But since a nation must have commodities to trade with manufactures were also encour aged within the country, while agriculture was to be developed sufficiently to make the nation self-sufficient. A dense population was desired as an element of military strength. It was an all-around system of protection, regulation, price fixation and state control, which should not be thoughtlessly condemned, as it was admirably suited to the spirit and needs of the times. Charles V is said to have introduced it, but its best-known exponents were Cromwell in Eng land, Colbert, the Minister of Louis XIV, in France, and Frederick the Great in Prussia. Among the best-known English Mercantilist writers were Mun, Child, Davenport, and Temple.
The Toward the end of the 17th century, and more markedly in the 18th, protests began to be urged against the extreme and burdensome restrictions of the Mercantilist policies. This system had performed its work and was outliving its usefulness. The agricul tural revolution, already being consummated in England, was demonstrating the profitableness of agriculture when conducted scientifically with sufficient capital and rotation of crops. The growing manufacturers of the towns, too, felt themselves burdened and restricted by obso lete regulations and the monopoly of the guilds. It was in France particularly, where the bur dens of taxation upon both agriculture and manufactures were especially onerous, that the protests found expression in a new system of thought. This was Physiocracy, which might be defined negatively as a revolt against Mer cantilism, though it was much more than this.
At the basis of the Physiocrats' doctrines lay their nature philosophy, as indicated in the name they gave themselves (0inc KO:Tot = rule of nature). By this they meant that social activi ties were subject to natural laws in the same way that nature is subject to physical laws. National well-being could be secured only by obeying these natural laws. The political appli cation of this philosophy led to the social con tract theory, according to which government exists for the benefit of the members of society and rests upon their consent. In the economic sphere this reasoning led them to approve of individual freedom and initiative. The func tions of government should be limited to the protection of life, liberty and property, and the individual should be permitted to pursue his own interests and make the most of his labor. There
should be freedom of exchange and competition, and all monopolies or restrictive privileges should be abolished. This idea was embodied in their famous maxim, laissez-faire et laissez passer (let things alone, let them take their own course). Thus far the Physiocratic doctrine was negative and aimed to break down the restrictions of Mercantilism. But it contained also positive contributions to economic theory.
The central doctrine of the Physiocrats was that of the product net or net surplus. Only ag riculture and the other extractive industries, as mining and fishing, are productive, that is, yield a surplus over the cost of production, and thereby increase the wealth of a nation. Manu factures and commerce are non-productive, for they merely give a new form and location to the materials produced by the extractive indus tries; the higher value of the manufactured articles is offset by the costs of production, the labor, provisions and materials used up in the process, and therefore there is no net surplus added to existing wealth. Artisans, merchants and the professional classes were regarded by the Physiocrats as sterile or non-productive. This doctrine led, of course, to a demand for the encouragement of agriculture by the state and the abolition of all measures mistakenly de signed to encourage manufactures or commerce. These should be left to develop naturally. In criticism of the doctrine of productivity it may be pointed out that to the Physiocrats produc tion meant an addition of material goods to the wealth of society. According to them, nature worked in a peculiar way in co-operation with the farmer; he alone added to the stores of material wealth. But the manufacturer or trader, who added only a form or place utility, was denied the name productive. This is con trary to modern economic theory.
From their doctrine of the product net fol lowed logically their theory of the impost unique or the single tax. Since land was the sole and ultimate source of wealth, all taxes should be levied directly upon it. If they were imposed upon other branches of industry, they would necessarily be shifted as there was no surplus out of which to pay them, and they would all ultimately rest on the land. A single tax on the net income from land was therefore the simplest way to secure the revenue of the state.