Speech on the occasion of the book launch of "Anticipating the Wealth of Nations: The Selected Works of Anders Chydenius (1729-1803)" by Maren Jonasson and Pertti Hyttinen
Seppo Honkapohja, Bank of Finland.
Finnish Embassy, London, 5 December 2011
Seppo Honkapohja, Bank of Finland.
Finnish Embassy, London, 5 December 2011
It is a great honour and pleasure for me to discuss this book from the economics point of view. I should point out right away that I am a macroeconomist by background and not a specialist in economic history or history of economic thought. As an undergraduate I became aware of Chydenius’ important work through a summary article and I even tried to read his most important work but got discouraged by its old-fashioned translation. The publication in English of this collection of the works of Anders Chydenius is a landmark in Finnish economic and more generally social history of thought. Moreover, the translation uses modern English, which is important to enhance the readership of the book.
I will not discuss Anders Chydenius’ life and career as an influential politician and intellectual in Sweden (and Finland as part of Sweden) in the 18th century. At the outset it must be said the breadth and depth of Chydenius’ writings is amazing. His writings convey that he was a passionate supporter of free trade, freedom of business and occupation, the rights of the rural labourers, as well as freedom of information and religion.
The new collection on display contains Chydenius’ most important economic writing, his writing about freedom of information and social rights and also his auto-biography. My remarks will focus on Chydenius’ economic ideas and writing as nowadays he is perhaps most known for his thoughts about economic liberalism.
It must be acknowledged at the start that many arguments by Chydenius are similar to those of Adam Smith. Chydenius’ most important writing, titled “The National Gain”, was published in 1765, i.e., eleven years before the publication of Adam Smiths’ Wealth Nations. The latter is of course considered to be the decisive precursor to modern economics. I will shortly make some comparisons of economic ideas of Chydenius and Smith.
Before discussing Chydenius’ economic writings in detail, I want to start with some remarks about the background and roots of his economic writings. Generally, scholarly economic writings in the 18th century Sweden can be said to correspond broadly to the major ideas and themes in economic doctrines in other countries in Europe. Sweden was well connected to the rest of Europe even. At the time the dominant school of economic thought was mercantilism, a doctrine that emphasized government control of foreign trade as the most important way for ensuring prosperity and security of the state. Mercantilist policies included high tariffs on manufactured goods, monopolized markets with staple ports, export subsidies, restricting imports, maximal use of domestic resources, and banning exports of gold and silver.
Mercantilist doctrines were initially formed well before the 18th century. In Sweden the views of the economics scholars who were active in the first half of that century are nowadays considered to belong to the realm of relatively standard mercantilist thinking. In particular, the importance of attaining a favorable balance of trade was emphasized as it provided the basis for heavy regulation of the economy. However, something called “reform-mercantilism” emerged from the earlier “old mercantilist” thought. Reform-mercantilism is said to have formed a bridge with the more modern liberal economic thinking. A number of important Swedish writers are considered to belong to this reform group. Historians of Swedish economic thought usually place also Anders Chydenius in this group of reform-mercantilists who favored liberal economic attitudes and were critical of the usual mercantilist economic policies.
If one looks at the writings of Chydenius, it is notable that he rather sparsely refers to other economic writers. Even Swedish writers are not mentioned that often in his work even though it is known that he interacted widely with the Swedish politicians and intelligentsia. As a starting point, it should be noted that Chydenius placed much less emphasis on the role of manufacturing than was done by mercantilists and correspondingly more on the role of agriculture. For this reason Chydenius is also placed in a school of writers called proto-Physiocrats. Initially, Physiocrats emphasized the role of agriculture on the basis of a “natural order” which should govern living together of people. They were critical of the regulations that supported manufactures and they favored unlimited trade – they had grain trade in mind.
It can be argued that Chydenius made an additional contribution to the views of the proto-Physiocracts, because Chydenius was insistent on free market and free trade quite broadly. He was against economic regulation as a matter of principle, not just to give more scope for agriculture. The school of Physiocrats also had a role in some ideas and doctrines presented in the Wealth of Nations. In particular, the concept of intertwined circular flows describing the organism of an economy was first formally presented Quesnai’s Tableau Economiques in 1758. Adam Smith’s concept of the invisible hand or, in modern terms, general equilibrium of markets relies on the idea of circular flows. In contrast, the idea of circular flows cannot be found in Chydenius’ writings.
Let me now come back to the economic writings of Anders Chydenius. I already mentioned that his most important work is “The National Gain”, published in 1765. The piece starts with the idea that the surplus of value of exported commodities over value of imported ones is called “the profit of the nation”. This sounds like a mercantilist notion, but Chydenius does not move on to the idea that an export surplus in the form of money is particularly good for the country. Instead, he says that the “wealth of people” consists of the value of products brought about with the help of “the number of people and their diligence” (p.145). Chydenius also entertains the coarse form of the idea of “comparative advantage”, so that Sweden should use cheap labor and ample raw materials. This would make workers to focus on production that delivers highest incomes, maximum employment and increase exports. I must point out that comparative advantage is nowadays one of the corner-stones of modern economic theories of international trade.
In the National Gain one can also find great deal of emphasis on freedom of enterprise and markets. Let me quote: “If the door to profit is opened by free enterprise, every man will be fully employed within a few years; if that does not happen, however, the nation will inevitably, regardless of all other measures, become as drowsy as it was before…” (p.156). These ideas are very similar to doctrines that Adam Smith endorsed in his Wealth of Nations. One way to see the relation is to think of Adam Smith’s concept of the division of labor as the fundamental element in improving the productivity of labor. Freedom to move from one occupation or industry is required if the gains from division of labor need to be attained. Constraints on mobility would diminish these gains.
The collection contains four most important writings of Anders Chydenius. I have already commented on the National Gain. The other three writings deal with:
(i) emigration of people from Sweden and measures address the problem,
(ii) the staple system that limits exports of goods as a weakness of the country, and
(iii) a natural system of finance as a remedy to the problem of inflation and weakness of the copper markka coinage.
(i) emigration of people from Sweden and measures address the problem,
(ii) the staple system that limits exports of goods as a weakness of the country, and
(iii) a natural system of finance as a remedy to the problem of inflation and weakness of the copper markka coinage.
Each of the three writings contains surprisingly modern ideas. For example, writing (i) mentions the pursuit of happiness and benefits as a reason for emigration. In other words, people think rationally about mobility. Writing (ii) is strong pamphlets against regulation, especially those on exports. Writing (iii) is critical of the usual reasoning about the source of inflation suggesting instead that the large issue of bank notes as the problem. The essay also argues that the planned remedy, restrictions on the supply of money would lead to problems of deflation.
I will not comment on these other essays in detail. I want to add that each of the four writings is accompanied by a commentary by Professor Lars Magnusson from Uppsala University. Magnusson is a very prominent scholar in economic history and history of economic thought. Magnusson’s comments place each piece of writing in its surrounding political environment. This enhances the use of the book.
Looking at the overall profile of Chydenius’ economic writings, it must be noted that Chydenius was primarily a politician and a remarkable intellectual. The four writings take the form of essays or pamphlets and they were published in a very short period 1765-1766. These observations deliver one contrast between Chydenius and Adam Smith. Smith was largely an academic scholar who studied in Glasgow and Oxford and became a Professor at Glasgow University in 1751. Wealth of Nations took ten years to write.
It must be emphasized that the economic thinking of Anders Chydenius and Adam Smith are independent from one another despite the eleven year difference in the publication dates of The National Gain and the Wealth of Nations. Anglo-Saxon books about the history of economic thought do not mention Chydenius, because his writings appeared in Swedish and until now they have not been properly published in English. There have been a couple of earlier translations but their quality is not that high and the places of publication are obscure to the bigger world. The current collection of Chydenius’ most important writings finally rectifies the omission.
I have made some brief comparisons of the writings of Chydenius to those of Adam Smith. I will not say more about this, but I want to make a comment about the title of the book. The word ”anticipating” in the title has some different meanings in English. As the writings of Chydenius ja Smith were made independently of each other, the neutral interpretation of the word “anticipate” as meaning ”do something earlier than” (Oxford English Dictionary) is the correct one.
There is no causal connection, but this does not reduce the significance of Chydenius. He was an influential intellectual who had many original ideas worthy of study by historians of economic and social thought. All significant scholars have intellectual predecessors and contemporaries. The real issue is whether a scholar has made contributions that improve and add to the existing intellectual and political knowledge and arguments.