(1727-1781)

Biography

Turgot was a French statesman and economist. He was born in Paris in 1727. He studied theology and at the age of twenty-two was elected prior of the Sorbonne. In that capacity he delivered in 1750 an address On the Benfits which the Christian Religion has Conferred on Mankind, and in the same year an account of The Historical Progress of the Human Mind in which he predicted as inevitable the separation of the American colonies from the mother country (Britain). A year later he turned from theological to legal studies and decided to enter the administrative and judicial service.

In 1755 and 1756 he accompanied his friend Vincent de Gournay, (a minister of commerce under Louis XV) on tours of inspection through rural France. It may have been Gournay who first awakened Turgot's interest in physiocratic doctrine. The favorite maxim of Gournay was laisser laire, laisser passer. Another of Turgot's intimate friends was Francois Quesnay, court physician and physiocratic enthusiast. Quesnay was the first to use the word "physiocracy," interpreted to mean "the rule of nature". The physiocrats were generally known in their own time as economistes.

In 1761 Turgot was appointed administrator of the district of Limoges, which included some of the poorest and most overtaxed parts of France. He held this office for thirteen years, and tried to apply in a practical way some of his economic principles. He improved the system of tax collection, constructed new roads, increased facilities for grain trading, established a system of poor relief, and strengthened the schools. During this period Turgot was writing articles for the great liberal French Encyclopedia and was corresponding with Voltaire and Benjamin Franklin. A congenial group in Paris in the winter of 1765-66 included David Hume then secretary of the British Embassy and Adam Smith, who was traveling with the Duke of Buccleuch. In the quickening of minds to which Turgot contributed when he visited Paris, the physiocratic system was beginning to take literary form.

Ten years before the appearance of Wealth of Nations Turgot wrote his Reflections on the Formation and Distribution of Wealth which, according to Condorcet (French philosopher and political theorist) contained the basic ideas behind Smith's larger book.

Among Turgot's most notable contributions was the introduction of the concept of capital into the Physiocratic system (which had previously concentrated only on land and labor). He also clarified the meaning of surplus and provided the link between the surplus and growth and relating the profit rate to the rate of interest. He was also among the first to make clear the distinction between market price and natural price. As a result, Turgot differed from original Physiocrats on the nature of the produit net. Another notable economic contribution was the introduction of variable input proportions in production - Turgot was the first to conceive the notion of diminishing returns to factor inputs. As noted, all these points were highly influential upon Adam Smith.

In 1774, when Louis XVI became king, Turgot was appointed a minister. Later in the same year he became controller of finance. The country was in a desperate financial situation, and Turgot's first act was to submit to the King his guiding principles: "No bankruptcy, no increase of taxation, no borrowing". He attempted to carry out on a national scale the reforms which he had initiated in the Limoges district.

In six famous principles he proposed to abolish the system of unpaid labor then prevailing throughout the country; suppress various taxes and tolls upon corn, cattle, etc, in Paris; and also suppress the trade guilds (corporations) which were raising the prices of commodities beyond reasonable limits.

It was Turgot's hope that revolution might be prevented by these timely reforms; but his program was not accepted, and in 1776, as a result of the opposition of Parliament and of privileged groups, he was dismissed from office. The legislatures of the French Revolution reenacted the measures which Louis XVI and his ministers had rejected.

Turgot represented a rare combination of statesman and theorist. In the world of practical affairs he pointed the way to progressive legislation. In the domain of economic theory he helped to expose fallacies and opened the path to a new period represented by Adam Smith's Wealth of Nations.

Introduction to Physiocratic Literature

Physiocratic literature is a reaction against the ideas of the Mercantilists. They write that agriculture is the only real productive part (sector) of the economy. Farming is unique because a farmer can plant one seed and reap ten. Industry, on the other hand, can only change the shape of something already made.

Originally, the term "Physiocrats" was reserved for Quesnay and the inner circle of his disciples. However, Jacques Turgot can also be included. Turgot advanced a distinctly different and more advanced version of the Physiocratic doctrine in his Reflections (1770) which, as stated, proved to be highly influential upon Adam Smith.

The Mercantilists policy doctrines were clear enough: external and internal free trade (France was then covered with internal road tolls as well as possessing a highly protectionist foreign trade policy), land reform (i.e. land enclosures) to precipitate an agrarian revolution and, most famously, a call for fiscal reform in the form of a single tax upon land rent. For most other economic matters, they recommended a laissez-faire, laissez-passer (let do, let pass) approach.

Introduction to the Turgot's Reflections

Reflections on the Formation and Distribution of Wealth was first published in a periodical. One of its purposes had been to enlighten two Chinese students who had been brought to France and educated by Jesuits and then sent back to their native land with a scholarship and the understanding that they were to keep their European patrons informed regarding the state of literature and science in China. Turgot had drawn up a list of questions for these students to answer, and prepared the Reflections in order to give them a better understanding of his questions.

Among the main themes which the Reflections on the Formation and Distribution of Wealth covers are: division of labor, the origin and use of money, the improvement of agriculture, the nature of capital and the different modes of its employment, the legitimacy of interest and loans, and the revenue from land.

The physiocratic doctrine (as noted above) was a reaction against mercantilism. The mercantile policy, with its emphasis on nationalism and protection of industry, had tended to centralize manufacture and sacrifice the country to the towns. The new physiocratic doctrine was the very opposite of the old one. It looked with favor on internationalism and free trade, and it placed agriculture at the very centre of its system. Only the land, according to the physiocratic argument, was productive. Manufacturers and "artificers" were unproductive. The physiocrats proposed a tax on the "net produce" of land - a "single tax" that anticipated the doctrine of Henry George more than a hundred years later.