Subordination and Dependence

Steuart presents an agrarian society with two social classes: those who live from the fruits of the earth without working, and those who need to work to survive. Personal interest and natural inequalities generate a social relationship characterized by a surplus produced by a working class, which enables another sector of the population to live without working.^{Footnote 10} The working class need, of course, to cultivate the land for their subsistence. Yet, they at first have no incentive to produce more than what they need to survive. So how does a surplus emerge? According to Steuart, a surplus emerges from the power of or subordination to the landowners.^{Footnote 11}

Dependence and subordination are present in all historical phases, albeit with varying intensity. The principle of dependence refers to a kind of personal advantage, which does not stem from cooperation between equals but from subordination to the authority. Consequently, social relations always entail authority. Equality between individuals, Steuart asserts, has never existed because society as a whole is composed of a union of hierarchical relationships. Natural dependence, such as the relationship between parents and children, is now extended alongside political dependence, which implies subordination via property laws or legal obligations, first present in the form of slavery and then, through the influence of Christianity, under the feudal system (Steuart [1767] 1995, I, p. 8). From feudal communities with strong social cohesion, owing to the high level of dependence and subordination between their members, Steuart moves towards societies of free men where the introduction of industry enables the individual to depend solely on the results of their “industry.”

In a society of free men, the need for labor as a system of generating surplus on the basis of subordination does not exist. From then on, what the working classes do is called “industry” because, over time, it also incorporates ingenuity.

The concept of industry has been the subject of a great debate (James Reference James1977; Braudel 1986) seeking to understand a meaning lost today and difficult to replace with a modern concept.^{Footnote 12} Throughout the seventeenth and eighteenth centuries, the term “industry” described talents that were useful for productive purposes and became one of the keys to economic prosperity. This use of the word “industry” vanished with the emergence of the classical economists’ labor input. Nonetheless, Steuart made a distinction between man’s industry and labor input in his analysis by introducing different types of dependence.

Once industry has emerged, feudalism declines on account of the appearance of money and sumptuary consumption (Steuart [1767] 1995, I, p. 237). In several chapters of his Principles—chapter VI, book I; chapters III and XIII, book II—Steuart is explicit regarding the necessary conditions for the emergence of a commercial nation—i.e., the use of money and a taste for luxuries—to such an extent that he begins his analysis with the definition of both terms.^{Footnote 13}

The Introduction of Money

In book III of his Principles, titled Of Money and Coin, Steuart tackles the history of money and of monetary systems.^{Footnote 14} When explaining the origin of commercial nations, Steuart surmises who introduced money into the nation.

Money had always been in the nation, or, more specifically, in the hands of a small number of the inhabitants of a country. As Steuart explains, they persuaded the others to accept a commodity “of no material use to man” as a means of payment. In contrast to David Hume’s view (Piteau Reference Piteau2002, p. 260), it is a process of convention that resembles not at all a spontaneous phenomenon.

Steuart does not explain this process of arbitrary social choice. He is interested in the consequences of the use or introduction of money—i.e., how money becomes “an universal object of want to all the inhabitants.” Although Steuart eventually argues that merchants are indispensable to the rise of commercial nations, here he makes it clear that merchants are not the ones who introduced money. On the contrary, money had to precede merchants: before there could be a commercial nation, the desire for superfluous products needed to become general, which first required a larger population involved in exchanges, which first required money.

Once money has emerged, the “moral incapacity” of the inhabitants to increase demand disappears. How does this happen? Those who have money—the proprietors—cease to work, but not to consume. On the one hand, the production of farmers increases because the proprietors raise their demand for food. Farmers’ surpluses increase and the “rich” demanders pay them with money. On the other hand, free hands will supply their service (or labor), and rich demanders do not give them food in return but rather money. And “this money in their hand will serve as an equivalent for superfluidity of nourishment produced by additional agriculture” (Steuart [1767] 1995, I, p. 45). Now there is a greater population involved in exchanges and a greater surplus of the agricultural product to feed the whole population.

Moreover, Steuart adds that individuals are now linked by another type of dependence, known as “commercial” dependence. Steuart historically observes the permanent need of the individual for others, how these social relations procure a series of advantages, and what kinds of obligation they entail. Dependence has appeared in different ways: (i) natural dependence, as the relationship between parents and children; (ii) dependence through law, in the case of slavery; and (iii) commercial dependence between the rich demander of goods and the industrious individual or worker who supplies them (Steuart [1767] 1995, I, p. 316). Even if the last is the lowest degree of dependence, equality between individuals does not exist within a commercial nation, given that dependence always entails subordination: “he who depends totally upon the sale of his own industry, stands in the fourth degree: this is the case of tradesmen and manufacturers, with respect to those who employ them” (Steuart [1767] 1995, I, p. 318). If the characteristic of this type of authority that superiors wield over inferiors is notoriously elusive in Steuart, the following paragraph can help to clarify the question.

Now the industrious tradesmen and manufacturers—“the poor,” in Steuart’s words—are under subordination to the proprietor—“the rich”—who buys their products or employs them, and they depend on him for money. Therefore, subordination survives in commercial nations through a monetary relationship between workers and proprietors, which replaces feudal subordination between lords and vassals.^{Footnote 15} Once money has emerged, free-hands and farmers depend on the demand of the rich, who provide them with money.

The raw material for the system of trade and commerce is ready. “When once this imaginary wealth (money) becomes well introduced into a country, luxury will very naturally follow” (Steuart [1767] 1995, I, p. 45). Now is the time for merchants to build it up.

The System of Trade and Commerce

For Steuart, the new institutions that allow the commercial nation are linked to an artificial construction called the “system of trade and commerce.” Hume uses the term “artificial” to describe an imagined process aimed intentionally at a predetermined purpose, particularly a convention of rules that provide a sense of justice and that represent an alternative to the natural way or are to be inevitably the consequence of natural propensities (self-interest, sexual passion, or natural affection). To explain the formation of rules determining property, rights, and obligations, Hume introduces the artificial process as the result of invention.^{Footnote 16} In this regard, and used in another historical view, Steuart highlights the artificial nature of the institutions that give rise, together with the statesmen, to the commercial nation, and proof of this is the introduction of the general utility principle required by Hume in order for the artifice to function.^{Footnote 17} “Trade and commerce are an abbreviation of this long process; a scheme invented and set on foot by merchants, from a principle of gain, supported and extended among men, from a principle of general utility to every individual, rich or poor, to every society, great or small” (Steuart [1767] 1995, I, p. 241).

Steuart highlights, in particular, the artificial nature of these institutions by presenting merchants as creators, responsible for implementing “the system of trade and commerce.”^{Footnote 18} The system has two stages. The first one creates and stimulates the demand for superfluous products. The second stage is an artificial identification of interests driven by merchants that guides production and exchange.^{Footnote 19}

The process begins when the system of trade and commerce, which merchants were already executing in their countries of origin, spreads to other nations. Chapter V of the second book of his Principles of Political Œconomy is exclusively dedicated to the merchants’ process of introducing a trade described as “active,”^{Footnote 20} since it is not limited to providing goods that arise from the needs of families.

With the help of correspondents and producers, the merchant devises the means to generate superfluous needs, in accordance with the customs of each town and with initial prices according to the ability to pay, and not the cost (Steuart [1767] 1995, I, p. 249).

Beyond the purpose for which the artifice is created, Steuart stresses the important alterations of social relationships entailed by the system. The imitation of the nobility and the ‘aspiration effect’ of workers lead the system to spread until the consumption of superfluous goods becomes a habit among all members of society.^{Footnote 21} Steuart considers needs to be accumulative and unlimited, in such a way that ostentatious consumption in the present later becomes a need—which Steuart calls “political necessaries” to differentiate them from those needs stemming from subsistence—for every social class.^{Footnote 22} Although the boost in the demand generates unlimited possibilities for growth, the generalization of the desire for superfluous products requires a greater surplus (Steuart [1767] 1995, I, p. 236). Once again, people need an additional push for their work to create a surplus, and the added element stems from dependence. Now “men are now forced to labour because they are slaves to their own wants” (Steuart [1767] 1995, I, p. 52). A generalized desire for the superfluous leads to the need to generate a surplus with which exchange can be performed.

Once luxury and convenience are introduced into a country, merchants are ready to build the system of trade and commerce (Steuart [1767] 1995, I, pp. 241).

The first part of this “fabric” is a new system of production. As Adam Smith would do later, Steuart uses the example of a pin factory to explain the economic change involved in the new institutional arrangement for production. Steuart focuses on the new relationship between producer and consumer, rather than on the form of production caused by the technical division of labor in Adam Smith. He explains that now the producer sells all his produce to the merchant, who (i) satisfies more distant clients, (ii) detects excesses in supply or demand in the sectors, (iii) transfers this information to the producers via markets, and (iv) avoids the problems that lead consumers to acquire goods directly from the producer: “the distance of the manufactures, the obscurity of his dwelling, the caprice in selling his work …; the retailer has all in his shop, and the public buys at a current price” (Steuart [1767] 1995, I, p. 243).

The next step is the new organization of exchange. Steuart describes the introduction of a ‘public market’—i.e., “how bartering grows into trade” (Steuart [1767] 1995, I, p. 237). Steuart understands the market as a social system of exchange that diverges from “a simple operation” of two contracting parties—i.e., barter—which is the representative exchange within a non-commercial nation. In barter, one exchange realizes the purposes of both exchangers; with money, this is no longer true, as the seller must engage in an additional exchange with a third person, whose purpose is not realized unless there is yet another exchange, and so on. The market is represented by means of a continual flow made up of operations bound closely together. Through the “money of account,” Steuart emphasizes a tripartite division—(i) manufacturers–industry, (ii) merchants–money, and (iii) consumers–wants—that make up the “public market.”^{Footnote 23} Steuart distinguishes three types of economic agents involved in the process: producers or “manufacturers,” consumers, and merchants who acquire and spread knowledge and information for the functioning of the market. The relationship among the three agents based on money and merchants enables individual exchanges to form a monetary circulation driven by merchants.

Once the system of trade and commerce has been explained, Steuart considers the issue of its transition to the commercial nation, and warns about the unfounded expectations that it generates.

Obstacles to the Emergence of Commercial Nations

The first discussion is whether it is possible to establish the system of trade and commerce in another nation. Steuart describes the challenges involved in implementing it in a nation with considerable natural disadvantages (Steuart [1767] 1995, I, p. 327).^{Footnote 26} With superfluous consumption generalized, the purchase of foreign products offered by merchants can be paid for only with an agricultural surplus fully destined for exportation. Thus the appearance of an industrial population that enables the foreign product to be replaced by a national one is not possible. Without the intervention of the statesman, the price increase in food will reduce incomes until society is divided into two classes: rich and poor. In these nations, the system of trade and commerce is more harmful than beneficial. Economic policy can promote only “passive trade,” which consists of defining a national demand for foreign products that is met ad hoc—i.e., without the existence of the system of trade and commerce (Steuart [1767] 1995, I, p. 247).

Steuart then turns his attention to the political and social conditions required to introduce the system of trade and commerce in a nation and turn it into a commercial nation.

In the relationship between political and economic systems, both republics or democracies (he uses both terms) and monarchies allow the system of trade and commerce to be implemented, although each political system entails a particular commercial nation (Steuart [1767] 1995, I, p. 322).^{Footnote 27} Equality is a priority in the democratic system, involving a guarantee of freedom but a moderation of expenses, discouraging national industry. The inequality intrinsic to the monarchic system is detrimental to freedom but allows an increase in the luxury that encourages local manufacture. Therefore, democracy promotes a commercial nation with pre-eminence in the external sector, while monarchies encourage an economy in which domestic trade dominates. In any case, the threat to freedom and frugality are inconveniences only if statesmen “neglect the interest of commerce, so far as not to make it an object of administration” (Steuart [1767] 1995, I, p. 313).

The only political system that is not compatible with the commercial nation is tyranny. The problem is known as “undetermined subordination,” meaning a lack of public liberty.^{Footnote 28} A society of free men means that the exercise of authority upholds the principles of impartiality (uniform application) and non-arbitrariness (equal treatment of similarly situated individuals). Steuart presents the relationship between freedom and the rule of law from a different perspective from that of the clash between the restriction of the legislator and the power of freedom.^{Footnote 29} Instead of being an instrument of protection, the rule of law is a means of guaranteeing the exercise of economic activity—e.g., when a legislative project removes the physical barriers of a territory, creates a space of action, and eliminates a situation of privilege, or when the law develops a commercial agreement between nations, merchants join new market spaces. The system of trade and commerce does not operate without “public liberty” because industry is destroyed when the producer is subjected to discretionary taxes, charges, or assistance. Steuart highlights the unbearable uncertainty that this situation provokes in the producer (Steuart [1767] 1995, I, pp. 324–325). It is not the essence of the tax system in itself because Steuart considers it completely necessary to the economic activity. For example, high, general, stable, and progressive taxes do not ruin manufacture, although they may have negative consequences on external trade.^{Footnote 30} But an arbitrary tax system distorts competition, interrupts industrial activity, and prevents the appearance of new initiatives. Hoarding eventually appears and public revenues diminish because the sources of private wealth have disappeared. The lower classes “ought by industry to enrich” the nation but they find themselves without credit, because the money is lent to the state, with taxes that fall on productive resources instead of taxing the outcome of production.^{Footnote 31}

The third matter is the influence of the system of trade and commerce on the division of social classes. Steuart discusses its incompatibility with a society divided between landowners and serfs, as occurs in feudalism. Since industry generates wealth and wealth grants power, the sovereign cannot establish a system that grants power to those who must only obey (Steuart [1767] 1995, I, p. 328). When the system of trade and commerce is possible, the sovereign of the feudal nation must assume an inevitable change in the relations of dependence and subordination. Steuart describes three historical situations to illustrate how subordination gives way to the emergence of classes that question the power balance: (i) the opening of the doors of the senate of Venice or Genoa to prosperous citizens; (ii) the political influence of the Praetorian Guard or the Janissaries through the security they provided to the emperor or the sultan; and (iii) the replacement in terms of influence on the monarch’s decisions of the nobleman’s wisdom by the liquidity of an industrial class that holds the monarch’s sources of wealth. If the statesman limits the power of the upper classes and spreads public freedom via a single subordination to the law, “a more mild, and a more regular plan of administration” will be introduced (Steuart [1767] 1995, I, p. 329). The effects are greater when Steuart describes how the market system limits the power of the sovereign himself. Now the legislator cannot access the wealth of the citizens because they can evade his authority by avoiding taxes.

The system of trade and commerce implies that the administration or government system enabling the action of power is more complex and that the influence of the statesman’s policy over citizens is weaker (Steuart [1767] 1995, I, pp. 277–278). Greater attention should be paid, according to Steuart, to this loss of influence because the system of trade and commerce can be channeled but not counteracted (Steuart [1767] 1995, I, p. 331).^{Footnote 32}

The Wedge and the Watch: The Consequences for the Statesman

Steuart’s discourse is aimed at public opinion and defends the argument that the response to the system of trade and commerce is not less government, but a new exercise of political power. However, the definition and content of this statesman’s policy are notoriously elusive in Steuart. Of particular relevance here is the fact that the statesman plays a part at least as important as that of merchants when it comes to turning a country into a commercial nation.

In chapters XIV, XV, and XVI of the second book of his Principles of Political Œconomy, Steuart explains how the statesman responds to the system of trade and commerce with the creation of another artifice, called the “plan of political economy,” with no relation with central planning, because society cannot be planned, according to Steuart.^{Footnote 33} In line with his idea of a lack of an invisible hand, chapter XVI—Lycurgus’s plan—presents an artifice as the necessary way of achieving public happiness within a commercial nation. The first conclusion that Steuart wants readers to draw from the case of Lycurgus’s Sparta is that the new statesman’s mode of action is taking place for the public good.

A new approach to economic policy is required due to the fact that “security, ease, and happiness, therefore, are not inseparable concomitants of trade and industry” (Steuart [1767] 1995, I, p. 341). The forces of the system of trade and commerce modify the correspondence between the contributions to the community and the profit obtained, altering the welfare of social groups in contrasting directions. Damages can arise from the introduction of machinery, from the variation of prices of necessary goods, from delays in the operation of the markets, or from the loss of competitiveness. The consequences are unemployment, hunger, crisis in the balance of payments, or an increase in credit. First, therefore, the statesman’s action is a necessary response to social relations that are in constant movement, to maintain common well-being (Steuart [1767] 1995, I, p. 161). The statesman must precisely be “attentive to provide food, other necessaries and employment for all the people” (Steuart [1767] 1995, I, p. 352).

Second, the statesman’s new mode of action is not reduced to “a system of written laws, but stamped upon the minds” of individuals. Steuart distances himself from both the concept of policy, which regulates economic activity, and a legal or institutional framework, based on natural or artificial laws, to suggest an intervention that is active, gradual, and preventing (Karayiannis Reference Karayiannis and Reisman1994, p. 42).^{Footnote 34} Steuart assumes that commerce and self-interest might lead to disorder. Instead of a self-adjusting mechanism, he believes, private self-interest will conform to the public good in the long run by means of the plan of political economy. There are no results to expect in the short run because the plan needs time to have influence on conduct and behavior. In the same way that merchants have modified the behavior of individuals, the statesman can make society benefit from the effects of the mechanics of passions by guiding individual action towards the direction specified in the plan. In conformity with the principle of the artificial identification of interests, the work of the artifices of the legislator should be to identify the interest of individuals with the general interest.^{Footnote 35} The way in which economic policy is transmitted is an incentive for citizens who are looking out for their own interests.

Finally, Lycurgus’s plan teaches Steuart another lesson. Sufficient authority is necessary in the nation to support the execution of his plan: “I never recommend them [his principles of political economy] farther than they may be rendered possible in execution, by preparatory steps, and by properly working on the spirit of the people” (Steuart [1767] 1995, I, p. 363). For this reason, in modern nations the statesman needs to limit the power of the upper classes and to spread public freedom via a single subordination to the law. Part of the population, those devoted to manufacture, assumes the risk of leaving their survival in the hands of farmers and agricultural landowners. Benefitting from a relationship of dependence on agriculture that guarantees them the necessary goods, the industrial class accepts subordination to the rule of law.^{Footnote 36} Consequently, a pact is devised so that society guarantees the protection of tradesmen and manufacturers who produce far from the subsistence sources: “This conveys my idea of a free and perfect society, which is, a general tacit contract, from which reciprocal and proportional services result universally between all those who compose it” (Steuart [1767] 1995, I, p. 109). This artifice consists of a dependence contract that encompasses everyone—i.e., it prohibits unilateral independence—and, therefore, the “political” relationships of dependence and subordination are limited to the link between the individual and the state. The subordination of subjects to the rule of law in exchange for survival enables the statesman to execute his plan. The exercise of authority is likened to the exercise of strength and solidity of a wedge, but now it must be similar to the delicacy of a watch (Steuart [1767] 1995, I, p. 426).^{Footnote 37}

In chapters XV and XVI, the content of the “modern” plan of political economy is superficially explained by Steuart. Given that the action of power is more complex, it is necessary first to have an extensive knowledge of the socio-economic structures prevailing in a given society. The statesman’s action requires a vast amount of information and personal knowledge of a country, but also of literature and economic conditions. Therefore, the administrators of a state must be local and involved in the welfare of their people (Ramos Reference Ramos2007, p. 203). Second, the statesman must choose the political economy that suits the well-being of his nation. The public good cannot stem from an immediate response of the natural propensities of individuals and, therefore, also requires an imagined artifice aimed at a predetermined purpose—e.g., a schema of being long great and powerful by trade (Steuart [1767] 1995, I, p. 363). However, there is no ideal society. The plan must be adapted to each community because not all communities have the same combination of private interests or the same economic conditions; thus, the same response and goals will not apply to all societies.^{Footnote 38} The content consists of a body of knowledge provided by economic science (Steuart [1767] 1995, I, p. 308). When the principles are well understood by the statesman, every transgression of them is clearly seen—this is the limit imposed by the political economy on the leader’s arbitrary abuses.^{Footnote 39}

To sum up, the plan of political economy is the new statesman’s mode of action. Steuart does not want to repeat past mistakes—e.g., the abuses of the sovereign, the application of economic policy without considering its impact in the long run, the absence of information available to the government. Economic policy requires a design that seeks to organize the statesman’s exercise of power over citizens towards a predetermined purpose.