The kind of pressing need which is nearly always stronger than fear of revenge or remorse can also occur in the working classes, either because of a want of wage, or because of a temporary mismatch of their wage with the necessities of life; and even, it is most common among these people. For agriculture is, after all, the most productive of all professions for individuals, while for states, it is the unique source of real and lasting wealth.
But now we have conclusive evidence that lack of wages or insufficient wages were caused nearly entirely by prohibitive laws hampering commerce and industry. Those laws, at the same time, were harming the well-being of all by collecting, little by little, in the hands of a few, wealth that then became in those hands a means of oppression, and which otherwise, through the free movement of interests would have remained if not equal, at least common to all. The unequal division of taxes at last overwhelmed the inferior class who, with no property and no liberty, was reduced to rely on fraud and would cheat remorselessly, because our conscience cannot survive when it is in chains. The incentive to behave unjustly, when it is based on need, is therefore extremely rare in the absence of bad laws, as even when they are present, this incentive is weak, its effects are the least widely spread, and it is to be feared the least.--Sophie de Grouchy, Letters on Sympathy, Letter 7, translated by Sandrine Berges (with minor modifications by me).
The 1798 Letters on Sympathy (Letters) were attached to De Grouchy's translation of the last, posthumous edition of Smith's The Theory of Moral Sentiments (TMS) and his Dissertation on the Origin of Languages. Sandrine Berges has argued persuasively that the Letters would have been written in the early 1790s and may well pre-date both De Grouchy's translation of TMS and her decision to publish them jointly. So, the relationship between Smith's TMS and De Grouchy's intentions for the Letter's is not straightforward. In this post I bracket that, and look at De Grouchy's relationship to Smith's political economy in light of the two quoted paragraphs. (The context is De Grouchy's philosophy of law and program for legal reform [recall here, here, and here.]) The larger claim is that a proper legal structure will generate fewer crimes; because good laws deter individuals properly and do not creative incentives for more crimes and the system of "reasonable laws can both increase the personal desire to be just and strengthen the power of conscience, even towards such objects that are governed and punished by conscience alone." (Letter VIII)
I have discussed the quoted passage before a few weeks ago with an eye toward discussing De Grouchy's political analysis of trade barriers. (I apologize for overlap.) She closes the first quoted paragraph above with an embrace of a two-fold Physiocratic doctrine: "agriculture is, after all, (i) the most productive of all professions for individuals, while (ii) for states, it is the unique source of real and lasting wealth." Physiocracy was a distinctly french political economy, which aimed to redress the economic backwardness of French countryside, which had suffered at the mercantile-imperial policies pursued since Colbert. They promoted free trade, including in agricultural products, in order to enrich the agricultural sector and to reduce the prevalence of famine. (In addition to Quesnay, Turgot and Rousseau developed importan themes of the school.) While Smith admired many Physiocrats personally and intellectually, and may be open to the idea that (i) is true in some circumstances, he would reject (ii). Smith devotes the whole of chapter IX of book 4 of Wealth of Nations to criticizing it.
In the second paragraph, she is responding to an implied critic, who might suggest that the lack of income of the poor is due to their laziness. In this she echoes (as Sam Fleischacker has argued) Smith. That the poor were deserving poor -- due to some defect in moral character -- was then (and still is, alas) a popular trope, especially among defenders of social hierarchy (be it on meritocratic or conservative grounds). De Grouchy notes that the lack of purchasing power among the poor is due to bad institutions. She believes that political economy has demonstrated this. And when we look at her argument for this we see that she is only in a very qualified sense a Physiocrat.
For, her first claim -- "lack of wages or insufficient wages were caused nearly entirely by prohibitive laws hampering commerce and industry" -- is, in fact, as my sometime co-author, Spencer Pack, noticed in correspondence a Smithian criticism of physiocracy (which promoted laws that hampered "commerce and industry" and promoted laws that favored agriculture). The underlying idea is that laws that promote one sector of the economy depress effective total demand for labor and, thereby, depress wages. More important, such laws also depress growth (because "commerce and industry" contribute to that), which according to Smith is key to stimulate higher wages, and such laws stimulate inefficiency (because they favor investment in parts of the economy beyond the point of increasing returns).
But the criticism of physiocratic policies does not exhaust her explanation for the existence of low wages. Her second criticism is an attack mercantile trade policies (which hamper "the free movement of interests"), which have regressive economic and political effects (that was the topic of my earlier post on this passage so won't repeat the argument). This is clearly indebted to Smith's Wealth of Nations, Book 4, chapters i-viii.
Third, she points out that existing tax policies are regressive and so de facto reduce the effective demand that the wages of the working poor can support. For, a central feature of De Grouchy's analysis of feudalism is that under it the aristocratic rich (and clergy) are exempt from all kinds of taxes (so called 'privileges' and 'exemptions'). Because these rich benefit dis-proportionally from public goods like justice, defense, public works, and from economic policies which favor their interests, the feudal tax code effectively redistributes from the bottom to the top. (This is a point she returns to in Letter VIII.) This means that that the tax code undermines the effective demand of and helps to impoverish the working poor.*
I think a natural way to reconcile the first two paragraphs is as follows: she agreed with Physiocrats that agriculture was the unique source of real and lasting wealth for states. It would be interesting to learn how she evaluated the political economy of relatively small trading or industrializing nations. But she seems to h ave agreed with Smith that policies which favored one sector in the economy over another end up being a tax on the wages of the working poor (over the medium term). Even industrial/agricultural policy which is meant to promote long term wealth of the state may impoverish the working poor (then the vast majority of inhabitants). Such a policy is not just immoral (it hurts the vulnerable), but also undermines public order and public virtue (by encouraging lawlessness and undermining the proper functioning of conscience & reactive attitudes). So, here underlying idea seems to be (and this is the reconcialition I just promised) this: if one wants to achieve physiocratic ends in a humane and just way, one must follow a Smithian political economy.