocracy based its ideology on more premises to achieve the optimal functioning of the economy. These ideas, in keeping with the two elementary principles, constituted the perfect system for the Physiocrats.
- Private property . For the Physiocrats, private property was a fundamental right. Well, they aspired to the total guarantee of the right that man could own what he obtained with his own work. Only by guaranteeing private property could economic progress exist. In this way, the guarantee of feedback between work and property guaranteed the effort of individuals and the interests of continuing to progress. Furthermore, based on inequality and the concentration of wealth, the Physiocrats considered inequality as a determining factor for growth. Their point of view about the economy proposed that absolute equality prevented the generation of wealth, they considered.
- Private property is followed by the questioning of the mercantilist system and its defense of foreign trade as a source of wealth . The Physiocrats viewed foreign trade as barter, which was a "sterile" source of wealth. This is not to say that the Physiocrats rejected trade, since they considered that all economic activity was relevant. The Physiocrats that trade was not the main source of wealth, as well as the mercantilist principle of accumulating gold and silver as wealth. For the Physiocrats, trade should be free and serve as a method to obtain resources that cannot be obtained in the country, but not as an engine of growth and development. In addition, he considered trade as a threat to well-being as it is the possible cause of wars by enriching each other.
- It is also among the principles, even having been mentioned superficially in the belief of natural law, economic liberalism, or what the Physiocrats referred to in the expression " Laissez faire ." For the Physiocrats, economic liberalism was indispensable for the fulfillment of the natural order. They considered that excessive state regulation, prohibitions, controls and limits on production, as well as any state intervention, impeded the proper functioning of the economy. Even any intervention to correct the inequality of a country, in line with the idea of wealth accumulation, in the minds of the Physiocrats was not justified. That is why one of its most basic principles is economic liberalism, thus rejecting any intervention that prevents economic development that contemplates the natural order.
- Finally, there is what the Physiocrats called the single tax . For the Physiocrats, the best way to tax an economy was to tax a single direct tax on net income. For the Physiocrats, applying taxes to other economic activities that were not net production, exempt from relation to production costs, would end up damaging the economy, since it would transfer these taxes via costs to the net product. A theory also defended by the philosopher John Locke, considered the father of classical liberalism.
History of physiocracy
In response to commercialism, in the 18th century, two new economic schools were created that tried to end the prevailing current. These schools, one in France and one in Great Britain, were the Physiocratic School and the Classical Liberal School. One promoted by the French economist François Quesnay, and another promoted by the famous Scottish economist Adam Smith, emerged in response to the mercantilist idea, offering a liberal alternative to the great bet that the mercantilists made for an intervened economy. Physiocracy, considered by some to be the mother of the social sciences, led to what is known as the Enlightenment period. During the 18th century, theories developed by the Physiocrats were applied, although these were not in the way that the theoretical fathers of Physiocracy devised.
During the Seven Years’ War, where France played a fundamental role, the physiocracy began to weigh heavily on the economy. Many physiocratic ideas saw the light and began to be implanted in the economic system. Measures that put an end to many mercantilist policies that prevented free trade, price regulation, the exclusivity of the unions, as well as a great relationship of taxes on land. A series of ideas with which the physiocratic school ended. This was possible thanks to the media pressure of the economic newspapers of the decade, as well as the promotion of physiocratic ideas. Measures that ended up being applied and that brought benefits, but that ended up giving way to the capitalist system. A new system in which industrial development prevailed over agricultural development promoted by the Physiocrats.
Criticisms of the Physiocratic School
Although many economists have recognized the contribution of the Physiocrats to the economy, the Physiocracy has also been harshly criticized by great opposites throughout history.
Among the most controversial theories for these authors was that of agricultural production as the only source of wealth. Well, they underestimated it with studies in which they tried to demonstrate the poverty of those countries that gave priority to agricultural production over the industrialization of the economy as a method of development. They also criticized the idea of a single tax, as well as the view of the Physiocrats about state intervention. However, the contributions of this current of thought continue to prevail, as well as the contributions in the historical context that the Physiocrats lived in the Gallic country.