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Chydenius as an economist

As we have already noted, a lively debate touching upon economic matters was opened up during the decades after the establishment of the Age of Liberty. Earlier scholars dealing with the history of Swedish economic thought and literature have tried to find theoretical propositions from these economic debates during the Age of Liberty that correspond to major themes in the history of economic doctrines at large. Hence, the first economics professor at Uppsala, Anders Berch, has often been depicted as a typical proponent of “mercantilism”. To this group, such writers as Eric Salander, Johan Fredrik Kryger, Anders von Höpken, Johan Alströmer and Johan Låstbom (docent at Uppsala) are usually added. The young Anders Nordencrantz (or Bachmanson before he was ennobled) also seems to belong there, with his Arcana oeconomiae et commercii (1730). Arcana was in fact the first comprehensive treatise in economics ever printed in Sweden.1 Especially in Berch’s 1747 textbook Inledning til almänna hushålningen, all the ingredients of the mercantilist doctrine can be found, according to Eli F. Heckscher, including the theory of the favourable balance of trade.2 In the same manner, Karl Petander finds traces of the “typical” mercantilist view that money is wealth in Bachmanson-Nordencrantz’s text from 1730, as well as in texts written by Eric Salander. Moreover, because Thomas Mun’s England’s Treasure by Forraign Trade was translated into Swedish and published in two editions (1732 and 1745), Petander takes for granted that this archetypal mercantilist (according to Adam Smith) also had a great influence in Sweden.3 However, to identify a “typical mercantilist” is not always so easy. With regard to Berch, it is, however, clear that he did not believe that money was identical to wealth, or that an inflow of currency would immediately increase the wealth of the nation. He was rather of the opinion that foreign trade should be organized in a manner that maximized the export of worked-up wares in order to increase jobs and population – a view which rather resembles that of late-seventeenth- and early-eighteenth-century English economic writers such as Charles Davenant and Charles King, to whom we will return.4

Hence, after more than a century of discussion it is not clear to what extent mercantilism really was a “school” of economic thought, as for example the French Physiocrats were. To a large extent the proposed theoretical foundations of the Colbert system, or système mercantile, which the French économistes criticized from the 1740s onwards, was rather something that Smith invented in his Wealth of Nations (1776) – mainly in order to contrast his own theories on economic value and growth. Hence, it is not generally true that “mercantilists” confused wealth with gold and silver. It is in fact difficult to find writers after the middle of the seventeenth century who wrote favourably of a positive balance of trade.5 Certainly this still makes it possible to depict mercantilism or Colbertism as a particular strand of economic policy and practice founded upon certain ideas, for example regarding the positive role of the state in economic growth and improvement, or even with regard to how the economy worked and functioned during this age of perpetual trade wars. As was noted by David Hume in the 1750s, “jealousy of trade” was a prevailing state of affairs in Europe during the early eighteenth century.6

According to historians of economic doctrine, a stream of thought developed in Sweden from the 1720s onwards that was critical of mercantilism. Building upon writers from an earlier period like Christopher Polhem and Emanuel Swedenborg in the 1720s as well as Lars Salvius in the decade that followed, this “school” has conventionally been called “reform-mercantilism”. Breaking with the dirigisme of old mercantilism, reform-mercantilism is said to build a bridge with the new economic liberal school of Adam Smith and classical political economy. It includes important figures such as the mature Anders Nordencrantz, Carl Leuhusen, Per Stenhagen, Carl Fredrik Scheffer (although Scheffer is most often described as a Swedish Physiocrat, perhaps the only true specimen7 ), the brothers Edvard Fredric and Ephraim Otto Runeberg from Finland – and Anders Chydenius. While it is clear that this group of writers were hostile to the economic policies of the Hat party, especially such regulations as particularly favoured manufactories in relation to other sectors in general and agriculture in particular, it is more difficult to find coherent theoretical principles behind their criticism. Karl Forsman – whose analytical contribution to the analysis of reform-mercantilism has been sadly neglected by later historians – especially emphasized the emergence of more “liberal” economic attitudes as a consequence of the combination of patriotic Gothicism (göticism), with roots in the seventeenth century (including the fantasies by Olof Rudbeck the elder regarding Sweden as the sunken Atlantis and the home of the Hyperboreans), and natural rights theory. Moreover, Forsman particularly refers to the influence of French économistes and proto-Physiocrats such as Mirabeau the elder. This most certainly led the “reform-mercantilists” to agitate for “utilism” as developed by natural scientists like Linnaeus, while at the same time they argued for natural liberty and the importance of agriculture.

Most certainly Anders Chydenius must be placed within the group of Swedish “reform-mercantilists”. As we will see later on, many of his ideas of reform were developed within a contemporary discussion concerning moral philosophy and natural liberty which strongly influenced his political preferences. But can we also distil some kind of economics from his texts? Where should he be placed in the history of economic discourse at large?

To begin with, it must be noted that Chydenius refers only sparsely to other economic writers, Swedish or foreign. We have already seen that he describes Anders Nordencrantz as his intellectual father figure. From him he picked up ideas propounded by the leading philosophes during this time, including Montesquieu (whom Chydenius read, at least in translation), Helvétius, Voltaire and Hume – as well as Mandeville.8 Apart from these authors we do not know exactly from whom he received his ideas. He used the library of his father, of course, which included books his father had inherited from his son Samuel, who had died young. The library seems to have included some economic texts written by Carl Leuhusen, Pehr Niclas Christiernin, Abraham Sahlstedt and a few others.9 Furthermore, from his autobiography we know that during his stay in Stockholm he frequently used the library of the book printer and economic writer Lars Salvius, which included many political and economic texts, both Swedish and foreign. As the French cultural and intellectual influence was very strong in Sweden during this period – what English writers wrote was often read in French translations – it is perhaps not surprising that such texts dominated. In fact, Nordencrantz was one of the very few who were able to read books and pamphlets in English. While Chydenius probably found handwritten memoranda by Polhem and Swedenborg – who had such an important influence on him – in the Diet archive, Salvius’s library contained the bulk of what the leading Swedish authorities had written with regard to economic issues. Here Chydenius found most of the material for his tract Rikets hjelp (“A Remedy for the Country”). This also included Salvius’s own Tanckar öfwer den swenska oeconomien (“Thoughts on the Swedish Economy”, 1738), which no doubt contains critical passages that influenced Chydenius profoundly, for example with regard to his thoughts concerning the iron industry. He must also have felt quite comfortable with Salvius’s views on economic policy, which in general were quite liberal.10

As Heckscher pointed out, Chydenius in his perhaps most important text, The National Gain, takes his starting point from the notion that when “the value of exported commodities exceeds that of imported ones”, this is “rightly called the profit of the nation”.11 This was of course commonplace at the time, although the definition of what this “profit” consisted of varied considerably between authors. However, nowhere can we see in Chydenius (or in Berch, as we saw above) any signs of the main “mercantilist prejudice”, the idea that an export surplus in the form of hoarded money per se would be particularly gainful for a country. What he instead repeats several times is that the “wealth of the people” consists of the quantity or value of products brought forward with the help of the “number of workers and their diligence”. On the other hand, he does not explicitly criticize the favourable balance of trade theory. Instead, his argument is rather in the negative: he argues that it does not make a nation any richer if the state, for example by means of export bounties, redirects trade from one branch to another. But nowhere does he fall into the “fallacy” that Adam Smith conceived as the kernel of the mercantile system: to confuse an export surplus with material wealth.

Making production and the stock of labour the basis of a nation’s wealth, Chydenius instead defines “a favourable balance of trade” in a manner that became common, especially in England, from the 1690s and onwards, and which we find with other Swedish authors at the time, including Berch. While rejecting the simple idea of a pile of money as beneficial to the nation, English economic writers such as Josuah Child, Charles Davenant, Nicholas Barbon and Charles King instead emphasized such a gain in terms of exporting as much value added wares as possible, while importing products with less added value or raw materials. Especially by E.A. Johnson in a seminal work on the economic thinking of this era, this was called the theory of “foreign paid incomes”, or the “labour balance of trade” theory. Hence, by selling worked-up wares the foreigner was supposed to “pay” the wage bill for the exporting country’s workers. This led to more income for the country, more employment and – supposedly – a richer and stronger nation.12 To what extent Chydenius agreed with this we cannot be sure. As we have seen, he regarded full employment as the cornerstone of wealth. On the other hand, Chydenius seems not in the first place to have pressed for more worked-up goods. Arguments for giving priority to trades that produced value-added wares for export were of course often used at the time in order to make the case for more manufactories, as well as for regulative measures in order to support and protect them at the expense of other branches, for example agriculture or peasant handicrafts. But Chydenius saw no point in giving exclusive privileges to the manufactories, even though they might be able to produce more value-added wares.

It has been suggested that Chydenius here took a realistic viewpoint: the idea that Swedish manufactories might be able to contribute to the country’s exports lay at best in a very distant future. Sweden was much less economically developed and could not possibly compete on markets for advanced industrial products.13 Instead, it was Chydenius’s view that it should utilize its main “comparative advantage”, namely, cheap labour and the ample resources of different raw materials. Hence, if the native workers were allowed to freely concentrate on production where they could receive the highest income, this would in turn increase exports and ensure that a maximum of hands were employed at home. Hence, Chydenius, like many of the English writers in the eighteenth century, including Charles King, Josiah Tucker and James Steuart, argued that a nation’s wealth lies in a multitude of working hands. What an individual is able to gain through hard toil is also the profit of the nation – that was the conclusion he drew. Although Chydenius played with concepts such as “favourable balance of trade”, his preference for agriculture over manufactories makes it much more relevant to connect him to another stream of economic thought in the middle of the eighteenth century. Hence, while not exactly being a Finnish Adam Smith, Chydenius rather belongs to a broad school of writers often identified as proto-Physiocrats or économistes, many of them of French origin. In insisting upon this connection, Karl Forsman without doubt is on the right track. This implies that Chydenius belongs to a group of writers who certainly played a pivotal role in what Adam Smith would publish in his Wealth of Nations in 1776 – but, as we know, there were also great differences between Smith and the French économistes (and with the Physiocrats). This group of agriculture-friendly economists included Mirabeau the elder, Melon, Gournay and Forbonnais, but also Boisguilbert early in the century as well as Turgot later on. Accordingly, Heckscher quite accurately calls Chydenius “a Finnish Turgot”.14 In Salvius’s library, Chydenius could for example have read the Swedish translation of Melon’s Essai politique sur le commerce, published in 1751, or Mirabeau’s L’Ami des hommes (published in an abridged Swedish translation in 1759). However, he could also have picked up viewpoints of the économistes through Swedish authors such as Carl Leuhusen and Johan Fischerström, writing in the early 1760s.15 The latter in particular seems to have been well acquainted with the French literature, and he refers in his texts to authors such as Mirabeau, Savary, Montesquieu and Melon – but also to English authors such as Petty and Davenant. Moreover, both Leuhusen and Fischerström emphasized the role of agriculture in making a nation rich. With a strong voice they condemn “unnatural” regulations to support manufactories. They also proclaim themselves great friends of liberty with regard to trade and the establishment of enterprise. Leuhusen, for example, strongly argues in favour of a trade as unlimited as possible; his main focus here is the grain trade. Another writer, E.O. Runeberg, agreed, and regarded agriculture as the very cornerstone of economic wealth in general. The most pertinent problem with the inflation during the Hat regime was, according to most of these writers, that workers were drawn from agriculture to the “unnecessary” manufactories in Stockholm by the folly of luxury.16 “Agriculture-friendly” Swedish authors during this period seldom went so far as to reject all kinds of state support. In general they disfavoured support for urban industry, including the manufactories, but were ready to accept regulations and bounties intended to develop the agricultural sector.17 Chydenius had without doubt already come across the view that agriculture was more important than manufactories during his stay at the Academy in Turku in 1748. He would have heard Johan Kraftman emphasize in his lectures that as long as the Swedish realm was not self­sufficient in foodstuffs, no manufactories should be allowed.18

Did Chydenius add something beyond what this group of “proto-Physiocrats” had already said? To some extent the answer is yes. First, it is clear that Chydenius was more consequent in his free market views than perhaps anybody else in the Swedish realm at this time. He condemned economic regulation in principle, including with regard to agriculture, which was rather uncommon at the time. In a radical manner he scrutinized the “mercantilist” idea that only the political state can establish a correct balance between the different trades. In contrast, Chydenius argued that a true balance can only be achieved when every man is free to seek his opportunity wherever he finds it most suitable. However, this does not mean that Chydenius, ten years before Adam Smith, had “invented” the invisible hand argument19 – especially as this by no means is something that originated with Smith. The paradox that “private vices” can be transformed into “public benefits” was well known before 1776 from authors such as Mandeville.20 Moreover, the notion that some kind of harmonia preaestabilita existed in human society as well as in nature was a common theme in the prevailing moral philosophy discourse at the time. In Chydenius’s case his definition of “liberty” and “happiness” was also coloured by his religious views, as we will see.

Chydenius’s radical attitude especially shines through when discussing the rights of servants and workmen. His argument for a free contract between masters and servants is based upon the notion that the latter too are citizens of a free state. He emphasizes how the existing system of regulation builds on privilege and monopoly, as well as depicts the corruptive aspects of the mercantile system. He saw this system as being linked to vested interests, especially those of the elite of merchant capitalists in Stockholm. In his condemnation of the latter he is not at all far from Adam Smith’s harsh critique formulated in The Wealth of Nations some ten years later. However, his critique of corruption and monopoly also has to be seen as part of a wider moral philosophical discussion, which we will return to shortly.

Lastly, Chydenius propounds the beneficial influence that a division of labour has on the nation’s profit. He extends this argument to include trade with foreigners. Here he is more advanced than most of the proto-Physiocrats (who were not much concerned with international exchange). Like his contemporary Josiah Tucker in England – as well as Adam Smith later on – he develops a crude theory of comparative advantage in international trade. His view is that each country should export what it is best suited for. As we have seen, this argument was developed in order to make the case for free exportation from Ostrobothnia, rather than, in an “unnatural” fashion, support the export of Swedish manufactories that by themselves were unable to compete on the export markets.

Hence, it is clear that Chydenius held views that were close to what other “reform-mercantilists” of Swedish origin or French “proto-Physiocrats” were saying at the same time. But although he belonged to this broad group of economist writers, who certainly influenced the further development of economics, he also developed new ideas and insights within this framework. In this respect it is not unfair to regard him as a predecessor to Adam Smith. At the same time we must be more precise and acknowledge the very different context in which he wrote and in which his ideas must be placed. This will become even clearer when we later on discuss Chydenius’s moral philosophy and theology.

We have seen that it was Chydenius’s critique against the Caps’ plan for monetary restoration that led to his early return home from Stockholm in 1766. As has also been pointed out, “A Remedy for the Country by Means of a Natural System of Finance” to a large extent corrected his own previous views. Earlier, he had largely followed Nordencrantz in his analysis of the causes behind the inflation and the lowering of the exchange rate. Like his “teacher”, he had put the blame on “manipulating” and “criminal speculators”, who with their malicious operations had caused the fall in value of circulating money. At the start of the Diet of 1765–6 he seems to have agreed upon the scheme put forward by the new ruling Cap party to gradually increase the value of the copper mark to what it had been in 1737; at least, he kept quiet when the plan was up for scrutiny at a Diet meeting in 1765 (although he afterwards seems to blame this on being too busy with other matters to take enough notice).21 More probable is that he changed his mind as a consequence of his return to the old discussion between Nordencrantz and the adjunct in economics at Uppsala University, Pehr Niclas Christiernin, which started in 1761 with the publication of the latter’s Utdrag af föreläsningar angående den i Swea rike upstigne wexel-coursen (“Excerpts from Lectures concerning the High Exchange Rate in Sweden”). At some point he must have come to the conclusion that Christiernin (influenced by John Locke as he was) had a strong case when basing his analysis on the quantity theory of money, arguing that not evil speculators but an over-issue of banknotes was the root of the problem. He must have realized that what he himself had written some years earlier (in his emigration pamphlet) in favour of the Caps’ realization plan did not stand up to scrutiny. Apart from reading Christiernin, he heard arguments for such a revision from the Cap politician Christer Horn, as well as from reading an old memorandum by Emanuel Swedenborg written in 1722. Swedenborg here describes the negative consequences of raising the value of money which had occurred at the beginning of the 1720s especially for the iron industry, but also for other trades, including agriculture.22

Eli F. Heckscher in particular has credited Chydenius for distancing himself from Nordencrantz’s “not very clear” ideas about the causes of inflation and instead accepting Christiernin’s “basically sound” use of the quantity theory of money. This may be easy to agree on from the point of view of modern theory. On the other hand, there may have been a grain of empirical truth in Nordencrantz’s attacks on “capitalist speculators”. Hence, it is not at all unlikely that special interests during this period speculated in the fall of money in order to gain for themselves or their clients when borrowing from the Bank of the Estates. Moreover, even though Chydenius used theory that is accepted today, this should not make us believe that he was more “modern” than he actually was. We must repeat that he was neither an Adam Smith without being conscious of it, nor someone who would have been better understood a hundred years later.23 The angry reaction to his pamphlet – the eyewitness Daniel Tilas reported from a meeting with the Secret Committee that it was called a most “seditious” piece from which nothing good could be expected24 – indicates that its message at this time was perhaps too well understood for his own good!

  1. Petander, op. cit.; G. Schauman, Studier i Frihetstidens nationalekonomiska litteratur: Idéer och strömningar 1718–1740, Helsinki, 1910, p. 80f; E.F. Heckscher, Sveriges ekonomiska historia från Gustav Vasa, II:2, Stockholm: Albert Bonniers förlag, 1949, p. 806f; Magnusson, Äran, korruptionen och den borgerliga ordningen, op. cit., p. 51f.
  2. Heckscher, op. cit., p. 826f.
  3. Petander, op. cit., p. 19.
  4. A. Berch, Inledning til almänna hushålningen, Stockholm, 1747, p. 55f.
  5. L. Magnusson, Mercantilism: The Shaping of an Economic Language, London: Routledge, 1994, p. 147f.
  6. I. Hont, Jealousy of Trade: International Competition and the Nation-State in Historical Perspective, Cambridge, Mass.: Harvard University Press, 2005, p. 5f.
  7. Heckscher, op. cit., p. 824; L. Herlitz, Fysiokratismen i svensk tappning 1767–1770, Meddelanden från Ekonomisk-historiska institutionen vid Göteborgs universitet, vol. 35, Gothenburg, 1974, p. 9.
  8. Nordencrantz’s dependence upon Mandeville is especially emphasized by L. Herlitz, “Anders Nordencrantz”, in Sveriges Biografiska Lexikon, vol. 27, Stockholm, 1990–1, p. 187f.
  9. Virrankoski, op. cit., p. 43. The text by Sahlstedt was Om frihet i näringar, i synnerhet wid swenska fabrikerna och handtwärken, published in 1763.
  10. On Salvius and Polhem, see L. Magnusson, “Mercantilism and ‘reform’ mercantilism: the rise of economic discourse in Sweden during the eighteenth century”, History of Political Economy, 1987, vol. 19:3, pp. 415–33.
  11. See p. 144. LINKKI
  12. E.A. Johnson, Predecessors of Adam Smith: The Growth of British Economic Thought, New York: Prentice Hall, 1937; L. Magnusson, Mercantilism: The Shaping of an Economic Language, London: Routledge, 1994, p. 134f.
  13. Forsman, op. cit., p. 159.
  14. Heckscher, op. cit., p. 863.
  15. C. Leuhusen, Tankar om de rätta och sanskyldiga Medel Til Sweriges Wälmåga, 2 vols, Stockholm, 1761, 1763; J. Fischerström, Påminnelser wid Sweriges Allmänna och enskylta Hushållning, Stockholm, 1761.
  16. Forsman, op. cit., p. 195.
  17. Ibid., p. 201.
  18. Ibid., op. cit., p. 172.
  19. Heckscher, op. cit., p. 865; Uhr, op. cit., p. 41.
  20. For a discussion on Smith’s metaphor, see E. Rothschild, Economic Sentiments: Adam Smith, Condorcet and the Enlightenment, Cambridge, Mass.: Harvard University Press, 2001, p. 116f.
  21. Schauman, op. cit., p. 211.
  22. C. Horn, Ödmjukt memorial af fri-herre Christer Horn til Höglofliga Ridderskapets och Adelen angående Höglofliga Secrete utskottets til Riksens Högloflige Ständer upgifne berättelse om Banco-förwaltningen, Stockholm, 1766; E. Swedenborg, Oförgripelige Tanckar om Swenska Myntetz Förnedring och Förhögning, Stockholm, 1722.
  23. Uhr, op. cit., p. 7, 11.
  24. Cited from Schauman, op. cit, p. 223.