§ 12. Effect of modern forces upon custom. The in dustrial events following the discovery of America strength ened the forces making for economic freedom. Discoveries in the western hemisphere opened up a wide field for the ad venture and enterprise of Europe. Commerce is the strong est enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the vil lage. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation, and the spirit of the times which expressed the principle of personal liberty and allowed the individual to follow his own opinions and take the con sequences, were favorable to competition. Despite these facts, the restraints of the national governments on trade con tinued great, in some respects increasing during the seven teenth and eighteenth centuries in France, Holland, and Eng land. The regulation before attempted by towns and vil lages was employed on a larger scale by national governments in their industrial systems. The colonies in America were used for the economic ends of the "mother country" and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the Eng lish policy of trade restriction.
§ 13. Adam Smith's influence. "The Wealth of Na tions," the first great work on political economy, was pub lished in the year 1776. That was the "psychological mo ment" for its appearance, as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was merely negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, follow ing a few years later, emphasized this thought in the political field. The philosophers of the time believed in a "natural law" in industry and politics. The reformers of the time
wished to throw off the trammels of the past and to give men opportunity to exert themselves "naturally." In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Although the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet cus torn still is stronger to-day in Europe than in America. Serf dom was not abolished until the first half of the nineteenth century in Austria and southeastern Europe, and not until the last half in Russia. Many economic and cultural forces fur thered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an im pression did Smith's book make that in the minds of men "free trade" became almost identical in thought with political economy, whereas that was but the temporary economic prob lem of the eighteenth century.
Many men then thought that in "free and unlimited com petition" had been found a solution of all economic problems for all time. But soon it was apparent that it was no such simple and absolute solution. Indeed, many of the present economic problems—in one sense all of them—center around this one: to determine the proper forms and limits of coin petition. This problem has appeared in various aspects throughout the foregoing pages.
§ 14. The wage system. Viewed in another aspect, the present economic and social order is called the wage system.' The wage contract, like the use of money, is not essential to the existence of a system of private property. Communities such as the American colonies and many of the newly set tled states may consist almost entirely of self-employed own ers of land. Bulgaria, before the Balkan wars called the peasant state, presented this organization (though of course with some wage payment), as did also its neighbor Serbia. But, given the institution of private property :with competition (freedom to buy and sell), let manufactures and commerce develop to any extent, and inequalities of fortunes increase while an increasing number of persons work for wages. It is noteworthy that as this goes on (as it has done in America at an increasing rate since the middle of the nineteenth century) it is the agricultural and rural hand industries that continue to be mainly worked by owner-managers and workers, while it 8 See Vol. I, p. 227, and above, ch. 20, §§ 1-4.
is the manufacturing, transporting, and large commercial en terprises in which the labor is done for wages. The accept ance of the wage system thus far has been the inevitable price to be paid for manufacturing and industrial development.
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