Physiocracy is concerned with the belief in the existence
of a ‘Natural Order’. The role of
the state is seen as simply preserving property and up-holding the natural
order. Physiocrats held the belief that agriculture was the only source of
wealth and therefore that sector should not be taxed, they believed in the
advocacy of free trade.
Physiocracy was born in France and was at it’s peak
during the period prior to the French revolution.
1758 - ‘Tableau
Economique’ was published, this showed a circular flow of wealth.
1760 – Quensay writes a theory on taxation, in which
all existing taxes should be scrapped and replaced by a single tax, so the
tax on rent is introduced. Met opposition from landlords and tax collectors.
Physiocrats go underground and publish ‘Political Economy of Agriculture’, the French government
accepted free trade within France, the Physiocrats attract more followers.
PHASE THREE (1764-1767)
Reforms in this period were
a direct result of the physiocrats theory of value and distribution. Quensay
argued that under free trade, the merchants and landlords gains would be
diminished greatly, whilst the farmers would increase their rate of profit.
Quensay believed that demand
at home was not enough to push up agricultural prices, therefore
agricultural remained backward (i.e not enough effective demand), but that
the exportation of agricultural products especially corn would mean higher
prices. This would, he thought maintain the rate of profit in agriculture
and maintain the rate of profit with prices moving to the ‘Bon-Prix’
(Price of growth). As prices rise in the long term, so he supposed the
productivity of land would rise, resulting in a increased surplus.
PHASE FOUR (1767-1777)
The physiocrats attracted
more enemies. There was growing opposition to the deregulation of the corn
trade, which finally undermined physiocracy. Deregulation meant the price of
corn in the wholesale and retail markets rose during the 1760’s, possibly
attributed to some poor harvests, however the physiocrats were accused of
worsening the supply of corn for the French people, which was important as
corn was the most popular good consumed. A new minister of general affairs
was appointed, the standing of the physiocrats was at an all time low. 1770
saw the re-introduction of regulations for the corn trade. The final glimpse
of physiocracy came from Turgot who abolished all restrictions on the corn
trade within France. Turgot dissolved medieval guilds and curbed spending to
reduce the burden of luxury, consumption on surplus and wanted to keep the
taxation of agriculture to a minimum, however he came up against opposition
and was removed in 1776.