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More sophisticated proponents of the mercantilist doctrine understood that the real wealth of a nation was not its hoard of precious metals but its ability to produce They correctly saw that the influx of gold and silver from a favorable trade balance would serve as a stimulus to economic activity generally thus enabling the state to levy more taxes and gain more revenue Only a few states that practiced mercantilism however understood this principleTwo developments paved the way for the emergence of modern capitalism both took place in the latter half of the 18th century The first was the appearance of the physiocrats in France after 1750 and the second was the devastating impact that the ideas of Adam Smith had on the principles and practice of mercantilismPhysiocracy is the term applied to a school of economic thought that suggested the existence of a natural order in economics one that does not require direction from the state for people to be prosperous The leader of the physiocrats the economist Franois Quesnay set forth the basic principles in his Tableau conomique 1758 in which he traced the flow of money and goods through the economy Simply put this flow was seen to be both circular and self-sustaining More important however was that it rested on the division of society into three main classes 1 The productive class was made up of those engaged in agriculture fishing and mining representing one-half of the population 2 The proprietary class consisted of landed proprietors and those supported by them which amounted to one-quarter of the population 3 The artisan or sterile class made up the rest of the populationQuesnays Tableau is significant because it expressed the belief that only the agricultural classes are capable of producing a surplus or net product out of which the state either could find the capital to support an expansion of the flow of goods and money or could levy taxes to meet its
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