New Principles of Political Economy

Contents

1. Notice to the Second Edition (1827) 22 min 13

   Seven years after the first edition, Sismondi claims that events have proved him right against Say, Ricardo, Malthus and McCulloch. Revising the book in England after the crisis of 1825, he describes a nation whose production grows while enjoyments shrink: an insecure aristocracy, bankrupt merchants, peasants turned into day labourers, weavers starving before the power loom, and workers reduced to proletarians. His central principle is proportion: revenue must grow with capital, consumption with population, and production with revenue. The economists erred by ignoring revenue, so they believed consumption unlimited and encouraged the gluts now ruining the civilised world.

2. Notice to the First Edition (1819) 8 min 4

   Sismondi explains how the book grew out of his article “Political Economy” for the Edinburgh Encyclopaedia. Expecting only to restate Adam Smith’s settled doctrine, he reasoned the subject afresh without books and found that facts which had troubled him, above all the post-war commercial crisis and the sufferings of factory workers he had seen in Italy, Switzerland and France, now fell into place under new principles. He asks readers to follow the familiar Smithian exposition patiently and not to reject its unexpected consequences unexamined.

3. I.1 The Twofold Aim of the Science of Government 7 min 2

   The science of government has a twofold aim: to allow a few individuals the fullest development of mind and enjoyment, and to ensure that everyone shares in a decent happiness. A nation that sacrifices the many to the few is enslaved; one that levels all is only half civilised. Sismondi criticises those who judge nations by abstract wealth or liberty, citing England, where vast wealth coexists with a tenth of the people on public charity. Society and its inequalities are justified only by the common advantage they secure.

4. I.2 Division of the Science of Government: High Politics and Political Economy 6 min 1

   Government divides into high politics, which seeks moral happiness through liberty, education and religion, and political economy, which seeks physical well-being through the administration of wealth. The aim of political economy is not accumulation in the abstract but the share of all citizens in the enjoyments wealth represents; wealth and population are goods only in proportion to each other. Sismondi rejects equality of property: inequality spurs labour, and the legislator should seek happiness in every condition by guaranteeing labour its reward.

5. I.3 The Administration of National Wealth Before Its Theory Became the Object of a Science 12 min 7

   Before political economy became a science, states had finance, law of property and practical knowledge of agriculture, manufactures and commerce, but no theory of national wealth as a whole. Sismondi surveys the Greek writers: Xenophon’s Oeconomicus on household management, Aristotle’s “chrematistics” and the pseudo-Aristotelian Economics, and Plato’s account of the division of labour in the Republic. The ancients lacked the science, he concludes, but always judged wealth by its contribution to national happiness, and so sometimes saw more truly than the moderns.

6. II.6 How Consumption Determines Production, and Revenue Determines Expenditure 20 min 6

   Wealth moves in a circle: revenue governs expenditure, expenditure must absorb production, consumption calls forth reproduction, and reproduction yields revenue. The poor have only their labour as revenue and can spend only after selling it, so society can buy only what its revenue allows; goods produced beyond it, even beside hungry people, go unsold and ruin their producers. Gradual growth turns the circle into a spiral, but production outrunning last year’s revenue causes loss. Sismondi attacks Ricardo’s claim that capital grows equally by producing more or consuming less, using the example of Lyons hatmakers.

7. IV.4 How Commercial Wealth Follows the Growth of Revenue 23 min 10

   Commercial wealth grows only with national revenue. Concentration of revenue in a few hands narrows the home market, since the rich buy foreign luxuries and handmade goods while the poor can afford little, so industry turns to foreign markets that prove just as limited. Sismondi cites the glutted markets of 1818 from Italy to Calcutta and the United States, and blames the error on Say and Ricardo’s identification of production with revenue. In passages added in 1827 he explains the boom of 1825 as English goods bought with English loans, and the crash that followed.

8. IV.7 The Division of Labour, and Machines 12 min 2

   Cheap capital leads manufacturers to the division of labour and to machines. The division of labour multiplies output but stunts the worker’s mind, health and spirit, condemns children to repetitive tasks, and wastes the skill in which workers invested. Machines benefit society when they answer growing demand, but if they merely replace workers without new demand the social loss is certain. Sismondi distinguishes these cases, notes that capital moves more easily than workers, and suggests which industries suit rich towns like Geneva and which suit poor regions.

9. IV.8 Results of the Struggle to Produce More Cheaply 13 min 3

   Competition to produce more cheaply lowers wages and interest while multiplying output, so revenue and consumption grow more slowly than production; Sismondi’s cloth-factory example shows production quadrupling while revenue barely doubles. Each party, from capitalist to worker, accepts a sacrifice in its own interest, until the market cannot absorb the product. Free competition fails because interests are unequal, and the state sides with the stronger. Government may need to slow the movement; nations should compete with nature, not with each other at cut prices.

10. VII.2 How Revenue Sets the Limit to Population 14 min 5

    Revenue limits population, but the worker’s revenue, his power of working, depends on demand he cannot know. Large workshops and great farms separate workers from their customers, so labourers marry on the faith of employment that may vanish through others’ errors. The less property people have, the less they can calculate, which is why the Romans called the propertyless proletarians. Classes with a rank to keep restrict their families, while those used to bare subsistence, helped by parish allowances and child labour, multiply beyond the means of maintaining them.

11. VII.7 Of Population Made Superfluous by the Invention of Machines 30 min 11

    Demand for labour can fall while population stays the same, and machinery is the cause that belongs most to political economy. Inventions benefit society when demand is growing, as the stocking frame and printing once did, but when the world market is already supplied they merely throw producers out of work, cutting prices arithmetically while suspending labour geometrically. Sismondi attacks Ricardo’s indifference to the number of people a nation supports, describes the distress of England, and proposes ending inventors’ patents rather than suppressing inventions.

12. VII.9 The Worker Has a Right to a Guarantee from the Man Who Employs Him 29 min 12

    The division between a resting class of owners and a working class of the propertyless is an artificial creation of law, so the law should make those who profit from wage labour responsible for it. Great landowners and farmers, not small farmers, should bear the relief of their day labourers; manufacturers should support their own workers in sickness, old age and unemployment, perhaps through revived trade corporations. Sismondi distances himself from Owen and Fourier, wants small workshops and worker partnership, and condemns unlimited competition as sacrificing humanity to individual greed.