City and Country: Lessons from European Economic Thought - Critical Essay

American Journal of Economics and Sociology, The, Jan, 2001 by Jorgen G. Backhaus, Gerrit Meijer

GERRIT MEIJER [*]

ABSTRACT. The article concerns some European thought on the issue of city and country. We discuss the contributions of Henri von Storch, Gustav von Schmoller, Werner Sombart, Wilhelm Ropke, and Friedrich Hayek and attempt to translate these theories into practice in documenting the case of the city of Marl.

Introduction

This short essay is devoted to discussing theoretical issues of city and country in German economic literature. We give five examples of original and often overlooked classical contributors.

I

Henri von Storch: [1] Culture, City, Country and Culture of Development

IN INSISTING THAT POLITICAL ECONOMY IS ABOUT the wealth of nations broadly conceived, where wealth includes the stock of knowledge, abilities, and decency that is part of the cultural heritage and needs a continuous nurturing, Storch goes far beyond Adam Smith in integrating the theory of social goods into the system of political economy. [2] Any book needs to be read in its context, of course. Since this massive work had been prepared for the sole purpose of instructing the Russian Crown Prince and his brother, [3] one could believe that its emphasis on culture reflected aspects of the students' character. Although this is not inconceivable, the competing and not incompatible interpretation should prevail: that Storch took the opportunity of the relative leisure (of having to instruct only these two students) to work out a fresh approach to political economy that took full advantage of the then available knowledge, [4] yet substantially improved upon it. Whereas the Austrian Crown Prince Rudolph in 1867 rece ived just 15 lectures on political economy from Carl Menger (Streissler and Streissler 1994), the main point of which appears to have been to impress upon the young Crown Prince the futility of governmental attention to economic affairs, the Russian Crown Prince and his brother received a very different type of instruction from Storch. Here the emphasis was on Russia's vast natural resources and the desire for and feasibility of economic development, as well as an emphasis on cultural progress in order to alleviate the permanent dependence on foreign ideas and influences. Since Storch was, unlike Carl Menger later, an equally patient and impassioned instructor, rendering his ideas in clear prose, much of what he argues has retained a stunning freshness. Most of the problems he addresses have certainly not gone away during the almost two centuries that have followed.

The book [5] itself has a fascinating history related to the core part of this argument. Storch had corresponded with Jean-Baptiste Say and even secured him a knighthood in the order of Saint Volodomir. [6] Say, apparently without sufficient prior consultation, proceeded to publish the text in French, amended by extensive and, in part, very critical footnotes. The criticism was aimed at the core of the argument, the importance of the so-called "unproductive" part of the economy, in Smith's unfortunate phrase. Storch, infuriated by Say's translation, wrote a long essay on the measurement of national wealth that was published as the fifth volume of the text, which had previously been published in four bound volumes.

Storch's Cours d'Economie Politique (1823) is organized in two parts. Part I entitled Theory of the Wealth of Nations contains eight books and is concerned with the production of wealth (Book 1); the accumulation of wealth and funds (Book 2); the primitive distribution of wealth (Book 3); the circulation or secondary distribution of wealth (Book 4); the "numeraire," where this money is defined as first serving the purpose of unit of account and second having an although insignificant use value (Book 5); credit (Book 6); consumption (Book 7); and the natural progress of the wealth of nations (Book 8). The big surprise is Part II, which consists of just two books and is entitled Theory of Civilization. Book 1 enumerates the elements of civilization, the importance of the so-called internal goods including health, education, taste, customs, religious sects, and certainty and leisure, all the way to a complete theory of taxation. The second book of Theory of Civilization deals with the progress of civilization, adding the dynamic part. The work concludes with chapters on the influence of wealth on immaterial labor, the influence of civilization on industry, the mutual complementarity of wealth and civilization, and the real conclusion that equilibrium is constituted as a national prosperity when civilization and production of wealth grow in tandem. This remarkable work apparently never circulated in Russia. It was published in German and, in the 1823 and 1824 editions, in France, marketed through the same publisher in Leipzig and London, It is bound in five volumes. Volumes I through III contain the ten books just mentioned. Volume IV contains the table of contents and Jean Baptiste Say's extensive notes, which infuriated the author to such an extent that the publisher had to add Volume V. This last volume is a restatement of the example of measuring the wealth of a particular nation in terms of both its material wealth and its immaterial wealth, to which Part II (Books 9 and 10) had been devoted. Again, we have the specter, as in the cases of Jakob [7] and Schlozer, [8] of an enormous inspiration born in Russia, a sensible and sincere attempt to deal squarely with the Russian conditions and adapt Central European insight to it; yet with hardly any influence in Russia itself, although it produced extensive reverberations in Central Europe. [9]